Indian Property Developers Expects Higher Sales

DUBAI — Indian property developers expect bigger post event sales as a large number of Non-Resident Indians, NRIs, visit IndiaHome, an annual real estate event in Dubai, concluded 
on Sunday.

Around 18 prominent builders from across India showcased their projects during the three-day event for the Indians working in the UAE.

Organisers of IndiaHome claimed over 5,000 footfalls during the last two-days of the event.

Cityscape Dubai 2009, the region’s largest property show, concluded last week on a subdued note, with preliminary estimates showing a 50 per cent drop in visitors.

“This year’s show is much better than last year despite the global economic downturn,” Sidharth Sengupta, Senior Sales Executive of Gera Developments told Khaleej Times on Sunday.

Majority of the expats in the UAE belong to India and according to recent government statistics Indians account for 1.8 million of total 6 million population of the country.

Despite a good number of visitors no purchase or booking was done till the third day and developers are expecting the deals after site visits by the interested buyers.

“We are expecting some site visits by NRIs in November and after that any booking can be done,” 
Sengupta said.

Citibank NA was the sponsor of the event, which was jointly organised by the Dubai based Media Agency Middle East and Signature Events.

Citibank NA offered a loan of up to Rs.50 million to NRI customers for ready-to-move and under-construction properties which can be obtained under flexible repayment plans.

Radhakrishnan, one of the visitor and NRI, said that he does not need to go to India for site visit as the location of the project, he is planning to select, is close to his native town.

Another exhibitor Jackbastian Nazareth, Executive Director of Sobha Group, said that the first two days were ‘super busy’.

Sobha Group showcased 15 properties at the event. “No booking done because site visit a must before buying a property, Nazareth said, adding: “Even domestic buyer prefers site visit first.”

An NRI Ghulam Roshan, Managing Director of Dubai-based BlackHood Real Estate, said that there is a big gap between supply and demand in India. There is a demand of 6.5 million units in India in only mid-sized segments, Roshan said.

Companies participated  at the event included Brigade Enterprises, Chaithanya Projects, Emaar MGF Land, ETA Star Constructions, Fairy Land Foundations, Gera Developments, Goel Ganga Group, Hiranandani Constructions, Hiranandani Palace Garden, Hiranandani Upscale, Jaiprakash Associates, K Raheja Corp, Kalpataru, Kumar Properties, Lancor Holdings, Paranjape Schemes (Constructions), Sobha Developers and Three C Universal Developers.

Source : http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/business/2009/October/business_October258.xml&section=business&col=

B’lore realtors scout Goa, Mumbai for new projects

MUMBAI: With the real estate sector story looking up in large parts of the country, Bangalore-based realty companies are now exploring options to  enter new markets. Among the interested players are Puravankara Developers, Sobha Developers and Nitesh Estates, three of Bangalore’s large real estate companies. It is learnt that these players are drawing up plans to invest in cities like Mumbai , Goa and Pune.

Provident Housing, a fully-owned subsidiary of the Puravankara Group, is said to be in talks with individual land owners in Mumbai to buy land in three locations for affordable housing projects. An industry tracker said Provident Housing is largely looking at western Mumbai for this venture. Ashish Puravankara , director, Provident Housing confirmed the plan to enter the Mumbai market through affordable housing projects though he declined to share details on locations. “We have not bought any land yet and are exploring options in Mumbai,” he said.

The cause for concern, according to analysts, comes from the fact that companies in the sector are highly leveraged. Purvankara , for instance, had a debt of Rs 582 crore on its books at the end of FY09 even as company officials maintained that the the debt-equity ratio at 0.56 was favourable.

Like Purvankara, Sobha Developers is also keenly looking at Mumbai and Pune. A source in the industry said that the company is close to sealing a deal with another developer for an affordable housing project. JC Sharma, managing director, Sobha Developers, when contacted said, “Mumbai is an attractive market and we are certainly interested in it though nothing concrete has been decided so far.” After a recent debt restructuring exercise, Sobha has reduced its debt from Rs 1,900 crore to Rs 1,450 crore. “We are at a comfortable position as far as debt is concerned,” he added.

Joining Purvankara and Sobha is Nitesh Estates which has already bought a large tract of land in Goa for a high-end project . “We would be developing higher end villas in Goa,” L.S. Vaidyanathan, Director, Nitesh Estates. The company is planning to raise around Rs 1,200 crore through an infusion of private equity (PE) funding and a planned public issue. Nitesh is also said to be interested in the Mumbai market.

The consensus is that money will not be easy to raise at a time like this. “It will be interesting to see how these companies arrange for the funds for these projects. While PE money is hard to come by, it will not be easy to take the capital markets route,” said a consultant at an international real estate firm.

Source : http://economictimes.indiatimes.com/News/News-By-Industry/Services/Blore-realtors-scout-Goa-Mumbai-for-new-projects/articleshow/4905366.cms

Low-cost housing drive may dent margins of realty firms

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

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

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

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

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

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

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

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

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

Realty companies resorting to discounts

MUMBAI: Realty companies are resorting to discounts to sell commercial properties in order to improve cash flows and reduce mounting debts.

DLF, the country’s biggest real estate firm by market capitalisation, has recently sold its 66% stake in a special purpose vehicle that owns eight acres at Prabhadevi in Mumbai for Rs 310 crore, which analysts feel was at a discount.

It is also eyeing to raise around Rs 2,000 crore by selling two commercial properties in the city. Unlisted firm K Raheja Universal recently sold a plot in Santa Cruz in north Mumbai for around Rs 60 crore.

Mumbai is not the only city witnessing distress deals in the commercial property space. Bangalore-based Sobha Developers is learnt to have put a plot in the country’s IT capital on the block with a ticket size of Rs 100 crore. India’s second-largest firm by market cap Unitech, too, is going all out to sell some of its commercial properties to pay down debt.

In the past few months, it has sold its Marriott Courtyard Hotel in Gurgaon for Rs 232 crore and an office property in Saket, New Delhi, for Rs 500 crore.

The combined debt of DLF, Sobha and Unitech is estimated to be at Rs 25,000 crore. Vimal Shah, managing director, Akruti City, a city based real estate firm, said: “While the residential space has started looking up, commercial properties do not have buyers. Many big builders all over India are cautious with their commercial complexes.”
In the past three months the commercial property rates in New Delhi, Mumbai and Bangalore have witnessed a 30-45% decline in price. Rates could fall further if analysts are to be believed.

Anuj Puri, country head, Jones Lang LaSalle Meghraj (JLLM), a property advisory firm, said: “It seems that the commercial property market will take at least a year to revive. Presently only the residential market looks stable and their rates may not fall for some time while commercial property could still see some correction in prices.”
“Many big builders have come up with proposals of selling commercial properties in Mumbai and New Delhi,” opined Pravin Doshi, chairman, Acme Group, a Mumbai-based real estate developer.

http://economictimes.indiatimes.com/Market-News/Realty-cos-resorting-to-discounts/articleshow/4633546.cms

Sobha plans to launch high-end apartment project in Bangalore

Even as the demand slump is forcing leading property developers across the country to prefer affordable housing in place of high value apartments, Bangalore-based Sobha Developers is firming up plans to launch a high-end apartment project in the city. The project, which would carry a price tag of about Rs 6,000 per sq ft, will be the first luxury apartment project from Sobha after crisis hit the Indian real estate sector.

According to sources, the J P Nagar project, to come up on 36 acres of land in J P Nagar in the south of the city, will be announced during the present year.

The company also plans to enter the affordable housing segment by announcing apartments in the Rs 25 lakh to Rs 30 lakh range in Coimbatore, Tamil Nadu.

Sobha’s move is in line with the industry trend to announce new launches in select areas and chosen price bands in the residential real estate segment. Availability of bank loans makes residential projects a safe bet for cash-strapped real estate developers.

Unlike other players who have lined up dozens of such project launches during the year, Sobha has decided to test the waters with just two launches in 2009-10.

“We are not in a hurry to announce future projects as our priority is to sell the ones nearing completion. Of about 2,000 flats / villas that are under various stages of construction across the country, Sobha has been able to sell about 50 per cent until now. The company expects to see the balance being sold off by the time the projects get completed within the next two and a half years,” a senior Sobha official said. He added that their projects in the neighbouring states of Kerala and Tamil Nadu are in greater demand than the ones in Bangalore.

Sobha’s plans for new investments come amidst its struggle to manage its Rs 2,000 crore debts. Company officials said the debt repayment plans are going ahead and the company will have no problems in funding the new projects.

“Of the total debts, about one-fourth has to be repaid this year. We are exploring various options, including issue of preferential shares and sale of land to generate the required amount,” company official said.

The company is also expecting a 25 per cent increase in its revenues from contract works for corporates like Infosys.

Source : http://www.business-standard.com/india/news/sobha-plans-to-launch-high-end-apartment-project-in-bangalore/356069/

For developers, customer is king once again

The persistent fall in property prices across the country, aided by RBI measures to slash key rates and spur demand, seems to be reviving interest among home buyers.

“Site visits have gone up almost 10 per cent in past 2-3 months. This can be attributed to the price cuts and to RBI announcements, which have made home loans cheaper,” says Harsh Nair, real estate consultant based in Chennai.

Customers have become far more discerning following the global economic meltdown and do not betray the recklessness that characterised the period of realty boom.

During the real estate boom, buyers, flush with funds, were willing to pay any amount. Developers were offering housing opportunity using themes, promos and freebies. Now, the emphasis is on “value for money” projects.
“We are emphasising on our USP, which we believe is quality control. We are showing prospective customers how we do not compromise on quality in terms of all the aspects of our units, whether its fittings or architectural design or raw material,” says Keshav Pandey, executive director, Sobha Developers.
Developers had gone out to woo young professionals, and double-income couples who earned handsome salaries. However, with the recession in the US and Europe, order books have thinned. As such salary increments in the IT sector have been rather poor and software companies are even resorting to layoffs to cut costs and stay afloat.
“Now, there is no specific age bracket for the prospective buyer. Buyers are looking for good home loan rates and a good home that they can buy within their allotted loan limit,” a senior banking official
told FC Estate on conditions of anonymity.

Given the price corrections in the realty market, NRI buyers are looking at taking advantage of the situation by buying multiple housing units in India. The sharp decline of rupee against the dollar has also made the sector that much more attractive.
Industry watchers advise that prospective buyers should have a multi-point checklist before they purchase a property.

According to Shreyans Chopra, CEO, Suksh Technologies, the parent company of realty portal www.100floors.com,“If you want to buy a house, location should be a key consideration. Identify pockets that have a potential to appreciate quickly, and a profitable situation will be to even out your rentals with EMIs. As a thumb rule, if rentals account for 10-12 per cent annually on actual value of home, it is better to consider buying one.

Even if property rates do not appreciate, it is a profitable deal; you have an asset to bank on even as you pay EMIs that equal the money you pay as rent. Considering a long investment horizon (10 years), this is always a good option.”

Good localities have planned infrastructure development around them such as metros, shopping malls, offices and airport.
A home on or near the main connecting roads rather than in the interiors will bring in more returns in the long run. A well-decorated, well-furnished house, but in the interiors, would fetch lower valuations when you want to resell the property.

http://www.mydigitalfc.com/real-estate/for-developers-customer-king-once-again-577

Real estate prices dip again

After DLF’s price correction in its Bannerghatta Road property, real estate major Sobha Developers dropped prices by a whopping 22%. Sobha was the first to effect a price drop of 8% to 10% three months ago. Now, some of its properties like Sobha Sunscape are selling at 22% lower than the price quoted three months ago.

According to a senior ICICI Home Search official, “The first round of price drops by developers didn’t create any market stir. Many are now looking at a second round that’s sure to create excitement among buyers.”

According to developers’ association CREDAI, Bangalore property prices have fallen by 15% to 20% as compared to the same period last year and a further drop is unlikely. A 2-bedroom, 1,200 sqft apartment at Sobha Sunscape is available for Rs 38 lakh, which includes car park, registration and stamp duty charges, VAT charges, as well as maintenance deposit and BWSSB and Bescom charges.

Except in two high-end villa projects, the company has dropped prices in all properties by 15%, though some rates may be available only during its ongoing property mela.

J C Sharma, MD, Sobha Developers, said though the real estate situation still remains challenging, “the current market situation allows us to pass on benefits to the consumer”. Interest rates have dropped to 8%, service tax is out, and stamp duty rate has fallen.

“After DLF dropped prices, there’s been tremendous excitement. Today, many project site visits are happening, something consumers had stopped for the past 4-5 months,” said a leading real estate agent who requested anonymity.

Source : http://timesofindia.indiatimes.com/Bangalore/Real-estate-prices-dip-again/articleshow/4168372.cms

Bangalore property prices expected to fall 40% by June

Bangalore property prices expected to fall 40% by June

Bangalore, Feb. 11 Bangalore is set to witness an accelerated 30-40 per cent fall in property prices until June 2009, says a report from Centrum, a financial services company.

The city, which has already witnessed a 10-15 per cent slump in property prices over the last six months, both in the primary and secondary markets, would see prices fall a further 20-25 per cent across micro-markets. The price correction should bring back affordability and enhance transaction volumes from September 2009 onwards, amidst a mild recovery in the IT/ITeS sector, says the report.

Overall residential sales is down 30-40 per cent in peripheral areas such as Whitefield, Electronic City, Yelahanka, Tumkur Road and Kanakpura. Even though prices hover at Rs 2,500-3,500 per sq ft, large ticket size of 2-3 bedroom apartments (1,200 sq ft onwards) coupled with additional 10 per cent stamp duty and registration charges have made buyers delay their purchase decisions.

Rentals for two-bedroom apartments in emerging areas range from Rs 8,000 per month (Yelahanka) to Rs 15,000 per month (Whitefield), implying a yield of 3-4 per cent.

Less demand, oversupply

A majority of three-bedroom flats priced at Rs 60 lakh upwards have no buyers, with investors unwilling to purchase flats and home buyers finding them unaffordable. Areas such as Whitefield, Kanakpura, Electronic City and Sarjapur are seeing enormous supply at sites with little or no infrastructure (inaccessible roads, water supply, etc).

The northern parts near the BIAL airport at Devanahalli and Yelahanka are the new hotspots, with a number of developers having launched projects in 2007.

The Bangalore market will continue to suffer from an oversupply situation in the residential space, hampering property prices there. Around 75 million sq ft of residential supply is expected to emerge over 2008-10, against an estimated demand of 51 million sq ft.

“This makes us believe that price correction in residential space is inevitable by June 2009,” adds the report.

According to the report, a 30-40 per cent fall in prices of real estate assets in Bangalore from the peak would bring back affordability and boost demand in a sliding interest rate environment.

The demand would come from end-users, especially in the IT/ITeS segment, as speculators have been ousted in the current downturn. The steep rise in property prices since 2004 had impacted affordability levels, which rose to 86 per cent in 2007 from 49 per cent in 2005.

Affordability key

With investors and speculators exiting the market and IT/ITeS sector facing a slowdown, demand for premium housing have waned and transaction volumes are down 40-60 per cent across micro-markets over 2007 levels.

A recent survey by real estate portal, makaan.com, in June-September 2008 reveals that maximum demand for homes is in the sub-Rs 40 lakh category (41 per cent of potential home buyers), while demand for premium budget homes merely accounts for a third of the total demand.

In comparison, maximum supply is in the premium homes segment with ticket sizes of homes ranging from 1,500-2,500 sq ft and costing around Rs 1 crore. “With slackening investor interest and speculators exiting the market, we expect existing stock to remain unsold with prices continuing to be unaffordable,” says the report.

Holding on

Most of the major developers such as Sobha Developers, Puravankara, Prestige Group and Brigade Group are holding on to prices, with a few developers launching new phases of projects at 10-15 per cent higher rates despite apartments in the previous phases remaining unsold. Construction activity has slowed down with lower pre-sales and absence of funding.

Although Sobha Developers has reduced prices by 8 per cent across all its ongoing projects, the average price of apartments continues to be in the Rs 60-lakh-plus range, which continues to witness slackening demand.

Source : http://www.thehindubusinessline.com/2009/02/12/stories/2009021250931700.htm

Small realty Companies rework deals with landowners

With land prices going down, an average 30% across India in the past six months, many medium-sized developers are trying to renegotiate the joint development agreements (JDAs), they had signed with landowners earlier. “Renegotiations have definitely started happening now with a drop in land prices,” says Cushman & Wakefield director (land & industrial) Manish Aggarwal. Players such as BL Kashyap, Sobha Developers, IVR Prime had entered into JDAs, when the real estate market was at its peak in 2007 and early-2008.

At the peak of the real estate market, several medium-sized developers found it too expensive to acquire land at exorbitant rates in cities such as Gurgaon, Pune, Bangalore and Hyderabad. Then, JDAs emerged as the best option. These same agreements are being renegotiated today because developers feel it is unviable to go ahead with projects in a slow moving market. But the agreement with landowners stipulates a time limit for the project to be finished.

“Many of these JDAs were done, when the market was at its peak. According to valuations at that time, the projects today will seem unviable to the developers,” says Edelweiss Capital real estate analyst Aashiesh Agarwaal. The market today is such that developers are being forced to offer lower cost housing, which will be impossible if they do not negotiate. To offer a lower cost product to customers, they will need to get land at a much lower cost. On the other side, another pressure for some real estate developers is from their private equity partners who want better IRR (internal rate of return), as they perceive the market as higher risk today. Private equity players have, in some cases, increased their IRR expectation by about 10%.

“The land value and sale price along with the overall risk profile of projects have been altered considerably. Therefore, the structuring parameters will have to be adjusted accordingly too,” says real estate expert Anckur Srivasttava. There are some developers who are trying to get out of deals completely. “Landowners have become more reasonable in the past three to four months. They are also willing to negotiate, as they understand that the market is slow and it might be difficult to get another deal in this scenario,” says Cushman & Wakefield’s Mr Aggarwal. Developers and landowners today are renegotiating both on time as well as percentages. According to a source, in a renegotiation happening between a developer and landowner in Pune, the land valuation has been pegged 10-15% lower, and the developer is asking for at least another six months before he starts construction.

Source : http://www.indianrealtynews.com/real-estate-india/small-realty-companies-rework-deals-with-landowners.html

Realtors May Have Some Relief

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

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

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

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

Battered realtors may get bailout package soon

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

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

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

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

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

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

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

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

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

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

‘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

Property prices could stabilise

BANGALORE: A two-day real estate conference, Build Up 2008, which started in Bangalore on Tuesday, bore the grim realities of the global financial cr
is and its impact on Indian real estate. Neither of the two major speakers  Union urban development minister S Jaipal Reddy and CM B S Yeddyurappa turned up.

The other prominent speakers painted a somewhat sombre picture. “We are feeling the ripples of the global slowdown.

There’s a 30% drop in new projects compared to a year ago,” said Kumar Gera, chairman of the Confederation of Real Estate Developers Association of India. However, he added pent-up demand will manifest itself once markets stabilise.

Irfan Razack, CMD of Prestige Estates, said, “Prices in the primary market are expected to stabilize. People are not going to make the profits they did before.”

J C Sharma, MD of Sobha Developers, said, “Going forward, people could see a softening in land prices.”

Timesofindia

Sobha gets $10 m from Dubai firm

Mumbai: Real estate firm Sobha Developers today said it has received an additional $10 million (about Rs 46 crore) of foreign investment for its residential project in Bangalore.

In a filing to the Bombay Stock Exchange, Sobha Developers said it has received foreign direct investment (FDI) from Dubai-based Pan Atlantic LLC in a Special Purpose Vehicle (SPV) for its project at Hosahalli in Bangalore.

Earlier in July, the company had received $10 million investment from the Dubai-based firm for the same project, totalling for a 40 per cent stake in the company. The project is spread over 13.27 acres with total developable area of more than 17 lakh sq ft of residential township, the filing added. Shares of the company closed at Rs 239.30, down 8.10 per cent on the BSE.

Sobha Developers Announce The Launch Of A Residential Project

Sobha Developers has launched the ‘Sobha Scarlet’ project in Mysore. The project will be developed in 14.2 acres of land and will have 83 villas. It will also have amenities like club house, spa, tennis court, swimming pool, gym, squash court, multi purpose hall, cards and carom room, library and other facilities. The company has revealed its plans to raise Rs 350 crores through a rights issue, which it will use for general corporate purposes, including working capital, acquiring land and other needs.

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.

Sobha plans 3 projects in Mysore

Sobha Developers, a Bangalore-based real estate developer, is foraying into Mysore realty market with three projects this financial year. The company has lined up a villa project on 14.5 acres at Jattihundi village and 500,000 square feet each residential and commercial project on seven acre plot in Belvatha grama near Mysore. Sobha Developers’ presence in Mysore for the last couple of years has only been through a contractual project for IT major, Infosys Technologies. They plan to take up 12 million square feet of development this financial year (2008-09) spread across six cities with a budget of around Rs 2,200 crore. This involves their entry to Mysore, Chennai and Gurgaon realty markets. The investments for these will be through customer advance, internal accruals and debt. Sobha Developers during financial year 2007-08, took up a similar scale of development (12 million square feet) of which 90 per cent was residential. Presently, the company has 28 ongoing projects and forthcoming are 20. In commercial development ongoing is three projects aggregating 1 million square feet and forthcoming is 20 projects aggregating 16 million square feet.

Sobha gets $10mn FDI for housing

Sobha Developers on Monday said it has received $10 million of foreign investment for setting up a residential project in Bangalore. The company has received Foreign Direct Investment from Dubai-based Pan Atlantic LLC totalling $10 million for a 40 per cent stake in a Special Purpose Vehicle (SPV), Sobha Developers said in a filing to the Bombay Stock Exchange.

The residential project to be set up by the SPV would be launched at Hosahalli in Bangalore, it added.

Liquidity crunch to hit retail growth

Expansion plans of retail majors may hit a roadblock as the unending liquidity crunch and higher interest rates have made it difficult for them to fund their projects.

Industry officials point out that many plans to develop mall projects in cities such as Mumbai, Bangalore, Chennai and Kochi are facing considerable delays. A big luxury mall, proposed at Vittal Mallya Road, in the central business district of Bangalore, has been delayed significantly.

A few others in Bangalore have also been post­poned to the latter half of 2008. A Cushman and Wakefield study suggests that the reason for the delay could be cash crunch in the wake of a tighter money market situation.

According to industry analysts, the trend is quite evident. “This is bound to affect retail expansion as developers are finding it difficult to raise funds due to steep hike in the interest rates. Also, property sales are not happening as much as expected as demand has gone down considerably,” said Suman Nemani, realty analyst, Religare Securities.

JC Sharma, managing director of Bangalore-based Sobha Developers, said, “liquidity crunch has not only affected real estate but also the economy in general. Obviously, the retail expansions will be affected.”

In fact, an industry official said a retail giant has apparently asked a Bangalore-based developer to renegotiate the earlier agreed price, a few months after signing the deal.

However, analysts say that the retail players associated with small developers are going to be the first casualties. “Retailers that have expansion plans in tier-II and tier-Ill cities might feel the pinch more since there aren’t too many branded players there. Renowned developers still manage to raise money because of their brand equity,” Nemani said.

Jay Gupta, managing director, The Loot (India), said that higher interest rates is a problem for a value retail model like theirs, as they also operate in company-owned stores.

“Interest rate hike is a problem. But, otherwise, the situation is good for our retail expansion as property prices might come down,” Gupta said.

However, certain analysts say the situation is yet to hit retail growth.

“Retailers might feel the pressure six months to one year down the line. Right now, their roll-out plans might not be affected, as multiple projects are going on everywhere,” said Shubhranshu Pani, managing director (Retail), Jones Lang Lasalle Meghraj.

NRIs home in on India, account for 10% of sales now

Home sales in India might have turned sluggish but sales to non-resident Indians (NRIs) is booming. According to Jones Lang LaSalle Meghraj (JLLM), residential sales to NRIs have tripled over the last six months, from 3% to about 10% of the total sales.

“What would happen when one loses his job in the US? The downturn is scaring many NRIs who fear job cuts,” says JLLM’s Raminder Grover. “There is a renewed interest in selling abroad,” says Lodha Group senior VPR Kartik. Many NRIs have been thinking of coming back to India and “many of them are making safety investments,” explains Mr Kartik. Over the last few months, Lodha has seen a 25% increase in its sales to NRIs.

Sobha Developers has seen the share of NRI sales go up from 5% to 10% of its sales. “In the last six months, we have been selling about 25,000 sq.ft. a month to NRIs,” says Sobha Developers MD Jagdish C Sharma. Selling to NRIs though is a very different proposition. “You need a different strategy for NRIs. To service the requirements of NRIs, you need to have your own representation in the target market,” says Mr Kartik.

Omaxe has had roadshows in the US, UK, Canada and Dubai to promote its residential projects and have representative offices, too. Omaxe VP marketing Vineet Nanda says, “NRIs made only about 3% of their total luxury apartment sales but today constitute about 10%. A good chunk of their NRI sales comes from Middle East.”

For some like Tata Housing, it is a much larger business. “We have not done any formal marketing of our properties in the international market but already 10-15% of our sales is to NRIs. When we start our promotions, we expect this figure to go up to 25-30% of our total sales,” says Tata Housing

CEO Brotin Banerjee. They have received a tremendous response from the US, UK and Canada for their projects in Bangalore, Gurgaon, Chandigarh and Kolkata.

“Many NRIs would like to have a place in India since the country is expected to tide over this downturn and would be a better place to work in the future,” says Mr Banerjee.

But not everybody thinks so. For Jayesh Desai, head, real estate at Ernst & Young, these are purely investment sales. Well over 50% of NRI sales will be for investment. “With a downturn in the west, India is still a better market for investment. But, if they don’t see returns, this segment will start going down too,” warns Desai.

According to him, the reality is that the market in India is very tight and Indian speculative investors are out. “The share of the NRI market might be higher because of this,” he says. Omaxe ED Vipin Aggarwal, too, subscribes to the same logic. “Most NRIs are buying in India only for investing and not for end-use,” he says.

For developers though, it is a good way to catch up on lost sales in the Indian market. With a big push, a number of developers from across the country are embarking on roadshows in markets where there is a large NRI presence. The favourites really are the Middle East, UK and the US markets.

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.

Sobha Eyes Slum Redevelopment, SEZs

Sobha Developers,  a Bangalore-based realty major focused on residential space, is looking at diversifying its portfolio through slum redevelopment schemes and special economic zones (SEZs), retail and commercial projects.

Executive director Raghav Menon said the company would build an SEZ in either Tamil Nadu or Kerala. “We haven’t decided on the place yet. We will also enter retail and commercial project development,” he added.

Sobha is planning projects in Delhi, Hyderabad, Pune, Mysore, Kerala and Orissa, Menon said. The Mysore project will kick off next month with an investment of Rs 100 crore.

The announcement, however, follows disappointing fourth quarter results posted by Sobha last week. Its topline grew by a mere 20% at Rs 1,423 crore against Rs 1,187 crore last fiscal. Sobha posted a net profit growth of 41% year-on-year to Rs 228 crore as against 82.5% (Rs 162 crore) in FY 2007.

In the next three years, the company has to pay Rs 660-crore loans taken for land acquisition. The developer has a land bank of 4,024 acre, most of which is in Bangalore. According to an analyst from a foreign brokerage, Bangalore is facing a price correction. “The returns estimates have been lowered and Sobha’s strategy of developing other locations could help,” the analyst added.

Angel Broking research analyst Sailesh Kanani said the company is facing a cash crunch and diversification into retail and commercial spaces could help it open another source of income. “It can also tap real estate investment trusts (Reits) that are doing well abroad,” he said.

Menon, however, denied that the company was facing liquidity crunch and said it was self-sufficient. “We are not looking at private equity investment as of now. But we are looking for good projects for joint venture development,” he said.