Slowdown-hit real estate bets big on Budget

Having been hit the hardest by the economic downturn, embattled realty majors are betting big on the forthcoming Budget, to be presented on July 6, in a bid to revive the sector’s fortunes. Experts say the sector needs government support as well as further stimulus to get out of the current slump.

While the government with a clear mandate has provided the requisite stability to the economy, it now needs to focus on retrieving the sluggish real estate which is now facing a severe financial crunch. This is important in view of the fact that real estate in India is the second largest employer next only to agriculture, and growth in the sector has a direct impact on ancillary industries such as steel and cement.

“In the backdrop of its importance to the growth of the Indian economy, it is vital for the government to nudge growth in the sector, through fiscal stimulus, to newer heights which would also help make affordable housing a reality and within the reach of the proverbial ‘aam aadmi’,” says Nandita Tripathi, associate director, KPMG.

As a first step, the government should accord ‘infrastructure status’ to the housing sector and appoint a regulator to act as a single window for overseeing and monitoring the affordable housing agenda. “After being hit by the global financial meltdown, real estate developers have now recognized the growing demand for affordable housing. To provide further impetus to this direction of development, the government should consider reinstatement of the tax holiday benefits under Section 80IB-(10) for affordable housing projects,” says Tripathi.

Brotin Banerjee, MD & CEO, Tata Housing, is also of the same view. “We seriously believe that the housing sector should be delinked from real estate and be accorded infrastructure status. This will enable easier access to low-cost institutional funds as also allow the sector to tap long-term funds,” he says.

Further, for affordable and low-cost housing, “we at TATA Housing believe that loans for such projects should be made available at lower rates and also qualify for stamp duty and fee waiver. Development and approval charges should similarly be done away with or at least subsidized,” says Banerjee.

Moreover, increase in the limit of interest on housing loan from the existing Rs 1.5 lakh to Rs 3 lakh and a corresponding increase in the tax deduction limit for the principal loan amount would also go a long way to enhance the common man’s appetite for home loans by lowering their tax outflows and, hence, making their dream home a reality. Besides, “tax benefit should be given from the year the loan is taken from banks, rather than after taking the possession of the house. This will help in providing stimulus to new launches,” suggests Neeraj Bansal, associate director - advisory services, KPMG.

In the current economic slowdown, real estate mutual funds (REMFs) could provide the necessary financial support to the cash-starved housing sector. However, since their introduction a year back, REMFs have not found any takers due to unclear regulations and absence of guidelines for their tax treatment. “Recognizing the need for REMFs as an important capital contributor for the sector, the government should consider aligning the regulations to global best practices, including providing a tax pass through status for registered REMFs,” says Tripathi.

'Property brokers expect prices to increase assetventures'

'Property brokers expect prices to increase'

Residential property builders have something to cheer if the result of a poll of property brokers conducted by Edelweiss Capital is any indication. The pan-India poll shows that property brokers expect prices of residential property, especially i n the Mumbai and NCR region, to increase around the Budget, Edelweiss said in a press release issued here.

"Throughout India, property brokers have turned positive on the Indian residential realty market, in the last three months," the poll said. There has already been an increase in the number of transactions in the past one month against nil in the preceding five months, it said.

The poll was conducted amongst 100 odd property brokers in the first-half of June in the four cities of Mumbai, NCR, Bengaluru and Chennai and 20 micro-markets. A significant change in sentiment post-elections and preceded by strong stimulus measures have contributed to a strong recovery in volumes and prices, the release said.

According to the poll, nearly 87 per cent of the brokers surveyed endorsed that transactions had indeed increased in the last one month.

Huge rush to avail property tax rebate

NEW DELHI: With the deadline for filing property tax returns (PTR) only a day away, property owners eager to avail the early payment rebate of

15% queued up from 9am at various MCD tax collection centres in the city. Despite the option of filing returns online, many still opted to submit the PTR forms manually. Some said they found the online procedure slow.

At the Lajpat Nagar centre, the queue was particularly long. Said Kavita Sharma, a resident of Sarita Vihar, " I don't have much faith on online transactions. We get a receipt immediately this way.''

Another taxpayer, K P Singh, added,"The online servers are not working properly and filing online is more expensive since we have to pay an additional Rs 50. I'm paying my taxes now because I did not find the time earlier.'' Some also said that despite filing their returns last year, the payment hadn't been updated online and still showed as arrears."I filed my returns by going to the centre. But this year, when I tried to pay it online, it showed as arrears. Why should I pay the tax twice?'' asked a tax payer who did not want to be named.

However, MCD officials said arrears were showing only in those cases where the cheques had not been realised before the due date or there had been a refund. The officials admitted that the online system may have been slow over the last three days because of the massive rush of people who waited till the last day to file returns.

"For the last three days the online system is slow because it's being hit 3500 times per minute, peak time being 10am to 4pm,'' said a senior official.

Meanwhile, MCD made provisions for property tax collection at all its 12 zonal offices and the headquarter in Lajpat Nagar. The centres will be open from 9am to 9pm on Tuesday to help tax payers get their 15% rebate on the last day. And taxpayers can pay online till midnight for the same rebate.

MCD's director press information, Deep Mathur said, "In order to facilitate property owners and tax payers we have kept all our property tax collection centres open from from 9am to 9pm on Tuesday so that they can avail the 15% rebate even on the last day.''

NRIs and gifting property Rules Assetventures.in

Mr Sharma is a Non-Resident Indian with relatives in India. Owing to a flourishing business, he is interested in gifting a house in India to his nephew. However, he is not sure about the taxation on such a transaction owing to his NRI status.

Let's take this as an example to learn more about taxes associated with such a transaction with regard to NRIs.

No special permission is required for an Indian citizen residing outside India to acquire (by purchase or gift) any immovable property in India other than agricultural land, plantation property or a farmhouse.

Therefore, Sharma can buy a house in India as easily as any resident Indian.

Also, for an NRI, there is no permission required to transfer (whether by sale or gift) immovable property in India. One important factor to keep an eye out for is the gift tax and income tax.

Under the Gift Tax Act, 1958, gift tax was payable by the donor up to September 30, 1998. The Gift Tax Act has been repealed with effect from October 1, 1998 and therefore the Gift Tax is not chargeable for the gifts made on or after 1st October, 1998. However, a new provision was inserted in the Income Tax Act 1961 under section 56 (2) which provides that if the gift is received by an Individual or Hindu Undivided Family (HUF) from any relatives or blood relatives or at the time of marriage or as inheritance or in contemplation of death and the aggregate of gifts received exceeds Rs 50,000 in a year, the gift will be taxable as 'income from other source'.

The Explanation to Section 56(2)(vi) provides that the expression "relative" means:

* Spouse of the individual;
* Brother or sister of the individual;
* Brother or sister of the spouse of the individual;
* Brother or sister of either of the parents of the individual;
* Any lineal ascendant or descendant of the individual;
* Any lineal ascendant or descendant of the spouse of the individual; and
* Spouse of the person referred to in clauses (ii) to (vi)

There is no restriction on gifts by NRIs to resident Indians in foreign exchange or Indian Rupees or in the form of assets -- in this example, the house. All sorts of gifts from relatives (as defines under Income Tax Act) are tax free.

All that is required is an offer by the donor and acceptance thereof by the receiver in black and white. To safeguard against any hassles, the receiver should request the donor for a gift and then the donor should remit the amount to the receiver.

Alternatively, the donor can offer the gift. In either case, it is necessary for the receiver to accept the gift in writing (maybe through a thank you note).

Also, the provisions relating to taxation of gifts from non-relatives and non-specified persons in excess of Rs 50,000 would be liable to income tax only when the gift is a sum of money, whether in cash, by way of cheque or a bank draft.

Thus, gifts in kind such as a gift of shares, gift of land, gift of house, gift of units or mutual funds, jewellery, etc. would not be liable to any income tax at all.

Therefore, Mr. Sharma or his nephew would not pay any 'gift tax' or income tax for such a transaction.

Residential property poised to lead India rebound Assetventures

MUMBAI, India -- Residential real estate will lead the recovery of India's wounded property market in 2010 thanks to accelerating economic growth, lower interest rates and improved liquidity, Indian ratings and research agency CRISIL said Wednesday.


Prices for commercial and retail space will likely remain weak through 2010 because of oversupply and slack demand, CRISIL said in a new study of 10 cities across India.
"Residential real estate is where we think by 2010 we can look for some kind of recovery," head of research Sudhir Nair said in a conference call with reporters. "There is a significant overhang of supply in commercial projects. ... You can't see a lease rental increase for a couple of years in this market."

India's property market, like many around the globe, boomed from 2005 to mid-2008. Average prices of both commercial and residential space more than doubled during that period, according to CRISIL.

In some high-demand places, like Mumbai, the nation's financial capital, commercial prices went up 231 percent, while residential prices rose 121 percent.

Since July, prices have softened. CRISIL predicts commercial lease and rental rates will fall by 38 percent from early 2008 peaks. Residential prices have already fallen by an average of about 20 percent, and will likely correct another 10 percent, CRISIL said.

India increases labour rates assetventures

Indian property developers in the city of Mumbai have announced that they are going to increase their labour rates, following a recent recovery in the stock market, and signs that property investors are starting to return to the market...

However, the industry move has received criticism, as existing demand for property in India remains weak, compared to this time last year, despite the fact that residential prices have fallen by up to 30 per cent since their peak last year.

Many experts project that many developers need to cut their rates by a further 15 per cent rather than raise them.

"It is understandable that Indian developers want to make up for lost revenue during the economic downturn, by hiking up their rates, especially as more global investors are seeking to invest in BRIC (China, India, Russia, and Brazil) nations.

"But many experts project that developers should cut their rates by a further 15 per cent, rather than raise them. Consequently, new-build property prices in the city will also have to be raised inline with construction rates, making property less affordable. This could slowdown any potential cyclical upturn in Mumbai's housing market."

Residential property prices to fall 8-10% more in 2009

Despite popular belief, residential property prices are expected to fall by another 8-10% in 2009 till they stabilise in 2010.
Residential property rates declined by 18-20 per cent in March this year, from the highs in the first half of 2008. Despite this drop, homebuyers adopted a 'wait and watch' policy, and this trend is likely to continue through 2009, as per the latest report by CRISIL Research.



Owing to improved affordability, steady economic growth and greater liquidity, the residential segment will witness a speedier recovery compared to the retail and commercial segments. Lease rentals are not expected to stabilise till another two years. Mr. Sudhir Nair, Head, CRISIL Research says, “Demand in the commercial and retail segment is likely to remain under stress for the next two years owing to excess supply and weak off take.”

Amongst the 10 cities covered by CRISIL Research, Pune, Bengaluru and Mumbai have witnessed the steepest correction in capital values compared to the highs seen in the first half of 2008. Capital values in NCR had already started stabilising during the first half of 2008 even as the upward trend continued in other cities. Hence, capital values in NCR declined by only 18 per cent, which is relatively low compared to other cities. The report covers more than 400 areas across 88 micro markets in 10 cities--Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai-MMR, NCR and Pune.

It is believed that lower home loan interest rates as well as better job security would help to revive demand in the residential segment. Hence, capital values are likely to stabilise in the first half of 2010, and increase during the second half of the year.

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Real estate sector seeks lower loan rates, higher exemptions

PUNE: Lower interest rates for home loans, higher tax exemptions for repayments and restoration of Section 80-IB of the Income Tax (I-T) Act top the real estate sector's budget wish list this year. Appropriate action on these counts will help improve the fortunes of this sector be devilled by a lack of demand for quite some time the players said. As the entire thrust of the ongoing debate in the sector is on reducing the prices of homes, an instrument such as the budget can be used to reduce the burden of both taxes and costs on the home buyer, Rohit Gera, executive director, Gera Developments Private Limited, said. "An income tax deduction up to Rs 1.50 lakh, currently available against interest paid on home loans, should be raised and so should the deduction for the principal amount repaid, currently restricted to Rs 1 lakh," Gera said. He added that the finance minister should also allow higher standard deduction (the amount deducted from rental income earned from a property) from rental income so that more rental stock can be available in the market. Gera said Section 80-IB of the I-T Act, which exempted profits earned by developers from housing units less than 1,500 sq ft in size, should be restored so that the overall cost of a house for a buyer will be reduced. Satish Magar, president of the Confederation of Real Estate Developers' Associations (Credai), Pune, said the key issues pertain to lower costs of housing and availability of funding to the sector. Magar said the deadlock over funding of housing projects by financial institutions will be broken if the construction industry is accorded priority sector status. "Banks and other lenders can ensure that developers are not using the money for land acquisitions and fund projects where construction has begun," Magar said. According to R Vasudevan, chairman and managing director, Vascon Engineers Limited, the definition of long-term capital gains in respect of the real estate sector should be modified to mean gains earned by sale of a unit after one year of acquiring it. At present, the term refers to gains earned by sale of a unit after three years. Vasudevan also demanded infrastructure status for the construction industry and asked for an increase in the deduction available on interest paid on home loans. Vasudevan said the upper limit for stamp duty on realty deals should be fixed at Rs 1 crore. Vinay Phadnis, chairman of the Sahil group of companies, said a reduction in service tax along with modification of the entire income tax structure for the real estate industry is the need of the hour. The government should prevail upon the banking sector to lend at 6 to 6.5 per cent for houses costing up to Rs 30 lakh, he stressed. "We expect the finance minister to create an environment of refinancing real estate projects and enabling the secondary market to finance the assets," Phadnis said. Aniruddha Deshpande, managing director, City Corporation Limited, said the budget should encourage affordable housing through further home loan support and housing policy reforms. According to Vishwajeet Jhavar, CEO, Marvel Realtors, "The real estate industry is one of the key drivers of growth for the country. We hope that this budget will bring some good news that will steer and cheer real estate developers and at the same time create a conducive buying environment for the consumer. We also expect some positive steps towards relaxing the norms for external commercial borrowings and on the foreign direct investment front, which will serve as an impetus to the industry." Atul Goel, director, Goel Ganga group, said the government must make an attempt to reduce the tax burden on real estate so that people get homes at affordable prices. "For every Rs 100 a buyer pays, there is a tax burden of Rs 45. If this is brought down, homes will become cheaper," he pointed out. Hemant Naiknavare of Naiknavare Developers suggested that there should be appropriate I-T exemption for slum redevelopment projects and financial institutions should fund such projects. He also said the JNNURM subsidy should be available to residents of slums that have come up after 1995 who are otherwise ineligible under the Slum Rehabilitation Authority norms.

Is it the right time to expand biz in property market?

The good news is that the commercial segment in real estate is upbeat and demand is picking up. While initially, the first quarter of the calendar year saw a major decline in rental values in commercial spaces, the process of stabilisation has now begun over the last few weeks. Companies, which were earlier hesitant to set up shop or expand are also looking at viable locations to close deals. A study by global real estate consultancy Jones Lang LaSalle Meghraj (JLLM) shows commercial rentals across all major cities reaching stability after an overall downward movement in the second quarter. According to the consultancy, an absorption between 4-5 million square feet of commercial space was witnessed in the first quarter of 2009, which was higher than 4th quarter of 2008.

Property prices shoot up thanks to our PM Mumbai Assetventures

Thanks to Prime Minister Manmohan Singh and his stable government in power, property prices in the city have shot up notably. In the past month, builders, who had earlier slashed rates by about 35 per cent, have increased their rates by 10-15 per cent. And the buyers don't seem to be complaining. The Lodha group registered 1,000 bookings, while the Nahar group sold 620 flats in the last month. Experts say people are investing in property because they foresee a steady economy because of our government.
DEAR ESTATE: After a long slump, builders have hiked rates by 15 per cent, as they foresee a good future in our stable government.R Karthik, senior vice-president, Lodha builders, said, "Transactions have increased due to economic stability." S Rao, a resident of Andheri, said, "The financial future of our country seems stable. I don't mind investing, but the builders should not increase the rates too much."Double effectSandeep Sadh, a realtor from the western suburbs, believes a combination of the Manmohan Singh government and the recent golden run of the stock market has led to the improvement in the real estate market. "It is ideally wrong on the part of the builders to increase rates since we are still burdened under the economic slowdown. But the morale of builders has risen because of improved sales," said Sadh. But Mihir Dhruva, CEO of Siddharth builders, said, "If the rates become unrealistically high, sales will drop again." However, some builders are unrelenting. Early this year, a Bandra broker had struck a deal for a four BHK flat in Khar for Rs 15,500 per sq ft. But now the builder is demanding Rs 18,000 per sq ft. "Rates in the Bandra-Khar area have risen to Rs 20,000 per sq ft from Rs 18,000 per sq ft. And buyers are still striking deals," said Vibhoo Mehra of Mumbai Properties, a real-estate brokerage firm.Experts warnMost of the bookings take place in the under-construction projects. Thus, buyers should check details, including date of possession, before investing. It is advisable to buy from credible builders. "Builders may demand unrealistic prices and try to extract money for excise on the cement from buyers," said a realty expert.

Four Seasons to add six more properties Assetventures

After hitting quite a few roadblocks early on in India, the Canada-headquartered luxury hotel chain operator Four Seasons has finally prepared a roadmap for its expansion in India, which involves the setting up of at least six more hotels and resorts.


The premium hotel brand plans to come up with properties in New Delhi, Gurgaon, Hyderabad, Bangalore, Kerala and Goa. All of the said properties will have management contracts handed to Four Seasons and will not entail any significant equity contribution from the company.
In a management contract, hotel companies sign a pact with the property’s owners, who can be real estate developers or financiers. Four Seasons, like most other international hotel players — including Marriott, Hyatt and Intercontinental, among many others — is a management operating company.
Currently, Four Seasons has only one property in India — a 33-storied tower with 202 guest rooms and suites located at Worli in Mumbai, which was thrown open in May last year, although it was supposed to come up in December 2007. The company has been able to seal a deal with a partner for its second property, which will come up in Bangalore in the next 2-3 years.
“We are in talks with our partners for hotels in the north as well as for the ones coming up in the south of the country. Since we operate in the premium category, our primary focus will be on major cities before we graduate to other centres,” said Uday Rao, hotel manager, Four Seasons Hotel Mumbai.
Plans are also underway to add service apartments and a ballroom to the Mumbai property, owned by the Jatia family, in its second phase of expansion. The Mumbai property was established at a cost of $90 million (about Rs 300-350 crore).
The company will shift its focus to resorts scheduled to come up in markets like Kerala and Goa once its hotels projects are finalised. In fact, the company is in advanced stages of inking a deal for the Goa property with the Jatia group.
As the company has maintained a low-key affair in India, Four Seasons will have to depend a lot on foreign tourists for revenue generation as the brand is relatively subdued in India when it comes to advertising and marketing. Furthermore, the company has decided against giving advertisements, while solely banking on word-of-mouth publicity.
“We cannot let the brand value of Four Seasons go down through advertisements. We would rather work with sales managers in various cities, identify top-level customers, sign up local companies from across the country and tie up with airline companies. It will be a long drawn process and will be difficult, but that’s how we will operate,” added Rao.
With India’s economy on the rebound, many hotel operators are eagerly waiting to have a slice of the Rs 2.88-lakh crore market. About Rs 52,000 crore worth of investments are expected to flow into the domestic market for setting up new hotels in the next two years by various international and domestic hoteliers.

Punjab Govt announces slew of incentives for Real Estate sector

CHANDIGARH: Keeping in view the slowdown and recession in economy, the Punjab government has come out with an economic stimulus package to give boost to affordable housing and real estate sector.
Disclosing this here Thursday a spokesman of the Punjab government said that the Confederations of Real Estate Developers Association of India (CREDAI) and National Real Estate Development Council (NARDECO) had recently submitted a memorandum to the Punjab Chief Minister Parkash Singh Badal and Deputy Chief Minister Sukhbir Singh Badal separately urging them to immediately announce some incentives/concessions to real estate developers in order to put the real sectoral growth back on the track on one hand and to encourage group housing for weaker sections on the other.
The spokesman further said that the stimulus package included waiver of Change in Land Use (CLU) charges for industrial land use in entire Punjab, moratorium on payment of External Development Charges till December 31, 2009 and promoters who make prepayment of EDC installments would be entitled for discount of 5%. Reduction in penal interest on over due charges from 18% per annum to 3% per annum over and above the normal interest @10% compound per annum w.e.f. September 19, 2007. Wherever Zonal/Sector Plan have been notified, the minimum area for developing a colony would be 25 acres. In low potential zone, the minimum area for residential colony would be reduced from 25 acres to 10 acres. However, no minimum area norm would apply in case of the left over pocket, i.e. where on all the sides construction had already been taken place.
The spokesman further mentioned that to promote affordable housing, it was also decided that in the earmarked industrial land use zones in the master plans across Punjab, the affordable housing as envisaged under JNNURM mission of Government of India shall be permissible and it was decided to waive CLU charges, External Development Charges and license fee/permission fee for financially weaker section houses. Stamp duty / Registration fee / Social Security cess on purchase of land for such houses would also be exempted.
The stimulus package further stipulated if any promoter creates any infrastructure with prior permission of concerned Urban Development Authority outside his project that falls within the definition of external development and then he would be given credit at PWD rates. Phasing in the super mega projects has also been allowed as already permitted in other projects.
In case of Group Housing Projects outside GMADA (Greater Mohali Area Development Authority) area, the minimum area for projects would now have been reduced from 10 acres to 5 acres. In case of housing for financial weaker sections, as notified in the policy of Local Government in November, 2008, this minimum area would be 2.5 acres.
It was also decided that in case of commercial pockets within municipal committee/ Corporation limits (excluding GMADA), the norms for minimum area would be the same as notified by the Department of Local Government. However outside municipal committee/ Corporation limit (excluding GMADA region), the minimum area norms would be reduced from 2 acres to 1000 sq. meters. Such plots must have a front of at least 20 meters.
The state government also decided that in case of parking for commercial projects, having no multiplexes, the minimum parking norms would be 2 ECS/100 sq. meters area. In case of commercial projects having multiplexes/ cinemas/ theatres, the minimum parking required would be 3 ECS/100 sq meters of covered area in respect of multiplexes/ cinemas/theatres component + 30% of total covered area of that component and 2 ECS/100 sq meters of covered area in respect of the balance commercial component + circulation area. Parking norms within Municipal Committee limits shall be the same as notified by the Department of Local Government. Similarly parking norms in case of group housing shall be reduced to 1.5 ECS/ 100 Sq meters from existing 2.0 ECS / 100 Sq meters.
In case of any excess payment paid by any promoter to any Urban Development Authority, the authority would pay interest to the developer at the rate fixed by State Bank of India for Fixed Deposit of 180 days, as on 1st April of that financial year, the spokesman added.

Mumbai builds up its low-cost housing

They say it is easy to find everything in Mumbai except for a house.
For 35-year-old Agnelo Fernandez it could not have been truer.
Fernandez and his wife live in a small one room tenement which is less than 180 square feet.
It is in this cramped room that they cook, bathe, entertain and sleep.
They are not exactly poor but Fernandez's salary of $160 a month as a driver cannot get him anything better.
His neighbours - some of whom work as clerks, others run their own small business establishments - make similar money.
"I'd like to move to a better place but with my salary I won't get anything better," Fernandez says.
"I can't afford to buy anything within the city."
Crowded city
He is not the only one.
There are millions of people who live in houses like this across Mumbai.
Entire families live together, with little or no privacy as husbands, wives, grandparents and children all jostle for space.
And because the houses are crowded, the narrow alleyways serve as makeshift sinks, playgrounds and even bathrooms.
But while the thought of owning a home may seem a million miles away at present, that might be about to change.
Faced with a slowing housing market, several builders in the country are switching from premium homes to focusing on more affordable ones.
Earlier during the boom times of India's real estate market, almost all were building swanky apartments for the rich because of the big returns they generated.
But now the high rises with swimming pools, gyms and Italian marble floors are giving way to plain structures with basic amenities that people from lower and middle-class incomes can afford.
'Comfortable prices'
One construction firm, HDIL, has tied up with the government to build over 100,000 new homes.
"What we did over the last four years from 2004 to 2008 was that we made it highly unaffordable and drove nearly 85% of the market out," says the company's managing director Sarang Wadhawan.
He adds that aspiring homeowners in the lower-priced segment of the market were not buying property because they were saving money.
Today that means they have a good cash flow and, after a 25% to 30% drop in prices, are willing to start spending.
"What we have seen is that prices have come down to 2004 levels. At this price level they are very comfortable," Mr Wadhawan says.
Pluggable gap?
Estimates suggest that India has a shortfall of more than 25 million low-cost or affordable houses.That is why companies like HDIL and rivals such as Tata Housing are entering this market.
However, even if each company builds 100,000 houses every 5 years there will still be a massive shortfall.
And with demand outstripping supply to such an extent, some analysts wonder if the gap can ever be closed.
That is why the government is so keen for the real estate sector to focus on affordable housing.
The construction industry has cottoned on to this fact and is pushing to get tax breaks in the forthcoming budget in return for working on the cheap end of the housing market.
Signs of recovery
Anuj Puri, chairman of property consultancy JLL Meghraj, says there is plenty of demand in the sector.
"Even in the lowest times, I'll call it the dark nights, from October until March when there was a bad period, there was demand for affordable housing," he explains.
But while he is optimistic that builders will keep producing low-cost housing in the midst of the downturn, he is not sure if they will be so keen to carry on when the market picks up again.
Already there are signs of recovery in India and developers may switch back to premium housing because of the big gains involved.

That will not be a welcome development for the millions of people who live next to high rises, in small houses in cramped alleyways.
They have fixed jobs and earn regular salaries.
All of them want to move to a better house. A place that they can call home and live in comfortably.
But that could remain a dream if companies here are not serious about the shift from premium to affordable housing.

DLF won't sell core assets as credit begins to flow

NEW DELHI: India’s largest real estate company DLF has decided against selling core assets — residential, industrial and commercial plots — which it had put on the block.

The company will now sell only the hotel plots, which are non-core to its business. DLF executive director YK Tyagi told ET that the company has pulled back these assets from the market over the past 2-3 weeks, considering that banks lending to the real estate sector has started to ease.
A few prime properties in Gurgaon’s Cybercity and Udyog Vihar areas, which have been on the block for sometime now, have been pulled back. DLF had recently told ET that it planned to raise Rs 10,000 crore by selling land parcels, treasury investments and real estate projects in the next 2-3 years.
There has been a change of heart for DLF. “The decision to pull back these core assets from the market was taken considering the fact that banks have become more liberal in lending to real estate companies,” said Mr Tyagi. He also pointed out that after the recent stake sale by the promoters of the company, the company was in a comfortable position.
DLF promoters had sold a 9.9% stake in the past month to raise Rs 3,980 crore, which has put the company in a comfortable position. Capital Group picked up close to 5% in DLF, while HSBC, GIC and Fidelity bought smaller stakes. Following the open market transaction, the promoter group now holds a 78.6% stake in DLF.
Mr Tyagi pointed out that the company will continue to sell its non-core assets, including hotel plots and its wind power business, which would help them reduce their debt by half. DLF’s debt stands at around Rs 14,000 crore.
“We expect to sell all of the hotel plots by the end of the year,” he said. The company had said earlier that they do not want to exit the entire hotel business. “We expect to sell all of the hotel plots by the end of the year,” he said.
The company had said earlier that they do not want to exit the entire hotel business. While looking at hotel properties and plots just as an investment, DLF would like to retain the Aman brand. DLF has a number of hotel plots located in Mumbai, Kolkata, Bangalore, Gurgaon, Baroda, Lucknow, Kasauli (Himachal Pradesh) and Sikkim among others. According to sources, DLF has managed to sell hotel plots in Sikkim and Baroda.
A number of core assets—commercial, residential, industrial plots—were on sale by the developer, some of which it managed to sell over the last few months. The company recently sold its 66% stake in Hindoostan Spinning and Weaving Mill in central Mumbai for Rs 310 crore.

‘Property prices set to rise’ Assetventures

Mumbai, June 17 Property prices in India which have been on the decline for several months on account of the credit crunch, are set to rise, according to Mr R.R. Nair, Director and Chief Executive, LIC Housing Finance Ltd.
“People cannot expect a further fall in property prices. That stage is over. Builders had lowered prices when they were in trouble in the last few months. For builders, the liquidity position has eased and the cash flows have improved. They have also cleared off existing inventories. Therefore, there is no reason for them to lower prices,” he said.
As the demand picks up, property prices will go up. This could happen in the next five-six months, Mr Nair, head of the second largest housing finance company in India, said.
“By how much the price will increase, will depend on the builders. In some pockets, they have started quietly increasing prices. However, it has not happened universally,” Mr Nair said in an interview to Business Line.
Moreover, builders had not increased prices in the last 15-18 months. Because of all this, there is a “good possibility’ that property prices will rise, he said.
Citing reasons for renewed housing demand, Mr Nair said that with a stable government in place, people feel that the economy will improve, the liquidity situation would be better and the soft interest regime will continue. They also feel that property prices have bottomed out. This is precisely why there is a renewed interest in buying homes, he said.
The property prices had seen a correction in the last two quarters as demand for housing had dried up. Builders had been forced to lower prices as they were sitting on a large inventory. Some builders who had planned luxury projects had converted to standard projects.
“With the economy looking up, there is confidence among builders that they can raise funds either through loans or through equity or QIPs. That is why builders have regained enthusiasm and started working on the projects”, he said.Growth pick-up
The housing finance company has seen growth pick up from end- February. In March, the company had a 42-per cent growth. For April and May put together, there was a 120 per cent growth in approvals and a 50 per cent growth in disbursements.
Most of the growth for LIC Housing Finance has come from retail finance, Mr Nair said.
The company has revised its business growth target upward from the 25 per cent it set for itself at the beginning of this fiscal.
“With the first two months of this fiscal registering a 50-per cent growth in disbursements, the growth should be in the range of 30-40 per cent this fiscal”, Mr Nair said.

Pune Property tax: 1,000 locks to shut out defaulters

Pune:
This is an open and shut case of a different kind. The tax collection department of the Pune Municipal Corporation has demanded that it be supplied with 1,000 locks so that it can seal those properties whose owners don’t pay their tax by June 30. It has issued tenders for the purchase of these locks.
Once the PMC gets the list of those who have not paid the bills by the month-end, stern action will be taken against them by sealing their properties, tax collection department chief Vilas Kanade told The Indian Express on Thursday.
The PMC had launched a scheme in April, wherein citizens have the opportunity to file their property tax by June 30 and avail themselves of a 10 per cent rebate. The rebate, however, is applicable to only those who have cleared all the tax arrears on their property so far. The rebate amount will be deducted from the tax for the next year.

This year, we rolled out the plan in the beginning of the financial year to provide people with an opportunity to clear their property tax dues by the June 30 deadline. So far, 2.5 lakh property owners have paid their tax, amounting to Rs 130 crore. The response to the scheme has been good and we expect to collect tax from three lakh properties out of a total of 6.4 lakh registered properties in the city,” Kanade said.
“However, those who still do not pay after the set deadline will face action in the remaining nine months of the current fiscal. As part of this, we have asked the civic administration to provide us with 1,000 locks to seal their properties. A tender to this effect has been issued and we will soon get these locks.

We are going to distribute the locks to our ward offices and provide them a list of tax defaulters. Accordingly, these officers will go and lock the properties,” he said.
This year, the PMC had dispatched the tax bills by March to enable early payment of taxes, so as to enable citizens get the 10 per cent rebate. The 10 per cent, thus saved, will be deducted from the next year’s property tax as it was not possible to do so this year owing to the election code of conduct.
Tax dues
* 6.4 lakh registered properties.
* Rs 130 cr property tax collected from March.
* June 30 last date of 10 per cent rebate scheme

Realtors wait to hear FM music Assetventures

The ministry of housing has taken kindly to the set of demands put across by the real estate developer associations.

The ministry officials are meeting their counterparts in the finance ministry to ask for specific stimulus for the real estate sector.“Liquidity is still a major concern for the sector andthe government needs to provide specific stimulus for its revival,” a senior official in the housing ministry told FC Estate. He added that the ministry would approach the finance ministry to structure the incentives in a way that it generates fiscal concessions for the sector.In fact, over the last week the real estate associations Naredco (National Real Estate Development Council) and Credai (Confederation of Real Estate Developers Association of India) had put across a slew of demands to the secretary, ministry of housing.Though officials of housing ministry remain tightlipped over the exact concessions demanded, developers are expecting that the government will allow an extension of the loan restructuring facility beyond June 2009. The present provisions allow a developer to go for one-time restructuring of debt. Though developers have been able to raise money through the qualified institutional placement (QIP) route over the last couple of months, liquidity still eludes them.“A moratorium on the payment of interest and extension of time for restructuring of debt taken by the real estate developers will help us execute projects on time,” Rohtas Goel, president Naredco told FC Estate. He further said that the finance minister’s move to ask banks to lower their borrowing rates is a welcome step. “I am hopeful that the move will extend the affordability of loans to a large number of people and for the manufacturers and suppliers. The move will help in reviving the real estate sector through reduction in home loan rates.”Further, if the government allows a developer to avail overseas funds through external commercial borrowings (ECB), it will ease cash flow to the sector. At present, ECB is prohibited for housing development. “ECB in housing construction will supplement the funds from banks and financial institutions and, in the long term, reduce the cost of finance, thereby reducing the price of houses in the country,” said Pradeep Jain president Credai (NCR).Further, if the group housing and integrated township development is brought within the definition of infrastructure it will also help in the sector’s revival. “This will ensure a wider finance window for these projects. As a safeguard, a developer may be required tobuild at least 100 residential units in such projects,”quipped Goel.However, how much of these demands actually pass the muster of finance minister remains to be seen.

The great SEZ rush skids on slowdown, land issues Assetventures

Almost half the proposals to be taken up by the Board of Approval involve developers wanting to curtail their plans.
Also Read Related Stories News Now - Vascon Engineers puts Guj IT SEZ project on hold - Opto Circuits plans to invest Rs 150 cr in Hassan SEZ - Software sector banking on tax benefit extension - Satyam staff get new portal on learning services - Board of Approval to meet on June 19 for SEZ approval - Satyam granted 1-yr extension to complete SEZs Also Read Related Stories News Now
- Sensex volatile; ACC down 4% - NEWSALERT: Inflation in red, at -1.61% - SpiceJet hikes fuel surcharge by Rs 400 - Most active stocks on the BSE - Mahindra firm in volatile market; MHRIL IPO to open on June 23 - Asian markets in red; Hang Seng sheds 356pts More When the Board of Approval for special economic zones (SEZs) meets on Friday, liaison and corporate affairs executives will jostle for space in the narrow corridors on the ground floor of Udyog Bhavan, which houses the commerce department.
In stark contrast to last year, however, few of them will be pushing proposals for new zones. Demand dynamics brought on by the global slowdown and persistent land acquisition problems are forcing developers to alter their plans.
As a result, almost half the proposals that the inter-ministerial panel headed by Commerce Secretary Rahul Khullar will consider have to do with extensions to acquire land or cancellations of these tax-free enclaves that were supposed to catapult India’s exports into the big league.
Of the 58 SEZ proposals on the agenda, only two are for setting up new zones; 23 zones are applying for an extension of the validity period and two — from K Rajeha Universal — are seeking de-notification on the grounds that the economic downturn has resulted in lower demand.
Then there is Mansarovar Industrial Development Corporation that has decided to expand the focus of its zone from handicrafts to information technology-enabled services (ITES), and to split the 131 hectare-zone.
“The developer has requested that due to the present downturn in the economy, the additional sectors (ITES) may kindly be permitted to be included in the SEZ,” the commerce ministry said in its note for the BoA meeting.
Similarly, financial constraints have forced Diamond Software Developers, which was setting up an SEZ focused on information technology (IT) and ITES in Noida, to drop its plans.
Meanwhile, companies such as Parasvnath SEZ have had to move the proposed 10.11 hectare Biotech SEZ from Ranga Reddy district in Andhra Pradesh to Medak in the southern state owing to legal hurdles in land acquisition.
Similarly, with only 63 per cent of the land acquired, Rajasthan Explosives and Chemicals has sought more time for developing a multi-product zone.
Plagued by insufficient demand for space, land acquisition problems and the liquidity crunch in the first half of 2009, nearly 27 developers with all approvals in place had already sought more time to operationalise SEZs. Ministry officials said the number could go up to 50 at Friday's BoA meeting and much more at subsequent meetings.
According to the norms, an SEZ has to be up and running within three years of receiving the formal approval, which is only given after land is in the developer’s possession.
When the economy was growing at 9 per cent, there was a rush to set up SEZs. Between February 2006 and May 2009, the government gave formal approvals to 568 proposals, nearly 60 per cent for IT. Of these, 315 have been notified, which means they can claim tax and duty benefits.
But work has been completed and exports are taking place in only 90 zones. So, only 16 per cent of the formally approved proposals are contributing to India’s exports.
Exports from these 90 operational SEZs are projected to grow 38 per cent to over Rs 1,25,000 crore in 2009-10, as against Rs 90,000 crore last year. This will, however, be just a quarter of the Rs 5,00,000 crore projected if all the formally approved zones were to become operational.
Government officials, however, said this was only to be expected. “When we started giving approvals, we expected at least one-third of the approved SEZs to fall by the wayside. But the slowdown and restrictions on state governments acquiring land could see more projects not seeing the light of the day,” said an official who was associated with SEZ policies and approvals for over five years.
“The number of approved zones is already high. The serious players are here to stay and our focus will be to facilitate SEZ-related matters,” added another official.
Experts said with prospective clients putting their expansion plans on hold, developers do not want to take risk and build zones. This is because, unlike the real estate business model, SEZs require a long gestation period before developers see any financial gains.
“Scrapping unviable zones is a systemic correction. When the business cycle is on an upturn, the zones will bounce back,” said Aradhana Agarwal, senior fellow at ICRIER and reader at Delhi University’s Department of Business Economics.
PricewaterhouseCoopers Executive Director Vivek Mehra, who is advising many developers, said the downturn had lowered demand for space in the IT zones. Besides, the extension of the Software Technology Park scheme also meant that the rush for SEZs has come down.
“There are pressures on timeline and builders, who have put in more than the requisite 25 acres, are looking at other options. Even if you de-notify now, you have the option to seek a re-notification later or a set up a zone with a smaller land area,” he said.
Developers seeking extensions include fraud-hit Satyam (three zones), Infosys (two zones), NIIT, and ONGC-promoted Kakinada SEZ in Andhra Pradesh.
The former commerce ministry official said the manufacturing sector-related SEZs, which have not shelved their plans, could stage a comeback over the next eight to 10 months if production shifted to low cost destinations.
For the moment, the absence of demand and liquidity crunch has also forced real estate major DLF to get conditional approval to scrap four of its notified zones, while its plea to get another of its Delhi-based zone has already been accepted.
Gitanjali Gems, which has permission to set up nine SEZs, has also applied the brakes on its plans. Although the company has decided against going ahead with a proposed zone in Nanded, the development of six zones in Gujarat and Maharashtra is yet to pick up. Only one SEZ in Hyderabad is expected to be operational, but that is one-and-a-half years away.
In pharmaceuticals, chemicals and biotech, most of the 16 notified SEZs have been non-starters. Apart from the projects of Divi’s Laboratories, Biocon and Serum Institute of India - the first among the notified SEZs in 2006 – the others are still under implementation. Issues such as land acquisition, delays in developing physical infrastructure, setting up of plants and regulatory approvals from the US and Europe are delaying the projects, sources said.
“The development of a pharmaceutical SEZ may take three-seven years as pharmaceutical plants need quality water, effluent treatment plants and good physical infrastructure,” said Hitesh Gajaria, head - pharmaceuticals and executive director, KPMG India.
Even government-promoted projects such as development of Kandla Port Trust’s Rs 7,000 crore port-based SEZ is in pause mode.
“A majority of the developers want to see how the situation evolves in the coming days. So, they do not want to scrap their plans for the zones as of now. But there is an oversupply issue in zones,” said Abhishek Goenka, partner at consulting firm BMR & Associates.

Home, asset sales ease pressure on Unitech to raise equity capital

India’s second largest developer by market value, Unitech Ltd, has sold more homes than expected and raised more than Rs1,000 crore from asset sales this year, and has no immediate need to raise money through an additional share sale, managing director Sanjay Chandra said.“We are not under pressure to raise equity capital,” Chandra said after a meeting of shareholders. “We have been able to sell more than expected and our asset sales have been good,” he said.The company has sold 4,000 apartments, covering 4 million sq. ft, in the last two-and-a-half months as demand revives in a property market recovering from a downturn that left developers strapped for cash last year. Unitech had a target of raising Rs1,700 crore this year from a sale of assets such as hotels.It has sold 4,000 apartments in under three months as demand revivesUnitech has rescheduled all of its outstanding debt of Rs7,800 crore and plans to reduce it by another Rs900 crore within this month, Chandra said.Sales have also started to pick up. “The volume of sales that we are seeing now is more than what we saw in 2006,” Chandra said. “Home prices have come down by 25-30% on an average.”Shareholders approved a resolution to allow the company to sell one billion equity shares through instruments such as a placement of shares with qualified institutional buyers or stock sales to overseas investors.The company can raise more than Rs8,500 crore at current market prices, but hasn’t decided on the timing or the route of a share sale, Chandra said. In April, Unitech raised $325 million (Rs1,553.5 crore) through a placement of shares with institutional buyers to reduce debt.The shareholders also approved a plan for the company to offer Rs1,150 crore of warrants to the promoters, including the Chandra family. Unitech will sell 227.5 million warrants at Rs50.75 a share to the promoters.The promoters will have to pay 25% of the amount for the warrants, around Rs271 crore, within the next 15 days, Chandra said. With the issue of warrants, the promoters’ stake in the company is expected to rise from 51% to 61%, Chandra said.Unitech expects to sell 20 million sq. ft of developable area in fiscal 2010. The company plans to launch homes in the Rs10-20 lakh range under its Uni Home brand in Gurgaon, Greater Noida and Chennai. In Greater Noida, Unitech recently launched an affordable housing project with 10,000 units and it has received 2,000 enquiries, Chandra said.The company has also increased prices by 2% in two of its projects in Gurgaon, a suburb of Delhi. “We have increased the prices in our ongoing projects just two weeks ago. We will evaluate whether there is a need for raising the prices in other projects as well,” Chandra said.Chandra also said that Unitech Wireless, the telecom unit of Unitech, will launch mobile services in the December quarter of this year.Unitech Wireless, in which Telenor SA of Norway has a 67% stake, has already placed orders with network providers Alcatel-Lucent SA and Huawei Technologies Co. Ltd. The telecom unit will have a capital expenditure of Rs10,000 crore over the next three years, Chandra said.Unitech’s share price rose 2.13% to close at Rs88.90 on the Bombay Stock Exchange. The benchmark Sensex was up around 0.5% and the BSE Realty Index gained 1.63%.

Property prices set to rise Assetventures

Property prices in India which have been on the decline for several months on account of the credit crunch, are set to rise, according to Mr R.R. Nair, Director and Chief Executive, LIC Housing Finance Ltd.
“People cannot expect a further fall in property prices. That stage is over. Builders had lowered prices when they were in trouble in the last few months. For builders, the liquidity position has eased and the cash flows have improved. They have also cleared off existing inventories. Therefore, there is no reason for them to lower prices,” he said.
As the demand picks up, property prices will go up. This could happen in the next five-six months, Mr Nair, head of the second largest housing finance company in India, said.
“By how much the price will increase, will depend on the builders. In some pockets, they have started quietly increasing prices. However, it has not happened universally,” Mr Nair said in an interview to Business Line.
Moreover, builders had not increased prices in the last 15-18 months. Because of all this, there is a “good possibility’ that property prices will rise, he said.
Citing reasons for renewed housing demand, Mr Nair said that with a stable government in place, people feel that the economy will improve, the liquidity situation would be better and the soft interest regime will continue. They also feel that property prices have bottomed out. This is precisely why there is a renewed interest in buying homes, he said.
The property prices had seen a correction in the last two quarters as demand for housing had dried up. Builders had been forced to lower prices as they were sitting on a large inventory. Some builders who had planned luxury projects had converted to standard projects.
“With the economy looking up, there is confidence among builders that they can raise funds either through loans or through equity or QIPs. That is why builders have regained enthusiasm and started working on the projects”, he said.
Growth pick-up
The housing finance company has seen growth pick up from end- February. In March, the company had a 42-per cent growth. For April and May put together, there was a 120 per cent growth in approvals and a 50 per cent growth in disbursements.
Most of the growth for LIC Housing Finance has come from retail finance, Mr Nair said.
The company has revised its business growth target upward from the 25 per cent it set for itself at the beginning of this fiscal.
“With the first two months of this fiscal registering a 50-per cent growth in disbursements, the growth should be in the range of 30-40 per cent this fiscal”, Mr Nair said.

Unitech may issue a billion shares

Hopes to mop Rs 8,500 crore; promoters could raise stake by 5%. Bolstered by the sharp run-up in its share price after the recent private placement, the country’s second-largest realty firm Unitech today took shareholders’ approval to issue up to a billion shares to raise more funds.
At the current market price of around Rs 87 a share, the company could bring in around Rs 8,500 crore through this route.
In addition, the company would raise Rs 1,150 crore through a preferential issue of convertible warrants to promoters at Rs 50 each. Each warrant is convertible into one equity share.
“The real estate market has bottomed out and investors are showing an interest in realty companies. Even though we do not need to raise funds immediately, we want to be ready as the market sentiment is very bullish,” said Sanjay Chandra, managing director, Unitech.
In April 2009, the company mobilised Rs 1,625 crore through issue of fresh shares to select foreign and domestic investors. Of the funds raised through QIP, Unitech used Rs 700 crore for repayment of a part of its debt, which is about Rs 7,800 crore.
“Our sale of assets in the past two months has fetched us more than the expected amount and we expect to mop over Rs 1,700 crore by the end of this fiscal, as against Rs 1,600 crore expected earlier,” Chandra added.
Till date, the company claims to have raised nearly Rs 1,000 crore through the sale of its two hotel properties and a commercial office space in Delhi NCR.
The company also got shareholders’ approval to issue 227.5 million convertible warrants on a preferential basis to promoters at Rs 50 for each. The promoter group will pay 25 per cent of the total amount in the next 15 days. On conversion of the warrants, the promoters’ stake in Unitech will go up by 5 per cent. It is 51 per cent currently.
On the listing of its real estate investment trust (REIT) on the Singapore Stock Exchange, Chandra said the market in Singapore was not good enough to get the desired money through public issue of its commercial assets.
“We were able to raise more money by selling our assets to high net worth individuals and will continue to do so this year. The listing of REIT would take another year,” said Chandra.
The company has booked over 4 million sq ft of residential space in the past two months and expects booking of around 20 million sq ft of space by the end of this fiscal year.

Govt moots for low cost housing

Updated: 16/06/2009 11:39 PM IST Top Stories Govt moots for low cost housing Rajat Guha Tuesday, June 16, 2009 (New Delhi) EMail Print BlogComments: Read (0) Post Rate the story Housing for the poor tops the UPA government’s agenda. The Budget may bring cheer to those looking to buy houses costing less than Rs 30 lakh. In order to revive the demand in the real estate sector, the government is considering the need for cheaper loans for buying houses.
Low cost homes could become cheaper still. The country's new Urban Development Minister, Jaipal Reddy, on Tuesday, met Finance Minister Pranab Mukherjee and proposed that low cost housing should be given cheaper loans.
The rate should be at 6.5 per cent for houses priced below Rs 5 lakh and about 7.5 per cent for houses below Rs 20 lakh.
“We have given our wish list to the Finance Minister. We want loans upto Rs 5 lakh at 6.5 per cent and loans upto Rs 20 lakh at 8 per cent, while loans above Rs 30 lakh be at 7.5 per cent,” Reddy said.
Apart from suggesting cheaper housing loans, Reddy also sought more budgetary allocations for projects under the Commonwealth Games and UPA's flagship scheme for urban renewal.
Now, with banks already forced to cut interests, these new proposals will have to wait to hear the final word from the finance ministry, but one thing is clear that the UPA's ‘aam admi’ agenda will put low cost housing right on top priority.

India 'most attractive' retail market

India still continues to be 'red hot' when it comes to a preferred destination as a retail market. India has reclaimed the top position amongst 30 nations in the results of the 8th Annual Global Retail Development Index (GRDI) revealed by global consulting firm A T Kearney. Low inflation, reduction in rent in smaller cities helped push India's score (68) above Russia (60), China (56), UAE (56), Saudi Arabia (56), the study shows. For the fourth time in five years, India has been ranked the most attractive for retail investment as global retailers including Wal-Mart, Carrefour and Tesco continue to expand in the country.The GDRI helps retailers prioritise their global development strategies by ranking the retail expansion attractiveness of emerging countries on a set of 25 variables including economic and political risks, retail market attractiveness and the difference between GDP growth and retail growth. In 2008, Vietnam toppled India to become the 'most attractive' retail market but tables changed as recession swept through continents. AT Kearney now believes that 'larger and resilient developing countries' such as India are most likely to lead the economic recovery. The global recession has made prime real estate locations increasingly available in many developing markets. It also has made acquisition valuations of many local-market retailers very attractive, says the report.Slower retail sales are causing Indian retailers to delay expansion plans and restructure their operations. But this has opened the window of opportunity for global retailers and many, including Wal-Mart, are continuing expansion plans as Indian consumers grow increasingly affluent, brand conscious and familiar with global retail formats.

Report puts India on top of retail potential index

New York: India has regained its position at the top of an annual rating of countries' retail sector potential that is being released a week after Ikea, the Swedish home retailer, said it was abandoning an attempt to open stores there.
The authors of AT Kearney's 2009 Global Retail Development Index said that India's largely unmodernised retail sector remained attractive to both domestic and international retailers, in spite of government regulations that prevent 100 per cent foreign ownership of retail stores.
"Overall ... the country risk is low and the market potential is still very high, making it the most attractive option for growth," the report says.
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Wal-Mart, the largest US retailer, opened a partly-owned cash-and-carry warehouse store in Punjab last month in a joint-venture with Bharti Enterprises, while Tesco and Carrefour are also planning joint venture stores.
Hana Ben-Shabat, one of the report's authors, said foreign companies including Jean-Claude Biguine, the French hair salon, Inditex's Zara and Arcadia's Top Shop were also developing arrangements to establish their brands with Indian consumers.
"Maybe the model won't be owning the establishment, but getting the brand into market place," she said.
AT Kearney argues that the economic recession has increased the opportunities for cross-border investment by those retailers who are still generating significant cash-flow as a result of the depressed costs of assets and real estate.
India remained ahead of both Russia and China in the index, and pushed Vietnam out of the number one slot amid concerns about the impact of the global recession on Vietnam's export-based economy, and the collapse of the country's real estate bubble.
But the report notes that Vietnam will allow foreign companies 100 per cent ownership of food retailing from January.
Ben-Shabat also noted that in Russia the impact of the slump had reduced the potential cost of assets, increasing existing interest in deals and acquisitions of a number of significant players.
In China, in third place, the report notes increased foreign interest in smaller format convenience stores, rather than the supermarkets and hypermarkets.

Budget 2009: Govt should provide stimulus to real estate sector

Although, Indian economy as a whole has largely been insulated against the global economic slowdown, the Indian real estate sector has been severely been affected keeping in sync with the fortunes of the global real estate sector. Demand dynamics of one large industry decide the fortune of its ancillary industries. The ups and downs of the real estate market have serious implications on companies whose future is linked to the housing and infrastructure demand in India.
The risk straddle includes industries such as furniture, granites, ceramic tiles, paints, power cables, glass, electrical equipments and interior designers among others, which exemplifies the significant backward and forward linkages that the real estate sector has with the economy. There is a need for the Government to provide a stimulus for the industry so as to revive this ailing spectrum of sectors. And what better time can there be, than the forthcoming budget!
Some of the measures that should be taken by the Government are as follows:
• Given the demand for and emphasis of the Government of India on affordable housing (through lower interest rates on loans upto Rs 30 lakhs) there is a need to reintroduce tax holiday under section 80IB for housing. • Tax holiday available to hotels under section 80ID to be extended 10 years from existing time limit of 5 yrs. The gestation period in hotel industry, itself, stretches from 4 to 5 yrs. • To garner resources for providing liquidity to the Indian real estate industry, there is a need to: o Re-introduce 'tax pass through' status for domestic venture capital funds that invest in the Indian real estate sector; o Clarify that the Real Estate Mutual Funds are to be treated as equity oriented fund; o Extend the external commercial borrowing scheme to the entire Indian real estate sector including Special Economic Zones and not just 100 acre township, hotels, hospitals in view of the moderate international costs of borrowing; • Encourage states to reduce stamp duty to 5 percent and to provide a system of credit for each stage of sale i.e. levy on value addition. • Increase in deduction available under section 24(b) to Rs 300,000, against, existing limit of Rs 150,000 for self occupied houses. • Increase the basic exemption limit under provisions of Wealth tax Act to Rs 50 lakhs against existing limit of Rs 15 lakhs keeping in perspective the price of property, etc. • Service tax provisions should be amended as follows: o It has been clarified that no service tax should be levied in case pre-construction sale of residential complex where the seller and the buyer enter into an 'agreement to sell'. Similar clarification should be issued for pre-construction sale of commercial complex. o Service tax on renting immovable property should be abolished • To reduce the cost of procurement of capital equipments for construction purposes there should reduction/ rationalization of customs duty (exemption from special additional duty) and excise duty (8 percent to 4 percent)
In summary, the above measures would go a long way in providing much needed succour to the Indian real estate sector in these difficult times.

Lehman Property Boss Returns

Mark Walsh, the lead executive who loaded Lehman Brothers Holdings Inc. with toxic property investments, is part of a group chosen by Lehman to take over the bankrupt firm's real-estate private-equity arm.

Mr. Walsh and a team of former Lehman colleagues are setting up a new stand-alone business to manage the private-equity portfolio. They stand to profit if the portfolio of distressed assets -- for which they once paid top dollar -- recovers only some of its value.
The arrangement is a remarkable second act for 49-year-old Mr. Walsh, formerly Lehman's global head of real estate. When it filed for bankruptcy protection last September, Lehman directly held roughly $43 billion worth of real-estate loans and assets, exposure that played a key role in its collapse.
Federal prosecutors continue to investigate, among other things, whether Mr. Walsh and his team improperly valued commercial-real-estate holdings to prop up Lehman's balance sheet.
New Jersey Attorney General Anne Milgram also has filed a civil suit against Mr. Walsh and others accusing them of defrauding the state's pension funds by misrepresenting the value of Lehman's real-estate holdings.
Anton Troianovski/The Wall Street Journal The InterContinental hotel in New York's Times Square is among the property investments made by Lehman Brothers Real Estate Partners.A lawyer for Mr. Walsh declined to comment
While helping strike deals using Lehman's own balance sheet, Mr. Walsh also oversaw a separate unit called Lehman Brothers Real Estate Partners. Set up as a trio of private-equity funds, the unit eventually invested in $5.6 billion worth of deals, attracting some of the nation's largest pension funds as backers. Lehman itself also contributed about 20% of the unit's capital.
Properties in the portfolio include the 34-story InterContinental hotel in New York's Times Square, 60 hotels in the United Kingdom, and a commercial-real-estate development in Mumbai called Santa Cruz. About three-quarters of the portfolio is located outside the U.S. And it is valued at about 50% of its original purchase price, according to people familiar with the matter.
To maximize recovery for creditors, Lehman's restructuring advisers Alvarez & Marsal have been trying to find a buyer for the unit since late last year. Dozens of prospective buyers expressed interest, but it winnowed the group to five finalists, including AREA Property Partners, formerly Apollo Real Estate Advisors LP, and a group led by Raymond Mikulich, the former co-head of the group who left the firm in early 2007.
Lehman's estate eventually chose a management group that had run the business for years, which includes Mr. Walsh and executives Brett Bossung and Mark Newman. Lehman will retain its roughly 20% stake and hold seats on the new firm's oversight committees.
The group paid about $10 million for the business, according to a person familiar with the deal. The number was low, say people familiar with the matter, because continuing management fees are likely to be consumed by the costs of managing the existing properties.
The fund also will shrink the size of its most recent vehicle, a $3.2 billion fund, closed just days before Lehman's collapse. The fund will forgo about $1.6 billion in uninvested capital from investors, limiting new management fees.
The funds' new managers and Lehman creditors will thus only profit if the value of the properties increase over time. Lehman's investors agreed to "reset' some incentive fees for the managers, giving them payouts if asset values rise above their current distressed levels.
Typically managers would receive 20% of the "carry," or cut of certain profits, but that figure is expected to be lower for the new management, according to people familiar with the transaction.
"We fully support this management team and believe not only that they are best equipped to maximize the value of the assets," a Lehman spokeswoman said, "but also that they will be extremely successful in the growth of the new platform."
The transaction follows similar spinouts by the Lehman estate, including its flagship private-equity fund and its venture-capital unit.
The largest of those deals was a management buyout of Neuberger Berman, Lehman's money-management unit, which is 51% owned by its employees, with Lehman retaining the balance.
The Lehman group's sale comes at a time of crisis for the real-estate fund industry. During the boom years, funds run by Wall Street banks and boutique firms funneled billions of dollars from pension funds and other big investors into highly levered bets on office buildings, shopping malls, warehouses and other commercial property around the world.
Funds at Goldman Sachs Group Inc., Morgan Stanley and elsewhere have been marked down by more than half their equity value. Industry experts and investors, known as limited partners, expect the losses to mount.

Pay your property tax online in Bangalore Now

Starting July, you can pay your property tax online! No more standing in 

queues and waiting for assistance at help 
centres. Pay your tax using VISA/Mastercard 
online without incurring any extra charge for the card itself. More options, more forms and easy ways -- it's going to be less taxing for those already on the taxpayers' list, says the BBMP. 

The online system will be in place for the next `block period' (2009-10), which begins on July 1. 

"We took the decision while discussing the action plan for 2009-10 at a meeting of revenue officers with outgoing commissioner S Subramanya on Wednesday," BBMP deputy commissioner (resources) U A Vasanth Rao said. 

"We'll also hold training sessions before the system becomes operational in full capacity," he added. 

By going online, the Palike hopes to redress many tax issues of the current block period. Reducing manual process, extending services to property owners outside the city and accepting only completely filled forms are some corrective measures. 

The new system will also have a provision for taxpayers who want to pay by cheque. They can do so by downloading the filled-up form and submitting it at the respective help centres. 

The online module is being developed by the National Informatics Centre and IDBI bank has agreed to provide the `payment gateway' free of any extra charge on the card user. 

This is unlike the system currently followed in Chennai, Hyderabad and Delhi. Two new forms 

The new `block period' will also have two kinds of forms available online. One is `Form IV' for properties with no changes in built-up area or property usage, and `Form V' for those with changes in these parameters. 

"Taxpayers will have to use the appropriate form. But with the property database getting updated, the software should continuously update the taxpayer database," Vasanth Rao explained. 

How it works 

-- One can opt to pay online through a link on BBMP website (www.bmponline.org) 

-- Enter your application number in the box and get access to details of previous tax paid 

-- Fill up mandatory fields along with the tax calculated and submit it 

-- Pay your tax online using VISA/Mastercard 

-- Download the acknowledgement receipt on submission. A hard copy of the same will also be sent by BBMP 

-- If you want to pay by cheque, download the filled-up form and submit it along with the cheque at your help centre

Incentives to protect heritage properties In Mumbai

In a bid to rein in the steady metamorphosis of bungalows into highrises, art deco single-screen theatres into multiplexes and quaint two-storeyed buildings in South Mumbai into towers with glass and steel façades, the state government is planning to award incentives to owners of listed heritage properties. 

The Mumbai Heritage Conservation Committee is studying ways to reward conservation of the remaining vestiges of city’s architectural history. This may range from waivers on property tax, entertainment tax rebate in case of theatres, soft loans or grants for restoration of the property, declaring special zones for heritage, liberal use of heritage TDR or giving income tax benefits on money spent on conserving such properties. 

“Under the current heritage regulatory framework, there is a substantial liability on the home owner once his property is listed as a heritage structure with no benefit for him,” said Pankaj Joshi, executive director of Urban Design Research Institute (UDRI). 

On instructions from the state Urban Development Department, the heritage committee is now studying reports submitted by the Bombay Environmental Action Group (BEAG) and another by a committee under former heritage committee chief DM Sukthankar so as to make heritage conservation viable in Mumbai. “We are compiling extracts from each of the regulations to prepare revised heritage regulations for the city,” said heritage committee chief DK Afzalpurkar. 

The BEAG report, for instance, recommends the practice in Hyderabad where no building permission is issued if the owner deliberately allows his property to deteriorate and crumble eventually. “In order to make it viable for owners, we have also recommended that they be allowed to have commercial establishments in residential zones as long as the listed structure is maintained as it is,” said Shyam Chainani of BEAG. 

City-based historian Sharada Dwivedi points out that when the heritage listing was initially done, several privately owned heritage structures were listed as grade 3 just because the owners were financially incapable of maintaining the high standards of façade and interiors meant for grade 2 structures. “Today many of these have been bought over by builders and razed down.”

THE NR EYE: Overseas Indians may shift focus to real estate market

With the market sentiment buoyant over the prospects of a stable and investment-friendly government at the Centre and a distinct exchange rate advantage, overseas Indians may once again turn their attention to the rapidly-recovering real estate market in India.
More so, as market regulator Sebi (Securities and Exchange Board of India) has begun deliberations with experts to set up a framework for Real Estate Investment Trusts (REITs). In April last year, Sebi had prepared norms for real estate mutual fund. But the launch of real estate MF was delayed due to the market meltdown.
The realty sector, battered by the financial crisis, is looking at the real estate investment trust (REIT) market to lift the spectre of gloom.
Over the past 3-4 months, the global REIT market has witnessed a sharp pullback, recording an equity infusion of $8.7 bn. Equity infusion by investors at this point in cycle suggests that they see value and opportunity at current price levels.
According to a recent research by brokerage Motilal Oswal, the improvement in the global REIT market will positively impact commercial real estate in India, which lacks any monetisation vehicle at present. If the recovery in REIT demand continues, it might prompt leading commercial real estate players such as DLF, Unitech and IBREL to re-draw their REIT plans.
A real estate investment trust or REIT is a vehicle for a company that invests in real estate, which helps in reducing or eliminating corporate income-tax. An REIT is a trust that uses the pooled capital of many investors to purchase and manage real estate assets and/or mortgage loans.
It is a security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. It receives special tax considerations and generally offers investors high yields. Like other corporations, REITs can be publicly or privately held. Experts say REIT provides a similar structure for investment in real estate as mutual funds do for investment in stocks.
Real Estate Mutual Funds (REMFs) are the Indian avatar of the international REITs platform, adapted to the existing Indian mutual funds platform. The asset management company (AMC) invests in a range of real estate assets around the country and creates a fund based on those assets. Investors can buy shares in those funds, which are traded on a daily basis on stock exchanges. The value of the shares depends on the value of the underlying real estate assets.
If the sector needs quick money, these funds are liquid assets, which can be sold conveniently. The flexibility of investment will offer a great sense of confidence as they can liquidate their investment faster than the physical assets.
As for their potential in the current context - while everybody is now working on entry and creating assets, the important question of who will buy these assets to provide an exit to the developers / investors needs to be addressed. The leveraging allowed in case of Indian REITs is the lowest (at 20 per cent of the value) compared to 35 per cent in case of Malaysia, Hong Kong, Singapore, and Taiwan and 200 per cent in case of Korea. This could result in a lower yield - and because it is not really leveraged, the risk taken is also more.
According to Shobhit Agarwal, Joint MD — Capital Markets, Jones Lang Lasalle Meghraj, products like this should be more for low-risk–low-return investors, or most suited for risk-averse investors.
Speaking to Express Estates, Dr Devinder Gupta, CMD, CENTURY 21 India, opined that with the formation of a stable government at the Centre, the realty sector has a high expectation from the new government.
Fortunately, the sentiment part which has contributed significantly to make the market depressed in last FY 08-09 is now reversing and is reviving on optimistic side. These sentiments have a huge impact on the level of consumer confidence and reviving of market. This has been reflected in report coming from different cities showing revival of real estate transactions.

Indian realty pulling a lot more money from private equity, NRIs

After foreign institutional investors (FIIs) lapped up realty stocks in the recently concluded equity placements by property majors, India-focused private equity players and non-resident Indians (NRIs) are loosening their purse strings in the real estate space.
Delhi-based realty major Parsvnath Developers said on Thursday it has signed an agreement with realty fund Red Fort Capital to invest Rs 90 crore in its premium luxury project in Delhi, making it the first PE deal in the housing segment in the June quarter.
Red Fort picked up an 18 per cent stake in Parsvnath Landmark Developers Pvt Ltd (PLDPL), which is developing the 16.84-acre project in Civil Lines in north Delhi.
SUN Apollo Ventures, an international property fund, picked up a 15 per cent stake in Mumbai-based Keystone Realtors for Rs 300 crore earlier this year, after a long lull in the PE-realty space.
“PE is getting back in real estate as valuations have become reasonable, confidence is reviving and end-user demand is coming back. Though demand for premium housing is down, investors and buyers are showing interest in good projects,” said Anuj Puri, chairman of Jones Lang LaSalle Meghraj (JLLM), an international property consultancy.
FIIs oversubscribed for stocks in the qualified institutional placements (QIPs) of Unitech and Indiabulls and bought stake sold by the promoters of DLF, the country’s largest developer, indicating a renewed interest by investors in property space.
In a separate development, Maharashtra Chamber of Housing Industry (MCHI), a realty developers’ body, said on Thursday its twelfth India Realty Expo 2009 held in Dubai saw 106 flats worth Rs 65.33 crore being booked.
“Around 86 flats worth Rs 80.18 crore are in the pipeline for NRIs when they come to India in July-August on their annual vacation,” Zubin Mehta, chief executive of MCHI, said.
The expo evoked an encouraging response, with 2,700 NRIs visiting the exhibition during June 4-6, the release said. “The softening of real estate prices and home loan interest in India were the key reasons that attracted a large number of NRIs during the expo,” Mehta added

Housing sector back in business Assetventures

Spurred by price corrections, new launches, lowering of interest rates, increase in sales inquiries and, more importantly, the newfound mantra of
‘affordable housing’, the real estate industry has started showing signs of recovery.

Industry body Assocham has gone to the extent of saying that the real estate recovery is possible in the coming three months. A recent Assocham Business Barometer (ABB) survey has found that anticipating strong policy measures for the real estate in the forthcoming Budget, embattled realty majors see positive signs of recovery taking place within the next three months as affordable housing projects rev up demand and improved cash flows address their liquidity concerns.

As per the survey, a whopping 92% of the respondent developers considered affordable housing as the most dominating segment to shore up the demand in real estate sector. And the policy actions supplementing the robust demand in the housing sector are likely to hold the key for a speedy recovery phase in the sector.

Although the findings of this survey may seem to be too optimistic, particularly in view of the prolonged slowdown in the industry, but taking the current positive signs in the property market into account, both industry majors as well as experts feel the real estate recovery is not a distant dream. And they have ample reasons to believe this.

Firstly, after a gap of more than a year, some real ‘actions’ are being witnessed in the realty market, including the high-profile launches of some major projects coupled with increased sales inquiries. Along with that, some realty majors are also said to have recorded an overwhelming response for their upcoming projects.

For instance, the Jaypee group claims to have booked all the 3300 apartments of Jaypee Greens Aman, its new residential project in Noida, within 24 hours of their launch, while Capital Greens, DLF’s first residential project in Delhi, is claimed to have showed bookings of 1,400 flats on the first day itself. Such instances only prove that buyers and strategic investors are once again warming up to the sector, though in a restricted manner.

Secondly, the Indian economy recorded a better-than-expected growth rate of 6.7% in 2008-09. “The GDP growth rate, clocked in tumultuous times of global financial crisis, lends credibility to the presence of real domestic demand and consumption continuing to fuel the economy, though albeit at a reduced growth rate,” says Neeraj Bansal, associate director - advisory services, KPMG.

Thirdly, sensing a near-term economic recovery and, resultantly, expecting the realty sector to outperform other sectors in the months to come, fund managers are reposing their faith in real estate. This explains why in the month of April, mutual fund houses increased their exposure in the realty sector to Rs 308.16 crore as against Rs 98.76 crore in March, translating into a whopping 212.03% rise in the exposure.

Fourthly, there is a renewed faith of overseas investors also, stemming from the series of steps taken by developers to improve their financial position.” Unitech has, for instance, cut debt by Rs 2,000 crore while DLF has repaid Rs 1,700 crore of loans in the past year. And similar is the case with lots of other large and mediumsized developers,” says Bansal.

Fifthly, home loan disbursements by the country’s top lenders, which signal the actual demand for homes, is also improving. HDFC saw its fourth quarter disbursals going up by 17.5% at Rs 12,400 crore, while LIC Housing saw an increase of 42% and 22% in March and in Q4, respectively. Moreover, a general softening of interest rates has also helped developers cut their borrowing costs by as much as 300 basis points.

Realty firms focus on ‘affordable’ homes to boost sales, profits Assetventures

To boost slowing demand in the realty sector and tap the growing market for affordable housing, realty firm Unitech Ltd will build 20,000 homes this year, priced between Rs10 lakh and Rs30 lakh, launching its first such project in Chennai this month.
India’s second largest property developer by market value on Tuesday launched its new initiative branded Uni Homes, which will have apartment sizes starting at 660 sq. ft. 
The realty firm said its second such project will be constructed in Manesar in Haryana, on the outskirts of New Delhi. The apartments in Chennai would cost around Rs10 lakh and those at Manesar around Rs15 lakh, it said.
Faced with falling sales on the back of an economic slowdown, India’s realty companies have been launching what they call affordable housing because they say there is robust demand in this segment.
Earlier this year, Unitech had launched a project in Gurgaon, south-east of New Delhi, where apartments are priced between Rs28 lakh and Rs40 lakh. All 750 homes were sold in 45 days, the firm said. Encouraged by the response, it launched another project, also in Gurgaon, with prices at Rs35-45 lakh. It has so far sold 180 of the 200 flats in that project.
In May, Mumbai-based Tata Housing Development Co. Ltd launched a low-cost housing project branded Shubh Griha in Boisar, around 50km north of Mumbai. The apartments of 283 sq. ft, 360 sq. ft and 465 sq. ft would cost between Rs3.9 lakh and Rs6.7 lakh, the company said.
In March, Mumbai-based developer Lodha Group launched Casa Bella, an integrated township project in Dombivalli, a Mumbai suburb, where apartments would cost between Rs11.7 lakh and Rs24.3 lakh.
In August, Bangalore-based realtor Puravankara Projects Ltd launched a unit called Provident Housing and Infrastructure Ltd to construct apartments priced at Rs10-20 lakh in cities such as Bangalore, Chennai, Hyderabad, Coimbatore and Mysore.
In May last year, Omaxe Ltd, another New Delhi-based developer, set up a subsidiary called National Affordable Housing and Infrastructure Ltd to build homes in the Rs3-15 lakh category in smaller cities such as Sonepat in Haryana, and Nimrana and Bhiwadi in Rajasthan.
“There is a demand in the affordable housing segment. Interest rates have come down and that helps because people can take loan at a cheaper cost,” said Anshuman Magazine, managing director of CB Richard Ellis, a real estate consultancy firm. “There is also a renewal of confidence among buyers.”
Unitech expects to start its Uni Homes projects in Hyderabad, Bangalore, Kolkata and Lucknow. 
The company said these projects will all be well located. “The project in Chennai will not be very far away from the city.”
Unitech plans to invest Rs1,700 crore this year to build these homes. 
“This is just the construction cost,” the spokesperson said. “Land for the projects has already been paid for,” the spokesperson said.
The real estate company says it owns around 8,000 acres of land in various cities, on which it can develop some 500 million sq. ft of residential and commercial space.

Demand for homes inching up, but recovery likely to take months

Home sales in India are trickling back in some sections of the market, but industry watchers say a rebound is months away as buyers await further price corrections.
Builders have begun new projects after a year-long hiatus, and are also swapping older premium project proposals for cheaper ones to restart sales as they try to beat a severe cash crunch.
“While the market has turned up, I don’t expect it to be back to 2007 or 2008-beginning levels for another six months or eight months,” said Rajesh Goenka, chairman, Axiom Estates, a real estate agency servicing overseas Indians, mostly in the earning bracket of $100,000-300,000 (around Rs47.5 lakh-Rs1.5 crore) a year.
Indian realtors have spent months battling a severe cash crunch as high interest rates and a slowdown kept buyers away and funding from investors dried up. But, a spate of interest rate cuts and a sentiment revival have encouraged builders to focus on middle-income buyers by launching new projects or re-marketing older ones as mid-income properties.
Unitech Ltd, Parsvnath Developers Ltd and India’s top listed real estate firm DLF Ltd redesigned projects and cut costs to appeal to a wider consumer base. Demand is swaying towards affordable housing. 
In the quarter to March, half of the homes sold were in 114 new projects of the 2,000 available for sale, according to estimates by realty rating and research agency, Leases Foras Real Estate Rating and Research.
Even though builders say new projects are being lapped up, home loans are not picking up as fast, suggesting that the homes were picked up by investors, said Pankaj Kapoor, founder and chief executive, Leases Foras.
Homebuyers say that the ground reality hasn’t changed much. Prices haven’t fallen as anticipated with builders’ standing guard, hoping prices will continue to firm and investors, too, hope for a return in pricing.