NCR Developers Expecting High Sales during Navratri

After a lull of almost six months, real estate developers are once again launching residential projects aggressively to cash on the Navratri festival, considered auspicious for property buying. The festival of Navratri comes after the Shraadh period, considered inauspicious in the Hindu religious calendar, when property buyers do not book houses. The interest from developers was so much that over a dozen residential projects by companies such as Parsvnath, BPTP and Emaar MGF were launched in the National Capital Region in the past week. DLF, the country’s largest developer, is launching the second phase of its Capital Greens in West Delhi on Tuesday. DLF sold 1,356 apartments under its first phase of the project in a single day in April this year, due to competitive pricing.

Emaar MGF, a Delhi-based developer, launched Emerald Floors Premier on Monday after it sold off Emerald Floors and Emerald Estate in the Emerald Hills integrated gated community project in Gurgaon. The same company launched plots and villa floors at Jaipur Greens on September 19, where it has sold 120 plots so far, while Parsvnath Developers also launched Parsvnath City at Saharanpur in UP last Sunday. According to property consultants, this year the new launches were double the number of last year’s Navratri launches, when the property market was in a bad shape. Home sales had fallen by over 50 per cent from the beginning of the year, and developers were offering freebies and discounts to sell their existing projects.

Though on a lower scale, Mumbai also witnessed a couple of launches of luxury projects in South Central Mumbai by companies such as Indiabulls Real Estate and Orbit Corporation last week. “Every day, we are seeing one or two launches and every developer is launching projects. Last year, most of them were selling old products due to the downturn. This year, we have a seen a slew of new projects during Navratri,”said Raminder Grover, chief executive of Homebay Residential, a unit of property consultancy Jones Lang LaSalle Meghraj. Consultants say the increased activity in home sales is giving confidence to developers to launch new projects. Residential prices have gone up by 15 to 20 per cent in the past six months or so, as developers sold projects which were aggressively priced and marketed.

“The last few months were indeed good for the residential market. There is an increased activity due to good launches and better pricing by developers,’’ says Anshuman Magazine, chairman and managing director of CB Richard Ellis, South Asia. Grover says that unlike last Navratri, developers are not giving any freebies and discounts, as they were confident of selling their products without any added attraction. Magazine adds that developers are selling homes with better amenities and designs to prospective buyers. “Though developers are marketing their products aggressively, buyers have a high level of awareness on the available projects. It is certainly a buyers’ market now,’’ said Magazine.

Source : http://www.indianrealtynews.com/real-estate-developers/ncr-developers-expecting-high-sales-during-navratri.html

Accor to invest Rs 636 cr in India for 50 hotels by 2012

New Delhi, Sep 2 (PTI) European hospitality major Accor will make equity investment of Rs 636 crore in India for setting up 50 hotels over the next 2-3 years.

“We will make equity investment of USD 130 million by 2012 to have 50 hotels with 10,400 room capacity by then. This (USD 130 million) does not include investment by our (joint venture) partners for setting up the investment,” Accor Asia Pacific Chairman and Chief Operating Officer Michael Issenberg told reporters here today.

He declined to give details on the total investment and the joint venture partners in the projects. A part of this expense has already been made in five properties currently operational in India.

Accor has a JV with real estate developer Emaar MGF and another with aviation and hospitality services group Interglobe in India. It also has project-specific ventures with several companies in the country.

Source : http://www.ptinews.com/news/260961_Accor-to-invest-Rs-636-cr-in-India-for-50-hotels-by-2012

Developers build on low margins, high volumes

Does low-cost housing make economic sense? It seems to. Developers believe the loss in margins (20 per cent in affordable housing, against 50-300 per cent in case of premium housing) can be made up somewhat by the sheer volumes of sales. Rajeev Talwar, group executive director of DLF, says: “Every group has to chart out its strategy. We have decided to take on the market by pricing our products 30 per cent lower than others, even if it means less margins.”

In any case, as Rashesh Shah, chairman of brokerage firm Edelweiss points out, the days of making a killing are over. “Sales weren’t happening anyway and developers have finally realised that they would survive only if they brought prices down,” Shah says. That realisation has prompted developers to tweak their strategies and reduce apartment sizes to attract home buyers. For instance, Unitech has stopped giving modular kitchens and is laying vitrified tiles instead of expensive marbles in its affordable housing projects, apart from cutting parking and basement space. It also restricts the total floors in a building to three-four to save on construction costs.

“The average cost of our land is Rs 200 a sq ft and construction cost varies from Rs 900-1,500 a sq ft. In affordable projects, we keep construction cost to the bare minimum. We design our buildings and use materials accordingly,” says a Unitech official.

Besides, Unitech has reduced the size of its apartments to 800-1,000 sq ft, on an average, from 2,000-2500 sq ft a couple of years ago, even as the price per sq ft has come down to Rs 3,000 from Rs 4,500 a sq ft earlier.

DLF, too, is changing its housing designs in Gurgaon to squeeze in more two-bedroom units. Scores of property developers, such as Akruti City and Parsvnath Developers, use pre-fabricated slabs in their buildings, which help them save 15-20 per cent in costs against manually-laid slabs in their buildings. While others, such as Unitech, Ansal API and Omaxe, import sanitaryware and fittings from countries such as China, Malaysia and others, as these are 10-15 per cent cheaper than Indian products.

Most developers are also focusing on completing their housing projects in 30 months instead of the earlier 36 months, using advanced technology.

Tata Housing, which is building 15,000 low-cost homes in the country, is keeping construction cost to about Rs 700 a sq ft by sharing returns with the land owners, according to Managing Director Brotin Banerjee.

The company is in advanced stages of talks with the Delhi-based Raheja Developers (which owns the land) to initiate a similar low-cost project at Manesar near Gurgaon. The apartment size will range between 283 sq ft and 465 sq ft each. Plans are on the anvil to start similar projects, called Shubh Griha, in Chennai and Kolkata and, subsequently, in other Tier-I and Tier-II cities.

What also helps are the measures announced by the government — special interest rates for sub-Rs 20 lakh home loans. Public sector banks charge a maximum interest rate of 8.5 per cent for loans below Rs 5 lakh and 9.25 per cent for those between Rs 5 lakh and Rs 20 lakh. A marginal part was also played by the lower input costs of steel and cement, which has seen some softening in the last 12-18 months.

All’s not over for premium
Unitech’s GM (Corporate Planning) R Nagaraju could have been exaggerating when he said premium housing had become extinct. The fact is quite a few companies are still operating at different price-points and the real estate market has got segmented,though with a bias towards low-cost projects.

For instance, just seven days after Tata Housing announced its Shubh Griha project, group company Tata Realty announced a high-end residential project in the Chennai special economic zone. At Rs 13,000 a sq ft, the price tag for the smallest apartments would be Rs 2.6 crore and the largest Rs 3.9 crore.

The complex would have about 180-200 apartments and is getting an encouraging response. For Tata Housing, too, Shubh Griha is just one of the eight projects the company is taking up. But, going forward, the company expects low-cost housing to have a 20-25 per cent share in the total mix, while another 25-30 per cent would be accounted by mid-income homes, with high-end products taking up the balance.

Abhishek Lodha, director of the Lodha group, says the company would build premium housing for margins, and mid-income housing for volumes.

The company has launched five mid-income housing projects in Mumbai and an equal number of high-end projects in South Central Mumbai. The Lodha Bellissimo in Mumbai’s Mahalaxmi area, for example, is offering super-luxury apartments spread across 48 floors.

Or, take Emaar MGF, for example. The company recently launched ‘The Terraces’ with an aim to cater to the growing mid-market segment. Phase-I of the project is expected to be completed by 2010, with units priced at Rs 36 lakh onwards. It would house three independent dwelling units, with the ground floor priced at Rs 46 lakh, first floor at Rs 38 lakh and the second floor at Rs 36 lakh — not exactly low-cost, but affordable for the mid-income population. The company, however, is also operating at a much higher price-point too — Commonwealth Village, for example, despite the temporary hiccups.

Many also say it’s just a matter of time before the premium housing market comes alive. Aditi Vijayakar, executive director (residential), Cushman & Wakefield, says: “In the future, as the demand for luxury projects gains momentum, big players will once again change their portfolio to high-end apartments.”

Then there are, of course, recession-proof areas, like Mumbai’s Bandra or Santa Cruz. Prices continue to rule high at Rs 20,000-40,000 a sq ft, mainly because of the demand-supply mismatch and the aspirational value. Real estate developers all over the country must be hoping the tag extends to many other areas as well.

Source : http://www.business-standard.com/india/news/developers-buildlow-margins-high-volumes/360489/

Emaar MGF launches its first hotel in Jaipur

NEW DELHI: Real estate major Emaar MGF Thursday unveiled its first hotel project in India, Fortune Select Metropolitan, to be managed by an ITC  subsidiary.

Located in the heart of Jaipur, Fortune Select has 90 rooms that include six suites. The property also has a sun deck, rooftop swimming pool, spa and health club.

“Jaipur offers tremendous potential to the business and tourism industry and the opening of the Fortune Select Metropolitan is a key strategic move in expanding our presence here,said Emaar MGF chief executive Sanjiv Rai.

Added Pawan Verma, senior executive vice-president of ITC’s hotels division: “It is our 28th hotel and the second in Jaipur.”

The new property will be managed by ITC subsidiary Fortune Park Hotels.

Source : http://economictimes.indiatimes.com/News/News-By-Industry/Services/Hotels–Restaurants/Emaar-MGF-launches-its-first-hotel-in-Jaipur–/articleshow/4561203.cms

Now, DLF homes for the ‘aam aadmi’

An economic recession sometimes has its advantages like pushing luxury realty developers to make houses for the middle class.

Well, DLF, India’s largest real estate company is looking to set up a residential complex in West Delhi with a very aggressive pricing.

The complex will be set up in the Swatantra Bharat Mills compound, a property that DLF bought from DCM Shriram in 2007 for Rs 1,675 crore. The developer plans to attach a competitive price tag of Rs 7,000 per square feet—a price that may spur a price war in the capital as a minimum area for a two-bedroom hall kitchen is about 1,200 square feet.

Anuj Puri, MD of Jones Lang LaSalle Meghraj, said, “The country’s largest developer launching a project in this kind of a market will definitely help revive sentiments. The fact that the project is being launched at quite an affordable price will attract lot of consumer interest.”

This is expected to be compared with Emaar MGF’s Commonwealth Games Village project, which has priced flats at nearly double than that of DLF’s at Rs 12,750 a square feet.

However, real estate experts say that an aggressive pricing by a leading developer might force other realtors to reduce rates.

It looks like finally DLF is targeting middle class people, who always save and hardly spend. But survival in a depressed market, where access to funds is getting increasingly difficult, is also another reason for big developers to lower prices and construct affordable houses.

Source : http://profit.ndtv.com/2009/03/18223523/Now-DLF-homes-for-the-aam-aa.html

Property in hill stations on a uphill

At a time when sales in most real estate markets are seeing a downward trend, there is one segment that could start moving uphill, literally.

In a bid to escape the stress and hectic schedules, many feel that homes in hill stations and foothills such as Rishikesh, Mussoorie, Almora, Shimla, Ooty, Kodaikanal, Haridwar and Dehradun will be an ideal buy in the present scenario. Desiring a break from slowdown blues is, in fact, making many of these locations a better proposition.

The only thing, however, that a buyer needs to keep in mind is to check if buying property is legal in these locations or not. In some Indian states, non-locals are not permitted to buy land.

In Jammu & Kashmir, for instance, there are laws prohibiting affluent outsiders from buying land so that the interests of local farmers are protected.

This law is applicable to all those who have not been residing in the state for at least 10 years before May 14, 1954. In Sikkim, non-locals cannot purchase land except to establish industrial units.

In Arunachal Pradesh, sale of land or property to non-locals, more specifically non-tribals, is not allowed. There were also restrictions on purchase by outsiders in Himachal Pradesh under the Himachal Tenancy Land Reform Act (1972).

Many of these laws, however, are being bypassed by outside investors entering into partnership deals with locals. Today, Himachal Pradesh Urban Development Authority (HIMUDA) has granted permission to builders to develop land and licenses are now being issued.

There are a lot of reasons why buying in hill stations is gaining momentum these days. Modern day stress, hectic schedules and a desire to lead a peaceful life makes these hill locations a preferred choice for many.

Buyers also love the spaciousness, greenery and natural beauty which homes in these locations offer.

Says Raminder Grover, CEO of Homebay Residential, Jones Lang LaSalle Meghraj (JLLM), “Despite the negative economic dynamics prevalent today, the market for residences in hill towns is still emerging in India. This buyer segment is usually in the age bracket of 35-45 years. These buyers purchase such homes either for investment purposes or as weekend getaways.”

However, as compared to the West, the trend of buying in hill towns is yet to catch on in India.

“Buyers of holiday homes at locations in the West tend to spend their entire summers at their vacation homes and buy them accordingly in terms of scale and numbers. The concept is an emerging one this side of the globe, but the driving motives and scale are very different,” adds Grover.

Many feel the trend of buying a home away from the city or a weekend home is increasingly becoming predominant in the country, much on the lines of the West.

Says Shravan Gupta, vice-chairman of Emaar MGF, “Having widespread appeal in the West, the idea is quickly catching on here, with various individuals opting for the alternate house on the outskirts of their cities, in order to get away from the hustle and bustle as often as possible, in the relaxed atmosphere of one’s own home in these areas. These homes are created either in the form of cottages or built-up apartments, with the view being an important criterion.”

Experts say those who buy homes in hill stations do so in locations close to accessible areas with convivial surroundings.

For instance, in the case of Mumbai and Pune, the locations of choice are Lonavala, Khandala, Baneshwar and Alibagh. Towards the north, it is mainly non-restricted areas around Dehradun, Mussoorie and Nainital which are popular.

In the east, areas around Darjeeling are popular while in the south, destinations such as Ooty and Kodaikanal are quite a hit with buyers.

Developers are very positive about the opportunities in these markets and agree that properties here could become attractive. Omaxe, for instance, is constructing Park Wood township which will have more than 2,000 flats in Baddi.

Says Rohtas Goel, CMD, Omaxe Group, “The real estate sector in Punjab and Himachal has great demand and Shimla’s industrial areas such as Baddi are close to Chandigarh and that is the reason for the growth in Himachal Pradesh. We are making one of the biggest townships in the state and are confident of its success.”

Needless to say these hill stations are more popular as vacation homes. And in that sense they are still seeing a steady clientele.

Says Rajeev Rai, vice-president (corporate) of Assotech, “Homes perched atop a hill always buck the slowdown trend as they offer luxury of a different kind. Single family homes are preferred where the developer enters into an agreement with the buyer to maintain his property throughout the year. Some of the developers are also offering a model in which the buyer can use his property for a part of the year and during rest of the year, his property will be rented out to users thereby guaranteeing a return on buyer’s investment.”

This developer has a project located in the industrial hub of Rudrapur amidst natural beauty, which is witnessing a good response from buyers.

What also acts as an incentive is the prices in these locations which are more lucrative than that in new residential property. “The added attraction is the pricing of such new built residential property, which is being offered at quite attractive prices compared to new residential property available in suburbs in the bigger cities. Such developments are conspicuous in towns which have witnessed a fair amount of interest from buyers in bigger cities, looking at a holiday home for religious or weekend getaways,” says Kamal Taneja, MD of TDI Developers.

Well, here then is an opportunity to buy your own home in the hills. You could feel the serenity of nature all around you — and beat the slowdown blues.

Source : http://economictimes.indiatimes.com/Features/The-Sunday-ET/Property-in-hill-stations-on-a-uphill/articleshow/4265741.cms

Singapore co to invest in Formulae 1 hotels in India

New Delhi, March 4 The Government has allowed AAPC Singapore Pte Ltd to invest Rs 365.78 crore in an Indian company to construct, develop, own and manage low-budget Formulae 1 hotels here. AAPC is a hotel management company and Formulae 1 is an Accor brand.

Globally, Formulae 1 hotels are recognised as the international benchmark for budget hotels and offer modern functional rooms with basic comforts at affordable prices.

The Foreign Investment Promotion Board on Wednesday allowed AAPC Singapore to invest up to 100 per cent in an Indian company by subscribing to equity and fully convertible debentures to construct, develop, own and manage Formulae 1 hotels.

Earlier MoU

While no details were available of the project cleared on Wednesday, in 2006, Emaar MGF and Accor announced the formation of a joint venture, Budget Hotels India Pvt Ltd, to bring Formulae 1 brand to the country.

In 2006, the new venture planned to invest $300 million over the next decade. Starting with the major metros, the joint venture company had planned to develop 50 hotels during the first five years of operations, with the remaining 50 to be developed in the second phase. The total development will add 10,000 hotel rooms, officials said. Emaar MGF is a partnership between global property developer Emaar Properties, the Dubai-based public joint venture stock company, and MGF Developments.

Source : http://www.thehindubusinessline.com/2009/03/05/stories/2009030552340100.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

Leading Developers Target Patna

As an endeavor to provide professional real estate solutions to its clients in Patna, MoneyBag, the strategic business unit of InvestCare, in association with Century 21, India launched ‘Real Estate Enabling Services (REES)’ on 17th January 2009 at Chanakya Hotel. In association with Century 21 India (Part of Worlds largest Real Estate Sales Organization) MoneyBag brings best of projects and structured deals to the doorsteps of Patna where the services are introduced. Now individuals seeking investment option across India will have a single window service to meet their real estate requirements from identification, diligence, financing to post sales documentation backed by professional team, unbiased opinion and constant update on investment through the local office of MoneyBag/Century 21 India.

Leading real estate developers like DLF, Emaar MGF, Assotech, Mapsko and Spire Edge work closely with this association. MoneyBag and Century 21 India will equip investors to expand their commercial and residential real estate portfolio, while ensuring trust and transparency in the transaction. Given the unstructured market scenario, lack of benchmark process and almost non existent number of organized players at the local level, the partnership seeks to empower citizens with access to opportunities in emerging metro markets. Besides opening up the buyer-seller platform, the services aim at reducing resource wastage of time and money by providing a qualified professional to assist you in all your Real Estate needs. A touch point for Developers and customer, the services will close the gap between global players and the local demographics of the city.

The association will act as a facilitator to client needs varying from buying and selling of residential and commercial properties, lease in and out of residential and commercial premises and timely update on property appreciation and scope of development. The bouquets of projects are designed to suit a wide range of investors starting from a minimum ticket size of Rs 25 lakh.

Source : http://www.indianrealtynews.com/real-estate-india/leading-developers-target-patna.html

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.

Slowdown? Home loans grow 20-25%

NEW DELHI: Contrary to popular perceptions that the Indian housing market is in the doldrums, the home loan market is exhibiting surprisingly Home loan: Should you prepay? positive trends.

SundayET spoke to a cross-section of bankers and came out with the conclusion that the home loan segment is quite robust. During the last three months, the segment has witnessed an average growth of 20-25%, largely due to small-ticket buying.

And with real estate developers planning to announce major discounts in the coming days, housing finance companies are getting ready to meet an increased demand as they expect more first-time buyers to come to the market. Bankers say the demand never evaporated from the market, it just changed hands from speculators to genuine home buyers.

Says Uday Sareen, country head, retail banking, ING Vysya Bank: “It’s all about perception. We have seen a growth of over 40% in the home loan segment in the recent quarter against the year-ago period. This shows that genuine buyers still exist in the market.”

“With developers now offering good deals, we expect the demand to further go up in the coming days.” The bank’s average loan ticket size is Rs 20-25 lakh.

LIC Housing Finance is not far behind. The housing finance company saw 33% growth in October, year-on-year, in comparison to 29% growth last October, year-on-year. “It shows that the end-user is still persistant. In fact, the average loan size has also grown from Rs 10.6 lakh to Rs 13 lakh. We are very much on track to achieve our growth target of 30%. We have witnessed maximum growth in Chennai and Hyderabad among metros,” he said.

Bankers believe that the interest rate cut alone can not prop up demand in the Indian housing market, unless it makes sense for all the stakeholders, customer, builder, and financier.

“It’s a tall order. It’s not going to help in the long-term. Interest rate. property price and income improvement create demand for housing. Reducing interest rate alone can’t solve the problem, there has to be a genuine cut by realty players in property prices to prop up the demand,” feels Mr Nair.

Agrees Kapil Wadhawan, vice chairman & managing director of Dewan Housing Finance. “There is a genuine need for a rate cut,” he said. The company has registered a growth of around 17% over the six month period, and the average loan size in their case has been Rs 6 lakh. “We have set ourselves a realistic target of 20% growth this financial year,” he said.

Shravan Gupta, executive vice-chairman & MD, Emaar-MGF believes that today’s market is experiencing greater end-user participation. “It is a good time to buy property for your own use. The consumer needs to make prudent decisions based on his value perception of a product from a developer with a proven track record that seamlessly addresses his requirements. Only price should not be the determining factor as it clearly needs to be reasonable and feasible enough for the developer to execute his project,” he said.

Mr Nair has an optimistic view on the overall macro environment. “The temporary perception of liquidity shortage should disappear soon. The fact is that genuine user is still buying, only his expectations have reduced in line with affordability,” he believes

Source : Economictimes

Realty blues hit foreign hotel majors’ India plans

MUMBAI: International hotel chains like Hilton, Accor, Carlson and Starwood are concerned about the viability of their India plans. Many of these
hotel chains have tied up with real estate developers like DLF, Emaar MGF, Unitech and Parsvanath to set up five-star hotels. However, fund-starved developers, who are trying to raise money for their core activities like residential and commercial property projects, are understood to have put the hotel ventures on the back burner. A drop in occupancy and room rates, inflow of business travellers and tourists to India have also raised concerns on the viability of these projects, industry sources say.

“Out of a total of 1.14 lakh proposed room supply, only 58% or about 66,000 rooms, will actually be developed over the next few years. So, we feel many announced projects may not take off as planned,” said Manav Thadani, MD, HVS International, a hospitality consulting firm.

“Now, debt raising is a difficult process,” says Homi Aibara of Aibara Consultants. Lemon Tree Hotels CMD Petu Keswani said: “Only developer-led hotel projects will face a problem as their priorities are different.” However, when contacted by ET, real estate developers insisted that projects were on track.

According to the latest HVS report, cities like Bangalore, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune, where massive new room capacities are planned with real estate operators, are seeing trouble. In Bangalore not more than 60% of the new capacity is likely to come up. The same goes with Chennai, Delhi, Hyderabad, Mumbai and Pune.

However, cities like Agra, Hyderabad, Jaipur and Mumbai saw a negative growth in room supply in 2007-08 as compared to 2006-07.

The last few months have seen a demand-supply mismatch in tier II cities like Bangalore, Pune, Hyderabad and Chennai. Room rates too have fallen steeply in these markets, making it unviable for real estate developers to go ahead with the planned hotel projects. This is happening at a time when there is a severe shortage of branded hotel rooms.

Unitech MD Sanjay Chandra said: “We have management tie-up with the Marriott Group for three projects, and one of them will be commissioned in January. Other two projects are very much on.” Recent media reports had suggested that DLF’s hotel JV with Hilton had hit a rough patch. However, DLF clarified to the stock exchanges that “DLF’s JV with Hilton is on a firm footing and all plans for the development of hotels stand as originally envisaged”. However, industry sources said DLF has put the hotel project on the back burner for at least a year.

An Emaar-MGF spokesperson said there were no change in the hotel plans of the real estate firm and its tie-up with Accor. Says Uttam Dave, president and CEO, Interglobe Hotels and head of development, Accor Hotels India (Accor has tied up with Emaar MGF to launch Formule 1, a budget hotel): “Most of our projects are on track, and so far at least none of our projects have been either cancelled or put on hold, and this includes both managed and investment projects. There have been some delays in the actual development and commissioning of projects, and this has been on account of obtaining development approvals from municipal authorities and not due to real estate values.”

Source : Economictimes.com

‘Realty in india still underpriced’

The heat of the US meltdown has not spared Indian shores and the booming realty sector too is feeling its impact. But tough times makes you stronger
. “The present turbulence will make the real estate grow strong and it will emerge stronger after this phase,” said Shravan Gupta, executive vice-chairman & MD of Emaar MGF Land Private.

The importance to the real estate sector is a little underrated in terms of regulations and policy. Mr Gupta said it is an important sector for the growth of the economy and should be given more importance. He felt that considering the present scenario, sentiments were overpowering people’s thoughts rather than actual ground conditions. The effect of the global financial condition is certainly felt in India but according to him it’s not as bad as it is portrayed.

“Demand for homes does exist today. It’s just that the buyer is in a state of uncertainty looking into the world around him,” said Mr Gupta. The major factor which has hurt the sector is the high lending interest rates that drive away the buyers and the sector is in a stage of hibernation but no real slowdown is seen, felt Mr Gupta.

He added that prices in some cities may have gone up on the basis of lack of supply but still in India real estate is under-priced when compared to the rest of world. A collective force of the real estate developers should be presented before the government to implement certain uniform policies and regulations, which can benefit both the buyer and the developer. “As a developer we want to be a strong stakeholder in the growing economy of India,” said Mr Gupta

Source : Economictimes

BUY NOW AND GET A PARKING LOT FREE

Traditionally, Indians prefer to buy or move in to a new place either on an auspicious day or during a festive season. Developers across the country are aware of this cultural pattern of ‘date the deal’ and so, they try to woo home seekers during various festivities with lucrative offers including discounts, freebie, value additions, waivers, gifts etc. However, due to a slow down in the real estate market since January 2008 and buyers adapting to “wait and watch” approach, the developers are now worried and are crossing their fingers with optimism to see the same magic of festive-time business even this year. For the first time, festivities discount this year has touched a high of 15 per cent —officially.

The timing
Usually buyers in north India including Delhi, Chandigarh etc strike a deal during either Baisakhi or Dussehara and Diwali, while people in the western parts of India including metropolitan cities like Mumbai, Pune, Ahmedabad, Baroda, Nasik etc would target the period from Gudi Padwa (new year of Maharashtrians) to Akshaya Trutiya (another auspicious day and the beginning of a new year for Gujaratis). South Indian cities like Bengaluru, Chennai, Hyderabad, Kochi etc would either prefer Onam or Vijaya Dashami (Dussehara) for a new beginning at a new place. Towards the east, mainly in Kolkata,people celebrate their Gruha Pravesh mainly during Durga Pooja and Diwali.

Every year most incentives are offered to attract the customers during Navaratri-Dussehara and Diwali as that is the most auspicious and widely celebrated festival across the country. In fact, most developers also inaugurate their new projects or even time the possession during this period. However, this year is a testing time for the industry.

In the tier II and III cities the situation seems to be challenging for most developers this year. Mathura based Shri Group, MD, Sudeep Aggarwal, says, “The rates in these cities are lower than the metros. And there is no room for further discounts. Small developers usually offer discounts when the buyer is paying the down payment or the developer has launched a new project. Such projects have inaugural offer. In such cases, the percentage of discount is in the range of five per cent to 7.5 per cent.”

The current hitch
Apart from certain builders pretending `all is well’, most of them have agreed that the real estate market is experiencing a slow-down. Despite high demand, transactions are not happening. Liquidity crunch has engulfed the sector and cash starved developers are trying to come out of the situation at the earliest without losing their good will. Instead of launching new projects, most are focusing on completing the unfinished ones. In order to raise fast money to meet their commitments to banks, financiers, investors and buyers, they are looking at aggressive sales. But most home buyers are waiting for the property prices to fall. They are expecting corrections.

It is a catch-22 situation. Many are not officially reducing the per sq ft price as they may not be able afford it. But even those who can afford it may still not do it as it will send a wrong signal for his reputation and for the state of property market. The stigma attached to the property price reduction in the Indian market coupled with an on going slow-down may result into stagnancy. Considering that the sentiment may worsen further, choking the cash flow, he may opt for discounts to push sales in the current sluggish market. Most developers are now offering the reduced price under the disguise of incentives. Those shying away from accepting the correction are labeling it as ‘Festival-discount’. Those who are not yet open to this idea are giving away the discounts to the customers on the negotiating table.

However, most discounts have strings attached. Firstly, all incentives are not offered together. Secondly, many of them have a time limit. Another condition is that the offers are not for all the projects but for a few selected ones. It is usually for those projects which are either slow moving or at the very primary level when developer would need funds to carry on further. Many a time the direct reduction in price is applicable only for those who are going for a full down payment. Sometimes there are other limitations and discretionary conditions as well.

On the home loan front
Despite being an inevitable part of most property purchased, lending statistics have declined as banks are also hit by the slow down. High rate of interest has added to low turn out at the home loan counters. Now, a few banks have also joined the incentive band wagon. Many nationalised banks are charging 1 per cent less interest during the period of festivities and for selected projects only. Many are waiving off the 1 per cent processing fees as well. Some banks such as State Bank of India (SBI) have tied up with some developers to offer ‘Interest Subvention’. This means the buyer will be paying 2 to 2.5 per cent less interest on the loan taken during the first two or three years during which the construction is going on. SBI has already announced interest rate of 11 per cent and further declared 0.25 per cent reduction for selected projects for stipulated period of festivals.

On offer
In the Delhi-NCR region, many developers have started to consider offering such discounts. Although Delhi based developers starting to gather under the banner of property shows like the ones organised by Services (India) Pvt Ltd, many are yet to start the ‘festive discount’ scheme. Apart from real estate major DLF, nearly 25 small and big developers are presenting their projects and offering discounts at the show. The show will last till October 12.

Even Omaxe is organising a Home Loan Mela at Omaxe Palm Green, Sector MU, Greater Noida. The show will last till October 12. Rohtas Goel, managing director, Omaxe says, “We are inviting dealers, direct customers and prospective buyers to the event. Many bankers would be present for on-the-spot approval of loans to the eligible customers.” He further added, “Looking at the overwhelming demand for all our projects, we are also giving gifts to our customers for their association with us. Looking at the present scenario where demand has shifted from investors to end-users, who look for freebie and discounts while making purchase decisions, we have also announced schemes for this festive season to perk up sales.”

Developers like Pasrvnath, Emaar MGF have not yet decided whether they will offer any discounts. An industry expert says, “Discounts are usually offered in projects which are not selling. But this is not an indicator of a negative response for the project. Developers usually bring down rates in their overpriced projects to an affordable level.”

ING Vysya Bank, one of India’s leading private sector banks is also organising a two day, Property Mart on October 11-12 at Pragati Maidan in Delhi. The Property Mart will showcase the new and upcoming projects around the Capital. The properties on sale would range from Rs 25 lakh to Rs 2.5 crore.

However, in Mumbai and around, many developers have declared various incentives. Sunil Mantri Realty Ltd is offering ‘No Stamp Duty’ for its project Mantri Park at Goregaon (east), Ravi Group is offering assured tax free benefits worth up to Rs 15 lakh if one books a flat in any of its Mira Road projects. Lok Group is planning a rebate for their up coming project while the Runwal group is planning to offer customisation of the flat as per the buyer’s taste.

The second home buyers in Mumbai are not lagging. The benefits include price reduction by Rs 400 per sq.ft, free accessories worth Rs 2.5 lakh, free club membership and surprise gifts on spot booking.

The other side
It is interesting that many big players such as Evershine, Raheja, Hiranandani, Sheth Shah etc developers are missing on the incentive-caravan. According to Niranjan Hiranandani, MD, Hiranandani Constructions, “Offers don’t get you more bookings or help you overcome a sluggish market as buyers don’t change their decision due to discounts. In fact, in Mumbai and Pune, a good project will need no special offer to push the sell. Any decent project will sell anyway.”

However, there are developers who wish to sell off their product but are not in the list just because they can not afford to give any discount as they have purchased the property at a very high price during the boom.

The flip side
There are chances that the developer giving the discount is not disclosing the earlier rate and so, the buyer may pay the prevailing market rate or even more after the so called discount. Many a time hidden costs are not revealed up front and buyer may have to pay more than what he thinks he has saved on the discount. There are so many conditions applied that at some point of time one may feel the offer is not fair deal. The main limitation of these offers is that they are only for specific projects and for too a small period. One may feel pushed to take a call in a very short span of time regarding life long issue.

The last mile
Despite limitations and flip side, slump in the real estate market is always a good time to buy a house if one is ready with criteria and fund arrangement. The buyer must study the track record of the developer before falling for the discounts. Make judicious decision and bargain well. The good product with discount, will sell fast. In the current situation, one should try to buy a ready possession flat with discount instead of under construction as one can not be sure of future.

According to Pranay Vakil, chairman, Knight Frank, India, about 70 per cent of deals are struck during the period of October to March. In 2007, the real estate market witnessed around 100 per cent rise in the sales and enquires as compared to the previous year. The developers are expecting at least 20 to 30 per cent rise in the sales and enquires this year but according to Vakil, the rise this year would be marginal despite discounts.

Source : Expressestates.in

Overbuilding promises a kick in the gut for realtors

Demand-supply mismatch in residential, commercial developments intensifies.

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

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

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

They predict high vacancy rates.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Rising land prices hit property developers

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

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

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

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

Dehradun Is Emerging As A Potential Real Estate Destination

Dehradun is emerging as an attractive investment option for realty developers in India. Considering the scenic locales and the various institutes and schools based in and around the area, many builders are exploring their options and setting up projects in commercial as well as residential segments. The state capital has attracted developers from all over the country. Apart from Parsvnath and GTM Builders, other prominent developers operating in the region are Emaar-MGF, which has signed an agreement with the Uttarakhand government to soon build and run a five-star hotel and a convention centre in Dehradun. The Rs 2 billion (US $49 million) new hotel and convention centre will be part of an integrated facility comprising a 10-acre retail and entertainment space. Then there is Prabhatam Buildwell, which is also planning various mega township projects in cities like Bangalore, Kochi, Indore, Bhopal, Ranchi and Dhanbad apart from a project slated in Dehradun as well.

Kolkata loses charm for real estate firms

Realty firms seem to have lost their appetite for properties in Kolkata, where developers such as Emaar MGF Land Ltd and DLF Ltd were fighting to secure plots for building luxury hotels. For the first time, a tender to lease out a prime 10-acre plot on the western fringes of the city is being scrapped because there was only one bidder. The Kolkata Metropolitan Development Authority (KMDA) had invited bids for two more properties, but the response to each was poor. KMDA officials had claimed that developers such as Emaar MGF and DLF had enquired about the properties, but none of them bid even for the 10-acre plot, which was to be leased for building a five-star hotel. Less than a year ago, Life Insurance Corporation of India (LIC) had set a new benchmark by buying a five-acre property on the eastern fringes of Kolkata for Rs276.20 crore, or Rs55.24 crore an acre. LIC has since announced it would build 50-storey towers on the plot.A KMDA official, who didn’t want to be named, confirmed that the tender for the 10-acre plot would be cancelled, but he wasn’t sure what would be done with the bids for the other two plots— one measuring five acres and the other 2.7 acres. “The bids aren’t attractive, but we haven’t decided yet,” he added.

Emaar MGF to float mega project in north Chennai

Emaar MGF, one of the leading builders in India, is planning to set up a mega housing project at the northern part of Chennai. The project, to be called as Esplanade, is the first such major project to be developed by any leading developer in the northern part of the city and also claimed to the largest housing project to be developed within the jurisdiction of Chennai Metropolitan Development Authority (CMDA).

Spread over a stretch of 14 acres of land at Tondiarpet, the project will consist of 536 apartments with an average size of 1,500 sq ft each. The project will have three different types of apartments and will be set up in 24 towers.

The apartments will have an integrated security systems, centralised gas pipe connections, 1,000 MV generator back up power for each apartment, sewage treatment and reverse osmosis plants.

According to William Rattazzi, chief executive officer, ‘Esplanade’ is one of the first redevelopment projects in Chennai. While most of the old projects and the new developments are focused towards southern Chennai and Old Mahabalipuram Road (now Rajiv Gandhi Salai), Esplanade leads the way in providing customers best in class apartments.

When asked to comment on the project cost, he declined to divulge the same. However, he said that ‘Esplanade’is one of our first few projects planned for the southern region and hence it assumes significance for the company. The project will be partly funded by internal accruals and the remaining will be generated through sale of apartments.

The per sq ft cost has been fixed at Rs 3,400 and the project has been targeted at businessmen as well as middle cass people, he said. This project will be a reflection of the company’s commitment to bring a residential development that integrates modern design, amenities and facilities, he added.

Emaar to ramp up India investments

Emaar Properties, the largest real estate company in the Middle East, is set to inject $150 million for a 20-25 percent stake each in three real estate developments in India. Emaar and MGF Developments of India set up a joint venture in 2005 called Emaar MGF, which currently accounts for India’s largest foreign direct investment in real estate through projects with a combined development value of US$1bn. Emaar is now considering establishing three separate special purpose vehicles which will then develop two retail properties and one office property in Gurgaon and Mohali.