Bangalore realty sector fails to benefit from low-cost housing

Bangalore: Bangalore’s real estate market continues to groan under the burden of unsold property and sluggish demand, even as a revival in property sales in other cities has encouraged developers to launch a slew of projects.

Nearly one in every five homes scheduled for completion by the end of this year remains unsold, according to a report released last week by DTZ International Property Advisers Pvt. Ltd and Indiareit Fund Advisors Pvt. Ltd, a private equity fund. For projects scheduled for possession in 2011, this figure jumps to 56%.

DLF Ltd, Unitech Ltd and Housing Development and Infrastructure Ltd have started launching projects in Mumbai and New Delhi, particularly in the “affordable category” that has residences priced under Rs30 lakh.

The recovery may take longer in Bangalore, the country’s third largest realty market, where big technology firms such as Infosys Technologies Ltd and Wipro Ltd are headquartered.

“Bangalore has continued to witness a correcting trend as the investor community hasn’t quite revived activity yet,” said Aditi Vijaykar, executive director, residential services, at property advisory Cushman and Wakefield.

While the growth in Mumbai and New Delhi is driven by multiple sectors, growth in Bangalore is largely dependent on the technology sector, she pointed out.

Interestingly, lower prices, to the tune of 25-30%, hasn’t pushed up demand in the city, both developers and analysts said. For instance, Whitefield, a suburb in east Bangalore and close to a prominent information technology (IT) hub, saw sluggish sales even after prices corrected by nearly 30%.

“The affordable concept didn’t work as much in Bangalore as it did in Delhi or on Mumbai’s outskirts,” said Prakash Gurbaxani, managing director of QVC Realty Ltd, a property developer. “Prices in Bangalore are lower but home sales and office sector take a direct hit when IT firms stop expanding and the sentiment is negative.”

Unlike Bangalore, where prices are still falling, realtors in Mumbai, New Delhi and Gurgaon have already raised prices between 5% and 10% on the back of rising sales.

Starting July, Lodha Group increased prices by 10% and Unitech by a flat 2% after the latter sold 4 million sq. ft in three months and Lodha’s mid-income flats got good customer response.

“Restricted supply has boosted demand in Mumbai in the past months, price checks and mid-income projects by big developers have worked for Delhi,” said Kumar Gera, chairman of Confederation of Real Estate Developer’s Association of India, an industry lobby. “Bangalore will see a revival only by 2010.”

Bangalore also has a problem of over supply, which doesn’t bother metros such as Mumbai and Delhi. According to the Indiareit-DTZ report, there are around 51,470 residential units across 193 projects coming up in east and south Bangalore, where 66% of under-construction projects are located, which would take the total stock to 122,431 homes by 2011.

Besides a few low-cost projects, larger developers in Bangalore such as Sobha Developers Ltd and Puravankara Projects Ltd have stayed away from fresh launches and are focusing on selling inventory.

After a hiatus of 18 months, Sobha is only now planning to launch a residential project in the next two months, and Puravankara doesn’t have any Bangalore launch in the pipeline after launching its mid-income project in Chennai.

Growth corridors such as areas near the new international airport also haven’t really turned out as expected. Although most developers have picked up land parcels in the area, few projects have been launched.

Tangible effects of the slowdown in construction activity would be visible in 2010-11, the report said.

source:http://www.livemint.com/2009/11/11222710/Bangalore-realty-sector-fails.html?h=B

Builders revive stalled commercial projects on early signs of recovery

Bangalore: Realty firms, encouraged by early signs of a revival in the market, are dusting off shelved or deferred projects and testing their financial viability to gauge which of these can be resurrected.

Solid foundation: A commercial complex under construction at DLF Cybercity, Gurgaon. Developers who had shifted focus from commercial projects to residential sales during the slowdown are restarting them. Rajkumar / Mint

DLF Ltd and Unitech Ltd, India’s top two developers by market value, which had suspended most of their commercial projects earlier this year, said they are in the process of redeveloping them because of a return in demand.

Unitech, which is more upbeat about the potential of commercial development, said on Monday that it has started developing many projects which had been suspended before. DLF, however, plans to remain cautious and wants to launch only in selective markets such as New Delhi and Hyderabad that it thinks have revived faster than others, a senior DLF official said on condition of anonymity.

Large developers such as Housing Development and Infrastructure Ltd (HDIL), Orbit Corp. Ltd, Ozonegroup and Prestige Estates Projects Pvt. Ltd are also launching or firming up plans to build offices and shopping malls.

“This is a good time because most of us have repaired balance sheets and can afford to start construction and can hold on if needed,” said Hari Pandey, vice-president of finance and investor relations at HDIL. “We are also observing a rise in interest from healthcare, financial services and IT (information technology) companies.”

HDIL, the country’s third largest developer by market value, in September and October launched 3.5 million sq. ft of commercial and retail development projects in two Mumbai suburbs that were initially scheduled for a 2010 launch. HDIL’s capital outlay for these projects is Rs600-700 crore over the next four years.

Improved cash flows from sales and a rise in the so-called transfer of development rights (TDR) rates, too, propelled the company’s decision to start building these projects. Slum TDR is a tradable paper issued by state governments in exchange for free development of slums by builders. They, in turn, use the paper to develop other sites.

Analysts, however, remain sceptical and say the commercial and retail segments, unlike residential housing, may be far from a turnaround. Real estate consultancy Cushman and Wakefield said in a 27 October report that the estimated absorption of office space in the first three quarters of 2009 was 4 million sq. ft and is expected to be 5 million sq. ft for the entire year—a 50% drop from the 10.36 million sq. ft sold in 2008.

Developers had shifted their focus from commercial, retail and hospitality projects to residential sales during the slowdown. DLF and Unitech led the way, saying they would concentrate on mid-income homes, and suspended other projects. While a Unitech official said on condition of anonymity that the company has changed its stand and gotten back to commercial development, DLF is also developing about 2.5-3 million sq. ft of commercial space.

Overall, DLF is trying to clean up whatever commercial space was launched by beginning construction as well as delivering what was promised, said a DLF official, who also did not want to be identified.

“The revival of the commercial sector will be a slow process, and the initial trends emerging after the lull include the gradual return of demand from non-IT companies as well as from investors,” said Anshuman Magazine, managing director at property advisory CB Richard Ellis.

Bangalore-based Ozonegroup is back at the drawing board, deliberating the format of its Urbana project—a 162-acre sprawl in Bangalore. The company, which had earlier considered building an IT special economic zone (SEZ) here, may instead build a large IT park with retail spaces.

Similarly, Orbit, after turning its premium commercial projects into residential formats, plans to launch two commercial projects in the coming months in the Bandra-Kurla Complex and Andheri, both Mumbai suburbs.

“The launches are in anticipation of demand picking up as companies begin to expand again,” said Pujit Aggarwal, managing director of Orbit.

India’s retail property market has recorded the highest correction in the world, according to a 22 September report by Cushman and Wakefield. The biggest fall in rentals globally was in Colaba Causeway, a high street in Mumbai, where rentals fell by 63.5%.

In the past couple of months, many mall developers have restarted projects they had given up on.

A Bangalore-based developer, requesting anonymity, said he is redesigning a 2 million sq. ft mall off Bellary Road in north Bangalore, which he had shelved late last year. “We had even dissolved our entire retail team but now we are again at it, though we have to rethink our mix of retailers, etc.,” he said.

From the complete silence that reigned in the retail sector in the past two quarters, sign-ups have started though retailers are more demanding this time, said two retail analysts.

“The current set of mall developers are long-term players and are more cautious because retailers want to see that construction has begun, unlike earlier,” said Susil Dungarwal, founder of Beyond Squarefeet Advisory Pvt. Ltd, a mall advisory.

Retail investors, too, are hopeful of seeing more movement in an otherwise dull sector. Ivanhoe Cambridge Investment Advisory (India) Pvt. Ltd, a Canadian retail-focused fund, is close to signing a joint venture with a leading developer, almost a year-and-a-half after it announced its India plans.

“We see India as a long-term strategy, and the recent economic downturn has not impacted our interest in investing in quality shopping centre projects with competent local partners,” said Phil McArthur, senior vice-president, India, Ivanhoe Cambridge.

Source:http://www.livemint.com/2009/11/02214640/Builders-revive-stalled-commer.html

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

Property prices could get costlier this Diwali

If you are a homebuyer looking for some hefty discounts to come your way this festive season, you are in for some bad news. Real estate companies across the country are all set to increase prices this season in a bid to improve investor sentiment. CNBC-TV18’s Priyanka Ghosh reports.

Traditionally, the Diwali season has great offers for homebuyers. Developers shell out free parking, price-offs and in some cases even a Mercedes Benz to kick in bumper sales. But such offers may be hard to come by this time around. Analysts rule out a further price reduction as prices have already corrected by 30-35% since last Diwali. In fact, a price increase seems imminent.

Says Anuj Puri, Country Head of Jones Lang Lasalle Meghraj, “If the schemes have done well, you’re going to see some price increase. I think where the developers are coming in, they want to provide confidence to the buyer who had bought may be three-four months ago to say: look, when you bought it, it was at x price but today it is 5-7% higher.”

In the past few months, the real estate sector has seen a sharp price increase led by mumbai and the NCR market. An IIFL report says Mumbai has seen a price recovery by 25-40% from the bottom of early 2009. Prices in the NCR market has revived by 15-20% from March-April levels. Take a look at a few projects: HDIL has revised prices upwards by 38% along with Peninsula Land. Godrej Properties too has increased prices in its Planet Godrej project by Rs 5,000 per square feet.

In the NCR region, both Unitech and Indiabulls Real Estate have revised prices by 18% and 23%.

A slew of real estate companies are set to hit the primary market in the next six months. A price revival boosts cash flow income — that’s vital for the valuation these companies are vying for. There are projects where volume has been kicking in — both DLF and Unitech have doubled transactions in the first five months of this financial year compared to FY09. However, analysts caution that growth of income could soon fail to keep pace with the indicative price increase.

Source : http://www.moneycontrol.com/news/cnbc-tv18-comments/property-prices-could-get-costlier-this-diwali_417525.html

Developers Raise Property Prices- Plan to Give Discounts During Dussehra-Diwali

The last fortnight of Pitrupaksh, a period considered inauspicious for buying a new home, had few property transactions as usual but that did not stop developers from hiking their rates for projects under construction. Real estate players say this is a tactic to lure buyers with discounts during Dussehra-Diwali. “It is nothing but a strategy to make the festive pricing look attractive. Even new launches that were reasonably priced have seen a rise in prices,” said Pankaj Kapoor of the real estate research agency Liases Foras.

The 15-day Pitrupaksh phase ended Friday. “In North and West India, this period is considered inauspicious for buying a home or starting anything new. Sales normally pick up after Pitrupaksh between Dussehra and Diwali,” said Aditi Vijayakar, director of residential services at Cushman & Wakefield. Developer Sunil Mantri, vice president of the Maharashtra Chamber of Housing Industry (MCHI), ruled out substantial discounts during Diwali. He pointed out that prices have been rising anyway. “After a 30 to 40 per cent fall in rates, overall the market has stabilised and prices have been increasing since June. There might be festive period add-ons and marginal discounts on prices to attract sales, but nothing substantial,” he said.

Overall, between July and mid-September, prices of several projects including relatively affordable ones have been jacked up. For instance, the average rates at Rustomjee’s Global City in Virar, around Rs 1,900 per sq ft in July 2009, is Rs 2,750 per sq ft today. Flats at HDIL’s Premier Residences at Kurla, sold for about Rs 5,250 per sq ft in July, cost Rs 6,151 per sq ft today. Many other projects such as Kalpataru Aura at Ghatkopar, Lodha’s Casa Bella at Dombivli, Ackruti Greenwoods in Thane, to name a few, have each seen a rate increase of Rs 200 to Rs 1000 per sq ft.

Source : http://www.indianrealtynews.com/real-estate-trends/developers-raise-property-prices-plan-to-give-discounts-during-dussehra-diwali.html

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

Eastern suburbs to be Mumbai’s next commercial hub

Kurla is dotted with narrow, dingy bylanes and isn’t exactly considered a tony address in the commercial capital of the country. But that could change soon.

Kurla is set to add over 6 million square feet (sq ft) of swanky office space and around 3 million sq ft of mall space shortly. Leading the charge are developers such as Phoenix Mills, Kohinoor, HDIL and others.

This upcoming office space is three times the 2 million sq ft office space at Nariman Point, the city’s main office hub, and half of Bandra Kurla Complex, the secondary business district.

There’s more. R City, the biggest mall in the city covering 1.25 million sq ft, is up and running in the eastern suburbs of Ghatkopar, which houses global brands such as Marks & Spencer and Apple i-store, among others.

And the Vikhroli-Kanjur Marg belt, which is in close proximity to Hiranandani’s Powai township, has added nearly 5 million sq ft of office space, with new developments by Lodha, HCC, Akruti and others vying with each other for new clients.

Last year saw one of the biggest property deals in Mumbai when the National Stock Exchange bought 80,000 sq ft of office space from Unmesh Joshi-led Kohinoor City in Kurla, for Rs 120 crore (Rs 1.2 billion). NSE is expected to use the Kurla property for its operations, as its main office in BKC is not adequate for its operational requirements.

The hitherto low-profile eastern suburb of Mumbai, starting from Kurla to Thane on the Lal Bahadur Shastri Marg, is fast becoming the next commercial hub of the city with tony office complexes and new-age retail destinations, giving tough competition to its southern and western counterparts such as Nariman Point, Worli-Lower Parel and Bandra Kurla Complex, among others.

The reason: Easy accessibility from most parts of the city, a good road network, lower property prices than the western and southern suburbs and availability of large tracts of land from now-defunct mills.

“After 2003, the only region that saw rapid growth is the eastern suburbs because of land availability and cheaper property prices. In 2003, the average property price in the eastern suburbs was less than Rs 2,000 a sq ft, while the western suburbs fetched Rs 3,000 a sq ft,” Pankaj Kapoor, chief executive of Liases Foras, a realty research firm, said.

Lower property prices have played a major part in the growth of the eastern suburbs. The new office complexes in Kurla charge rents of Rs 100-150 per sq ft compared to Rs 300-325 at BKC, which is just a 15-minute drive from Kurla.

Outright sale prices at BKC are Rs 35,000 a sq ft, against Rs 10,000-15,000 in Kurla.

Though home prices in this belt have nearly doubled in the last four years, they are still 30 per cent lower than those in their western counterparts, property consultants said.

“Since many suburbs such as Powai, Bhandup, Mulund, Thane and others have come up very fast, it makes sense for companies to set up offices there. This belt is also becoming a destination for firms that want to move from BKC and Nariman Point for lower rentals,” said Pawan Swamy, managing director – West India, Jones Lang LaSalle Meghraj, an international property consultant.

Developers agree. Atul Ruia, managing director of Phoenix Mills said, “Where else in Mumbai would you get land to develop large-scale projects? I think this belt will become a hotbed for development projects.”

Ruia should know, as his company is investing around Rs 600 crore in its 25-acre Phoenix Market City project on LBS Marg in Kurla, which will see 1.7 million sq feet of office space, a 2 million sq feet mall and a 220-room hotel.

Lower property prices have played a major part in the growth of the eastern suburbs. The new office complexes in Kurla charge rents of Rs 100-150 per sq ft compared to Rs 300-325 at BKC, which is just a 15-minute drive from Kurla.

Outright sale prices at BKC are Rs 35,000 a sq ft, against Rs 10,000-15,000 in Kurla.

Though home prices in this belt have nearly doubled in the last four years, they are still 30 per cent lower than those in their western counterparts, property consultants said.

“Since many suburbs such as Powai, Bhandup, Mulund, Thane and others have come up very fast, it makes sense for companies to set up offices there. This belt is also becoming a destination for firms that want to move from BKC and Nariman Point for lower rentals,” said Pawan Swamy, managing director – West India, Jones Lang LaSalle Meghraj, an international property consultant.

Developers agree. Atul Ruia, managing director of Phoenix Mills said, “Where else in Mumbai would you get land to develop large-scale projects? I think this belt will become a hotbed for development projects.”

Ruia should know, as his company is investing around Rs 600 crore in its 25-acre Phoenix Market City project on LBS Marg in Kurla, which will see 1.7 million sq feet of office space, a 2 million sq feet mall and a 220-room hotel.

Though the suburb is connected by LBS Marg, the Eastern Express Highway along the way has improved connectivity significantly, experts said. The Rapid Bus Transit System, with its dedicated bus lines on the express highway, will ease the traffic on it.

Phase I of the Mumbai Metro project from Ghatkopar to Versova, scheduled to be completed by 2011, is expected to give a fillip to the connectivity of the eastern and western suburbs.

The subsequent phases, which will be completed in 2016, are expected to boost the accessibility of these suburbs. Phase II of the Mumbai Metro involves a 12.4 km stretch between Ghatkopar and Mulund and Phase III involves a 19.5 km stretch between BKC and the Kanjur Marg via Airport.

The plans of six-laning the Central Railway tracks from Chhatrapathi Shivaji Terminus to Thane is also expected to ease the train commute on the eastern suburbs.

Though developers are bullish about commercial rates shooting up soon, with demand for commercial properties coming back, real estate analysts are wary of the eastern suburbs going the way of the western and central suburbs.

“We expect rents to go up almost four times to Rs 400 a sq ft in the next three years. The rents would have gone beyond Rs 200 by now in places like Kurla but for the economic slowdown,” said Atul Modak, project Head, Kohinoor City, in Kurla, which will have 900,000 sq ft of commercial space.

“Commercial real estate is still a major concern because there is a huge commercial supply and demand has not picked up significantly as the economy is still not doing well enough,” said Pankaj Kapoor, chief executive of Liases Foras, a realty research firm.

Source : http://business.rediff.com/slide-show/2009/sep/11/slide-show-1-eastern-suburb-to-be-mumbais-next-commercial-hub.htm

Residential prices creep up

Call it better home loan rates or just improved consumer confidence and market sentiment, demand in the residential category, particularly in the affordable segment, has picked up.

And, as bookings and enquiries pour in, developers, particularly in Mumbai, have gone back to the customary practice of hiking rates, which have risen 20-30 per cent since May and continue to go up by the day as bookings grow.

Sales improve

Of late, there has been a marked improvement in sales across metros. DLF reported bookings for 1,356 apartments, measuring 2 million sq.ft, for its project Capital Greens, on a single day.

Indiabulls Group, which launched an affordable home project in Gurgaon, has closed over 100 bookings of its launch of 200 in the first phase. The project is a cluster of 800 apartments.

In Mumbai, Kalpataru Group’s project in Thane saw 110 flats sold in 10 days at Rs 3,100 per sq.ft. Another of its project at LBS Marg logged a sale of 50 flats after the rate for a two-and-a-half BHK was reduced from Rs 98 lakh to Rs 82 lakh. At the distant western Mumbai suburb of Virar, a residential township project promoted by Rustomjee and Evershine on 217 acres registered sale of 174 apartments at Rs 1,700 a sq.ft.

“DB Realty project at Dahisar registered 1,400 bookings, even before construction began,” says Mr Suman Memani, Associate Vice-President, Religare Securities, who also points out that prices have since gone up, particularly in the Mumbai suburbs.

Prices go up

According to Mr Memani, HDIL’s Versova project launched at Rs 7,500 a sq.ft had since gone up to Rs 9,500. Similarly, DB Realty had raised prices at Dahisar to Rs 3,300, from Rs 2,700. The most recent instance is of the Harasiddhi Group, which launched its offering in Goregaon, near here, at Rs 10,000 a sq.ft (carpet area), raised the price to 10,300 a sq.ft.

In general, the price hike creeps in after 50-60 per cent of the project gets sold out. In some ways developers are testing the waters and gauging how much the market can absorb. In any case, after the major chunk is sold any developer can afford to wait for a better tiding, he says.

The price increase is only 5-8 per cent since May, says Mr Anand J. Gupta, General Secretary, Builders Association of India.

Justifying the increase, Mr Gupta says it is purely based on demand-supply dynamics. Builders, who were languishing for want of enquiries, now see a silver lining on the horizon, after they had lowered prices to the maximum to stimulate demand.

Mr Gupta points out that historically real estate had either gone up or come down. It had never been stagnant and in places where it had been constant, development was rather stunted such as in Baroda and Ahmedabad. For ages, the only reason for real estate remaining a choice asset class is because it appreciates, he says.

NO JUSTIFICATION

Mr Pawan Swamy, Managing Director – West India, Jones Lang LaSalle Meghraj, sees little justification for escalation in rates at this point in time. The corrections that have taken place in overheated locations of cities such as Mumbai were required, since developers had priced themselves out of the market.

The fact that the slowdown forced them to rationalise their rates has been working to the developers’ advantage, and one would have assumed that the recent market dynamics had delivered a clear and unequivocal message.

However, Mr Swamy feels that there has been a resurgence of demand for residential property in many markets that are not seeing much supply. In such locations, a number of developers who have successfully sold a sizable component of their existing projects are now attempting to see what kind of price escalations the market will be able to accommodate.

This is, to a significant extent, a gamble that can backfire if the developer in question misjudges market dynamics.

However, this is not happening across the board, but rather in high demand-low supply locations and only among developers who have sufficient capital clout. Nevertheless, much depends on the buyer community — if such price escalations are pandered to, we may be looking at price bubbles building up in such locations.

Last month, Mr Deepak Parekh, Chairman, HDFC, cautioned developers against raising prices, stating that such a move would stall recovery of the segment. He was also sceptical about the builder fraternity’s commitment to the affordable housing segment.

Source : http://www.thehindubusinessline.com/iw/2009/08/30/stories/2009083051051500.htm

Big-ticket land buys on realty radar again

With a boost in sales and better cash flows from the June quarter, the appetite for land has improved

Bangalore/New Delhi: With the first signs surfacing of a revival in the realty sector, several developers have resumed buying large plots of land for building luxury and budget housing projects as well as to enter new markets.

India’s largest residential developer, Hiranandani Group, Lodha Group, Indiabulls Real Estate Ltd, Provident Housing Ltd and Anant Raj Industries Ltd have purchased tracts of land in cities such as Mumbai, Kochi and Pune at lower valuations following a boost in sales and improved cash flows from the June quarter.

The Mumbai-based Lodha Group, which last year had kept away from land deals worth more than Rs50 crore, came out of its sabbatical in July when it bid Rs710 crore for the 10.4-acre defunct Finlay property in Mumbai, auctioned by National Textile Corp. Ltd (NTC).

NTC now plans to put the Kohinoor Mill No.1 property in central Mumbai on the block for Rs1,100 crore. The Lodha Group may bid for this property as well, said a top executive.

“We bid for Finlay because we are planning new supply, more projects,” said Abhisheck Lodha, director, Lodha Group. “We may buy more land if the deal is good. We would build high-end homes in one part of it.”

In 2005, when land prices were beginning to peak, Lodha had bought Apollo mill, another NTC property in Mumbai, for Rs180 crore.

“The appetite for land transactions has improved. And if that continues, we can say the market has revived,” said Hari Pandey, deputy general manager (finance), Housing Development and Infrastructure Ltd, or HDIL.

The economic downturn had pushed developers such as DLF Ltd, Unitech Ltd—India’s top two realty firms—and Sobha Developers Ltd to sell land and non-core assets such as hotels.

This lull in buying land, which began sometime in mid-2008, followed a three-year realty boom that saw a spate of expensive transactions and continuous land assembling by developers.

Realty firms say they are now buying land for specific purposes. Land prices have not climbed down on par with property prices, but have dipped by 10-20% in certain markets such as Mumbai, Pune, Bangalore and Chennai.

Hiranandani Upscale, founded by Surendra Hiranandani, managing director of Hiranandani Group, intends to buy land in smaller cities such as Pune and Kochi to build townships.

“We are in talks with four private equity players—three foreign and one domestic—to raise about Rs800 crore to develop these projects,” said Hiranandani.

The company also plans to launch three projects in Bangalore, Chennai and Hyderabad, where it already owns land.

Indiabulls Real Estate, the country’s third largest developer by market value, is set to buy land in the metros and large cities after selling small parcels in the past eight months, primarily non-core assets such as 2-3% of a 150-acre plot in Sonepat, Haryana.

“We want to buy land in the heart of the city and are looking at Mumbai, Delhi and Chennai. We are also interested in buying through the government auction route and are looking for attractive deals,” said Gagan Banga, chief executive, Indiabulls Financial Services Ltd, and group spokesman.

Developers are in a relatively better position to buy land after restructuring debt and offloading part of their inventory, said Ashutosh Limaye, associate director (strategic consulting), Jones Lang LaSalle Meghraj, a property advisory.

“We will now see a lot of developers roping in a partner to buy land. Developers will also tie up with private equity funds at the land buying stage, which was not very common earlier,” Limaye said.

As it became more difficult to buy land due to a severe cash crunch, many developers resorted to joint venture projects with landowners to cut costs. But many projects didn’t take off because the landowners demanded more money, he added.

Another set of developers is scouting for cheaper land parcels far from city centres for low-cost and mid-segment housing projects.

After launching two low-cost residential projects in distant suburbs in Chennai and Bangalore, Provident Housing, a subsidiary of Bangalore-based Puravankara Projects Ltd, is negotiating with landowners in Kochi and Coimbatore. Typically, Provident’s apartments are priced at Rs15-20 lakh, excluding taxes.

“We have restrictions in cost because we need to build the homes in a lower price bracket,” said Jayakar Jerome, managing director of Provident Housing, at the launch of the Bangalore project this week.

For other builders, the worst is clearly behind them. Anant Raj Industries, which has a land bank of 990 acres, has set aside Rs400 crore for buying land in prime locations as prices have fallen, Anant Raj is looking at launching houses near New Delhi in the Rs15-18 lakh range, said Amit Sareen, executive director.

http://www.livemint.com/2009/08/02214942/Bigticket-land-buys-on-realty.html?h=B

Low-cost housing drive may dent margins of realty firms

The June quarter financial results of real estate companies will mirror the changes that the sector went through during the quarter. The sector,  which has been languishing for some time, appears to have found its feet with its focus on affordable housing. This has led to higher sales for many companies. But on the flip side, the move has impacted the margins negatively for many. The reason being that the mid-segment housing is a high volume-low margin business.

The June quarter results, hence, may be a tad better on a quarter-on-quarter (q-o-q) basis, but much lower than those reported in the corresponding quarter of the previous year. The average of the estimates of ET Intelligence Group and eight brokerage houses shows that the overall industry sales are expected to decline 30% on a year-on-year (y-o-y) basis. On a q-o-q basis, industry sales would grow at an average of 30%.

It may also be understood that only the residential market has seen a recovery, while the commercial and retail segments are still under stress. Among all the listed companies, Orbit and Indiabulls Real Estate (IBREL) are expected to show a marginal improvement in sales. With a huge fall in property prices in the luxury segment, Orbit has shown a 5% increase in sales. With a 70% yoy decline in revenue, Parsvnath is expected to see the highest fall. DLF and Unitech may follow with a 60% and 54% decline, respectively.

As a move to generate cash for business activities, both these companies have exited from unviable projects and also sold non-core assets. This would help in completing under-construction projects. Even some large SEZ projects have been shelved.

A lot of companies have launched new residential projects in the affordable housing segment. Though construction costs would be low, EBIDTA margins would fall by an average of 5-10% due to a sharper decrease in prices. However, companies such as Unitech, DLF, HDIL and Sobha, which have raised funds, have improved their balance sheet positions and thus lowered their overall finance cost. Average EBIDTA margin for the June quarter would be 39% against 43% for the March quarter. Peninsula Land is expected to show a positive margin, as the number of projects was very limited, hence leverage was also low.

Despite all the gloom, realty sector is seen to show some improvement in margins. The overall profit after tax (PAT) margins for the June quarter will be at 26%.

Though real estate sector is one of the major contributors to the over all profit growth for India Inc, yet it is low as compared to the past PAT margins of 35-40%.

However, since alternate sources of funds have become available, builders have managed to improve their cash position. Loans have been restructured and thus interest liability has been reduced. Developers, such as Mahindra Lifespaces, IBREL and Peninsula Land, are expected to report PAT margins upward of 30%.

http://economictimes.indiatimes.com/News-/Low-cost-housing-drive-may-dent-margins-of-realty-firms/articleshow/4787053.cms

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/

Property buyers begin value picks

MUMBAI: Falling real estate prices coupled with lower booking amounts are helping developers sell new properties in cities such as Mumbai and EMIs and tenure

Chennai. A recent report from Nomura Securities said that there has been a correction of as much as 30% in prices of projects that have just been announced.

“While there has definitely been a correction in prices, it is patchy and not yet complete in many cases. Most correction is around the 10-15% mark with some projects having corrected by almost 30%. A large amount of correction seems to have taken place in and around Mumbai in areas such as Thane, Mulund, Virar and Mira Road,” the report said.

Over the past one month or so, several developers launched new projects at lower prices that were adjacent to their ongoing projects. Often, they have lowered prices in their existing projects to woo prospective buyers. “While there is no mad rush to buy homes at the right price, deals will happen. Both buyers and builders have realised that,” said Akshaya Kumar, MD, Parklane Advisors, a real estate consulting firm.

A case in point is that of Nirmal Lifestyle. The company launched new projects in Mulund and Kalyan at special prices and now claims to have sold over 700 flats. “While the price in November was Rs 7,000 per square foot, the flats in the new project in Mulund are being offered at Rs 4,800 per square foot,” said Nirmal’s MD, Dharmesh Jain.

Several other developers like Akruti in Mira Road has sold 300 flats within days of its launch. HDIL, another builder, has offered properties in Mumbai’s suburbs, such as Andheri and Kurla, for which the response is said to be good.

Chennai, too, has seen a correction in prices with several builders dropping prices by 10-30%. “Some genuine builders are ready to pass on the cost benefit to people, who booked earlier. This could be in the form of more area for the same price or just more freebies,” said a property dealer in Chennai.

A leading builder in the city is offering a discount of Rs 200 per square foot, if the payment is made upfront. This gives a good opportunity to cash-rich investors.

In Mumbai, Neptune Builders for its Bhandup project, has asked for a booking amount of just Rs 51,000 for a two bedroom apartment. Since most buildings take about 2-3 years for completion, the balance payment can be staggered.

“Definitely, when compared to the first three months, there is larger number of transactions taking place, though the exact situation will only be known in a couple of months when the next installment needs to be paid,” said a senior official at a real estate mutual fund.

Source : http://economictimes.indiatimes.com/News-by-Industry/Property-buyers-begin-value-picks/articleshow/4452557.cms

Realtors slash new project rates by 30% to woo buyers

MUMBAI: A scenario of falling real estate prices coupled with lower booking amounts are helping developers sell new properties in centres like

Mumbai and Chennai. A recent report from Nomura Securities says that there has been a correction of as much as 30% in projects that have just been announced.

“While there has definitely been a correction in prices, it is patchy and not yet complete in many cases. Most of the correction is around the 10-15 % mark with some projects having corrected by almost 30%.

A large amount of correction seems to have taken place in and around Mumbai in areas like Thane, Mulund, Virar and Mira Road, adds the report. Over the last one month or so, several developers launched new projects at lower prices which were adjacent to their ongoing projects.

Often, they have lowered prices in their existing projects to woo prospective buyers . “While there is no mad rush to buy homes at the right price, deals will happen. Both buyers and builders have realized that” , says Akshaya Kumar, MD, Parklane Advisors, a real esate consulting firm.

A case in point is that of Nirmal Lifestyle. The company launched new projects in Mulund and Kalyan at special prices and now claims to have sold over 700 flats. “While the price in November was Rs 7000 per square foot, the flats in the new project in Mulund are being offered at Rs 4800 per square foot,” said Nirmal’s MD, Dharmesh Jain. Several other developers like Akruti in Mira Road has sold 300 flats within days of its launch. HDIL, another builder, has offered properties in Mumbai’s suburbs like Andheri and Kurla for which the response is said to be good.

Chennai too has seen a correction in its prices with several builders dropping prices in a 10-30 % range. “Some genuine builders are ready to pass on the cost benefit to people who booked earlier. This could be in the form of more area for the same price or just more freebies ,” says a property dealer in Chennai.

A leading builder in the city is offering a discount of Rs 200 per square foot if the payment is made upfront. This gives a good opportunity to cash rich investors. In Mumbai, Neptune Builders for its Bhandup project, has asked for a booking amount of just Rs 51,000 for a two bedroom apartment. Since most buildings take about 2-3 years for completion, the balance payment can be staggered.

‘When compared to the first three months, there are larger number of transactions taking place though the exact situation will only be known in a couple of months when the next instalment needs to be paid,” says a senior official at a real estate mutual fund.

Source : http://economictimes.indiatimes.com/Markets/Real-Estate/Realtors-slash-new-project-rates-by-30-to-woo-buyers-/articleshow/4447394.cms

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

Past prices perfect for now

Could residential demand pick up if prices are rolled back to levels prevalent a few years back?

Yes, seems to be the answer going by the experience of one of the largest developers in Mumbai — Housing Development and Infrastructure Ltd (HDIL).

Property buyers in Mumbai appear to be looking for 2004 prices in the current economic scenario, going by the responses that HDIL got last fortnight.

One of the large-scale real estate developers in Mumbai, HDIL has executed 32 projects spanning over 28 million sq.ft of saleable area, besides four million sq.ft under slum rehabilitation schemes in the city since 1996.

Primarily into residential housing, HDIL priced its March launches, comprising one- and two-BHK (bedroom-hall-kitchen) apartments at Kurla, a central suburb in the city, at Rs 5,251 a sq.ft — a level of pricing that prevailed there in 2004. The response has been overwhelming and the company, which opened bookings on March 6, has sold over 85 per cent of the 756 apartments till date.

Even in the present market conditions, where builders have lowered rates across the city, the Kurla project appears to be at least 30 per cent lower than the prevailing rates in the locality.

The second project of 413 apartments at Andheri, an upmarket locality close to the airport, too garnered good response so much so that the company has raised the price from Rs 7,651 a sq.ft to Rs 7,951 a sq.ft.

“We were looking for first-time buyers, who were pushed to the sidelines over the last three-four years and who form a sizable population of the working class in Mumbai,” says Mr Hariprakash Pandey, Deputy General Manager – Finance, HDIL.

Referring to the Kurla project, Mr Pandey says the offering of one and two BHK in the range of Rs 50 lakh fitted the bill of the middle and upper-middle classes who are willing to pay that much more for a central location with good road and rail connectivity, besides other infrastructure. “Many of our buyers told us that they had gone in for no more than a Rs 30 lakh loan by bringing in the balance as margin money,” he said.

The Andheri property too has its advantages, though the company managed to leverage on the prevailing rentals at the locale to arrive at the price point. With two BHK rentals at Rs 50,000-60,000 and buyers known to correlate rentals to the equated monthly instalments of bank loans, the pricing was seemingly attractive. “More importantly, there is no fresh supply coming in at the moment in the locality and the price is close to 40 per cent lower than the 2007 prices,” says Mr Pandey.

HDIL has lined up two more such launches in the coming months, where the price band would look overtly competitive to home-seekers.

Opts out of Dharavi

HDIL has pulled out of the Rs 15,000-crore Dharavi Redevelopment Project and may instead look for contracts from the bid winners.

Mr Pandey said the contract had become unviable and there was a great deal of uncertainty over the biding process. Further, there was no clarity in execution — how much space would have to be provided to the slum dwellers — 269 sq.ft or 400 sq.ft, besides the issue of premium the government sought for the slum resettlement project.

In 2007, the company was awarded the Mumbai international airport slum rehabilitation project as part of the Mumbai airport expansion project, which involves resettling 85,000 slum families by 2012.

Under phase I, HDIL plans to resettle 20,000 slum families on 38 acres at a cost of Rs 3,200 crore by December.

Source : http://www.thehindubusinessline.com/iw/2009/04/05/stories/2009040550781500.htm

Realtors Try Real Ways to Woo Buyers

After offering customers free cars and apartments to tide over the slump in the property sector, developers are now getting real: From price cuts, paying equated monthly instalments (EMIs) in case the buyer loses his job, and treating the rent paid as down payment for new purchases, realtors are trying every possible trick to woo buyers. Recently, DLF, the country’s largest real estate developer, wrote to buyers of its new housing project in Gurgaon about a cut in apartment prices by 20 per cent.

According to the new plan, buyers will get 5 per cent discount over the basic sale price, another 10 per cent as timely-payment rebate and an increase in the compensation rate for delay from Rs 5 per sq ft per month to Rs 10 per sq ft per month. DLF is expected to provide a similar package for customers of its ‘Express Greens’ project in Gurgaon and in other cities too. Another real estate developer, Omaxe, is said to be working out a similar offer for its Greater Noida customers.

In Pune, the Promoters and Builders Association of Pune, a 300-member strong body of developers, has come out with a scheme wherein members pay three EMIs if the buyer loses his job due to slowdown. The scheme is expected to help more than 700 buyers who lost jobs in the past few months. “We want our clients to find a good job and not get tensed over the EMIs they have to pay,” said Atul Goel, MD, Goel Ganga group. Another developer, Mont Vert, has come out with a scheme under which the tenant will be able to buy the apartment after his/her agreement ends. The rent paid will be considered as down payment and deducted from the final sale price. Though Mumbai has not seen any eye-popping scheme after the Cosmos group’s “get one house free on every house” offer and assured buyback from Sunil Mantri Realty, developers like HDIL, Nirmal Lifestyle and others have launched apartments at prices 15-30 per cent less than the market rates.

Source : http://www.indianrealtynews.com/real-estate-india/realtors-try-real-ways-to-woo-buyers.html

Properties in Mumbai Remain Unsold Despite Low Price and Discount

Property prices across Mumbai have dropped by 30-40 per cent from its peak rates. Realty research figures indicate that the average property prices in Mumbai, Thane and Navi Mumbai (Mumbai Metropolitan Region) have come down from its peak of Rs 8,136 a sq ft in June 2008 to Rs 4,607 a sq ft in March 2009. With 420 ready and 1,349 under-construction projects in the MMR, the mounting inventory has led to a more pronounced price cut in the latter category.

Eager to tide over the absolute slack, several developers are advertising limited time discounts. HDIL has done the same at its Kurla and Andheri projects, Nirmal Lifestyle at its Mulund project, Lodha at its Dombivli project as well as a slew of others with big-sized projects in Thane and Navi Mumbai. They urge buyers to go in for a panic buying till the offer lasts, claiming that there will only be an upward movement in prices hereafter. This is a far cry from the initial days of the slump, when developers dangled sweeteners like stamp duty waivers or a free car and electronic goods, ruling out any reduction in rates.

However, realty players say that with banks tightening the noose around developers, the fate of many under-construction projects is unsure. Real estate rating agency Liases Foras estimates that about 50 per cent of the ongoing projects are doomed to either get stalled or get deferred. “All these projects that claim to offer flats at discounted rates for limited time only, are nothing but attempts to scare the buyers into buying their projects. Property rates are bound to fall up to 60 per cent. Not only are the developers starved for money, the buyers also have no money to spare. Also no buyer wants to put his money or risk taking a loan for buying an under-construction flat,” said Yashwant Dalal, president of Estate Agents Association of India.

He said the rates of even plush flats in prime areas such as Peddar Road have come down from a staggering Rs 1 lakh a sq ft to a range of Rs 60,000-35,000 a sq ft. In Bandra, it has dropped from Rs 25,000 a sq ft to Rs 14,000 a sq ft.” The prices in the area have fallen by 35 per cent from the peak rates of Rs 35,000-40,000 a sq ft.

Source : http://www.indianrealtynews.com/real-estate-india/mumbai/properties-in-mumbai-remain-unsold-despite-low-price-and-discount.html

Mumbai resi prices fall by up to 40%

Premium residential property prices built by major developers in Mumbai, till now relatively shielded from the recession, have fallen by 25-40%.

Large builders and developers including HDIL, Mahindra Lifespaces and Runwal Group are now ready to renegotiate prices, and throw in a few goodies in the bargain.

Mahindra Lifespaces, the real estate and development arm of the Mahindra Group, is offering 10% flat discounts on its property in Bhandup, an upmarket Mumbai suburb.

The company, which has close to 500 apartments in the housing complex, has also tied up with celebrity interior designers, at a fee that is ‘negotiable’, the company’s president, Pavan Malhotra, told Hindustan Times.

Source : http://www.propertyweek.com/story.asp?sectioncode=297&storycode=3136851&c=1

Private builders will get to redevelop cessed buildings in Mumbai

MUMBAI: The Maharashtra government recently cleared a guideline that will open up a huge business opportunity for redevelopment in South and Central

Mumbai, considered to be among the few of the most expensive real estate markets in Asia.

In a notification that clears the modified Development Control Regulations (DCR) 33(7) and 33(9), the government has paved the way for redevelopment of about 16,000 cessed buildings in south and central Mumbai and also allowed private developers to redevelop properties with a size of 43,000 sq ft in joint ventures with Mhada, or tenants/owners.

Earlier, this clause under the DCR was allowed only to Mhada and the BMC. This implies that developers, including Orbit Corporation, Housing Development and Infrastructure, Akruti City, Lok Housing and Unity Infra Projects, can now join hands with the state’s housing authority, or their tenants and owners, to develop the properties.

The prospects for such developers are also better as in a redevelopment project, the investment is comparatively low and the saleable area is about 50% of the project. In particular, Orbit Corporation, HDIL and Akruti have developed their business models focusing on redevelopment projects.

Cessed buildings are typically old constructions wherein the tenants pay a predetermined amount to the BMC.
The notification also stipulates an increase in the applicable floor space index (FSI) to four (from 2.5), thereby giving developers more space develop.

Said Cess Properties Developers Association president Kishore Aversekar: “The modified DCR is aimed at providing an incentive for accelerated development through the cluster approach in the urban renewal scheme and encourages development of projects through joint ventures with the Maharashtra Housing and Area Development Authority, tenants and landlords and private developers.”

The modified DCR has also increased the threshold of the minimum area to be allotted to the tenants/occupants of the cessed building to 300 sq ft carpet from 225 sq ft. “It’s a huge opportunity for us,” Ram Yadav, finance director of Orbit Corporation, said.

“The change in DCR 33(9) would allow us to develop at least 20 to 25 new housing societies. We are already in talks with various housing societies and tenants at the moment.” Other redevelopment-focused developers, such as Shapoorji Pallonji, the Rohan group, Lodha and RNA, have initiated steps to tap the opportunity as well.

The initial investment in the average redevelopment project is about 30-35% of the total development cost that needs to be paid to owners and tenants. Other costs for a middle-class redevelopment project include transit rentals and construction costs.

The government has also applied the eligibility criteria on the lines of the Maharashtra Slum Area (Improvement and Clearance of Redevelopment) Act, 1971 for developers and has made it compulsory for private developers to obtain the consent of at least 70% of the occupants.

Source : http://economictimes.indiatimes.com/News/Economy/Infrastructure/Private-builders-will-get-to-redevelop-cessed-buildings-in-Mumbai/articleshow/4284632.cms

Listed realtors start to slash prices

Mumbai: The much-awaited correction in residential realty prices in Mumbai may not have been obvious to start with, but now even the bigger developers that are listed at the stock exchanges have started slashing rates.

For instance, Unitech, the second-largest realty player in the country, has launched a residential project in Dadar West, one of the prime locations in the central suburbs. The project is divided into two categories — one with a price range of Rs 9,900 per square feet and the premium range priced at Rs 14,000 per square foot. Interestingly, the market rate in that area of the city is Rs 18,000 per sq ft! Thus, there’s a 45% reduction in prices.

Similarly, the country’s third-largest realtor, Housing Development and Infrastructure Ltd (HDIL), on March 4, launched its residential project in Kurla, adjacent to the redevelopment site of its Mumbai airport rehabilitation project. The project was initially priced at Rs 5,251 per square feet, but the price was raised to Rs 5,351 per square feet by Monday. However, the going price of the area is approximately Rs 7,500-8,000 per square feet — 33% more than HDIL’s offer.

Hari Prakash Pandey, deputy general manager (finance), HDIL, said, “We had launched 756 flats and, at the end of Monday, we have already booked more than 400 apartments.”

“Fund managers are pretty gung-ho owing to the price reduction by one of the largest realty players in the country,” said an analyst with a domestic brokerage. “Most developers in Mumbai are not yet out in the open and have not slashed prices,” the analyst added. This is despite the fact that residential prices in the city have fallen by 10-15% in December and by a further 15% in January.

The situation is similar in Gurgaon (near Delhi), a market that has rarely seen a price correction even after the downturn.

Indiabulls Real Estate, the Mumbai-based player, last week launched its residential project there. It was priced at Rs 1,950 per sq ft, which is much lower than its peer’s rates of Rs 3,100-3,200 per sq ft.

Traditionally, DLF, Parsvnath, the Jaypee Group and other north-based developers have ruled the Gurgaon market. But Indiabulls’ 40% lower pricing has brought them tough competition.

An analyst from a foreign brokerage based out of Mumbai told DNA Money, “Realty players are tapping new markets and bringing in new price cards, which is hitting developers in that market. But today, developers need to sell each and every project to get money in their kitty as debt repayments dates are coming closer.”

Some major players such as Omaxe, Parsvnath and Unitech have had negligible sales in several of their projects in the last quarter. Any money, even through reduced pricing of projects, could help shore up their balance sheets.

Analysts add that after the reduction in prices by the listed players, even the unlisted players would have to follow suit.

Despite the reductions effected, consultants say, developers are still making margins and no one is selling below the replacement price of the property. Thus, there is always scope for further reduction in prices.

Source : http://www.dnaindia.com/report.asp?newsid=1238250

Is realty demand showing signs of picking up?

Since last September, top builders froze the launch of new projects. But after cutting prices by as much as 40%, it seems consumers are beginning to bite. Sales are picking up for some developers and Priyanka Ghosh checks if this is indeed a turnaround.

Homebuyers back?

From virtually no sales for real estate developers last quarter, February and March seem to have been marginally better. Project launches, which had been frozen since last September, are seeing the light of the day but at least 30-40% cheaper. And that is triggering some sales.

Some cases in point:

- In March, HDIL sold 350–400 flats in one single day when it launched Premier Residences in Kurla at 30% lower prices.

- A month earlier, DLF’s New Town, launched at a 45% discount, sold 230 flats of the 440 units launched.

- Unitech’s Uniworld Garden II in Gurgaon launched at 20-30% discount and sold nearly 80 of the 156 units launched.

Inside details

However, the fine print of these transactions is significantly different now. For one, payment obligations are now linked to construction schedule and not to time. Even banks are now insistent on this method of payment. More importantly, clauses are being worked out in the agreement to compensate buyers for any future price cuts. This is interesting as several developers could not bring down prices in existing projects as a part of the project was already sold at a particular price point.

The launches are also happening in small phases, testing the market and avoiding any speculative demand. It is perhaps too early to say whether it will significantly impact the results but certainly, at a good price, the end-user demand will kick in like it has for these companies.

Source : http://www.moneycontrol.com/india/news/business/is-realty-demand-showing-signspicking-up/388499

Realty cos say govt move not enough to spur demand

MUMBAI (Reuters) – Real estate companies say the recent rate cuts and extra spending announced by the government over the weekend are not enough to spur demand.

Amid a global slowdown and slumping economy, the federal government said it would seek approval for extra spending worth $4 billion in the remainder of the fiscal year, while the Reserve Bank of India (RBI) slashed key interest rates over the weekend.

On Sunday, India said state-run banks are to announce a package for borrowers of home loans up to 2 million rupees.

“This is unlikely to stir demand unless it is being followed by at least 20-25 percent price cuts by developers,” brokerage UBS Securities India Pvt Ltd said in a report on Monday.

Real-estate companies said the loans would help raise demand for homes in small towns and cities as well as for lower-income housing, but were too small to boost demand in India’s metros.

“It’s not enough. You need to be softening the rate of interest across the board and some other concessions to the consumer who will go buy out properties at this point of time,” said Pradeep Jain, chairman of Parsvnath Developers.

“Hardly few properties in tier 2, tier 3 are available.” About 35-40 percent of its housing projects are in the 3.5- 4-million-rupee range, he said.

“Unless you are talking of really low-income housing it really does not provide much. Commercial real-estate needs a lot more impetus,” said Sarang Wadhawan, managing director, Housing Development & Infrastructure Ltd (HDIL).

It does not offer flats in the 2-million-rupee range. 

On Saturday, the RBI said loans by banks to housing finance companies for individuals may be classified under priority sector lending for loans up to 2 million rupees per house, per family.

This, along with Sunday’s announcements, would bolster demand for affordable housing, said Ravi Ramu, chief financial officer, Puravankara Projects Ltd. Its unit plans to develop 60 million sq. ft. of such properties across five cities.

To address the issue of non-performing assets of realty firms, the RBI has extended a regulatory concession to loans disbursed to the sector that are currently dilinquent but can be restructured by June 2009, UBS said.

“The disappointment is they only allowed it up to 30 June. It should be up to 31 December,” Parsvnath’s Jain said.

Real-estate will continue to be under stress if banks are not asked to start lending again, HDIL’s Wadhawan said.

“We maintain that prices have to correct for volumes to revive,” the UBS report said.

Source : http://in.reuters.com/article/businessNews/idINIndia-36928420081208?pageNumber=2&virtualBrandChannel=0

Slowdown In Demand Forces Realtors To Freeze Rates

Real estate developers have hardly hiked their rates in the last six to eight months and some of them have not hiked them at all. Property analysts say this scenario is different from that witnessed between April and October 2007, when developers hiked rates by as much as 24% to 32%. According to a pan-India survey of local brokers in the residential property market, carried out by global research analysts Edelweiss, around 80% of brokers across India have witnessed a reduction in enquiries over the past month, and about 90% have seen a drop in transactions over the past month. A hundred brokers in 20 micro-markets like Bandra-Borivili, Mulund-Thane, Gurgaon, Noida, Whitefield-Marathalli and Annanagar, in Mumbai, Delhi, Bangalore and Chennai, were polled. Godrej Properties hiked rates for its Riverside project at Kalyan by 24% in 2007, but this year, it has increased them by a mere 7%, from Rs 2,000 per sq ft to Rs 3,000 per sq ft. Rates at Rustomjee’s Elanza project in Malad (W) has remained constant, at Rs 9,000 per sq ft, after its hike of 20% at Rs 7,500 per sq ft last year. Similarly, property rates at RNA Builders’ Royale Park and HDIL’s Dreams project in Bhandup remained at Rs 6,500 per sq ft and Rs 5,750 per sq ft, after jumping 18% and 5% respectively from 2007.

Source : Source : Realty Digest

DLF seeks lower home loan rates

NEW DELHI: Top DLF officials, including chairman Kushal Pal Singh and vice-chairman Rajiv Singh, on Thursday met finance ministry officials to press for a lowering of interest rates on housing loans to ease the liquidity squeeze in real estate.

A source told DNA Money, “The DLF executives were also pushing for declaring real estate an industry rather than just a sector.”

Indian real estate is the second-largest employer in the country and the downward spiral of the realty market would severely impact the Indian growth story.”
The Delhi-based developer wants the ministry to ask the Reserve Bank of India to ease norms for bank lending to real estate firms.

Most banks have stopped giving loans to developers as they consider the real estate market risky at moment. This has forced realtors to raise funds from private investors and other sources with interest rates as high as 30%, way above the 13-15% they are paying on their outstanding debt to banks.

Earlier this month, sources had said DLF is looking at offloading stake in its power venture DLF Utilities and in special purpose vehicles to private equity investors. The realtor plans to raise around $1-1.25 billion from the divestments.

The developer is also the sole bidder for the Rail Land Development Authority’s 45,371 sq m land in Bandra (east) — near the railway station and adjacent to the Western Express Highway — for development of commercial space. The reserve bid for the land price has been kept at Rs 3,960 crore. Akruti City, HDIL and Reliance Infrastructure were also eyeing the piece of land but backed out due to higher valuations.

DLF will announce its quarterly results on October 31.

Source : Dnaindia.com

Lack of demand forces builders to freeze rates

Real estate developers in the city and across the country have steadfastly refused to lower property rates, yet they have barely hiked their rates in the last six to eight months – not hiking them at all, in some cases.

Property analysts say this scenario is different from that witnessed between April and October 2007, when developers hiked rates by as much as 24% to 32%.

“The reason is simply the lack of demand,” said an analyst with a foreign institutional equities firm. “The sharp increase in prices, along with rising interest rates, has led to a decline in affordability, and lower sales. Affordability will improve by 15% next year only if developers reduce rates, else it will become a major concern,”’ said Puneet Jain, an analyst with Kotak Institutional Equities.

According to a pan-India survey of local brokers in the residential property market, carried out by global research analysts Edelweiss, almost 80% of brokers across India have witnessed a reduction in enquiries over the past month, and about 90% have seen a drop in transactions over the past month. A hundred brokers in 20 micro-markets like Bandra-Borivii, Mulund-Thane, Gurgaon, Noida, Whitefield-Marathalli and Annanagar, in Mumbai, Delhi, Bangalore and Chennai, were polled.

While Godrej Properties hiked rates for its Riverside project at Kalyan by 24% in 2007, this year, it has increased them by a mere 7%, from Rs 2,000 per sq ft to Rs 3,000 per sq ft. Rates at Rustomjee’s Elanza project in Malad (W) has remained constant, at Rs 9,000 per sq ft, after its hike of 20% at Rs 7,500 per sq ft last year.

Similarly, property rates at RNA Builders’ Royale Park and HDIL’s Dreams project in Bhandup remained at Rs 6,500 per sq ft and Rs 5,750 per sq ft, after jumping 18% and 5% respectively from 2007.

Source : Dnaindia

PE inflows in realty space dry up during July-Sept quarter

According to preliminary estimates during July-September 2008 period, PE fund flows into the real estate sector stood at $669.7 million

New Delhi: Country’s real estate segment has taken a beating in terms of private equity investment in the third quarter of this year as the inflows into the sector was only $669.7 million, a dip of 73.21% from the second quarter of 2008.
“Realty space is already buffeted by rising inflation, input costs and a tight squeeze by the government on fund inflows into the sector in order to discourage speculation,” research and financial consulting firm Four-S Services CEO Satyendra Shukla said, adding that fall of global investment banks has come as the latest salvo to hit the sector.

According to preliminary estimates during July-September 2008 period, PE fund flows into the real estate sector stood at $669.7 million, down sharply from $1.66 billion during the January-March 2008 and $2.5 billion during the April-June 2008, Four-S Services said.
“We are seeing signs of fund inflows from private equity players in real estate getting affected,” Shukla added.

The various factors that had a negative impact on the PE fund flows include rising capital costs as high as 15-20% increasing input (raw material) costs and tightening fund inflows both domestic as well as global. Accordingly, there has been a sharp hike in the cost of real estate properties, which in turn has dampened demand.

Real estate companies have been increasingly accessing funds from PE players in specific projects by splitting the projects into Special Purpose Vehicles (SPVs), instead of offloading stakes in the mother company.
Four-S Services further said some of the real estate giants like Unitech, DLF Assets, Peninsula Land, Future Group and HDIL are reportedly in trouble after US-based investment bank Lehman Brothers filed for bankruptcy protection. Besides, Lehman is said to have had a total commitment of over $1 billion in the Indian real estate sector.

“Between January and August 2008, investments made in phases in SPVs stood at about $1.8 billion spread across 25 deals, constituting 45% of the overall investments in the sector,” the provider of research, financial consulting and business content services said.

In the domestic market, despite the cut in Cash Reserve Ratio, interest rates are not expected to go down in a hurry, especially since the government is keen on keeping inflation under check, market observers said, adding that the short-term outlook for the real estate sector looks grim and only those players who have significant reserves will be able to survive the current downswing.

Earlier, PE investments in the country witnessed an increase of 55% in terms of value to touch $10.4 million during the first six months of this year, driven mainly by significant deals announced in the realty and infrastructure sector.

Livemint.com

After The Lehman Crash, Realtors Eye PE Funds

Developers such as Unitech, Peninsula Land, HDIL and Future Capital, the financial services arm of the Future Group, are in talks with investors including some leading private equity funds for raising investments for their projects, after the collapse of Lehman Brothers, whose third party fund, Lehman Brothers Real Estate Partners had committed an investment of over $ 1 billion to these companies. Even the private equity players are equally upbeat about property investments. Mr. Bharath Banka, Chief Executive of Aditya Birla group’s private equity division, “The current credit crisis, which is expected to continue for a few more months, opens up avenue for private equity firms to make large investments in the real estate sector. Long term returns will be higher in real estate for investments made during this point of economic cycle.”

Mumbai realty sales plunge in August

Stamp duty data hint continuous decline

MUMBAI: Mumbai, India’s hottest property mart, is cooling off rather fast.

Stamp duty registration data show sales volumes in FY09 (till August) have fallen 14% year-on-year and 33% since FY07, said a report by international brokerage Credit Suisse.

In August alone, the drop was a massive 27% year-on-year, the steepest fall in any month this year.

The figures put paid to claims by consultants and developers that the Mumbai realty mart wouldn’t be affected by the slowdown in the real estate market as demand in the island city exceeds the supply.

Developers ruling the Mumbai market —- Orbit Corporation, Housing Development and Infrastructure Ltd (HDIL), Akruti City, Lok Housing, Godrej Properties, IB Real – have been hit the hardest by slowing demand, say analysts.

Ramashray Yadav, chief financial officer of Orbit Corp, said in the last five-six months, demand has fallen drastically. “We don’t foresee any stimulation of demand. Our focus is on pre-selling and completing projects.”

The company is not announcing any new projects. “We had set aside over Rs 150 crore to buy new properties when the market fell but have now changed strategy. We are using the money to execute projects in the pipeline. Liquidity is not our main concern as we generated around Rs 600 crore through prior sales,” he said.

But analysts said total sales so far are just 20% of what Orbit clocked last year in the same period.

An analyst, who did not wish to be named, projects by various realtors are getting deferred.

“Even Orbit is running behind on project plans. Unlisted developers who have leveraged land are nearing bankruptcy. Most of the listed players will eventually succumb to liquidity stress,” the analyst said.

Orbit officials refused to comment on delay in projects.

Mumbai’s residential space is predominantly dominated by the premium segment, which is facing a hard time finding takers. Hike in home loan rates and developers’ refusal to cut prices have kept buyers at bay.

The aforementioned analyst said developers are likely to start slashing prices in two months.

“The direct price cut will be 10-15% but if they have to attract buyers, it should be a minimum of 25-30%,” he said.

As many as 60% of brokers across India surveyed by Edelweiss Securities said they expect prices in Mumbai to fall in the next one year. This goes against the developers’ expectation that prices will increase in the island city.

Sarang Wadhawan, managing director of HDIL, remains gung-ho. He said the company is busy executing 25 projects. “Also, we are selling transfer of development rights (TDR). There is a minor correction of prices in TDR sales,” he said

Real Estate: Mumbai In Agony

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

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

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

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

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

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

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

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

Housing Development and Infrastructure Ltd (HDIL) enters oil and gas exploration business

Real estate company Housing Development and Infrastructure Ltd (HDIL) has diversified into the high risk energy sector by floating a subsidiary, HDIL Oil & Gas Pvt Ltd in tie-up with a foreign collaborator, whose identity has not been disclosed.

The company has already diversified into hospitality and SEZs but is diversifying in to other sectors due to the the slump in the real estate market.

Under the New Exploration and Licensing Policy (NELP) VII round HDIL Oil & Gas will bid for 10 blocks for which the government had extended the deadline for the placing the bids to 30 June.

In the seventh round of bidding 57 blocks were up for bids of which 29 are on land, 19 in deep water and 9 in shallow water. However, the company’s name does not figure in the winners of successful bidders in NELP VII.

As one of the largest real estate firms, HDIL was ranked the fastest growing real estate company in India in October 2007 by Construction World, National Institute of Construction Management and Research.

The company’s turnover and profitability grew by more than 100 per cent in 2007-08 from the previous year, with the company having maintained more than 100 per cent growth in the last three years.

In October 2007 HDIL was awarded the contract from Mumbai International Airport Limited (MIAL) for rehabilitation of approximately 85,000 slum dwellers under expansion and modernisation of Mumbai airport. For this project the company has bought 110 acres of land to rehabilitate the slum dwellers at an approx cost of 22 crores per acre. Construction work is already underway on 15 million sq ft at Kurla, for the rehabilitation project as also some commercial development. The first phase of rehabilitation is to be completed in 2 years.

MIAL had awarded HDIL the contract to redevelop 96 acres of land over five years. The company expects to generate 60-70 lakh sq ft of saleable area from the airport project.

It had acquired industrial plots for redevelopment in Navi Mumbai, Mulund and Bhandup aggregating close to 35 acres during November 2007 to February 2008. It is opening two malls this year at Kandivli and Bhandup and plans to open 200 malls across the country.

The company plans to put up 20 broadway screens by the year-end and is also open to buying other theatres, which are up on sale.