Low Cost Homes – A Boon For Real Estate Developers

The earnings of DLF and Unitech in this quarter were better than the June quarter as sale of low-priced homes brought in hopes of revival, But this may fizzle out if developers keep raising prices. During the current fiscal, Unitech and DLF have sold over 7 million sq ft and 4 million sq ft of space, respectively, from their new launches.

Source : indianrealtynews.com

Real estate industry may exclaim crackers this Diwali

The real estate industry is reviving, but yet to get back to its old pace, which was impressive and estimable in the past four years. Even the festive season shows not much spur in the sector. Yes, Diwali looks a bit glimmer then the last year with not many offers. Leaving a few, developers have nothing to offer in terms of discounts. It’s just that they are launching new projects now with the hope that the season will show some productive results.

Developers like Omaxe, DLF, Amrapali, Meriton Group, SVP Group and Assotech believe that with the festive season India’s real estate market will revive further. “The festive season, which starts with Navaratra, is considered to be an auspicious time to purchase a house and when coupled with bottomed out real estate prices and home loan rates starting at 8% per annum along with other benefits offered by developers, we expect a good revival in demand”, said Rohtas Goel, chairman and managing director, Omaxe.

Last Diwali, developers were showering festival offers in plenty. Along with flats they offered cars, holiday packages and gold coins to buyers. But this year, the baits have almost disappeared. Yet, builders are expecting good sales during the festive period. Their justification is – “the buyers will come as the market is picking up and the prices on offer are good for investment.”

The developers feel that market is picking up and soon the real estate market will see a boom again. Talking more about the reasons behind the optimism, Jindal said, “With eased cash reserve ratio (CRR), statutory liquidity ratio (SLR) and prime lending rates (PLR), banks have good liquidity now. They will definitely come out with attractive home loan schemes to draw fence sitters during the festive season. Bottomed-out real estate prices coupled with new home loan schemes should ensure a good deal for all types of property buyers.”

Developers are not giving exorbitant gifts but are offering some good rates and discounts. To delight the customers in this festive season, Omaxe has recently launched attractive projects like Omaxe Eternity in Vrindavan, Villas at Omaxe City in Bathinda, Omaxe Sangam City in Allahabad, Omaxe New Heights in Faridabad etc.

“All these newly launched projects are very attractively priced. While our recently launched projects saw impressive turn-out of customers, we have also received more than the expected response with in a short span of time”, said Goel.

Talking about the Meriton Group, all those who missed its Orange county flat offers in Indirapuram, can still feel proud to buy a three BHK apartment in its new tower, which will be the part of the same project. “Offered at the same price as other Orange County Flats, the new tower, having three BHK flats, will be launched before Diwali”, said Avnish Agarwal, director, Meriton Group.

The Supertech builders seems to offer something different, as R K Arora, chairman and managing director, Supertech Limited, said: “For the festive season, we have come up with some special offers and schemes at various projects to bestow our customers with a “special” feeling of buying their dream home on this auspicious festive season.”

Supertech will be organising “Green Village – Lucky Draw offer” in Meerut around Diwali. The Lucky Draw will be held for all the buyers who will book their flats in this township till October 11, 2009. The winner of the lucky draw will be gifted with one BHK flat in the same township. Green Village is the first township of Supertech in Meerut, which spreads in approximately 25 acres of land with around 1500 units of high and low rise buildings.

For other projects such as 34 Pavilion and Emerald Court (Noida), Czar Suits (Greater Noida), Palm Greens (Meerut & New Moradabad) and Livingston (Crossing Republik, NH 24, Ghaziabad), Supertech had offered Air-Conditioners to its buyers which were equivalent to the number of rooms which they had booked in aforesaid projects. It was a special festival offer for a limited period up to September 27, 2009.

To conclude, gifts and offers are can’t match pricing of a flat anyhow. Even developers say that buyers should not get swayed by attractive offers alone or get disheartened by the lack of offers. Buyers must assess their requirement and repayment capacity, along with the financial capabilities and delivering capacity of the developer, so that they are not trapped by the offer mania.

Source:http://mail.google.com/mail/?shva=1#inbox/1244bae3cc84c62c

Residential realty prices moving up

Residential real estate prices are going up. In the last three months, prices of affordable apartments have appreciated by around 10%
across the country.

“With improvement in the sentiment in the economy, transactions in the affordable range of residential real estate have gone up. This has made developers to increase prices by 5% to 10% in the last three months,” said Anshuman Magazine, MD of real estate consultancy firm CB Richard Ellis, South Asia.

The developers had cut prices by around 30% in first two quarters of calendar 2009 to revive the demand of residential units, which plummeted to a low due to the global financial crisis. Magazine said the price cut led to some recovery in demand. Enthused by the partial recovery, he said, the developers, who had sold a substantial portion of their projects at hugely discounted prices, decided to increase them marginally in the next phase.

According to an IIFL report, in Mumbai, prices are up 25%-40% from the bottom in early 2009, while in NCR, the corresponding figure is 15-20%. ‘‘Constrained supply and a revival in demand drove up prices in Mumbai, and NCR,” the report said.

In Mumbai, the prices of apartment in Metropolis, being developed by HDIL appreciated by 38% since March to Rs 10,500 per sq. ft. Similarly, the project, Planet Godrej, has become 20% costlier to Rs 25,000 per sq ft in the last six months. In NCR also, many developers like DLF, Unitech, Jaypee Greens, Mahagun and Amrapali among others, have increased prices by around 10% from the launch prices in March-June. In the premium segment also, there is revival in demand, said Vibhor Gupta, senior official of Jaypee Greens. However, the prices have not witnessed any escalation in the premium segment. Similar trend has been noticed in cities like Bangalore, Pune and Chennai.

“The current trend of price escalation can not be sustained as it will affect the demand,” said Aditi Vijayakar, ED of Cushman and Wakefiled, adding, as the demand has revived following interest rate cuts by banks, many developers have announced projects in the affordable range. This will increase the supply and will put pressure on the price rise.

At the same time, another consultant said the financial condition of the developers has not improved to a level that they can hold a project for long. They need cash flow to service the debt, which they have taken to buy lands. The source said the money from other sources like dilution of equity is still not easily available. This has forced developers to depend on the sales proceeds to service debt.

Source:http://timesofindia.indiatimes.com/business/india-business/Residential-realty-prices-moving-up/articleshow/5103968.cms

Yesterday once more: Realty firms start raising prices

Mumbai: DLF, the country’s largest property developer, will soon conduct a poll among property brokers to decide the pricing and number of apartments to be offered in the second phase of its Capital Greens project in West Delhi.

Yesterday once more: Realty firms start raising prices

It’s a novel experiment, but property brokers in Delhi say the company is trying to test the waters in view of the vastly changed situation in the real estate market.

Though DLF’s spokesman said the company is yet to fix a final price, feedback from brokers suggests the company is exploring the option of charging around Rs 7,000 a square foot (sq ft). At this level, the price is 56 per cent more than Rs 4,500 a sq ft it charged in the first phase of Capital Greens, when DLF had sold 1,356 apartments in a single day in April this year.

Developers such as DLF, Unitech, Omaxe, Parsvnath and HDIL were among those that cut property prices or forayed into mid-income housing, which were 25 to 30 per cent lower than prevailing prices, in the last quarters of 2008-09, as the economic slowdown and fears of job losses impacted home sales. Property sales fell 50 per cent from their peak in 2007-08 (when prices had more than doubled froom 2004-05) as buyers stayed away.

Those days are rapidly becoming a distant memory, with many developers increasing prices 15 to 30 per cent the moment they became sure of demand returning.

Take Mumbai-based Lodha Developers. The developer has increased prices 30 per cent in its premium housing project, Lodha Primero in South Mumbai, since its launch about four months ago. It has already sold 90 per cent of the apartments. For its mid-income projects, Lodha has increased prices 12 to 14 per cent.

Neptune Group, another Mumbai-based property developer, has increased prices in its Neptune Flying Kite project in Bhandup 26 per cent, from Rs 4,691 a sq ft a couple of months ago to Rs 5,900 a sq ft.

The national capital region (NCR) is not far behind with housing prices in Gurgaon having moved up to Rs 3,200 a sq ft from Rs 2,800 a sq ft six months back, brokers in the locality say.
Unitech, the country’s second largest developer, which is mostly focusing on mid-income housing projects under the Unihomes brand, is also considering a minor price rise in its home prices, a company official says.

“Markets are looking up and this is prompting developers to come up with increased prices for their Navratra launches. Prices are up by 15 to 20 per cent in the secondary market,” says Anil Singhal, a property consultant based in Connaught Place, Delhi. Navratra, a Hindu festival, is considered auspicious for property buys and developers generally launch new projects in the 10-day period.

Developers say the move to increase prices is in tune with rising demand from home buyers. “We are not hoarding our property. When the market was down, we were quoting low prices. Since it has moved up, we have increased prices. We sell according to the forces of demand and supply,” says Nayan Bheda, chairman and managing director of Neptune Group.

Adds R Karthik, senior vice president of marketing at Lodha Developers: “It is a standard way of operating projects. It is a strategic as well as tactical move so as to offer value for those who have bought properties.”

However, the move to raise housing prices has had its fair share of criticism. Analysts warn that property sales may fall again if developers increase prices sharply since the economic recovery is hardly complete.
“Demand is coming back with much difficulty. It does not make sense to increase prices now. They have to hold prices steady till demand comes back fully,” says Anuj Puri, chairman of Jones Lang LaSalle Meghraj (JLLM), an international property consultant.

According to a recent CII study, the Indian real estate market is expected to recover only in 2010-11. However, the government growing fiscal deficit is expected to impact the sector negatively with increases in the cost of funding and falling return on investments through exchange rate variations.

Some have been once-bitten-twice-shy and have avoided raising prices. Parsvnath Developers Chairman Pradeep Jain says he doesn’t see any scope to increase prices for the next couple of months. “We have to concentrate on selling properties and generating internal accruals first. We are planning to sell properties with attractive discounts in the festive season,” says Jain who is also president of NCR chapter of the Confederation of Real Estate Developer’s Associations of India (Credai).

Going by the trend in property prices in recent weeks, few of his counterparts in other real estate companies agree with Jain.

Source:http://news.in.msn.com/business/article.aspx?cp-documentid=3229249

Prime Indian property prices up 15%

With residential demand on rise once more, particularly in key destinations such as New Delhi and Mumbai, India property prices in these regions have appreciated by up to 15% in recent months, as developers seek to cash in, by increasing prices across their projects.

Experts monitoring the Indian property market fear that the there recent hike in property prices could adversely affect demand.

Vikas Chimakurthy of Realty fund Kotak Investment Advisors said: “There was a substantial demand, especially in the mature markets, after prices dropped a few months ago.

“Today, potential customers are not willing to buy properties at these prices.”

Abhishek Lodha, director at Lodha Developers, a Mumbai-based company which has property projects in and around Delhi, says that recent residential price hikes in Delhi and Mumbai “is not much and is the result of the improved market conditions,” he said.

India’s largest property firm, DLF, also confirmed that property prices being increased. “Yes, there has been a price increase though it is still limited to some projects nearing completion,” said DLF executive director Rajeev Talwar.

Source : http://www.google.com/url?sa=X&q=http://www.homesoverseas.co.uk/news/Prime_Indian_property_prices_up_15/12800-1002&ct=ga&cd=14fJzKZr8_o&usg=AFQjCNEugoYxA0YyQm9Z22vysghyyQ0ckA

Changes in Indian Real Estate Affairs

Real estate in India has always been the playing field for entrepreneurs. This industry has witnessed unprecedented highs and frightening lows over the years. One is often left dyspnoeic with the continuous shifts in this sector. Due to rise in demand in the IT/ITeS sector and significant increase in FDI, the commercial and retail real estate markets experienced tremendous growth in the first quarter of 2008. Land deals accrued around Rs 23,000 crore with additional deals worth Rs 10,000-crore in the pipeline. The highest recorded land deal was Mumbai’s Bandra-Kurla Complex. However, it has not been an easy journey for all in the property market. Last year, the global property collapse exacerbated by the credit bubble burst resulted in reduced finance and business activity. Equity markets also remained lacklustre and raising money through IPOs proved to be difficult. Both real estate giants, Unitech and DLF, delayed the plans to raise money through REIT issues after witnessing unfavourable initial response.

Consequently, lack of funds forced developers into high interest loans. High credit amounts proved to be detrimental for property companies. Most companies borrowed a large portion of their land-development outlays up front and relied on advance sales to repay these loans. However, poor sales led to delays and massive cost overruns. According to industry estimates, around Rs 8,000 crore worth of projects had faced considerable delay by June 2008. The collapse of Lehman Brothers, in September 2008, was perhaps the most significant event that spiflicated an already floundering property market in India. It triggered a shockwave that rippled through the liquidity centric commercial and retail real estate markets leaving a trail of defaults, delays, and losses. Even though property prices have corrected by 22-42% in major cities over the last few months, 10-15% downside is further expected. Commercial real estate demand has languished as corporate firms deferred expansion plans to deal with the credit situation.

Negative absorption rate aggravated by falling rentals led to decreasing margins. Companies like DLF, with 40% of its portfolio in the commercial and retail space, reported 29% y-o-y decline in 2009 revenues while its net profit plummeted by 43%. Similarly, the top line was also distorted for companies like Ansal (-26%), Parsvanath (-60%), etc. Timely and synchronised measures taken by central banks and governments around the world restored balance and prevented a total collapse of the financial system. Thus, markets saw a mild recovery. According to Rajeev Rai, vice-president of Corporate Assotech Ltd, “To counter decreasing demand and to gain confidence of all stakeholders of Indian real estate, associations like NAREDCO and CREDAI decided to bring down prices of various properties by reducing overheads and marketing costs.

In some cases, ticket size of the property was reduced with reduction in size of apartment to make it more affordable for the masses.” As per a report by Grant Thornton, the total number of PE deals announced during the first half of 2009 stood at 93 with a total announced value of $2.89 billion with the highest proportion invested in real estate and infrastructure management worth $1.61 billion. Bhim Yadav, CEO, Falcon Realty Services Pvt Ltd, reckons, “A higher FAR not only brings in more supply to the market, it is also vital for creating room for more affordable housing and control the steep rise in prices, ultimately benefiting the common man.” The Mumbai real estate saw a sharp price correction. Average peak rentals fell 40–60%. While there was a slight mismatch with excess supply, (supply of over 30mn sq ft over 2008–10E vs expected demand of 22mn sq ft), the demand in Mumbai has been healthy.

Unlike Mumbai, commercial and retail space in NCR is expected to languish due to weaker absorption rate. As per Centrum, the average vacancy rate in malls across India was about 9% in Q408 and NCR had the highest vacancy rate of around 25%. According a study by Knight Frank India, average rentals in Gurgaon was down from Rs 120/sq ft to the Rs 51/sq ft while rents in Noida dropped from Rs 90/sq ft to Rs 44/sq ft. In conclusion, as market conditions stabilise, the financial markets will slowly pick up resulting in an improved liquidity scenario, stable government, and affordable prices. This may well serve to bring back the shine to this lacklustre sector.

Source : http://www.indianrealtynews.com/real-estate-india/changes-in-indian-real-estate-affairs.html

Commercial overreach

Already having a huge land bank, DLF, the country’s largest real estate developer, is once again on a land buying spree. Last week, the developer bought 350 acres in Gurgaon at an outlay of Rs 1,703 crore. Market experts severely criticised the move because of its high valuation and for buying at a time when several of the liquidity-squeezed developer’s projects have been delayed, put on hold temporarily, or terminated.

Many of the company’s projects, both residential and commercial, have been stalled due to lack of demand and owing to the liquidity crunch. Earlier, the company had announced halting of construction work on nearly 16 million sq ft of office and retail mall space out of the 62 million sq ft it had planned. In the office space, the developer has stalled construction on nearly 12 million sq ft out of the 36 million sq ft planned. According to DLF’s chairman KP Singh, the projects would remain suspended until its finances improve and demand revived.

Company officials maintain that seeking denotification of SEZs has nothing do with the liquidity crunch. “Due to the slowdown, we do not see any value proposition in going ahead with these projects. However, all our commercial projects, where construction work is on, will be completed in one year. Space in these projects have already been pre-leased,” an official, who did not wish to be quoted, said.

PULLING BACK
DLF has failed to buy a 1,000-hectare land parcel from Yamuna Expressway Industrial Development Authority (YEIDA) along the Yamuna Expressway, which was earmarked as a special development zone (SDZ). It had shown interest by paying the earnest amount of Rs 1 crore along with the application last year. According to Lalit Srivastava, chairman of YEIDA, while the cost of land was Rs 800 crore, the entire project cost was estimated at Rs 8,000 crore to 10,000 crore. However, the company failed to buy the land citing financial constraints.

The mega convention centre to be developed in Dwarka, which was expected to be the biggest in the country, was scrapped as the company felt it could not undertake it without a foreign equity partner. Earlier, speaking at the Idea Exchange programme of the Indian Express Group, DLF chairman KP Singh had said, “We are ready to revisit the project if we are allowed to rope in foreign partners for funding, including private equity players.” The Delhi convention centre was one of the four state-of-the-art facilities announced in Union Budget 2007-08. Singh said that unless the Delhi Development Authority (DDA) allowed a special purpose vehicle that would include additional equity players, the project was unlikely to take off.

The developer also exited from a 4,840-acres township project, slated to be one of the world’s largest, to be developed at Dankuni in West Bengal. According to the developer, the state government failed to acquire land for the Rs 33,000 crore public-private partnership (PPP) township project.

PENDING PROJECTS
Gurgaon, which is the stronghold of the company, has a number delayed project namely — Park Place, Belaire, Magnolias, New Town Heights and Express Green. The developer has also delayed work at some of its biggest mid-income housing projects. The construction of DLF New Town Heights in Gurgaon Sector 90 and Express Greens in sector M1 in Manesar, both in Haryana, has been halted. These projects were launched in January and August 2008 respectively. Deepak Kumar, a Singapore-based NRI, who booked a flat in January 2008 in DLF’s New Town Heights coming up in Gurgaon, said that even after paying 42.5 per cent of the total cost of the flat, he found that the developer had not started construction work. According to the developer, the project has been held up sinc it has not received environment clearance.

In the commercial segment, the developer has held back several projects namely Digital Greens, Star Mall and South Point Mall in Gurgaon. Similarly, Star Towers, a complex meant for offices, though has been completely sold out the construction is yet to be resumed, which is on hold for three years now.

DLF’s vice chairman Rajiv Singh declined to respond to the mail sent by The Indian Express on the issue of delay of several of their projects.

BUYERS UNITING IN PROTEST
After waiting for over a year and paying over 42.5 per cent of the cost, when buyers were unable to see any progress in construction, around 400 of them formed an online group called New Town Heights Yahoo Group.

Kumar, the buyer who invested in DLF’s property, raises a question: “Under which account does the money paid so far for this project exist? Or has it been invested in some other project? If it is still in the bank, then how much interest is DLF earning on the money, since the money has not been utilised towards the delivery of the project?” Five months ago when Kumar had enquired about when the project would begin, he was told that it would start in two-three weeks and the status remains the same till date. “If environment approval required to start the project was not in place, then under what clause of the agreement does the deal remain valid?” he asks.

The developer faced a similar situation in Chennai’s Garden City project, where a large number of buyers had queued up to consider the exit offer made by the developer for its 3,493 apartments. While the group of buyers claims to have mobilised 600 exit letters, DLF authorities maintain that only between 150 and 200 members have asked for the exit option. To retain buyers, the company announced a revised value proposition with an ‘early bird’ offer of Rs 2,650 per sq ft. All other charges for preferential location, parking, etc. remained unchanged. However, a number of consumers preferred to opt out of the project, despite the fact that obtaining a refund from any developer is not easy.

FURTHER LAUNCHES
The developer has further planned to launch 16 million sq ft of residential space in the current fiscal, even as it continues to have a guarded outlook. It has reduced its debt by over Rs 2,000 crore and has received another Rs 2,000 crore from group company DLF Assets Limited (DAL) in the June quarter, indicating that the company’s cash condition is fair.

While announcing the last quarter’s result of the company, Rajiv Singh said: “We are more cautious than other players as we will launch not just for selling but for adding value and making reasonable profits.”

PLUNGING NET PROFIT
Having sold a stake of 10 per cent to a clutch of investors, the promoters are sitting on Rs 3,800 crore of cash. At the end of the June 2009 quarter, receivables from DLF Assets were down to Rs 2,600 crore from nearly Rs 5,000 crore at the end of the March 2009 quarter. That has brought down the company’s net debt to around Rs 11,700 crore and consequently, the debt-equity ratio is now lower at 0.5 times. The company’s operating profit margins, in the June 2009 quarter, was 45 per cent. However, net profits, which increased 150 per cent sequentially at Rs 395 crore, came in a bit below prospect. In fact, adjusted for a one-time price reset taken in the March quarter, profits were flat.

Witnessing the state of affairs of the country’s top developer, it has become clear that homebuyers have to be very cautious while investing in property. It is not just the middle rung and small developers that are feeling the heat of the economic downturn but even the top guns. Many of them over-extended themselves during the realty boom and are now unable to deliver on their commitments. This will further delay the revival of the sector as it hits buyers’ confidence levels and market sentiment. DLF, the market leader, is as guilty as the others.

Source : http://www.expressestates.in/full_story.php?content_id=93893

Realty Estate Developers Showing Interest in Land Acquisition

Following a slew of new launches in the affordable housing segment in the past few months, real estate developers in the country are once again showing interest in land acquisition. They are now also expecting “some price escalations” for residential properties, with easier liquidity and overall positive market environment in the second half of the year. “We believe developers’ appetite for land has increased, given easier financing conditions and availability of prime land parcels (which many developers do not have) at reasonable rates. Increase in both off-takes and unit prices has improved developers’ confidence to purchase new land, in our view,” J P Morgan analyst Saurabh Kumar said in a note to clients.

In recent deals, Indiabulls Real Estate won the four-acre Mantralaya modernisation project in Mumbai with a bid of Rs 1,376 crore. DLF Ltd, the country’s largest realtor, won a 350-acre plot in Gurgaon for about Rs 1,750 crore after two other bidders — Unitech and Bharti — were disqualified on technical grounds. DLF, however, still wants the government to ease policies to ramp up deals. “The overall demand is certainly firming up. All the developers have reduced property prices in the past so I don’t think any price hike can be expected in the near future,” DLF’s group executive director Rajeev Talwar told DNA. However, if demand continues to build up and supply gets restrained, the situation may lead to prices moving northwards. I think the government should ease the policies on giving clearances faster as that creates unnecessary delay in executing the projects,” he said.

Realty analysts and consultants are skeptical about the plan due to developers’ high debt. “That (price revival) is something skeptical to talk about right now. Most developers have raised money through capital markets by either a qualified institutional placement of shares or they are lining up an initial public offering. Companies which are heavy with debt or those who have reduced debt by raising capital should not look at purchasing land outright. However, if they have a fair debt position they can look at it,” Ambar Maheshwari, director-investment advisory at DTZ, told DNA. Omaxe chairman and managing director Rohtas Goel is optimistic of a price hike early next calender. “We have seen projects being launched at rock bottom prices off-late. The same projects are selling at a premium in the re-sale market, so you can expect developers to launch new projects at a higher price, we would also be looking at acquiring some key land plots,” he said.

Nitin Idnani, research analyst with Enam Securities, said, “Developers are still ready to buy land which can be monetised and [as for] those parcels located in tier 2 and tier 3 cities, developers still want to sell them off as it would be difficult to get returns on that land bank.” New Delhi-based developer Anant Raj Industries is also looking to buy distressed land from developers reeling under high debt and has started acquiring land in Maneswar and Bhagwandas. The company has allocated Rs 450 crore for land, on which it plans to build affordable homes. “We are negotiating for many land parcels, which we can get at discounted rates in the current market,” Amit Sarin, director, Anant Raj said.

Source : http://www.indianrealtynews.com/real-estate-developers/realty-estate-developers-showing-interest-in-land-acquisition.html

Indian developers to hold property fair here

REAL estate is real hot. And we are not talking about the scene in Singapore.

The Indian residential apartment market, which hit a slump last October-November, is rising again.

Almost every day, there is a report in the Indian media about the housing recovery and many say this is the best time to buy.

Well, for those of you here in Singapore, you need not go looking for a good developer in India to buy an apartment.

More than 40 developers managing 150 projects in different Indian cities will be here on Sept 5 and 6 to showcase their projects.

It is called India Homes Fair and it is being organised by Housing Development Finance Corporation Limited (HDFC), which has an office in Singapore. For details of the fair.

Said HDFC’s Singapore head Sanjna Parasrampuria: ‘HDFC has been regularly organising such events in India and abroad.

The objective is to facilitate interaction amongst the NRIs and PIOs interested in buying properties in India, with the developers and HDFC under one roof.

‘And now with HDFC’s presence in Singapore, we are attempting to make property purchase in India seamless for the Indian diaspora based here.’

Some of those who have heard about the forthcoming fair, the first such organised by HDFC here, want to check it out.

Mr Srinivas Bilamkar, 34, an electrical engineer from Bangalore, who is based here, told tabla!: ‘I’ve been in Singapore for a while so I am not sure what the property market is like back home.

‘I have been wanting to buy property in Bangalore for my family and I would like to see what is on offer and what the price ranges are like at this exhibition.

If it fits my criteria and my budget, I might consider buying.’

The India Homes Fair will be held at the Meritus Mandarin Singapore.

And the event will showcase prime properties from across India. Some of the big developers at this event include DLF, Hiranandani, K Raheja Corp, Paranjpe Schemes and the Nahar Group. HDFC officials will be on hand to help with the procedural and housing loan requirements.

Looking forward to the property fair, director of K Raheja Corp, Mr Vinod Rohira, said: ‘In the past few years we are seeing a greatly increased interest for residential properties in India. There has been increased sales of apartments offered from Singapore. We believe this trend will go on increasing and see lots of potential from this region.’

India’s Business Standard newspaper reported recently that the housing market has turned around. It said that sales of major real estate developers have more than trebled in the June quarter compared to the preceding three months, amid growing expectations that the good times will continue.

Mumbai’s realtors claim that this is the best time to invest in residential apartments as prices have touched the bottom.

‘Realty prices will only rise again and the best time to invest is between September and December,’ Hiranandani Group of Companies managing director Niranjan Hiranandani told The Times Of India on Aug 17 while addressing a real estate meeting in Mumbai.

This feeling of optimism is echoed across India. Mr Santosh Rungta, president of the Confederation of Real Estate Developer’s Associations of India was quoted in the Economic Times on Aug 2 as saying in Kolkata: ‘The prices have got corrected. And whatever pent-up demand was there in the market has started getting converted into business.’

Analysts are also upbeat.

Mr Pankaj Kapoor, chief executive of Liases Foras, a real estate research firm, told the media that the momentum in sales would increase after Diwali.

But for some, like those who will be showcasing their projects here, Diwali might come early!

The India Home Fair

When: Sept 5 and 6, 10am to 8pm
Where: The Grand Ballroom, Meritus Mandarin Singapore, 333 Orchard Road
Who’s coming: 40 developers from India displaying over 150 projects.
For more information contact HDFC Singapore: 20 Raffles Place, #10-01A Ocean Towers, Singapore 048620. Contact: 6536-7000, e-mail nrisingapore@hdfc.com or log on to www.hdfc.com

Source : http://business.asiaone.com/Business/My+Money/Property/Story/A1Story20090821-162497.html

Want to buy a home? Shift to a less costly city

A  study of households with an annual income of Rs 3 lakh (Rs 300,000) to Rs 10 lakh (Rs 1 million) in seven cities shows substantial variations in the type of houses they can afford to buy.

The study on affordable housing, done by property consultants Knight Frank, says the Rs 8-10 lakh (Rs 800,000-1 million) income category in Chennai can afford houses up to Rs 45 lakh (Rs 4.5 million), while the same group can afford houses up to only Rs 38 lakh (Rs 3.8 million) in Mumbai [ Images ] and Rs 37 lakh (Rs 3.7 million) in Bangalore. The same category in Hyderabad, Kolkata [ Images ] and Pune could afford between Rs 40 lakh (Rs 4 million) and 43 lakh (Rs 4.3 million).

In terms of apartment sizes, the Chennai households can afford up to 1,200 square feet, while those of Pune and Mumbai can only afford 800 sq ft and 950 sq ft, respectively.

In terms of affordable rates per sq ft, Pune can afford up to Rs 5,900 a sq ft and Bangalore only Rs 3,600 a sq ft, the study said.

“Mumbai’s high cost of living, coupled with the generally higher maintenance lifestyle, has adversely affected the affordability of households in the city. For instance, middle class households in Kolkata, Chennai and Hyderabad can afford houses valued at Rs 14-45 lakh (Rs 1.4-4.5 million), whereas households of similar stature in Mumbai can afford houses valued at Rs 12-38 lakh (Rs 1.2-3.8 million),” the study said.

“Affordable rates are higher if sizes are smaller. If buyers can compromise on size, they can afford higher priced apartments,” said Samantak Das, national head, research, Knight Frank.

The study assumes significance, as top real estate developers such as DLF, Unitech and Parsvnath have shifted their focus towards the Rs 20-60 lakh (Rs 2-6 million) income category in many cities, with the premium housing segment seeing sharp decline in sales after the economic slowdown and stock market decline impacted home buyers.

The report states that not all of the so-called affordable housing projects in the country are really affordable; they are way beyond the means and preferences of buyers.

“Although preferred unit sizes are less than 1,200 sq ft, many projects are offering greater sizes that are unaffordable. Based on consumer preferences, house property beyond Rs 5,900 a sq ft would be unaffordable across all cities covered,” it said.

The consultancy thinks it is premature for developer to raise prices now.

“It is too short a period for developers to increase prices. It is just euphoria after elections and a stable government and not supported by fundamentals,” said Gulam M Zia, national director, research and advisory services, Knight Frank.

Source : http://business.rediff.com/report/2009/aug/13/shift-to-a-less-costly-city-to-buy-a-home.htm

Realtors may not gain from tax benefit extension

The government’s decision to extend the time limit for claiming tax exemption on profit earned from projects may not give the desired benefits to Buying a house?

Instead of giving benefits to ongoing projects, the government chose to extend a tax waiver to ‘affordable’ housing projects that were approved till March 31, 2008.

“A change in any regulation with retrospective effect doesn’t seem to address either the pricing or the supply issue in the real estate sector,” said Kumar Gera, chairman, CREDAI, a builder’s association.

The current provision is unlikely to have any impact on the prices or on the sale of stock. Had it been an exemption for ongoing projects, it would have been an incentive for developers to build more such projects.

Though there is a shortage of 24 million dwelling units in India, there is not enough supply, especially in bigger cities that cater to middle-income segment. “Such an announcement would have no impact on the overall sector,” said E Sudhir Reddy, chairman, IVR Prime, a south-based developer.

Since projects are already under construction, we will check their eligibility status only when tax is due, said R Nagaraju, corporate strategy planning head at Unitech. For developers, project completion is more important than the checking whether it will benefit from any regulatory change.

As per the new regulation, all projects which were approved by March 31, 2008 against the earlier deadline of March 31, 2007, would be eligible for the benefits of Section 80 IB (10). This section provides tax waiver for a project, which is on a minimum one-acre plot of land and the residential unit, and has a maximum built up area of 1,000 sq ft in Mumbai or Delhi and 1,500 sq ft at any other place. Besides these, there are certain other criteria that need to be fulfilled.

“Most builders preferred large units during April 2007 to March 2008, as they were in high demand at that time,” said A Shyamsunder, executive director, marketing agency Disha Direct.

All big builders, such as DLF, Unitech, Sobha, Omaxe and Parsvnath, had launched their luxury projects those days. One of the few listed players that had launched mid-housing projects during that time was Indiabulls Real Estate and DLF.

However, experts say that this relaxation could benefit a few developers, but not the entire industry. “The overall effect of the announced provisions will only be noticeable in smaller cities, where homes costing below Rs 20 lakh are still procurable. In larger cities such as Mumbai, a flat of 1,000-1,500 sq ft can by no yardstick be considered affordable,” said Anuj Puri, chairman, real estate consultancy firm Jones Lang LaSalle Meghraj.

Source : http://economictimes.indiatimes.com/Markets/Real-Estate/Realtors-may-not-gain-from-tax-benefit-extension/articleshow/4858000.cms

Realtors plan lock-in clauses to weed out speculators

Stung by recent experiences, many real estate companies such as Tata Housing, Omaxe, DLF and others are planning to impose lock-in periods of up to one year for their mass housing projects.
 
A lock-in clause means buyers cannot sell their properties within a certain period after booking the property or have to pay a penalty if they do so.

Realtors are doing these because investors or speculators often leveraged volume discounts on property purchases to re-sell them at prices lower than those available to individual buyers. This created problems for realtors when demand slowed, since it put pressure on them to take a hit on margins and lower prices still further.

In the boom years of 2006 and 2007, 30 to 50 per cent of such projects were sold on bulk discounts, especially in the national capital region.

Now, companies such as Tata Housing will not issue no-objection certificates to property buyers for the first six months after allotment and DLF, India’s largest listed realtor, said it would not transfer the title of the property in the name of the buyer for a year after a property is booked.

Several other companies have imposed a steep transfer charge — Rs 100 to Rs 1,000 a square foot — if the first-time buyer sells the property within a specified period.

The lock-ins are expected to be introduced mostly for mid-income projects, that offer prices 20 to 30 per cent below the market and, therefore, attract more undercutting from bulk discount buyers.

”We are going to introduce such clauses in all our future affordable housing projects. We do not want short-term investors to compete with us later in the market, as the margins in affordable housing are very low,” confirmed Rohtas Goel, chairman and managing director of Delhi-based developer Omaxe, which is launching 10 mid-income projects this year.

Margins on such housing projects are typically 20 to 25 per cent compared with 50 to 70 per cent for premium housing.

DLF Ltd, the country’s largest developer, claims it is the first developer to introduce the clause for both premium and mid-income projects.

“Earlier, the same buyer used to buy five to six flats in our projects and sell it within a month in the market. We, as the largest developer, decided to discourage such speculation”, said Rajeev Talwar, executive director, DLF.

The clause, however, has attracted criticism from analysts. “Developers want the best of both worlds. They want to delay registration and charge a transfer fee because once a property is registered it is binding on both developers and buyers,” said Pranay Vakil, chairman, Knight Frank India, an international property consultant.

The legal fraternity is, however, divided on whether the move was legally tenable.

“It is a contractual obligation and not a statutory one. The statute does not say that a property cannot be sold in a certain period of time. Developers are merely putting pressure on buyers,” said Vinod Sampat, a Mumbai-based advocate.

He added some Mumbai developers even charged Rs 1,000 a square foot as transfer charges though the state housing department has said the developer cannot charge a single paisa as transfer charges.

PH Parekh, a senior Supreme Court lawyer, said, however, that all legal documents signed by a person were binding, unless he decided to challenge it in court. “If a buyer decides to challenge the lock-in period, the decision of the court can go either way,” Parekh said.

Source : http://www.business-standard.com/india/news/realtors-plan-lock-in-clauses-to-weed-out-speculators/359498/

Housing projects are back with a vengeance

DLF, Unitech, HDIL & Puravankara line up 60 million square feet of new launches.
 
Top real estate developers are trying their best to make up for lost time. Buoyed by encouraging response from home-buyers for their marked-down properties, companies such as DLF, Unitech, HDIL and others have lined up housing projects of over 60 million square feet — all in the current financial year.

This is more than double the sales bookings in the past financial year.

Presentations by these companies to analysts show that Unitech is leading with 27 million square feet of new launches. DLF’s tally is 15 million square feet, roughly the same as last year’s. Puravankara and HDIL follow with 6 to 9 million and 8 million square feet respectively.

Mid-income housing is the flavour of the year and accounts for around 90 per cent of the projects. After a prolonged lull in the property market in 2008, which saw sales declining 70 per cent from their peak, the big developers moved into the mid-income segment and cut prices 20 to 30 per cent to generate liquidity.

With their apartments selling quicker than expected, liquidity constraints easing with debt roll-overs, the stock market rally and improved bank credit, realtors are now planning more such launches.

“We have sold 2,500 units in three to four projects in the last one-and-a-half months. The company has decided to go aggressive with new launches because we are quite confident of selling quickly,” said a spokesperson of Unitech, the country’s second largest developer.

DLF will launch 8 to 9 million sq ft of city-centre projects in Chennai, Kochi, Delhi and Gurgaon and around 5 to 8 million sq ft of mid-income housing projects in the National Capital Region (Delhi’s suburbs) and southern cities, DLF Vice-Chairman Rajiv Singh told analysts recently.

“We have met with good response for our projects wherever we have launched. If the product is good and price is right, it will sell irrespective of market conditions,” said Rajeev Talwar, group executive director , DLF.

The company sold 1,356 apartments at its Shivaji Marg (better known as Najafgarh Road) project within a day in early April as the price was nearly 25 per cent lower than the existing market price.

Aditi Vijayakar, executive director-residential, Cushman & Wakefield, said most developers were making good sales as they have cut prices. “The new projects are certainly attractive for home buyers,” he said.

Unitech added the cut in prices was inevitable since it’s clearly a buyers’ market. So a lot of marketing and sales efforts went into selling space. The efforts, he said, were worth its because the company was selling more flats now that what it sold even during the peak of 2007.

Unitech has cut its home prices by roughly 25 per cent and reduced ticket sizes. Currently, the average size of apartment is 700 to 800 sq ft against 1,500 sq ft a couple of years ago.

Analysts, however, said developers had taken huge hits on their margins. Mid-income apartments have a margin of 25 to 30 per cent versus 50 to 70 per cent in premium housing. For instance, DLF’s EBITDA (earnings before interest, tax, depreciation and amortisation) margins have been falling continuously.

“The days of 70 per cent margins are over. They have to be happy with 20 to 25 per cent margins now since liquidity is the bigger issue than profits today,” said an analyst from a Mumbai-based brokerage.

Apart from sales in the mid-income housing category, several other factors have also given developers confidence to move ahead, the primary being relief from immediate debt payments.

All the top developers have rolled over their short term liabilities by 12 to 18 months after the Reserve Bank of India (RBI) allowed commercial banks to restructure their debt.

Unitech has cut debt by Rs 2,000 crore and DLF, the country’s biggest developer, has repaid Rs 1,700 crore of loans in the past year. Between them the top three realtors — DLF, Unitech and HDIL — have restructured as much as Rs 4,100 crore worth of loans with commercial banks and mutual funds.

Developers have also benefited from the recent surge in the stock market, which has given many of them the opportunity to tap institutional investors to reduce debt and investing in new projects. After Unitech raised Rs 1,625 crore from a qualified institutional placement (QIP) in April, DLF’s promoters sold 9.9 per cent in the company for Rs 3,860 crore and Indiabulls Real Estate raised Rs 2,656 crore through a QIP. Now, smaller realtors such as Sobha, Puravankara and Parsvnath have lined up QIPs to raise money.

Source : http://www.business-standard.com/india/news/housing-projectsbacka-vengeance/359299/

REITs may Lead to Overall Recovery of Real Estate Sector

The marked improvement in the performance, in recent months, of Real Estate Investment Trusts (REITs), including those set up by Indian developers, is being seen as a pointer to an imminent revival in the property market. Indian property developers’ overseas-listed REITs such as Ascendas, Hirco, Unitech Corporate Park and Ishaan have nearly doubled in value from a year ago, even as the FTSE Global Real Estate Indices for Asia, Europe and the US have appreciated by 50% since March 2009.

The improved market conditions could also pave the way for the REIT listings of DLF and Unitech, which have been put on hold. REITs are entities that own and manage a portfolio of real estate properties. Anyone can invest in a publicly-traded REIT, which is seen providing the advantages of liquidity and diversity because it invests in a portfolio of properties. REITs are currently not allowed in India, but the Securities and Exchange Board of India has rules for its implementation.

Source : http://www.indianrealtynews.com/real-estate-developers/reits-may-lead-to-overall-recovery-of-real-estate-sector.html

SEZ developers need time to complete their projects

NEW DELHI: Faced with a severe financial crunch, several SEZ developers have approached the Commerce Ministry seeking more time to complete their projects.

“Some companies have asked for extension of time,” said the Commerce Secretary Mr G K Pillai. Mr Pillai heads the inter-ministerial Board of Approval which clears the proposals for setting up of special economic zones (SEZs) where units are given tax ex emptions.

Export Promotion Council for export-oriented units (EOUs) and SEZ Units Director General Mr L B Singhal said, “It is natural because of the current economic slowdown … demand for space has also come down.”

After each stage of approval – in principle and formal – the developer is given time to proceed and return to the government for final notification. Even after final notification, the promoter gets time to make the SEZ functional.

While Mr Pillai did not disclose the companies approaching the Commerce Ministry for extension of time, sources said developers, mainly from the real estate sector, have put their SEZ plans on the back-burner.

The real estate majors such as DLF, Parsvanath Developers, Rahejas and Emmar have received formal approvals for tax-free enclaves. Several of these projects have been deferred. – PTI

Source : http://www.thehindubusinessline.com/blnus/03141921.htm

Slowdown heat melts realty prices in Mumbai

MUMBAI: The heat of global financial slow down seems to have melted the real estate prices in the financial capital of the country, as the developers slashed the prices of properties to a record low.

During past few years, the real estate prices had swelled up to the maximum levels in metros and several other cosmopolitan cities. However, according to experts the price rise was artificial and temporary. The boom in the real estate sector caused immediate spurt in the prices of the construction related commodities including cement, steel and ceramics. But with real estate prices cooling off in recent times, the cascading effect was seen in the construction related commodities.

However, in the wake of the general election, the government infused huge funds for infrastructure development projects in the country. This gave some strength to the falling commodity prices, but the government support could not give a hold to the falling realty prices in the metros.

In an exhibition held at Mumbai by Maharashtra Chamber of Housing Industry (MCHI), the developers were offering apartments at 25-35% lower prices than the peak price. More interestingly, few developers were also selling residential apartments at 30% lower than the peak prices which were nearing completion.

In the commercial office space as well, few developers were offering at price points which were 25% lower than the peak prices.
There was a consensus that in the last 2 months volumes have improved due to new project launches at competitive prices. However, we believe this could be called a trend reversal (in terms of volumes and not pricing) if such encouraging volumes continue for the next few quarters as well.

However, developers opined that there had been better response than the in October 2008.

Amongst the listed space, DLF, Unitech and HDIL have launched residential projects at competitive prices in the last two months. With loan restructuring for most of the companies now over, investors will focus on the interest servicing capabilities of the companies.

However, leading realty stocks witnessed a steady rise in the stock prices. DLF Ltd and Unitech Ltd gained by over 40% during past one month, while HDIL Ltd surged by whopping 53% from its monthly low of Rs.63.45 during mid-March to Rs. 137.65 recently.

Source : http://www.commodityonline.com/commodity-stocks/Slowdown-heat-melts-realty-prices-in-Mumbai-2009-04-14-16883-3-1.html

Depleting NRI Interest Force Developers to Put Projects on Hold

Real estate majors, who had lined up projects in Punjab to woo non-resident Indians, have put on hold their plans indefinitely with most NRIs no longer keen to invest in these properties. These players had planned integrated townships and shopping complexes in towns including Mohali, Jallandhar, Bhatinda, Patiala and Amritsar for the NRI customers. But with dwindling incomes across the globe, NRIs too have tightened their purse strings. Among those who have put their plans on hold include DLF, Emmar MGF, Zoom Developers Private Limited and Omaxe Limited.

Zoom Developers president and chief executive officer Rumneek Bawa said the company was going slow on its investments in Punjab. The company, which announced an investment of Rs 600 cr across Amritsar, Patiala, Jallandhar and Bhatinda for constructing housing complexes, hotels and shopping malls in 2007, has till now invested only 30 crore. “A housing complex with 100 expandable villas on 225 yards each at Patiala was in the pipeline. The villas, which were proposed to be ready in 18 months, may now take longer as the buyers are not as aggressive as were expected to be,” he said.

Similarly, Emmar MGF was to invest Rs 16,000 crore in housing and infrastructure projects in Punjab. It proposed an integrated township project in Mohali on 3,000 acre and also announced that it would launch other integrated township projects in Jalandhar and Ludhiana. Each project was be spread over 400 acre. DLF Limited, on the other hand, had planned to set up two integrated townships each in Mohali and Chandigarh besides commercial projects. A company official said they were going slow on projects where they had not made any commitments. He added that the shopping mall in Jallandhar will be operational on schedule.

Source : http://www.indianrealtynews.com/nri/depleting-nri-interest-force-developers-to-put-projects-on-hold.html

Indian Housing Sector Analysis – companiesandmarkets.com adds new report

The real estate industry in India has grown on the back of fast developing housing segment. In fact, it is the most dynamic segment of the real estate industry compared to commercial and other property development segments. With the entry of corporate houses like DLF, Parsvnath and Omaxe, easy finance options from financial institutions and government support, the housing industry
in India has rapidly grown over the past few years.

The housing construction industry is poised for tremendous growth in coming years in the backdrop of large population base, rising income level, increasing demand for housing units, fast changing rural housing landscape. In addition, the housing construction industry is expected to overtake other industrial sectors in terms of contribution to GDP growth in the next few years. Although the Indian housing industry will see slowdown in 2009 due to after effects of global financial crisis, it is anticipated to attain earlier growth trajectory by the end of 2010 on account of precautionary measures.

RNCOS report ?Indian Housing Sector Analysis? provides exhaustive information and objective analysis on the growing housing industry in India, its components and supporting financing structure. The report also discusses the market structure, current and past market performance and factors critical to the success of housing industry in India. Detailed data and rational analysis helps investors, financial service providers and global banking players to navigate through the latest trends in the Indian housing industry.

The forecast given in the report is not based on a complex economic model, but is intended as a rough guide to the direction in which the market is likely to move. The forecast is based on the correlation between past market growth and growth in base drivers, such as household size, disposable personal income, GDP growth, long-term interest rates, competitive structure, government support, contribution by housing financing industry and growing industrialization.

Source : http://www.pr-inside.com/indian-housing-sector-analysis-companiesandmarkets-r1149965.htm

Realtors freeze land acquisitions as values dip

NEW DELHI: There was a time when real estate biggies were literally banking on land. Huge land banks were considered an invaluable asset to flaunt aggressively when selling projects or raising money.

But today things have changed and the benchmark of the valuation of these companies, the land bank, is coming back to haunt them. Leading real estate developers across the country, DLF, Unitech, Emaar MGF, Omaxe, BPTP and Hiranandani Developers, have all put a freeze on their ambitious and aggressive land acquisition spree.

Also, in some cases they are even trying to give back the land they had acquired. The unproductive nature of land banks coupled with erosion in notional value means that the most prized possession of real estate majors is languishing in the slowdown.

SundayET dug out some data on land banks of the top real estate companies and found that the current kitty of DLF stands at approximately 13,055 acres while that of Unitech is around 14,000 acres. Omaxe has 3,700 acres as its land holding while BPTP has 2,000 acres.

According to a real estate consultant, who didn’t wish to be named, value of land prices have dropped by almost 30% since July last year, when they had peaked. By that estimate, assuming a correction of 30%, DLF’s land value stands at Rs 1,272 cr against Rs 1,817 cr standing in its balance sheet in March ‘08. Similarly, Unitech’s land value is priced at Rs 316 cr at current market prices, as compared to its value of Rs 451 cr in March’08.

Most developers, however, are not willing to concede that land banks have lost lustre. Says Sanjay Chandra MD of Unitech Group: “It depends on how you have acquired the land. We didn’t participate in open auctions. Most of our land is directly acquired from either land owners or from government auctions. Hence the cost is on the lower side. We are not burdened with any of the land parcels as the FSI cost of all our land bank is sub Rs 200 per sq ft.”

But denials apart, developers such as DLF, Unitech and BPTP are shying away from mega land deals signed during the real estate boom. This asset class is, in fact, especially pinching those developers who acquired land at various auctions at heavily escalated costs.

BPTP, which hogged the limelight for the costliest land deal in Noida, surrendered a part of the land parcel earlier this month. Last year, the developer had bagged a 95-acre plot at Noida in an auction for a princely sum of Rs 5,006 cr.

However, foreseeing difficulties in executing the project, the developer only retained part of the land. The case is similar with other developers, many of whom have withdrawn from key projects which would have ensured availability of large tracts of land for them. For instance, DLF recently gave up the Rs 5,000 cr Dankuni project in West Bengal and a multi-crore convention centre project in Delhi’s Dwarka.

Others like Omaxe are looking at a shift in strategy of the current situation. “Currently, we have around 3,700 acres of land. Now we are not acquiring more land, so the strategy is to develop the acquired land first,” says Omaxe Group chairman and managing director Rohtas Goel. Valuation of land is not the only problem. It’s also got to do with availability of funds for developing the land.

A senior private sector bank official, who did not wish to be identified, admitted that they had severely cut down on their exposure to the real
estate sector in terms of sanctioning loans. “There’s a high risk involved. And keeping in mind the current situation, we are averse to risk-taking propositions,” he said.

Ganesh Raj, tax partner and leader policy advisory group, Ernst & Young, in fact, feels that substantial landbanking could lead to a cash deficit situation in a downturn for real estate players. “They could easily get stuck in a vicious circle since not only landbanks are non-productive compared to a developed/semi-developed project but also bank funding on the basis of landbanks is a thing of the past,” he said.

According to Mr Raj, large land banks are no longer holding the fancy of investors. And that is the reason why developers with large landbanks are now feeling the pinch of having locked up significant amounts of free cash into such land banks. Economists too hold the view that the erosion of the notional value of land holdings is pulling real estate developers down in a depressed market.

“When the economy is on an upswing, notional value of your asset goes up. Today real estate developers are at the mercy of a bank, if they want to raise a loan or debt against those land holdings. Unlike the boom time, when they were able to raise a much higher amount against land, today the bank decides how much they judge the value of land holdings is,” says Sunil Sinha, senior economist, Crisil.

Though developers don’t outright admit that land is straining their bottomlines, all of them do agree that there isn’t any more land acquisition on the cards immediately. To capture the sentiment in the words of DLF executive director, Rajeev Talwar; “It’s not a good time for business development right now. We are not acquiring more land right now as we already have abundant supply for the next seven-ten years.”

Most of the developers are, in fact, putting up a brave front, agreeing that while land may not be offering them attractive returns at present, it is not acting as a liability either. Niranjan Hiranandani, MD, Hiranandani Developers feels that that it is primarily the mode of financing or excessive debt that has become a “liability” today, not the land acquired.

“Investors may still be interested in cases where a developer has a land bank at a premium location and the valuations are attractive enough. Therefore such developers could focus on premium land banks to generate cash in these difficult times,” says Raj.

Another option for developers, he feels, is to restructure their original plans to launch projects which would have quicker off-take such as low-cost housing.

Source : http://economictimes.indiatimes.com/News-by-Industry/Realtors-freeze-land-acquisitions/articleshow/4167542.cms

Banks Suggest Developers to Bring Down Property Prices

Like the government, banks and private equity funds are also urging developers to reduce property prices. Bankers feel that the demand for houses still exists, but soaring property prices are keeping customers away. “Despite an industry bailout programme and the relaxation of lending rules, developers are refusing to cut the inflated property prices,” said Mr. Deepak Parekh, chairman of mortgage lender Housing Development Finance Corp Ltd (HDFC). However, realtors said it was difficult to get funds for new projects as banks and private lenders were coming up with fresh conditions. “Apart from slackening demand and a liquidity crisis, banks and private lenders are now putting up new terms and conditions for funding,” said Mr. Rohtash Goel, chairman and managing director of real estate developer Omaxe Ltd. Major realtors such as DLF, Unitech, Sobha, Omaxe, Parsvnath and Housing Development and Infrastructure have approached the banks to restructure their loans.

Source : indianrealtynews.com

Mall retailers start defaulting on realty payments

New Delhi: While retail may have been touted as the safest bet for putting in money by the country’s top bank, defaults are becoming common there as well. Whether its one of your favourite jeans, shoes, bedspreads or the much-needed winter collection, they have all been hit by the downturn. About a dozen leading retailers have defaulted on realty payments for precious mall space that they occupy in leading Tier I and II cities.

Caught in the tentacles of the current economic crunch, retailers are being hit by high credit costs and less liquidity. The outcome is that leading retailers at malls such as Realtech, Advance India, Emaar MGF, Shipraworld, TDI, Select City Walk and Pacific India are refusing to part with pre-determined lease rentals.

According to the 300-member strong Association of Mall Owners of North India (AMONI) including DLF, Parsvnath, Unitech, Omaxe etc, out of the 300-odd retailers operating out of approximately 70 malls in north India, the defaulting players are big names in the organised retail industry, with some of them even listed on the bourses.

Most of these retailers are defaulting on payments from September-October 2008 onwards. These retailers cite a failure in their business model or slowdown in international markets,” an AMONI member said. This is the case even when the Indian wedding season is at its peak.

The situation is no different for other parts of India. “Retailers are trying to renege on contracts and renegotiate rents in Pune and Mumbai, asking for lower rentals or a revenue-sharing model,” said Kumar Gera, chairman of Confederation of Real Estate Developers’ Association of India (CREDAI).

When contacted, most of the retailers figuring in the list of 13 defaulting on payments refused to speak on record. The concerns of the retail industry are echoed by the industry body, Retailers Association of India (Rai). “If the mall owners have not passed on the correction in rentals, there may be a possibility that the retailers are trying to re-negotiate the rental. In such a scenario, payments are likely to be delayed,” said Rai CEO Gibson Vedamani. In fact, in most of the cases, retailers are defaulting on mall properties which have come up in the last two years, or where the retailers have signed lease rentals in the last two years. “From second half of 2006 to around March 2008, the rentals were steep, now they have fallen by 30-35 per cent,” Vedamani said.

Realtors may cut prices 30% next year to boost sales

DLF, Unitech and other real estate developers may lower prices by 30 per cent by mid-2009 to nudge buyers out of their “wait and watch” stance, according to experts.

The price cut, if implemented by the country’s builders will also push sales higher, especially of the affordable category, property consultants said.

”Many developers will come down on their asking rates after being saddled with unsold stock beyond their ability to hold on,” added Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj (JLLM).

Property prices in the key cities have more than doubled in the past few years helped by a boom in the stock market and a spurt in salaries of home buyers. The subsequent measures of the Reserve Bank of India to cool the overheated economy and a subprime crisis coupled with a credit crunch, has tempered growth prospects in the country hurting sales of property developers.

The benchmark sensitive index, the Sensex, has dropped more than 60 per cent from the beginning of the year, eroding much of the investors’ wealth and RBI has increased repo rates by 150 basis points till September this year to curb inflation.

“If you take same time next year, there will be better volumes at lower prices than what they are today. Buyers will be tired of waiting and all the developers realise that price cuts are necessary across the board,” said Pranay Vakil, chairman of property consultancy Knight Frank India.

To boost sales, property developers have been forced to cut prices of real estate but buyers are still adopting a “wait and watch” stance as many feel that even the lower rates continue to be unaffordable.

Property prices in Gurgaon, Noida in the National Capital Region (NCR) have fallen by 25-30 per cent while Mumbai’s distant suburbs have seen 15-20 per cent drop in prices. Now property consultants foresee further price correction of 25-30 per cent in 2009.

“By the middle of 2009, developers will loose holding power and cut prices sharply. Cuts will follow big time after elections,” said Ambar Maheshwari, director of DTZ, an investment advisory.

Experts say that developers are likely to focus on sub Rs 20 lakh flats due to huge demand for such flats and the government’s stimulus package for Rs 20 lakh home loans.

“Earlier, developers thought that there is latent demand for premium homes, but in the current slowdown, that perception has changed. There is always demand for Rs 5 lakh-Rs 15 lakh homes and developers will look towards that,” Maheshwari said.

Source :  http://www.business-standard.com/india/news/property-prices-may-fall-by-30-next-year/12/31/50909/on

Realtors May Have Some Relief

The urban development ministry has drafted a bailout package for the real estate industry, which would be shortly sent to the finance ministry for consideration. The ministry has called for relaxation in norms for foreign loans so that realty companies can tide over the liquidity crunch, urban development secretary M Ramachandran said on Monday. The note has also urged the finance ministry to consider other sops like rescheduling of total debt of the real estate industry and reduction in home loan rates for affordable houses. “We have included some of the demands from the National Real Estate Development Council (Naredco) in the note.

Once the finance ministry clears the package, it will go for Cabinet approval,” Ramachandran said. Naredco has asked for a reduction in the interest rate on home loans by at least 3-4 %. The rate of interest on home loans has drastically gone up from around 7.75% in 2004 to around 12.75% now. Almost 90% of home buyers opt for loans to buy homes. But with the hardening of interest rates, and liquidity crunch in the market, demand for houses has been hit. The council has also asked for rescheduling of bank debt to real estate developers with a moratorium of one-two years. The total debt of the real estate is to the tune of Rs 25,000 crore, a Naredco statement said.

The industry body has also asked for an easing of norms for foreign loans and declaration of ongoing projects as NPAs. Meanwhile, to bring about correction in the property prices, the Naredco has asked its members to cut prices by reducing costs, cutting profit margins, reducing advertising and brokerage costs. Its members include DLF, Ansal API, Unitech, Parasvnath Developers, Sobha developers and several other realty companies. There are several factors working against the Indian real estate sector. Banks are getting jittery over loan disbursals to real estate developers. Even if the developers manage to get loans from banks, they are hardpressed to keep more collateral with the banks. To further aggravate the situation, the property market has also been witnessing a drop in PE fund flow

Source : http://www.indianrealtynews.com/real-estate-trends/realtors-may-have-some-relief.html

Battered realtors may get bailout package soon

NEW DELHI: The urban development ministry has drafted a bailout package for the real estate industry, which would be shortly sent to the finance
ministry for consideration.

The ministry has called for relaxation in norms for foreign loans so that realty companies can tide over the liquidity crunch, urban development secretary M Ramachandran said on Monday. The note has also urged the finance ministry to consider other sops like rescheduling of total debt of the real estate industry and reduction in home loan rates for affordable houses.

“We have included some of the demands from the National Real Estate Development Council (Naredco) in the note. Once the finance ministry clears the package, it will go for Cabinet approval,” Ramachandran said.

Naredco has asked for a reduction in the interest rate on home loans by at least 3-4 %. The rate of interest on home loans has drastically gone up from around 7.75% in 2004 to around 12.75% now.

Almost 90% of home buyers opt for loans to buy homes. But with the hardening of interest rates, and liquidity crunch in the market, demand for houses has been hit.

The council has also asked for rescheduling of bank debt to developers with a moratorium of one-two years. The total debt of the real estate is to the tune of Rs 25,000 crore, a Naredco statement said. The industry body has also asked for an easing of norms for foreign loans and declaration of ongoing projects as NPAs.

Meanwhile, to bring about correction in the property prices, the Naredco has asked its members to cut prices by reducing costs, cutting profit margins, reducing advertising and brokerage costs. Its members include DLF, Ansal API, Unitech, Parasvnath Developers, Sobha developers and several other realty companies.

There are several factors working against the Indian real estate sector. Banks are getting jittery over loan disbursals to real estate developers.

Even if the developers manage to get loans from banks, they are hardpressed to keep more collateral with the banks. To further aggravate the situation, the property market has also been witnessing a drop in PE fund flow.

Source : http://economictimes.indiatimes.com/News/Economy/Finance/Battered_realtors_may_get_bailout_package_soon/articleshow/3781923.cms

Pricing pains hit real estate

It’s an uncertain world out there in the real estate sector. If 2007 was a memorable year for the Indian real estate market as record highs painted the realty canvas, 2008 saw that growth dwindling. Homebuyers have been deferring purchases owing to the growing negative sentiments; developers are finding it hard to get the desired prices. With voices echoing the need for price cuts, the sector is headed for a major price correction. According to a report on Indian real estate by Goldman Sachs, prices may have to fall by up to 30% for affordability to catch up. The report by the global financial institution endorses the views of Finance Minister P Chidambaram, who requested the industry to reduce prices to boost consumer demand.

The industry too has been echoing similar sentiments. The National Real Estate Development Council (NAREDCO) that works under the patronage of Ministry of Housing and Urban Poverty Alleviation, Government of India and its members including leading developers as members such as DLF, Unitech, Ansals, Parsvnath, Omaxe, Assotech among others requested all its members to review their property prices. CREDAI, the apex body of real estate developers in the country with a membership of more than 3,500 plus developers in 18 states across India also urged and advised its members across the country to make every effort in lowering prices to the levels possible.

Price correction imminent

Industry experts are of the view that the correction in land prices was imminent since the beginning. Says Anuj Puri, Chairman & Country head, Jones Lang LaSalle Meghraj, “Land prices in many locations will come down as developers who have been holding on to it for future development release it to the market in order to generate funds for completion of their ongoing projects, or to ease their debt burden. Demand will also sink as the lack of liquidity among potential buyers makes itself felt.” Developers expect a lot to happen in the coming few months. “If Government starts supporting developers in development of affordable housing by working towards controlling high prices of land, price cut will happen,” says Rohtas Goel, CMD, Omaxe. He adds that interest rate on home loans should be drastically cut by at least 3-4% so that cost of borrowings can be reduced for the common man.

Profits in land investments

With builder flats and projects not able to attract buyers at the current or proposed reduced prices, land investments do present a profitable alternative. The market in most known growth sectors will improve within two-three years, so the holding period should be at least that long. “In a growth sector with new market drivers coming in, a plot of sufficient dimensions makes a lot of sense since it has equal potential for developers from the residential, retail, office and hospitality sectors. As an area attains more and more market drivers and begins to saturate, plots increase in value manifold and can be sold in a sellers, not a buyer’s market,” says Puri. According to experts, possibility of a profit is always there, depending upon the availability of liquidity. “Sometimes the best deals happen when the market is down,” asserts Prakash Gurbaxani, founder and CEO, QVC Realty.

Where to invest

Metro cities still seem to be holding the focus when it comes to the ever important question of where to put your money. In terms of residential land, one should consider areas beyond the currently favoured residential zones that are scheduled for residential development in the future. “The NCR region is a good bet, owing to future prospects of industrial and commercial growth. However, the necessary holding period would be a minimum of 5-7 years. Tourist spots such as Goa, Dehradun, Nainital, Mussoorie as well as religious places such as Haridwar are suitable for long-term investment,” suggests Puri. Goel believes that with rising demand and population the sector will also witness scarcity of land with a shift of demand from Tier-I to Tier-II and III cities. “Bhatinda, Lucknow, Jaipur, Nai Raipur, Ludhiana etc should attract attention. We foresee continuous boom in the sector for at least a decade in Tier-II and III cities,” he adds. Vijay Jindal, CMD, SVP Builders believes that cities like Ghaziabad, Greater Noida, Meerut, and Panipat are preferable destinations that can earn lucrative deals for buyers as well. Puri advises investors to judge buying opportunity solely on local demand for the property typology being invested in, the number of units already sold/booked in the project, and market drivers scheduled to arrive in that locality.

Affordable housing an option?

In India about 100 million people live in slums and slum-like conditions without adequate basic facilities such as piped water, sanitation, schools, health, and more. According to the State of World Population Report 2007, these numbers are expected to touch 200 million by 2020. If the current trend continues

the number of urban dwellers will reach almost five billion by 2030. In India, the urban population is expected to reach 576 million in 2030 from the current 328 million. With this rapid urbanisation, one of the biggest challenges will be providing affordable housing to city dwellers, especially the poor.

With increasing difficulty in procuring funds to finish existing projects, developers are turning towards the affordable housing sector. “To counter the pressure on customers of high interest rates, rising inflation, etc and keeping in mind the high demand of housing, affordable housing is the feasible option for now,” says Goel. However, these sentiments are not echoed by all. Gurbaxani finds a market opportunity in affordable housing but refuses to acknowledge it as an option in the current scenario. “Larger developers are not talking about this different market segment,” he adds. The industry patiently awaits tax breaks and reduction in stamp duty to increase affordable housing

Source : http://www.financialexpress.com/news/pricing-pains-hit-real-estate/392262/3

Fall in demand for purchasing property: Assocham

High cost of borrowing has resulted in nearly 35 per cent fall in demand for purchase of properties in most of Tier II and Tier III cities during the first half of the current fiscal year, according to an assessment by The Associated Chambers of Commerce and Industry of India (Assocham).

Assocham assessment reveals that over 2 crore people in about 25 Tier II and Tier III cities are the claimant for buying of dwelling units who are unable to make purchases as higher borrowing cost have compelled most of real estate developers to defer their projects.

The buyers of dwelling units have also not been able to make payments as higher interest rates  and higher inflation have come on their ways to partly dampen their enthusiasm and eroded their budget.

The assessment has been arrived at the Chamber in its latest exercise about as to what has been happening in purchase of properties in Tier II and Tier III cities in first 7 months of current fiscal in which the properties purchases had registered a growth of over 25 per cent between April-October in the last year.

The analysis of Assocham is based from the feedback received from  well known real estate members like Parsavnath Developers, Omaxe, DLF, Unitech, BPTP among others that are developing real estate projects in number of tier II and tier III cities which include Meerut, Bulandsahahr, Muradabad, Bhiwadi,  Dehradun, Rudarpur, Chandigarh, Sonepat, Panipat, Manesar, Pune, Nasik, Bhopal, Indore and many other such cities and towns in Southern and other parts of the country.

Source : www.business-standard.com

Realtors don’t budge on price

Mumbai: Developers have been howling from the rooftops for a government bailout, but most of them are unwilling to take the first step and scale down rates.

In Mumbai, despite being in financial hot waters, they are plain unwilling to make housing affordable. Realty sector analysts say this is because developers have formed a cartel to the detriment of prospective customers.

Posing as home buyers, DNA enquired at 18 prime properties in Mumbai, the National Capital Region of Delhi and Bangalore.

The story that emerges is that builders in the south and the north are offering price cuts of between 10% and 20%, but those in Mumbai are not ready to budge an inch.

An analyst with a foreign brokerage, who requested anonymity since he is not authorised to speak, blamed the situation on cartelisation.

“Without reducing their card rates, they ran to the government for a bailout. Not a single developer has said he has cut prices. The fact is developers are unable to sell flats and have huge loans to repay. This needs to be cleared this year itself and banks are not ready to give any extension on repayments,” he said.

“Reducing property rates will mean their ability to repay banks gets reduced, which is why they are chary of cutting prices,” he added.

He may not be far off the mark. Of the 10 properties surveyed in Mumbai not a single developer was willing to offer a discount. Even on projects where possession would be only after November 2009, there was no room for bargaining.

Nirmal Lifestyle was offering a discount —- a mere 1% or Rs 76,000 on a flat costing Rs 76 lakh.

The sales officer at Orbit Corporation, which focuses on redevelopment of dilapidated buildings, said the going rate for Orbit Arya, a project on Napean Sea Road, is Rs 60,060 per square feet.

“We have already reduced the price from Rs 72,000 three months back,” the official said, claiming seven of 11 flats have been sold.

RBI steps not a certainty to banks increasing lending

Some time back, real estate analysts had warned buyers not to put money into under-construction projects since realtors were facing a severe financial crunch. The projects DNA contacted were all ready for possession.

“It’s almost as if developers are taking advantage of the situation —- if you don’t invest in under-construction projects, there will be no reduction in the prices of ready flats,” said an industry source.

But the north and the south are a different story.

Companies such as DLF, Unitech, Parsvanath, Omaxe and Raheja Developers are all offering a minimum 9% to a maximum 17% in places such as Gurgaon and Noida on upfront payments with room for further negotiations, DNA’s enquiries revealed.

Most of these apartments are large, between 1,600 sq ft and 3,000 sq ft.

Unitech’s ambitious project in Noida, Unitech Grande, which was expected to generate a revenue of Rs 15,000 crore, has excellent discount offers.

The sales officer said there is 15% discount on upfront payments for flats costing Rs 2-3 crore; “We can negotiate further,” the official said.

That’s twice the discount Unitech’s competitors are offering for similar projects.

A spokesperson for DLF, India’s largest realtor, said the company will not cut prices as it is offering “affordable” apartments starting at Rs45 lakh.

On Thursday, Rohtas Goel, president of Naredco, the government body for realty players, requested its members to cut prices by 1-5% on present projects, nearly 10% on future projects and 10-15% for affordable housing flats costing Rs3-20 lakh.

Bangalore-based Sobha Developers has already announced an 8% cut in rates on Friday on “immediate and upfront” payment for its Rs 1.5-2 crore luxury project that will come up in two years.

Jai Mavani, infrastructure and real estate head of audit giant KPMG, says realtors have no choice but to cut prices in one stroke. “Otherwise there is no way they can stimulate sales. It is a Catch-22 situation for them. They need to bite the bullet if they want money to come into their pockets,” Mavani said.

Source : Sify.com

Property rates to fall further in ’09

Domestic property prices are set to fall by a quarter in ’09 as the global economic crisis saps homebuyer confidence, adding to problems of
capital-strapped developers. A property market boom has been waning for a year, with land prices falling 15% from a mid- ’07 peak. But analysts predict tougher times ahead. “We’re expecting a horrible ’09,” said Anshul Jain, CEO for property services firm DTZ in India . “Prices have already shown signs of coming off, and chinks in the armour are surfacing.”

Property prices doubled in the two years after rules were eased in ’05 on investment in the construction industry, sparking interest in home-building among foreign funds. Developers, often in league with funds run by the likes of Morgan Stanley, Citigroup and Merrill Lynch, snapped up land. Realty majors like DLF and Parsvnath Developers launched huge IPOs to fund new projects. But the sharp rise in prices and interest rates slowed home sales. The global crisis has added to the gloom. “We expect a 20-25 % price correction,” says Anurag Mathur, joint MD at Cushman and Wakefield.

FIIs are now unlikely to jump into the Indian market. But the funds already raised, somewhere between 75 and 100 of them, are waiting for developers to drop their pricing for JVs, so they can get the 30% internal rates of return they hanker for, even in a bad market. Developers are hoping that as inflation softens, falling mortgage rates will make homes affordable again . But financing deals will not happen until developers get a better grasp on how far the market will fall, Mr Jain said.

Source : Economictimes.com

Omaxe cuts some prices, other realty cos hold firm

NEW DELHI, Nov 21 (Reuters) – Real-estate firm Omaxe Ltd (OMAX.BO: Quote, Profile, Research) has cut prices of some of its properties for some customers by up to 5 percent, its chairman said on Friday.

Rohtas Goel, who is also the president of the National Real Estate Development Council, said the council had recommended similar cuts to its members.

But member firms said they were not considering any cuts for now.

Demand for real estate in India has slumped on high costs of home loans and on weakening economic activity. Analysts say prices have to come down before demand revives.

“There is a 1-5 percent discount on the basic sale price … from today, depending on the project and location,” Goel said. “It is not in all projects.”

The cuts will be for customers who pay on the basis of the progress of construction at the project, he said. Goel declined to say what percentage of their projects would be sold at the lower rates.

NAREDCO counts among its members India’s top listed realty DLF (DLF.BO: Quote, Profile, Research), Unitech (UNTE.BO: Quote, Profile, Research), Omaxe, Parsvnath Developers (PARV.BO: Quote, Profile, Research) and Ansal Properties and Infrastructure Ltd (ANSP.BO: Quote, Profile, Research).

A DLF spokesman said prices could come down further only if input costs fell.

Parsvnath Chairman Pradeep Jain said he had not received any letter from the council and was not mulling price cuts. “It is a little difficult to say as a forum to any developer to cut prices,” he said over the telephone.

Ansal’s Chief Executive Anil Kumar said the firm had not taken a decision yet. “We may consider it for new projects,” he said over the telephone.

Source : in.reuters.com

‘Cut house prices by up to 15%’

New Delhi: Realty industry body National Real Estate Development Council today asked its members to cut rates on housing projects by up to 15 per cent to revive sales.

Companies like Ansal API, Omaxe, Assotech and DLF have already agreed to cut prices, while Bangalore-based Sobha Developers has promised to evaluate slashing rates, the NREDCO President, Rohtas Goel, told reporters here.

The Council has asked members to cut sales price by 1-5 per cent for existing projects, 5-10 per cent on future projects and 10-15 per cent on affordable housing ranging between Rs 3 lakh and Rs 20 lakh.

Earlier this week, the Finance Minister, P. Chidambaram, had asked the Indian industry to cut prices to revive sales and reduce inventories.

“We respect the concerns of the Finance Minister and we are ready for price cuts. On existing projects the prices have already fallen by 20-40 per cent across the country,” said Goel, who is also the Chairman and Managing Director of Omaxe.

In existing projects, there is no cushion on account of higher steel and cement prices that have been prevailing for the last one-year. NREDCO claims to have 500 members, including all big realty players.

Source : sify.com

Hospitality Business Attracts Northern Realtors

Realty majors in the North like DLF, Uppal and Amrapali Group have started executing their plans in the hospitality business quite aggressively. DLF, which had signed a JV with California-based Hilton Hotels in 2006, is on an intense land hunt in Bangalore and Hyderabad to set up five-star hotels. In Kolkata, the company has already acquired a six-acre plot to build such a hotel by early 2011. The joint venture, DLF-Hilton, plans to set up 75 hotels and service apartments over the next five years. Delhi-based Uppal Group, which recently joined hands with Marriott International to operate two five-star luxury hotels, is now planning to enter the budget hotel segment by early 2009. Amrapali, also from Delhi, has tied up with Choice Hotels to launch its Clarion brand hotel in Greater Noida. The hotel is expected to come up in the next one and a half years at a cost of Rs. 120 crores.

Source : propertybytes.com

Realty cos queue up for Cidco’s Kharghar project

MUMBAI: Nearly 85 companies across the world have expressed interest in the City and Industrial Development Corporation’s (Cidco) Rs 5,000-crore the me city project at Kharghar in Navi Mumbai. Of those, a dozen companies, including Essel World, have already approached Cidco for the project.

The location of the theme city, a 250-acre plateau, boasts of a few other world-class projects that are already on the cards. This explains why Tishmen Speyer, a leading US real estate firm that recently bought MetLife Inc’s prime properties in Manhattan, has approached Cidco for a project. Dubai’s infrastructure giants Limitless and Emmar are also queuing up. Big Entertainment, too, wants to build a state-of-the-art studio for its joint ventures with Steven Speilberg.

It seems that the global downturn has failed to deter plans of global realty giants. D L N Murthy, general manager (special projects), Cidco, said, “The market situation is worse, no doubt. But for the wise, this is an
opportunity.”

Besides Mukesh Ambani, whose company has been in touch with Cidco authorities ever since the theme park tender was advertised last month, Manmohan Shetty’s Walkwater Media, Hindustan Construction Company, GVK International, L&T, DLF, Essar and Mahindra & Mahindra are vying for the project.

The proposed project will have a theme-cum-entertainment city rivalling Disneyland in the US or Singapore’s Sentosa Park in size and scope. The corporation has invited global bids with a reserve price of Rs 2,000 crore. The bidding process is expected to be concluded by December.

Mr Murthy said the shortlisted bidder will either pay the corporation Rs 2,000 crore upfront against the land or make Cidco an equity partner in the project by forming a special purpose vehicle (SPV). According to a top Cidco official, 60% of the total 250 acres will be reserved for the theme park, while 40% would be earmarked for real estate development.

The winning bidder will have to spend a minimum of Rs 2,500 crore on developing and preserving the scenic location.

The theme city will be well-connected as its location is right across the proposed international airport near the Kharghar railway station. It will comprise adventure parks, a wildlife reserve, a lagoon for aquatic life, galleries, museums, resorts, a health spa, multiplexes, a planetarium, studios, night clubs and parks for children.

Source : Economictimes

Expensive land buys put developers in a bind

Builders, especially in Mumbai, who bought property at steep prices are finding it tough to sell or develop the land

Bangalore: In November last year, Vijay Associates (Wadhwa) Developers acquired a plot of land in Mumbai’s new central business district, the Bandra Kurla Complex, for Rs821 crore, paying around Rs5.04 lakh a sq. m in what was then touted as the most expensive land deal in Mumbai by analysts and media. The company is yet to start developing this land. Some real estate firms are wrestling with formats,?deciding which one will be more profitable
A slowing economy, tight credit and lower demand for houses and offices have made things difficult for real estate developers, many of whom bought land at high prices and are finding it difficult either to develop it or sell it off. While developers across the country face this problem, it is most significant in Mumbai, where the sheer unavailability of land has seen real estate rates soar in recent years. According to an April article in Newsweek magazine, apartments in Manhattan cost around $1,263 (Rs61,381) a sq. ft, less than in some parts of Mumbai.

In 2005, Kohinoor Consolidated Transport Network Ltd bought the defunct Kohinoor Mill located on a 4.8-acre plot for Rs421 crore. Work on the project is stuck and the firm has been unable to sell the property. The same year, India’s largest developer by market value, DLF Ltd, bought the 17.5-acre Mumbai Textile Mill for Rs702 crore. Three years and many changes in design later, the company has only now finalized plans for the land.
Rajan Shirodkar, managing director of Matoshree Realtors Pvt. Ltd, part of the joint venture that bought the Kohinoor Mill property, said that when a plot of land was acquired at a high price, it was difficult to get desired lease rentals or find buyers. “We will either develop and sell it outright or sell it off in its present condition. We have been speaking to various buyers.”
A DLF official in Delhi, speaking on condition of anonymity, said the company had decided to construct a mixed-development project with both retail and office space on the Mumbai Textile Mill land. The project will take two years to be completed, the official said.

In some cases, builders are wrestling with formats, deciding which one will be more profitable. In others, they are looking to sell off all or part of the land acquired to raise money because they have been hit hard by the ongoing credit crisis. And still others, those who can afford it, are waiting and watching.
“We are at the planning and designing stage of the project and we will launch when we are ready,” said Vijay Wadhwa, the man behind Vijay Associates (Wadhwa) Developers. A real estate consultant familiar with the development said the project will be launched after a year. “(Vijay Wadhwa) can wait till he gets his desired margin,” added this person who did not want to be named.
Not all real estate firms, however, will be able to wait out the crisis. An October report by Macquarie Research says stocks of companies which had earlier leveraged themselves to buy land are being punished. The Bombay Stock Exchange’s realty index has fallen 81.12% since January compared with the 47.6% fall in the exchange’s benchmark Sensex index in the same period.

The country’s two top developers, DLF and Unitech Ltd saw their net profit for the quarter ended September, the second of 2008-09 for both companies, decline by 4% to Rs1,935 crore and 12.48% to Rs358.92 crore, respectively, even as their share prices have lost 76.31% and 89.74% since their January high.
Profitability is the first thing that is threatened at such times, said an expert. “The sale price of the finished product is the first challenge because one needs to keep (in mind) the profit margin. When you buy land at a very high cost, then sometimes you are forced to negotiate on margins,” said Ashutosh Limaye, associate director, strategic consulting, Jones Lang LaSalle Meghraj, a property advisory. Limaye said many developers were selling some of the land on their books. “Typically, builders work on 12-14 sites but now they are exiting three-four sites selling them to funds looking to buy distressed assets.”
Housing Development and Infrastructure Ltd (HDIL), the country’s third largest developer by market value, which also buys land, develops surrounding infrastructure, and then sells it, has stopped doing so. “Land prices have still not come down even as property prices are softening and keeping the market conditions in mind, it is wise to finish what we have started,” said Sarang Wadhawan, managing director, HDIL.

Several recent auctions have not attracted any buyers. Developers have withdrawn their bids because they know they won’t make their margins after paying high valuations for land, said S.G. Maheshwari, former president of Estate Agents Association of India, an industry body. Citra Developers Ltd, a subsidiary of Indiabulls Group, withdrew its Rs676 crore bid for a plot in a distant Mumbai suburb. Maheshwari said the developer realized that the plot wouldn’t fetch more than Rs400 crore when developed.

Gagan Banga, chief executive officer of Indiabulls Financial Services Ltd, said in September that the bid had been withdrawn for “certain reasons” and that the company hadn’t decided whether it would reconsider the decision if fresh bids are invited.

Source : livemint.com

Realtors may need more collateral to raise funds

MUMBAI/DELHI: Real estate companies, the darlings of the India’s capital and financial markets for the past two years, will continue to hog the limelight in the coming year as well, but for the wrong reasons.

The global credit crunch which has affected the Indian market has taken the sheen off large property firms, with DLF and Unitech, two of India’s leading real estate companies seeing their market cap eroding almost completely and their fund raising plans hitting a rut due to unavailability of funds.

The situation has also led many non-banking financial companies holding large equity stakes in real estate companies as collateral. Their shareholding is also likely to cross the crucial 15% limit as most realty firms fail to meet payment deadlines.

“A lot of projects announced may not happen ,” a senior investment banker said. “With significant pressure on companies, they are likely to go for restructuring and focus on selective projects in the short- to medium-term . There will be more tie-ups at the project level. For realty players, these will be testing times that will check whether they are strong enough to weather the downturn,” he added.

However, Unitech MD Sanjay Chandra said: “The disbursal of loans has again begun after a freeze of few weeks. We have very recently got the disbursal of a loan from a public sector bank, although the rate was 250 basis points more than the earlier agreed rate.” He added that the company has not defaulted on any loan or fixed maturity plan. “We will continue to service debt as and when they become due. We would soon make some announcement on a PE deal for our hotel business,” Mr Chandra said.

DLF and Unitech have seen their market capitalisation eroding sharply by 81% and 94% respectively in the past few months.

“Till today, DLF has not rescheduled payment of any loan so far. Banks have still not started disbursing loans. The highest rate at which we have borrowed so far has been at 15%. We are confident of raising funds through private placement in DLF Assets. Our construction is not suffering on account of buyback. We are injecting liquidity in the market by buying back shares.” DLF executive director Rajeev Talwar said.

Last week, credit rating agency IRA downgraded the Rs 100 crore fund raising programme of Unitech from A1+ to A2+. “The rating revision has been driven by the increasingly challenging operating environment that real estate players are currently facing, given the slowdown in the market and the difficulty in raising funds, both through the debt and equity route” said ICRA.

Unitech’s total debt had increased significantly from Rs 3,980 crore to Rs 8,552 crore due to difference in its Real Estate Investment Trust(REIT) listing in the overseas market and increase in land purchases.
With stocks of all listed real estate companies plummeting, jittery non banking finance companies are seeking higher margins in the form of pledged shares from borrowers.

Non-banking finance companies such as Reliance Capital, Indiabulls, GE Capital, ECL Finance are believed to have sought higher collateral by way of pledged shares from the promoters of real estate firm such as Parsvnath Developers, Omaxe, Unitech, Akruty City and Lok Housing. It is learnt that almost all reality companies have borrowed cash from private financiers at steep interest rates of 36-48 % per annum.

“The company has started asking for more fresh shares or equivalent cash in order to maintain the margin. Till date we have not a single pledged share as we always maintain highest margins than what they owed to us,” an ECL Finance official told ET.

Margins are generally defined as the difference in value between the security and loan balance. Finance companies usually stipulate that securities should be double the amount of the loan balance to maintain the margin.

A borrower is asked to make up for the margin, if the stock price of the borrowing company falls. If the borrower fails to meet the margin calls, the finance company has the power to sell off the pledged securities. Industry insiders say if share prices keep falling, a promoter is normally asked to pledge more shares with the lending companies.

Market rumours suggest that GE Capital has been selling Unitech shares in the market where the company had pledged its shares. According to sources close to the development, the funding was done at coverage of about two times. But the massive fall in the stock price is due to media reports speculating default by the company.

According to industry sources, many developers have taken at least Rs 250 crore to Rs 1,000 crore from financiers in lieu of their existing projects in the past few months.

TOUGH TIME

The global credit crunch has taken the sheen off large property firms With stocks of all listed real estate cos plummeting, jittery NBFCs are seeking higher collateral for loans The market capitalisation of DLF & Unitech have fallen by 81% & 94%, respectively.

Source : Economictimes.com

Citibank, IndiaHome contribute customers to find property in India at IndiaHome Exhibition in Dubai

This upcoming weekend of 17th & 18th October will have the reputed real estate developers from India coming together under one roof with Citibank offering attractive options for availing home loans to purchase properties.

NRI community in UAE has shown keen interest for properties in India and this event will provide an attractive opportunity for Non Resident Indians (NRIs) in the entire UAE to look at a variety of home options in various cities across India under one roof and select their ‘Home Back Home’.

The IndiaHome exhibition is being held at Dusit Thani Hotel on Sheikh Zayed Road with participation from the most reputed Indian developers like DLF, Unitech Ltd, Emaar MGF, Jaypee Greens, Hiranandani Constructions, Mahindra Life Spaces , GERA Developers,,Rohan Developers, Kumar Developers,Ekta World, ETA Star, Keppel and Hirco. These developers have residential, commercial and retail projects planned or under execution across various towns and cities in India. The exhibition offers a wide range of property options ranging from INR40 lacs (approx Dhs370000) to INR10 crores (approx Dhs9.8m).

Ashish Mehrotra, Business Manager – Mortgages, Citibank, said:

‘It is our continuous endeavor to provide value added offerings to NRI customers and service their need of home purchase back in India. As part of that endeavor, we are getting the best in class real estate developers from India to their doorstep this weekend.’

Mehrotra added, ‘The developers will provide them with large range of property options suited to wide range of budgets bundled with some very attractive schemes for purchase during this period. This will be supplemented by on-the-spot loan pre-approval and guidance by Citibank mortgage counselors to facilitate the purchase of their dream home in India.’

‘The NRI clients can get loans ranging from Rs 15 lacs to upto Rs 5 crores for ready to move and under construction properties. Loans will also be provided for built-up commercial properties across Metro cities in India. The loans can be taken under flexible repayment schemes with construction linked plans or down payment plan and the EMI payments can be done through the convenient Citibank NRE/NRO account which comes with a host of superior banking features,’ added Mehrotra.

Vipul Kapur, Global Sales Director, Citibank NRI, said: ‘Buying a home is not just an investment; it is an emotional commitment, especially for NRIs. Citibank has rich experience and established presence in the Indian home loans market. To cater to the needs of our NRI customers, we have been offering a dedicated Home Loan programme since 1997. Through our NRI Home Loan Program, we cater to customers based in USA, Canada, Singapore, UAE, Kuwait and Bahrain.’

With over two decades of success, the Citibank NRI Business functions from over 64 centers across the globe. Managing assets worth over $8bn, the Business has been a pioneer in NRI banking, serving as a model for other Indian banks targeting NRIs. The business has four regional hubs in New York, London, Dubai and Singapore. Its comprehensive wealth management services provide specialized solutions through the personalized attention of expert relationship managers.

Ameinfo.com

Owing a home seems a distant dream in Kolkata

KOLKATA HAS been known for its rich culture, strong family bonding and a peaceful state.

However, in the last seven to eight years Kolkata has witnessed a radical change in the mood of the young generation.

The mushroom growth of software companies in Sector-V of Salt Lake, which resulted a substantial absorbing of local pool of qualified engineers, as a result there has been a graphic rise in income. Young pass out graduate are more inclined toward private companies rather than public sector as they feel that their aspiration level will be achieved there.

The high disposable income brought a peculiar metamorphosis in the perception of the young generation. The desire to own a flat in a modern complex has become a big necessity and this germinates a great demand for residential complexes.

The private promoters and joint ventures projects has open the doors to welcome these buyers. This leads to the boom of real estate in the city. Area like New Town, South Extension ie EM By pass and Garia has become the most sought after preferred residential area because of better supporting infrastructure and the extension of the proposed Metro station.

Most of the projects were sold at the launching stage giving an apparent indication of more supply. The developers become more adventurous and took calculative risk to launch better residential complexes in large format, which lead to the rise of price of the property. New Town itself has seen a phenomenal appreciation of 40 per cent annually. The projects developed by joint sector companies were sold at launching stage. Seeing this vibrant market scenario national players like DLF and Unitech foray into the Kolkata realty market.

Garia has become a residential destination for the home seeker falling into the middle income group.
Residential complexes of various formats ranging from 50,000 to five lakhs square feet equipped with all modern amenities and facilities were launched. The demand are still growing around 20 per cent, but the price has increased by 30 per cent annually. The recent increase in the cost of raw materials especially steel and cement leads to a substantial increase in the construction cost. To make the scenario more gloomy was the steep increase of lending rate (RPLR) of home loan, which is hovering around 12 per cent per annum.

A common man dream of owing a two bedroom flat for twelve lakhs has shoot to 20 lakhs in just a year and a half and is still increasing. I agree with the view of many consultants and developers that the price is still under control compare to the property price of slow realty market of Bangalore, Chennai, Hyderabad and Bhubaneswar. But Kolkata is witnessing a gradual decrease in the demand of highly priced apartment. Is this a sign of stagnation? Will Kolkatans resist to this price hike or succumb to it.

Source : Merinews.com

NCR sees fall in real estate projects

NEW DELHI: New housing project launches in the national capital region (NCR) slumped by 20% during January-June 2008. This is explained by the slowdown in demand due to appreciation in real estate prices and rising interest rates for borrowers.

The first half of this year also saw a marked shift in developers strategy towards mid-income houses, as the high-end segment witnessed increased resistance from buyers.

Project launches in the high-end category fell by two-third to just 5, while mid-income housing project launches rose by over 20% to 37.

As per a report by international property consultancy firm DTZ, the absorption of mid-income houses in July at 76% had overtaken that of high end houses (68%). This means that high end houses are selling at a slower pace than the mid income segment. The report says that the share of mid-income housing in the overall residential supply is expected to rise to 62% in three years, compared to 22% currently.

This translates into a CAGR of 131% for mid income housing units.

“Affordability is the single biggest factor that influences a home buyer’s decision,” says DTZ director (consulting and research) Abhilash Lal, adding that a series of interest rate hikes has almost doubled the equated monthly instalment (EMI) outflow for a home buyer in the past few years. “Buyers are increasingly shifting to mid-income homes as they can’t afford a higher EMI.”

Lately, several developers, including India’s largest real estate firm DLF, Ansals, Parsvnath, Omaxe, BPTP, Raheja and Gaursons have been actively building mid-income homes.

At present, Ghaziabad is the most favoured destination for mid-income housing, accounting for 68% of the total mid-income homes in NCR. Its contribution is likely to fall to 40% by 2011 with fresh supplies coming up in other suburbs.

Mid-income homes account for 71% of all homes in Ghaziabad and only 6% in Gurgaon. Ghaziabad is followed by Faridabad (64%) and Greater Noida (53%).

The report says a shift towards mid-income was prompted by developers’ need to keep their profit growing as high-end market stagnated after property prices went up almost three times in several NCR micro markets.

The ability to procure cheap land has been critical in launching mid-income projects. Most of the mid income projects are located far away from developed areas or in places where land parcels were procured cheaply by developers long back.

Interestingly, the report also highlights high investor interest in mid-income projects. It says 90% of the investors surveyed wanted to put their money in two mid-income flats rather than one high end flat when both attracted the same investment.

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.

Chennai IT residential sector witnessing slowdown

Real estate developers are worried as the residential sector on the IT corridor in Chennai is undergoing one of its worst crises ever. Builders had planned luxury apartment projects on Chennai’s IT corridor wanting to take advantage of the growing IT industry. Of the 40,000-odd residential apartments that are expected to come up in the outlying areas of the city over the next three years, 50% have been planned along the IT highway. Prominent developers – DLF, Hiranandani, Puravankara, True Value Homes, Arihant, Vijay Shanthi, Akshaya, SSPDL, L&T, Doshi, ETA Star and Mantri – all have their presence on this six lane road that is also home to IT giants that include TCS, Cognizant, Satyam and Infosys.

Builders here have not increased prices (average price Rs 4,000 per sq ft) since their projects were launched. “We bet our stocks on these projects as the city is already facing a shortage of 30,000 dwelling units. To add to the demand, eight million sq ft of IT space has been added in the Siruseri IT Park and another eight million sq ft IT space is being readied in the park over the next three years. Going by a conservative estimate of 100 sq ft per employee, it would have generated 1.6 lakh new jobs, and for us, selling 20,000 flats to IT professionals should have been a cakewalk,” said Prakash Challa, president of the Tamil Nadu unit of Confederation of Real Estate Developers ‘ Association of India. But their calculations have gone wrong. IT professionals are in no hurry to buy flats now.

“Against a monthly booking of 30 to 40 units last year, we’re down to three to four, and many try to negotiate the price. People are adopting a wait-and-watch approach. If interest rates go up further, the scenario will worsen,” said Suresh Kumar, managing director of Vijay Shanthi Builders. To add to the builders’ woes, the IT sector is going through a bad phase. Many companies that recruited students on campus this year have not yet taken the new employees on board. Some companies have even suspended civil works in Chennai. A leading IT company, which was developing a 50-acre plot of land in Sholinganallur and was expected to add 10,000 employees soon, has stopped construction halfway through, reliable sources said.

Demand For Houses In Small Towns Falls

Study by the Associated Chambers of Commerce and Industry of India (Assocham) has revealed that housing demand in small towns witnessed a 25 percent fall during February-July 2008 because of higher borrowing costs.

Assocham Secretary General, Mr. D.S. Rawat said, “Approximately 15 million people in about 30-40 tier II and tier III cities were unable to make purchases as higher inflation and interest rate have dampened their enthusiasm and eroded their budget.” The Assocham study is based on results given by affiliated real estate majors like Parsvnath, Omaxe, DLF, Unitech, and BPTP, which are developing projects in small towns. Besides rising cost, non-availability of inputs such as bricks, cement and steel, and power shortage also cause inordinate delays in project completion.

The chamber has suggested that the government introduce real estate investment trusts (REITs) to bring the much needed class of institutional investors to strongly support the domestic real estate market. As per Assocham, REITs can also help develop commercial mortgage backed securities (CMBS) market and create a source of cheaper debt for commercial real estate.

DLF Puts Pressure On Government For Dankuni Township Project

Real estate developer, DLF has threatened to withdraw the thirty three thousand crore rupees Dankuni township project, as no progress has been made in the case for months and the company is yet to get ownership of the land. State urban development minister, Mr. Asok Bhattacharya confirmed that DLF had increased pressure on the government. “The project is not making any headway and DLF is telling us that they’ll pull out if the situation continues,” he said, pointing out that with the entire district administration in Hoogly focusing on Singur, hardly any other work is getting done. “There’s also opposition to the Dankuni project at the local level. It would have generated huge employment in the state. We are still trying to convince DLF,” the minister said. The Dankuni Township is one of the biggest real estate projects in the country covering over 4,840 acres to be built through public-private-partnership over ten years. The company has already paid two hundred seventy crore rupees in advance to the government, which is supposed to hand over the land after procuring it.

Housing demand in small towns falls by 25 per cent

New Delhi : Slowdown in the housing sector in metros seems to have spilled over to small towns, where housing demand fell by 25 per cent during February-July 2008 period because of higher cost of borrowing, according to an industry lobby report.

The study by the Associated Chambers of Commerce and Industry of India (Assocham) said realty transaction has gone down by nearly 25 per cent in most of tier II and tier III cities between February and July 2008.

These small boomtowns registered a growth of around 22-23 percent in property purchase in the same period last year. Assocham secretary general D.S. Rawat said: “Approximately 15 million people in about 30-40 tier II and tier III cities were unable to make purchases as higher inflation and interest rate have dampened their enthusiasm and eroded their budget.”

“Also higher borrowing cost has compelled most of real estate developers to defer their projects,” he added. The Assocham study is based on feedback from affiliated real estate majors like Parsvnath, Omaxe, DLF, Unitech, and BPTP, which are developing projects in small towns.

Besides rising cost, non-availability of inputs such as bricks, cement and steel, and power shortage also cause inordinate delays in project completion.

The chamber has urged the government to introduce real estate investment trusts (REITs) to bring the much needed class of institutional investors to strongly support the domestic real estate market.

According to the Assocham, REITs can also help develop commercial mortgage backed securities (CMBS) market and create a source of cheaper debt for commercial real estate.

DLF Goes Global To Beat Domestic Slowdown

DLF is planning to develop residential projects in the overseas market to overcome the slowdown in the Indian property market. The company may build houses in Singapore, Malaysia, which have a large Indian population. DLF will also use cost-effective resources and work at higher levels of efficiency to beat the slump, Mr. KP Singh said during the company’s annual general report of 2007-08.

NRIs bullish on Indian realty market

New Delhi : While home turf may not look as lucrative to resident Indians in times of a sluggish real estate market, Non-Resident Indians (NRIs) are still betting big on the realty sector. In fact, the NRI contribution to overall residential sales has amounted to approximately 10% of total sales over the past six months. Cities such as Pune, Mumbai, Chandigarh, Gurgaon and Kolkata are drawing the highest number of serious inquiries.

What has contributed to the bullish sentiments for the Indian realty sector is the the negative economic patterns reigning across most developed countries. Plus sentimental attachment for one’s country of origin and attractive returns from an emerging economy make NRIs turn immediate attention towards India.

According to global real estate consultancy Jones Lang LaSalle Meghraj (JLLM), 10% represents a significant growth and indicates that India, despite the economic pressures, is still a desirable country to invest in. “It is no secret that the real estate market will soon permit low entry costs and high returns after the current property cycle is completed.

Developers are responding to the demand,” says Anuj Puri, chairman and country head, JLLM. Developers cater to NRI sensibilities by including ‘green’ and ‘smart home’ features and investing in superior architectural designs. While NRIs are showing an increasing preference for tier II/III cities, the metros are still preferred by those who wish to launch businesses in India, Puri adds.

However, the developers whom Sunday ET spoke to denied that the NRI market is driving the current sales in the realty market. “There is no difference between then and now. It’s the same number of NRIs then and now. India is still the flavour of the day and continues to evoke interest among people,” says Niranjan Hiranandani, MD, Hiranandani Developers. Hiranandani says that Mumbai and South cities are popular among the lot.

Ditto for Rajeev Talwar, executive group director, DLF, who feels that NRI is not a major market and it does not make up a majority of sales in the current scenario. On the other hand, realtor Parsvnath Developers , who admits that although a renewed thrust is being given to the NRI segment during the sluggish market, it isn’t as if one is going the extra mile.

“There is no special scheme for NRIs. Participation in sales campaign and exhibitions is on, like before. NRIs from Middle East, UK, USA and Canada are actively looking at the Indian real estate market,” says B P Dhaka, COO, Parsvnath Developers.

Dhaka feels that NRIs choice appears to be in and around metros and other financially active cities in states.

Developers cater to NRI sensibilities by including ‘green’ and ‘smart home’ features and investing in superior architectural designs.

Realty Majors up ad Budget

Despite the downturn, real estate players have increased their advertising budgets, even as other advertisers are cutting ad costs. The reasons for this are manifold.

“This is a result of desperate measures by most of the developers, and second, stakes are very high as most of the projects are not being sold. Developers have gone aggressive with an increase of 20-35% in the advertising budget due to inflation,” said Noshe Oceanic V-P Rajiv Gupta.

The agency handles accounts of real estate developers like Spaze Towers, Rohtas, AMR Infrastructure. Agreed Spaze Towers director Bharat Kumar: “We have increased our advertising budget by another 20% due to recession in the market as well. Our stakes are high at the moment but things are going to get right in the next two-three months.”

Many players have even bought back their sold-out properties and are re-selling them to make out for the losses. Most of the players are using tactical promotional strategies to be high on the recall value. With inflation on the high and property prices on the rise, developers are desperate. “It’s a do or die situation out there due to high recession in the market. Many developers are buying back their projects and re-selling. It is necessary to make a noise at this time to keep the projects on high visibility radar for those who actively trade on the real estate.

The print media is taking up the major chunk while the rest goes to the outdoors. Out of a scale of 10, together advertising in print and outdoor could be rated as seven,” said Noshe Oceanic president Asheesh Sethi.

Despite a desperate situation, most developers see brighter day ahead. “There has been a minor moderation because of liquidity crunch and many internal and external expenses have been re-budgeted. But I don’t think the overall indications would be visible on an annual basis,” said Parsvnath Developers CEO BP Dhaka.

Developers like Unitech, DLF and Ansal API have not cut down on their advertising budgets. “We have increased our promotional budget and see no reason why we should cut costs here. Moreover, in companies such as ours, the ability to fight recession is inbuilt,” said Ansal API president (international market) Kunal Banerji.

Mahindras cash in on early SEZ appeal

Workers are putting the finishing touches to a five-storey building that will house a 3,200-seater BPO unit of lnfosys Technologies in the 2,500-acre multi-product special economic zone (SEZ), 21 km from the Pink City. Infosys has leased 200-acres in the 385-acre IT zone, which is sold out Fifty meters away at the SEZ’s technology park, two floors of offices are ready.

Deutsche Bank Outsourcing International, which has leased out seven floors in two buildings, will start operations this week. Welcome to the Mahindra World City Jaipur. Even as several SEZs are struggling to get off the ground, the Mahindras have managed to kick off their second SEZ at Jaipur, after their first one in Chennai.

“None of the big SEZ projects have taken off while we have made good progress on two of them. The Jaipur project will be operational this month,” said Arun Nahda, vice-chairman, Mahindra lifespaces.

Most other projects have not been able to cross the first hurdle of land acquisition. “The Mahindras believed in SEZs before they came into place in India. Others are sitting on approvals and now thinking about what to do with them,” said Tapan Singhal, senior manager, Pricewater-houseCoopers.

To be fair, many SEZs have come up in the country. But a majority of them are captive units of IT, ITes, or pharma companies. Many government free trade zones and export promotion zones have been converted into SEZs. There are about half a dozen third-party SEZs from developers like DLF and Unitech but they are much smaller in size and scale (40-60 acres).

“Many of the big SEZ projects are suffering because of issues related to land acquisition; execution is not so much an issue. Mahindras were early starters in Chennai in the older regime, when land stipulation was not there,” said Vivek Mehra, executive director, PricewaterhouseC-oopers and an expert on SEZs. Mahindra World City Jaipur—a 74:26 joint venture between Mahindra group firm and Mahindra Lifespaces and Rajasthan Industrial and Investment Corporation is the largest public private partnership projects in Rajasthan, and is expected to create large scale industrial development and employment in the state.

The multi-product SEZ will have three zones: IT (750 acres), light engineering, including auto and auto component (250 acres), handicraft (250 acres), besides zones for apparel, gems & jewellery, logistics and warehousing, a domestic tariff area for ancillaries to support export units and 1,000-acres of social infrastructure.

Twenty companies have signed up for these zones, who will invest more than Rs 1000 crore, employ 75,000 people and generate exports of Rs 3500 crore within four years.

The group’s first SEZ, the 1400-acre Mahindra World City near Chennai, already boasts clients like Infosys, Wipro, BMW and Braun and achieved a break even this year, in its eighth year.

The Mahindras had acquired 1,000-acres of land, close to the Ford factory near Chennai for an auto-ancillary park and later thought of doing a township. “When we thought of an SEZ, we said can we build an island of excellence, opportunity for people to get plug and play infrastructure,” said Nanda, a 35-year-old veteran at the M&M Group.

Mahindras In fact, M&M’s success in Chennai saw other businessmen jumping onto the SEZ bandwagon. What does it do differently that’s helping it implement its projects while others are stuck with issues like land acquisition?

“The basic difference is we did not look at it as a real estate business but as an infrastructure business. The profits can wait. We focused on creating the right infrastructure and attracting the right anchors (clients like Infosys),” said Nanda.

Take Chennai, for instance. It took the company four-and-half years to acquire the land and build the infrastructure and another year to get a good anchor in Infosys.

“A good anchor makes a lot of a difference,” said Nanda. It wasn’t easy; Mahindra had to invest upfront (Mahindras, for instance, are investing Rs 600 crore in Jaipur), build the infrastructure for Infosys to come in.

Mahindra could rope in Infosys after three of its directors led by Narayan Murthy visited the site and bought into the concept that a parallel city can be built 35-km away from Chennai. Of course, Infosys also managed to get a great deal, (not to be written: as an anchor, it got a rate which was a third of what others paid). “They showed faith in us and we delivered to that faith,” said Nanda who needs customers like Infosys who can scale-up quickly from 5,000-people at a centre to 25,000-people.

Even after selling all space in Chennai, it invested in sprucing up a nearby railway station that eased commuting for its customers’ employees. Perhaps, it’s not enough. “Our experience has been fair to good at Chennai. The SEZ went through a learning curve and in some areas could not match our speed in execution of our facility.

For instance, we have grown to 6500 employees there and the railway system cannot take the load. The internal transport system has been inadequate,” said TV Mohandas Pai, director (human resources), Infosys. Yet, its Chennai project has been able to win the confidence of its customers. So, when the government of Rajasthan invited Infosys to set up a campus in Jaipur, it suggested to them to create a SEZ so that there will be totality of infrastructure.

Servant quarters, not home for the poor

India’s largest real estate developer DLF has given a new definition to housing for the Economically Weaker Section (EWS). A senior company executive recently proposed to the urban development minister Jaipal Reddy (and was promptly snubbed) that servant quarters attached to high-end apartments should be counted as the developer’s contribution towards EWS, according to a source in the government.

A developer needs to compulsorily construct at least 35% of dwelling units or 15% of permissible FAR (ratio of developable space and the total area available for the project), whichever is higher, for EWS in all group housing projects in Delhi.

As this would mean building cheap accommodation in posh colonies and lose out on revenue, DLF tried to float the ’servant quarter’ proposal in order to get around this stipulation. The company has never been comfortable with the EWS quota. “It is not feasible to have very high-end apartments and low-income group housing in the same compound.

The owners of both types of houses will feel uncomfortable,” a company official had earlier told ET. THIS mindset, however, runs counter to the government’s effort at ensuring more dwelling space for members of economically weaker sections, who now find it impossible to buy a house in metros and its suburbs, given the high prevailing prices. The realty boom of the past four years has seen housing prices treble in several markets.

In just a year, DLF’s net profit went up almost four times from Rs 1,934 crore to Rs 7,856 crore in FY08. However, there has been little initiative by developers to cater to the needs of those who can’t afford expensive houses.

Leading private developers have mostly confined themselves to high-end apartments, which bring attractive margins. Of late, some developers have started tapping demand in mid-income housing. DLF, too, has launched its mid-income housing projects, priced around Rs 50 lakh, in Gurgaon, Chennai and a few other cities.

Luxury Market for NRIS and HNIS, a New Opportunity for Real Estate Developers

As home sales continue to dip, real estate developers are tapping the luxury home segment by targeting non-resident Indians and high net worth individuals keen on buying that exclusive villa in India. The move also seems to be backed by pure market play as demand in the luxury home segment is growing sharply, bucking the trend seen in other areas of the industry where exposure to high-risk borrowers has tightened loan flow from banks.

Real estate players whom ET spoke to said these ‘nouveau riche’ were now moving up the chain and extending their possessions to luxury homes with ultra sophisticated amenities like personal swimming pools, jogging tracks, health clubs and personal gardens.

Leading real estate developers like Sobha Developers, DLF, Kalpataru, Nitesh Estates, Unitech, Omaxe, Royal Palms, Lodha Developers and Marvell Realtors are currently developing projects in cities like Mumbai, Delhi, Pune, Goa, Bangalore and Kerala, with the price of an average luxury home varying between Rs 3 crore and Rs 50 crore. The price of the luxury home depends on the city it is built in and the range of amenities it offers.

“Our customers typically belong to the top management in various corporate firms while some are overseas Indians,” says Nitesh Shetty, chairman of Nitesh Estates which has priced its luxury home products in Goa, Bangalore and Chennai in the range between Rs 5 crore and Rs 8 crore. The Bangalore-based firm is currently marketing its projects in the overseas market by hiring sales executives and participating in property exhibitions.

DLF To Come Up With Eight Shopping Malls

Real estate developer, DLF Ltd is coming up with eight shopping malls under the leasing format in the metros this fiscal. “We are thinking of launching seven-eight new shopping malls in the metros in this financial year,” DLF Retailing Developers Senior General Manager (Marketing), Mr. Manish Sawhney. The company would also open four shopping malls in the current year, of which three would be in the Delhi NCR and one in Chandigarh.

Realty Majors Acquiring Properties From Smaller Players

Real estate majors like DLF, Sobha Developers, Unitech and Omaxe are said to be at the forefront to acquire properties from cash-starved companies. According to industry experts, the sector will see more of this trend in the coming months. While both Sobha and Omaxe have already started developing land owned by smaller players, DLF and Unitech are also looking for buyouts.