Indian ‘Golf Cities’ Fuel Real Estate Boom

Townships with designer interiors and world-class architecture are passé. Developers are now turning to golf to attract non-resident Indians and high net worth individuals in the premium housing segment.

Residential dwellings built around a golf course are the latest buzzword in the super-premium housing segment of the Indian realty industry, estimated at $15 billion and growing at 35 per cent annually.

“The golf cities make an attractive preposition for NRIs and HNIs who together constitute 50 per cent of buyers in the premium housing segment,” Kunal Banerjee, head of corporate communication, Ansal API.

No wonder big players like Unitech, DLF, Ansal API, Omaxe and Jaypee have already taken the plunge with an array of golf-centric projects.

Royal Indian Raj International Corporation, a foreign direct investment company in the Indian real estate sector based out of Vancouver, just last month announced a partnership with golf legend Jack Nicklaus to build as many as eight 18-hole courses as multi-million-dollar centerpieces to the firm’s new resort and residential communities across India.

“These high end customers are ready to pay big bucks for a sprawling home amidst the greens with a promise of high class lifestyle,” said a spokesman from DLF.

“And even with a hefty price range from Rs.7.5 million to Rs.90 million, these projects have been snapped up like hot cakes,” he further added.

DLF Golf and Country Club, Gurgaon, situated on the outskirts of Delhi, is flanked by the twin luxury high-rise residential projects ‘The Aralias’ and ‘Magnolias’ inside the 18-hole DLF Golf Course. And DLF is not a case in isolation.

After the Karma Lakelands project in Gurgaon with a 9-hole golf course, Unitech has launched Unitech Grande over 347 acres along the Noida expressway neighboring the capital city. It offers an ultra luxurious residential project built around Greg Norman-designed 18-hole golf course.

In the same locality, Jaypee Green, a township by the Jaypee Group, also boasts of luxury villas and high-rise apartments built around Greg Norman-designed 18-hole golf course. Omaxe is also developing a Golf Theme Township estimated at Rs.18 billion in Raipur, the capital of Chhattisgarh.

Developers attribute the trend to growing passion for golf among the elites. “Golf is not just a game but it’s a symbol of urban upper class lifestyle,” Pramod K. Magu, executive vice president, Unitech.

“So from the top brass of the corporate world to those who aspire to arrive in life, everyone finds residences built around the golf course an ideal abode,” Magu added. The fact that the project caters to an exclusive segment of society goes in favor of the developers.

“Golf home projects are exclusive projects. Slight slumps in the market that generally slow down the middle housing segments usually do not affect these projects, as the buyer is exclusive and very selective about the property,” Magu said.

And the trend is fast spreading from metros to emerging cities. For example, Ansal API’s Sushant Golf City Lucknow is spread over 2,000 acres on the outskirts of the Uttar Pradesh capital.

“Earlier golf was restricted to a select group, but it has grown popular over the years with many middle level executives and business class taking active interest in the game,” Banerjee said. And with top-tier Indian players like Jeev Milkha Singh and Digvijay Singh teeing off at $ 2.3 million world tournaments, the sport’s popularity is booming across the socio-economic spectrum.

That is the reason Ansal API are proposing a Royal Palms Golf and Country Club in Lucknow that will offer residents the services of golf trainers and coaches.

Even Sahara is providing a golf academy to impart professional golf training in its Amby Valley project built around an 18-hole golf course at Lonavala, 96 km from Mumbai.

Berkeley Group Forays into Real Estate Business

Chandigarh based Berkeley Group on Monday announced to foray into real estate business with the launch of its new company Berkeley Realtech Limited which will provide commercial, retail and industrial space on rental basis to corporate and further said that it was aiming for Rs. 300 crore of business in the first year of its operations.

“We will help the corporate in finding suitable space on rental basis in the tricity of Chandigarh, Mohali and Panchkula as per their requirements,” Berkeley Realtech Limited, Director, Sanjay Dahuja told reporters here today.

The company will also assist corporate starting from personal verification and surveying of site, proper handling of legal procedures till signing of the final agreement, he said.

The company would charge one month rental from both landlord and occupant as commission for the deal, he said.

“We have already identified 400 such locations which are available with us and we are further looking for more space so as to cater to the emerging requirements of companies,” he said.

“The tricity of Chandigarh, Mohali and Panchkula is gaining immense momentum and becoming an economic hub of Punjab, Haryana and Himachal Pradesh. As a result of it, several companies are quite keen on establishing their base make so as to mark their presence in this region,” he said.

Berkeley Group, having interest in automobiles, insurance, finance, is looking to increase its turnover from Rs 400 crore to Rs. 1000 crore by end of 2008-09, “We are expecting our sales from other businesses to increase from Rs. 400 crore to Rs. 700 crore and balance Rs 300 crore would come from realty business,” he said.

Residential Enclaves on the Lines of SEZs Proposed To Beat Slowdown

After special economic zones (SEZ), it’s now the turn of special residential zones (SRZ). The government is considering a proposal from real estate developers to set up SRZs outside the main cities. These SRZs are also proposed to be given tax benefits on the lines of SEZs. Developers say SRZs would help them build and sell affordable houses for as low as one-third of the existing price to low-income groups, although SRZs wouldn’t be limited to low-income houses alone.

Commerce minister Kamal Nath has already had talks with real estate developers regarding setting up of SRZs. “The special residential zones have been conceived by the developers on the lines of SEZs with tax benefits and single-window clearance. The proposal is being actively looked into by the government. The government would require time to devise the modalities as tax incentives to SRZs would mean an additional burden on the exchequer,” a commerce ministry official said.

According to the proposal, an SRZ would be spread over at least 500 acre. The land would be acquired by developers from landowners for a negotiated price. The development will be done by the company, but the onus of building the road linking the SRZ with the main city will fall on the government.

“Houses have become unaffordable for a large segment of the population as prices have shot up in the past three years. If the government allows us to set up the special residential zones, we will be able to meet the acute housing shortage in the low-income segment,” Parsvnath Developers chairman Pradeep Jain said.

“A house built a little away from Gurgaon may cost Rs 7 lakh in an SRZ compared to the existing cost of Rs 20 lakh,” says Mr Jain, adding that exemption of tax, which comprises around 27% of the present house cost, availability of cheap land away from the city, and faster clearance through singlewindow will together bring down cost substantially. At present, obtaining all clearances from the government for building a housing project takes around two years, according to property developers.

The entire proposal is based on the developers’ objective to provide low-cost affordable housing to the low-income population. But SRZs would also have high-end houses. Above all, the biggest apprehension is that these cheap houses, as and when they are built, may be booked by high-income individuals. “This is a challenge the SRZ will face. The government will have to bring in some regulation to ensure that the houses go to the intended people,” says Omaxe CMD Rohtas Goel, who is also the president of National Real Estate Development Council.

Delhi NCR Rents may Stabilize Next Quarter: Report

Rentals in the National Capital region are expected to stabilize in the next quarter as supply is set to increase Gurgaon and Noida, says a report.

According to commercial real estate services firm CB Richard Ellis, rentals are expected to be stable in the next quarter as the supply is set to increase significantly in Gurgaon and Noida.

“However, no significant change in supply is expected in Delhi except in Jasola where an additional 500,000 sq ft is expected to be added in the second quarter,” the report stated.

Rentals rose steadily in the Central Business District Area of Connaught Place in the absence of any new supply in the first quarter of 2008. The report stated that an evident feature in the last quarter was that a number of the older buildings made a noticeable attempt to improve infrastructure in their premises in an attempt to cash in on the low available supply and high rentals.

However, CBRE forecast that there would be no respite in rentals in the near future in the absence of any upcoming supply in the Central Business District of Delhi. The average rent in Connaught Place (Grade A) rose to Rs 340 per sq feet per month in March this year from Rs 325 in December 2007.

While in the peripheral markets Gurgaon and Noida, the rentals are expected to stabilize in the next quarter. Rentals in Gurgaon showed no sign of a meltdown in the previous quarter. However, they are expected to remain stable in the next quarter with additional supply on the MG and Golf Course Road offsetting the corporate demand, the CBRE report said.

Besides, in Noida rentals were marginally higher in the last quarter but are expected to be steady with high supply available especially in the industrial/institutional sectors.

Noida continues to be an attractive destination for IT/ITeS companies primarily for their back office operations. The report said that absorption rates in Noida are expected to rise significantly this year with improved infrastructure and affordable rentals.

Marriott Signs New Hotel in Bangalore

Marriott has signed a management contract with Prestige Estates Projects Private Limited, for a 300-room golf resort, spa, and convention center in Bangalore, India. When opened in 2012, the Bangalore Marriott Golf Resort & Convention Center at Nandi Hills will be Marriott’s fifth property in Bangalore and 30th in India.

The Bangalore Marriott Golf Resort & Convention Center at Nandi Hills will be part of a 300-acre, mixed-use project in the city’s Nandi Hills area, approximately 10 kilometers from the airport. The project will also consist of a first-class 18-hole golf course and a residential community comprised of approximately 225 single-family homes.

“We continue to be excited by the robust opportunity India presents as we implement our global growth strategy,” said Ed Fuller, president and managing director for international lodging at Marriott. “This particular project holds great promise. Its golf course, extensive conference facilities which, at 1,940 square meters will be the largest among the hotel’s competitors, and spa will be an enormous advantage in helping the hotel penetrates more than its fair share in the meeting, convention and leisure segments.”

Guest rooms at the Bangalore Marriott Golf Resort & Convention Center at Nandi Hills will feature stylish appointments and Marriott’s famed plush bed and bath linens and amenities. For dining and entertainment, the hotel will have three restaurants, including an all-day casual restaurant offering three meals daily and two specialty dining outlets; a lobby lounge, pool bar and entertainment bar.

In addition to the golf course, which will be operated by Prestige, recreational amenities will include a 1,800 square-meter spa, sauna, gym, Jacuzzi and 10 treatment rooms; a fitness center and an outdoor swimming pool. Other amenities include a business center with four workstations, two offices, a meeting room for small conferences and two boardrooms; an executive floor and lounge with its own meeting room; retail shops; and a gift/sundries shop.

For conferences and social events, the Bangalore Marriott Golf Resort & Convention Center at Nandi Hills will offer 1,940 square meters of space including a 1,200 square-meter ballroom which will be divisible into five sections: a 450 square- meter junior ballroom divisible into two sections; three individual meeting rooms, each also divisible into two sections; and a 50 square-meter ballroom.

Also under development in Bangalore are the JW Marriott Hotel Bangalore (2009, Renaissance Bangalore Hotel (2010), Renaissance Bangalore High Grounds Hotel (2010), The Ritz-Carlton Bangalore (2010).

No Room for Slow Down in the Hospitality Industry

Forget slowdown jitters and dollar decline, Indian hospitality industry registered strong growth in 2007-08. Though hotel occupancies in Bangalore, Hyderabad and Pune dipped marginally owing to over capacity, average room rates (ARRs) for branded hotels across star categories continue to witness robust growth in most cities.

As per hotel consultancy HVS Hospitality Services, Delhi and Mumbai witnessed highest room rates in the country pegged at around Rs 10,200 per night. Bangalore finally saw a marginal correction in room rates. It recorded a room rate of Rs 10,100, marginally lower than Rs 10,545 that it commanded last fiscal.

Occupancy-wise the country’s commercial capital Mumbai performed the best, followed by Delhi and Kolkata. While branded hotels in Mumbai registered an average occupancy of 80%, Delhi was at 78% and Kolkata at 77.4%. “Overall the occupancies in most markets softened while ARRs saw a marginal increase. Going forward, we will see correction in ARRs in next two years. Most of the markets have peaked out in terms of occupancies though revenue wise this was one of the best years for the hospitality industry,” says Siddharth Thaker, associate director, HVS Hospitality Services.

Though occupancies were not significantly higher this year, hotels still managed good revenues due to dearer room rates. Says Raymond Bickson, MD, The Taj Group of Hotels, “Across board we registered occupancy of 75%. The RevPar (revenue per room) for this year has been good. ARRs may soften a bit though overall tourism sector looks strong.”

Most branded hotels, especially in five star categories, though have cause for concern in Bangalore. As unbranded hotels proliferate in India’s silicon city, occupancies are softening. “While Delhi and Mumbai properties performed well, occupancy has decreased for our Bangalore property. The ARR too is not growing. Bangalore will be the focus of our sales and marketing strategy this year and in fact for most hotel chains,”

says Farhat Jamal, COO, The Grand Group of Hotels . The group at present operates seven hotels in the country and has witnessed a growth of 22% over last year. The rupee appreciation, expected to be a dampner on revenue, didn’t make any significant impact after all in 2007-08. “Yields were not impacted primarily as most hotels had started quoting in rupees in the second half of the year,” says Peter Leitgeb, president & CEO, The Claridges Group of Hotels.

M&M, ARCH Capital Asian in JV to Develop Residential Complex

Mahindra Residential Developers, a subsidiary of Mahindra Lifespace Developers, and ARCH Capital Asian Partners, a private equity real estate fund, have entered into joint venture agreement for residential development.

The venture will undertake development of a gated residential community together with support, retail and recreational facilities on 55 acres within Mahindra Lifespaces’ special economic zone at Mahindra World City, New Chennai.

The joint venture entity, Mahindra Residential Development, will be 51 per cent owned by the Mahindra group and balance 49 per cent by an ARCH Capital controlled investment vehicle.

The residential development will offer an exclusive community of around 750 residential units with sprawling green spaces and large community Interaction zones.

Mahindra World City is India’s first integrated business city developed by the Mahindra Group and Tamil Nadu Industrial Development Corporation. Spread over 1,500 acres in the outskirts of Chennai near Chengiepet, Mahindra World City has three sector-specific SEZs for information technology, auto ancillaries, and apparel & fashion accessories. Mahindra World City is expected to have a working population of 1,00,000 people by 2015 with current employment at close to 10,000 persons.

“The Mahindra Group has demonstrated the vision and the ability to build a world class SEZ in Mahindra world city. This will now be ably supported with flying infrastructure built to international standards. Our partnership with Ayala, Philippines leading real estate developer, heralds the beginning of a relationship that will combine the marketing and property development skills of Mahindra Lifespaces with the project management and execution expertise of Ayala,” said Arun Nanda, Executive Director Mahindra & Mahindra.

ARCH Capital Asian is managed by ARCH Capital Management Company, an affiliate of Ayala Land of the Philippines.

Real Estate FDI inflow up Nearly Five-Fold

The Indian real estate and housing space emerged as the darling of foreign investors in 2007-08, clinching FDI equity inflows of about Rs 8,749 crore, a near five-fold increase over FY07.

“The investors have seen that the real estate potential in India is huge. The returns are quite attractive. In fact, we see the trend picking up even further this year as the prices are getting more attractive for investors,” Ramesh Sanka, Chief Financial Officer at DLF said.

Late last year, DLF Ltd had sold 49 per cent stake in eight residential project SPVs to private equity investors for a total consideration of Rs 1,675 crore.

A Merrill Lynch & Co entity had bought 49 per cent equity in seven residential projects in Chennai, Bangalore, Kochi and Indore for Rs 1,481 crore. The company — headed by K P Singh — has also diluted 49 per cent stake, in another middle-income housing project in Panchkula, Haryana, to Brahma Investments for Rs 194 crore.

According to data released by the Government on Tuesday, the real estate sector, thrown open in 2004-05, saw the FDI picking up significantly between FY05 and FY08; it was Rs 171 crore in 2005-06 surging to Rs 2,121 crore in 2006-07.

“Over the last three years, there has been a build-up in investor interest. We saw the impact of that interest and euphoria for FY07 and FY08 as new townships and projects were announced. Depending on the asset class within real estate sector, the average rate of return stood at 25-35 per cent for India, against a global average of single digit return,” Sanjay Verma, Executive Managing Director, South Asia, of Cushman & Wakefield said.

“However, at the beginning of the current year we have seen some asset bubble deflation. With prices moving southwards, choppiness in the stock markets, pressure on interest rates and global issues, while deals will still happen, pricing will be the question,” Verma added.

Realty at its Premium Best

With an aim to help discerning customers realise their dreams, Vancouver-based Royal Indian Raj International Corporation (RIRIC) plans its foray into the Indian market. With Manoj C Benjamin at the helm of affairs, the group comes to Bangalore with a pioneering concept of self sustained townships, under its Royal Garden City projects and its Royal Garden Villas & Resorts’ brand.

The Royal Garden Villas and Resort in Bangalore is a master-planned gated community with exclusive amenities, including a chateau winery, opulent club house, world-class spa and pool. Besides these, the property also boasts a five-star hotel, Vijay Amritraj Tennis & Fitness Center, internationally renowned shops, restaurants , an equestrian center and supermarkets.

Also included in the plans is a movie theatre, which is slated for phases 2 and 3. “We see the integrated township format as a key driver of future housing supply and as a catalyst for the much needed infrastructure investments in India. The Indian government has spelt out key incentive policies to provide an impetus towards easing the flow of private investments and Royal Garden City is one of the first to have been conceptualised and planned to meet this objective,” says Manoj.

Under this initiative, RIRIC plans to develop firstclass resort communities and modern satellite cities in India, with the first project coming up near the new Bangalore airport. The project is touted to be one of Asia’s largest new city developments and is expected to become a model for such projects. The company has also planned similar projects in Mumbai, Delhi and Kolkata.

The first phase of the 6,000-acre development in Bangalore is conceived to be built on 3,000 acres and will include 13.59 million square meters of built-up space. Further to these developments , RIRIC has partnered with one of the worlds largest hotel chain’s to build budget style hotel rooms throughout India at an estimated investment of US $ 5 billion. The firm also has plans to announce exclusive rights in India with one of the world’s largest realty marketing groups by June.

The Royal Garden Villas & Resort, Bangalore, RIRIC’s inaugural project, lies on approximately 400 acres of prime land situated between downtown Bangalore and the new Bangalore International Airport. The project will offer residential apartments from bungalows to townhouses and the ones modelled after luxurious western subdivisions. Manoj says, “We will offer affordable homes from $ 80,000 to $ 300,000, as well as high-end villas that are in the half million dollar range.”

Through ingenious landscaping and architectural designs, Royal Garden Villas & Resort has been endowed with the look, feel, grace and sense of community enjoyed in Tuscany, but also offers amenities that could never even be imagined in rural Italy. Tuscany Square, in the heart of the Royal Garden Villas, is not just elegant but a standing testimony to refined living. In the charming piazza, with its feeling of a friendly neighborhood, residents, along with their children and guests, can sample fine cuisine or casual fare, the best of local and imported goods, or simply relax by the fountain and plan the rest of the day.

Real Estate Developers Bet on Eco-Friendly Buildings to Woo Buyer

Call it green revolution in the real estate business. Top developers are now betting on green buildings – that use less energy, water and natural resources, creates less waste and is healthier for the people living inside compared to a standard building – to woo large tenants. Even though green buildings involve an incremental cost of 7-10% over traditional buildings, developers see it as an opportunity for differentiation in a growing market.

The trigger is a growing environment consciousness among topnotch tenants, particularly the multinationals. In the request for proposals (RFPs) that are coming in, many MNCs are starting to ask the question about the green quotient. “It may not be mandatory today but going forward, many MNCs will make it mandatory,” says Jones Lang Lasalle-Meghraj chairman and country head Anuj Puri. Developers such as K Raheja and RMZ have decided to go all green.

RMZ’s 1.9 million sq ft mall, RMZ Galleria, in Bangalore is currently under construction and will be a green development. So will be K Raheja’s Mindspace projects at Mumbai and Hyderabad, both of which are currently under development. According to CII-Indian Green Building Council (IGBC), 147 million sq ft of green space has been registered in India to date across a total of 239 projects. At the moment, K Raheja is planning and developing around 14.5 million sq ft of green space across the country. “We are looking at the long-term and want to be the first ones to go green in a big way,” says K Raheja associate vice-president Shabbir Kanchwala.

The company has also signed an MoU with CII to train their architects and engineers in green technology, as there is a “dearth of green staff in India,” he adds. M Selvarasu, GM-Projects at RMZ, estimates the payback to be 7-8 years for gold-rated buildings and about 12 years for platinum rating. “The certification level will differ from project to project but all of it will be green,” he says. At the moment, RMZ is developing a gold-rated building in Chennai and platinum-rated building in Kolkata, both of which have been pre-certified by the CII-IGBC, with another 4-5 buildings in the pipeline.

The Lodha Group, though, is getting into it only partially. “Only our commercial buildings will be green,” says Lodha Group senior vice-president Bharat Dhuppar. Lodha has about twelve buildings in the pipeline and most of them will be commissioned between 2009 and 2010.

In their projects, K Raheja expects the cost to be around 7-8% higher. The savings, though, will be considerable. “We are looking at 30-40% power saving and about 20% water saving,” confirms Kanchwala. “Also in construction, we try and use a lot of recycled materials — aluminum and glass — as well as mix fly ash with the concrete that is used,” he adds. The use of glass too is being reduced. “We keep the use of glass to the minimum, to about 35% in commercial and about 20% in retail,” says Selvarasu.

In a world where energy costs are going up by the day and investments in energy are peaking, a green building which saves precious energy and comes at the same rental for the occupier is a decent marketing tool for developers. “Many of our customers are Fortune 500 companies who understand and prefer green buildings,” says Kanchwala. “The future is in sustainability,” says Selvarasu.

Rs 8,000 Crore Premium Realty Projects Face Delay

India’s largest real estate company DLF bought the 17.5 acre Mumbai Textile Mills land for Rs 702 crore from the National Textile Coporation (NTC) and announced a futuristic retail-cum-entertainment centre in Lower Parel. The project, which was earlier expected to be completed this year, is unlikely to be over before 2010.The same year, Shiv Sena leader Manohar Joshi’s Kohinoor Group and Raj Thackeray’s Matoshree Realtors bought the Kohinoor Mills land in Dadar from NTC for Rs 421 crore. The land was expected to be converted into a plush retail mall, but the property was put up for sale following disagreements between the retailers and the developers over rentals. So far, no one has bought the land. According to industry estimates, around Rs 8,000 crore of real estate projects covering over 40 million square feet are facing delays. Analysts said the construction cost for large commercial projects was Rs 2,000 per square foot, on average. In the process, developers are facing huge cost overruns. According to analysts, construction cost is growing 20 per cent every year and the developers are carrying a compounded interest burden of 30 to 40 per cent after three years. Real estate observers believe that cost of the projects has doubled in the last three or four years owing to the rise in input and construction costs, and increase in interest rates. Steel and cement prices, which are the main components in property projects apart from labour, have risen nearly 50 per cent since December 2005.The reasons for the delays are varied: tardy government approvals, stop-work notices from the municipality, construction delays, labour unavailability and so on. Though developers maintain that their projects are on schedule, in private they blame the delay in getting government approvals.

Real Estate to feel the Heat as Inflation Soars

The recent fate of real estate stocks on the bourses mirrored the first signs of trouble ahead for the industry. Fuel price hike and lower IIP (Index of Industrial Production) numbers were recent setbacks to the sector and now with a 11.05% growth in WPI (wholesale price index), inflation has emerged as a serious threat to the sector, which has been cooling off in recent times.Market experts predict further softening of prices. “Even though prices have corrected by 10-20% and even beyond in some regions, it has not yet touched the bottom. It is advisable to wait till at least the year-end to buy homes,” says Jai Mavani, real estate practice head, KPMG.However, since many developers are holding onto prices and even operating as a cartel in some prime pockets like Mumbai, postponing purchase decisions may not really be a solution. Despite the fact that volumes have fallen sharply, established developers are clearly unwilling to drop prices. According to Kotak Institutional Equities’ research report, home prices in Mumbai market continue to rise since last October.

Lohia Group to Invest Rs 350 cr in Real Estate Projects

Amidst correction in the country’s real estate scenario, diversified business house Lohia Group is planning to invest up to Rs 350 crore in developing three projects in the National Capital and Uttar Pradesh by 2011.

The group’s subsidiary – Lohia Developers Pvt Ltd plans to develop two townships in Lucknow and Moradabad, and a commercial complex in Delhi.

“We have already bought a 10-acre commercial land in Delhi, which will have about 1.5 million sq ft saleable area. In developing the property, we will invest about Rs 150 crore in the next 2-3 years,” Lohia Group Vice-President Ayush Lohia told reporters.

The company is currently awaiting for various administrative clearances to start the construction, he added. Besides, the company has also acquired 100 acres of land in Lucknow and 50 acres in Moradabad to develop two integrated townships there.

Lohia said the company would invest about Rs 150 crore in the Lucknow Township, while the Moradabad project would cost about Rs 50 crore.

“We have just acquired the land in the two cities. We have not decided much about the construction as it is in the planning stage,” he added. On funding the projects, Lohia said it would be a mix of internal accruals and debt, but refused to give details.

In property market, the growth in rentals for office space has slowed down during the first quarter of the current year on account of adequate supply, leading consultant Cushman & Wakefield had said in its latest report.

Lesser deposits, higher rentals for real estate players at Delhi airport

The real estate developers wanting to develop the hospitality district in the airport land may now pay lesser security deposits and higher lease rentals according to the latest proposal from the GMR group that heads the consortium developing the Delhi airport. This development is a shift from an earlier proposal and the issue has essentially taken a full circle. The new plan of GMR brings down the deposit amount and raising lease rentals. It will be partly funded by equity infusion from the stakeholders.

Britannia likely to sell Bangalore HQ

Britannia Industries, a food company, is likely to sell its corporate headquarters located in Bangalore, revealed The Economic Times. It is understood that the firm has already asked real estate consultants to quietly look up for potential buyers. The Nusli Wadia-led company may shift office to Mumbai where the Wadia Group is based. Britannia’s joint venture partner Groupe Danone is expected to exit from the partnership. It was on a condition placed by Danone that the Wadia Group had to locate Britannia headquarters in a city away from its home turf, Mumbai. When Danone will cease to be a partner, the company may have no compelling reason to continue with a head office in Bangalore. However, according to sources, if the property is disposed off, the company might take for lease new property in Bangalore or move to Mumbai. Denying any plans to sell the headquarters in Bangalore, Vinita Bali, managing director of Britannia, said: “We have not even thought about it, and there is no point in even asking me this question.” The newspaper further added that in order to generate funds, the group may be selling properties. The money thus received is likely to be invested in purchasing Danone’s stake in Britannia and also put into the group’s aviation business, GoAir.

State govt to build Mumbai sea link on its own

The Maharashtra government has decided to scrap the bidding process for the 22-km sea link between Sewri and Nhava Sheva and build the project on its own. The government said the decision was taken as it didn’t want to delay the Rs 6,000-crore project further because of the warring Ambani brothers, the main contenders for the contract.

“One can’t deny the fact that the project has been delayed because of the two warring brothers. If we had decided to go for re-bidding, we would have faced the same problem. So, we decided to do it on our own,” Public Works Minister Anil Deshmukh said after a meeting of the Cabinet Committee on Infrastructure (CCI).

The only two bidders for the project were the RELINFRA-Hyundai consortium and the SeaKing Infrastructure Ltd (SKIL)-IL&FS consortium. RELINFRA is led by Anil Ambani while SKIL is controlled by Mukesh Ambani. Last week, the bid granted to the RELINFRA-led consortium was treated as invalid by the Maharashtra State Road Development Corporation (MSRDC), the nodal agency for the project, as it did not respond positively to its request to extend the bid validity.

Officials said the MSRDC would now work out the financial model with other state infrastructure agencies like the Mumbai Metropolitan Region Development Authority (MMRDA) and the City and Industrial Development Corporation (CIDCO) and place it before the Cabinet panel within the next fortnight.

“After the panel approves the model, we will call bids for the engineering contract,” Deshmukh said, but refused to give any deadline for awarding the engineering contract. Deshmukh said the state government was also contemplating increasing the number of lanes on the link from six to eight. The state government, an official said, might consider options like levying an impact premium on real estate transactions in the vicinity as real estate rates would rise considerably after the link starts.

Sources close to SKIL and IL&FS welcomed the decision saying “this will ensure speedy completion of the project without creating any legal problems and give impetus to industrial development in the region”.

Rate hike to delay realty projects

Real estate developers see further slowdown in demand and price correction due to RBI’s move to raise interest rate. Caught between sluggish demand and rising cost of capital and construction, developers are deferring launch of new projects. Some even fear that ongoing projects may get delayed.

“Interest rate hike has dampened the sentiment in the real estate market, which will result in further slowdown. We see 5-15% price correction in the real estate sector in the next few months depending on the project and its location,” says real estate player Indiabulls’ group spokesperson Gagan Banga.

Real estate market has been under pressure for the past six months with sales declining by up to 70% in several markets and prices declining by up to 20% in overheated pockets like Gurgaon, Greater Noida, Ghaziabad and Kundli in the national capital region and some Mumbai suburbs.

“There is no alternative to credit. Land transactions have dried up due to developers’ inability to bring funds. The fund-raising plans of developers have also changed and some have limited their expansion plans,” says Cushman & Wakefield South Asia MD Sanjay Verma.

Some developers, especially smaller ones, also fear that their project might get stuck due to unavailability of funds. The bank credit had already dried up for small developers and they now fear rising interest rate will further increase their borrowing cost from NBFCs or private moneylenders. With homeloan rates, likely to go up, the advance money received from customers too will dry up forcing them to slow the pace of project execution.

Unitech general manager (corporate planning & strategy) R Nagraju, however, feels that high borrowing cost will have only a marginal impact on company’s margins. He pointed out that a bigger concern is slackening demand.

“We can’t do anything about high interest rates, but we need to stimulate demand by adapting our products suited to the current market needs. This could mean cutting down on frills and making houses more affordable to the end user,” says Mr Nagraju.

Unitech plans to launch houses at Rs 40 lakh in Gurgaon and at even lower price points in smaller cities, which it thinks will find large number of buyers. Similarly, Ansal Properties and Infrastructure (API) is tweaking its plans to suit the changing demand scenario.

“We plan to launch plotted development projects soon, which still has a good demand. Besides, we would focus on execution of projects rather than launching more housing projects,” says API CEO Anil Kumar.

Developers take to new routes as loans get costlier

Real estate developers, who are already straddled with stagnant demand for housing and high costs of construction, have now to reckon with a major liquidity crunch in the banking system and high interest rates on loans. While developers are optimistic that the current phase is temporary and the market is likely to rebound after the general elections, they are also seeking alternative funding methods including private equity players to fund their projects.

Currently, real estate developers pay interest rates as high as 18% on funds, due to their shortage. Niranjan Hiranandani, managing director, Hiranandani Constructions told FE, “I feel this is a temporary phenomenon and the liquidity crunch in the banking system will not have a major impact in the long term on the real estate market. Such ups and downs have happened earlier, too. There are many people who are still willing to invest and the years 2008 and 2009 will see more investors investing in the real estate market. Hence, we now need more construction. This is despite the fact that the cost of construction is going up due to rising inflation and limited supply.”

Earlier, Hiranandani had raised funds to the tune of $500 million internationally through UK’s Alternative Exchange. This means that the company is sitting on good cash reserves. Hiranandani said, “This is the right time for us to enter into new land deals as there is an expected correction in the Economy.” Similarly, many other builders who have sourced money from private equity players will now start buying land.

Says Rana Kapoor, managing director and CEO at YES Bank, “These days, most real estate developers are opting to get funded from private equity players for specific projects, as banks are charging high rates. Also, the traditional method of getting funded through banks are getting constrained, as the capital adequacy ratio and provisioning requirements is high on real estate exposure. This is one sector where banks have to exercise caution. In the long run, we believe, demand will soften and there will be a serious price correction in real estate properties.”

Star, Era Group in talks for Multiplex Biz

Star TV and engineering and construction major Era Group are reportedly in talks to enter into the multiplex management business.

Era will see the construction and management of multiplex properties while Star will lend its name, says a PTI report.

Era Group reportedly has major plans of installing 120 screens by next three years. So far, it is running a few screens in Meerut and Agra in Uttar Pradesh.

“We are talking to media group for the business. While the cinemas will be branded as Star, we will invest and run them,” said Era Group chairman H S Bharana to PTI. “About half of the properties will be constructed and owned by us while the rest would belong to other real estate companies.”

Era is also planning to strike long-term deals with major real estate players which are developing malls and multiplexes to run all the screens coming up in their projects.

Realtors Parsvnath to Expand into Retail

Real estate major Parsvnath Developers Ltd is looking for expansion into retail business, the company chairman said here Friday. “Retail is going to be the next focus area for the company. By the end of this financial year, we will have 5-10 retail stores operational,” Pradeep Jain, chairman of Parsvnath Developers, told reporters here.

“Initially, we will come up with retail stores in Delhi and Mumbai, followed by other cities. We are already looking for partners for our retail venture,” Jain added.

“These stores will be in different formats, including hypermarket, convenience stores, food joints and one larger version of hypermarket on lines of Mustafa, the 24-hour shopping mart in Singapore,” he said.

Parsvnath had last year formed a subsidiary, Parsvnath Retail Ltd, for its retail business and has acquired 5.5 million square feet of space across the country.

Actis buys Vaishnavi Project Stake

Bangalore-based real estate developer Vaishnavi Infrastructures has received an investment of $25 million from private equity investor Actis for its Rs 350 crore Bangalore project, an investment bank official said.

The proceeds of the investment will fund the construction and development of approximately 925,000 square feet of high-end residential and retail space at Yeshwantpur, a Bangalore suburb.

This is the first investment by Actis India Real Estate Fund, a $300 million fund sponsored by Actis.

“Actis has taken a significant minority stake in Vaishnavi’s Bangalore project as it is situated at the perfect location. With current realty market conditions … private equity players prefer to invest in projects as they can get the right valuations,” T R Srinivas, director at o3 Capital told DNA Money from his Bangalore office.

Srinivas added that, for further funding, Vaishnavi would take the “debt route” rather than sell more stake in the project.

With the current turmoil in the real estate market, it is becoming increasingly difficult for realtors to raise debt from banks. Industry experts believe many developers are paying interest of around 30% for new loans.

To address the problem, developers are hunting private equity investors to sell stake in their projects.

Recently, the New Delhi-based Unitech said it would sell a 50% stake in the first phase of its Mumbai project (near Bandra-Kurla complex) to Lehman Brothers for $175 million.

However, another Delhi-based developer Parsvnath Developers said it has no liquidity issues for its current project.

“I have Rs 300 crore in fixed deposits and over Rs 500 crore is unutilised and sanctioned debts available with us. I do not see any liquidity issues and am in a comfortable position,” Parsvnath’s chairman Pradeep Jain said. He added that the average cost of the funding is around 12% for Parsvnath.

Langham Hotels forays into India with Wadhwa Developers

Hong Kong-based Langham Hotels International (LHI) is all set to foray into the Indian hospitality segment. It has recently tied up with Mumbai-based real estate developer Wadhwa Developers for the same. The hotel chain entered into a management agreement with the developer for a five-star property being developed in Pune. It will introduce its five-star brand Langham Place Hotel for the same. The property located near Koregaon Park, one of the prime locations in Pune, is slated for operations by 2010 end.

The property will consist of around 180 rooms, a coffee shop and a speciality restaurant. It will also house Chuan Spa, the group’s spa brand. The group will also focus on developing an extensive conferencing facility to cater to the meetings, incentives, conferences and exhibitions (MICE) segment.

Besides this property, LHI also plans to expand its presence in the Indian market. “We’re in discussions with several real estate developers in India, and are considering locations in key cities like Mumbai, Ahmedabad, Delhi, Chennai, Kolkata, Goa and Bengaluru,” says Helmut Knipp, Senior Vice President – Development, Langham Hotels International

Mega Realty Deals dot Delhi’s Golf Links

The real estate sector might have hit a rough patch of late, but that has not stopped India’s rich and mighty from striking housing deals in Delhi’s elite areas at fancy prices. Three low-profile but high-value transactions worth Rs 300 crore have been closed in Central Delhi’s posh Golf Links locality, where infrastructure major GMR, a prominent auto dealer, former prime minister IK Gujral’s son Naresh Gujral and a politician have each bought a house in the past two months. According to property consultancy firm Cushman & Wakefield, the average prevailing rates for Golf Links could be one of the highest in Delhi at Rs 7 lakh per sq yard, marginally lower than Chanakyapuri’s Rs 7.25 lakh per sq yard. Prices in both localities have shot up four-and-a-half times in the past three years and by over 50% in a year. Limited availability of properties in the area and rising demand from the rich-getting-richer clientele has resulted in such price appreciation. Besides the strategic location, this area has a certain snob value attached to it. Buying a house here means announcing to the world that one has arrived in life. The past few years have seen quite a few deals in these localities, one rivaling the other in terms of value.

Builders Pull out of Hotel Ventures as Profits Dry up

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 enter the hospitality sector, according to sources.

Real estate developers with presence in National Capital Region (NCR), Bangalore, Chennai, Pune, among others, are opting out of four and five-star hotel projects. According to sources, a five-star hotel in Pune shelved its plans recently as its developer pulled out of the commitment.

“The return on investment in a hotel will not be as high as it will be in putting the land to commercial use. Committing to the hospitality sector means waiting for five or more years (till the hotel becomes operational) to get returns,” says Shivaram Malakala, executive director of Habitat Ventures, Bangalore.

“Developers are looking at realising their money through any alternative means and are thus in the exit mode,” he says.

However, Wyndham Hotel Group International, which is promoting Royal Orchid Hotels and Ramada Worldwide, has denied any such development.

Says Sunil Mathur, director (international development), Indian Ocean Region, Wyndham Hotel Group, “All our projects are doing fine. They could be delayed by a month or two but none of them have been shelved.”

While Bangalore is said to have around 10 such properties up for sale, NCR has over five properties. Last year, over 20 four-star hotels were slated for construction in Bangalore, of which six properties have begun operations.

According to a Mumbai-based hospitality consultant, the developers are facing cash crunch and have either put the property (unfinished buildings in some cases) on sale or have asked the hotel companies to find them partners who can invest in the venture.

Properties that were worth Rs 30 crore, for instance, are being sold at a discount of over Rs 25-50 lakh. To be sure, players in the field believe that this slowdown could benefit the big players in the market and hoteliers will look to acquire land in areas where it was otherwise difficult for them to make purchases.

“If the real estate market slows down and there is still demand for hotel rooms in that micromarket, a developer might want to mitigate his risk of holding on to unsold inventory by considering lower immediate returns in a hotel project,” says Shreenath Shastry, national director (hospitality and leisure), Knight Frank (India).

In 2007, over a dozen global chains, including the Hilton, Accor, Marriott International, Berggruen Hotels, Cabana Hotels, Premier Travel Inn and InterContinental Hotels group, announced plans to set up over 350 five-star, four-star and budget hotels and 50 villas in India.

Most of these chains joined hands with real estate developers. The plans would roughly translate into 65,000 additional hotel rooms a quantum leap, considering that over the past decade the total number of hotel rooms in all categories only grew by 10 per cent to about 92,000 rooms.

The slowdown in the real state sector can, however, soften the occupancy rate of hotels in the metros and leisure destinations, say analysts.

The occupancy rate in metros at present is between 75 to 80 per cent, which could go down to around 70 per cent in the next few months as the off-season will begin. “If the off season is weaker than usual, there could be a down grading of hospitality stocks,” said an analyst.

“Builders could be putting the land to commercial use as the land rates (FSI cost) are too high (more that 50 per cent of the cost of the project for a hotel), and the commercial market is bullish. Also, a particular micro market may see many hotel rooms coming up, as a result of which a non-hotelier developer may develop cold feet.

Feasibility studies to that effect have a tendency to scare a developer as it is easy to predict supply and difficult to predict demand for hotel rooms,” adds Shastry.

Old Havelis, Palaces making way for Apartment Complexes

Regarded as the most ancient living city in the world, Varanasi evokes exotic and spiritual feelings. The fact that the city is a maze of narrow lanes and bylanes makes the real estate sector follow its own typical pattern.

The traditional mindset of the people here has resulted in only the properties in established and old areas witnessing a surge in prices. Buyers are still reluctant to move to new areas. “People do not prefer to invest in new areas that are being developed due to the age-old mindset of the people,” said VN Singh a prominent property developer and investor.

The city, well known for zari-zardozi work, weaving and Banarasi sarees, is flush with funds leading to property prices being comparatively higher than other large cities in Uttar Pradesh.

The commercial hubs are Sigra, Mahmoorganj, Ardali Bazaar, Lanka, Gadaulia and Lahurabir. Lease rents for an office space in Sigra range from Rs 40-50 per sq ft a month; Mahmoorganj Rs 30-40 and Lahurabir Rs 25-30. While the lease rent could go much higher — by about 20% — in these areas if the property is located on the ground floor with good frontage. Commercial property rates for outright purchase in these areas range between Rs 3,000 and Rs 5,500 per sq ft.

Availability of commercial spaces for sale is less as owners tend to hold on to their properties only offering it on rent. But all this is set to change with malls such ad IP Mall and JHV Mall. The traditional city of lassi and kachaori-jaleebi is embracing the burgers of Mac Donalds and even the Italian and Israeli cuisine.

The huge tourism market — domestic and foreign visitors — has been a big boost for the top luxury hotel chains in the city. The thriving hotel and restaurant industry is another driver of the real estate market in the city. The luxury hotels are mostly located in the Canttonment, Assi, Lahurabir-Jagatganj areas. Many old palaces are being converted into heritage hotels to woo tourists.

Though the flat culture is slowly catching up in the city it is preferred mostly by the service-class people, majority of whom have shifted from other places. Old havelis and palaces which dot the city are making way for apartment complexes and realty majors have slowly started taking an interest in the city’s development.

Devang Dhawan of Dhawan Property and Real Estate Agents said: “Development and marketing of properties, both residential and commercial, in the city is mostly dominated by the local builders, some of whom have executed large projects and have acquired credibility among the locals. Big names like Unitech, Ansals and Sahara Housing have now started initiating housing projects.”

However, the influx of population in the city due to its thriving business and tourism activity is leading to real estate growth on the outskirts of the city in a well planned manner. The new growth areas are Shivpur, Sarnath, and Rohania.

Kolkata heating up

The real-estate market in Kolkata has been largely unaffected by the soaring inflation and the US economic crisis. While the sales and price figures in other metros and cities have shown signs of cooling down, the prices in Kolkata have increased by 7-10 per cent over the last four months. The city has managed to avoid a crisis because prices here had never reached ‘unrealistic’ proportions. Kolkata’s real-estate market is also relatively stabilized since the number of speculative investors here is much less compared with end-users.

Need for relaxing FDI, PE norms for small city builders

With land and construction material prices skyrocketing, bank finance hard to come by and bookings slowing down affecting the cash flow, the real-estate industry in Coimbatore wants the Centre to tweak the FDI and foreign Private Equity (PE) investment norms in real estate in small cities so that these fund sources are able to extend them a lifeline. The industry also emphasizes the need for classifying the real-estate sector as an industry so that it becomes eligible for bank finance at reasonable interest rates. Due to the opening up of the real-estate sector in India to FDI and PE investments; the sector has witnessed huge funds flow. This has benefited mostly large builders based in metros and big cities and most of the real-estate developers in small cities such as Coimbatore have not been able to access funds from these sources because of the stringent norms. So there is a need for relaxing these norms as the size specified for FDI investment is very large for a city of the potential of Coimbatore. The Government should also accord industry status to the real-estate sector that would make bank funds available at reasonable rates.

Developers plan to build low-cost airports

The financial turbulence that airlines are experiencing these days due to soaring fuel cost is pushing airport developers to think on lines of building low cost airports. Such airports would mean lower charges for airlines, helping their survival and also no extra charges for passengers that would help reverse the trend of lower demand. This thinking comes shortly after airlines are bleeding heavily due to high global oil prices and delayed payments to airports by them have become common. Recovering costs of fancy airports through levy of user development fee (UDF) has also become a touchy issue in these times of high surcharges and taxes. Fancy airports can either be built with government support or levying very high charges on airlines and UDF on passengers. In the current scenario, this is increasingly becoming a difficult option for cities where traffic is going to be less than 10 to 20 million. So low cost but ultra efficient airports are the need of the day Creation of low-cost airports with economical charges has been a major demand of Indian LCCs as they offer relatively cheaper tickets while paying the same amount as airport charge as full service carriers.

Sarovar to Sign 8-Hotel Deal with Phoenix JV

After its five-hotel deal with Vipul Hospitality late last year, Sarovar Hotels & Resorts is now in the process of finalizing a brand new eight-hotel deal with the JV Company of Phoenix Hospitality and Entertainment World Developers (EWDPL).

The eight hotels, says Sarovar Hotels & Resorts executive director Ajay Bakaya, will be set up at tier-II locations of Raipur, Udaipur, Nanded, Jabalpur, Chandigarh, Indore, Ujjain and Bhilai. At many of these places, the plan is to have malls-cum-hotels for which development and construction is already underway.

These eight new hotels will add anywhere between 1,000-1,100 rooms to Phoenix’s hospitality portfolio. Going by an average of Rs 30 lakh a room as development cost, the total cost of these eight hotels could be around Rs 300 crore, excluding the cost of land, says an industry source.

Sarovar Hotels & Resorts will manage, market and provide reservation systems for these properties across India for 15-20 years, It would also guide in the design process, says Mr Bakaya. Phoenix, on its part, has the option to choose from Sarovar’s portfolio of Premier, Portico and Hometel brands for these hotels as well as the Park Plaza and Park Inn brands that Sarovar represents in India.

Many of these locations do not have any quality hotels and with these properties, Sarovar and Phoenix would gain a first-mover advantage in these markets. The average room rates that can be expected in these locations is in the Rs 2,000-3,500 range. Since Sarovar itself has an aggressive expansion plan across India, the two are likely to have a non-compete agreement within the same brand (within a 2-3 km radius) in the city.

Apart from the proposed hotels, Phoenix Hospitality, the hospitality arm of Phoenix Mills, is developing nearly 14 hotels across the country. Phoenix has tied up with Hong Kong-based Shangri-La to manage its hotel property in Lower Parel in Mumbai (which opens in 2009) and has also tied up with the Hyatt Group and US-based Marriott International to manage its other hotel properties.

Phoenix, which had picked up a 42% stake earlier in EWDPL, a mall developer based in Indore, was reported earlier this month as planning to raise nearly $450 million (nearly Rs 1,890 crore) from private equity investors to fund its mall and hospitality projects. The company is planning to raise $200 million to fund its retail plans while the $250 million would fund its hospitality projects.

Real Estate firms want a Regulator

Builders and real estate developers are not averse to the idea of a regulator in the real estate sector.

Confederation of Real Estate Developer Association of India (Credai) president Kumar Gera said that developers want a regulator to discourage the unscrupulous players from entering the sector.

He said that Credai has made a number of representations to the government in this regard. He said that the real estate development industry is fragmented and there is no pre-qualification, resulting into entry of fly by night operators in the sector.

He said, formation of a regulatory body should not end up creating another layer of controls and licensing, which would promote corruption.

President of National Real Estate Development Council (Naredco) Rohtas Goel concurring with the view said that government should first draft a regulatory act, with the consultation of real estate body. The regulatory act should be adopted by all states. Goel said that in the competitive era, developers while selling their project promises a number of things to its buyers. But some times, he might not be able to deliver those things on time because of changes in the law or delay in getting permission In that situation, there are cases when customer refuse to pay to ask for damages. If there is a regulator, he said, genuine builders can seek redressal in that situation.

Prudential forms JV to Invest in Indian Real Estate

Prudential Real Estate Investors on Tuesday announced that it has launched a joint venture with Beekman Helix India Partners LLC (BHI) to invest in real estate in India. Through its new private equity real estate platform, the venture plans to embark on a strategy to create real estate funds for institutional clients.

Prudential Real Estate Investors is the real estate investment management and advisory business of Prudential Financial Inc.

The joint venture, operating as Pramerica BHI India and headquartered in Gurgaon near New Delhi, will invest in middle-income residential development projects and office parks on behalf of institutional investors around the world. The strategy may also include other sectors.

Working with BHI through a relationship formed in 2006, Prudential Real Estate Investors was among the first US-based real estate investment companies to invest in real estate opportunities in India.

So far, BHI and Prudential Real Estate Investors have made 11 equity investments, totaling about US$220mn across seven markets in India, including Bangalore, Chennai, Mumbai, the National Capital Region (NCR) and Punjab.

CHD Developers to Invest Rs 1k Cr in Realty Sector

Real estate developer—CHD Developers have firmed up plans to pump in Rs 1,000 crore into various projects over the next 3-4 years. The developer plans to raise the money from the market as well as plough back the profits.

The company will be developing group housing projects as well as commercial complexes. “We have a proposal to set up retirement lifestyle housing project for the retired people,” said RK Mittal, chairman and managing director,

CHD Developers. He further informed that the company targets to build resorts and luxury housing for people above 55 years of age. “These projects will come up in Haryana, Rajasthan, Mathura and Rishikesh etc. We will be designing the resorts in consultation with an Australian expert and things will be finalised soon.”

CHD Developers has recently opened bookings for residential plots at its mega project, the CHD City, an integrated township spread across 200 acres on GT Road in Karnal, Haryana. “About 500 plots are already booked and now we have opened the booking for 200 more. Next stage will be to launch villas, commercial spaces and apartments. A shopping mall is also coming up in the township, which will have 2 cinemax screens. We are also developing group housing project in Vrindavan and Haridwar. Plans are in the pipeline to develop about 350 villas in Ludhiana over 50 acres and the plan will be finalised soon,” said Mittal.

The company has delivered projects covering more than 700,000 sq. feet area and proposes to develop more than 10 million sq. ft. area in the next few years. Its turnover in the year 2007-08 was Rs 70 crore and target for this year is Rs 100 crore.

Deepak Parekh proposes real estate regulator

HDFC chairman Mr. Deepak Parekh has advocated the need for a real estate regulator in an attempt to protect the interest of property buyers in the country. The real estate sector has been growing rapidly and is a sensitive sector given its strong inter-linkages to other industries in the Economy. Mr. Parekh feels that developers rarely offer any warranty for the flats and in case of disputes, consumers have only the consumer or civil courts as recourse – both of which may take ages before a case can even come for hearing. Delays in handing possession of the property to a purchaser have become the order of the day. Needless to say, the developer community is free from any liability in case of any delay. Parekh conveyed that the subprime crisis has also brought to light the fact that there is no substitute for cautious and prudent lending. The basic tenets of home financing are simple – lending must be done according to earning capacity, which is on a cash flow basis and not on asset values.

No More ‘Jhuggis’ and ‘Jhopris’

Buoyed by the success of co-operative housing for the middle class, the government now wants to do the same for the urban poor. And if this works out, jhuggi-jhopris in Delhi could make way for neatly-planned, permanent shelters for the poor. The plan was originally mooted by the Delhi government to solve the problems of slum colonies but has now been taken up by the Urban Employment and Poverty Alleviation (UEPA) ministry. With the objective of making Delhi a ’slum-free city, the Delhi Cabinet has decided to invite applications in June for allotment of low-cost houses under the Jawaharlal Nehru National Renewal Mission (JNNURM) scheme. Chief Minister, Ms Sheila Dikshit, who presided over the Cabinet meeting, said, this decision is a major step to provide a respectable address to the residents of slum and ‘jhuggi’ clusters in the city. The residents with an annual family income of up to Rs 60, 000 would be eligible for the low-cost dwelling units which are being constructed under the JNNURM scheme. These houses would provide all basic amenities such as schools, parks, transport, drinking water, electricity and shops for daily needs.

Ace Tennis Player joins hands with a Realty Player

Ace tennis player Leander Paes today joined hands with real estate developer Omaxe Ltd to design and manage fitness centers in latter’s five townships in North India. ‘Leander Sports’, the company promoted by Paes, today signed a memorandum of understanding to provide the concept and design of health clubs, spas, meditation centers, yoga cells, gyms, sports complexes in the upcoming five townships of the developer. According to the MoU, ‘Leander Sports’ would design and manage the health and sport centers in Omaxe’s integrated townships coming up at Ludhiana, Indore, Yamuna Nagar, Noida and Faridabad. It is not a revenue sharing tie-up, but ‘Leander Sports’ would only charge a consolidated fee for all the five projects, the ace tennis player added.“This partnership would help us in providing healthy living designs to our residents. Though we have tied up only for five projects, but we are looking forward to other projects also,” Omaxe Chairman and Managing Director Rohtas Goel said. Besides, ‘Leander Sports’ is also constructing two sports centers- one at Bangalore in 20 acres of land and the other at a 20-acre area in Pune, Paes said.

Zoom Developers gets contract to build budget hotels

Real estate firm Zoom Developers has bagged a contract from the Indian Railways to build four budget hotels.In a press statement, Zoom said the company has won the bid for IRCTC Ratna Budget Hotels at four places. The Indian Railway Catering and Tourism Corporation, a sister organisation of Indian Railway has today opened tender for budget hotels at four sites. The places are Chennai, Pondicherry, Manglore and Coimbatore. However, IRCTC sources said PTI that nothing has been decided yet. The tender committee is yet to submit its report and decision could be taken only after submission of the report.

Banks turn choosy on realty loans

Sensing a correction in the real estate sector, commercial banks have become selective in lending to new residential and commercial real estate projects. Besides increasing the lending rates, some banks have asked the promoters to increase their share in project funding in an attempt to mitigate the associated risks. Banks have already turned selective in taking up new funding proposals. The Reserve Bank of India has already declared the real estate space as a sensitive sector under its prudential norms. The sector thereby attracts higher risk weightage (banks have to set aside higher amount of capital for real estate exposure) and the lending is closely monitored. Keeping with the rising cost of funds and the need for additional capital for risky assets, the banks have increased the lending rates for real estate projects. The real estate companies are now paying prime lending rates (PLR) for new projects. The growth in loans to commercial real estate remained high, notwithstanding some moderation, RBI said in its macro-economy report for 2007-08.

Leading Bahraini Islamic Bank to Invest in Indian Real Estate Sector

Khaleeji Commercial Bank (KHCB), one of Bahrain’s leading Islamic banks, has announced that it has raised $163.5 million for a real estate investment company focused on India. The fund – named Danat India Investment Company – will invest in an unnamed real estate development project near New Delhi, India’s capital. The development is targeted at the expanding middle class of India. India, currently one of the leading emerging markets is expected to be the world’s third largest economy by 2050, ahead of Japan, the UK and Germany. The economy has posted an average annual growth rate of more than 7% in the decade since 1994, with 2007-2010 growth estimated to be maintained at over 8%. The demand for quality real estate in India is seeing unprecedented growth, adding to the existing gap between demand and supply across all segments of realty, providing tremendous opportunity for property development.

GMR’s Delhi Hospitality Project hits AAI Hurdle

The GMR Group-backed Delhi International Airport’s (DIAL) plans to develop a 45-acre hospitality district in the capital have hit an air pocket. Airports Authority of India (AAI), which owns 26% in DIAL, is unwilling to raise the required fund of Rs 1,000 crore for the proposed real estate development.

It was decided that all the stakeholders in DIAL would bring in funds in proportion to their equity holding in the company to part finance the project. This arrangement was opted after AAI raised its objection to GMR’s plan to collect security deposits from realty developers. DIAL is a joint venture between GMR (50.1%), AAI (26%), Fraport and Malaysian Airports (10% each) and IDFC (3.9%).

“AAI has said it would not pump in Rs 1,000 crore for the proposed real estate project. This would further hold the hospitality project at the airport,” a government official said. The dispute between AAI and GMR began last year when the former floated a subsidiary — Delhi Aerotropolis (DAPL) for the hospitality district. As per the plans, DAPL was to receive deposits of about Rs 2,835 crore in lieu of leasing land to developers.

This revenue-generation model was objected by AAI saying it would reduce rent from realty developers and hence result into significant revenue loss to them. “We, however, expect to solve the issue and work out some model in the next few weeks. This would be acceptable by all the parties concerned,” he added.

The agreement stipulates that AAI will receive 45.9% of the revenue collected by DIAL. DIAL had earlier planned to build 3,000-room hotel complex at the capital’s Indira Gandhi International (IGI) airport before the Commonwealth Games in 2010.

According to an estimate, Delhi currently faces a deficit of about 30,000 hotel rooms. The airport developer is allowed to do commercial development at 5% land of over 5,000-acre Delhi airport. In the first phase of modernisation, DIAL plans to invest Rs 8,900 crore in building new terminals and a new runway.

Norms for Housing Loans by Coop Banks Relaxed: RBI

Making it easier for urban cooperative banks to extend housing loans, Reserve Bank has relaxed the risk provisioning norm for purchase of residential properties up to Rs 30 lakh.

The central bank issued notification yesterday in pursuance of the annual credit policy announcement made by the Reserve Bank Governor Y V Reddy on April 29.

Earlier on May 15, the Central Bank had relaxed the risk provisioning norms for housing advances by the commercial banks. “It has been decided to enhance the limit of Rs 20 lakh to Rs 30 lakh in respect of bank loans for housing in terms of applicability of risk weights for capital adequacy purposes. Accordingly, such loans will carry a risk weight of 50 per cent,” Reddy had said.

The move would provide the urban cooperative banks additional capital for lending more to housing sector. For banks, the amount of capital they are required to set aside for each loan is decided by minimum capital adequacy ratio prescribed by the central bank. Capital adequacy ratio is the ratio of a bank’s net worth to its risk-weighted credit.

According to the analysts, the RBI has modified the provisioning limit for housing loan to take care of the growing property rates mainly in the urban centers.

The risk provisioning earlier was 75 per cent of the loan value between Rs 20-30 lakh. For loans exceeding Rs 30 lakh for purchase of residential property, the banks would have to make a risk provision on 75 per cent of the loan amount.

Realty rocks in Micro Markets

Not everyone is unhappy about the way real estate prices are moving up in the country. In fact, there’s reason for cheer for some who live in the periphery! Would you have thought five years back that your property in Indirapuram in NCR, Lower Parel in Mumbai, Old Madras Road (OMR) in Chennai or Bellary Road in Bangalore would fetch you such high returns? Maybe not. These locations may not have been commanding a premium then, but today the rates here have jumped manifold.

Figure this out: A phenomenal level of growth, with residential capital values in certain areas recording a 400-500% increase, has been wit-nessed in the last five years. Locations such as Noida in NCR, Lower Parel and Parel in Mumbai and many areas in North East Bangalore such as Hebbal, R T Nagar, Bellary Road, Yelahanka and Cox Town have seen a rise of over 400% in the last six years.

SundayET com-missioned a survey to global real estate consultancy Cushman & Wakefield(C&W) to find out why certain locations have seen such a massive and unexpected rise in values.

The study attributes to a mix of different factors for the phenomenal surge in values. While the Noida-Greater Noida Expressway has largely helped to improve infrastructure facilities, a developer’s focus on middle-class housing in Indirapuram has led to a scaling up of prices.

Release of mill land in Central Mumbai locations such as Parel, Lower Parel and 7 Rasta and announcement of the 6-lane IT corridor in OMR in Chennai led to a dramatic rise in values. Areas such as Hebbal, R T Nagar, Bellary Road, Yelahanka, Dodballapur Road,Cox Town and Frazer Town in North East Bangalore have largely benefited from proximity to IT offices that fuelled demand.

Industry experts don’t discount the fact that steep growth has been witnessed in certain micro-markets. Vipin Agarwal, executive director, Omaxe feels that the high realty rates in prime areas led to a springing up of other locations.

“When core areas became non-affordable, alternative locations began to be seen as more feasible options. Now with locations such as Noida and Lower Parel also witnessing high demand and prices, people will shift to other peripheral areas in the near future. Greater Noida, Sonepat, Karjat, Navi Mumbai etc will soon emerge as the next best investment options.”

Moving to peripheral locations might make sense, especially if one sees the Delhi-NCR market where locations such as Noida and Gur-gaon have seen an astronomical rise in values. Although the real estate market in Delhi NCR has in itself seen a major growth in terms of sales values and number of transactions, it is certain micro-markets in the NCR region that have steadily climbed up in capital values. The Noida-Greater Noida Expressway has seen excellent growth in the past six years.

Average capital values that stood at Rs 1200 to Rs 1500/sq ft in 2002 have gone up to Rs 4,000-Rs 6,000/sq ft, a percentage growth of nearly 430%! In case of a plotted development, the values have gone up from Rs 8000/sqm to Rs 45,000/sqm during the same period.

The construction of the Noida Expressway has had a major influence on the swing in values. Its connectivity with South Delhi, Central Delhi, and Fakirabad & Greater Noida is another reason which won it favor. Indirapuram, that has seen a percentage growth of 230%, is another example.

The biggest reason that has contributed towards its growth has been the excellent connectivity it has with Delhi & Ghaziabad. In fact, even after the recent slowdown of the market, this area has seen a steady demand by the end-users and the prices are appreciating gradually.

Says Rajeev Talwar, group executive director, DLF, “No new supply is coming up in locations such as Nariman Point, Marine Drive or Con-naught Place. That has led to shifting of attention to other locations which are close to the heart of the city. Hence locations such as lower Parel, OMR and Noida are now thought to be much more commer-cially viable than say a few years back. Even in terms of residential options, these areas are seen as being rather lucrative.”

In Chennai, it is locations such as OMR, GST and Sriperumbudur that have witnessed a big boom. While OMR has seen average residential capital values rise from Rs 1300/sq ft in 2003 to Rs 3,500/sq ft in 2008, GST has also been witness to an almost similar rise.

In fact, a major reason for OMR springing up has been the announcement of the 6-lane IT corridor as land prices increased significantly soon after. In Bangalore, areas such as Hebbal, R. T. Nagar, Bellary Road, Yelahanka, Dollars Colony in North East Bangalore have seen a high percentage growth of 350% over the last six years.

Central Mumbai locations such as Lower Parel and Parel have re-corded a 400% increase in residential capital values over the last 5 years. Values have risen dramatically based on the latent demand for housing met by the release of mill land in central Mumbai and the launch of good quality residential developments. The destination has also attracted numerous office and retail developments thus trans-forming dead mills, little shops, slums, etc. into stunning high-rises, malls and intelligent office buildings.

Unitech bags $700 mn Lehman Investment

Lehman Brothers Real Estate Partners is investing $700 million in Unitech’s real estate projects in Mumbai. The $4-billion global private equity fund managed by Lehman Brothers is learnt to be in the process of striking three separate deals with Unitech to invest a total of $525 million. This is in addition to Lehman’s $175-million investment in Unitech’s Santacruz project in Mumbai, which was announced on Monday.

According to sources, Lehman is negotiating with Unitech for a similar stake in two projects of 1 million sq ft each in the Santacruz project. This would mean an investment of $350 million. These two deals are likely to materialise in the next 3-4 months.

Besides, Lehman and Unitech may strike another deal to develop a 1 million sq ft office space in Worli. Sources say this deal may be closed sooner, as the negotiations in this case have reached a fairly advanced stage. Indications are that Lehman is willing to invest nearly $175 million in the project. Unitech holds 50% equity in the Worli project.

Unitech on Monday said Lehman has agreed to invest approximately $175 million (Rs 740 crore) to acquire a 50% stake in the initial phase of the Santacruz project on the Western Expressway of Mumbai.

Unitech shares, which are down close to 60% this year, gained 5.6% on BSE to close at Rs 197.80 on Monday following the announcement of the deal and a broader surge in the market. The benchmark BSE Sensex gained 1.36%.

As per the agreement, Lehman gets 50% equity in the SPV, which will develop just 1 million sq ft of the entire project of 18 million sq ft of office space in Santacruz. The Western Expressway JV – an equal partnership between Unitech and a local Mumbai developer – owns the entire project. The JV has thereby offloaded its 50% stake in the SPV in favour of Lehman. The deal has valued the entire Santacruz project at Rs 26,640 crore.

Lehman’s current and proposed investments in real estate projects are being seen as a major boost to the Gurgaon-based developer. The global credit crisis, RBI’s policy towards lending to real estate and falling realty stocks have together forced Indian realty firms on the backfoot.

India’s leading developers DLF and Unitech have postponed their office trust share sale in Singapore, even as borrowings from banks have substantially gone up. Smaller developers are facing a bigger crunch in the absence of bank credit and are forced to borrow at an exorbitant rates from non banking finance companies and HNIs.

In the given scenario, private equity has emerged as the only viable option. But industry sources say that even PE players are using the changed circumstances to their advantage, forcing developers to settle for lower valuation of land, the prime asset for developers.

Zoom Developers gets Contract to Build Budget Hotels

Real estate firm Zoom Developers on Monday said it has bagged contract from the Indian Railways to build four budget hotels.

In a press statement, Zoom said the company has won the bid for IRCTC Ratna Budget Hotels at four places.

The Indian Railway Catering and Tourism Corporation, a sister organisation of Indian Railway has today opened tender for budget hotels at four sites.

The places are Chennai, Pondicherry, Manglore and Coimbatore. However, IRCTC sources said PTI that nothing has been decided yet.

“The tender committee is yet to submit its report and decision could be taken only after submission of the report,” the sources added.

Check-ins drop 10% in Business Hotels

The slowdown in some segments of the economy may be beginning to impact the hospitality industry. Occupancy levels at hotels catering to business travelers have dropped 5-10% since January-end, with major impact seen in Bangalore and Hyderabad, analysts said.

Though industry experts dub this a cyclical phenomenon, there are others who believe there is more to the dip than just the seasonality. A slump in the stock markets, rising input costs and weakening dollar have led to a cut in travel and lodging costs by the companies.

And if this continues, business hotels may be in for tougher times. May-June is a lean phase for business travel since its vacation time. Awadhesh Garg of Kotak Securities Ltd, said economic activities have been on the decline since January-end.

“Due to rising costs, companies are facing pressure on their earnings; intentional cost-cutting is leading to a 5-10% drop in occupancy levels for business hotels in June,” Garg said.

Though a full-fledged slowdown has not hit India Inc yet, fears of one are impacting business, say experts. Also, major expenditure-cutting exercises by information technology sector companies, which are hurt by rupee appreciation, have begun to impact Bangalore and Hyderabad hospitality segments.

Pradeep Kalra, senior vice president, marketing, Sarovar Hotels, said business has been affected by slowdown fears. “Another reason for the dip in occupancy is the hike is airline fares. This has impacted corporate travel.”

Rs 300 Crore Housing Project to be developed by Elpro Estates

Elpro International’s real estate arm Elpro Estates plans to invest around Rs 300 crore in developing a mall and a housing project in Pune. A part of the investment will be through internal accruals and a part through debt. The mall would be known as Elpro Mall. It would be of seven and half lakh sq ft and be operational by the first quarter of 2009. The mall will be developed on 1, 50,000 sq ft of land and will have more than 50 brands apart from a multiplex and a food court. The housing project of the company, ‘Metropolitan’ will be developed on an area of five lakh sq ft. In the phase I, there will be around 350 apartments. Later, they may come up with similar projects in the area. The projects have been planned keeping in mind that there is an IT park nearby and hence there would be ready buyers for the apartments.

DDA to Come up with 6, 000 Flats in North and South Delhi

The Booming real estate prices and the mounting rentals in the city have left the middle-income families dumbstruck. The only option often left for them is the Delhi Development Authority (DDA) flats, which are available at a reasonable price. The Delhi Development Authority (DDA) is all set to launch its biggest housing schemes since 2004 in July 2008. According to the officials, about 6, 000 one and two bedroom flats will be on offer. Thought the final cost of the flats is yet to be decided, the senior officials of the civic agency said it would vary between Rs 12 lakh and Rs 22 lakh, depending on the locality and carpet area. These flats will be mainly located in north and southwest areas like Narela, Vasant Kunj, Dwarka, Rohini, Shalimar Bagh and Bakkarwala. The registration amount of the flats will be Rs 1.5 lakh and it would allot the flats through a draw of lots.

HDFC takes stake in Acme’s housing project

HDFC Property Fund international has picked up a nearly 50 per cent stake in Mumbai-based Acme Group’s housing project at Thane in Mumbai. Though the fund has bought the stake in a special purpose vehicle (SPV) to develop an eco- township, the exact financial details is yet to be known. The township – Acme Ozone – will spread over 1.1 million sq.ft and will have 760 residential apartments along with a small commercial space based on the eco-living theme. Work on the township project is underway and expected to be completed within four years.

Peninsula widens Portfolio with IT Parks, Townships

Peninsula Land Ltd, the Ashok Piramal-backed real estate company, is diversifying into integrated townships and information technology parks in Pune, Nashik and Hyderabad. It also plans to enter Ahmedabad, Chennai, Mysore, Bangalore and Coimbatore by next year. Peninsula is developing five projects, which includes one residential and one township project in Nashik, and integrated townships and IT Parks in Pune and Hyderabad. The company is taking a very risky decision by putting up five huge projects during the same time, because looking at the present conditions it is unsure whether it will be able to sell the residential units. Secondly, these are IT Parks not special economic zones where IT companies would rarely tread as the tax benefit scheme will get over by March 2009 even before the project is ready.

MAN Industries to diversify into real estate sector

MAN Industries India, a line pipe manufacturer and part of UK’s MAN Group, today announced its foray into real estate with a newly formed subsidiary MAN Infraprojects in Mumbai, where property prices have almost doubled in the last two years. It plans to invest 10 billion rupees over three years to develop seven real-estate projects in Mumbai, Navi Mumbai and Indore. The company expects realisation of 40 billion rupees from these projects which will have a total built-up space of 10 million square feet. In Phase I, MAN Infraprojects Limited plans to develop three projects two in Mumbai and one in Navi Mumbai with a total built-up area of over one million sq ft. In Mumbai, the company is planning two commercial projects in Bandra and Vile Parle. In Navi Mumbai, MAN Infraprojects Limited will develop a mixed-use township complete with a five-star hotel, a IT-cum-commercial centre besides a luxury residential block. The site is located opposite the D Y Patil stadium.

Clinton Climate Initiative joins hands with Indian group to retrofit buildings

Marking the biggest and first of its kind tie-up in the private sector, Real Estate major K Raheja Corp is working with former US president Bill Clinton-led Clinton Climate Initiative (CCI) to retrofit their buildings across the country to cut greenhouse gases. Work has started in Mumbai and Hyderabad, and according to the company, 50 lakh square feet of built space (in over 20-odd buildings) will be retrofitted. For the process, smarter glass varieties (which let in light, not heat) and better suited air-conditioning systems are used. Sewage treatment is also done to conserve and recycle water. While some government buildings have been retrofitted for cutting carbon emissions, the concept is still picking up in the private sector.