Raheja bags 500 cr Delhi slum project

New Delhi:
Delhi Development Authority (DDA) has awarded Delhi’s first slum redevelopment project, worth Rs 500 crore, to a local builder, Raheja Developers, in a move that may see more such projects in the national capital resulting in better living conditions for urban poor and thousands of crores of businesses for builders.
DDA has awarded 5.22-hectare , or 13-acre , project at Kathputli Colony near Shadipur Depot in west Delhi to Raheja Developers for Rs 6.11 crore, a DDA spokesperson said. Under the scheme, the builder pays only Rs 6.11 crore—the bid amount—for the land, but has to build 2,800 homes, of 30 sq metre size each, for existing slum dwellers of Kathputli Colony named after its majority residents of puppeteers and craftsmen.

In the bargain, the builder gets for commercial exploitation 10% of the total space slated for 2800 homes and also close to a hectare for high-end residential development. Therefore, the cost incurred in building 2800 homes for slum-dwellers will be offset by the sale of commercial space (office, shops) and high-end houses in the project, while land would come dirt cheap at Rs 6 crore.
DLF has recently sold 1,250 apartments in its Capital Greens project, just 3-4 kilometres from Shadipur Depot at a rate of Rs 5,677 a sq ft. Raheja Developers will have to create temporary accommodation for the slum dwellers at a piece of land close to the project site that will be given by the DDA in a month or two.
The builder will be expected to build homes for slum-dwellers within two years of the allotment of the land for temporary accommodation. Usually, slum redevelopment projects offer a very high margin of 70-75 % to the developers, mainly because land comes cheap even as projects are fraught with political risks. In Mumbai, developers have to get the consent of 70% of the slum-dwellers and many a time face opposition from political interests as well as voluntary organisations.

In Delhi’s Kathputli Colony project, the government has already got slum-dwellers on board. And Navin Raheja, CMD of Raheja Developers, said the project is a ‘loss-making proposition’ , but he has taken this up because he is engaged in a social ‘mission’ to help urban poor get homes. He estimates this project to be worth Rs 500 crore.

DDA had invited technical bids for the project over a year ago. Eight developers , including Unitech, HDIL and Raheja, met the technical qualification criteria, but only one of them submitted financial bid early this year amid cash crunch faced by most realty firms.

Unitech, country’s second largest realty firm, declined to comment on why it didn’t submit a bid.

Best time to look for a value deal in real estate

It’s perhaps the best time to look around for a value buy in real estate. With lower price points in locations which were not earlier within your Land as investment

wallet’s reach, buyers are scouting for good ‘value’ bargains at this time. And with developers going big on affordable home launches, the timing may just be one of the best for buyers seeking a steal deal.

Anshuman Magazine, CMD of global real estate consultancy CB Richard Ellis (CBRE) says that value buying is happening mostly in suburban locations as that is where the current supply is. “Certain pockets in Gurgaon and Noida, where the price earlier used to be Rs 65 lakh-Rs 1.5 cr, today have deals to offer anywhere between Rs 35 lakh to Rs 50 lakh! Developers have reduced the total ticket sizes, adjusted area, price and given amenities. This has got people back and is making them hunt for value deals right now.”

Locations such as Gurgaon, Faridabad, Noida in Delhi NCR and Navi Mumbai and Thane in Mumbai are some of the good locations for value buying, feels Navin M Raheja, chairman and managing director of Raheja Developers. “Anything which is available between Rs 2,500 to Rs 3,500 per sq ft is the right price depending, of course, upon the location and infrastructural facilities available in the vicinity with specifications offered.” The developer is soon going to launch a housing project, ‘Raheja Shilas’ near IGI airport wherein the price would range between Rs 2,575 to Rs 2,875 per sq ft.

Raheja further adds that there are three kinds of value buying that are taking place in the real estate market right now. Ready to move in residential property in and around metros and their suburbs, ready to move in commercial property which is already leased or generating income and low income and middle-income housing ranging from Rs 15 lakh to Rs 40 lakh are the primary types of value purchases in his opinion.

Many of those who were holding out have also decided to make a purchase now as prices have bottomed out. Plus with many affordable housing launches by developers, the view is that prices are more pocket friendly at this time. “Prices have reached the bottom and in these prices you are bound to get good appreciation in future. So if you are buying a particular property now, one is definitely going to feel later that they grabbed a good deal,” says Vijay Jindal , CMD, SVP Group.

Jindal’s view is shared by many others in the market as well. Smaller investment opportunities with a starting price bracket of Rs 35 lakh-Rs 40 lakh have fuelled the demand. “Earlier the prime focus was on high-end purchases, but today, the conversions are happening mostly for smaller properties. At least 50-60% conversions are there in the market today for properties priced between Rs 30 lakh – Rs 80 lakh, 20-25% are for the expensive ones priced between Rs 90 lakh – Rs 2.5 cr and a miniscule number is for the ones above Rs 5 cr,” says Pankaj Jain, executive director of Realistic Realtors, a North Indian real estate consulting firm.

But are people also looking at Tier II and Tier III cities right now, which were prime investment hubs in the good times? “People are not primarily Land as investment

seeing these locations for investment at this time. Value buys here are mostly end-user driven,” adds Magazine.

However it’s best not to overlook the pros and cons before deciding on such value buys. Though the pricing and the product may both look highly appealing, it’s best to read the fineprint carefully. This will hold in good stead for the future. Rajeev Rai, vice president, corporate, Assotech, advises about key strategies that should be followed. “One shouldn’t get carried away by sops or discounts offered and one must also not ignore the sold stock status of such a project. As far as the dos are concerned, one must set their priority of the price, location, size etc. A due diligence about the supply and demand of such projects is necessary. Lastly, one must check the developer’s profile, delivery schedule and legality of the project.” Assotech has projects such as The Nest in Crossings Republik at Rs 2,300 per sq ft and Metropolis in Rudrapur at Rs 1,850 per sq ft.

So if you have been thinking of investing your money in a home, it’s the right time to go deal hunting. Negotiate a bargain, go for value and close the deal.

http://economictimes.indiatimes.com/features/the-sunday-et/property/Best-time-to-look-for-a-value-deal-in-real-estate/articleshow/5032421.cms

Indian Landscape goes greener

Globalization and free market economy being the order of the day, the landscape activities are no more confined to a few professionals. Landscaping has got the industry status with a lot of activities taking place over the last few years.

“The rapid urbanization and industrialization leading to the ongoing construction boom, malls culture, green belts, amusement parks and residential townships, all these have given a new dimension to the art of landscaping, points out S Jafar Naqvi, President, Indian Flowers and Ornamental Plants Welfare Association (IFLORA)

In fact, Naqvi notes, India is availing itself of the services of landscape professionals from Europe, Malaysia, Singapore and importing all kinds of high value products from all over the world”,

Today, green architecture and energy-efficient landscape designs propose an alternative idea of how the appearance of landscape can integrate more fully with the life processes of plants, rather than remain dependent only on their shape and form, says Professor M Shaheer, Shaheer Associates, a prominent landscape architect, based in Delhi.

Indian real estate developers like Ansal API, DLF Universal Ltd, Omaxe Ltd., Hiranandani Developers, MGF Emaar Properties (Dubai), Prestige Group, Supertech, Unitech Builders, Rizvi Builders, Hafeez Contractors, K Raheja Group, Raheja Developers, Meriton Group, Parsvnath Developers, International Land Developers Ltd., Aashiyana Group, Sahara Group, JMD Ltd., Amrapali Group, Panchsheel Buildtech, M2K, Kalpataru Constructions, Merlin Group, Prestige Builders, Rungta Group and many more have joined the new urbanization revolution in India by creating new “Green Living” concepts.

It is undeniable that plants and trees play a key role in the development of our society and culture. Healthy environment is a boon especially for the growing children. Professor Dario Gamboni puts it even more pithily: “Plants make the shape of life itself visible”,

Naqvi adds, “The concept of using Indoor plants in offices and work places is growing in India rapidly because it enhances the employees’ working capability and creativity, while making the environment more peaceful and friendly.” Alongside, some of these plants are useful in curing many common diseases. Therefore offices of MNCs and many corporate bodies in India are growing them often in their office premises

Secondly Pune is a major production hub of quality plants, trees, shrubs and playing an important role to protect environment by supplying nursery plants to almost all top landscape designers, real estate developers, Urban development departments, and also exporting to other countries.

The following from Pune based companies participated in the expo. Display of Maharashtrian produces in this expo is a major attraction among landscape designers, officers of Urban development departments and nurserymen from all over India coming to source their requirements through this mega platform.

K F Bioplants, a leading tissue cultue lab in the country and a most successful Indo-Dutch joint venture project, supplying and exporting tissue culture plants from India.

Tukai Exotics -one of the prominent nursery project involved in developing of all kinds of trees and plants and placing Pune as a sustainable long term suppliers to green projects.

Tropica Nursery- the collection of different imported and indigenous accessories and inputs is the specialisation of this company supplying all kinds of pots, plants, trees, and other inputs all over India.

Vardhaman Fertilizer -a leading soluble fertilizer company focusing on high quality growing of plants, flowers and other horticulture crops.

Gajra Nursery -Ornamental plants and the variety of big size trees is the specialization of this company and became a reliable supplier to sports complexes and new urban projects coming in different metros.

Jagtap Horticulture-Pune’s one of the oldest nurserymen diversified into gardening centre, landscaping and importers of inputs for landscape and golf course sector.

It is also proven through various surveys that in the developed world the productivity of working staff has increased by 10 to 15 per cent by providing green surroundings or a good green plant nearby.

The country’s landscape industry has devised its own architectural creativity in the last five decades.

In view of the growing consciousness on Redesigning India thorough promotion of environment-friendly concepts, the 4th International Landscape & Gardening Expo 2009, to be held on 2-3-4 October 2009 in Hyderabad, India, will be an ideal destination for the entire landscape industry. It will be a single platform and a meeting place for all stakeholders under one roof. This mega event will be a world class experience for all professionals in this sector to increase their business through interaction and business dealings.

Adding value to the event will be a two-day conference devoted to “Plants, Places and People”. The discussions will focus on improving the quality of life of people by preserving the environment through proper planning of public places, parks and recreation centres. It will open a new chapter in the history of India’s greening movement.

Key speakers, who have been invited, are: the President of Indian Society of Landscape Architects (ISOLA) Ms. Savita Punde and the presidents of IFPRA, GCSMAI, HMDA, IBA, ITC Group, Raheja Group, Tourism Industry, Nursery Industry, Sports Authority, Amusement Park Industry, Lighting Industry and individuals working for Green sector.

Source  : http://www.indiaprwire.com/pressrelease/agriculture/2009091834008.htm

Developers witness revival of big ticket residential deals

The wealthy and elite across the country are scouting for good deals in the real estate sector. And in their kitty are a few crore of rupees to buy Land as investment the home of their choice. The concept of bigger, better and more luxurious has caught on. So is the demand in the Rs 5 crore plus housing seeing a revival?

Says Anuj Puri, chairman & country head of global real estate consultancy Jones Lang LaSalle Meghraj (JLLM), “Our Homebay residential agency has concluded several high-ticket residential transactions over the past three to four months, and we can vouch for a significant sea-change in how the luxury home market is being perceived. High networth individuals (HNIs) have begun to show renewed investment sense of purchasing luxury properties in prime locations of leading metros, realizing that supply in such locations is limited.”

But some feel that this demand is primarily coming from existing projects. Shveta Jain, national head, marketing & investment, residential, Cushman & Wakefield (C&W) India, says there already are significant amount of existing projects in the luxury segment that have not been fully absorbed. The demand, thus, is not significant enough to warrant key new luxury project launches, she feels.

At a time when affordable is the buzz in the real estate sector, are developers looking at new luxury launches? Manu Goswami, head, business development and strategic planning, Jaypee Greens, says although they have not launch anything over the last 10 months, they do have plans of launching luxury projects in mid September.

“The demand has turned around over the last few months. But people are more choosy now.” The developer has Estate Homes in Greater Noida which are priced at an upwards of Rs 8 cr and about 50% of their inventory has already been sold.

During the boom time in 2007, real estate developers were mainly concentrating on luxury projects. The margin for a developer in luxury housing would be at least 15-20% higher than say an affordable housing project. So for many, this seemed as a more attractive proposition in earlier times. But developers defend this logic.

“The absolute margins may be higher for a luxury development but the profitability also accrues over a much longer period of time vis-a-vis affordable housing which gets sold much earlier,” adds Goswami.

However, there are some developers who are not launching any new projects in this category at the moment. BPTP, for instance, is focusing on the affordable housing segment. But they agree that activity has started happening in the luxury segment. “The elite who were earlier waiting for the right investment opportunity have now started buying property. There has been an increase in demand for luxury housing,” says a BPTP spokesperson.

Raheja Developers too has an upcoming project — Raheja Atlantis, a ready-to-move-in luxury housing project. Located on NH-8 in Sector 31, Gurgaon, villas and presidential suites are primarily available for sale. It’s priced at Rs 6,600 per sq ft.

Harinder Dhillon, GM, marketing, Raheja Developers, says the demand has been quite encouraging. “In Atlantis we have had over 30 bookings in the last three months at Rs 1.50 cr onwards per apartment. The demand for luxury housing is making a comeback, provided it is ready to move in and at a good location.”

Most of the demand in the apartments segment is being seen for ready-to-move-in apartments. “We are witnessing enhanced demand for completed Land as investment projects or those nearing completion,” says Rohtas Goel, chairman National Real Estate Development Council and CMD of Omaxe. He says developers across the board are noticing this trend and focusing on completing existing projects and speeding up delivery.

Puri of JLLM too seconds the view. “The highest demand is for ready-to-move luxury properties, since the ability of developers to complete projects is generally not being viewed with much enthusiasm at the current time.

However, there are serious purchase inquiries for under-construction projects by highly reputed developers, especially in locations where there is very little potential for future supply.”

Real estate investment advisers such as Ashok Kumar find that the bulk of revival in Delhi has been in the heart of the city in premium areas such as Defence Colony and Greater Kailash where the supply is limited. So deal hunters are now picking up plots for between Rs 12-19 crore to redevelop old properties. And the buyers? CEOs, professionals and HNIs.

Buyers today are willing to spend to get the home of their choice. But the last economic downturn has showed them that long-term investments are counter-productive. Projects are behind schedule by one to two years and there is no guarantee that buying at premium rates fetches you better returns. Therefore buying a near-complete apartment is seen as mitigating the risk.

Though developers too have started to build in the affordable segment in keeping with the thrust of the government and the incentives offered to developers as well as buyers, few have exited the luxury segment. But with an increased interest shown from buyers, it seems that luxury housing is ready for a grand comeback.

Source : http://economictimes.indiatimes.com/News-by-Industry/Realty-sees-revival-of-big-deals/articleshow/4949705.cms

Haryana eases building norms, makes room for cheaper homes

New Delhi:  Homebuyers can now look forward to buying homes for as low as Rs 4 lakh to Rs 16 lakh in Gurgaon, thanks to a recent policy initiative by the Haryana government. The state government’s new scheme caps the price of the homes built by developers in return for permission to builders to make more housing units of smaller sizes in the same area.

Developers say the scheme will help launch new projects and increase cashflow . “Projects under the scheme would give minimal margin. Nevertheless , developers would be encouraged to launch homes under the scheme, as there is a great demand for low-cost homes,” says Navin Raheja, chairman of Delhi-based Raheja Developers that plans to shortly launch some projects in Gurgaon under the scheme.

The incentives for developers include a relaxed density norm (from current 250 people per acre in Gurgaon to 600 people per acre) and higher ground coverage area from 35% to 50%. “The move to relax density norms will help us build smaller homes and thus make them more affordable ,” Unitech head of corporate planning R Nagraju said, adding that it was impossible to build homes of less than 1,500 sq ft on average under present density norms. Under the new scheme, a 10-acre plot will be able to house over 1,200 dwelling units as against 450 units at present, Mr Raheja estimates.
A larger ground coverage means concrete structure could occupy larger area on the ground thus lowering project costs. Construction cost is usually lower in low-rise buildings.

Under the scheme, which will be open for developers until November 20, the low-cost homes with a minimum carpet area of 25 sq mt (approx 350 sq ft) will have a maximum price tag of Rs 4 lakh all over the state. Dwelling units with a minimum 48 sq mt (approx 700 sq ft) carpet area, defined as affordable category by the government, will be sold for Rs 16 lakh in Gurgaon-Manesar urban complex, Rs 14 Lakh in Faridabad, Panchkula and Ballabhgarh complex and Rs 12.50 lakh for rest of the state.

Below poverty line (BPL) families as well as the class IV staff of the state government will be eligible for the Rs 4-lakh homes, which will be at least 15% of the total dwelling units built in a project. The allotment will be made through a draw of lots and allottees can’t sell their property before five years of possession.

Haryana government’s new scheme caps the price of the homes built by developers in return for permission to builders to make more housing units of smaller sizes in the same area

Incentives for developers include a relaxed density norm (from current 250 people per acre in Gurgaon to 600 people per acre) and higher ground coverage area from 35% to 50%

Under the new scheme, a 10-acre plot will be able to house over 1,200 dwelling units as against 450 units at present.

Source : http://content.magicbricks.com/haryana-changes-building-norms-to-make-room-for-cheaper-homes

Raheja Developers plans to develop serviced apartments in Delhi, Noida and Faridabad

According to a report in The Financial Express, development of serviced apartments in major metros is the latest trend in the Rs 10000-Crore real estate sector. Top builders aim at supplying 100 per cent service apartments to attract tourists and business travellers.

Delhi-based Raheja Developers is planning to venture into the development of serviced apartments in India, for which the company is planning land deals in Delhi, Noida and Faridabad. The move coincides with the Commonwealth Games 2010.

Navin Raheja, Managing Director, Raheja Developers, said, “In the next one year, we will launch 150 units of serviced apartments in various sectors of Gurgaon to cover the huge shortage of hotel rooms and apartments for tourist and business travellers. The demand for serviced apartments is suddenly high in the National Capital Region (NCR) because of the upcoming Commonwealth Games. We would be offering 25 per cent lower room rents, an alternative option to steep hotel accommodation. The area would vary from 400 sq ft to 600 sq ft and would be extremely competitive in pricing.”

Serviced apartments are fully furnished, ready-to-use apartments, usually 300

Source : http://www.hospitalitybizindia.com/detailNews.aspx?aid=5849&sid=1

Developers in India switch to providing budget housing

INDIA: Real estate developers in India think the worst may be over as property prices stabilise. Buyers are also returning, encouraged by the government’s decision to provide cheaper home loans.

India’s real estate sector is showing its first signs of stability after a free fall that started last year. A series of interest rate cuts on home loans and a revival in optimism have encouraged developers to start new projects.

Some are even putting a halt to discounts as demand picks up – property prices are going up by 10 to 15 per cent after falling nearly 30 per cent last year.

Naveen Rahja, managing director, Raheja Developers Engineering, said: “For some time, there will be cautious correction and there will be upward trend (of prices). But ultimately, the demand and supply are going to continue because India has globally the largest young workforce whose disposable income is increasing. They will all need houses and places to shop.”

Budget housing, which was rarely considered lucrative, is now the target for developers.

In its recent budget, the government revealed a housing scheme that aims to make India slum-free in five years. Following that, more than 65 developers announced new budget housing projects.

“Government planners were not given appropriate population density so the smaller houses were not facilitated and encouraged by the government. Now, developers have realised the hard way that there is actual demand existing in this segment so everyone is running after that,” said Rahja.

During the property boom of 2007, residential prices went up three-fold in major cities.

Developers have admitted that they made a mistake by focusing on the top 2 to 3 per cent of India’s population. Many are now switching from premium projects to cheaper ones.

But a complete rebound in home sales is still said to be months away as buyers wait for further price correction.

Source : http://www.channelnewsasia.com/stories/marketnews/view/444948/1/.html

Low-rise apartments on a high

Are you one of those who have always wanted to own an independent house? If ample space and a private dwelling are topmost on your mind, then there  are options galore for you.

Low-rise apartments are the latest trend to catch on in the real estate market. Typically, low-rise apartment units are built on Ground+ 2 floors or a maximum of Ground+3 floors. These are fast becoming a consumer preference owing to their cost effective advantage as well as the independent space that they offer.

No surprise then that a lot of developers are seeking an opportunity aggressively in this segment. Realty players such as BPTP, Vatika Group, Raheja Developers and Assotech are coming up with projects which cater to this inherent demand in the market.
And if you are wondering why would a developer want to build a low rise apartment vis-a-vis a big volume one, then there is a good enough reason. Here’s how this model works: The cost of construction is lower, more maintenance equipment costs are saved and developers tend to operate on a high volume strategy.

Says Venu Gopal, senior professional, real estate practice, Ernst & Young, “The cost efficiencies are on account of lower cost of base foundation construction, lower municipal fees/charges, limited need of amenities such as lifts etc. Generally, for such projects as the developer is not able utilise the full floor space index (FSI) available to them, the ground coverage is higher than high-rise buildings. The margins for projects depend upon a number of factors, including cost of land, amenities provided, prevailing market price etc, but generally such projects can achieve comparable margins as big volume projects.”

Now in a slow market, these formats of construction have been picking well. And that’s a reason why many developers have chosen the current time to tap the opportunity.

Delhi-based Raheja Developers, for instance, is coming up with a plotted development in Sohna(Gurgaon). There are also developments coming up at Sector 109 in Gurgaon priced in the range of Rs 2,575-2,775 per sq ft area, Dharuhera; Bawal (Haryana) and other parts of northern India.

Harinder Dhillon, GM (marketing), Raheja Developers, feels this trend is now coming up since there is a set of customers in the market who prefer the privacy and space which independent floors offer. “Consumers prefer it as additional costs such as lifts, greater common areas and more maintenance equipment costs are saved in the case of low-rise development. Also, one gets the benefit of adequate space which may be a constraint in high-rise apartments.”

Vatika Group too had launched low-rise apartments within Vatika City in 2005 called Iris Rows and Laurus Apartments comprising a total of 300 units. While possession for Iris Rows started two years back, Laurus would be complete in 5-6 months. Market rate for it is 4,000/sq ft for an area of 2,160 sq ft. And the response to that, they say, has been rather encouraging.

“In North India, a large percentage of apartment buyers have retained their traditional and psychological preference for being as close to the ground as possible. In addition, low-rise developments entail lower costs. From the site planning perspective, low rise housing implies spread of population on a larger area as compared to high-rise and results in smaller and more compact communities,” says Pankaj Pal, president, sales and marketing, Vatika Group.

Ditto is the case with BPTP which recently launched its independent floors in the price bracket of Rs 16-25 lakh in Faridabad. Amit Raj Jain, vice-president, marketing, BPTP, says low-rise apartments are far more affordable as compared to group housing projects. “Looking at the demand in the market, BPTP recently launched Park Elite Floors at Parklands Faridabad which received tremendous response with over 5,000 bookings.”

Many also feel that independent floors are paying off in this market as they fall within the concept of ‘right price housing.’ According to Rohit Malhotra, CEO of Realtech Developers, independent housing is one of the concepts in a mid-sized housing development project and it seems to have taken off well. Citing a survey of 40 new residential projects during the last six months in Delhi NCR, he says, 28% of the units were in the form of individual floors in low rise, as compared to only two villa projects that were launched.

But don’t just go for a low-rise without looking at the basics. Follow some dos and don’ts. Rajeev Rai, V-P, corporate, Assotech, says basics such as land title, background of the developer, quality and type of construction, maintenance charges after possession and delivery schedule need to be borne in mind for these apartments as well.

However, some things which need to be checked are the security aspect as you will be living in an independent house. Checking on power back-up availability is equally important. Buyers should also look for projects that offer easy accessibility, connectivity and safety.

With buyers increasingly looking at low-rise purchases, this segment is expanding its scope in the market. So if you want to buy a home, don’t forget to look at this choice. It could well turn out to be your preference too!

Source : http://economictimes.indiatimes.com/Features/The-Sunday-ET/Property/Low-rise-apartments-on-a-high/articleshow/4767834.cms

Real estate loans may get cheaper

The Reserve Bank of India (RBI) on Wednesday issued draft guidelines on the classification of bank exposures under which loans to hotel & hospital projects and special economic zones (SEZs) will not be considered as commercial real estate. However, investments in real estate funds will be considered as capital market exposure.

RBI had earlier issued guidelines for such loans on January 7. It has called for comments from banks and the public on the new draft.
“If lending to hospitals and hotels is kept outside the purview of commercial real estate lending, then banks will be left with more funds for commercial and residential projects. Most banks have an internal limit of 3 to 7 per cent of their total advances as real estate exposure. If the draft guidelines are finally adopted, more money can be allocated to commercial and residential real estate,” said a senior Bank of India official.
The exposures to entrepreneurs who buy real estate as a carry-on- business, which is serviced out of the cash flows generated by the business, will also not be regarded as commercial real estate exposure.

B Ravi Ramu, finance director of the Bangalore-based Puravankara Projects, said this would allow greater scope to banks to lend to real estate projects. “Loans for hotel projects are usually long term, and the repayment usually begins only after their commissioning,” he said.

“The recommendations, if and when notified, will ensure cheaper credit to developers,” said Naveen Raheja, managing director of the Gurgaon-based Raheja Developers. He said the move would lead to lower risk ratings of projects and finance would become easier not only for building hotels and hospitals but other commercial and residential projects as well.

Loans given for construction of cinema halls, amusement parks, hotels & hospitals, cold storages, educational institutions, beauty parlours & saloons, restaurants and gymnasiums will also be exempted. Such loans will generally be secured by these properties, according to RBI.

For instance, in the case of hotels & hospitals, the source of repayment in the normal course will be the cash flows generated by services offered by these establishments. In the case of a hotel, the cash flows will be largely sensitive to factors influencing tourist flows and not directly to fluctuations in real estate prices.

In the case of a hospital, the cash flows in the normal course will be sensitive to the quality of doctors and other diagnostic services. The hospital’s source of repayment may also depend, to some extent, on changes in real estate prices. But this is a minor factor in determining the overall cash flows.

In case of default, if the exposure is secured by the commercial real estate, the recovery would depend on the sale price of the asset.

Similarly, investments in the equity of a real estate company or a mutual fund, venture capital fund (VCF) or private equity fund (PEF) – which, in turn, invest such companies — will be sensitive to real estate price changes, in addition to having a correlation with the general equity market. Hence, these will be reckoned both as ‘capital market exposure’ (for the purpose of compliance with the regulatory ceiling fixed by RBI) and the internal ceiling for ‘real estate exposure’ fixed by the lending bank itself.

The RBI ceiling on banks’ capital market exposure is 40 per cent of their tier-I capital, which is the core capital and includes capital and reserves.

(With inputs from Shilpa Shree in Bangalore and Vivek Sinha in New Delhi)

Source : http://www.mydigitalfc.com/banking/real-estate-loans-may-get-cheaper-767

Developers build on low margins, high volumes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Right location & viable project will reward investments

Investors are in two minds about commercial projects at this time. Given the slowdown and delivery hassles, investments in such projects are moving  at a slow pace. But if you choose the right location and a viable project, returns will follow. So which are the lucrative commercial locations for an investor in the current scenario?

Paresh Chawla, associate director, real estate practice, Ernst & Young says different cities have different parameters to ascertain the viability of a commercial project. “In cities such as Mumbai and Delhi occupancies are driven largely by financial services, banks, corporate headquarters, telecom, insurance and IT. Here the possibility to lease out vacant commercial spaces would be relatively better, in comparison to other cities.

Some good commercial spaces (Grade A) are available in Mumbai at central Mumbai, Andheri and Malad. Rentals at these locations are under pressure since supply is in excess of demand. In locations such as Fort and Ballard Estate, prices seem to have bottomed out and there is no major supply that is forthcoming.”

According to Jones Lang LaSalle Meghraj, while overall the segment has stayed flat in terms of transactions, there has been a 5-10% increase in absolute sales volumes of resale properties in completed buildings. This has been primarily due to the churn brought on by corporates leaving projects to relocate, leading to a number of new leases being signed in these buildings.

Pawan Swamy, MD, west, JLLM, says due to the protracted slowdown in IT and outsourcing, projects related to these segments are not on the majority of preference lists at present. “In the present context, corporate offices in the CBDs and city centre locations are the best bet for retail investors into commercial projects. Bandra-Kurla Complex and Nariman Point in Mumbai and Delhi locations such as Saket and Connaught Place are good options. As are Nungambakam and RK Salai in Chennai and MG Road, Residency Road and Richmond Road in Bangalore. Retail investors are currently buying into projects that are close to completion, already have anchor tenants signed up and are located in infrastructure development zones.”

Many feel that while Tier-I cities offer an immediate lucrative investment option for an investor, Tier II and III should be chosen more from a long-term perspective. Rohtas Goel, CMD, Omaxe, feels that for those investors looking at a long-term investment option, locations on the outskirts of the city and Tier-II and III cities offer a wider choice as well as return on investments.

Agrees Ajay Midha, V-P, commercial and SEZ, Raheja Developers, who feels that factors such as the piling inventory of commercial space followed by  falling rentals makes Tier II and Tier III cities a better solution for investors. “Such areas will still have a scope of a fair capital growth due to realistic circle rates and land prices. The prices in these cities are also 30%-50% cheaper than the Grade A cities and fresh supply is expected ahead.”

But are there any projects which investors are showing a preference for in the present context? Investors are parking their money in four main segments — insurance, education, telecom and infrastructure, feels Vijay Jindal, CMD, SVP Group. He says: “These sectors are linked to business activity in India, hence the impact of slowdown is lesser. Retail investors are looking at the companies whose target market/focus will be on India as they will need more office space in the next six months.”

It is, however, necessary to keep a few things in mind while investing in a commercial project. Mr Swamy of JLLM highlights some key dos and don’ts for a retail investor. “One should buy into buildings that are close to completion, or into resale spaces in completed buildings at corporate-centric locations. Investing with a long-term view of three to five years is also important. Take position in smaller buildings to avoid the fallout of occupancy shortfall. Also understand the intricacies of the asset class before investing. This applies equally to commercial, retail and land investments.”

It is necessary to understand the significance of a given location investing in a project. Knowing about the supply situation of commercial property in the micro-market will also help. Smart investors are out to make the best of the tough times.

Source : http://economictimes.indiatimes.com/Features/The-Sunday-ET/Property/Right-location–viable-project-will-reward-investments/articleshow/4599175.cms?curpg=2

Pay later, it’s okay, say developers

Cash-starved real estate developers are leaving no stone unturned to improve cash flow. For example, Unitech, Omaxe and Raheja Developers are waiving penalty on late payments so that customers do not quit.

“These are tough times for customers as well as developers in terms of cash generation. We are focusing on increasing cash flow from all directions and are making sure that no customer defaults or feels disheartened on not being able to pay his instalment due to unavoidable problems,” said an official from Unitech.

Most developers charge 18 per cent annual penalty from defaulting customers.

A recent report by IDFC said Unitech had seen delayed payments by customers for already booked properties. The receivables of the company increased to Rs 1,000 crore in fiscal year 2009, compared with Rs 750 crore in FY08.

Over the past year, a lot of people have lost jobs and taken salary cuts. Many of them had booked their first homes on instalments. The past six to nine months have seen a number of them defaulting on payments.

“The move to waive penalty on late payment is a smart move. This will provide customers the much-needed cushion at a time when a lot of them may want to back out due to their financial condition,” said a Mumbai-based real estate consultant.

Omaxe Ltd, which charged 18 per cent penalty for the first two months of default and 24 per cent after that, is offering a waiver to customers with a good record. “We are not offering the scheme to all our customers and are giving the waiver to only those who have made all their payments before their first default,” said an Omaxe spokesperson.

The debt of all real estate firms has risen over the past year and they do not want to lose an opportunity to gain cash from potential customers by insisting on penalty.

“We keep in mind the financial position of our customer. If someone has lost his job or faced some other financial problem, we allow him/her to start paying his EMI without caring about the penalty,” said Naveen Raheja, managing director, Raheja Developers.

Source : http://www.business-standard.com/india/news/pay-later-it/s-okay-say-developers/358033/

Developers find JVs attractive in realty market fall

Cash-strapped property developers, who had leveraged aggressively between the boom years of 2005-2008 to fund land buying, are now increasingly opting for joint ventures (JVs) with owners to save cash while developing land, developers and consultants said.
 
Developers who are launching new projects are opting for this route, as they need not pay the entire amount in one lot and owners need not forego the potential rise in value. As much as 70 per cent of land deals in the country take place through this model now, against 40-45 per cent a couple of years earlier, say property consultants.

If some developers return built-up space to land owners for their contribution, others share a percentage of revenues with owners. The model changes depending on location, price and potential.

Unitech, the country’s second largest developer, has developed 1.5 million sq ft of space in JVs with local companies in Chennai and has launched an office property project in Mumbai in a JV with the local Omkar group.

Delhi-based Raheja Developers, which has 100 acres of land under joint development, is planning to launch an 18-acre luxury residential project in Gurgaon in the next six months under the JV route, wherein they are giving 30 per cent of the apartments to land owners. Mumbai-based Sunil Mantri Realty, which entered into eight JVs in the past year, gives 10-50 per cent of built up area to the land-owners depending on the project.

Tata Housing, a unit of Tata Sons, recently launched a Rs 100 crore low-cost housing project in Bhoisar, in the Mumbai outskirts, in a JV with a local company, wherein Tatas share a certain percentage of revenues with the latter. Tata Housing plans to follow a similar model in other cities and is talking with state governments for public-private partnership agreements, said Brotin Banerjee, managing director.

“The downturn and drying up of bank funds has forced developers to work out this option. A plenty of such options are available today, where developers need to take care of only development and construction cost,” said Sunil Mantri, promoter of Sunil Mantri Realty.

Analysts say developers are in a difficult situation today due to leveraged balance sheets and fall in cash flows, which is forcing them to look at new options.

“Aggressive land acquisition through leveraging the balance sheet was the mantra during FY 2005-08. Real estate companies hit the equity markets and raised funds to build up a land bank, with the additional intention of reducing debt from operations. However, the with economic slowdown from January 2008, cash flows dried up significantly,” said stock brokerage Emkay Securities in a recent report.

Developers say the fall in stock and property markets, coupled with slowdown in the economy, is also forcing land owners in places such as Mumbai to opt for JVs with realtors. “Earlier, this concept was popular in the north and south. Now we are getting proposals from cities such as Mumbai too, as land owners are exploring different options to raise money,” Mantri said.

Adds Anshuman Magazine, chairman and managing director of property consultant C B Richard Ellis: “Terms are in favour of developers when markets are down. It depends on the profile of a developer in such agreements.”

Though the concept is getting popular, some developers and consultants have apprehensions about the model. “Though we are not averse to joint development, we prefer outright purchase, as one gets full control of the land and avoids dealing with land owners later,” said Rajeev Piramal, executive vice-chairman, Peninsula Land.

Says Mantri: “It is fine as long as the deal is structured properly. If the sharing is unreasonable, then it will put both developers and land-owners in trouble.”

Source : http://www.business-standard.com/india/news/developers-find-jvs-attractive-in-realty-market-fall/358561/

SEZ developers need time to complete their projects

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

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

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

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

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

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

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

Real estate market down, apt time for your dream home

Real estate prices have fallen remarkably in the last few months. The reasons for it are not unknown. The prices were being affected even before Top Ten Global Financial Centers Bandra-Worli Bridge

Lehman brothers collapsed or Citibank had to be bailed out. When inflation reached the peak in India, so did the cost of buying a home. Property prices were at an all time high, interest rates had been much higher than the rates that many could afford, and buying a house in the city was a mammoth task to achieve.

But all this has changed now. Due to the global financial crisis, property prices have fallen to approximately 10% to 30% in different areas in Delhi and NCR as compared to last year. In Delhi, certain areas like Golf links, Westend, New Friends Colony have seen marginal decline of approximately 5% in their prices as compared to last year, prices have reduced by 10% in Gurgaon and approximately 20% in Indirapuram, Vaishali and Greater Noida. But it isn’t over yet it seems.

Kamal Taneja, MD, TDI Infrastructure Ltd. points out, “The economic slump will last till another two quarters at least. But, there is hope for the market to pick up after the elections.”

A report from JLLM had suggested that two scenarios might present themselves in front of the residential real estate market in 2009. The residential market was lying low in 2008, while the developers were enjoying the profits out of selling luxury properties, but 2009 is a different story. Even the top developers like DLF and Unitech which were only looking at profitability from luxury properties, have now come up with announcements of their plans to bring up affordable housing over the next few years.

While DLF plans to invest Rs 15,000 crore to build up 40,000 affordable housing units, Unitech made an announcement of 10,000 apartments with an investment of Rs 2,500 crore over the next couple of years. Even Omaxe has announced an astronomical investment of Rs 80,000 crore in the next five years to come up with 10 lakh housing units, for sale at Rs 3 lakh to Rs 15 lakh. In its report, JLLM had suggested that the buyers, who have been waiting to purchase their dream home because the rates were high, would be able to buy their own home in the year 2009 as the prices will drop.

If the volume of buying is high enough, then, with the money that the developers will draw in, they can move on to finish other projects on hold. However, if the buyer continues to wait for the prices to fall to a desirable level in order to get the best rates, there is a possibility that the ‘best rates’ might even come and go, without the buyer being aware of it, said the report.

In the NCR region, especially in Gurgaon and Noida, the prices that were touching the sky, have also come down substantially by 25-30 %. And it is estimated that the market will further dive to another 10-15 %. Navin M Raheja, MD, Raheja Developers states, “According to me, it is the best time for homebuyers to buy property now, since prices are extremely low.

The banks rates on home loans too have come down to single digit. One must not delay the buying decision since the market is already showing signs of revival and will bounce back certainly September onwards.” Raheja’s advice can only second the report from JLLM that points out that buyers might miss out on the opportunity to buy their dream home at an affordable price if they keep waiting for the prices to come down further more.

But there is good news, prices might not have touched the lowest yet as developers have another advice, “We shall advice that people should wait till the results of elections now and see whether our electorate would be able to give us a stable government,” says Raheja. However, elections are not far away and the residential real estate prices have already started showing sings of revival and it is only over the next two quarters that the buyers should wait to buy their own home.

Focal Point
Due to the global financial crisis, property prices have fallen to about 10 percent to 30 percent in different areas in Delhi and NCR as compared to last year. In Gurgaon and Noida, the prices have come down substantially by 25-30 percent The economic slump will last till another two quarters at least. But, there is hope after the elections.

Source : http://economictimes.indiatimes.com/Markets/Real-Estate/News-/Real-estate-market-down-apt-time-for-your-dream-home/articleshow/4352911.cms?curpg=2

Developers build smaller offices as demand slows

To cater to the non-IT market, developers are discounting future rentals to generate cash flows during the downturn.

Developers of work places are shifting their focus to non-infotech companies and building smaller offices to buck the slowdown in the commercial property market, realty companies and consultants said.

“The demand for IT space has come down substantially, and we are focusing more on non-IT space.We are developing 2.5 million sq ft of commercial space, of which 1.5m sq ft has already been delivered and the rest will be completed in the next few months,’’ said R Nagaraju, deputy general manager, corporate planning, Unitech, a Delhi-based developer.

Unitech has dropped plans to develop two of the proposed six information technology parks, due to the slump in demand from the IT industry. At least 38 per cent, or 8.3m sq ft of its projected commercial space of 21.4 m sq ft, is on hold.

IT firms, which absorbed 70-80 per cent of office space a couple of years earlier, had cut their requirement sharply as the global economy slowed, consultants said.

DLF, the country’s largest developer, has halted construction work on nearly 16m sq ft of office and mall space out of 62m sq ft of planned construction. In the office space category, the developer has stalled construction on nearly 12m sq ft of the 36m sq ft planned, the company said recently.

Due to lower demand from IT firms and corporates, office rents have fallen 20-30 per cent in cities such as Mumbai, the National Capital Region and Bangalore, among others. Despite this, the percentage of vacant properties has shot up. Vacancy levels, under 5 per cent in 2007, have moved up to 8-9 per cent in 2008. Property consultancy JLLM expects it to reach 16-17 per cent if the projected space gets completed this year.

To cater to the non-IT market, developers are doing everything from building smaller offices, selling properties floorwise and discounting future rentals to generate cash flows during the downturn.

“Non-IT firms are demanding smaller spaces today. We are thinking of cutting sizes of our big offices, so that we can provide customised products to our clients”, said Neetal Naarang , assistant general manager, corporate communication, Parsvnath Developers.

Said Naveen Raheja, managing director, Raheja Developers: ‘’There was a time when clients used to demand 350,000 sq ft space and we did not cater to customers that required office space less than 2,000 sq ft. However, we are ready to deliver even 500 sq ft of office space today.’’

Analysts say developers cannot change their product mix overnight as they have to revise plans and change operations. “It will take at least a couple of months. Just as affordable housing is the norm today, they have turned to affordable offices,’’ said Akshaya Kumar, chief executive of Park LaneProperty Advisors.

Source : http://www.business-standard.com/india/news/developers-build-smaller-offices-as-demand-slows/351181/

Buying a home much more affordable

For the past few years, the desire among millions of middle-class Indians to own a home remained just a pipe-dream as soaring prices and builders’  keenness to focus on exclusive gated communities shut them out of the market.

But that could be about to change. More middle-class Indians can hope to get a step on the housing ladder in 2009 as bank loans become cheaper and desperate builders, chastened by last year’s property market slump, cut prices to move unsold stock and build cheaper homes.

The past few years have seen houses become just another financial asset, as punters and wealthy investors, buoyed by surging stock market earnings, trooped into the property market in the blind faith that the only direction to house prices was up. Their faith was rewarded, and house prices were driven up to surreal levels. Builders were only happy to play along, and many of them focused on high-margin exclusive developments, almost oblivious to the fact that such properties were beyond the reach of the vast majority of India’s 300-million middle class.

But sometime last year, realty discovered reality. High prices together with double-digit interest rates put off genuine buyers and many families abandoned their search for a home. And the stock market collapse turned the tables on the speculators, and with them, the building trade.

“Developers have understood that affordable or relatively lower-priced homes are the solution to the current mess,” says R Nagraju, head of corporate planning and strategy at Unitech, the country’s second-biggest property company.

In the mess also lies the solution to their misery. Many builders are rediscovering a basic truth: the bread-and-butter of real estate in India comprises simple, affordable houses bought with bank loans at reasonable interest rates. The demand is there — according to government data, India needs 26.5 million homes for 75 million households — but pricing has been out of synch with reality.

A fall in prices may be the secret to reviving the market. The recent rush to get a low-cost dwelling in Delhi – 800,000 applications for 5,000 houses being offered by state-run Delhi Development Authority – is a sign that the appetite for properly-priced houses remains huge.

Builders will have to drop prices if they have capitalise on it. And if they do it, help is at hand from the banking sector. Several state-run banks have slashed interest rates to single-digit levels for housing loans up to Rs 20 lakh in recent weeks, albeit after being nudged by the government which views sentiment in the housing market as a bellwether for the economy and is keen to inject life back into the sector. “The package announced by the government would trigger home sales in the affordable housing segment and in smaller cities,” says Niranjan Hiranandani, chairman of Mumbai-based Hiranandani Developers.

But the impact of recent government actions won’t be limited just to smaller towns and cities. Several developers are launching homes that cost between Rs 20 lakh and Rs 30 lakh (Rs 2-3 million) in bigger centres too.

Ramesh Sanka, chief financial officer of India’s biggest property company DLF says it is a move dictated by the market. “Companies can’t build homes according to their own desire. They build homes for customers and is a if there demand in that segment, we will certainly have more launches in that category,” he said.

Meanwhile, price corrections in Indian realty have been quite stark. Prices of luxury homes have corrected by almost 30%, while houses priced below Rs 50 lakh are cheaper by 10-15%, analysts say. They feel prices need to drop another 20-25% in the latter category for customers to walk in. One reason holding back customers could be hope that prices would drop further. Builders disagree. They believe the housing market has already scraped its bottom. Now it is only a matter of waiting for customers to accept it. The market will revive by April or May this year, says Raheja Developers chairman Navin Raheja.

Source : http://economictimes.indiatimes.com/Personal_Finance/Buying_a_home_much_more_affordable/articleshow/3935080.cms

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

Global downturn hits young property investors

YOUNG PROPERTY investors in India are selling off their assets at a loss because they can no longer afford to pay the interest and costs associated with owning multiple properties.

The global downturn has set off a panic reaction, inducing investors to close deals at losses. It has become almost impossible for those, who invested in real estate last year, to exit the scene, as the downturn has deepened and the prices being quoted do not even cover the purchase costs and interest expenses.

A typical example is that of 35-year-old Rahul Verma, who works with a Noida-based information technology company. He bought a flat in Greater Noida early last year, purely as an investment, with a bank loan to finance 85 per cent of the cost.

Since then, his equal monthly installments (EMIs) have continuously gone up, thanks to a series of rate hikes by the Reserve Bank of India (RBI). However, the prices haven’t climbed as expected and the outgoings have made the property expensive. Rahul is now left with the only option of selling at a loss. And given the global economic gloom, he is willing to take a hit.
’Several investors are stuck simply because there hasn’t been enough price appreciation in the past one year,’ said Navin Raheja, chairman of Raheja Developers.

He said that young investors bought at the peak of the property cycle last year. Many purchased two apartments simultaneously, assuming that they would finance one by selling off the other at a premium. They are now caught in a difficult situation, as they bought at a higher market rate and are compelled to service two EMIs.

Some investors have started defaulting. Others are approaching developers to cancel their bookings and return the money.

State lender Punjab National Bank (PNB) has taken a lead and has stopped giving such loans, while Bank of India, Bank of Baroda and Indian Overseas Bank have decided to go slow on such loans.

“We are discouraging loan against property by refusing to provide overdraft facilities and charging higher margins,” said a spokesman for Bank of India. Other banks are discouraging such loans by valuing the property at distress level or by valuing the property at the price it was purchased.

The recent changes in Indian economy have made a tough for the individual, young and salaried investors facing a dearth. However, the RBI action of reducing repo rate and interest rates of home loans might give some help in terms of EMI to the investors.

Source : www.merinews.com

Global credit crisis takes its toll on India’s real estate sector

INDIA: October to November is traditionally the biggest shopping time in India. Real estate sales can go up to 60 per cent during this period.

This year, realtors are offering huge discounts as well as freebies like cars and jewellery to attract buyers. But not many are taking up the offer.

B.P Singh, an investor, said: “Everyone is feeling the heat of the economic slump. I am already tensed about how I would manage during this crisis. My business is on a low and I can’t think of spending anymore (on my house construction) right now. This is a sad Diwali for everyone.”

The global economic meltdown has taken its toll on India’s real estate sector.

DLF, the country’s largest developer lost three fourths’ of its value in the past month.

At construction sites, like this one there is little or no activity.

Lalu Shah, a construction worker, said: “Our payments have been drastically reduced and some of us are not even getting paid as the work has stopped (here).”

Real estate developers dependent on foreign investment are also feeling the pinch.

They have had to slow down their projects because foreign buyers are cutting back.

To add to their woes, they’re seeing their funds dry up as banks hold back on disbursement of loans. It’s a squeeze from all sides Harinder Dhillon, general manager, marketing, Raheja Developers, said: “There has been a minor slowdown. No doubt at all. If people are losing jobs, not getting bonuses or getting increments, of course this impacts all markets. It impacts automobiles, civil aviation as well as real estate. No industry in this economy has been left untouched and that is the reality.”

This is a rare occurrence in India.

In the past prices fell negligibly in small towns and sales activity slows down in the suburbs but nobody remembers a nationwide overall fall in home prices.

Some builders said that India has such a huge population, that even if you keep building for 40 years at the current pace, there will still be a shortage of housing.

But there is no denying the fact that house purchase plans have been shelved by middle class India.

Source : Channelnewsasia.com

Delayed home deliveries likely as realtors move to time-linked plans

NEW DELHI: Several property firms, including DLF and Unitech, are increasingly doing away with ‘construction-linked’ payment plans and instead introducing ‘time-linked’ payment plans for home buyers. By doing so, buyers become prone to higher risk of late delivery of homes, besides facing an indirect increase in the cost of owning a home.

In a construction-linked plan, a developer gets payment based on certain construction milestones, and is thereby forced to ensure progress in the project. Under time-linked plan, a developer gets assured money from a home buyer in installments but is under no obligation to use that money in the same project to deliver homes in time.
It’s been a usual business practice for developers to divert sales proceeds from one project to another. During the real estate boom of the past five years, builders expanded massively by routinely using the proceeds of one project to purchase land elsewhere.

Times have changed with the global financial crisis and realty firms are now facing major cash crunch, which is likely to worsen. Therefore, if they were to divert funds from one project to another now, there is a likelihood that some projects may get stuck mid-way, leaving home buyers high and dry.

Much of the new launches by DLF and Unitech this year have not offered construction-linked payment plans.
For instance, DLF’s ‘New Town Heights’ and ‘Express Greens’ projects in Gurgaon and Unitech’s ‘Uniworld City’ and ‘Unitech Verve’ in greater Noida do not offer construction-linked payment plan, although they give time-linked plan option.

When contacted by ET, DLF and Unitech declined to comment on why they have replaced the option of construction-linked plan with a time-linked payment plan.

DLF spokesperson, however, said time-linked plan is “not a new introduction” for the company. Many other developers are offering time-linked as well as construction-linked plans.

Traditionally, home buyers have had the choice of either paying the full amount upfront or going in for construction-linked plan. Buyers can avail of a discount — usually up to 10% — in case of upfront payment, while construction-linked plan gives them a sense of security that the homes they have booked is actually getting built as they pay. But time-linked plan offers neither.

While some developers, including DLF and Unitech, have started offering penalty in case of late delivery, many others do not offer any such reimbursement. The penalty itself is generally Rs 5-7 per sq ft per month to the home buyer.

“The penalty amount is far too less compared to the rentals one pays for the same kind of accommodation,” says Raheja Developers chairman Navin Raheja.

Thus, a late delivery imposes additional cost on a home buyer in the form of rentals for the period one has to extend staying in a rented accommodation.

Economictimes

Property investors in India forced to sell at a loss by global downturn

Young property investors in India are selling at a loss because they can no longer afford to pay the interest and costs associated with owning multiple properties.

The global downturn has set off a panic reaction, inducing investors to close deals at losses. It has become almost impossible for those who invested in real estate last year to exit the scene as the downturn has deepened and the prices being quoted do not even cover the purchase costs and interest expenses.

Typical is 35-year-old Rahul Verma, who works with a Noida-based IT company. He bought a flat in Greater Noida early last year purely as an investment with a bank loan to finance 85% of the cost.

Since then his EMIs have continuously gone up thanks to a series of rate hikes by the RBI. However, the prices haven’t climbed as expected and the outgoings have made the property expensive. Rahul is now left with the only option of selling at a loss. And given the global economic gloom, he is willing to take a hit.

‘Several investors are stuck simply because there hasn’t been enough price appreciation in the past one year,’ said Raheja Developers Chairman of Navin Raheja.

He said that young investors bought at the peak of the property cycle last year. Many purchased two apartments simultaneously, assuming that they would finance one by selling off the other at a premium. They are now caught in a difficult situation as they bought at a higher market rate and are compelled to service two EMIs.

Some investors have started defaulting. Others are approaching developers to cancel their bookings and return the money.

Meanwhile developers are finding it hard to finance projects and banks have started taking proactive measures to prevent defaults in their real estate portfolio by cutting exposure to loans against property.

State lender Punjab National Bank (PNB) has taken a lead and has stopped giving such loans, while Bank of India, Bank of Baroda and Indian Overseas Bank have decided to go slow on such loans.

‘We are discouraging loan against property by refusing to provide overdraft facilities and charging higher margins,’ said a spokesman for Bank if India. Other banks are discouraging such loans by valuing the property at distress level or by valuing the property at the price it was purchased.

Tatas & Rahejas to invest Rs 500 cr in housing complex

New Delhi : Tata Housing Development Company and Raheja Developers have tied up to build a luxury housing project in Gurgaon in the next three years at an investment of Rs 500 crore.
The project — Raisina Residency — spread over 11.73 acres, would be developed by the two companies in a 50:50 partnership. The total number of housing units would be 340. “We are looking at an average realisation of Rs 6,000 per sq ft. The total sales potential from this project is about Rs 700 crore,” Tata Housing managing director Brotin Banerjee said here.

Asked about the investment in this project, Raheja Developers chairman Naveen M Raheja said: “It will be about Rs 500 crore, including land and other development cost.” Of the total 340 units, Banerjee said about 100 units have been sold through soft launch in the last two months and the company has witnessed “good appreciation” in the project.

Realty Majors go out to Pamper Customers

In a market that’s dull and lifeless, pampering customers silly seems to be the mantra for most real estate developers. Whether it’s training brokers for customer convenience, giving them a feel of future projects, getting instant customer feedback, launching model homes or an all-ladies sales team! The idea is just one: building strong, long-term relationship with the customer. Developers such as Akme Projects, Asipac Projects, Emmar MGF and Raheja Developers have kept customers as the prime focus in their core marketing strategies.

In fact, call it the result of the slowdown or fallout of the new-age organised real estate market, the customer is winning hands down. Akme Projects, a real estate firm promoted by The Anil Nanda Group (TANG), trains brokers who are generally perceived as a ‘shady’ lot by many customers.

They are trained how to sell and how to dress appropriately to build on customer confidence and loyalty. This is a far cry from the usual norm wherein brokers work independently at times handling customers in a rough manner.

“It is the demand of the current time. Increasing professionalism is making inroads in the real estate industry and soon other developers will also need to follow suit,” says Anil Nanda, chairman & MD, Akme Projects. The developer also facilitates a car pick-up and drop for prospective buyers who would want to take a look at their sample projects.

While Akme focuses on skilled personnel, Bangalore-based development management and property marketing firm Asipac Projects believes in getting instant feedback from the customers. The firm, which will soon unveil its plans of developing ‘retirement villages’ in different cities, has already identified a group of potential buyers.

These potential buyers will be taken to Australia to see retirement communities there and get an idea of how the project will shape up in India.

While the buyers have to for their tickets and accommodation, various events will be organised by Asipac for the buyers’ understanding of the concept as a whole. Says Amit Bagaria, chairman, Asipac Projects, “It is an exercise aimed at educating prospective buyers on the retirement community concept that is still emerging in India. Hence, this initiative will be quite useful in gauging their response and interest levels.”

Carrying forward a personalised approach, Delhi-based Raheja Developers maintains contact with its clientele via welcome letters and quarterly newsletters. Existing customers are given incentives for giving referrals that eventually convert into bookings. In fact, for their project, Raheja Atlantis on NH-8 in sec-31, Gurgaon, the company organised a meet to personally talk to the clients and gather feedback regarding the colour choices of the project’s external facade.

Likewise, real estate major Emmar MGF’s Street of Dreams marketing initiative consists of a number of sample homes that can be seen by a prospective buyer. The sample villas, apartments and townhouses in the project give the customer a clear vision of the end product, thereby making it much easier for him to take a decision.

The trend is a big hit globally and real estate companies believe in focussing on incentive-oriented marketing strategies. Players like Dubai-based Damac properties had fantastic offers earlier this year such as a Bentley or a BMW with every apartment brought during the Dubai Shopping Festival 2008!

However, not everyone thinks innovative marketing strategies are important, even as developers compete to get closer to the end-users. “We don’t focus on marketing tools, we just believe in giving a fantastic product to our customers,” says Niranjan Hiranandani, MD, Hiranandani Developers. But for others, it’s customer ahoy for now.