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Indiabulls Real Estate gets HC nod to merge subsidiaries

Thu, 04 Dec 2008 12:34:00 GMT

Indiabulls Real Estate gets HC nod to merge subsidiaries Indiabulls Real Estate announced that the High Court of Delhi has sanctioned the scheme of amalgamation of Indiabulls Power Services (IPSL) with Sophia Power.

Both IPSL and Sophia Power are subsidiaries of the company. The company further said that it would be allotted equity shares in Sophia on the basis of share exchange ratio as per the approved scheme and in consideration of its existing equity holding in IPSL. Post such allotment, the company would hold 71.43%, FIM would hold 17.86% and LNM India Internet Ventures would hold 10.71% of the equity of Sophia.

Indiabulls Real Estate, engaged in the business of real estate, was separated from Indiabulls Financial Services on Dec. 21, 2006 following the de-merger of the company.

Banks want RBI to ease realty NPA norms

Thu, 04 Dec 2008 12:32:00 GMT

Banks want RBI to ease realty NPA norms In a bid to avoid classifying advances to troubled real estate companies as bad loans, banks have urged RBI to put in place a uniform norm for restructuring debt to realty companies.

As of now, the moment a loan extended to real estate, capital market or personal loan segment is restructured; the lender has to classify it as a bad loan. At the same time, however, one-time restructuring of loans to any other sector such as steel, textile or cement would not result in the loans being classified as non-performing assets.

In a recent meeting with RBI governor D Subbarao, CEOs of many large banks urged the regulator to relax these restructuring norms. They pointed out that a number of real estate companies have been complaining about the liquidity crunch and have approached lenders to rollover the loan.

However, there is a resistance among banks to give them an additional line of credit or reschedule their loans on the ground that this will add to their pool of NPAs.

Loan restructuring allows banks not to treat the account as an NPA. Banks often indulge in this exercise whenever they sense that the borrower is in stress and the account may turn into an NPA or bad loan.

It enables them to declare a lower NPA ratio — the percentage of sticky loans to total loans — a dead-weight on their books. Also, once an account is deemed as an NPA, the bank has to make some provisions, which affect its bottom-line.

If a real estate company fails to repay loans on a due date, the bank will either accept it as an NPA and restructure the loan or resort to legal action.

Some banks have already come to terms with this and have begun restructuring their real estate loans while a number of banks are looking at ways to reschedule loans to this sector without showing it as NPAs.

Meanwhile, banks have also urged RBI to relax norms on restructuring of loans to manufacturing companies. As of now, when a performing loan to a manufacturing company is restructured for the first time, it can be treated as a standard asset.

However, if the loan to the same company is restructured again, it has to be treated as sub-standard. Banks have urged RBI that given the global turmoil and the slowdown in the economy, banks should be given a second chance to restructure the loan of manufacturing companies while allowing them to classify the same as standard assets.

Affordable housing in India is not sub-prime

Wed, 03 Dec 2008 12:46:00 GMT

Affordable housing in India is not sub-prime Thanks to a variety of witty presentations explaining financial woes afflicting the US via e-mails, everyone today is an “expert” on sub-prime;everyone is risk-averse and everyone who is not affluent is seen as “high risk” and deemed by most as “sub-prime.”

But, there are fundamental differences, both in the economic situation and the customer segment that constituted “sub-prime” in the US and the segment that needs affordable housing in India.

In US, the housing market was booming and moving only one way — up. With easy and plenty of cheap money available, lenders were increasingly tempted to offer home loans to persons with poor and tarnished credit histories.

They could charge these customers higher interest rates and fees than they would have been able to charge other consumers. Given the rising prices of property, a tidy profit was in store anyway. The idea became popular and large numbers of loans were made to customers who were likely to have problems servicing regular loans even at low rates. While the sun shone, everyone was happy. Then, things changed.

These customers had no way of meeting their repayments and started defaulting on the loans, which led to foreclosures and home sales. As the numbers snowballed, property prices also gave way. Creatively-packaged debt, that was sold as good credit risk, started turning bad. The crisis had begun.

The Indian scenario is not really comparable. True, we’ve had a real estate boom too; but that boom has been limited to the middle and upper income residential and the commercial property market. If we were to use the standard banking benchmark of home loan entitlements being equal to 3.5 times annual salary, this effectively means that over 80% of the Indian population that earns less than Rs 11,000 per month cannot even dream of owning a house, since there has been no supply at all.

The segment earning between Rs 7,000-Rs 15,000 has never been considered significant for home loan offerings. While the prospects of getting a home loan for the formal sector employee do exist, chances for informal sector employees and the self-employed like drivers, NGO staff, small caterers and others are bleak. This is despite the fact that they have marketable skills, steady jobs/incomes and employer/customer recommendations.

These people have the capability and willingness to make a 20%-25% down payment on houses costing between Rs 4 lakh-5 lakh and are happy and able to take on a 15-year loan obligation, at market rates, in order to realize their dream home. Given that in these small-sized homes, the land cost represents a small percentage of the overall cost, the speculative risk is low, with a very low probability of a drop in these property prices.

Thus, labeling the entire segment as sub-prime would be a misnomer. The higher- and middle-income market has already been tapped and it may now be a good time to take a fresh look at the lower middle class. It could represent a new horizon for growth, diversification and de-risking. Some rough arithmetic suggests that the housing market for the Rs 7,000-Rs 15,000 segment translates into a market size of over Rs 5,00,000 crore!

And then there is the huge multiplier benefit — a strong growth in this market will yield a positive spin-off effect on employment generation (the residential housing sector hires a relatively high percentage of low-skilled daily wage workers as opposed to infrastructure projects) and uptake in consumption of commodities, including cement and steel. Needless to add, lives of millions of Indians and our urban landscapes will be transformed.

The handful of niche players that currently service this customer group, are clearly not enough. The question is will the financial sector rise to the challenge and develop this market quickly enough. The real estate players are already sniffing at the opportunity and a positive signal from banks may be just the trigger they need to take off. And, therefore, ironically, the housing segment which was the cause of all ills in the US may just be the answer to all our problems in India.

Market expects speedier, steeper rate cuts

Wed, 03 Dec 2008 12:44:00 GMT

Market expects speedier, steeper rate cuts

RBI may be forced to cut interest rates earlier than planned and more aggressively than previously hoped, as it comes under pressure to navigate an already faltering economy away from the turbulent economic aftershocks of the Mumbai terror attacks.

Last week’s attacks, which killed around 200 people, targeted key symbols of enterprise in a city that is widely viewed as the country’s economic powerhouse and a key barometer of business confidence. The attacks and the choice of targets appear at least partly aimed at puncturing investor confidence at a time when the country’s economy is already reeling under slowdown.

Much like the 9/11 attacks in the US in 2001, hastened the easing of the monetary policy stance — which had been started by the Federal Reserve in response to the bursting of the technology bubble, many in the market are expecting RBI to adopt a similar response to what many are calling India’s version of 9/11. The Fed progressively brought down its key federal funds rate to 1% in the months, following the 9/11 attacks, although no one in India is expecting that aggressive a move.

“With signs of economic slowdown already staring at us, the terrorist attacks are likely to affect investor confidence. To counter the possibility of still slower capital inflows, the market is hopeful about a sooner rate cut from RBI,” said B Prasanna, MD & CEO, ICICI Securities, a primary dealer in government securities.

Terror attacks in Mumbai are hardly new, but it’s the first time that it targeted five-star hotels frequented by top business figures and foreigners visiting the city. Analysts say the likely fall out of the attacks could be foreign investors getting worried about the safety of their employees and establishments, which in turn could impact already shrinking capital flows into the country.

Economic growth this year is expected by most forecasters at less than 7%, down from the 9%-plus of the previous three years, and some analysts expect it to fall further next year. Anticipating this, and helped by a falling inflation rate, the central bank has already switched gears in favour of an easier monetary policy, but analysts say the Mumbai attacks may force it to become more aggressive.

“Declining inflation and increased downside risk to growth hint that another round of easing by the central bank is imminent. However, the Mumbai attacks could prompt RBI to announce a bigger cut than the 50-basis point we had expected prior to the attacks,” said Rajeev Malik, chief economist with Macquarie Securities in a research report.
The market is already betting on this. Overnight interest rate swaps, a derivative product commonly used by traders to express a view on interest rates, are trading at a 5-year low, suggesting rate cuts are imminent.

Amid all this, RBI has been predictably silent on further rate cuts. However, that it remains biased in favour of softer rates is clear by some of its recent actions — it cut a key short-term rate and slashed banks’ reserve requirements in early November and recently extended the time period for its various liquidity enhancing measures to June next year.

T reported on Saturday that a group of bankers had in a meeting with RBI asked it to cut its reverse repo rates rather than bring down the cash reserve ratio. This, they feel, will give an indication to the market that interest rates are headed south.

Sobha Developers Offering 8% Discount

Tue, 02 Dec 2008 12:38:00 GMT

Sobha Developers Offering 8% Discount Its raining discount here in Bangalore on residential projects being developed by Sobha Developers. Residential demand in Bangalore is currently sluggish. Although the company plans to launch one new project in Bangalore in Fiscal year 2009, given the slowdown in demand, the company has pushed back time lines of its other planned projects. The company is evaluating plans to offer homes with smaller ticket sizes of about 1,000 square feet at an average price of about Rs. 3,200 per square feet.

Malls under construction, developers pray Delhi-like culture sweeps region too

Tue, 02 Dec 2008 12:34:00 GMT

Malls under construction, developers pray Delhi-like culture sweeps region too Even as two recently-opened multiplexes fell considerably short of footfalls, as many as 16 new malls and such complexes will hit the tricity in a year’s time.

Against much anticipation among the residents and the developers at the time of the launch, Uppal’s Centra Mall in the Industrial Area and DT Mall at IT Park Chandigarh, are still looking for takers. Maximum number of visitors here comprise of cine-goers.

“The recession in the real estate industry is definitely going to impact the future developments of malls in the region. At the same time, we are hopeful that a lot of potential is there in the tricity to generate demand for malls,” said Pradeep Rai, brand manager, Paras Build-Call Pvt Ltd, Gurgaon. The company is constructing one of the largest malls in Punjab with a built-up area of 3.5 lakh square feet — Paras Downtown Square at Zirakpur.

While developers claim most shops have been sold and leased out both in the existing as well as under construction sites, experts are keen to know how this huge inventory of commercial space waiting to be launched in the tricity will generate demand. The malls, where space is usually available with a mix of lease, rent and sale, the rate varies from Rs 16,000 to Rs 25,000 per square feet, depending upon the floor and the location.

EWDPL plans to acquire malls from cash-strapped builders

Mon, 01 Dec 2008 13:21:00 GMT

EWDPL plans to acquire malls from cash-strapped builders Entertainment World Development (EWDPL), a real estate developer, said it plans to acquire malls from cash-strapped builders who are unlikely to finish their projects and may be scouting for a partner.

EWDPL’s move comes at a time when most of the country’s developers have either deferred or slowed down their projects. DLF and Unitech, two of the country’s largest developers, have recently announced plans to defer or sell some of its projects for want of cash.

As many as 60% of the projects embarked upon by small developers are not likely to be completed as retailers cut back on their expansion plans, stock markets tumble and banks curb lending to real estate projects, experts said.

”This is a time for distress sale of assets by small developers,’’ said Manish Kalani, managing director, EWDPL. ”This provides a great opportunity for us, as our company will be able to raise the funds from private equity.’’

EWDPL recently raised Rs 1,300 crore from a German real estate fund, MPC Synergy, by selling equity in the range of 10% - 49% in 21 projects. In February this year, Phoneix Mills, which is also in the business of retail space development, bought a 42% stake in EWDPL for Rs 1250 crore.

EWDPL plans to open 50 malls by 2012 that will make them the biggest mall developer of the country. By the end of this financial year, the company will open malls in Indore, Nanded, and Raipur.

EWDPL plans to tap the retail potential in the tier-II and tier-III cities as big developers have focused mainly in the metros and other key information technology-linked hubs of the country. The growth in smaller towns was largely untapped.

Talking to Business Standard, Kalani said even at the time of economic downturn the retail sector will grow by 15%, which otherwise would have grown by 20% - 25%.

“We reached small towns even before DLF and Unitech,” added Kalani.

”This downturn will help developers like us who also have expertise in mall management. We were the first ones to introduce the revenue sharing model in the country which has becoming so popular among the retailers today,” said Kalani.

LAVA Electronics in talks with realty

Mon, 01 Dec 2008 13:19:00 GMT

LAVA Electronics in talks with realty

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

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

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

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

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

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

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

Terror impact is a temporary setback

Sat, 29 Nov 2008 11:39:00 GMT

Terror impact is a temporary setback

Rating agencies and foreign investors do not see any impact on the prospects of the economy because of terror attacks in the financial capital. The meltdown in the global financial markets is still a larger concern.

Past experience has shown that markets have reacted only temporarily to such extraordinary events. Although some reports do not make a reference to the terrorist strikes, the event is likely to have been factored since the report includes India’s Q2 GDP numbers, which were released on Friday.

Orissa episode of the Credai

Sat, 29 Nov 2008 11:25:00 GMT

Orissa episode of the Credai

The Orissa episode of the Credai has decided to reduce prices of their forthcoming housing projects by 5-10% in the coming 2 months in the wake of fall in raw material prices.

The strategy comes close on the heels of a call given by Credai to more than three thousand of its members in the country earlier this month to reduce prices to revitalize the falling consumer demand.

The price reduction in the forthcoming housing projects by the thirty-seven developers of Credai, Orissa will be effective from January 2009 after full development plan of the city, prepared by the IIT, Kharagpur is expected to come into force.

Following the price reduction, the residential real estate projects in the city will be available in the range of Rs 2,200-Rs 2,400 per square feet as against the existing rates of around Rs. 2,500 per square feet.

According to the CDP of Bhubaneswar, prepared by IIT, Kharagpur, about 30 lakh people need to be accommodated in the city in coming twenty years, as against the city’s present population of about thirteen lakh. To accommodate thirty lakh people in the city, an area of 9,286 acres has been earmarked for residential purposes in the new CDP.

Addressing the media, Mohammed Moquim, president of Credai, Orissa said “Credai Orissa has decided to reduce prices of all the upcoming housing projects by 5-10% to bring more affordability to the end customers in the wake of slide in raw material prices and falling prices of land.”

Further hw added that land prices are predicted to drop further by about 20 to 25% in the coming months and in such a scenario, Credai, Orissa will announce an additional cut in prices for the real estate projects by about 15-20%.

John works for habitat for poors

Sat, 29 Nov 2008 11:23:00 GMT

John works for habitat for poors John Abraham has got more than five lac US dollars on behalf of a Georgia based non-profit organization for building homes for the poor in India, Pakistan, Bangladesh and other countries.

John Abraham, who is the goodwill ambassador of Habitat of Humanity, received the money at a glittering ceremony here yesterday. The contribution, made by leading property developer ETA Star, is for Homes for the Homeless initiative and will be used to build homes for the needy.

Mr. Rick Hathaway, area vice president of Habitat for Humanity International, Asia-Pacific, was present on the occasion.

DELHI TO DEVELOP SLUM AREAS SOON: REDDY

Fri, 28 Nov 2008 12:20:00 GMT

DELHI TO DEVELOP SLUM AREAS SOON: REDDY

Union urban development minister Jaipal Reddy said that the government will soon make available slum lands in New Delhi for re-development. The government will follow the Mumbai model where land is auctioned to the real estate developers for building flats. Certain number of flats will be reserved for the slum dwellers at a minimal price. The developers can sell other flats to customers at the market rate.

“We are in the advance stage of finalizing the auction process in consultation with the Delhi development Authority (DDA). We would be ready with the guidelines soon,” the minister said.

The minister informed that the government is also taking suitable steps to increase housing supply for people in middle income group in the Capital. “We have asked DDA to construct large number of flats for middle class population living in Delhi. With land cost hitting the roof and the financial slowdown squeezing the paying capacity of people, the government would take all possible steps to release and develop large chunks of land into affordable residential apartments,” the minister said.

Mr Reddy also said that the urban development ministry is giving final touches to the long pending bill on real estate regulator. “It would be a model bill that would be mandatory for Delhi and a model for other states to incorporate in their state legislature,” he said.

Mr Reddy further said that while the government is trying to pep the dying sentiments in the realty sector, the regular infrastructure needs would also be given a very high priority. He informed that the Planning Commission is considering ministry’s proposal to inject more funds into the existing corpus of Rs 50,000 crore. “We have asked for an additional funding Rs 20,000 to take up additional projects under the flagship programmed of Jawaharlal Nehru National Urban renewal Mission,” he said.

Property prices may go down in south mumbai

Fri, 28 Nov 2008 12:15:00 GMT

Property prices may go down in south mumbai

The terrorist attacks on Mumbai are likely to further pull down the sagging property prices in the city, especially in South Mumbai. South Mumbai, the most expensive property market is expected to face a dip in value across all segments, including rentals, in the next half year.

“It’s is too early to say anything now. However, the attack would definitely be a dampener to the sentiment, at least in the initial few months. The attack may also create a ripple effect on the property prices in the suburban market,” Pranay Vakil, chairman of Knight Frank India said.

Many property consultants had already assumed that South Mumbai property prices would further appreciate, though marginally, in the second half of the year due to demand-supply mismatch. With the government taking measures to attract more foreign business in recent years, there has been consistent interest in establishing and expanding operations in India, thus leading to an obvious pressure on real estate, especially in South Mumbai.

Price is usually a function of demand and supply. The excess demand for properties had been pushing up the prices in this part of the city till recently. “The attacks would spread negative sentiments in the property market. New property deals will be very negligible in the next few months,” said a senior official with Birla SunLife’s real estate division.

Real Estate Market Has Enomous Power

Thu, 27 Nov 2008 12:49:00 GMT

Real Estate Market Has Enomous Power Indian real estate market could reach a value of $60 billion by 2010, and become an “enormous” economic power, a Middle East developer has said. Abdullah bin Abdulaziz Al Majed, vice chairman of Tanmiyat Group, was speaking ahead of the firm’s participation at property show Cityscape India 2008. Tanmiyat is among a group of international firms expected to make a move in the Indian market when it recovers from a current slump. Al Majed pointed to statistics showing the market will grow from $16 billion to a possible $60 billion in two years, with 21 million new units needed. Al Majed said: “Cityscape India 2008 will shed light on the development of residential units for the poor, who form 70% of the population, along with its main concern of the development of units for medium-income people.

“This draws a clear picture of the future of real estate investments and available opportunities.” He said his company’s presence at the show meant it could “take a detailed look” at everything related to the Indian market. Cityscape India 2008, to be held at the Bombay Exhibition Center from December 8 to 10, is expected to attract more than three lacs property professionals and international investors.

Unitech plans sale of assets to raise funds

Thu, 27 Nov 2008 12:46:00 GMT

Unitech plans sale of assets to raise funds In a bid to tide over the current financial crisis, Unitech, the second largest real estate developer in the country, is planning to raise money by selling some of its assets, such as hotels and commercial real estate.

The company, which currently has a debt of Rs 8,200 crore, is also planning to rope in private equity funds for residential projects by March 2009. In addition, it will transfer Rs 1,200 crore of debt to its telecom joint venture.
Talking to Business Standard, Unitech Chairman Ramesh Chandra said the company would raise around Rs 1,500 crore from sale of hotels and commercial space. Besides, it will transfer Rs 1,200 crore of debt to its telecom joint venture and will also realise Rs 300 crore as debt repayment from the joint venture. Unitech had lent Rs 820 crore to the joint venture and given a guarantee for another Rs 1,200 crore.
“By January, Unitech will raise Rs 2,500 crore through these routes,” said Chandra. The company has also decided to sell its plots to schools and hospitals. The company has around 27 plots, mostly of five acres each, and another 15 plots earmarked for hospitals.
Unitech is aiming to divest three of its hotels projects that are nearing completion. Depending upon the success of negotiations, these projects may be divested by 2009. It is already at an advanced stage of discussion to sell Courtyard by Marriot, the 199-room budget hotel in Gurgaon, and expects to close the transaction before January.

Housing demand falls 35% in smaller cities: Assocham

Wed, 26 Nov 2008 13:08:00 GMT

Housing demand falls 35% in smaller cities: Assocham The demand in the housing sector fell by 35% in tier-II and tier-III cities in the first half of this fiscal due to the high cost of borrowings, says an assessment by an industry lobby.

According to the assessment of Assocham, over 20 million people in about 25 tier-II and tier-III cities, who want to purchase dwelling units, but had to back out on account of rising borrowing costs.

This, in turn, has compelled most real estate developers to defer projects, Assocham said, adding that the rising cost of raw materials like brick, cement and steel has worsened the situation for them.

In tier-II and tier-III cities, property purchases had registered a growth of over 25% between April and September last year.

Higher interest rates have also upset payment plans of borrowers, it said.

The chamber’s assessment is based on feedback from real estate members operating in cities such as Chandigarh, Meerut, Pune, Bhopal, Indore and a slew of smaller urban centres across the country.

Developers giving the feedback include Parsvnath, Omaxe, DLF and Unitech.

Citigroup gets economical support from US government

Tue, 25 Nov 2008 12:53:00 GMT

Citigroup gets economical support from US government Citigroup has got US government support of $326 billion, which is roughly equivalent to one-third of the Indian economy.

Citi has received US government guarantees of $306 billion, a cover that will help it sell the sticky assets and irrecoverable mortgages on its books, and a $20-billion cash infusion from the US Treasury, which is over and above the $25 billion it had received earlier.

Citigroup’s CEO Vikram S Pandit gets to keep his job, at least for now. However, the US government will get $27 billion of preferred stock, paying 8% dividend.

After the stock crashed last week, there were speculations that Mr Pandit will have to quit and Citigroup may be sold in parts. The biggest banking rescue deal was quickly cobbled together over the weekend before markets could further punish the scrip and paralyze the financial system. When trading resumed on Monday, the Dow was in the green. The European markets also cheered the state support for Citigroup and were up between 2% and 5%, amid expectations that president-elect Barack Obama will push for an unprecedented government role in reviving growth and stabilizing the financial system.

But many emerging markets, where Citi has a sizeable exposure, were more guarded in their response. Key Asian markets were down between 0.25% and 3%, while back home, Indian equities rebounded from their day’s lows on news of the Citi bailout package, but ended the day on a subdued note.

The distant shakeout in Citi is also creating ripples in India. Among the senior officials to quit in the past few days is Brian Brown, head of equities at Citigroup Global Markets India. Citi Financial, the group’s non-banking finance arm in India which has seen high delinquencies, will receive $200 million infusion by March.

Developers in the metropolis plan to target NRI buyers

Mon, 24 Nov 2008 13:06:00 GMT

Developers in the metropolis plan to target NRI buyers Real estate developers in the metropolis plan to target NRI buyers, primarily in the UAE, in a bid to push up their sales, affected in recent times by high prices and adverse sentiment, a senior industry official said.

“With the Rupee depreciating via-a-vis the dollar, NRI buyers stand to gain by around 20%. Prices too have begin to decline. NRIs can get a good deal now and we intend to highlight this,” Maharashtra Chamber of Housing Industry’s CEO Zubin Mehta said.

The Rupee had depreciated from the Rs 40 mark a few months ago to the Rs 50 mark against the dollar last week, a fall of over 20% in the span of a few months.

The Rupee depreciation against the dollar would benefit NRI purchasers by around 20%. Besides, prices have declined by 10-15% in the last few days. If discounts by builders are also factored in, buyers could be advantaged to the tune of nearly 40%, Mehta said.

“If a 2 BHK flat in a decent Mumbai suburb costs around Rs 50 lakh, it could be available to NRIs for around Rs 40 lakh. Factor in the price decline and if the builder offers a further discount or says the stamp-duty is for free, then the flat could be available for as low as Rs 35 lakh,” he said.

The MCHI intends to use the Rupee depreciation against the US dollar as a major selling point to NRI buyers. It would be a holding an exhibition in Dubai end-this month where major developers affiliated to the MCHI would be showcasing their properties.

“NRIs in the Gulf primarily look at ready property and these could now be easily available to them,” Mehta said. Mehta said that the main reason for targeting UAE NRIs was that they were mainly working-class people who have gone to Dubai and other places in the UAE with the aim of earning a living and buying a home in India.

“They are not permanent residents like in the US or the UK. They primarily earn their living in the UAE and buy a home in India,” Mehta said.

These NRIs have the money and are the actual buyers but are holding back on purchases hoping that prices would fall.

Asia Pacific realty market rolling under slump

Fri, 21 Nov 2008 10:07:00 GMT

Asia Pacific realty market rolling under slump The Asia Pacific property market is witnessing major impact from global economic turmoil, with vacancy rates rising and office space leasing declining, according to global realty consultant Jones Lang LaSalle.

“In Asia Pacific, the financial market turmoil is starting to significantly affect the occupancy market for major financial office centres. Net leasing activity has been negative and vacancy rates have been on the rise for several quarters in Sydney, Tokyo, Singapore and Hong Kong,” JLL said in a latest report.

The consultant pointed out that rentals in Tokyo, Sydney and Hong Kong have already moved in downward phase of the cycle, with Singapore expected to follow suit in this quarter.

It has forecast that largest rental declines over the next one or two years are expected to be seen in the mature Asian markets following the demand contraction and the very strong rental increases observed in recent years.

JLL also noted that in the tier I cities in China and in some Indian suburban micro markets, the next two year will see abundant new supply hitting the market as demand begins to fall which would result in increased vacancy levels that could lead to major correction in rentals in short and medium term.

“In leasing markets where financial services companies contribute significantly to office occupancy and have driven rents to record levels, the increases now are beginning to reverse as the landlord-tenant power play shifts,” JLL said.

The report further pointed out that economic impact on real estate fundamentals are hitting more gradually in Europe than in the middle east and North Africa or Asia Pacific.

Realty cos fight shy of price cuts

Fri, 21 Nov 2008 10:05:00 GMT

Realty cos fight shy of price cuts Real estate companies seem little inclined to listen to the government’s call to reduce prices. Even as realty firms such as DLF, Parsvnath and Emaar MGF demand rollback of taxes, they are reluctant to commit any price cut.

An association of developers, Confederation of Real Estate Developers Association of India (Credai), has asked member developers to reduce prices, but no one seems willing to announce any cuts.

“The government has imposed a number of taxes on the real estate sector. It needs to roll them back,” said DLF chairman KP Singh. He, however, didn’t make any commitment on price cut. “Prices are a function of demand and supply. Today, supply is far ahead of demand,” he said, adding that housing demand will pick up only after interest rates are brought down to 6-7%.

Most developers are banking on the possibility that the Reserve Bank will slash rates that will in turn bring home buyers back into the market. Many developers don’t think it is possible to slash prices.

Delhi-based Emaar MGF feels lower interest rates and an improvement in general economic sentiment are the answer to revive residential market, not price cuts. Emaar MGF managing director Shravan Gupta says several micro-markets across the country have already seen a correction of 20-25%.

“We have already cut prices, which have brought our margin down to 15% from 30% last year. If we cut prices further, our margin will get wiped out,” said Mr Gupta.

Parsvnath Developers chairman Pradeep Jain, too, feels prices are unlikely to come down, even though builders may focus on small-size homes to bring down overall cost. “The ticket size will get smaller for making homes more affordable. But per square feet rate will not come down,” said Mr Jain. He is the president of the Delhi chapter of Credai, which gave a call to its 3,500 members on Wednesday to reduce prices.

There is a wide spectrum of views among developers on price correction in the residential market. Even as Emaar MGF’s Mr Gupta says a price correction of around 25% has been seen in several micro-markets across the country, Mr Jain of Parsvnath says prices have remained stable. Another Delhi-based realty firm Omaxe CMD Rohtas Goel says prices have reached ‘rock-bottom’ by having corrected up to 40-50%.

The correction, developers say, is not with respect to the rates at which transactions were made in the past. “There is no benchmark to compare rates of new launches. We can only compare it with our estimates of prices, which similar projects could have fetched in good market,” says Mr Gupta.

Therefore, price correction, as mentioned by developers, remains debatable. Developers say price correction can be seen only in new launches, as old buyers will not allow builders to reduce prices in an ongoing project.

Sahara Prime City to raise Rs 2000 crore to build townships

Thu, 20 Nov 2008 12:37:00 GMT

Sahara Prime City to raise Rs 2000 crore to build townships Realty firm Sahara Prime City said it would raise Rs 2,000 crore in the next 12-18 months to part fund development of 217 integrated townships across the country.

The company, which is planing to invest the amount in the first phase of the plan that will see development of 102 townships, is looking at both debt and private equity investments to raise the fund. The move by the firm follows consolidation of real estate business of the Sahara Group under it as the holding company.

“We plan to develop 102 townships in the first phase. The average project cost for developing townships would be 150 million dollar,” Sahara Prime City Head (Strategic Finance) Sandeep Wadhwa said. Asked about source of funding for the project that will spread over 100-300 acre, he said it was being done through sales, debt and promoters contribution but there is a gap of Rs 100 crore in each project.

“We will raise Rs 2,000 crore by 2009-10 fiscal as debt and private equity,” Wadhwa said, adding the company was in talks with banks, financial institutions and private equity firms. The company is open to selling stakes at both company and project level, he added. It is also in talks with global developers to form joint venture for townships development.

On initial public offer, he said the company would unlock value when market condition improves. Sahara Group had announced its plan to develop townships in 217 cities in 2004-05. It has launched nine townships where construction is in full swing and is planning to launch 22 more townships by middle of 2009.

Sahara Prime City has 20,000 acre of land, including 10,600 acre in Aamby Valley City near Mumbai.

DLF requests Haryana to refund license fees

Thu, 20 Nov 2008 12:35:00 GMT

DLF requests Haryana to refund license fees

In a bid to seemingly boost its cash reserves, DLF, India’s largest real estate company, has requested the Haryana government to refund license fees worth Rs 235 crore for various commercial and residential projects in Gurgaon.

In two separate letters to the state government’s director of town and country planning department, DLF requested the authority to refund the license as well as the scrutiny fees for commercial and residential projects in various sectors of Gurgaon.

Developers usually acquire agricultural land from farmers and pay the government a conversion fee, or a fee for change of usage of land, and a license fee seeking permission to construct a commercial or residential project on the land. The government also charges a nominal scrutiny fee, which is a kind of a processing fee. The license fee is higher for commercial projects.

The Haryana government charges license fees of Rs 6.70 lakh per acre for group housing and Rs 2.15 crore for commercial projects with a floor area ratio (FAR or actual developable space) of 1.50 and Rs 2.70 crore per acre for FAR of 1.75, one of the highest such fees levied in the country.

DLF has sought refund for about 110 acre comprising 16 commercial projects in almost as many sectors, including 57 acre in sector 88 and 14 acre in sector 89. The company has sought complete or partial withdrawal of license fee in the scheduled projects.

Similarly, in another letter to the government, DLF has sought refund of license and scrutiny fees worth Rs 8.6 crore for multiple projects spread over 103 acre in Gurgaon. The company has not given any specific reason for withdrawal of license applications in either case, but only mentioned that the licenses were pending and were formally being withdrawn.

Even as realty players are struggling with a cash crunch, DLF chairman K P Singh on Tuesday said that the company faces no liquidity issues. However, he added that some projects have been deferred and some jobs cut due to weak demand. Seeking a refund of license fee is not an ordinary way of shoring up liquidity at any firm.

Changed usage of land and the license to construct a project on it is what differentiates raw land from development land. Development land fetches far higher value than a piece of agricultural land. In India, getting these licenses is a mammoth task.

Several multi-million dollar foreign investments, which came into the realty sector in the past few years, attached a huge premium to the land. Developers’ equity was mostly limited to the land. The ability to obtain licenses for construction in Indian is what put developers in a strong position vis-a-vis other investors, including private equity players.

RBI makes recast of realty loans tougher

Thu, 20 Nov 2008 12:32:00 GMT

RBI makes recast of realty loans tougher India’s struggling real estate sector is set to come under further pressure in the coming weeks as the Reserve Bank of India (RBI) has made it tougher for banks to ‘restructure’ loans, forcing them to cut house prices or risk being starved of bank funding. Banks often resort to restructuring loans — a practice aimed at preventing loans from being classified as bad — when they sense their borrowers are facing difficulties in repaying loans. In a typical restructuring, banks give borrowers more time to repay the loan by extending the loan tenure, and sometimes, even at reduced interest rates.

Such an exercise enables banks to keep their non-performing assets (NPA) ratios under check and their books clean of the stigma of dud loans. But in a little-known directive issued earlier this year, the central bank has ordered that the moment a loan to a builder is restructured, banks must classify the account as an NPA.

However, for restructured loans in all other sectors, the account can continue to be treated as a so-called ‘standard asset’, thus sparing banks from having to make large provisions in their profit and loss accounts. The inability to restructure loans easily is forcing banks to put pressure on builders to cut prices, sell properties and service loans. Builders are usually left with little choice as an NPA tag will make it difficult for them to approach other banks for funds.

“We are putting pressure on the real estate sector to reduce property prices. In such times, even if they are able to keep their head above water, it would be fine. They have all had a good innings so far. Now, they have to learn to live with thin margins,” said TS Narayanasami, chairman & managing director of state-run Bank of India, and the chief of industry body — Indian Banks’ Association.

“Just banks reducing interest rates will not help in reviving sentiments; builders will have to bring down prices for buyers,” Mr Narayanasami added.

Bankers say demand for home loans has fallen because buyers are waiting for property prices to fall. “Banks have taken the initiative by cutting home loan rates. Prices of cement and steel too have fallen, but builders have not reduced property prices,” said MV Nair, CMD of Union Bank of India.

Although the RBI relaxed some bank lending norms for the building sector last weekend, it has remained quiet on the issue of restructured loans of builders.

Analysts have expressed concerns over the financial health of the real estate sector. City-based retail broking firm, India Infoline, fears the liquidity situation of developers could worsen further if banks refuse to refinance maturing debts of real estate companies and maintain the credit freeze on their accounts.

“We reckon that debt maturing over the next 12 months for developers like Unitech, Sobha and Puravankara is higher than our estimate of these companies’ revenues over the corresponding period. The situation with Omaxe, Parsvnath and Ansals also remains precarious, owing to large land advances and high receivables”, it said in a research note.

The building sector has seen a raft of credit downgrades amid refinancing concerns and bankers say the sector has little choice but to cut prices. “If a builder does not pay, banks would either initiate a recovery proceeding or restructure the loan. A recovery proceeding often results in lower realization. This, hopefully, should indirectly put pressure on builders to bring down price and go for negotiated sales,” said SA Bhat, CMD of Indian Overseas Bank.

Frasers Hospitality signs First Three Properties in India

Thu, 20 Nov 2008 12:30:00 GMT

Frasers Hospitality signs First Three Properties in India Frasers Hospitality has signed contracts to manage its first three properties in India. June 2009 will see the opening of Fraser Residence Beverly Park, Bangalore, owned by the Skyline Group and managed by Frasers Hospitality. The property will have 50 Gold-Standard serviced residences and is located in the business district of the Hebbal sector, close to Bangalore’s new International airport.

Skyline Group also signed another contract for Frasers Hospitality to manage its other Bangalore property. Slated for opening in 2011, Fraser Place Hosur Road, Bangalore will have 153 serviced residences and is located at Bangalore’s “Electronic City” near the IT Park.
“Bangalore is India’s IT Hub,” said Skyline’s Group Managing Director Avinash Prabhu. “We are confident that the Fraser brand of luxury serviced apartments which has a loyal following in Europe, Australia and Asia, will appeal to the expatriate community here, as well as the well-heeled India businessmen and professionals in Bangalore on medium-term travel.”
A contract for Frasers Hospitality to manage a third Bangalore property has been signed with the Minerva Group. Fraser Place Whitefield, Bangalore will have 99 serviced residences located in the heart of the city’s IT hub of Whitefield, a well connected and self contained suburb, home to many multinational companies. The property will also open in June 2009.
India forecasts US$35 billion in foreign direct investment for its 2008-09 financial year, an increase of 42% compared to US$24.57 billion in 2007-08.
“Though these numbers will be impacted by the financial crisis, India will still see positive growth,” said Mr Choe. “This is impressive by global standards and India will still see demand for high-quality secure branded hospitality like Fraser especially among business travelers, our target market.”
All Fraser-branded properties provide five-star-type luxury combined with the space of an apartment, with separate living room, dining room and fully-equipped kitchen complete with clothes washer and dryer. In addition, residents can enjoy a full range of facilities, including all-day dining, business centre, swimming pools, fitness club, children’s playground and indoor playroom.

TDI comes up with an EMI Scheme

Wed, 19 Nov 2008 13:25:00 GMT

TDI comes up with an EMI Scheme TDI Infrastructure Limited (TDIL), one of India’s leading real estate developers, today launched a special scheme for the customers who wish to invest in its lifestyle apartments - ‘Kingsbury Terraces’. This one of its kind scheme will enable the prospective buyers to own the lavish apartment settings for just Rs. 9 lacs whereas the rest of the payments can be disbursed in EMI for the next 24 months.

Responding to the request and interest shown by all section of buyers, TDI has brought in this scheme as a part of its customer friendly approach. Though the actual price of the apartments start from Rs. 68 Lacs, the scheme enables the buyer to own any one of these exquisite high rise apartments for as less as Rs 9 Lacs.

Launching the scheme, Mr. Kamal Taneja, Managing Director, TDIL said, “Launching this scheme for “Kingsbury Terraces” is just one way of bringing in more customer friendly and innovative approaches to serve our customers better. We will soon introduce many more innovative schemes for our other projects which will be of benefit to our valued customers.”

Owing to the location of the project in Kundli, the potential emerging hub of NCR, Kingsbury Terraces offer the best of world-class facilities and features. Residents of each of these Kingsbury apartments will have their select king size living space and style.

This is ensured by exclusive gated access, with the block sporting modern amenities like gymnasium, swimming pool, billiards room and community club to name the basic ones. Inter-flowing beautiful greenery and landscaping, State-of-the-art international standard elevations, terrace garden, four spacious bed rooms with hall, a separate servant room and balconies all around are a part of the world-class designs given to these apartments.

Unitech repays Rs 200-crore loan to Indiabulls Financial

Tue, 18 Nov 2008 13:48:00 GMT

Unitech repays Rs 200-crore loan to Indiabulls Financial Unitech repays Rs 200-crore loan to Indiabulls Financial Real estate player Unitech has managed to raise around Rs 200 crore through partial monetisation of assets and internal debt restructuring within the group to pay back the 45-day debt taken from Indiabulls Financial Services (IBFSL). The deadline to pay back the debt was November 17.

Sources at Unitech revealed that money from the escrow has been handed over to IBFSL on Monday. After this, collaterals that Unitech had pledged with Indiabulls to secure the debt will be released to the company. With this payment, the company does not have any outstanding debt towards IBFSL. Indiabulls founder Gagan Banga confirmed that Unitech has cleared its loan, which was taken 45 days back (early October) within the stipulated time.

“Unitech had pledged some flats and hotels against the loan,” informed Mr Banga. He, however, did not confirm the amount of loan that was raised. Unitech’s total net debt as of June 30, 2008, was around Rs 7,700 crore. Earlier this month, the company had put its 2,00,000 square feet commercial office building in Saket, New Delhi, on the block, which is expected to fetch upwards of Rs 600 crore.

Sources said that Unitech is also looking for buyers for its underconstruction hotel in Gurgaon, which is valued close to Rs 300 crore. Unitech’s stock has dropped from a 52-week high of Rs 546.80 on January 2 to a low of Rs 26.60 on October 24. Its shares closed at Rs 42.75 on the Bombay Stock Exchange, down 6.56% from its previous closing of Rs 45.75.

The overall slowdown along with the increased home loan rates has translated into gradual slowing down of sales in the real estate sector. Most real estate developers today are cash-strapped and are looking at avenues of raising capital.

With bank lending becoming tight over the months and private equity players getting overcautious, the only way out for real estate companies has been to monetise their assets. Market sources indicate that a number of such deals are in the market, but investor interest is very low at the moment.

Unitech sounds out PEs to sell hotel properties

Tue, 18 Nov 2008 13:47:00 GMT

Unitech sounds out PEs to sell hotel properties Unitech, the country’s second-largest listed real estate company, has put on the block all its six hotel projects under construction to reduce its capital expenditure and raise cash to fund its other ongoing projects. The company is in talks with a few private equity investors to sell all its six properties, being constructed at Gurgaon and Kolkata.

“We are looking at divesting up to 100% stake in all six properties, comprising 1,000 rooms. We are also talking to a few private equity funds for this, but a deal hasn’t been clinched yet,” a top executive at Unitech’s hospitality arm told ET. He said the company had also scaled down its target for hotel business. Instead of 15 hotels with 2,500 rooms as planned earlier, Unitech has decided not to go beyond the 1,000-room capacity.

“We are proceeding with our hotel business as planned earlier. Six of our hotels are under construction. The first will open in January 2009. Unitech is in the business of developing properties and looking at monetizing its real estate assets. We are evaluating a divestment of equity at both individual assets as well as a group of assets. Depending on the price, we will be looking at minority or majority or outright sale in these assets,” Unitech MD Sanjay Chandra said.

Unitech’s first hotel project will be the 199-room mid-market property, which will be managed by Marriott and sport the ‘Courtyard’ brand. A person briefed on the matter said that Unitech was seeking a valuation of Rs 250 crore-Rs 300 crore for the property, but had been offered a lower Rs 200 crore by a private equity investor. He said the two parties may close the deal soon at the lower end of the band.

Other two hotels of Unitech, for which the company has management tie-ups with Marriott and Carlson hospital chains, will be ready in one-and-a-half years.

Mr Chandra had said that Unitech planned to build 35 hotels, including 15 in the first phase. The company expected to raise $350 million through private equity in the current fiscal for its hotel business. The global financial turmoil, however, has made fund-raising difficult for real estate firms.

With equity as well as debt becoming increasingly difficult to raise, a capital-intensive business like hospitality has taken a backseat for developers. Even DLF has shifted its focus from hotel and mall business to other segments where revenue realization is quicker and easier.

RBI sop fails to lift realty

Mon, 17 Nov 2008 12:01:00 GMT

RBI sop fails to lift realty It seems that the Reserve Bank of India’s move to ease lending to real estate hasn’t augured well with the banking sector. The apex bank effectively reduced the tax on lending to the real estate sector, which means banks can now more freely lend to the realty sector.

Considering the slump in the real estate sector with higher dips in demand for property and developers finding it hard to secure more land bank, which earlier was fulfilled with revenues generated from their projects itself, and increasing risk of rising NPAs of banks, the banking sector has come into focus once again.

The BSE Bankex was down 4.5% Monday at 10:38 am. The country’s largest private sector bank, ICICI Bank, fell 6.92% to Rs 368.55. It was followed HDFC Bank, which was down 6.09% to Rs 950, Axis Bank down 5.24%, Kotak Bank down 4.88%, Union Bank down 3.92%.

BSE Realty Index fell by 5.10%. Unitech was down 8.5%, Peninsula Lan falling by 6.11%, Indiabulls Realestate has fallen close 5.67%. Ansal Infrastructure was down 5.76%.

The benchmark Sensex was down by 2.6% to 9142.60.

Said Rahul Amritlal, an analyst with a CFP, “There is still concern left in the market with regard to trading considering the obscurity over global markets movement. We would see some respite after March-April period as the Assembly election proceeds. Till then, it would be range-bound activity as regards the Sensex movement.”

Real Estate Firms Look At Diaspora

Mon, 17 Nov 2008 11:59:00 GMT

Real Estate Firms Look At Diaspora In these times of economic slowdown, Indian companies, especially real estate firms, are looking at diaspora in the Middle East for investment.

The government kick-started a series of “investment meets” last week in Muscat that had major Indian firms hard selling India’s economic stability to the diaspora.
The Muscat meeting, held under the aegis of the overseas Indian affairs ministry on November 12, is the first in over 16 such meetings to be held in the Middle East, UK and US.
These countries account for the bulk of the Indian diaspora. According to Col Harmeet Singh Sethi, head of the Overseas Indian Facilitation Centre (OIFC), the Indian government and business groups will target areas in the Middle East that remain largely ignored but represent big money including Sharjah, Dubai, Abu Dhabi and Bahrain.
According to Sethi, real estate, education and wealth management are key areas where India is looking for investment and support from the diaspora. One of the major obstacles in this area is the bureaucracy and red tapism. “We were told that India is rated the 83rd most difficult place to do business in. There were reservations expressed by business people there who are interested in investing in India but we were able to allay their fears to a large extent,” Sethi said.
The meeting included biggies like DLF, Career Launcher and Kotak Mahindra.
The investor tete-a-tete comes close on the heels of PM Manmohan Singh’s trip to Oman where he asked Gulf nations to invest in Indian infrastructure and help the country register 9% growth.
India is now looking at big-ticket investments in areas like infrastructure, healthcare, education, assisted living, wealth management and real estate.
Indians send the highest amount of remittances back home, beating even China. India has now captured one-tenth of global remittance flows with total remittances from overseas Indians growing steadily from $2.1 billion in 1990-1991 to $27.1 billion in 2006-2007.
But investment from the diaspora lags behind. Sources said the ministry of overseas Indian affairs was keen to convert this emotional bond into a financially productive one.

No slowdown in realty projects

Mon, 17 Nov 2008 11:57:00 GMT

No slowdown in realty projects Mahindra and Mahindra on Monday said there is no slowdown in its real estate projects, even as there is a slump in demand.

“We are not slowing down on any of our projects. Jaipur is rocking, Chennai is doing well, city-based projects such as Faridabad are also doing well,” Mahindra and Mahindra Ltd Executive Mr Arun Nanda said.

Fundamentals of real estate have not changed. Mr Nanda said, there were no funding issues for its projects and the company’s affordable housing projects are not going to disappear.

“We have actually got cash in the bank,” he said, adding there is a huge demand in Rs 30 to 40 lakh apartments segment. He, however, said the housing loan segment is facing problems and investors are not coming forward. “Demand has been put on back-burner and interest rates are hurting people,” he said.

Save money by shifting home loan to public sector banks

Sat, 15 Nov 2008 11:56:00 GMT

Save money by shifting home loan to public sector banks The Indian government is trying hard to bring down the interest rates in order to counter the economic slowdown. Indian finance minister, Mr. P. Chidambaram, met with heads of private as well as PSU banks and advised them to lower lending rates.

Expectedly, several public sector lenders were first to follow the advise. SBI have lowered their prime lending rates to 13%. Bank of Baroda, Allahabad Bank, Syndicate Bank, Central Bank of India, Oriental Bank of Commerce and Corporation Bank have reduced lending rates by 75 bps to 13.25% with effect from November 10. Dena Bank cut its PLR to 13.5% from 14.25% and, among foreign banks, Citibank lowered its benchmark lending rates by 50 bps to 15% with immediate effect.

FM assures more loans for real estate

Fri, 14 Nov 2008 10:55:00 GMT

FM assures more loans for real estate Finance minister P Chidambaram assured real estate developers that government will impress upon banks to accelerate lending to realty, which is facing one of the worst slowdown in the recent times. A delegation of builders under the Confederation of Real Estate developers’ Association of India (CREDAI), met Chidambaram on Wednesday to complain against banks’ reluctance to disburse loans to the real estate companies.

A source, who was present in the meeting, said the government accepted that real estate is an engine of growth. At a time when the economy is facing a threat of slowdown, the sector could be used to revive it. Chidambaram, it is learnt, told the delegation that the government will not only help infusing liquidity in the system, but will also work to bring down the interest rates.

In the last couple of years, realty has been affected adversely because of rise in interest rates, which went up from 8% to around 12%. The interest rate was increased because of the sharp rise in prices of real estate assets, which RBI thought could create a bubble. To discourage the price rise, RBI tightened the provisioning norms, making loans to the sector costlier. At the same time, in the last nine months, when the inflation shot up to cross 6%, level RBI started tightening liquidity to keep price rise under check.

Such a steep rise in the interest rates increased the equated monthly instalment (EMI) of a loan for the same period by almost 40%. This has affected affordability factor of buyers adversely and in turn brought down buying of houses. According to the source,FM said the situation has now changed and the policy would also be tweaked accordingly, so that the interest rate on home loan comes down, making it more affordable.

It is learnt that RBI is considering to remove the high risk weightage on the home loan to enable banks to lend at lower rates. At present, banks have to make provisioning of higher capital against the home loan of more than Rs 30 lakh. Because of this, the interest rate of home loan above that slab is around one percentage point higher than that of less than Rs 30 lakh.

Saviour Group's Project In Ghaziabad

Fri, 14 Nov 2008 10:52:00 GMT

Saviour Group's Project In Ghaziabad Saviour Group, a company dealing in land acquisition and consolidation, has declared that it will soon launch an eco-friendly real estate project named Greenisle on Expressway (NH-24), Ghaziabad. The project, to be spread over six acres, promises to be India’s best evergreen real estate project, according to company directors, Mr Iqbal Singh Sodi, Mr Lakhbir Singh Gill and Mr Sanjay Rastogi.

Director of the company quoted that though the concept is still at a nascent stage, it is dynamic and fast catching up. The benefit of green concept is reduced environmental impact through energy efficiency.

Realtors shift focus to budget housing

Fri, 14 Nov 2008 10:50:00 GMT

Realtors shift focus to budget housing Declining sales, high interest rates, paucity of funds and global economic slowdown have badly impacted the real estate sector which is witnessing not only sudden slump in demand but also is at the receiving end in the stock market.

Freebies in the shape of luxury sedans, offers of foreign trips, 15%-20% discount or deferred payments have failed to attract buyers.

Fears of recession and an overall depressing sentiment have forced the real estate players to re-draw their strategies and curtail their expansion plans in the high-end and premium segment.

The focus has suddenly now shifted to providing budget housing in order to cash in on volumes and target Tier-II and Tier-III cities.

Parsvnath Developers Chairman Pradeep Jain said the Government should help the developers to launch a special scheme to promote affordable housing as costly land was a big hurdle.

Favouring Government’s intervention to give a fillip to affordable housing, Omaxe Chairman and Managing Director Rohtas Goel said: “There is an artificial scarcity of land. No cushion is left in the hands of developers to reduce the prices.” Omaxe has already put in place National Affordable Housing and Infrastructure Limited for developing affordable housing to a bigger section of the society.

Rising demand for affordable homes

Thu, 13 Nov 2008 11:17:00 GMT

Rising demand for affordable homes Property prices within the metropolitan areas of Delhi, Bombay, Hyderabad and Bangalore have seen massive growth in recent years and prices in some areas are considered

to be excessive. But, outside this golden circle, in cities such as Mohali in the foothills of the Himalayas and in the boom town of Rudrapur, in neighbouring Uttar Pradesh, where 465 factories are being built, construction is booming. In the south, Goa and Chennai are still steadily attracting investment.

In recent times, demand for housing has risen rapidly as income levels have soared, new jobs have been created and people’s aspirations have changed – although this is slowing down due to the credit crunch. A new report on commercial property by the Royal Institution of Chartered Surveyors lists India as one of the countries most vulnerable to the crunch.

Jane Jorgenson of Hamptons says: “The Indian property market is being affected by the credit crunch, as with all countries. Buying has certainly slowed. However, the growth of middle and high income earners continues to supply a steady market of buyers.” The property market has grown from £6.5 billion in 2005 to an estimated £30 billion. Hamptons has opened an office in Delhi, and has an India desk in London for UK-based investors.

Land prices have quadrupled over the past three years as developers rushed to build luxury residential developments, with starting prices at a minimum £125,000 for two bedrooms. But the big boom will be in low-cost affordable housing. The number of people earning more than £2,500 a year is forecast to double to 20 million in the next two years – not least because of the 2.5 million students teeming out of Indian universities each year.

The UK-based agency David Stanley Redfern is selling off-plan apartments in Rudrapur, northern India, costing £28,000 for two bedrooms. Called Mountain View, the scheme quickly sold out, but another is being built nearby which will also offer affordable housing, ready to capitalise on the anticipated demand. Rudrapur, designated a Special Economic Zone, offers tax incentives to companies moving into the area. The city’s new factories are expected to employ 300,000 people, at least 50,000 from outside the area, who will be looking for homes to rent. With only 20,000 new units being built, buy-to-let flat owners are hoping to cash in.

Emaar Properties and MGF are planning to build townships in Delhi, Hyderabad, Punjab, Uttar Pradesh and Chennai, an investment of more than £2 billion.

The potential for growth remains vast. Sebastian Siddiqui, who heads up Hampton’s Delhi office, claims: “With a rising middle class, 400 million people – more than the entire population of the USA – are set to buy their own homes.”

People Prefer Real Estate Companies For Business

Thu, 13 Nov 2008 11:15:00 GMT

People Prefer Real Estate Companies For Business India has always been a property oriented market. Irrespective of all the industries that have been booming, money flow into real estate has been steady and consistently increasing. In fact, people make money in their respective professions and most of the profits go back into property in India. That has been the way things have been for a very long time.

However, in the recent years, there has been a paradigm shift, and professional real estate management companies are slowly emerging as the preferred destination for investments of Indians from around the world. A survey states that the organized real estate sector in the country was a mere 2%, and will be counting for 20% by the end of this decade. That is serious growth!
If you look at the size of the country we are talking about, 20% of the market being developed by the organized sector would ensure that the overall quality of property in India would go up big time. And as always, property always reflects on all the other industries around it. So, when the quality of real estate becomes better, all the other indicators in all other associated industries would also become of a better quality.
A lot of people looking to buy residential property in India now prefer to go through established realty companies like Omaxe. Most of those investors are NRIs who’ve settled abroad many years ago. The reason is simple – going through a professional company adds value to your property in India, and is any day a better buy, as there are a lot of risks that are mitigated. The surprising trend is that people are now buy sell property in India in places that they have no direct interest in! All these years, investments were in our own cities. Now, investment happens wherever there is growth, and that is a very positive shift in the thought process of the investor. And many sellers also now prefer to go through organized channels. There are good times ahead – and we’re very happy!!

Realty Sector demands 'stimulus package'

Wed, 12 Nov 2008 12:01:00 GMT

Realty Sector demands 'stimulus package' National Real Estate Development Council (Naredco) and the Confederation of Real Estate Developers’ Associations of India (Credai) has petitioned the Government to ease foreign direct investment and external commercial borrowing norms and formulate a policy for rescheduling of term or construction loans to facilitate the roll-over of existing debt.

The request has also to be seen in the context of the recent announcement by China that it would invest about $586 billion on boosting infrastructure and consumption including low-cost housing.

In a letter to the Prime Minister recently, Credai said that the high credit squeeze was forcing ongoing projects to a virtual halt, amid an “extremely negative sentiment in the market”.

“Capital of both developers and funds have significantly eroded with crashing valuations. Developers and funds are unable to raise loans from external sources to finance completion of ongoing projects due to ECB and other restrictions on real estate development,” Credai said.

Stressing on the need to define ‘affordable housing’, Credai said that the FDI and ECB rules need to be modified to encourage investment in affordable housing. The norms currently allow 100% FDI in construction development projects including housing, commercial premises and resorts subject to conditions minimum capitalization, and area for development. “The limits of 50,000 square metres or 25 acres could be relaxed for this sector,” it said.

It further said that ECBs should be permitted for the real estate particularly for completion of all ongoing projects where there is already equity in form of FDI. Currently, the ECB is prohibited for real estate development.

“The monetary policies of the RBI for real estate projects and home loans by Indian banks, closure of ECBs and rise in interest rates together with stock market crash have lead to a situation where credit has dried up and buyers are hesitant to invest despite a strong demand,” said the Naredco Director-General, Brig. (Retd.) R.R. Singh.

Naredco has said that in cases where the land is purchased from Government agencies, banks should be allowed to finance the land cost in addition to construction costs.

The RBI, since October, has reduced several benchmark rates including mandatory deposit that banks keep with the central bank (cash reserve ratio), the amount which banks have to park in government securities (statutory liquidity ratio) and repo rate to unlock bank funds and trigger a low interest rate regime. However, the spate of negative news from the real estate sector shows no signs of waning. A report released by Cushman & Wakefield yesterday had pointed out that retail rentals fell by up to 20% in the third quarter ended September 2008, as retailers moved cautiously on expansion plans.

Barwa enters Indian real estate market

Wed, 12 Nov 2008 11:59:00 GMT

Barwa enters Indian real estate market

The Barwa Real Estate and Sun Group, a leading investor and private equity fund manager in India have entered into a joint venture agreement to explore the Indian real estate market.

Sun Group and Barwa have proposed to form a 50:50 joint venture company to be named as Sun-Barwa Land. The new company will seek approval from the Foreign Investment Promotion Board (FIPB) in India to aggregate, acquire, hold and develop land banks in high growth areas in the country. Sun Group and Barwa together will raise capital from Qatari and Middle Eastern investors.

Ghanim Bin Saad Al Saad, Barwa’s chairman and managing director said: “It was part of our strategy to enter the Indian market that has strong fundamentals and solid growth parameters. Barwa looks forward to its partnership with Sun Group due to its extensive experience in the Indian market.”

Nand Khemka, chairman of Sun Group said: “ We are proud to be partnering with Barwa which brings significant expertise from Qatar and the region to India with potential for major growth for years to come.”

Prudential, DLF get in-principle nod for fund unit

Tue, 11 Nov 2008 13:43:00 GMT

Prudential, DLF get in-principle nod for fund unit India’s most valuable real estate firm, DLF Ltd, and American life insurer Prudential Financial Inc (PFI) said they have an in-principle regulatory approval for a mutual fund venture formed in December.

“We look forward to a successful launch once we receive the remaining regulatory approvals, which should take place sometime in 2009,” Rajeev Talwar, group executive director of DLF, said in a joint statement with Christopher Cooper, chairman of PFI’s international investments unit on Tuesday.

The fund venture, DLF Pramerica Asset Managers Pvt Ltd, is headed by Vijay Mantri, who joined in April from the Indian fund unit of Deutsche Bank.

DLF Pramerica joins more than 20 firms looking to break into the Indian fund industry, which saw its assets grow more than four-fold to Rs 5.5 trillion in five year ending 2007.

Assets have shrunk 28% to Rs 3.9 trillion this year due to a stunning 51.5% slump in India’s benchmark index and outflows from fixed income fund

Foreign Insurers Set to Invest Heavily in a Cash-Starved India Market

Mon, 10 Nov 2008 12:44:00 GMT

Foreign Insurers Set to Invest Heavily in a Cash-Starved India Market India’s latest move to liberalize its insurance sector may create the long-hoped-for opening for foreign insurance companies to advance into the under-developed market. But while business is thriving, foreign insurers must face reality checks in the form of the country’s limited capacity for infrastructure and system supports, competition from public insurers, operating expenses and investment costs.

The Indian Parliament’s raising of direct foreign investment limits in insurance ventures from 26% to 49%, if enacted in December, will mark a milestone in India’s insurance industry since the opening of the sector for private and foreign investors in 1999. Since then, insurance sector has been expanding by an average of 25% per year, according to PricewaterhouseCoopers in a recent report.

Underlying factors for liberalization are being driven by fundamental developments in the country’s insurance market, in which foreign capital injection and knowledge are important to fuel the growth of distribution and product promotion.

Prior to the partial opening of the market, the insurance sector was controlled by a handful of state-owned enterprises. In the absence of competition, product choice was largely limited to endowment and money-back life policies and fire and property policies, according to PricewaterhouseCoopers.

Best real estate deal

Sat, 08 Nov 2008 11:58:00 GMT

Best real estate deal Real estate prices are over the moon these days and if you are house hunting there isn’t a decent deal available on earth. So isn’t it better to have a piece of land on moon.

The commute would may be a drag but there’s plenty of space on the moon and the view is to die for. A whole acre costs a measly Rs 1,000. No wonder, even Indians have put down a deposit. Scientists know it is rich in minerals and believe it might have frozen water. This is why NASA’s planning a lunar post by 2020.
“International treaties forbid private or sovereign ownership of extraterrestrial real estate,” says space lawyer Ranjana Kaul.
Plots have already started been named - The Sea of Tranquility, Mount Agnes, the Alpes Valley.

DLF looks for distress sale

Sat, 08 Nov 2008 11:56:00 GMT

DLF looks for distress sale DLF Vice-chairman Rajiv Singh says the company would try and fill the gap in its portfolio by acquiring suitable assets which come up for distress sale in a depressed real estate market.

“We will be prepared to look at opportunities, but won’t pick up something just because it’s cheap. However, there are some gaps in our portfolio, which we would like to fill. If there are some significant assets, which are hard to replace in a market like NCR or Mumbai, we will certainly look at it,” said Mr Singh.

He said a challenging external environment had forced his company not to move “at a pace we would have liked to” and asked the government to bring down interest rate for home buyer as well as developers.

“We pay 3% more interest on loan compared to any firm similar to us in another industry,” Mr Singh said. DLF recently borrowed at 16% interest rate. The company reported a 4% decline in net profit at Rs 1,935 crore for the September quarter, compared to the corresponding quarter last year. In comparison to the first quarter of the current fiscal, DLF’s revenue remained flat at Rs 3,840 crore, even as customer advances fell 8.6% to Rs 1,585 crore.

As global economic turmoil unfolds, several MNCs have been taking a relook at their space requirements. Mr Singh says no client so far has backed out, but most of them have been “reluctant to commit space in the past 2 months.” Office space contributes major chunk of DLF’s revenue.

Sales to promoter group company DLF Assets (DAL) contributed 37% to DLF’s sales and 47% to the company’s profits in September quarter. The receivables from DAL though have been piling up, raising analysts’s apprehension on its ability to pay back. DAL currently owes Rs 4,800 crore to DLF. Mr Singh agrees raising equity would be difficult in current situation, but says DAL will be able to raise enough debt on the strength of its rentals and pay back entire amount due to DLF by the end of this fiscal. Properties held by DAL are expected to generate a rental of over Rs 600 crore by March ‘09.

On company’s retail foray, Mr Singh said, “Our intention is to bring high-quality retailer to our malls and that’s why we keep engaging with them. But we have no intention to compete with our other tenants.”

DLF-Hilton JV hit by regulatory delays

Thu, 06 Nov 2008 12:47:00 GMT

DLF-Hilton JV hit by regulatory delays The DLF-Hilton, the joint venture company formed between India’s largest real estate company and world’s largest hotel chain, has been hit by regulatory delays. The first project, The Hilton Garden Inn in New Delhi, which was supposed to have opened in December, is delayed due to local planning consents and license approval. However, Hilton Hotels Corporation, according to a senior official, continues to be committed to its relationship with DLF in India.

Faith Thoms, director of public relations and communication-Asia Pacific, Hilton Hotels said, “The Hilton Garden Inn Saket project was delayed on various regulatory grounds. We are looking forward to opening the property next year. Hilton Hotels Corporation continues to be committed to its relationship with DLF in India.”

DLF, in its clarification filed with the stock exchanges on Tuesday, too said, “For the benefit of the market in general, it is clarified that DLF’s JV with Hilton is on a firm footing and all plans for development of hotels stand as originally envisaged.”

Further Thoms said that the relationship (with DLF) has evolved positively, with an unprecedented 17 hotel projects currently under development. The first hotel under the alliance, the Hilton Garden Inn Saket in Delhi, is scheduled to open in 2009, Thoms added.

On further progress of the joint venture, Thoms said, “Other examples of our progress include ongoing development of the Hilton and the Hilton Residences in Kolkata which amount to 550 rooms, and the Hilton, Homewood Suites by Hilton and the Hilton Garden Inn projects in Dwarka which comprise over 800 rooms.”

“DLF will exercise prudence in build out phase for the hotel business, which could be pushed back by 12-18 months from planned date owing to existing liquidity constraints,” said DLF in its clarification.

Parsvnath postpones its retail forays

Thu, 06 Nov 2008 12:41:00 GMT

Parsvnath postpones its retail forays Parsvnath Developers Ltd, the New Delhi-based real estate developer, has postponed its retail forays due to the current economic slowdown. The company, according to a senior official, would further re-evaluate the market situation to continue the initial plan. Meanwhile, the company is close to finalize the SEZ stake sale to private equity investors.

Pradeep Jain, chairman, Parsvnath said, “Due to the present economic slowdown, the company has put a hold on retail diversification. But this is a temporary hold and our international partner has also put hold on its expansion plans in India. If the condition improves, we can review the situation again in another 3-6 months.” However, Jain did not divulge the name of the retail partner.

Jain further added, “At present, we are talking to number of private equity investors, and talks are on for dilution of SEZ stake. We expect the deal to happen in another 2-4 months.”

On retail front, Parsvnath was planning to have 5-10 front-end stores by this fiscal, with an international retail partner supporting the company for logistics. The company’s retail plans included, hypermarkets, food joints, and “very large” retail stores of about 2.5-3 lakh square feet, but it will not include the cash and carry format.

In June, when the company announced its plans to foray into retail space, it expected large roll-out number to add to its balance-sheet this fiscal.

RBI may relax norms for loans

Wed, 05 Nov 2008 11:45:00 GMT

RBI may relax norms for loans The Reserve Bank of India (RBI) is likely to relax the provisioning norms against loans given to real estate and other sectors. In a meeting with FM P Chidambaram on Tuesday, PSU banks have asked for relaxation of the provisioning norms, without compromising on the quality of credit to utilize their capital more aggressively.

For example, at present banks must have a capital base of Rs 9 to offer a loan of Rs 100. But, in case of real estate sector, RBI has increased the requirement of capital base on certain category of loans by almost 50%. So to offer a loan of Rs 100 to realty, banks should maintain a base of Rs 13.5. On home loans of more than Rs 20 lakh, banks need to keep a capital base of almost 13.5% of the loan amount.
CMD of a public sector bank said this norm has increased the cost of funds, while lending to real estate, even if bad loan in this sector is less than 1%, which is lower than the banking sector average. If government wants to increase the credit flow to realty at competitive rate, the provisioning norms must be relaxed, the banker added.

Chidambaram on Tuesday said the real estate sector affects 50% of GDP, considering dependence of sectors like steel, cement and other small scale industries. He asked banks to enhance credit flow to realty.

The bankers also demanded change in the provisioning norms for other NPAs (non-performing assets). While RBI has tightened norms in the last couple of years, projects are getting delayed because of non-availability of funds, In some cases, corporates are asking for rescheduling of loans.

According to the existing norms, such accounts should be treated as bad loans and capital provisioning has to be made, which affects banks’ profitability. Besides, it reduces capital base of a bank and capacity to give loan.

Therefore, banks said if they are asked to reschedule loans or to give credit to vulnerable sectors, the provisioning norms should be relaxed and be made more practical. It is learnt that finance minister has given them the assurance that RBI will look into the matter soon. After the global financial crisis, central banks world over have relaxed the provisioning norms to enable banks to increase their exposures to companies.

However, keeping in mind the safety factor, Chidambaram asked banks to increase their capital bases to ensure that their total loan portfolio should not be more than 8.33 times of the capital base or in banking terms their capital adequacy ratio (CAR) should not be less than 12%.

Atria to expand in India

Wed, 05 Nov 2008 11:44:00 GMT

Atria to expand in India Bengaluru-based Atria group will expand in the Indian hospitality sector with plans to add 1500 rooms to its inventory at an investment of Rs 1500 Crore in the next five years. Hotel projects will come up in Delhi NCR, Chennai, Mysore, Coorg and Hyderabad. The group also plans to launch the 270 room Atria Grand, Whitefield, a five star luxury hotel, in 2009.

Atria Hospitality Management Services (AHMS), a part of the Atria group, will plan, build and operate the Atria Hotel, Atria Express Hotel, Atria Serviced Apartments and Atria Resort brands. AHMS will also offer Hotel and Hotel Project Consultancy, Management Services, Brand Franchise, Training and Sales and Marketing services on a pan-India basis.
Atria has interests in hospitality, power generation, convergence, education and real estate development.

Travel India Marketing launches serviced apartment in Malad

Wed, 05 Nov 2008 11:42:00 GMT

Travel India Marketing launches serviced apartment in Malad Mumbai-based Travel India Marketing has launched a 60-room standalone serviced apartment in Malad at an investment of Rs 15 Lakh. The company has commercially opened three apartments and will open the rest within six months. It has 25 apartments with a combination of three and four bedrooms. It is targeted at corporates especially long stays in and around the Malad area and from Mindspace, a business park which houses more than 200 companies. The rooms will be offered at promotional rates of Rs 3,500 per night till January 1, 2009, after which the tariff will be Rs 4,500 and above. The apartments have three or four rooms, a balcony, a common hall and a lobby area. There will be 24-hour butler service and home made food will be provided based on requirements.

“Service apartments are gaining popularity in Mumbai. There is always a room crunch in November every year especially for long stay guests. Also, companies are cutting down on the cost owing to the recession. Serviced apartment is the next best alternative. There are 9,000 rooms in the five-star category alone in Mumbai which is expected to increase to 11,000 by 2011.

Capital won't be issue for big realtors

Tue, 04 Nov 2008 11:45:00 GMT

Capital won't be issue for big realtors

Fund-starved realtors may heave a sigh of relief. Banks are now considering loans to this sector on case-to-case basis, especially for those facing genuine liquidity problems.
The move follows Prime Minister Manmohan Singh’s assurance to the industry that liquidity should not be a problem for companies having good fundamentals. Leading bankers have started asking developers to present a detailed account of their business challenges. Banks are also considering providing loans for purchase of land which was a strict no-no so far. Public sector banks are taking the lead in reviving the hopes of realtors.
Experts say RBI’s recent moves will also provide sufficient cushion to banks to lend to real estate companies. RBI slashed CRR by 350 basis points in the last few weeks, which will infuse about Rs 140,000 crore in the system. The central bank will also inject liquidity through its repo tenders at 7.5% instead of 8%. RBI has also lowered SLR to 24% from November 8 against the current norm of 25% of the banks’ deposits. Real estate developers’ association, Naredco, has had series of meetings with the leading banks, highlighting the effects of credit crunch on the sector and their shrinking revenue streams.
When contacted, Assotech MD Sanjeev Srivastava, who is a member of Naredco, said: “It has been brought to banks’ notice that 90% of the real estate market comprises unlisted firms. Hence the market situation is not the benchmark to draw conclusions about paying capabilities of unlisted companies. Top bankers have given us positive signals that things would soon improve.”
DLF executive director (finance) Saurav Chawla said things have started improving for the real estate sector. “In October, banks had temporarily shut loan disbursals but now interest rates have gone down and lending will regain momentum. As far as DLF is concerned, in the hardest of the times, we could sell our properties. We expect to do even better if liquidity improves,” he said.
Industry players pointed out that banks are waiting for a bit of correction to happen in the real estate sector. “With a slump in the Indian real estate sector due to excessive credit crunch and demand slowdown, home buyers can expect a further correction in real estate prices in the range of 20% in the short term. This would improve paying capacity of the loan borrowers and reduce their overall exposure,” a Delhi-based developer said.

Realtors still stuck in house of correction

Mon, 03 Nov 2008 10:42:00 GMT

Realtors still stuck in house of correction

The RBI’s rate cuts alone may not stimulate the sluggish residential market. Experts feel that developers may have to further cut prices to bring buyers back into the market. Meanwhile, as a result of drastic fall in home sales, higher capital and construction cost, most developers have reported decline in revenue in September quarter.

“We are not very sure, but hope that RBI rate cuts will encourage banks to lower interest rates for home loans. A lower home loan rate will increase home buyers’ interest in the market,” says Omaxe CMD Rohtas Goel.

“The lower rates may enhance enquiries from potential home buyers, but may not necessarily result in higher number of transactions,” says international property advisor DTZ director Abhilash Lal. Adds Centrum Broking real estate analyst Rupesh Sankhe, “Affordability is the major issue for any home buyer. Today, the affordability is much lower compared to 2003, when both interest rates and property prices were lower. The property prices too need to come down along with interest rates if people are to be lured to realty market.”

According to an analysis, a buyer’s decision depends 60% on interest rates, 30% on property prices and the rest on sentiment or other unexplained factors. Now, home loan rates are expected to come down, bringing down EMI for buyers, but would still remain high compared to 2003-04 level. Therefore, property prices, which have gone up almost thrice in most markets in the past five years, also need to rationalize. “We earlier expected property prices to correct by 30-35%. Now with expected lower mortgage rates, a correction of even 20-25% may have the desired impact on home buyers,” says Mr Sankhe.

Residential market has seen price correction in the past few months to the tune of 20-25% in several pockets, but sales haven’t picked up. Besides higher interest rates and property prices, global financial turmoil, stock market crash and fears of job cuts too are worrying home buyers.

The squeeze in the real estate market is now getting reflected in realtors’s earnings figure. India’s largest real estate developer DLF reported a 4% decline in net profit at Rs 1935 crore. The second largest realty firm, Unitech, reported 3% decline in sales at Rs 983 crore and 12.6% lower profit at Rs 358 crore. Parsvnath’s sales fell 45% to Rs 217 crore, and profit dropped 78% to Rs 22 crore. Omaxe’s revenue declined 70% to Rs 204 crore and profit fell 87% to Rs 20 crore.

The biggest issue for realty firms today is liquidity crunch, as sales have dried up and banks are refusing to lend while private equity funds have slipped into wait-and-watch mode. “Rate cuts may not actually help ease liquidity situation for the real estate firms. Unless RBI relaxes lending norms to real estate, nothing is going to change,” says Mr Lal of DTZ.

New housing projects on hold in mumbai

Mon, 03 Nov 2008 10:41:00 GMT

New housing projects on hold in mumbai

The city is unlikely to see any new housing project coming up soon as the screws turn on the property market. Last month, Mumbai’s leading developers met and discussed the possibility of not launching new residential projects considering the slowdown, sources said.
“New projects are not viable, sales are slow and buyers are sitting on the fence. Every developer is looking at his own cash flow and many projects have slowed down. Each one is wise enough to take a call on what to do,’’ said Mufatraj Munot of Kalpataru, one of the city’s oldest builders and past president of the Maharashtra chamber of housing industry. He, however, denied that builders had taken a unanimous decision not to start new projects.
But with each passing week, stagnant sales is turning up the heat on the construction industry. “Builders are deferring launching of new projects. With banks and financial institutions turning the screws, the real estate market has dried up. There are no investors and the actual users are waiting for prices to come down,’’ said a property developer, not wishing to be identified.
With their backs to the wall, a majority of builders has also started retrenching employees. Last week, a prominent developer known for his signature buildings decided to virtually halve the 450 employees on his payroll, it is learnt.
Even the once lucrative transfer of development rights (TDR) market has lost sheen. Builders used to purchase slum TDR at Rs 4,000 a square feet till about six months ago. It is now down to Rs 1,200 a square feet. Still, there are few takers. Moreover, builders who have bought TDR have been unable to pay sellers. It is estimated that about 100 builders owe close to Rs 200 crore to TDR owners and traders.

In the market, although builders are not officially reducing the rates of properties, they are negotiating with individual flat buyers and offering discounts to bulk purchasers. In Bhandup, a developer recently sold six flats after he reduced the price from Rs 7,500 to Rs 4,200 per square feet. In Goregaon, the builder has offered a similar reduction to six buyers.