Thursday, August 27, 2009

Commercial property market may revive post-Diwali: Assetventures

"We have seen a strong demand in the residential property market from December-January and now we may see buying activity in the commercial property market
post-Diwali," Religare Securities' Associate Vice-President, Suman Memani, told reporters here today.

Banks and financial services would be seen buying office spaces, but IT and ITeS sectors are yet to enter realty market as they are still passing through degrowth.

"We still remain negative on retail segments and expect sentiments to improve only 15-18 months from now as the economy gradually gets back on track," Memani said.

"We believe that there has been a significant rental correction happening in the commercial segment in Tier I and Tier II cities. However, there has not been any erosion of capital value of commercial properties," Memani said.

Lower home loan rates, property price cuts, apartment downsizing, and a recovery in the job market are translating to a pick-up in demand for residential projects as evidenced by an increase in property registration in major cities.

With the improvement in macro-economic conditions as well as buyer affordability, developers witnessed a stronger response to new launches across cities over the past quarter.

Now that property prices have climbed down and the risk of job lay-offs has diminished, the service class is likely to participate actively in property absorption, leading to a strong recovery in residential demand in Q2 FY 10, he said.

Commenting on realty prices, Memani said, "after going into a severe tailspin from January 08 onwards on account of weakening economic dynamics, we believe realty prices have started to bottom out and have already troughed in a few locations. With the return of liquidity to the sector in the form of FDI, QIPs and bank loans in recent months, the balance-sheet position of realty players has started to improve, in turn changing the risk dynamics of the business."

Listed real estate stocks were in the danger zone, a key risk measure for bankruptcy-but with equity infusion, the chances of bankruptcy have diminished, he added.

Most developers are looking to enhance their execution capabilities in this space. If 60 per cent of the planned development is executed, it will improve the balance-sheet of realty players and also enhance buyer affordability, he said.

Realty stock prices corrected 85-95 per cent over January 08-March 09, but have bounced back significantly thereafter. Still, they remain 25-30 per cent of their peaks. With positives like liquidity infusion, stronger balance-sheet positions, a stable reform-oriented Government and an improved employment outlook, "we expect the sectors' fundamentals to improve," he said.

North East's biggest real estate project

Shillong , Aug 24 Emaar MGF Land, one of the largest real estate developers in the country, would set up a residential complex here at an initial investment of Rs 400 crore.
The 84-acre Windermere Estate at Umpling, Shillong , once completed, would have villas, community retail centre, clubhouse and a hotel, a company statement said today.

It added that the development of Windermere Estate would have a multiplier effect on the local economy and provide employment, which will directly and indirectly benefit over 1,000 people.

" With Emaar MGF&aposs expertise in developing Commonwealth Games Village in New Delhi, the company would bring in similar expertise to develop Windermere Estate," Meghalaya Assembly Speaker and a partner of the project Charles Pyngrope said.

Emaar MGF CEO (East) Sanjay Choudhary said, Shillong offered value-proposition as well-travelled tourist destination. PTI RTJ AMD

Bandra-Worli Sea Link to drive prices of real estate

It’s a classic case of infrastructural development boosting real estate prices.The Bandra-Worli Sea Link seems to be doing more than just easing the traffic flow from north and south Mumbai. Experts in the country's financial capital say that there could be an increase of 10-15 per cent in property rates in surrounding areas. “The Bandra-Worli Sea Link will not only provide relief from the agonising traffic, but will also trigger a major crowd influx, which will affect real estate prices. South Mumbai will have high demand .There are indications of a 10-15 per cent hike in property prices and this may effect connecting areas. Builders who are already selling flats in the area would go for a price correction immediately, says Rajesh Vardhan, managing director, Vardh­aman Group, a Mumbai-based real estate development company. In the same breath, he says it is time for a Nariman Point-Worli sea link as well.
Bandra-Worli Sea Link is a Maharashtra state road development corporation project, constr­ucted by HCC, India's largest engineering contracting company. The road hangs in between cable-stayed bridges on the two ends namely, the Bandra and Worli Cable-stayed bridges of 500 and 150-metre spans, respectively – with the highest towers soaring to a height of 126 metres, equivalent to the height of a 43-storeyed building. The sea link was opened for general public on June 29.
Not everyone, however, shares the same optimism. Shreegopal Maheshwari, broker attached to Mumbai-based Maheshwari & Maheshwari, feels that it is too early to see an impact on property prices. “It is just over a month since the link was inaugurated. We may see the real impact in six months. Worli Sea face has, however, seen a drop of 10 per cent property prices due to increased traffic in the area,” he said. While the office properties in Mumbai generally continued to fall.
“Mumbai continued to remain volatile in terms of rental values. Bandra–Kurla Complex (BKC) corrected by another 20 per cent over the previous quarter to settle at Rs 225 per sq ft/month. The location has also witnessed over 40 per cent correction over June, 2008. This has triggered increased interest in the location from corporate occupiers and approximately 1.41 million sq.ft was leased within this location. With the growing demand for this location, the rentals are expected to remain stable in short to medium term,” said a recent report by Cush­man & Wakefield.

Commercial real estate rentals seem to be bottoming out

Mumbai continues to be the second costliest city in Asia Pacific in terms of prime rental rates. With rent of about USD 800 per sq metre per
annum, Mumbai is ahead of the likes of Tokyo (USD 750 per sq metre p.a.) and Singapore (USD 625 per sq metre p.a.) as per the latest report of real estate
consultancy firm Jones Lang LaSalle. This is despite a 40% drop in rentals from its peak values. Delhi comes fourth in the ranking with USD 725 per sq metre per annum.

With GDP growth expected to bounce back in 2010, India and China would outperform the global markets with a 7-10% growth rate. The early signs of recovery are visible in Delhi and Mumbai markets. Having dropped by 24% in March’09 quarter over the preceding quarter, Mumbai’s decline in June’09 was well below 10%. Delhi followed with an 8% decline, which was half of what it was in the quarter before.

The average decline for India in June’09 was 8.3% as against 19% in the quarter prior to that. This showed that the rate of decline in rentals has also slowed down in the June’09 quarter as compared to March’09 quarter. It is believed that rents in these cities have bottomed out. Pune outperformed with just about a 4% decline.

This trend is likely to improve by 2011 when the absorption rate would overcome the supply. With 57 million sq feet of office space expected to be operational by the end of 2009, vacancy rate would continue to be high at 27% in 2010 till it comes down to a little above 20% in 2011.

Talking city wise position, Bangalore is expected to relatively outperform other cities with a low vacancy rate as it has received good response for pre leasing properties.

Companies form telecom and pharma sector seem to be fast taking advantage of the low rentals and expanding their geographic reach. For example recently Aircel and Telenor Unitech wireless signed more than 50000 sq feet of real estate space. As rents become more affordable, we could see more companies scaling up their expansion plans.

Rich, powerful flouting laws for real estate construction

New Delhi: The Supreme Court today came down heavily on economically affluent people, bureaucrary and civic body officials for mushrooming illegal real estate construction in the country and ruled file notings by ministers or officials do not have any legal validity.

"Economically affluent people and those having support of the political and executive apparatus of the state have constructed buildings, commercial complexes, multiplexes, malls etc. in blatant violation of the municipal and town planning laws, master plans, zonal development plans and even sanctioned building plans", said a bench of Justices B N Aggarwal and G S Singhvi in a judgement.

"In most of the cases of illegal or unauthorized constructions, the officers of the municipal and other regulatory bodies turn blind eye either due to the influence of higher functionaries of the State or other extraneous reasons, the bench observed.

"In most of the cases of illegal or unauthorized constructions, the officers of the municipal and other regulatory bodies turn a blind eye either due to the influence of higher functionaries of the state or other extraneous reasons, it said.

The apex court also said file notings ministers or officials do not have any legal validity.

Its ruling came while dismissing an appeal filed by Sathish Khosla, President of Shanti Sports Club of India which claimed to run a cricket academy at a village in Delhi.

One of the pleas of the club was that its illegally constructed sports club should not be demolished as the then Minister for Urban Development in 1999 had noted in his file that the construction be regularised.

Tuesday, August 11, 2009

Real estate looking up, people start buying once again

Real estate looking up, people start buying once again

"Today flats are being sold, but the pace could be better. Generally things have reversed. In Mumbai also, rightly priced projects have been sold. The major contributor to this is the government policy to generate demand. It brought in stimulus packages, ensured availability of liquidity to the home buyers, interest rates softened," he said.

Another real estate player Indrajit De, chairman of Eden, also said housing loan lending rates cut may attract a few more buyers into the market.

"If the lending rate falls further by 50 basis points, the sales figure will climb up," he said, adding, "Certainly the market is looking up now. Sales have also improved.

"We are selling around 25-30 units (flats) per month. But it was much higher in the range of 55-60 units per month before the recession actually hit India."

Harshavardhan Neotia, chairman, Ambuja Realty Group, told IANS: "Sales have picked up in the last two-three months. There is more offtake now than what it was six months back. But now the buyers are genuine users and not just investors. These are the people who really need housing. They are lot more quality conscious and they look for the right products."

He said there was a drop of 10-15 per cent in the price during the recession period. In the last two-three months the company has sold around 200 flats, he said.

Reacting to the recent announcement by union Finance Minister Pranab Mukherjee on interest subsidy on new home loans and extension of deadline in tax holidays on projects approved by March 2008 if they are completed by March 2012, Rungta said: "One must understand that extending the tax holiday under 80 I B (10) for a mere one year to projects approved by March 2008 will fail to create a significant positive impact on the real estate market. It will only benefit a few micro markets with a handful of projects."

CREDAI has suggested the centre consider extending the dateline to March 2012 for providing tax holidays to projects irrespective of the date of approval. "This will be of greater benefit to the sector and encourage developers to take up new projects and expedite ongoing projects as well."

Rungta further said: "Even the proposed interest subsidy of one per cent to home loan borrowers for loan taken for houses costing up to Rs 20 lakh is also not justified."

CREDAI has proposed that the centre increase the subsidy to home loan interest rates by another one per cent to two per cent and extend the scheme for houses costing upto Rs 30 lakh from the currently proposed valuation of Rs 20 lakh.

DLF revives commercial plans

DLF revives commercial plans

DLF, India's biggest real estate company, seems to have forgotten its recent troubles. With some funding available to it, it has now decided to stay in some of the business that it had considered peripheral -- hospitality included.
DLF is gearing up for a second innings in the commercial space, thanks to an eased liquidity situation that has pumped some confidence in the real estate sector.
The company has now revived its commercial projects, which were on hold for the last one year or so.

NDTV learnt from sources that DLF's commercial expansion will be mainly centered around hospitality and retail, with an investment
of Rs 4,000 crore to be funded through long term debt. Stake sale, if any, would be at project specific only.
The company will initially focus on Delhi and plans to launch about 3 hotels and 7 malls in Delhi over the next couple of quarters.
An office project is in the offing in West Delhi, adjacent to its proposed housing complex at Swatantra Bharat Mills.

Anshuman Magazine, chairman of CBRE India, said, “The rental market has shown some recovery in the last few months. Things have somewhat started to look up. The country's largest realtor earmarking expansion plans in the commercial space will further help boost sentiment.”
Experts opine that DLF's approach seems to be much more subdued this time on. So, instead of the mega plans of 25,000 keys by 2010, it is now talking about a mere 350 keys across 3 properties in Delhi.

D K Agarwal, MD of SMC Global, said, “We will still be more cautious on our outlook for commercial and hospitality. The past experience has not been very positive.”

Although DLF has decided to revisit commercial projects, the company insiders say that residential projects, mainly affordable housing will continue to be the key growth driver, at least for the next few quarters.

QIPs save the day for real estate players

QIPs save the day for real estate players
year has seen just one private equity deal in the real estate sector. In May, Sun Apollo India Real Estate fund made an investment of Rs 300 crore in Mumbai-based Keystone Realtors. According to Kamal Khetan, MD of Sunteck Realty, another Mumbai-based realty company, it makes better sense to go to the capital market than looking for a PE investor. “It is difficult to get in the right kind of investor. We are looking at a Rs 500-crore QIP to expand our operations.”

Understandably, the large number of companies in the real estate sector, which have taken the QIP route, are the trigger for others in the sector. Said Amber Maheshwari, director, investments, DTZ, an international property consultant: “In the present situation, companies in the sector have had a good experience with QIPs and will now look at the capital markets as well. With PE money not easily available, options are limited.”

Industry trackers point out that stringent rules for investments have been the reason for a lack of common ground between PE investors and the real estate companies. “Now, most of the PE funds demand that the investment in an SPV be made in tranches and be directly proportional to the developers’ capacity to finish projects in time,” said Biren Parekh, partner, (Real Estate), Ernst & Young.

It is gathered that in some instances, the option of bringing in PE investors as well as going public is also being considered. According to a senior official at Bangalore-based Nitesh Estates, which is looking to raise Rs 1,200 crore, half of the amount will come through IPO, while the rest through potential PE investors.

Investors may have lost one-third investment in real estate

Investors may have lost one-third investment in real estate

"We are seeing some variations of teaser type housing loans being offered. The lure of low interest rate at the start of taking a housing loan is enticing. But are customers being made aware of future implications," he asked.

Parekh noted that the genesis of the US housing crisis lay in loans that offered artificially low interest rates in the initial years but once the rate normalised, many found themselves unable to service the loan. These are the lessons one should learn from, he said.

However, the HDFC Chairman pointed out the same disturbing trend being seen in India where some variation of teaser type housing loans are being offered in the market. "Are these lending institutions providing "what if" scenarios to their customers, he asked.

DDA given clean chit in housing scam

DDA given clean chit in housing scam
NEW DELHI: The Delhi Police, which is probing the multi-million-rupee housing scam, has given the Delhi Development Authority (DDA) a clean

"We have received a report from the forensic lab in Hyderabad that the software used by the DDA during the allotment of over 5000 flats was not rigged. The DDA conduct of allotment was fair and no discrepancy was found in it," a senior Crime Branch official told IANS.

"We have not found any wrongdoing by the DDA," the official said.

Over 500,000 people applied for 5,238 flats under the DDA's housing scheme 2008. But the housing scheme got mired in controversies amid allegations of fake applications.

The scam came to light earlier this year after a man who was allotted a flat in the draw of lots told the police that he had not even applied for it.

The Economic Offences Wing (EOW) of Delhi Police started investigations, which revealed a group of people conspired to buy several flats in the names of those from reserved categories like the Scheduled Castes and the Scheduled Tribes who were eligible for the flats but could not afford them. The conspirators meant to sell off these flats later for huge profits.

So far, the EOW has arrested Deepak Kumar, who allegedly blew the lid off the scam after he fell out with some fellow real estate agents, retired DDA employee M.L. Gautam, and real estate agents Raju Ram, Laxmi Narayan Meena and Vijay Pal.

Satbir Singh and Dinesh Dral were arrested for forging the documents to open bank accounts in fictitious names. Suresh Kumar Meena, a Delhi-based real estate agent, was arrested March 19 and the last one to be arrested was Jeet Ram - one of the key financiers - April 27.

MCD for survey to track property tax evaders

MCD for survey to track property tax evaders

Suggesting ways for increasing collections, leader of the House Subhash Arya proposed that commercial properties like malls, five star hotels, guesthouses etc should be levied higher rates of taxes by bringing them under a separate category.

According to MCD's own estimates, it is losing out on property tax from almost two-third of property owners in the capital. There are 25 lakh properties in the city but only 8.5 lakh are paying property tax. Municipal councillors also said in most cases, the executive agency has failed to maintain and update the records of property tax collected.

Moreover, according to leader of opposition J K Sharma, some Rs 800 crore in tax was due from government and other agencies including PWD, DMRC and DJB. Sharma said: "The Municipal Taxation Tribunal was set up by the civic body last year to take up property tax cases and hear appeals on dispute in this regard. But that has not been of any help and instead turned out to be a financial burden for the civic body.''