Mumbai commercial property hit by US financial crisis

The financial crisis in the US has affected the commercial property market in Mumbai commercial property market. Rentals in Mumbai are finally beginning to crack and deals for office space have slowed over 30 per cent in the last three months. Leading property brokers and consultants in Mumbai say things will be worse with prospective tenants asking for a 50 per cent cut in rates. Companies, mainly IT and BPO service providers and finance firms, with significant US businesses are cutting back expansion plans and, therefore, the need for prime commercial real estate. Meanwhile, tighter liquidity at home is encouraging companies to defer their property bookings.

In the Bandra Kurla Complex, the city’s second main commercial hub where rentals peaked at Rs 450 per sq ft a month, clients are now negotiating with developers at below Rs 300 per sq ft. Rents are expected to come down to Rs 200 a sq feet when three prominent buildings are completed in six months. In the Churchgate area of business district Nariman Point, which houses old office buildings, rentals have already settled at Rs 240-250 sq ft a month from Rs 325-350 a sq ft barely two months ago. That is a 45 per cent correction. “Companies are not signing at the rates asked by developers like they did earlier and transactions are not taking place. We have seen prices correcting sharply in Nariman Point in the last one month,’’ said Suketu Mody, president and chief operating officer of Coldwell Banker Goodwill Consultants, a US-based consultancy firm that advises many Indian companies on their property deals.

By early next year, Mumbai and its suburbs will add 15.4 million sq ft of office space, more than the commercial space now available at the Bandra-Kurla Complex or seven times the office space at Nariman Point. Rentals are expected to fall another 15 to 20 per cent in the next six to nine months as IT and BPO companies cut back on expansion plans as the financial crisis in the US, their biggest market, kicks in. As a result, vacancy levels in commercial space across the country are expected to touch 7.5 to 8 per cent by the end of this year from 5.5 per cent to 6 per cent in June. “Demand will slow from IT, BPO and finance companies that have enough choice in cities like Bangalore and Hyderabad. Rentals will drop to levels that you have seen two years ago,’’ said Pranay Vakil, chairman of Knight Frank, an international property consultancy.

However, developers believe demand will come from newer sectors of the economy and at different levels of the property market. “Though some companies have reduced space requirement, quality space is readily acceptable to high-end clients. Companies are moving to different parts of the city which is economical for them,’’ said Hemant Shah, chairman of Akruti City, which builds offices and homes in Mumbai.

Makaan.com unveils city specific homepages for real estate

Makaan.com the fastest growing online real estate portal by People Group, has unveiled city specific homepages for 11 top real estate hotspots in India. These hotspots account for almost 87% of real estate demand in India. Targeting Delhi, Mumbai, Bangalore, Chennai, Hyderabad, Kolkata, Ahmedabad, Chandigarh, Pune, Jaipur and Kochi, the portal aims at making the online property search more localized & simplified for the property seekers.

The localized homepages have been designed to benefit all 3 stakeholders – property seekers, builders and real estate agents:

•  Property seekers – will be able to access complete real estate information specific to their city of interest. Seeker looking for property in Mumbai can directly log on to www.makaan.com/mumbai to get info regarding his requirement. Apart from searching for properties, they will also be able to connect to prominent builders & real estate agents & view leading real estate projects in that city. Seeker can also search for properties in key localities, like for Mumbai, properties in localities like Worli, Mira Road, Kalyan, Kharghar etc can be reached directly.

•   Builders – Through the special section called “Featured Builders”, leading builders of a city can showcase their profiles as well as their projects among the property seekers in that city.

•   Real Estate agents – A special “Featured Brokers” section on these homepage allows the real estate agent to present their credentials in front of the property seekers in that city.

With these local city homepages, Makaan.com brings online real estate search a step closer to all the stakeholders. Aditya Verma, Business Head – Makaan.com adds, “ All our product releases are aimed to give a superior user experience to the property seekers. The local city page provides the information upfront and gives a personalized look & feel during the property search process”

Chandigarh developers to sell land to cope with slowdown

As the real estate sector in Chandigarh is witnessing a slowdown, realtors are even planning to sell their land, which they had bought out of the profits they earned from the earlier projects, to fund their ongoing projects. The multiple interest rates coupled with inflation have slowed down the residential sales around the city, worsening things for realtors who are grappling with financial crisis. The realtors of the area are bearing the brunt of the liquidity crisis and are not able to fund their existing projects.

“Last few months have not been good for the market. The liquidity cannot be generated through the stock markets and even the banks have got strict over loans. In order to generate liquidity many developers around Chandigarh are ready to sign off their land holdings to generate liquidity for their ongoing projects,” General Manager of Berkley Realtech Kamal Jindal said. Explaining the cycle, Jindal said that when the real estate market was in a boom most developers with the huge profit margins created land banks around Chandigarh. But as the real estate entered into the correction phase, liquidity became an issue for the developers who are ready to sign off their land holdings in order to clear the debts and fund their existing projects.

PBAB, ICICI tie up to offer cheaper home loans

The Promoters and Builders Association of Pune (PBAP) has tied up with ICICI Bank to offer home loans at 10 per cent rate of interest to buyers, which will be applicable for 24 months after booking. The move will help attract buyers at a time when they are shying away from property purchases due to heavy home loans. As per this agreement, the ICICI will charge 12.5 per cent rate of interest on home loans, out of which, the flat buyer will pay for 10 per cent of interest rate while the remaining would be taken care by the respective real estate developer. PBAP president Lalitkumar Jain announced this scheme expressing concerns over the recent slowdown in the real estate sector. “The boom in real estate sector in Pune is over and the market has stabilised. The demand for 1BRHK flats is increasing on a steadfast note in Pune. A major problem is the higher rate of interest on home loans and hence, we are trying to address the same,” Jain said.

The scheme will be available from October 3 to 5 when PBAP will organise its annual real estate exhibition in Pune. “We expect the home loan interest rate to go down within next 8 to 12 months. While this happens, we want customers to book flats with us through lower interest rate. As of now, people are paying around Rs 1,080 per lakh per annum interest on home loans. If they book flats with PBAP members, this amount would be around Rs 966,” Jain stated. PBAP is planning to incorporate other major players in home loan segment such as HDFC in this scheme. “We will announce more tie-ups soon,” Jain added. The PBAP members are planning to sell more than 6,000 flats through this scheme.

Overbuilding promises a kick in the gut for realtors

Demand-supply mismatch in residential, commercial developments intensifies.

MUMBAI: Nipun Sahni, director and global head of commercial real estate at Merrill Lynch Capital, says the number of information technology parks and special economic zones in the 21-km Old Mahabalipuram Road — popularly known as OMR — in Chennai surpasses demand in the entire IT industry in India.

“It will be difficult for builders to raise finances for their other developments and in subsequent phases, projects will also be postponed,” he said at a Ficci seminar recently.
OMR, realty analysts say, is symptomatic of the overbuilding that has happened in far too many pockets.

Two other plum areas that are likely to face the same fate, they said, are Lower Parel in Mumbai and Noida in the National Capital Region, both of which are hotspots for A-grade office space.

They predict high vacancy rates.

Lower Parel has a ready office space of 4.5 million sq ft and will add a minimum 5 million sq ft by 2009, taking the total commercial space to 9.5 million sq ft.

Of this, DLF, India’s largest realtor, alone will add 3.8 million sq ft through office space and a mall.

Indiabulls Real Estate, Peninsula Land and Orbit Corporation are also busy completing their projects in the locality.

To boot, top players such as DLF, Unitech, Emaar-MGF, Akruti City, Puravankara and others have expanded to states they were not present in, and have ended up in close proximity to each other, creating oversupply pockets.

What started as a building boom in 2007 across emerging markets such as Chennai, Hyderabad, Bangalore and Indore is a year later, a very different story thanks to the Reserve Bank of India’s rate hikes, the wealth-depletion effect of falling stock markets and economic headwinds.

The slowdown in the IT industry as a result of the turmoil in the United States has only made matters worse.

“IT companies are not ready to sign long-term lease deals such as for five years. Now, they are signing short-term leases and this trend will continue for the next 18-24 months. This will lead to softening of prices. Deals that were earlier signed for rentals of Rs 275-300 per sq ft are likely to be cancelled,” said an analyst with a local brokerage, who did not wish to be named.

A DLF official said the company would complete its projects by 2009 and look at an average rental of above Rs 200.

In the coming months, oversupply will hit the residential space too, especially in places such as OMR in Chennai, Whitefield in Bangalore and Gurgaon, a recent report by Enam Securities said. The 21-km stretch of OMR Chennai has seen a flood of residential projects by developers such as the Hiranandani Group, DLF and Puravankara.

This led to developers lowering prices to keep the working capital going.

According to an analyst, the stiff rivalry between developers will intensify with oversupply.

But Ramesh Sanka, group chief financial officer, DLF, sees no mismatch. “We haven’t faced residential oversupply yet. Yes, there will be pocket-to-pocket oversupply but that will be at a micro level,” he said.

Kuldip Chawlla, director (asset management) at international private equity firm Red Fort Capital Advisors, says there is a temporary oversupply and it is mainly in the luxury segment in the top seven cities in India.

“Developers have built projects in Delhi that exceed Rs 75 lakh per unit but the demand is in the Rs 25-55 lakh segment. It is the disproportionate demand-supply that is leading to an oversupply in the market,” he said.

The problem isn’t plaguing just metros. Tier II markets are also likely to be hit, says Anuj Puri, the country head of real estate consultants Jones Lang LaSalle Meghraj.
“Top Tier II cities where we are already seeing a slowdown are Indore, Bhopal, Ludhiana, Mohali and Jaipur. These places have also witnessed a steep 45-50% correction in prices,” he said.

Cinemax India opens 3-screen multiplex at Rajkot

Cinemax India on Sep. 29 20008 announced the launch of 3 Screens Multiplex at Iscon Mega Mall in Rajkot.

The multi screen theatre is having capacity of 760 seats including 35 recliner seats.

Cinemax claims that this multiplex will be an out of the world experience `Cinemaxperience`, to patrons.

Consequently with this addition, the company will have a total of 22 theater properties, 65 screens and 17,538 seats.

Cinemax India, part of the Kanakia group, is an emerging family entertainment center focused on the exhibition and gaming business. The company has one of the largest exhibition theater chains in India operating 13 multiplex properties with 39 screens and 11,028 seats. It operates 10 theaters in and around Mumbai.

Shares of the company gained Rs 1.75, or 2.15%, to settle at Rs 83. The total volume of shares traded was 11,792 at the BSE (Monday).

‘Quality products sell’

Shriram Properties, one of the largest developers of IT space and residential projects, is looking at diversifying into the commercial and hospitality space. The company has developed over 5.2 million sq.ft of built-up space and has 73 million sq.ft under implementation, putting it among the market leaders in real-estate development. Over 75 per cent of this area is in residential projects and rest in IT space. The company hopes to raise Rs 650 crore to fund some of its projects in the pipeline.

It has also announced plans to diversify into retail and hospitality space development, which will give it a pan-India presence. Shriram Properties’ Managing Director, Mr M. Murali, shares some of his plans with Business Line. The prevailing financial crisis in the international markets, which has tightened up money flow, is no constraint for an established player with a reputation for delivering quality products, he says.

Excerpts from the interview:

Given the market conditions, would you say raising money for the new projects would be tough for developers?

No, not tough. Given our track record we should be able to manage it fine. But the time taken to raise the funds will be a little stretched because of the tightening in the money market. But that is not the only way to look at it — the situation in the US throws up opportunities. Companies that have been hit there are looking at transferring jobs to India and that is good for us here.

Private equity funds have tapped just a fraction of the potential here; they have brought in about Rs 10,400 crore against the estimated potential at ten times that value. Raising funds will not be a problem for someone with a good track record. Developers need to get their act together. If the projects are good, the systems clean, then money will chase the projects.

What is the impact on the demand from the IT segment. Are lease rents at viable levels?

At the Shriram Gateway IT SEZ, in Chennai, we are planning to start the third phase in January 2009. Of the total of about 6 million sq.ft planned, over 1.8 million sq.ft is nearing completion and has been leased out or committed with lease rates in the Rs 45-48 a sq.ft a month range. This includes 8,00,000 sq.ft completed in the first phase and fully operational and another million sq.ft to be ready by March 2009. This space has also been fully leased out. At realistic pricing levels and in the SEZs, the demand continues to be good. The demand for IT space in SEZs is still on and vacancy is less than 10 per cent across the country and demand continues to exceed supply. But in non-SEZ space the vacancy level is around 40 per cent. There are a number of destinations in Chennai that are good for IT and we are looking at land in these locations. Developers need to be ahead of the market.

What would you forecast on the lease rates and what impact will it have on returns?

They are likely to settle around Rs 40. At these levels developers can manage if the property was acquired at realistic price levels. On the OMR, up to Rs 40 a sq.ft is still good. Just five years ago, land was available at Rs 1 crore an acre and taking into account the built-up area allowed, even at Rs 25 a sq.ft there was a decent margin for the developer. But the problem is that people have entered when land cost hit Rs 15-20 crore an acre in the last two years.

You have announced major expansion in residential space, is the slowdown a concern?

It is about pricing and land costs. Even in the residential segment, on the Old Mahabalipuram Road, we have launched a residential project that is doing well. Last month we did a soft launch of our 500-apartment project and 293 apartments were booked on the day the project was announced. We started at Rs 2,500 a sq.ft and over the next fortnight increased the prices because of demand to Rs 2,750 and then Rs 3,150, the demand continues unabated. This is at Siruseri (about 25 km from Chennai) where everyone is talking about prices crashing. Other developers are now asking us to take over some of their projects.

On your diversification plans…

We are looking at retail and hospitality segments, particularly budget hotels. The company is in discussions with a global player in mall development for developing retail space in Chennai, Bangalore, Visakhapatnam and Kolkata where a total of about 30 lakh sq.ft of space is planned at a cost of Rs 750 crore.

Once the tie-up is finalised, the projects can be launched immediately, we have the land for these projects in these cities. In the hotels segment, we have tied up with a strategic partner who has committed over $100 million and we will have a pan-India presence with hotels in Maharashtra, Rajasthan, Uttaranchal, and Gujarat.

Many eyeing property in Devanahalli

Bangalore : At a time, when sale of residential units have apparently taken a hit due to high home loan interest rates, interest seems to be running high in properties being developed around Devanahalli area.

At a property show in the city on Sunday, people who were being wooed with upcoming properties in and around Bangalore, had interest in one part of Bangalore – the area near Bangalore International Airport. Pavithra, a marketing executive for Maithreyi Promoters and Developers said that the number of people interested in properties coming up in the vicinity of the new airport had increased exponentially.

“Very few people are actually interested in living in these places. Most of them are looking for investment. For living, Bannerghatta Road, Whitefield and Electronic City are still popular choices, but interest has definitely perked up for property around Yelahanka and Devanahalli.”

The feeling is reflected by most builders and promoters. While a few people expressed their wish to live in these places, as they were frequent travellers, many were looking at it as second property, purely for investment value as they imagine prices and demand are bound to shoot up.

But there are not a whole lot of players in the Devanahalli area. Chandrashekar, an executive representing Aisshwarya Group asked bluntly, “What is there in Devanahalli area, except the airport? There are no amenities, no roads, no malls, no development at all. But people still want, apartments and plots there.”

Land rates have shot up running into several crores an acre, but builders have other problems. An executive for Gopalan Enterprises said, almost 60 per cent of the areas had water problems, so how do they provide water to the property Borewells have been known to reach 1,000 feet or more to hit water at some of these places.

Apart from these issues, builders are hesitant to venture into new projects immediately. On the buyers front, interest rates on home loans have spiralled leaving fewer buyers for their existing properties and the rates are expected to climb even more starting from February Rates for some of the properties in Devanahalli and Yelahanka area start from Rs 1,400 and go up to Rs 3,000.

Source: Deccan Herald

Organised retail to grow from 5 pc to 14-18% by 2015

Mumbai : Organised retail in India is expected to expand from the current 5 per cent of the total market to 14-18 per cent of total retail and reach the $450-billion mark in size by 2015, a report released here said.

To evolve a profitable model, however, retailers would require an approach that is distinctive from the rest of the world, the report entitled `The Great Indian Bazaar: Organised Retail Comes of Age in India’ by the retail practice of McKinsey & Company, said.

While the Indian market was a high-growth one, it was characterised by small transactions, rapidly-evolving customers with unique shopping habits and whose spending across categories was different from shoppers elsewhere.

To succeed here, the report referred to five ways in which retailers could create a profitable operating model.

They should integrate real estate into the business model, create an effective and scalable supply-chain and increase basket-size by shaping consumption, the report said.

Retailers should, further, develop and retain talent and influence regulation to ensure healthy development of the sector and to de-risk margins, it added.

“Driving consumption across categories is essential. We need to grow the basket-size per customer,” McKinsey & Company’s Partner and co-leader of the retail practice, Peter Haden, said.

Retailing in India would not succeed with the ‘cut and paste’ global formats, the report said.
Source:  http://economictimes.com

Diwali unlikely to light up real estate market

Analysts say prices may stagnate or decline in the next three months.

Home prices may decline in the next three months, according to a national poll conducted among top property brokers by Edelweiss Securities, a Mumbai-based brokerage.

Almost 70 per cent of the brokers who participated in the poll believe prices will be flat or negative in the period and even Diwali is unlikely to lift the mood in the property market.

About 60 per cent of them believe that prices have stagnated over the past three months. The Reserve Bank of India’s move to raise repo rates by 125 basis points in the last six months has resulted in commercial banks increasing their lending rates by similar margins. In turn, home buyers have to pay a much bigger amount as monthly pay-out on home loans.

On an average, the monthly instalment on a 20-year, Rs 10-lakh loan has gone up over 50 per cent to Rs 12,740 on a 14.25 per cent rate from Rs 8,060 (7.5 per cent interest rate) five years ago.

Due to high demand from end-users and investors alike, home prices in main markets such as Mumbai and Delhi have trebled in the last two years, making homes unaffordable for middle class buyers. According to the poll, 90 per cent of brokers have seen a drop in transactions in the last one month and almost 80 per cent of them witnessed a reduction in enquiries over the same period.

But, property brokers feel that price movements will differ in different markets. According to the poll, about 60 per cent of brokers expect prices in the Mumbai island city to come down in the next one year. But they feel prices in Gurgaon in the NCR region, Whitefield in Bangalore have stagnated over the past three months against the perception of a price fall.

Meanwhile, brokers say they have seen an increase in enquiries in Chennai in the last one month. However, they are yet to see the conversion of enquiries into transactions.

Says Pranay Vakil, chairman of Knight Frank, an international property firm, “If you compare residential sales this year compared with last year, there has been a drop of 90 per cent. It is just a tip of the iceberg. Worse is yet to come,’’ he says.
Adds Hemant Barabde, a Mumbai-based property consultant, “We feel the current slump to continue for a year till the general elections, after that prices may pick up again.’’

Fallout from US financial crisis hitting rental sector in India

As the US moves towards securing its bailout plan for Wall Street financial institutions the fall out is hitting hard in India.

In Mumbai commercial rentals are beginning to crack and deals for office space have slowed over 30% in the last three months, according to analysts.

Leading property brokers and consultants say things will be worse with prospective tenants asking for a 50% cut in rates and they put the blame firmly on the US financial crisis.

This is because companies, mainly IT and BPO service providers and finance firms, with significant US businesses are cutting back expansion plans and, therefore, the need for prime commercial real estate.

Meanwhile, tighter liquidity in the Asian markets is encouraging companies to defer their property bookings.

‘Companies are not signing at the rates asked by developers like they did earlier and transactions are not taking place. We have seen prices correcting sharply in the last month,’ said Suketu Mody, president and chief operating officer of Coldwell Banker Goodwill Consultants, a US-based consultancy firm that advises many Indian companies on their property deals.

Battery Ventures, a venture capital firm that has been looking for 3,000 sq ft of space in central Mumbai for the last couple of months, is still waiting in the hope of a further fall in rentals.

‘We have seen a 5% correction in rentals in the last three months and expect a 10 to 15% further correction in the coming months. We will certainly wait and see,’ said Gautam Patel, partner, Battery Ventures.

Oversupply could also start to have an effect. By early next year, Mumbai and its suburbs will add 15.4 million sq ft of office space, more than the commercial space now available at the Bandra-Kurla Complex or seven times the office space at Nariman Point.

Rentals are expected to fall another 15 to 20% in the next six to nine months. ‘Demand will slow from IT, BPO and finance companies that have enough choice in cities like Bangalore and Hyderabad. Rentals will drop to levels from two years ago,” said Pranay Vakil, chairman of Knight Frank.

However, developers believe demand will come from newer sectors of the economy and at different levels of the property market. ‘Though some companies have reduced space requirement I am not worried even if prices correct 10 to 15% because it is good for both buyers and sellers,’ said Hemant Shah, chairman of Akruti City, which builds offices and homes in Mumbai.

For the price of an air-ticket, you can buy a home in US

CHENNAI: Return tickets for Delhi-New York are priced around Rs 75,000, but with real estate prices crashing in the US, Indians could buy homes ther
e for the same amount! Thanks to the bottom falling out of the US housing market and struggling families abandoning homes, unable to keep up with mortgage payments.

A detailed look at US realty websites such as realtor.com, zillow.com and ziprealty.com show that homes with one bathroom and bedroom are being advertised at anywhere between $1,500-3000 (Rs 69,000-1.38 lakh), an incredible fact by itself, in places such as Detroit, Michigan, Jackson, Mississippi, and Cleveland, Ohio.

“The lowered residential property rates in many parts of the US can be attributed to the sub-prime crisis, which has caused a huge surplus of stock in the market, besides reducing liquidity, which slows down absorption,” said Raminder Grover, MD, Homebay, a subsidiary of international property consultants Jones Lang LaSalle Meghraj.

As per law, homes can be purchased by US residents, and the low prices could suit students travelling to US and techies sent for on-site operations. As per the RBI cap, an average Indian can invest upto $200,000 (Rs 93 lakh) in US real estate.

“Students live in apartments or as paying guests by shelling out $250-500 per month. If they or their parents can afford to pay money upfront, this might be a good option for students planning to stay for 1-2 years,” said Sridevi, US counsellor for Valmiki Group, which processes study visas for US. Over 6% of US home loans are in arrears and around 1.5-2 million Americans have lost their homes to foreclosure in 2007.

As in India, additional costs could be from the cost of borrowing, brokerage payable for the location of suitable property and registration of the purchase. For the likes of Rohan, an IT professional who is soon to be sent to New York for 3-6 months, a home could straightaway save $500-1000. Junior and middle-level techies get $400-600 per month as house allowance, while project managers and higher-ups are said to get even $1,000 per month.

But students or techies going to states such as Nevada or California may not be as lucky. “In California, homes still come at $50,000-200,000. Indian students cannot afford to pay that much. Plus, a group can still rent out an apartment for $2,000-3000 and split the costs,” Sudha Kumar, recruitment coordinator at Viterbi School of Engineering (University of Southern California), said.

Kerela Govt. postpones decision on SEZ policy

The LDF government in Kerala postponed a decision on finalising a policy framework for setting up special economic zones, (SEZ) in the state after CPI insisted on firm guarantees on issues like labour rights in SEZs. Despite a broad understanding reached at the LDF liaison last week, CPI state council had last night directed its ministers to insist on a clear set of conditions, preferably legislation for sanctioning SEZs without compromising on the party’s position on the matter. After the cabinet meeting, Chief Minister V S Achuthanandan said a final decision on SEZs would be taken by the cabinet next week after detailed discussion looking into all aspects of the matter. The question whether legislation was required as demanded by CPI would also be decided, he said.

The LDF had last week recommended the government to work out a condition-based policy framework and forward 10 pending proposals to the Centre. However, a powerful section in the CPI including its trade union and youth wings was of the view that SEZs should be based on stringent conditions to ensure labour rights, state control and proper utilisation of the land.

Realty downfall continues

The realty sector is still witnessing a downfall. As people still are reluctant to buy residential properties, developers are going an extra mile to dress up their wares this festive season. According to industry sources, the average drop in sales for the industry in the last calendar year was more than 60%. Since April, there has been another drop of 30-40% in sales compared with those last year. What’s more, the drop has not just been in the bigger metros, but in tier-II and tier-III cities as well. They have seen an average fall of more than 25% between February and August, according to the data compiled by the Associated Chambers of Commerce and Industry of India.

The home buying season typically starts during the festival season (Diwali) and ends in March and most developers do almost 60% of their business in this period. Says S K Sayal, CEO, Alpha G Corp: “We just hope Diwali brings us some relief as we have suffered enough in the last four months. If things do not improve we will be seeing lot of distress sales and massive price cuts.” To counter the downturn, many developers are now in the process of offering discounts to lure prospective buyers. For instance, Mumbai-based Orbit Corporation has announced a discount of 15% at a residential project in Lower Parel and many others are expected to follow suit. However, there still many developers who are holding on to their prices in the hope that Diwali, considered an auspicious time to buy flats, will revive the sagging market.

In fact, with the Reserve Bank of India tightening lending rules, it has become difficult for developers to secure finance. Also, interest rates on home loans have increased tremendously, causing several families to postpone house purchase plans. Now, adding to the turmoil is the financial collapse of global investment banking giants such as Lehman Brothers and Merrill Lynch. Says Niranjan Hiranandani, MD, Hiranandani Developers: “There will be softening of prices till April 2009, but things will look up from May onwards. This is a temporary slowdown and the market will pick up.” Although opinions differ, the scenario has changed a lot now and the reality market may soon become a consumer’s paradise with affordable houses.

DS Kulkarni to invest Rs 30 mn in DSK Global

The board of directors of DS Kulkarni Developers at its meeting held on Sep. 27, 2008, has approved the investment in DSK Global up to Rs 30 million to make it a subsidiary.

The board has also approved the fixed deposit scheme of the company for the year 2008-2009.

DS Kulkarni Developers is a real estate developer. It was incorporated on Sept. 20, 1991. The company has developed real estate projects in and around Pune and Mumbai.

Shares of the company declined Rs 4.6, or 6.79%, to end at Rs 63. The total volume of shares traded was 8,020 at the BSE (Friday).

Inox to invest Rs 1.6 bn in Karnataka for 9 plexes till 2010

MUMBAI:  Inox Leisure is planning to broaden its reach in the state of Karnataka and will be investing approximately Rs 1.6 billion (Rs 105.75 crores) in the state till 2010. The company planning to operate at least nine multiplexes with a total of 47 screens in Karnataka by 2010. It recently launched its second property in Bangalore.

On an average a sum of Rs 22.5 million (Rs 2.25 crores) is invested per screen. “We will open four more multiplexes in Bangalore city and one each in Mangalore, Hubli and Belgaum,” said Inox Leisure COO Alok Tandon.

The company’s first property in Bangalore is situated at Garuda Mall and has five screens, whereas the second one has commenced operations at Sri Garuda Swagath Mall in Jayanagar. The latter is Jayanagar’s first multiplex and opened to patrons from 29 September. It has a total of three screens and 793 seats.

Tandon added, “Inox was amongst the first few national multiplex chains to open in Bangalore and the city has grown by leaps and bounds since then. Our new cinema is strategically located in the midst of the premium residential locality of Jayanagar. This will ensure that more and more Bangaloreans choose Inox to watch their movies.”

Inox Leisure has a total of 26 multiplexes and 90 screens across 18 cities in India.

SEZ consultants could earn a lakh a day in commission: NGO representative

ALIBAUG/KARJAT: SEZ consultants, the new breed of middlemen, have a professional approach and they do not like to be called as agents, said Ulka Mahajan of the 24-Gaon Sangharsh Samiti.

Sanjay Saraf explained his work. “We help companies start SEZ projects and do liaisoning work between the MNCs and the government. At present, most SEZs have been sanctioned along the Mumbai-Goa highway. One IT-related SEZ is proposed in the Karjat area and MNCs are looking for land.”

A retired naib tehsildar of the state government has started a consultancy firm in Alibaug. Speaking to TOI on condition of anonymity, he said, “I am wellversed in land and revenue laws of Maharashtra . I brushed up by studying SEZrelated laws. I have very good contacts with my ex-colleagues in the revenue department and help purchase good plots quickly for SEZs.”

The naib tehsildar has also printed visiting cards with his son’s name and distributes them to executives of business houses.

Vaishali Patil, who heads an NGO in Pen, said, “A lot of the properties in Alibaug district do not have clear titles. Some families are in disputes over the land. Since the SEZ issue has come to the fore, the district administration has stopped making changes in land records. These SEZ consultants facilitate smoother change in property papers.”

Ramesh Shinde, who started an SEZ consultancy a few months back in Karjat , said, “The land requirement of the industrial giants is very large, but we try to help them.”

The Reliance-owned MahaMumbai SEZ and Navi Mumbai SEZ companies have hired a few retired IAS and revenue officers. A senior officer of the Reliance-owned companies said, “We have a battalion of officers who have retired from the government as well as professionals . We will never take the help of such SEZ consultants. They are meant for companies that are not well connected.”

MNCs that do not have access to such people use the SEZ consultants to establish links with the Raigad collectorate, for one. Vaishali Patil said, “Earlier , estate agents earned Rs 10,000 per acre as commission. Now, the SEZ consultants are earning around Rs 50,000 per acre. Even if they organise two acres a day, they can get richer by a lakh.”

An official of the industries department in Mantralaya said, “The honchos of MNCs and industrial houses know the bigwigs in Mantralaya, but often do not know how to prepare detailed proposals for the SEZ. This is where consultants help.”

Raigad district collectorate officials said that with the SEZ boom, new trades are starting or old ones are being refurbished. A couple of hotels in Raigad have now constructed meeting halls where the executives of companies can hold meetings.

Infrastructure investment is right on track, say CEOs

New Delhi : Despite growing apprehension over Indian Inc facing difficulty in raising overseas funds to meet investment plans in the wake of US financial crisis, majority of CEOs say infrastructure investments are on track.

Nearly 67 per cent of CEOs of major infrastructure developers and financiers of infrastructure projects in an infrastructure outlook survey conducted by Confederation of Indian Industry feel infrastructure investment is now picking up.

However, the survey also reveals that increase in inputs and interest costs have lead to cost overrun and is a cause for concern. The incidence of increase in inputs costs, as revealed by 46 per cent of respondents, is expected to be in the range of 10-20 per cent of infrastructure project costs and another 23 per cent of respondents expected this incidence to be more than 20 per cent.

Costs absorption

The Survey revealed that 46 per cent of respondents expected the increase in costs to be absorbed by infrastructure project developers, while 15 per cent of the infrastructure companies expected the cost to be passed on to the clients— mainly the government.

Assessing other factors responsible for any delays in project implementation, it reveals that land acquisition continues to be top most concern for project developers.

The survey enumerated the other key reasons for delay in implementation of infrastructure projects and revealed land acquisition, environment clearance and other government approvals to be the top three concerns for Infrastructure project developers.

Among these three, the CII survey revealed that 81 per cent of the CEOs felt that land acquisition was the most important impediment to infrastructure project implementation.

As per the survey results, 77 per cent and 58 per cent of the respondent CEOs felt that environment clearances and other government approvals respectively were among the top three concerns for delays in project implementation.

Source: Deccan Herald

JHM Interstate to bring in ‘Double Tree’ to India

JHM Interstate Hotels’ first property in India at Visakapatanam will be under the ‘Double Tree’ brand of Hilton. This is the first property JHM Interstate has signed since they started operation in India last March. The 124-room five-star hotel property is owned by Sarath Kumar, a real estate developer from Andhra Pradesh.

Anil Bhandari, Managing Director, JHM Interstate Hotels India Pvt. Ltd. said that the hotel will become operational by December 2008. “The 124-room hotel will have two restaurants, banqueting facilities and a spa,” informs Bhandari. Apart from the Vizag property, JHM has signed two hotels in Gujarat – one in Surat and another one in Ahmedabad. “These two hotels are still in the drawing board stage and construction is expected to begin soon,” adds Bhandari. When asked about the hotel group’s plans for the National Capital Region, Bhandari said that discussions were on with developers in areas like Gurgaon and Noida.

Ansals launch housing project in Agra

Following the success of its debut project “Ansal Courtyard” in Agra, Ansal Housing & Construction Ltd, one of the leading real estate developers in India, announced the launch of yet another Rs 200 crore housing project “Ansal Town” in Agra on Tuesday.

Talking to Business Standard on this occasion, President Kushagr Ansal said Ansal Town would be spread over 130 acres, located on the proposed 100-metre expressway passing close to the Taj Mahal and was easily accessible from all major state highways.

According to Ansal, the project will have 1,250 housing units in all, costing Rs 14–25 lakh, with plot sizes varying between 150 and 300 metres. And opposed to the established concept of “designer townships”, there is an option for purchasing independent plots at Rs 8-14 lakh where a house could be constructed according to the customised requirement of the buyer instead of going for a “pre-fab” house design.

Ansal said Ansal town had been designed keeping the premium segment of the market in mind, providing clubs, shopping malls, schools, etc within the fully secure confines of the township.

He said the project was expected to be formally launched on July 23 and the company expected to complete the construction of the Ansal Town by the end of 2008.

He said the company was on a major expansion spree with total of 1,200 acres of township projects and 1 million sq ft of condominium projects in the next 3-4 years. Besides Agra, he said, AHCL was also planning a 100 crore condominium project in Mumbai, 200 acre weekend houses project in Thane, 2.5 million sq. ft. IT/Residential project in Bangalore.

He said AHCL was widening its horizons by entering into retail sector. It had just completed a 200,000 sq. ft. branded factory outlet mall “Ansal Plaza” in Vaishali. It was also going to launch more retail malls in Lucknow and Karnal and the total investment in all the projects started by AHCL was worth Rs. 3500 crores.

Even on the international grounds, AHCL had been extremely successful, by creating Perth Paradise – an 800 acres of residential township in Srilanka, evolving as a multinational conglomerate over the past thirty years of existence in the real estate business, he said.

Ansal API launches 500 units

Ansal Properties and Infrastructure, (Ansal API) has launched a range of villas at Megapolis near Greater Noida. The township has excellent connectivity through expressways like NH-91 to Aligarh, East-West Peripheral Expressway and Greater Noida 110 m arterial road. The upcoming Taj Expressway and the Ganga Expressway are also in close vicinity. A total of 500 exclusive villas and luxury floors are being launched in the first phase of the project. These will comprise 3, 4, and 5 bedroom villas and the larger ones come with a multi-utility quarter.

IT project from Piyush

Piyush Group has announced the launch of its commercial IT project Global i in Faridabad. Spread over 3 lakh square feet area, the net worth of this ambitious project is Rs 210 crore. It is expected to be ready by 2010. The company has received the letter of intent and sanction of the construction plan for the project. Apart from the services and facilities, the complex will have five well-equipped service rooms. Interestingly to attract more investors for this project, the company is also promising a 12 per cent return on investment assured for 9 years.

DLF to Invest Rs.1000 Crores in Multiplex Business

Real estate giant DLF is likely to invest about Rs 1,250 crore on expanding its multiplex business, DT Cinema, by adding about 500 screens in the next four to five years.

Currently, DLF is at a pre-operative stage with about seven screens. In another four to five years time, the target is to have 500 screens across India. By September this year, two DT Cinema complexes in Delhi and one in Chandigarh would be operational and 35 screens are expected to be functional in the next seven months.

Once these initial projects start, the mid-term aim is to have about 150 screens operational within two years. Apart from north Indian cities, DT Cinema plans to set up multiplexes in Hyderabad, Chennai, Kochi, Bangalore, Mumbai, Pune, Ahmedabad, Goa and Kolkata.

The size of each multiplex could be between 35,000 sq ft to 90,000 sq ft. DLF believes that the multiplex business offered a big opportunity as there is a shortage of nearly 40,000 screens in India.

Bangalore developer to reduce EMI burden on buyers

With home loan rates and the property prices soaring, the demand for homes is somewhat on a decline. Developers are trying every trick in the trade to woo them. Thinking beyond cash discounts and freebies, some developers in Bangalore have come up with schemes that aim to lessen the EMI burden of customers. Value Designbuild Pvt Ltd, a Bangalore-based real estate company, has tied up with HDFC for housing loan for a scheme wherein one per cent interest for the entire loan tenure is being waived off.

The scheme is available for VDB Celadon, the developer’s upcoming project in North Bangalore and only till Dussera. The project would see a development of 190 apartments in the Rs 30-50 lakh price segment at Yelahanka. “To avail this offer, the client should be eligible for loan and be ready to start his EMIs immediately, as this offer is applicable only on upfront payment,” says Koshy Varghese, Managing Director, Value Designbuild. This means, the bank will release the entire sanctioned amount to developers in one shot and client will start paying his EMI. Advance interest. For most genuine buyers, “the main problem is high interest rates,” he says, adding that this offer would encourage customers to buy at rates that are better affordable.

Retail investment in India

Developers and private equity players are set to put India´s retail space market on full throttle with investments worth anywhere between $5 billion and $10 billion in FY09-FY10.

In moves that would lend retail space gigantic proportions, the Runwal Group and Singapore´s GIC will use a joint venture to launch a ´Our City Centre´ retail mall over 1.1 million sq ft of area in Ghatkopar, Mumbai. In the second phase of their foray, they will develop another ´Our City Centre´ over 7 million sq ft of area in Hyderabad. Mumbai-based ICS Group is their project advisor.

Equally bullish is Sheth Developers, which is building a shopping centre called ´Viva City´ over1 million sq ft in Hyderabad and Thane, Mumbai. The company is investing Rs 400 crore in this new retail development and has not associated with any private equity firms.

The sudden gush of investments has also swept across smaller cities. Media major Dainik Bhaskar Group will develop a 7.5-lakh sq ft retail mall in Bhopal. With construction already under way, the mall is likely to be up and running in December 2009. The mall comprises a basement, ground and six floors with seven anchor shops, 180 retail shops, six-screen multiplex and food courts. JMC projects have been appointed as the civil contractors and Bentel Associates, Mumbai, are the property advisors.

On the crest of the investment wave, Coimbatore-based PS Group is developing ´Our Grand Mall´, which is to be completed over the next 8-9 months. ICS Group is the retail management adviser to this project.

The pan-Indian ripples of the ´boom´ are spreading by the day. Provogue India Ltd´s real estate arm, Prozone, and UK-based mall property developers Liberty International PLC, are building a big mall each called ´Prozone Liberty Centers´ in Aurangabad, Jaipur, Nagpur and Indore.

According to sources, each shopping centre will be spread across an area of 1.5 million sq ft. Property Zone CEO Ashwin Puri says, “Prozone has formed a special purpose vehicle (SPV) in association with the ICS Group called Triangle Real Estate Fund to manage the Prozone and Liberty International´s upcoming shopping centers in India.” Meanwhile, DB Realty is developing over five retail malls in western India.

According to Sanjeev Dasgupta, chief financial officer and head of investments, Kshitij Investment Advisory Company Ltd, “With $5 billion investments coming into retail real estate development, developers are focusing on retail projects.

India trying to reach out to non resident property investors

Real estate developers and agents in India are now offering more solutions to market properties to Non-Resident Indians (NRIs) and international property investors. Their focus is geared to target the burgeoning and lucrative market of prospective Western buyers.

As an increasing number of businesses are outsourcing their IT functions to India, property in commercial hubs such as Mumbai, is in high demand but it comes at a cost. Renting office space in Mumbai is even more expensive than in Manhattan.

It seems then that there is good business sense to invest in emerging markets rather than expensive, established areas such as Mumbai. Rudrapur is reported as one place that is taking off in terms of investment in business. The government has made the area a tax free zone and there are over 450 global corporations planning to set up businesses there in 2008.

According to Liam Bailey, Head of International Research for David Stanley Redfern Ltd, India is becoming increasingly attractive. ‘We are seeing businesses flocking to the area since the government designated it as a Special Economic Zone (SEZ). This means businesses pay no income tax for the first five years and receive a 30% discount over the following five years.

Bangalore’s Orange County Resorts looking to offload 20% stake

Bangalore-based Orange County Resorts and Hotels Ltd that currently owns two holiday resorts in Coorg and Kabini and manages another in Hassan, Karnataka, is in discussions with New York-based investment firm Trikona Capital Ltd, private equity (PE) firm ICICI Venture, and a few others to sell up to a 20% stake for around Rs60-70 crore.

This money will part-fund the Rs220 crore the firm plans to invest in upgrading existing properties and opening four more resorts in the next three years. Orange County is also looking to expand to locations in Vietnam and the Maldives.
“We expect our valuation to go up to Rs1,000 crore by 2012. We want a strong investment partner that will not onlybring in expertise in finance, marketing and operational management, thus giving that value-addition to our brand, but also invest with us in our future and overseas expansion,” said Abe T. Ramapuram, vice-chairman and director (finance) at Orange County in a phone interview from Bangalore on Wednesday. He added that an investor would be identified within the next two months.
Ramapuram said that the company has already acquired land for its four new Indian resorts that will open for business by 2011.
Aashish Kalra, co-founder and managing director of Trikona Capital, said his company does not comment on future business initiatives.
“We have, however, said we will invest $10 billion (Rs46,300 crore) in India over 10 years in real estate and infrastructure,” he added.
An ICICI Venture spokesperson declined to comment.
The Indian hospitality business has grown 25-30% annually in revenues over the past three years on the back of an expanding economy that encouraged more business travel and put more money in the hands of domestic consumers. The concept of short weekend breaks has gained popularity.
Almost all of Orange County’s existing resorts are located within driving distance from Bangalore, India’s information technology hub.
An expert said that after infrastructure, PE firms would likely prefer to invest in any area that involves consumer spending.
“It is the right time for a one-two resort company like Orange County to bring in financial partners because they have been around for long, have well received properties, and will be able to replicate their model anywhere,” said Arun Natarajan, chief executive officer of Venture Intelligence, a research firm focused on PE and venture capital activity. Orange County, which is privately held, claims its valuation is around Rs300-350 crore.
The company is part of the Ramapuram group, promoted by a family of seven brothers that also owns coffee and rubber plantations in Karnataka spanning 2,000 acres and valued at more than Rs200 crore.

Disha Direct promoting Nagpur as ‘Destination Next’

The newly-established real estate expert advisory division Investment Square of Disha Direct, a Mumbai based premier real estate marketing organization, is promoting Nagpur as the “The Destination Next”. Continuing with the Disha Direct legacy of ensuring excellent returns to its investors, Investment Square is offering ASD plots in Nagpur. Since the rising demand for land puts a premium on it and often makes it overpriced, one of the first criterions used for the ASD plots from Investment Square is to offer plots that are fairly priced, minus curtailing add-on costs so as to give maximum price benefit to the buyers.

Secondly, Investment Square ensures a legitimate property for the buyer. The plots offered have all the relevant sanctions and permissions required. The plots come equipped with provisions of 7/12 extracts, clear & marketable title, N. A. order and other required permissions, thus making them ready for immediate registration. The third criterion, which is development at the site, ensures availability of complete infrastructure for the project. This means that there will be proper roads, water supply, electricity, fencing, entry gate and security. Complete transparency in transactions and hassle free formalities further characterise ASD Plots. Investment Square is offering these ASD plots at two new projects, SILVER LEAF and UDYAM ESTATE 1, developed by the Nagpur-based AXON DEVELOPERS who have been in the real estate business since 1995.

Valley real estate and housing market in dire straits

Srinagar, The overall business slump in the valley due to economic blockade and subsequent turn of situation has cast its spell on the real estate and housing market here.

Expert view it as a result of hardening of interest rates particularly interest on housing loan, labour migration and the present uncertain situation prevailing in the valley. According to industry sources, the average drop in sales for the industry is more than 40 percent.

Dealers, meanwhile, rue that their financers are not interested to invest any more in Kashmir owing to the uncertain situations here from past three months. Most of the prospective home buyers and developers are now waiting for October 6.
“Our financers are reluctant in releasing the pavements because of the uncertain situation in view of the October 6 rally. This coupled with the migration of labour and high interest rate on the housing loans has hit our business by more than 40 percent,” said Muneer Ahmad Pahalwan, owner of Hope Construction Company.

He added, “Before one year, banks charged only 9 per cent interest annually on housing loans which has now gone up to 14 per cent The per day labour wages used to be Rs 150  three months before , which has now escalated to Rs  200. These factors have affected our business. Our hope lies with October 6 now. How the day passes and what would be its aftermath, it will decide.”

The Reserve Bank of India’s move to raise repo rates by 125 basis points in the last six months has resulted in an increase of lending rates by commercial banks. This has in turn affected home buyers who have to pay bigger amounts as monthly installments on their home loans. On an average, the monthly installment on a 20-year, Rs 10-lakh loan has gone up over 50 per cent to Rs 12,740 on a 14.25 per cent rate from Rs 8,060 (7.5 per cent interest rate) five years ago.

Showket Shahdhar, proprietor of ‘The Home Construction Company’, said that most of their projects remained incomplete her after the situation took an ugly turn.

“Our business was already troubled with high interest rate on housing loans, and now the present situation has added to our trouble. Before three months we were working on 15 projects, and that has totally stopped now. I estimate our business losses more than 40 percent,” he said.

Shahdhar maintained that they have any how managed to go with the present state of their business, “but the shortage of labour is creating hurdles in our business.”

Meanwhile, owner of Sahara Housing Company Abdul Hamid Mufti said that the high interest rate is a big problem that proprietary dealers are facing throughout India, “but the sudden turn of situation here during past  months has made financers more jittery in investing in  troubled Kashmir.”

“Inflation has touched 12 percent in India, which resulted in escalation of prices in iron and coal. This has consequently increased the rates of all the construction material. So, the business of dealers was already under stress and now the increase in housing loans and troubled situations in valley has added to the slump,” he said.

Provide for deals with bankrupt Lehman arms, RBI tells banks

The Reserve Bank of India (RBI) has advised all banks to provide for the deals entered into directly or indirectly with subsidiaries of Lehman Brothers that have filed for bankruptcy globally.

The provision would have to be made for the quarter ended September 2008.

Sources close to the development said the total exposure of Indian banks to structured products — fixed income derivatives such as forward contracts, overnight interest rate swaps etc. — of Lehman would not exceed Rs 800 crore.

While Indian operations of Lehman Brothers are still intact, its subsidiaries namely Lehman Brothers Securities Asia, Lehman Brothers Futures Asia, Lehman Brothers Holdings Japan and Lehman Brothers Japan have already filed for bankruptcy.

Meanwhile, banks have been asked to terminate deals with Lehman subsidiaries, which were still operational, in due course of time in the open market or through bilateral negotiations with interested parties.

In a meeting held with the Fixed Income and Money Market Dealers’ Association, various foreign and Indian banks have already served their termination notices with regard to deals in structured products.

As for the exposure to the real estate sector in India, RBI is of the view that the government’s press note-5 on foreign direct investment (FDI) provides for exemption from the lock-in period in real estate investments in special cases. As per rules, FDI in real estate has a lock-in period of three years before any foreign entity could exit investments in India.

However, it has to be seen which arm of Lehman Brothers has made real estate investments directly or indirectly. If that subsidiary has already filed for bankruptcy globally, regulators may allow an exemption from the lock-in period. However, sources said no Lehman subsidiary or related entity has applied for an exemption from the lock-in period yet.

Joint development rights: popular choice for real estate projects

The real estate business in India has been making news for years, and has witnessed a period of vigorous activity leading to a “boom” that is only now beginning to settle into a more rational pattern of growth. As a result, development of residential and commercial projects has been a rapidly growing business. It is a fairly common arrangement for developers and builders to enter into development related arrangements with land owners rather than making an outright purchase of the land identified for their project. Land owners may grant rights to develop their land under an agreement entered on mutually agreed terms and conditions. Broadly speaking, development rights can be granted in many ways, such as by a joint development rights agreement, sole development rights agreement and through a development services agreement.

Illustration: Jayachandran / MintCommercially, in a sole development rights agreement, the developer makes an upfront payment in favour of the land owner which enables the developer to own the built-up space on the land without having any ownership rights in the land, which at all times vests in the hands of the owner.

As far as development service agreements are concerned, the land owner gets the land developed by a developer against payment of a fixed consideration. In such agreements, the developer’s only obligation is to develop the land and hand the developed land back to the land owner. In other words, the developer, being akin to a contractor, gets paid only for services rendered.

The third category—a popular choice for real estate projects—is the joint development rights agreement. Generically, in a joint development rights agreement, the owner provides the land free and clear of all title defects and encumbrances, and undertakes the development of such land along with the developer. In such arrangements, the land owner continues to own the land and shares the responsibility to develop the building project along with the developer. In such arrangements, it is understood that the basic grunt work of development will be done through the developer, who has (or has access to) the manpower, equipment, expertise and experience to implement the project. When it comes to enjoying the proceeds of the built-up space constructed, the land owner and developer can either agree on sharing revenue out of sale or lease of the built-up space or owning the built-up space in an agreed ratio. In the case of sharing revenue from the built-up space, it is the responsibility of the developer to develop the parcel of land jointly with the land owner and sell or lease the built-up space to third-party purchasers/lessees and share the proceeds in an agreed ratio.
Since the ownership in the land continues to be with the land owner, the developer would require the cooperation of the land owner to transfer the title in the land to a purchaser while it transfers the built-up space. On this, the courts have held in the case of Chheda Housing Development Corp. that the developer will have the right for specific performance which shall be specifically enforceable in a court of law if the land owner fails to cooperate with the developer in selling/leasing the built-up space on the land.
In scenarios of joint development rights agreements, the land owner, along with development rights, gives the developer a licence, authorizing the developer to enter the land for the purpose of development. The licence/authority to enter the land is typically given by way of a power of attorney issued in favour of the developer, authorizing the developer to develop the plot, apply for permissions related to the development of the land, carry out construction on the land, deal with local authorities for all necessary approvals and licences, raise debt for the project by mortgaging the land, appoint third party contractors for construction activity and advertising the project.

It is pertinent to mention that the power of attorney granted without consideration can be revoked at any time by the person granting it. However, a power of attorney issued as part of a contract to discharge contractual obligations, if revoked, would amount to a breach of such contract. In such cases, the developer could seek specific performance of the obligation of the land owner to transfer the land by either itself executing the sale deed in favour of the developer or its nominee (as the development agreement may provide) or issue power of attorney in favour of the developer to do so on its behalf, as required by the development agreement. It is also important to mention that in the event the developer is in breach of the terms of the development agreement, the land owner would have the right to revoke the power of attorney.

The rights of developers are also secured by the fact that on bringing up construction on the plot, they shall be considered owners of the built-up space irrespective of the fact that the land is not owned by them.
The Supreme Court of India has given concurrence to this proposition in the case of CAT v. Fazalbhoy Investment. In this case, the court held that there exists a concept of dual ownership in India wherein one person can be the owner of the land and another person can be considered the owner of the structure on that land.

This column is contributed by Aashish Vats of AZB & Partners, Advocates & Solicitors.

UAE firm plans to develop airstrips, helipads in India

DUBAI: The United Arab Emirates (UAE)-based real estate company ETA Star Ascon is planning to enter India’s business jet infrastructure sector by developing hundreds of small airstrips.

The company, which had set up Star Aviation in India earlier this year to charter out business jets, now plans to develop airstrips and helipads across India.

According to Hameed Salahuddin, there is a great demand for such facilities in India as the economy was growing fast.

“Corporate India has moved to the next generation that needs fast transit facilities across the country,” Salahuddin told the Gulf News, while pointing out that the subcontinent’s many business and industrial parks and economic zones needed airstrips or helipads for business leaders to travel back and forth.

“There is already a strong need for these services. However, the facilities are not in place. We want to fill up that gap,” he was quoted as saying.

Apart from the major cities, he said, the new urban communities in India’s remote townships still lack good airport facilities.

With the number of private airlines in the country growing, the demand for such facilities has become even more.

“In many of these cities, the airport infrastructure does not allow the high-flying executives to travel with business jets,” Salahuddin said.

“There is a need to develop the facilities and infrastructure so that they could have a fruitful meeting with officials and have a quick turnaround back to their offices.”

He added that his company is already in touch Indian airport authorities for this.

“The demand is already there in India. We just have to place the systems and facilities in place, using the existing airport infrastructure to facilitate the services, which will save valuable time of these officials. Currently they spend days in commuting to and from their offices to hold meetings,” he said.

Real Estate: Mumbai In Agony

Lok Housing, Godrej Industries, IB Real, Century Textiles, Bombay
Dyeing, Orbit and HDIL-all Bombay based Real Estate Developers have
been hit by slowing demand since the beginning of CY09. The softening
trend is sustaining and we would most likely see Real Estate price
cuts in CY10.

A visit to the office of the Deputy Inspector General of Stamps and
Registration has confirmed fears of a deep drawn slow down in real
estate demand in Mumbai.

Data of stamp duty registrations shows sales volumes so far in FY09
are down 14% yoy and 33% lower than in FY07. Volumes for August 2008
were down 27% YoY, the steepest fall in any month this year.

Mumbai has traditionally been the strongest property market in the
country – and we believe that the above evidence is highly indicative
of the state of property markets across the country.

Developers appear to be holding prices in the hope that demand will
revive during the festive season, and residential prices in Mumbai
appear to have risen marginally since the start of FY09. Despite this,
reports of developers offering direct and indirect discounts on
projects are becoming increasingly frequent implying that a price
correction might be just round the corner.

The trend of slowing volumes to continue going forward, leading to
price cuts by developers post the festive season.

The end of Fads, just like the Replacement Cost Thesis propagated by
Harshad Mehta in 1992, the NBFC Fad of mid 90s, the Tech Bubble of
1999-2000 were followed by massive stock market falls as investors
vanished form the sectors concerned.

It is highly possible, that the current series of falls in the Real
Estate segment is just the beginning of a deeper slide and the
aforementioned concerns too, will never be able to capture peak level
market capitalisation.

QVC project coming up in Bangalore

Bangalore : IL&FS funded realty firm QVC Realty today announced the launch of its first project, a residential community located close to the Bangalore International Airport.

The Rs 480-crore project in which QVC is investing Rs 150 crore would have its first phase ready by 2011 comprising 100 luxury residences spread across 26 acres.

The second phase is expected to be launched in mid-2009 would cover an additional 75 acres. The launch price for QVC Hills would be Rs 5,500/sq ft, according to Mr Prakash Gurbaxani, Founder and CEO, QVC ealty.

The Bangalore-based QVC Realty, founded in early 2007, currently has projects in Bangalore, Gurgaon, Pune, Chikmagalur and plans to be present in Hyderabad, Chennai and Kolkota before the end of the current financial year, Mr Gurbaxani announced today.

QVC Realty has so far received a $100 million funding from IL&FS, and is in talks ‘with several sources’ for its second round of finance and expected to raise another $100 million in the next four months.

A New Hi-Tech City On The Anvil

Kochi will soon attain global status with the coming of a Rs 5,000-crore hi-tech city project. The Bangalore-based Shobha Developers have signed up an MoU with the state government for setting up this hi-tech city.

Sobha Hi-Tech City will be an integrated city with focus on research and development, knowledge dissemination, information technology and pure and applied sciences. The city is located close to the National Highway 47 bypass near Maradu in Kochi.

It will have 7 million sq.ft. of knowledge park, commercial space to provide business-friendly ambience, hospitality and leisure projects, entertainment and amusement facilities, a marina and residential complexes. The project will be completed in eight years and would generate 75,000 direct jobs.

Source:  www.realtyplusmag.coms

Technologically advanced

Suppose you are on your way to watch the latest Hollywood flick. But in hurry you forgot to switch off the lights in the master-bedroom. You can call up a special smart device installed at your apartment and press a key on your handset. The light in the bedroom is automatically switched off.
This is not a miracle; it is just a technological advancement that has transformed a raw house into a smart home. Based on this concept, Designarch Infrastructure is coming up with group housing societies in Ghaziabad’s Vaishali area and Greater Noida. The apartments are christened as e-homes.

Reaching there
If you are coming from Central Delhi’s ITO crossing, take the Nizammuddin Overbridge. Drive straight till you reach the Ghazipur Crossing. Turn left from this red-light and go straight till you reach Anand Vihar Inter State Bus Terminal.
Once you reach the terminal, turn right to enter Uttar Pradesh border. Go straight till the Dabur Chowk. From here turn right to enter Vaishali’s residential area. Drive straight for 200 metres. The project comes on your left.

Quick check
The project is built on an area of 1.75 acre. The project is at an advanced stage of construction. The developer plans to hand over the possession by December 2008. Because of the popularity of the project and its concept, very few apartments are left on sale. Apartments are being sold at basic rate of Rs 3,700 per sq ft. There will be two towers having three-, four- and four-plus-one-bedroom apartments. Named as Splendour, the three-bedroom apartments offer area of 1,750 sq ft. The bigger apartments, the Elegant and the Elite have four bedrooms and are available in two different areas: 2,050 sq ft and 2,480 sq ft.
For apartments on the first floor, second and third floor, and fourth and fifth floor there are preferential location charges of Rs 250 per sq ft, Rs 200 per sq ft and Rs 150 per sq ft, respectively.
Occupants of these apartments have to pay Rs 25,000 for the club membership also. For single space meant for automated car parking, family has to shell out Rs 2 lakh. Apart from these, there are charges on maintenance, power back up and security.
It is worth mentioning, these additional mandatory costs raises the value of the dwelling unit. The average rate of for a residential apartment in Vaishali ranges between Rs 2,800 and Rs 3,000 per sq ft. So the rate is definitely high. If one is looking for a cheaper deal, apartments are also available in the secondary market at a cost lesser than the company’s rate.

Sample flat
The sample flat showcased at one of the floors is of the elegant category. The area of the four-plus-one-bedroom apartment is 2,480 sq ft. A servant room is adjacent to the main entrance. This room is separated from the house in a way that the servant can enter only from the main entrance. The entrance has a camera that keeps an eye on the visitors and maintains a log in the smart home solution installed at the entry point. The solution enables you to have the video and details of the visitors on your mail and also connects you to the main security of the entire complex.
A large sitting area and a dining space welcome the visitors. A guest room falls at the right of the entry point. This room can also be used for setting up an office. The large windows in this room create more space. A long balcony that runs parallel to the dining hall and the sitting area finally end up at the door of the guest room. A modular open kitchen is next to the dining space.
The developer is providing a raw kitchen but on demand a buyer can get it transformed into a modular one. As told by one official, the cost of such modification will cost around Rs 2 to 2.5 lakh.
A unique feature of the dining space is the virtual mirror that is also a television. It has sensors that will switch on the screen if somebody sits infront. The other three similar sized rooms open in the dining hall. The master-bedroom has a dressing bay and an attached bathroom with sensors. This will save the power cost. Kids’ room is next to the master-bedroom. A common balcony runs along these two rooms. The third room and the master-bedroom have wood laminate flooring. The attached bathroom of the third room has been made in such a way that it can also be used by the visitors and guests.
Most importantly, there is a small balcony-garden in each apartment on each floor.

Advantages
The area shares its borders with east Delhi area like Ghazipur. By September 2009, Vaishali will have Metro rail connectivity. The area then will be very well connected to other areas. Once the work on Metro will be complete, the commute to ITO crossing will reduce to a ten minutes zip.
Moreover, the Anand Vihar Bus Terminal has impacted real estate prices in the area. Shopping needs of the inhabitants are being taken care of by the malls around. Vaishali will also give better appreciation in terms of price of the apartment bought. So the option is good for investors with deep-pockets.

Kerala realty boom: perfect balancing act

Many commercial and residential properties across Kochi have been urbanised immensely. At the same time, Kozhikode – perhaps next only to Kochi, Thrissur and Thiruvananthapuram, in real estate development – has been witnessing a quiet ‘upheaval’ since mid-2007. All these factors have led to a steady boom in the realty sector in the State, finds out R Gopakumar.

The general sluggishness witnessed in the property sector in the country, has had a limited impact on the Kerala scene which is significantly driven by the NRI economy. However, affordable housing seems to be the buzzword in Kochi, the commercial hub of the State and an emerging metro. The Smartcity knowledge village, Vallarpadom container terminal, LNG terminal, cruise terminal and marina are some of the ongoing projects that created a huge demand for housing, two years ago. These high-profile projects which were almost simultaneously announced, triggered a boom in the property sector, with the resulting frenetic activity lasting till a few months ago.

Observers say the slip between the cup and the lip, if any, would be known once the end-user comes to the scene on the completion of these high-profile projects. According to the Kerala Builders Forum, the market has been showing a steady growth, though the number of ongoing projects is not significantly high. “Work is on in about 14,000 apartment units in Kochi. What is significant is that the number of players has gone up and so has the volume of business,” says forum chairman George E George.

With prices soaring like never before, affordability has become the cornerstone of urban housing. “Since a 3-bedroom flat costs between Rs 50 and 60 lakh, the trend is to go for two-bedroom or fully furnished single-bedroom flats,” he says. This being a feature of a metro city, has been generally welcomed. Nevertheless, plush apartments are now available at Rs 2,600 to Rs 3,000 per sq ft in several areas. Such apartments are mostly bought by non-Keralites, especially Gujaratis and Sindhis who find the rates here much cheaper compared to Mumbai or Bangalore.

Kochi going urban

All these point to the fact that many commercial and residential properties across Kochi have been urbanised immensely and they are all still in the process of development. Kakkanad, the eastern end of the city, which used to be a hilly village, is the new city hub. At least 40 builders have set up projects in Kakkanad where the Smartcity is coming up. They include local players like Abad, Asset Homes, Skyline and Trinity, as well as non-Kerala companies like DLF, Puravankara and Fernvalley. Work on some super luxury apartments at prime locations like Marine Drive, is also going full steam.

A considerable number of NRKs’ (Non Resident Keralites), has chosen to settle in Kochi and this might be a reason why the real estate scene here has been recording steady growth. Apart from Kakkanad, other sub-urban areas like Kaloor, Edapally and Kalamassery have also recorded a spurt in apartment projects. These are less congested, but accessible places away from the heart of the city. Edapally, which used to be a quiet residential place till three years ago, is now a beehive of activity. With at least two malls coming up at the Edappally junction and another one near the junction on the National Highway bypass, developers are making it a hub of commercial spaces.

Kozhikode’s ‘quiet upheaval’

Kozhikode, perhaps next only to Kochi, Thrissur and Thiruvananthapuram, in real estate development, has been witnessing a quiet ‘upheaval’ since mid-2007. A large volume of inflow remittances, a strong trading class and new upcoming sectors like information technology, have led to an increase in the demand for both, residential and commercial activity. A new breed of highly demanding consumers has started looking for quality living spaces. Most retail majors are claiming space in upcoming malls. Over 40 builders are said to be focussing on the city’s real estate market.

Though land prices in Kozhikode city and suburbs have gone down after a boom, prices at many major junctions in residential localities and commercial streets in Kozhikode have been ruling high. For instance, land prices at the busy Mavoor Road junction range between Rs 35 lakh and Rs 40 lakh a cent.

Needs lead

The building industry in Kozhikode claims that it has taken up projects after taking into account, demand of customers with genuine housing needs. As a result, there has been a consistency in the rates for built-up space in both, residential and commercial categories. The builders say they do not expect the rising interest rates and slowing growth to affect this demand. As in other parts of the state, Kozhikode also gets a large inflow of NRI money into real estate. However, the focus of the builders is on domestic demand which is growing at a healthy rate. They say the NRIs’ always look at bigger cities like Kochi when they make an investment decision. The realty boom in a city like Kozhikode is led by local clients.

The much-awaited expansion of Kozhikode airport, the growth of tourism and the potential of the city to emerge as a new IT destination, are the factors which the builders are pinning hopes on. However, it is the growing importance of the city as an IT destination that has given a fillip to the construction sector. Several companies — among them, even a Hungarian company — have announced plans to open centres in Kozhikode. The Calicut IT Initiative is trying to communicate the advantages of investing in Kozhikode to the investors. While the state IT park, Cyber Park, is fast becoming a reality, the 350-acre IT park by the Aditya Birla Group is awaiting government clearance. The proposed Advanced Technology Park spread across 60 acres, would be more of an incubation and R&D centre. A Malaysian company is promoting another industrial township in Kinalur near the city.

The rates for residential apartments now range between Rs 2,100 and Rs 3,500 per square feet, while those for premium apartments within the city, especially in places like Nadakkavu, have gone up to Rs 3,500 per sq ft. As for the commercial space, the rates are now ruling between Rs 5,000 per sq ft and Rs 6000 per sq ft, while for the premium category, it would be over Rs 10,000 per sq ft. With all these activities expected to generate more jobs and incomes, builders expect the construction activity in the city will see sustained growth.

With lifestyles in the city changing, property developers are also looking at other investment opportunities. The first major shopping mall in the state came up in Kozhikode last year. Its promoter, Mr Mehaboob, says 90% of the space has been booked by retailers.

Real estate developers confident of fund flow

Real estate developers are carrying on with their projects, unfazed by the global financial turmoil that is expected to hit the Indian real estate sector. They remain confident about flow of funds, despite the prevalent crunch.

“Funding (for our projects) will not be an issue. We are accepting funding from a lot foreign agencies, some of them being HSBC, HDFC and ILFS,” said Rakesh Jain, executive director, Ansal API. He however expects funds to shrink if the RBI hikes interest rates further.

Vipin Agarwal, executive director, Omaxe Ltd, however, is a tad more optimistic. “Different countries are taking measures to bail out their banks. As a result, banks are going to be refurbished with liquidity. There is no reason why this liquidity will not flow into Asian countries,” he said.

Sharing the optimism, Shobhit Agarwal, joint managing director, capital markets, Jones Lang LaSalle Meghraj said that many new funding agencies will now decide to operate in the market. He said, “Some PE funds exercised caution at a time when others went overboard with doling out mortgage loans. Once these conservative funds come into the field, market dynamics will change once again.”

Incidentally, Indian realty stocks tumbled by almost one thousand points after the buyout of Merrill Lynch and collapse of Lehman Brothers, the world’s third and fourth largest investment banks respectively. While Jain thinks that all realty operators are trying to figure out ways to cushion their stocks from impact of the global meltdown, Agarwal believes in the philosophy of what goes down also comes up.

“Realty stocks will go up,” he said. Jain added that stocks are going down mainly because of negative sentiments and that the fundamentals of the sector are strong.

Both Jain and Agarwal claim that their order book is “very healthy”.

“We have a pending order of 1.5 billion houses in the mid-income segment,” said Agarwal. He expects mortgage rates to go down, taking a cue from inflation, which is currently on a downward mode.

Both Ansal API and Omaxe Ltd are focusing on MIG housing. The ongoing projects of Ansal API include Sushant City-Jodhpur and Jaipur, Sushant Golf City-Lucknow, among others.

 

Rising land prices hit property developers

NEW DELHI: The property market is desperately seeking a silver lining — but that seems to be evasive. In fact, real estate developers are facing a double whammy of a dip in prices of residences across the country by around 15-20% in the last few months, even as land prices are going up. While home buyers have reason to be happy over falling prices, an increase of 15-30% in land prices over the last eight months is causing sleepless nights for developers.

Besides cash crunch, what’s worrying real estate players is that with land prices going up, they are not being able to add to their land bank. In fact, many developers told SundayET that in the last four months, the number of land deals had dried up, with barely any land changing hands in this sector.

Industry sources, in fact, say that across all metros and tier II cities such as Mohali, Kundli (Sonepat), Jaipur, Lucknow, Indore, Surat and Cochin, there has been an increase in land prices. The situation is such that there are no buyers for any kind of land here. In fact, many developers feel they don’t want to lock up capital at this stage by buying land, as there is a holding cost involved in building land banks. Says Shravan Gupta, executive vice-chairman & MD, Emaar MGF: “There has been a significant rise in land prices in the last couple of years. The developers are finding it tough to get cheaper land so you will see that the number of land deals by developers have come down.”

In the last couple of years, land prices have escalated by 50% to 100%, depending on the location. In some places, prices have risen by as much as 200%. For developers, land is the main raw material and typically, they have made their money buying land cheap and building and selling homes on it after prices have tripled or quadrupled.

Apac property markets enter correction phase

NEW DELHI: The Asia-Pacific property markets are entering a correction phase that will continue over the next 12 months, according to the global real estate consultancy Jones Lang LaSalle (JLL). It also suggests that the rapid run-up in rents and capital values seen in recent years has come to an end in most of the markets.

In fact, Raminder Grover of Homebay Residential (a wholly owned subsidiary of Jones Lang LaSalle Meghraj) feels that property markets across India will also witness a price correction in the months ahead.

“Factors such as rising inflation, the impact of the sub-prime crisis on the global banking sector, slowing GDP growth, rising interest rates and the general skepticism in the business world are directing occupiers to re-strategise their expansion plans. This may lead to demand rationalisation over the next few quarters and may cause vacancy levels in these micro-markets to rise,” he says.

The housing sector in India is a direct reflection of the interest rates and housing loan availability. Due to rising interest rate, residential demand has been affected.

The high interest rates have acted as quite a dampener, leading to a drop in demand from investors/genuine buyers. As money is drying out, investors in the market are diversifying in their investment portfolio. Even end-users have become cautious in their investment decisions.

Developers, although do not outrightly deny the fact that a further slowdown will be seen in the residential sector, do sound more optimistic about the months ahead.

“The demand has not diminished but it is definitely slower than what it was. Such a scenario is expected to continue till atleast the next fiscal as the slowdown is mainly due to high bank interest rates and inflation,” reveals Kunal Banerji president-marketing Ansal API.

India’s largest real estate developer, DLF, feels that growth and demand will primarily depend on the GDP of the country. “The slowdown in demand is mainly because of inflation and RBI’s initiative to curb demand and not because people don’t want to buy a house now. But people are still buying houses. So, I don’t think the impact on buying can remain for long,” says Rajeev Talwar group executive director DLF.

Shradh may burn Rs 500-700 cr hole in mkt

NEW DELHI: The Shradh or the Pitri Paksh fortnight, which ends in the last week of this month, has hit the real estate industry hard since consumers have held their plans to buy houses. Coming close on the heels of the US financial crisis, which has seen some big Wall Street giants collapsing, the “inauspicious period” is bound to have a cascading effect on the realty market that has already slowed down considerably over the past one year.

In the National Capital Region (NCR) alone, the housing sector mops up Rs 250 to Rs 300 cr every month, despite being in a depressed state. But the last one month witnessed a dip of more than 50% to 75%, which means a loss of Rs 200 cr. Shradh comes a fortnight before the Navratri festival in the country, and is considered to be an inauspicious period in the Hindu religious calendar in most parts of India.

Says Shobhit Agarwal, joint MD, Capital Markets, Jones Lang LaSalle Meghraj: “The traditional period of Shradh is an annual event which is already factored in by the Indian market. Moreover, deals are still finalised in principle and intent during this period — they are merely not signed. This period, which lasts for a month, brings a halt in transactions in real estate. Real estate companies face a slowdown and utilise this period for developing contacts, bringing deals close to the finalisation stage and trying and executing the deals as the Shradh gets over.”

Agrees Rohtas Goel, CMD, Omaxe Group: “The real estate market, like the auto sector, is one of the worst hit during this period as buying or selling of property is considered inauspicious. The volume of property transactions during this period goes down substantially and in terms of value, the market is worse off than other assets. Though consumers come and check out property, they put purchases on hold.”

In fact, the Shardh period brings a slowdown for most of the markets in India, as Hindus are usually unwilling to buy assets. The fortnight creates an adverse impact on almost all the major markets of consumer durables, cars, assets and real estate throughout the country.

Says Vikram Sabharwal, director, SAB Infrastructure: “This phase sees a dip in sales — from two-wheelers and cars to gold and real estate. Most people keep away from buying these assets. This is because if we go to a shopkeeper for buying a consumer durable, he would not refuse the buyer during the Shradh period, but if a buyer wants to buy a property, there is every chance that the landlord would convey his apathy for selling his property during this period. As a consequence, the property markets — be it residential, commercial, retail or land — face problems pertaining to minimal or no transactions during this period.”

Constru India in Kolkata with its curtain raiser

Kolkata, (UNI) Constru India, an all-India exhibition on the construction business, organised its curtain raiser here to give the industry a preview of what could be expected from this year’s exhibition in Mumbai.

Speaking at the curtain raiser to the mega expo last evening, Avneet Singh, vice-president, Winmark Services Private Limited said, ”Constru India is the most anticipated exhibition for infrastructure and real estate companies in India as well as abroad which is evident from the response we have received for the curtain raiser as well as the pre-event feelers for the exhibition in Mumbai.” Constru India 2008, which is the tenth edition of the popular all-India exhibition, was started with a vision to highlight the progress made so far in infrastructure sector and the policy initiatives taken by the government at various levels, he informed.

He maintained that the exhibition aims to showcase the progress madein the country to help strengthen “Made in India” image for the indigenous technologies, expertise and services along with new technologies.

The three-day gathering in Mumbai will bring together business leaders from public and private sectors along with senior officers from Central and state governments to adress the development of the country’s infrastructure sector, he said.

Bengal plans to relocate Dankuni project

Kolkata : Facing a problem in purchasing land at Dankuni in Hooghly district, the state government is now mulling the idea of relocating the DLF project. The government had planned to build the township on a public-private partnership basis with Delhi-based real estate giant DLF Ltd.
“We will go ahead with the project but this may not take place at Dankuni,” said Ashok Bhattacharya, Minister for Urban Development.

A meeting was held on Tuesday between the officials of the urban development department and representatives of DLF at Writers’ Buildings. “We have decided not to go ahead with the acquisition of the land, we will purchase it. As of now, we have not yet been able to buy even one acre of land,” said Bhattacharya.

The project was to come up on 4800 acres with an investment of Rs 33,000 crore.

In February 2007, the Kolkata Metropolitan Development Authority (KMDA) signed an agreement with DLF for building the project — Dankuni World Project — comprising a township and an industrial hub.

Following the Nandigram episode, the state government had set up a land procurement committee to purchase the land in Dankuni. But till date, the committee could make little headway because of the opposition from a large number of land owners.

The real estate giant has already paid Rs 270 crore to the government for the project.

LIC outbids Punjab developers in land auction

Life Insurance Corporation (LIC) has won in the bidding process for land for commercial purposes auctioned by the Punjab Urban Planning and Development Authority (PUDA) and Greater Mohali Development Authority (GMADA, which was carved out of PUDA). It has outbid other pvt. developers. The other five participants included Tata Realty and Infrastructure, Best City Realtech, AERENR Enterprises, Malhotra Land Developers and Inderpreet Singh Chadha. The chunk of land, put under the hammer, was handed over to PUDA by the state government for commercial exploration under the “optimum use of government vacant land” policy. The property would be used for commercial purpose.

In an earlier auction, LIC took possession of 16, 973 square yard of land in Bathinda by offering Rs 45,100 per square yard as against the reserve price of Rs 30,000 per square yard. The state managed to secure Rs 76.54 crore through this auction. Furthermore, a commercial site in Amritsar belonging to Amritsar Improvement Trust was bagged by LIC.

GMADA had auctioned 9.6 acres at Mohali (Punjab) for Rs 464.12 crore as against the reserved price of Rs 464 crore. The deal was clinched by Life Insurance Corporation of India (LIC) which was the sole bidder. LIC had offered Rs 1, 00,025 per square yard as against the reserved price of Rs 1 lakh. The site fetched GMADA Mohali only Rs 12 lakh more than the original reserved real estate price of Rs 464 crore. The property purchased by LIC could be used for industrial purpose or for constructing multiplexes, shopping malls or luxurious hotels.

Center to follow Haryana example, push forward real estate bill

After Haryana government passed the landmark bill to contain real estate malpractices, the Centre has now requisitioned a copy of the legislation passed by the state assembly and is open to including some of the provisions in its own Bill, which has been hanging since the past three years. The Haryana Regulation Property Dealers and Consultants Bill, 2008 passed by the state assembly early this month seeks to check fraudulent and benami deals and protect those who buy property from unscrupulous developers and middlemen.

Confirming the development, a senior official of the Urban Development Ministry said, “The ministry will compare the legislation with the central draft on real estate regulation. It will study the Haryana legislation and evaluate if any of the provisions in it could be included in the central draft.” However, he did not specify any timeframe for the enactment of the legislation saying, “the Government is not in a hurry,” implying that the legislation may not see the light of day in the near future.

In fact, the proposed bill has become the object of a political ping-pong game. According to informed sources, the Delhi Lieutenant Governor Tejender Khanna had suggested that the central government broad-base the regulatory authority’s ambit to include other service providers like Delhi Development Authority in the National Capital Region as well. This suggestion apparently hasn’t gone down well with the union urban development ministry, which subsequently vetoed the proposal of the Delhi government.

Govt approves 3 SEZs in Gujarat

The government of India gave green signal to the three proposals for special economic zones (SEZ) in Gujarat. These 3 SEZ projects all together would involve an investment of Rs 12,035 crore. Of the three proposals cleared by The Board of Approval of the Special Economic Zones in it’s meeting one with land in possession received formal go-ahead, while two received in-principle approval.

Two SEZs that have got in-principle green signal are being promoted by former Central Vigilance Commissioner N Vittal. They would involve an investment of Rs. 11,340 crore. The multi-product EMPI Vittal Centre will come up on an area of 1,100 hectare in Gujarat. While one Gujarat SEZ that has got formal approval is Myron Realtor Private Ltd’s Rs. 695-crore IT/ITES/Electronic Hardware and Software zone over 10.93 hectares.

Design Arch to invest Rs 150 crore in e-home at Greater Noida

NEW DELHI: Real Estate firm Design Arch today said it will develop a residential project with application of green technology in Greater Noida, which could entail an investment of Rs 150 crore.

Besides, the company plans to develop 10 such e-house projects in the metro cities across the country by 2010-11.

“We have just announced our first e-home concept called Gardenia E-Homes at Greater Noida. It will be followed by another nine such project in various metros over next three years,” Design Arch Managing Director J K Jain said.

He said the company is investing Rs 150 crore for the Greater Noida project and expects a realisation of Rs 250 crore once the project is completed by mid 2010.

Jain, however, declined to disclose the investment figures for the other projects planned by the company.
“A green building may cost a little more initially, but saves through lower operative cost over the life of the building. There are many benefits, such as improving occupants’ health, comforts, productivity, reducing pollution and land fill waste,” he added.

He said the company is looking at developing both commercial as well as residential properties with this new concept.

Elaborating on the concept, Jain said structures would be electronic savvy, environment friendly, earthquake resistant besides other amenities.

“The green buildings in our project area will have four components, including energy saving, water saving, better indoor air quality and hygienic conditions and reduction of construction material waste,” he said.

The project would have some other eco-friendly concepts, like integrated rain water harvesting coupled with recycling of water and automatic fire detection sensors, he added.

Organised retail to form 18% of overall retail pie: McKinsey

Bangalore, Sept. 25 This may be good news for leading global retail players waiting to enter the Indian retail bazaar scene: the organised segment of the retail industry is expected to grow from the current 5 per cent of the total market to about 14-18 per cent of the expected Rs 18-lakh crore market by 2015. But a report by leading management consulting firm McKinsey and Co cautions global players waiting to enter the great Indian retail bazaar that a ‘cut and paste’ format of their stores elsewhere would not work here.

“They need to have innovative formats based on where to participate in the retail value chain, which geographies to play in and what price points to offer. They also have to craft a customer-insight driven merchandise strategy and create an efficient retail operating platform,” suggests the report.

Indian shopper

McKinsey’s retail report also talks about the uniqueness of the Indian shopper vis-À-vis the rest of the world: least loyal to a single retailer, dislike for pre-packaged fresh foods, willingness to pay more for convenience and services but not a premium price for a brand and demands ethnicity in apparel accessories. And, in the absence of quality control, information about the product and trust in retailers, brands serve as a proxy for all these factors.

Of the current 204 million households in India, the report estimates that only about 13 million households have the income to patronise organised retail. The great news is that this relevant consumer segment will grow five fold from 13 million to 65 million households in the next eight years but mom and pop stores would continue to be relevant across the country, in both small and large towns.

The report, titled ‘The Great Indian Bazaar: Organised Retail Comes of Age in India,’ also suggests retailing in India would require an approach that is distinctively different from the rest of the world. To achieve leadership position in the sector, players would have to integrate real estate into the business model, create an effective and scalable supply chain, increase basket size by shaping consumption, develop and retain talent, influence regulation to ensure healthy development of the sector and to de-risk margins.

“Given the nascent state of organised retail and the rapid evolution of the industry, it is imperative for retailers, manufacturers, real estate developers, logistics providers and partners along the value chain to work in a collaborative spirit,” says Mr Laxman Narasimhan, Director, McKinsey & Co and leader of the Consumer, Retail and Media Practice in India.

Mahindra Lifespaces mulls entering affordable housing segment

MUMBAI: Mahindra Group’s real estate arm Mahindra Lifespaces is likely to join the ‘affordable’ housing bandwagon in a year, aiming the middle-income group.

“We are looking at opportunities to enter into the affordable housing sector, but it is still at the discussion stage. It may take one year to concertise the plan,” Mahindra Lifespaces Managing Director and Chief Executive Officer Pawan Malhotra told PTI here.

Affordable housing is making waves in the realty sector due to high cost of property, dearer home loan and its availability, high inflation and the huge gap between demand and supply.

A mapping of the supply trend of housing from private developers done by Ernst & Young shows that 70-80 per cent of it caters only to the higher-income groups.

In contrast, the Planning Commission expects that the housing shortage in the country to go up to 26.53 million units over the next four years. Of the total housing shortage, economically weaker sections and low-income groups account for about 99 per cent of the shortfall in India.

Thus, anticipating volumes to make up for lower margins, a number of recognised real estate players, like Puravankara and Omaxe Ltd, have already plunged into the new asset class of the real estate sector.

In addition, Matheran Realty, Indu Projects, Shriram Properties, Jain Heights and Structures, Ansal Properties and Shapoorji Pallonji among others are either entered or are in the wings to enter into the creation of affordable housing.

Mumbai commercial property feels the pinch of the US financial crisis

London-based banking major Barclays Bank created history in May when it took space at Cee Jay House, a landmark office complex in Worli, for Rs 725 a square foot (sq ft) per month. The building owned by Civil Aviation Minister Praful Patel is fully occupied with the likes of the now-bankrupt Lehman Brothers, Credit Suisse and Societe Generale, among others. The developers are building 80,000 sq ft of space next to Cee Jay House, and leading brokers said they are getting enquiries for Rs 300-350 per sq ft.
Though property developer Indiabulls Real Estate is leasing office space at One Indiabulls Centre, an upcoming commercial complex at Lower Parel, at Rs 325 per sq ft per month and closed deals with big companies for Rs 275 per sq ft as anchor tenants, property brokers said they are now getting queries for Rs 200-225 a sq ft, 40 per cent less than the quoted price.
Commercial rentals in Mumbai are beginning to crack and deals for office space have slowed over 30 per cent in the last three months. Leading property brokers and consultants in Mumbai say things will be worse with prospective tenants asking for a 50 per cent cut in rates.

This depression in the commercial market is a potent sign of the fall-out from the financial crisis in the US. Companies, mainly IT and BPO service providers and finance firms, with significant US businesses are cutting back expansion plans and, therefore, the need for prime commercial real estate. Meanwhile, tighter liquidity at home is encouraging companies to defer their property bookings.

In the Bandra Kurla Complex, the city’s second main commercial hub where rentals peaked at Rs 450 per sq ft a month, clients are now negotiating with developers at below Rs 300 per sq ft. Rents are expected to come down to Rs 200 a sq feet when three prominent buildings are completed in six months.

In the Churchgate area of business district Nariman Point, which houses old office buildings, rentals have already settled at Rs 240-250 sq ft a month from Rs 325-350 a sq ft barely two months ago. That is a 45 per cent correction.

“Companies are not signing at the rates asked by developers like they did earlier and transactions are not taking place. We have seen prices correcting sharply in Nariman Point in the last one month,” said Suketu Mody, president and chief operating officer of Coldwell Banker Goodwill Consultants, a US-based consultancy firm that advises many Indian companies on their property deals.

Battery Ventures, a venture capital firm that has been looking for 3,000 sq ft of space in central Mumbai for the last couple of months, is still waiting in the hope of a further fall in rentals.

“We have seen a five per cent correction in rentals in the last three months and expect a 10 to 15 per cent further correction in the coming months. We will certainly wait some more time,” said Gautam Patel, partner, Battery Ventures.

The other factor they are banking on is the enormous supply lined up.

By early next year, Mumbai and its suburbs will add 15.4 million sq ft of office space, more than the commercial space now available at the Bandra-Kurla Complex or seven times the office space at Nariman Point.

Business consultancy KPMG’s Jai Mavani believes that since companies have deferred their plans in the current conditions, most of them are going for smaller lock-ins with developers and saying they will book more space later when the market improves.

Rentals are expected to fall another 15 to 20 per cent in the next six to nine months as IT and BPO companies cut back on expansion plans as the financial crisis in the US, their biggest market, kicks in.

As a result, vacancy levels in commercial space across the country is expected to touch 7.5 to 8 per cent by the end of this year from 5.5 per cent to 6 per cent in June.

“Demand will slow from IT, BPO and finance companies that have enough choice in cities like Bangalore and Hyderabad. Rentals will drop to levels that you have seen two years ago,” said Pranay Vakil, chairman of Knight Frank, an international property consultancy.

Added Mahua Ghose, managing director of IL&FS Property Management & Services: “So far rentals have corrected much more than selling prices. After Diwali, I believe selling prices will also correct significantly.”

However, developers believe demand will come from newer sectors of the economy and at different levels of the property market. “Though some companies have reduced space requirement, quality space is readily acceptable to high-end clients. Companies are moving to different parts of the city which is economical for them,” said Hemant Shah, chairman of Akruti City, which builds offices and homes in Mumbai.

“I am not worried even if prices correct 10 to 15 per cent because it is good for both buyers and sellers,” he added.