Real estate industry may exclaim crackers this Diwali

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

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

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

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

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

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

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

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

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

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

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

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

Real estate firms build hopes on festival sales

NEW DELHI: Property firms are launching housing projects and raising pitch for ongoing ones in the hope of making decent sales going into the  festive season. The mood among builders may be buoyant, but very few believe price hike is possible as demand is still hesitant and new supplies are hitting the market.

The festive season, which usually begins late September with the Hindu festival of Navratra and continues up to Christmas, often sees higher sales of property, cars and other durables.

“Last year’s festive season was a total washout. But this time indications are that we are back to normal,” said Mumbai-based Lodha Developers director Abhisheck Lodha. He said property firms usually make 30% of their sales in one-and-a-half month between Navratra and Diwali, and this time will be no different.

Last festive season though was disastrous. Lehman had collapsed plunging the economy in a crisis and driving away homebuyers.

Mr Lodha is planning to launch two new projects, comprising apartments priced over Rs 1 crore, in Mumbai’s suburbs of Andheri and Thane. So far, the slow return of housing demand was scripted by lower-priced homes. But Lodha’s offerings indicate the builder is confident of getting buyers for high-priced segment as well.

Similarly in Delhi, DLF is preparing to launch over 1,500 apartments in a project in which it sold 1,350 apartments just six months ago.

DLF says it is yet to fix a price or number of apartments to be sold for the project, but brokers on behalf of DLF are offering apartments at a 30% premium to the first phase price. “If a location has a very good demand and not enough supply, prices will go up,” says DLF executive director Rajiv Talwar. Delhi may be one such market as it has lived under state-controlled DDA’s monopoly for long and has not many private developers building homes.

But price rise is not something many are really betting on. “Housing demand is not going to rise dramatically in a hurry. The market remains price-sensitive and any attempt at price hike will adversely impact demand,” says Vipin Aggarwal , principal of $200-million India Industrial Growth Fund. Mr Aggarwal is currently engaged in raising a $600-million India-focused real estate and special situation fund.

Agrees Pradeep Jain, chairman of Delhibased Parsvnath Developers and head of the NCR chapter of industry body CREDAI. “We have requested all  developers not to increase prices. If we increase prices in the next six months, it’s likely that demand will be hurt and we may get into that vicious circle of lower demand and higher debt,” he says. He is also launching more projects in NCR and western UP, as he expects demand to go up in the next few months on housing finance companies further lowering mortgage rates.

But Omaxe chairman Rohtas Goel says prices will go up after Diwali as festive sales will help ease cashflow pressure for developers. But international real estate consultancy DTZ India director Ambar Maheshwari says it’s still a delicate situation in the property market. “Developers still carry a lot of debt despite a string of QIPs and need steady cashflow to service that,” says Mr Maheshwari.

Several listed realty firms, including Unitech, Indiabulls real estate and HDIL, have in the past six months raised funds via qualified institutional placement route.

But this festive season, unlike last year, homebuyers may not get many freebies. “Developers’ margins have shrunk and there is little scope for freebies, even though in some cases, one would see such offers,” says NCR-based Supertech CMD R K Arora, who is offering free ACs in one of his projects.

Source : http://economictimes.indiatimes.com/News-by-Industry/Real-estate-firms-eye-festival-sales/articleshow/5040847.cms

Housing sector is shining again

Last August, Gurgaon real-estate broker S Karan was planning to move out of his tiny basement office in a small building to a fancy new one in one of the tall steel-and-glass buildings that have become the signature of this booming Delhi suburb.

Then, Lehman Brothers, one of the Big Four investment banks in the US, collapsed on September 15, sparking off a global recession, an Indian economic slowdown, and a slump in the once booming real-estate sector.

Karan (34) then thought his dreams would remain still-born — till the first signs of a recovery in the first quarter of 2009-10.  “Usually, we seal 70 per cent of our deals around Diwali. Last year, that figure dropped to 30 per cent.”
There were many reasons for the death of his dream.

The global recession took the Indian stock markets down with it. The BSE Sensex fell from 14,001 on September 12, the last trading day before the Lehman collapse, to a low of 8,198 on March 5, this year.

So, the supply of speculative money that had mainly fuelled the 2005-08 real estate boom, in which house prices doubled and rentals soared more than 75 per cent, stopped.

Rising inflation also forced the Reserve Bank of India to hike interest rates. Result: interest rates on housing loans rose from 7-8 per cent levels at the end of 2007 to 12 per cent a year later.

Housing was no longer attractive for speculators, and out of reach of the middle class.

The bubble had burst.

Between October last year and March this year, housing sales dropped from 10,000-12,000 units per month in the National Capital Region to less than a third of that number.

“Earlier (prior to the Lehman collapse), I used to conduct two to three transactions in the resale category and three to four original bookings every month. After October, that number fell by half,” says Karan.

Transaction values also fell as realtors, who had got used to net profit margins of more than 50 per cent, cut prices to lure buyers back.

But the double whammy of lower prices and plunging sales took its toll. DLF, India’s largest real estate company, saw its January-March 2009 sales and profits plunge 96.6 per cent and 95.3 per cent, respectively, to Rs 55.5 crore and Rs 29.8 crore.

Unitech, India’s second-largest real estate developer, and a host of other biggies like Omaxe, Parasvnath, Prestige, Puravankara, etc., also suffered similar setbacks.

Then the tide began to turn in the first quarter of 2009-10. The global recession brought down crude oil and commodity prices worldwide.

The wholesale price-based inflation rate began to ease – and even entered negative territory for a while. Interest rates started falling once again.

Realtors cut prices, by up to 30 per cent, and launched a slew of affordable housing projects (priced at Rs 15-50 lakh per apartment).

And the release of arrears to government employees, following the Sixth Pay Commission Report, thus, putting massive sums of money in the hands of government employees, provided the icing on the cake.

Buyers returned to the market.

Unitech Managing Director Sanjay Chandra says the company booked nearly 4,000 housing units in the first two-and-a-half months of 2009-10.

The number of registration agreements signed has also seen a healthy improvement. In Mumbai and Pune, registrations increased 24 per cent and 21 per cent month on month, respectively, said a June 2009 report, On the road to recovery, by Religare, Hitchens Harrison.

“The residential property market has been driving this recovery,” says Aditi Vijayakar, director, residential services, Cushman & Wakefield India, a large real estate consultant. The commercial and retail segments, though, have not yet picked up.

“The worst is over,” says Kumar Gera, chairman of the Confederation of Real Estate Developers Association of India, the apex body of realtors in India.

So, Karan can probably breathe easier now, even though his dream office may still be out of reach.

Source : http://www.hindustantimes.com/Housing-sector-is-shining-again/H1-Article1-455508.aspx

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

Affordability trap

Before the great economic doom caught up with the economy in general and the real estate sector in particular, life for developers was relatively cushy. High-priced houses were being hawked as if there was no tomorrow. But when tomorrow did come, there were many lessons to be learnt. The foremost among them being this: a residential project should appeal and target the majority to be successfully sold out. Real estate developers learnt this concept of ‘affordability’ only after a large number of their premium and luxurious residential projects failed to take off and many others had to be tweaked in order to cater to a wide spectrum of end-users.

Over the last one year, developers of all hues have announced residential projects in the affordable category. These projects, which were launched in different parts of NCR (national capital region) reported quick sales within days of their official announcement.

Consider this: DLF sold its phase-I of the Capital Greens project located in the heart of Dehi within two days of the launch, Jaypee sold its residential project Aman in Noida within a day of the official launch. BPTP reported brisk sales for its Park Floors project in Faridabad. Similar has been the case with residential projects launched by Omaxe.

The developers claim that the end users have finally come out of their hibernation. Sales figures provided ballast to their claims.

Yet doubts remains about the timely completion of projects. Many affordable projects which have been launched and successfully pre-sold, do not either have the mandatory environmental clearance or have not received orders for the change in land usage required for residential development.

“Many developers miscalculated the time lag between the soft launch, and actual delivery. Some of the projects monitored by us are already delayed by a year or so,” Ajay Dabas, director of Gurgaon-based consultancy Certes Realty, told FC Estate.

The developers do not wish to delve too much on these aspects. They concede, however, that mandatory clearances are a matter of concern for them. “A project’s delay does affect our reputation. But as these clearances are given by various governmental agencies, which take their own time, there is very little a developer can do to ensure speedy clearances,” admitted an NCR-based developer on conditions of anonymity.

However Tanuja Pradhan, national head of the global real estate consultancy Cushman & Wakefield, holds a divergent view. “The affordable projects have been launched by the same developers who have various stalled projects in their kitty. They are under pressure to complete them.” She added that it would be too early to say that the projects are being delayed: “Even if delay takes place, developers are willing to compensate with a penalty amount payable on per sq ft basis.”

In fact, a closer look reveals that similar factors lie at the roots of the present-day crisis in real estate.

Circa 2004: Project after project was being launched albeit in the premium category with a price tag of Rs 1 crore plus. ‘Income levels are increasing at a fast pace’, ‘the average age of the home buyer has come down drastically’, ‘NRIs will be our target customers’, were some of the rationales doled out while launching these projects.

This was also the time when Rs 1 crore became the base value while talking about the price of a house. Ironically this was also the time when real estate deals started happening only between reckless investors (read speculators).

These projects too did not have the mandatory clearances. People were lured to invest money in realty projects to make a fast buck. Prices were appreciating within a matter of weeks. But as this appreciation was bereft of any real buyers, be it resident or non-resident Indians, the developers soon felt the pinch. The weeks after collapse of the erstwhile Lehman Brothers saw developers of all hues being gripped by a severe financial crunch.

Intense analysis and introspection into what went wrong followed. Dwelling deeper into the causes the sector soon found the mantra of all ills, affordable housing!

Akin to the phoenix rising from ashes, developer after developer began announcing projects in the affordable category. So even as a couple of years earlier ‘premium’, ‘luxury’, ‘exclusive’ and ‘Rs 1 crore’ were the catch words, they have been replaced by ‘inclusive’, ‘affordable’ and ‘Rs 1 lakh. How times change!

The transformation and change of heart has been often been touted as a learning curve for the real estate sector. The sector has found its place and would emerge stronger in a short time, has been the argument. In fact, a recent Knight Frank survey points out that it is the average tenant households staying in their current residence for the last two-and-a-half years who are driving the demand for affordable houses. These buyers perceive Noida, Ghaziabad and Gurgaon as the most favoured destinations for living.

A large number of affordable projects have indeed been launched in these cities. Interestingly, with inevitable delays, the affordability of projects are also at risk. “Projects were launched with the popular tag of “affordable” but the hidden costs and delays would amount to over-runs for the end buyer in many cases. Coupled with the fact that many developers insisted on a lock-in period and no cancellation for 12-15 months, consumers are not very happy too,” argued Ajay Dabas.

The Knight Frank survey also revealed that the developers have to pay external and internal development charges to the government which ultimately, are passed on to the consumer thus increasing the overall cost of a house. “The EDC and IDC costs coupled with the high transaction cost and stamp duty can go as high as Rs 350-400 per sq ft which are transferred on to the end user by the developer,” says the report.

Counters Dabas: “Many developers who had priced their projects at high rates were forced to re-launch with a lower price tag. That signalled the increase in demand. ”

However, most are really not affordable owing to the many hidden costs and spiralling charges of external and internal development charges, parking etc, which constitutes nearly 25 per cent of the base price.” He further adds that there is hardly any project which has been launched in the recent past in the truly affordable gross cost of Rs 20-22 lakh.

Yet another concern which warrants attention is the diversion of funds which have been garnered from the investors for a specific project to other incomplete projects of the company. The developers remain tight-lipped over the issue of fund diversion towards completion of other projects and only say that their affordable housing projects will be completed on time.

However, a couple of years earlier, funds were diverted towards purchase of land and building land banks.

So if the developers divert the funds mopped from their ‘affordable housing’ projects towards completion of earlier projects and miss on the deadlines promised in their brochures, the sector would fall into a deeper mess than at present.

Industry body Assocham had recently mooted the idea of having an escrow account, which can ensure that payments received from the buyers is utilised towards the construction and development of the said project.

“Very few projects are funded through deposits into the escrow accounts. In its absence, the buyer would remain at the mercy of the developers, till the validity of the lock-in and payment commitments,” said Dabas. He added that payments made against project “A” can legally be used by the recipient for other purposes too, since it is legitimately accessed.

However, R Nagaraju, general manager corporate planning of Delhi-based developer Unitech, said that an escrow account for all projects will make it difficult to simultaneously manage various product portfolios of the company. He further reasoned that subsidising a low-profit project with that of high profit projects is a commonly accepted business practice.

Nitty-gritty aside, the end-user who puts in his hard-earned money into buying a house would want to move in it as promised by the developer.

Whether the delay happens due to governmental apathy or the lack of business acumen on the part of developer, the sufferer ultimately remains the end-user.

Source:http://www.mydigitalfc.com/real-estate/affordability-trap-171

Red tape worries keep builders away from cheap housing plan

NEW DELHI: Most real estate developers have been focusing on building affordable houses after property prices slumped, but none of them has made use  of a central government scheme that offers subsidy to developers of small-sized dwellings, citing red-tapism and lack of clarity in the scheme.

Almost six months ago, the ministry of housing and urban poverty alleviation announced the scheme which allows state governments and private developers to build houses for the lower-income segment and avail of a central grant.

This grant could be either Rs 50,000 per housing unit or 25% of the cost of all civic services proposed in a housing project. But projects must have a minimum of 200 houses, which could range in size from 300 sqft to 1,200 sqft of super built-up area.

An official at the ministry of housing and urban poverty alleviation says Uttar Pradesh and Maharashtra governments have separately sent proposals under the scheme to construct about 18,000 houses in total, but developers have not come forward so far.

“Under the scheme, funds will be channelled to developers through state governments, which is what realty companies don’t want as they fear red-tapism. They want the central government to disburse funds directly,” said the official requesting anonymity.

The government had introduced the scheme with the view that it would help developers, saddled with unused land in a realty slump, to build more homes at an affordable rate. But developers seem doubtful about the execution of projects under the scheme.

Said Kumar Gera, chairman of Pune-based Gera Developers and chairman of real estate industry lobby CREDAI, “Developers may not be willing to deal with so much of bureaucracy for such a small incentive.” He also questioned the economic viability of such projects saying land still remained costly.

The houses built under the scheme are to be allotted by the state governments through a draw of lottery and will have a ceiling on sale price. The state governments are supposed to propose a price, which is to be approved by the Centre.

“Price cap is not a bad idea, but this has been left open to all state governments. We need a clearer formula on the pricing for us to work out the viability of any project,” said Sunil Malhotra, vice-president (finance) at Delhi-based developer Omaxe.

India has a massive shortage of residential units and the government hopes to solve the problem by incentivising developers to increase housing supply.

Source : http://economictimes.indiatimes.com/News/News-By-Industry/Services/Red-tape-worries-keep-builders-away-from-cheap-housing-plan/articleshow/4979903.cms

Realty Estate Developers Showing Interest in Land Acquisition

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

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

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

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

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

Royal Palms Estates slashes prices by 40% in Mumbai

Housing in the city has become a bit more affordable, with Royal Palms Estates slashing prices of prime properties in the western suburbs by up to 40 per cent.

This follows a similar move by other realtors, including Housing Development & Infrastructure, Puravankara Projects, Omaxe, Tata Housing Development and even the state government, all of whom have either reduced prices or forayed into affordable housing, following a slump in demand.

According to an analyst, this would have an impact on overall property prices in the city, with other real estate companies expected to follow suit. The monsoon being a dull season, builders come up with such offers till September.

Royal Palms Estates has begun offering ready to possess apartments at Goregaon, a north-western suburb, for Rs 3,999 a sq ft (PSF). This is lower by around 40 per cent compared with the prevailing property rates of around Rs 5,500-5,700 PSF.

When spoken to, Royal Palms Estates’ joint managing director Dilawar Nensey confirmed the development. “There is still a price resistance in the market, and traditionally the monsoon is a slack period for property sales. A number of bargain hunters surface during this season and take quick decisions if they find a property worth acquiring, either for personal use or for investing,” Nensey said.

More important, Royal Palms Estates needs to generate funds for future plans and is doing so by disposing of existing properties. It’s better to sell at discounted prices, rather than holding on to it, he added.

Royal Palms is setting up two Special Economic Zones (SEZ) at Goregaon – one for information technology and another for gems and jewellery – and needs funds for these projects.

http://www.business-standard.com/india/news/royal-palms-estates-slashes-prices-by-40-in-mumbai/365861/

Realtors may not gain from tax benefit extension

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

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

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

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

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

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

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

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

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

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

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

In real estate slump, developers pin hope on service apartments

Chandigarh After being launched in cities like Delhi, Bangalore and Pune, service apartments will soon be a reality in Tier II and III cities.

Considering the growing number of corporate honchos visiting the tri-city, Ludhiana and Amritsar, real estate developers will soon introduce service apartments in these cities.

Another reason that has evoked developers’ interest in service apartments is the slump in the real estate industry.

The negligible sale of apartments in the tri-city has forced them to convert these into service apartments.

Service apartments, which are fully-furnished with all facilities, are an alternative to five-star hotels. Unlike a normal apartment, a service apartment is given only on lease or rent and is a good option for travelling professionals and nuclear families.

Soon, Omaxe will launch a few limited service apartments in Omaxe Royal Residency on Pakhowal Road, Ludhiana. These apartments, with an area of 650 square feet each, will be launched in July.

“Ludhiana has marked its presence in India as a commercial city. It has many industries, which result in a number of corporate heads visiting this city. These apartments will offer them a nice and cheaper accommodation compared to hotels,” Avneet Soni, director of Omaxe Limited, said.

Manoj Kashyap, regional director of JLL Meghraj, added: “As there is no movement in the real estate market for the last many months, developers are trying various options keeping in mind the demand. The firm is working on the modalities and research on behalf of several national developers eager to launch service apartments in the region.”

Developers plan to launch service apartments in other cities in the region too. “The company is in the process of launching these apartments in Chandigarh, Faridabad and a few other cities in the near future,” Soni said.

Real estate experts feel since there is a demand, the concept of service apartments will soon be adopted by other developers.

“Many nuclear families like mine would prefer to stay in a serviced apartment while looking for a house in a new city,” Sanjay Rai, manager in an IT company in Chandigarh Technology Park, said. “They are good for those seeking transit accommodation as they have all facilities. And it feels much like living at home.”

Omaxe has, meanwhile, tied up with a leading hospitality management company in the National Capital Region to maintain these apartments.

Explained Service apartments
* A service apartment is given only on lease or rent
* Like hotel rooms, these apartments are fully-furnished and come with a host of ready facilities and services
* These apartments are maintained by hospitality management companies
* They are a better and cheaper alterative to five-star hotels

Realtors plan lock-in clauses to weed out speculators

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tata Housing eyes Rs 700 cr from low-cost projects

Tata Housing Development Company, a unit of Tata Sons, expects to earn Rs 700 crore in revenue from low-cost housing in the next four years, a top company official has said.

Tata Housing is launching over 1,000 low-cost houses under the brand “Shubh Griha” priced between Rs 3.9 lakh and Rs 6.7 lakh in Bhoisar, on the outskirts of Mumbai, and plans to launch around 4,000 such houses across other cities in the next four years, mainly targeting industrial workers and other low-wage earners.

The company is targeting Rs 15,000 crore revenue by FY13 from its projects, covering an area of 20 million square feet. It plans to build 10,000-13,000 homes by then. The company aims to earn 5 per cent of its revenue from low-cost houses.

“Low-cost projects have more velocity and can be completed in two years. We see huge opportunity in this space, especially in industrial belts,” said Brotin Banerjee, managing director and chief executive of Tata Housing.

The company is launching two-three such projects in Bangalore and the national capital region in this fiscal and plans joint development with land owners, wherein it will share a percentage of revenues with the owners of the land, and outright of purchase of land in other cases, according to Banerjee.

A host of companies such as Omaxe and Ansal API have launched low-cost apartments to target the low-wage earners and generate cash in the downturn. While New Delhi-based Omaxe has launched 5,000 apartments in Rs 5.99-8.99 lakh range at Mayakhedi in Indore, Ansal API has launched 4,000 low-cost apartments in Jaipur, Jodhpur, Agra and Meerut.

“Our revenues are doubling every year and we hope to continue by being present in different categories and launching innovative products,” said Banerjee. Currently, the company has more than 10 million square feet under development.

Banerjee says more land is now available for developers and land prices have come down to realistic levels. “Earlier, land prices used to escalate within a month. Prices have hit their bottom and I expect them to remain sluggish for the next eight-nine months,” he said.

Source : http://www.google.com/url?sa=X&q=http://www.business-standard.com/india/news/tata-housing-eyes-rs-700-crlow-cost-projects/357607/&ct=ga&cd=IKkcjF1VKlg&usg=AFQjCNFRhGsdR8mKdu4SCTncXKC8v_Ye1Q

Is it good time to buy property near religious destinations?

More and more Indians want to have homes in religious centres. Whether it is the peace of Vrindavan, the serenity of Haridwar or the tranquillity of Shirdi—devotees want to be very close to their place of worship. But while developers seem gung-ho about buyer activity in these places, experts are of the view that religious hubs have been impacted by the slowdown. So is it really as good a time to buy in these destinations?

According to global real estate consultancy Jones Lang LaSalle Meghraj (JLLM), investments in religious locations have now taken a back seat because of an intense cash-conservation outlook. They however do mention some exceptions, such as a recent project in Brindavan near Dwarka, which saw a rather healthy response by buyers from the Iskcon movement. “Though property in venues of religious interest represent rather specialised catchments, this segment has also been affected by the slowdown.

Traditionally, buyers are of two categories—investors seeking to cash in on rental and resale value, and genuine buyers fulfilling a long-cherished aspiration. The demand by investors is non-existent today, while demand by genuine buyers has dropped by over 60% since mid-2008,” feels Raminder Grover, CEO, Homebay Residential, JLLM.

But there are some options which have traditionally been of interest to investors and buyers. The places traditionally of interest to investors and buyers who are driven by religious sentiments include Shirdi, Pota, Haridwar, Putapatti (between Bangalore and Hyderabad), Trimbakeshwar near Nasik, Rishikesh, Brindavan near Dwarka, Haridwar and Madurai and Bhubaneshwar, according to JLLM.

Prices, of course, could vary depending on locations. Rates will be higher in places of religious interest if these locations also have other market drivers to push up real estate values, adds Grover. He gives the example of a 2BHK in Madurai or Bhubaneshwar that could cost as much as Rs 35-40 lakh while the same configuration would only cost Rs 15-20 lakh in a place like Trimbhakeshwar in Nasik. Rishikesh and Haridwar would also end up costing more due to amenable natural conditions.

But not all are of the view that this segment has been impacted. Developers seem to have an entirely different take. Developers such as Omaxe, CHD and Assotech are some examples of those coming up with projects in these cities. Omaxe, for instance, recently announced the launch of an integrated township, Omaxe Eternity in Vrindavan. Offering one and two room apartments, these range approximately between Rs 7.25 lakh-Rs 14.25 lakh in ground +2 structure.

Says Rohtas Goel, CMD, Omaxe, “The demand of 1-2 BHK apartments in religious places is rising both from end-users and investors. While most of the end-users are buying these properties as a second home option, these homes also offer a good investment opportunity for the investors to park in their money for long-term benefit and earn at present by renting them.”

Similarly, CHD Developers is currently working on several projects in religious locations. Some of these include apartments at Vrindavan and senior lifestyle townships at Vrindavan and Rishikesh. R.K. Mittal, CMD, CHD Developers feels that the demand for such properties has been consistent over the last five years. “We have consistently seen about 15-20% annual rise in demand for such properties over the past 5 years or so.

Even during the current slowdown, we have not witnessed any major slump in demand level. Most of the enquiries for our projects in these spiritual locations are from well placed people in their late 40s to late 50s.”

In fact, homes in such locations are increasingly gaining preference also as retirement homes and weekend getaways for the spiritually minded. Rajeev Rai, vice president, corporate, Assotech, feels that factors such as new infrastructural developments in these cities have further boosted demand for these properties.

“A perfect blend of modern amenities like golf courses, billiard rooms, tennis courts, ayurvedic spas, yoga centres, clubs and swimming pools fulfil the various needs of modern spiritual living. This has added to the already existing demand for such homes,” he says. The developer has an upcoming township in Bhubaneshwar – The Cosmopolis—a high-rise residential complex with modern amenities, with basic selling price at Rs 2,200 per sq ft.

What also makes these destinations attractive is the fact that land is available here at lower rates as compared to other cities. “The prices are lower here which makes these destinations a much sought after buy. From a second home or investment perspective, buying property in these places makes a lot of sense,” says Vikram Sabharwal MD, SAB Infrastructure.

Religious hubs such as Ajmer, Haridwar and Mathura are examples of cities that have witnessed a spurt in one and two BHK apartments. This again is indicative of the growth being seen for spiritual locations. “With upscale development coming up in these places, many have turned into a weekend destination where people besides visiting the holy places also desire to spend weekends with the family,” says Kushal Rana MD, KII India.

For home-buyers who are looking for peace and tranquility, the religious centres could offer just that. Further, the prices too could be very attractive.

Source : http://economictimes.indiatimes.com/Features/The-Sunday-ET/Property/Is-it-good-time-to-buy-property-near-religious-destinations/articleshow/4360419.cms?curpg=2

Indian Housing Sector Analysis – companiesandmarkets.com adds new report

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

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

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

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

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

Developers Target the Bottom Segment to Generate Liquidity

Unitech, Omaxe, Raheja, Tata Housing and Ansal API are planning new projects in the suburbs of satellite towns or smaller cities to target the bottom segment, to generate more cash. New Delhi-based Unitech and the Raheja group are planning to build single-bedroom homes in and around Gurgaon. While Unitech is busy conceptualising the project, Raheja has announced plans to construct 10,000 flats in the Rs 5 lakh range at Gurgaon, the satellite town bordering New Delhi. Tata Housing Development, too, is working out the feasibility of a sub-Rs 5 lakh housing project. Unitech plans to launch mid-segment residential projects in the Rs 5-10 lakh range in metros like Chennai and Kolkata, and suburban cities like Gurgaon, over the next few months.

Another developer, Omaxe, is planning a sub-Rs 4-10 lakh project at Peetampur and the Dewas industrial area near Indore to target workers. In the first phase, to be launched in the next 10 days, Omaxe would launch 5,000 flats and in the second phase, 5,000 more flats, the company said. “The inspiration to develop smaller and cheaper apartments comes from the Nano, which is eliciting a tremendous response. I am sure our project will see a similar response, given the fact that we will come up with such low-cost apartments near metros,” said Nagaraju. “Many industries around Udyog Vihar and Manesar are looking for houses for their workers. Our demand survey has shown tremendous interest among such firms to provide houses for their employees in the vicinity of the workplace. The new project will take care of their interest,” said Navin M Raheja, managing director, Raheja Developers.

“Nothing is selling today, as people do not have money. When both large and mid-income projects are not selling, developers have to come up with smaller projects, though they cannot earn the 30-50 per cent margins that they used to make earlier,” said Akshaya Kumar, chief executive of Park Lane Property Advisors. Developers are battling slowing sales since the beginning of 2008. Higher property prices, which more than doubled in metro cities during 2004-07, and high interest rates have made property buyers stay away from new purchases. Despite a nearly 30 per cent fall in property prices and a cut in loan rates from 11 per cent to 8.5 per cent in recent months, property sales have fallen 70 per cent from their peak last year.

DLF, Unitech, Parsvnath and all other major developers have entered the Rs 20-40 lakh segment to generate liquidity, even as their top line fell as much as 80 per cent in the last quarter. But property experts believe sub-Rs 5 lakh projects have few takers, even in smaller cities like Indore. “Even a good wage earner wants to stay in a comfortable home, which costs between Rs 8 lakh and Rs 10 lakh in smaller cities and Rs 18 lakh and Rs 20 lakh in the metros,” said a top executive of a New Delhi-based realty firm who did not wish to be quoted.

“At such as a price (sub Rs 5 lakh), either the houses have to be small or not in a good location. Prices should at least be in the range of Rs 10-15 lakh (per flat) for a project to make profit,” said Kumar of Park Lane Advisors. But developers are still launching projects to generate cash. Ansal API has launched 4,000 apartments in Jaipur, Jodhpur, Agra and Meerut. “We have priced these apartments in the range of Rs 5-10 lakh per unit, keeping in mind customers who are ready to buy small apartments. The size of a one-bedroom apartment is 500-550 sq ft, while a two-bedroom apartment has an area of 850-900 sq ft,” said a company spokesperson. The company will launch another 6,000 apartments in the coming months.

http://www.indianrealtynews.com/real-estate-developers/developers-target-the-bottom-segment-to-generate-liquidity.html

Realtors freeze land acquisitions as values dip

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Banks Suggest Developers to Bring Down Property Prices

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

Source : indianrealtynews.com

Builders under pressure as buyers press for refund

NEW DELHI: Some of India’s largest real estate firms such as DLF, Unitech, Omaxe and Parsvnath that launched multiple projects at the peak of the Tallest buildings in India real estate boom are now under pressure from buyers and investors who look to exit these projects.

Already in a spot due to unavailability of bank loans and a fall in sales, the developers are less inclined to oblige the buyers who are coming together to mount pressure for refunds in projects that are yet to take off.

Several buyers and investors, angered by the developers’ inability to start work on projects, have stopped payment of installments on their purchases, adding to the companies’ cash problems.

Investors in DLF’s commercial projects in Delhi and Kolkata have come together with the help of brokers to put pressure on DLF to start construction or refund initial deposits. “DLF is way behind schedule in their projects. It should either start work on the project immediately and deliver in time or return our investment with 15% interest,” says Amit Jain (name changed), a senior executive with an MNC who invested Rs 1 crore each in DLF’s projects in Okhla in Delhi and Kolkata.

Mr Jain says since DLF follows a time-linked payment plan, it has been demanding payments from buyers even without starting construction.

The broker, who facilitated Mr Jain’s purchase, says DLF has not even paid the government to convert the industrial plots at Shivaji Marg and Okhla in Delhi into commercial plots. However, a DLF spokesman denied this saying, “We go by the agreement with the buyers signed at the time of booking. The allegations over the status of our projects are not true. We will deliver as per schedule.”

Several projects of Omaxe, Unitech and Parsvnath are also facing similar problems. Akash Verma, a Noida-based garment exporter, had booked an apartment each in projects of Omaxe and Unitech in Noida. He booked an apartment at the ‘soft launch’ of Omaxe’s Noida project in May 2007. Omaxe had promised to launch the project formally a few months later at a higher rate. The formal launch never happened and investors like Mr Verma are stuck. Omaxe has turned down requests for a refund. An Omaxe spokesman, however, said the company has ‘considered and taken care’ of all such requests.

Mr Verma has also been unsuccessfully seeking a refund of his investment in Unitech’s Grande project. “I am paying Rs 4.5 lakh as EMI. Unitech executives say the project will be delivered on schedule, but there is no worker at the site,” he says. A Unitech spokesman said, “We generally discourage cancellations. But if the buyers insist, we refund the money after deducting 10-15% of the total value of the apartment.”

Most realty firms do not encourage refund requests. Till the end of 2007, investors could easily sell their property in open market as the prices were going up. But with buyers disappearing from the market, investors are forced to approach developers for refunds.

Some property buyers are seeking refunds due to their weakened financial positions, while several others do so as they are not sure of the developers’ ability to complete the project. There are a few others who seek refunds as they feel that they can strike a better deal now with prices undergoing a major correction.

Source : http://economictimes.indiatimes.com/Markets/Real_Estate/News_/Builders_under_pressure_as_buyers_press_for_refund/articleshow/3970375.cms

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.

Builders Ask Govt to Buy Unsold Flats at Current Rate

In the first of its kind bailout demand, real-estate companies are planning to ask the Government to buy out their unsold flats at current market prices and sell these at a later date. The proposal floated by one of the big Delhi-headquartered and listed real-estate companies is one of the many ideas to be hard sold at the Planning Commission tomorrow.

According to Jaskirat Singh, owner of Delhi-based real estate broking firm Grand Real Estates, about 30-45 per cent of properties worth Rs 50 lakh and above launched over the last six months remain unsold for DLF and Unitech. In the case of Omaxe, it is 25-30 per cent, he said. These companies do not disclose their ready but unsold assets. When contacted, a promoter of another leading Delhi-based and listed developer said this was not the only proposal on the table to bail out the sector. “We want states to enter into joint ventures with big real-estate players by offering land as equity. State-owned banks must also be directed to start disbursing home loans now that they do not have a problem of funds,” he said.

To boost consumer demand and give a fresh stimulus to the sector, the companies are also seeking a further cut in interest rates on home loans. “It should be slashed to 6 per cent for loans up to Rs 5 lakh and to 7-7.5 per cent for loans up to Rs 30 lakh. What the public sector banks have done is grossly inadequate,” a developer said. Tax incentives to home buyers must be enhanced and rental income be made tax-free to incentivise purchases, he added. Stung by the liquidity crisis, real estate companies also want the Reserve Bank of India to refinance the cash gap in existing projects. Most companies are borrowing at rates over 20-22 per cent to complete ongoing projects. “But, now, loans from banks have virtually dried up,” a promoter said.

Source : http://www.indianrealtynews.com/real-estate-india/delhi/builders-ask-govt-to-buy-unsold-flats-at-current-rate.html

Buyers take fancy to affordable housing

Alternatives in the real estate sector, especially in the current market situation, are suddenly getting more focus than ever before. Time was when  major developers swore by luxury living and it reflected in their portfolio. Then, it was swanky and high-end apartments which ruled the realty business. Today, however, it’s a different story. Big is no more beautiful. Instead, small and affordable housing is finding favour with most households as well as major realty players.

Developers have realised that the bulk demand lies in this segment and are increasingly turning their attention to units which are affordable. Forget luxurious condos and big, spacious developments, the accent is towards housing which will not create a dent in your pocket! What does act in favour of realtors is the number of government initiatives that have been coming in. Benefits for housing loans up to Rs 20 lakh is one such measure that will make more people come forward to buy property.

Leading players in the industry — DLF, Omaxe, Parsvnath Developers, Unitech and Hiranandani Developers — are echoing this thought as well. Omaxe, for instance, will be looking at properties in the range of Rs 10-Rs 25 lakh in tier II and III cities as well as Delhi NCR.

“We will build low-cost homes wherever land is available. Cities such as Indore, Chandigarh, Lucknow and others will see our projects coming up. Once we get a good response to this initiative, we will create a bigger footprint. In 2009, we will be focussing on this segment,” says Vipin Agarwal, executive director, Omaxe.

Even players who previously were betting big on the luxury and super luxury segment have now shifted attention to homes for the mid-segment. Unitech, which earlier had more luxury housing projects in its portfolio, is also now more inclined towards affordable housing.

Pradeep Jain, chairman, Parsvnath Developers says that demand will be most up to the Rs 40 lakh category. “There is no definition of ‘affordable.’ But mostly if you see it is till the Rs 40 lakh amount. The demand for this segment is robust at this point in time and going forward, there will be a stronger focus to meet these demands.”

Mumbai-based Hiranandani Developers will be looking at locations in Thane and Panvel for constructing these projects. “It is where the demand lies, so it will be hard to find someone not constructing affordable at this point. It will definitely be a focus point,” says Niranjan Hiranandani, MD, Hirandandani Developers. Experts feel that the year 2009 will see a good market revival, with properties being offered at the right price.

“We expect that many of our developers will shift gears and offer the right properties at affordable prices, especially in residential space, where the need to revive demand is most pronounced,” feels Anuj Puri, chairman & country head, Jones Lang LaSalle Meghraj.

With developers looking at low and mid alternatives in housing right now, your dream of owning a home may not be too distant!

Source : http://economictimes.indiatimes.com/Features/The_Sunday_ET/Special_Report/Buyers_take_fancy_to_affordable_housing/articleshow/3834331.cms

LAVA Electronics in talks with realty cos for India entry

NEW DELHI: Sweden-based electronic products maker LAVA Electronics is in talks with real estate firms Ansal API, Omaxe and Parsvnath for a possible
India entry through a franchisee arrangement.

The LCD television maker, which gets 60% of its revenues from the B2B segment, is planning to sell its products to large hotel chains. The company clocked a turnover of e60 million last year. LAVA executives met officials of real estate companies during the weekend.

LAVA Electronics’ managing director Christian Svantesson said: “We are looking for a suitable franchise partner and aim to enter India by the third quarter of 2009.’’

He said his company will have exclusive outlets to cater to consumers directly but five-star hotels would continue to remain its focus area. “We want to position the company as a high-end brand in India,” he added.

The firm has an assembling unit in Southern Sweden. While television cabinets, panels and other hardware are imported from Germany, software programming and product designing is done by the company at its Swedish unit.

The firm intends to replicate similar business models in India. Mr Svantesson said that initially the company would import and sell in India. It will start assembling products in the country after creating a presence among consumers and business houses.

LAVA sold 50,000 LCD televisions world-wide last year and targets to sell 70,000 sets this year. Currently, the firm has operations in countries such as Hong Kong, Australia, Spain, UK, Italy, France and the US.

Source : http://economictimes.indiatimes.com/Corporate_Trends/LAVA_Electronics_in_talks_with_realty_cos_for_India_entry/articleshow/3777259.cms

Pricing pains hit real estate

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

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

Price correction imminent

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

Profits in land investments

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

Where to invest

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

Affordable housing an option?

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

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

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

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

Fall in demand for purchasing property: Assocham

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

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

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

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

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

Source : www.business-standard.com

Realtors don’t budge on price

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

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

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

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

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

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

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

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

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

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

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

RBI steps not a certainty to banks increasing lending

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

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

But the north and the south are a different story.

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

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

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

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

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

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

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

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

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

Source : Sify.com

‘Cut house prices by up to 15%’

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

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

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

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

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

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

Source : sify.com

Realtors may need more collateral to raise funds

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TOUGH TIME

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

Source : Economictimes.com

NCR sees fall in real estate projects

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

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

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

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

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

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

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

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

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

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

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

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

Developers offering cash discounts to buyers

The realty market scenario has made buyers hesitant with regard to the purchase of residential property. So, developers are planning to go all out this buying season. Just three months ago, no builder was willing to go on record that they were offering cash discounts to home buyers. The reason: they did not want to give it away that property prices were under pressure. However, falling sales and rising inventory over the last 18 months have forced them to come out and admit that they are looking to offer cash discounts, besides other measures in this buying season.

The home buying season typically starts during the festival season (Diwali) and ends in the month of March and most builders do almost 60 per cent of their business in this period. Most of these discounts are going to be unveiled in property exhibitions that will start just before the festival season. There will be spot discounts for booking flats at the exhibitions. Add these to offers from home loan companies like lower rates or waivers on processing and administration fees and things look much better this year.

The admission of a price cut between 5 and 15 per cent from builders has come right before this buying season. For instance, in Delhi, real estate major DLF has launched a project comprising 36 villas of about 194 sq yard, each priced at Rs 90 lakh, in Manesar, Gurgaon – a far cry from Rs 1.5-crore villas that were being sold a year-and a-half ago. The developer has already made a shift to middle-income housing last year, where it was offering flats between Rs 25 lakh and Rs 35 lakh. Others like Puravankara, Unitech and Omaxe too are planning to go the mid-income way.

The government has also done its bit to ease the matters. For instance, in Mumbai especially, the state government has decided to increase the floor space index (FSI) from 2 to 4. This basically implies that the builder will be able to develop twice as much on the same piece of land. However, if you are going to buy an existing project, do not expect the builder to come out and openly give you a cash discount. Ramani Sastri, the former president of Credai says, “Early buyers will feel cheated, if the developer starts selling the flats at a lower rate.” So if you are eyeing an existing project, negotiate with the builder directly for a good bargain.

The change in ground realities has forced builders to change their minds. Since the last year, many potential home buyers have deferred their decision due to unrealistic prices and spiraling home loan rates. The numbers clearly depict this. Since the start of the property boom in 2003, real estate prices have gone up by as much as 400 per cent, according to various estimates. Also, floating home loan rates have gone up 4.5 per cent (from 7 per cent to 11.5 per cent). Fixed rates today are as high as 14 per cent – equal to what they were a decade ago. This basically implies that considering every 0.5-per cent rise in the rate leads to an increase by Rs 40 per lakh, the equated monthly installment (EMI) on a Rs 20 lakh home loan for 15 years would have increased by almost Rs 1,800.This, along with rise in realty prices, has ensured that buyers stay away. As a result, most have witnessed a drastic slowdown in their businesses. For instance, Delhi-based Parsvnath reported a 17 per cent growth in revenues this financial year as against 135 per cent in the last financial year. Unitech witnessed subdued 26 per cent growth in sales this financial year after a whopping 253 per cent in the previous year.

Demand For Houses In Small Towns Falls

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

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

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

Housing demand in small towns falls by 25 per cent

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

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

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

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

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

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

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

Real estate developers tying up with Construction firms

Many real estate developers are tying up with construction companies for timely delivery, cost saving and achieving a competitive edge in the market. Realty companies such as Omaxe and Indiabulls Real Estate are entering into alliances with construction majors, following in the footsteps of biggies such as Ansal API, Emaar MGF and DLF. And some like Uppal Group have tied up with another real estate developer, Chadha Group, for specific projects.

As per global real estate consultancy, Jones Lang LaSalle Meghraj (JLLM), some developers are giving turnkey contracts to construction companies to benefit from the lower borrowing cost at which construction companies can raise money from banks. “If developers try to raise finance from banks on their own, they would normally incur a borrowing cost of around 14-15%, whereas a construction company would be able to raise funding at lower rates, depending on various factors.”

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Type	Size(Sqft)	Price PSqft(Rs)	Amount(Rs)	Booking	Status	Floor Plan	Specials
3 BHK	1700	2751	46,76,700	15%	Booking Open		Incl Inaugural Rebate Rs.150/-
3 BHK + SQ	2000	2751	55,02,000	15%	Booking Open		Incl Inaugural Rebate Rs.150/-
4 BHK + SQ	2435	2751	66,98,685	15%	Booking Open		Incl Inaugural Rebate Rs.150/-

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Foreign architects make real estate projects attractive

In their bid to score over their rivals, many developers are now going abroad to hire noted architects who can design their new projects. Not withstanding the fact that currently the realty sector is seeing downward trend, still some of the noted design companies from other countries are opening their Indian offices to cater the real estate market.

The likes of Godrej Properties, Unitech, Omaxe, Hiranandani and many more are hiring foreign architect firms. As recently as last year, Godrej hired DP Architects of Singapore to design their 50-storey residential project in Mahalaxmi area of Mumbai.

US-based Hellmuth Obata Kassabaum Inc (HOK), has already worked with Indian builders such as Unitech, Hiranandani and many other big firms. Will Roes, programme manager of HOK India says that they bring a global perspective and diverse expertise to a project.

It is true that hiring foreign designers and planners have many advantages. But, the negative side of hiring them is that in some cases they do not understand the complexities of doing business in India, including tax laws and also cultural consideration, feels Devinder Gupta of realty advisory Century 21 India.

In an interview, Niranjan Hiranandani, the managing director of the Hiranandani group says that there is a big difference in approach between Indian and foreign firms that undertake design jobs. He feels that international firms are more empathetic to developers’ needs and aspirations. “

They find a solution which is required for a particular site, location and land. They are also more in tune with the land use demand ,” says Hiranandani. “They are more open to new ideas. On the other hand, Indian firms have a trial and error approach to design and planning. They also try to impose their ideas on the developers.”

Singapore based firms like RSP Architects Planners and Architects 61 Ltd are also designing projects in many big cities in India and are serious of winning more projects here. RSP has reportedly opened their offices in Mumbai, Bangalore, and Hyderabad. It designed the international Tech Park in Bangalore.

It has also designed offices for IT giants like Wipro, Satyam and Microsoft. Devinder Gupta informs that legendry Unitech group has taken the services of great golfer Greg Norman to design the lush green golf course for their prestigious Unitech Grande project in Greater Noida. Clearly, the Indian realty firms are taking the services of foreign firms and experts to make their projects attractive.

Meanwhile, some Indian architects feel that global firms are definitely good when it comes to designing projects. But, they are critical of some of the mismatch. On many occasions, the initial designs done by them don’t make any sense. Finally, Indian architects have to enter the scene to undo the damage. CMD of Omaxe group, Rohtas Goyal says that with money starting to flow into Indian realty sector, it has become necessary to bring global architectural practices and expertise.

Moreover, customers fancy projects designed by overseas firms. From the developers’ point of view, it becomes a good marketing and sales proposition. It may be mentioned here that Omaxe has recently hired Indian Davis cup Star Leander Paes company to help them design the tennis courts in their residential projects. Those who follow the realty market of India feel that as competition hots up and properties get bigger, developers going to hire global architects to design their projects will become more frequent.

Moreover, builders are entrusting the design work for commercial projects and master planning of a mixed use developments to foreign firms.

It is also learnt that several developers choose foreign architects only for their large projects. “It is affordable to hire an international firm to master planning if there is a big volume of work. Time is never an issue with them. They keep their words,” says Anil Sharma of Amrapali group.

Meanwhile, there are some people in realty sector who feel that foreign firms will continue to win projects here, but they will be hired for a limited purpose. They would design the master plans of the projects, while the execution part would continue to be taken care by the Indian firms.

Greener pastures

Many real estate companies that were hitherto confined to developing residential and commercial spaces are chalking out plans to build spas and resorts, lured by their ability to generate revenues consistently over a long period of time. At present, some standalone players dominate the resort and spa industry. With the entry of big realty companies, the industry is set to become more organised and competitive.

While some developers are setting up independent resorts and spas, others are offering similar products in ultra luxury mega township projects.

Brigade group, Sobha Developers and Omaxe are among those planning to establish resorts across India. “Like all real estate asset classes, this too is directly impacted by the supply and demand dynamics, and hence, the recent influx of capital into the hospitality sector.

Though investment and gestation period is higher than residential or commercial office projects, it creates a bigger enterprise value. It is healthy, from a developer’s perspective, to diversify into different asset classes,” says Karun Varma, managing director of property consultancy firm Jones Lang LaSalle Meghraj (Bangalore).

The huge demand in the luxury segment has inspired builders to explore this domain, aimed at upper and upper middle class people. Thanks to the new­found prosperity, rich Indians are willing to travel overseas to countries such as Thailand for the spa or the specialised resort experience. In such a scenario, why not create a similar ambience at home?

“Spas and resorts are a highly specialised form of business. A hotel needs to provide some basics, but a resort has to provide an experience, a spa needs to have a purpose. These projects in a luxury residential complex need sound business foundation,” says Jesper Hougaard, managing director of French spa chain Serena Spa, which has set up independent spas in India. The group is mulling joint ventures with local realty developers.

Hougaard says the business is highly dependant on consistent efficiency and high quality standards. “There is business potential in India, not only because of foreigners and Indian expatriates, but also because of the local populace. The discerning Indian would look for quality products that are natural, besides efficient and well-trained staff and high hygiene levels,” he says.

Almost all spas and resorts, to be developed by these realty firms, are theme-based. While the spas offer either Oriental or European experiences, resorts are themed around golf courses or wooded serene areas.

Sobha Developers is setting up an ayurvedic spa, offering traditional Kerala ayurvedic massages and herbal baths on its 55-acre integrated township, Sobha City in Thrissur. The project entails an investment of Rs 850 crore and is expected to be ready by May 2011.

“Tier II cities offer tremendous potential for real estate development. We aim to capitalise on the growing demands of tier II cities by offering the best of all facilities to the consumers,” says P N C Menon, chairman, Sobha Group. Brigade Group’s hospitality wing, Brigade Hospitality, too has partnered Banyan Tree Hotels & Resorts to launch a Rs 100-crore sprawling hill resort in Chikmagalur, Karnataka.

Spread over 48 acres, the hill resort will have 25 high-end villas — The Banyan Tree Resort and Spa — and a 74-room Angsana Resort and Spa. These two resorts are expected to become operational by 2009-2010.

Vineet Verma, chief executive officer, Brigade Hospitality Services, says the company plans to strengthen its presence in the hospitality segment. “Brigade Hospitality plans to strengthen its presence in the hospitality sector through a series of state-of-the-art projects,” he says.

Delhi-based Omaxe has tied up with Thai Privilege Spa to establish and operate, in the next two years, 10 spa outlets of Thai Privilege Spa in Delhi and other parts of north India. It is setting up The Forest Spa in Noida, Royal Residency in Ludhiana, Omaxe Spa Village in Faridabad, among others. The developer will also house Thai Privilege Spa in its luxury residential projects.

“Keeping in view a stressful life due to fierce competition, which takes away the joys of life, Omaxe has introduced the concept of spas within the complex of its hi-end ultra luxury apartments and penthouses,” says Rohtas Goel, chairman and managing director, Omaxe.

The company has joined hands with Leander Sports, a wellness concept design company promoted by lawn tennis player Leander Paes, to design and manage fitness facilities in five of the company’s townships in northern India.

Meanwhile, DLF has also strengthened its presence in the hospitality sector with the acquisition of Singapore-based luxury hotel and resorts chain, Aman Resorts. Bangalore-based MRG Hospitality and Infrastructure, a small entity, has also entered the race and is developing resorts over 38 acres on the Bangalore-Mysore Road.

With spas and wellness centres mushrooming all over the country, industry experts say tie-ups with branded spa chains will help developers leverage their names. A spa or resort that delivers a memorable experience has the potential to have a loyal, high-end clientele.

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

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

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

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

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

Realty Majors Acquiring Properties From Smaller Players

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

Indian ‘Golf Cities’ Fuel Real Estate Boom

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Realty rocks in Micro Markets

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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