Monday, November 30, 2009

Murphy's law is at work in the global financial and realty markets. If something can go wrong, it will. No one who is familiar with the facts of Dubai's boom and its global dimension ought to have been surprised by the debt crisis that has hit Dubai World.

For the last one year, there have been far too many stories coming out of the region on real and potential bankruptcies, plans being shelved, excess capacity and inadequate demand.

The global financial crisis and the rollback in oil prices in 2008 were largely responsible for this. However, for the same reason, the moderation of the global slowdown and the recent rise in oil prices have helped improve sentiment in the region.

Lack of transparency, poor management of a financial problem and the long weekend seem to have done more to spook the markets than the real size of the problem itself.

Nevertheless, it is better to be forewarned and to hedge one's bets about hot spots like Dubai till the global economy is back on an even keel.

The government of Abu Dhabi has already stepped in with some reassuring remarks, even if these do not fully ease the situation for Dubai.

Informed analysts suggest that Dubai World has the capability to handle a large part of the problem it faces, given the better economics of its other subsidiaries like Dubai Port World.

It is the property subsidiary, Nakheel, that has taken the hit from the near 50 per cent fall in property prices in Dubai. State-controlled economies like China can absorb the shock of excess capacity in real estate better than a more market-dependent economy like Dubai.

As for India , the central bank and the finance ministry have made reassuring statements and it is possible that direct exposure of the banking system to Dubai World is limited.

However, there is a larger problem of stability and future of Gulf economies that India must think about. The growth engines of the region have fuelled the Indian economy for more than two decades now.

The slow pace of urban modernisation in India, especially in a city like Mumbai , has made city states like Dubai and Singapore attractive havens for an increasingly wealthy and globalised elite.

States like Kerala have become far too dependent on financial inflows from the Gulf. All those with this kind of exposure to the region must hedge their bets.

While it is true that the global financial crisis and the slowdown did not result in a decline in inward remittances from Indians abroad, it is possible that the so-called "flight to safety" factor may have been partly responsible for this.

Even now, Indians in the Gulf may step up homeward remittances as an escape to safety. In the medium- to long-term, however, India must find newer sources of foreign exchange inflow and not remain too dependent on workers' remittances.

Dubai property recovery under threat

The fear of government-owned Dubai World reneging on its commitments to global lenders is expected to find an echo in a reversal of a recent tentative recovery in Dubai's real estate values unless the emirate manages to strike some sort of deal with creditors and / or somehow raises the cash to meet its obligations, analysts and industry professionals said on Sunday.

The ports, property and hospitality conglomerate last Wednesday asked its creditors for a six-month standstill period while it restructures its debt obligations. Dubai World has borrowed $59 billion to finance its expansion, including the acquisition of port, retail and leisure assets and the setting up real estate ventures globally.

"Unless there is some agreement with creditors on the $10 billion or so that is due in the next two months, I see an indirect perceptional impact on property values in Dubai, maybe even sending them spiralling downward again," said Ashutosh Maitra, one of the partners at a Dubai-based property marketing firm.

This would have a direct impact on the Indian investors in the emirate's real estate sector, who constitute the largest number of property buyers followed by Britons. In real terms, however, such an impact would further push back the possibility of a profitable exit.

An economist attached to an asset management firm at the Dubai International Financial Centre, or DIFC, added: "Such an impact is only likely if there is no quick resolution to the Dubai World crisis. And frankly, this seems to be a storm in a teacup. Dubai World is not seeking to renege on obligations, it is simply asking for some time out from paying off the interest while it restructures its commitments."

By the middle of this year, property values had fallen by about 65 per cent in peak advertised prices since September 2008, when a delayed reaction to the global credit crunch hit the market. According to HSBC data, May 2009 saw a slight uptick in agreed prices month on month, indicating signs of recovery. The lender said distressed stock was gradually clearing due to renewed interest as well as some repricing by sellers. "Anecdotal evidence also suggests that foreign investors seem to be back in the market and there are bulk buyers of property for investment purposes," HSBC said.

The research arm of HC Securities said the main catalyst of an uptick is credit returning to the market as mortgage providers raised their loan-to-value ratios, relaxed credit norms and lowered rates in line with a downward trend in the Emirates Inter-Bank Offer Rate, or Eibor, which fell from 3.87 per cent in January to 1.95 per cent in October.

After dropping to a two-year low of seven per cent and six per cent, mortgage values and volumes as a percentage of total transactions have since steadily recovered to pre-crisis levels, reaching 24 per cent and 14 per cent, respectively, in October. Mortgage volumes have also recorded a strong growth, reaching a two-year high of 374 units in August, as prices drop to attractive levels, only to back-pedal to 191 units in October.

However, a number of factors are likely to keep the recovery fragile. According to HC Securities' own research, 60,000 residential units are likely to hit the market between 2009 and 2011, putting further pressure on prices.

At the same time, rental returns will continue to stagnate or fall marginally as uncertainty over the business environment keeps the expatriate population lower than in recent years. Several rounds of lay-offs by large and small corporations have resulted in rents in most parts of Dubai coming under intense pressure in the past 18 months, making property investments less attractive than they used to be in the glory days of 2002 to 2007, when so-called "flippers" -- investors who bought property with a 10 per cent down payment, only to sell it one or two months later for a 100 per cent return on investment -- made massive amounts of cash.

Asking rentals in Dubai have retreated for 10 months in succession since the start of the year, dropping more than 40 per cent year to date. Occupancy levels have been driven down by expatriates leaving and new stock coming into the market. The pace of the decline, however, seems to be slowing, according to HC Securities, with rent values declining only two per cent month-on-month in September and October.

Advertised rentals on agreed sale prices resulted in yields that are higher, upwards of 10 per cent in October. Considering there is a large bid/ask spread on prices, HC Securities believes rentals are no different and estimates that agreed rental yields have compressed from a high of 8.6 per cent in November 2008 to around 5.7 per cent in October 2009.

On the other hand, this is making life easier for tenants, who now have the upper hand in negotiating down their monthly rents. Over the past four months, there has been a large population shift from the traditionally low-rent areas of Dubai into the relatively upper-crust areas where rents have suddenly become more affordable.

Any quick recovery in realty values driven by massive foreign capital, as witnessed in the boom years, will be predicated on global fund managers allocating larger amounts to the Dubai and UAE markets. "I don't see that happening very quickly," said the DIFC-based economist, who refused to be named. "Primary fund flows will be allocated to more developed markets like New York and London -- where there is an established secondary market that facilitates an exit, and where transparent data shows a clear bottoming out. I believe only the high-risk hot money like hedge funds will be allocated to emerging markets."

Also, other real estate opportunities in the Arabian Gulf itself are looking more attractive, according to several property consultancies such as Jones Lang Lasalle and Colliers. One of them is Dubai's own neighbour, the oil-rich UAE capital city of Abu Dhabi, where severe residential and commercial property shortages are keeping prices and rental yields high.

"If the Dubai World debt imbroglio results in pushing property prices down again, it will be seen as the start of the double-dip in that sector. Since perception is everything these days, the worry is the double-dip will result in a W-shaped overall economic recovery for the emirate," said the DIFC-based economist. This would be bad news for real estate buyers in Dubai, who will witness their investments eroding even more before recovering.

"These worries would prove unfounded, however, if the Abu Dhabi Government or the Federal Government takes a hand in helping out the Dubai Government, as they have done on two occasions in the past," he said.

Action on illegal PG properties Chandigarh.

CHANDIGARH: After conducting a detailed survey of unauthorized and illegally paying guest (PG) accommodations in the area, cops at the Sector-19 police station are ready to book and arrest owners of properties who are still not adhering to set norms.

SHO Ram Gopal said the operation would be launched within a day or two in sectors 18, 19, 20 and in Sector 21. He said raids and special checking would also be conducted in the early hours of scheduled days.

Notably, as many as 144 illegal and unauthorized PG accommodations were found during an earlier survey carried out by the Sector-19 police personnel along with members of resident welfare associations.

A senior police official said detailed report of unauthorized PGs was sent to the estate office for further action but nothing was done. Sources said fresh raids would be conducted by four different teams and this time criminal cases would be registered against owners. Action would be taken under Section 188 (disobedience of order promulgated by public servant) of the IPC.

Notably, UT administration has made several guidelines for PG accommodation owners and it is mandatory for property owners to follow these.

According to sources, around 300 PG properties are being run under the jurisdiction of Sector-19 police station comprising sectors 19, 18, 20 and Sector 21.

Majority of these paying guests are college/university students. Inspector Ram Gopal said the earlier survey was a warning to these owners but apparently some of them have not yet started following the norms.

IT majors worried about cascading effect of Dubai crisis

MUMBAI/BANGALORE: As World, the emirate’s investment firm seeks more time to repay almost $60-billion debt, India’s top tech firms fear that the once lucrative West Asia market for outsourcing can enter a prolonged recession and customers in other top export markets of the US and Europe may exercise more caution while making outsourcing decisions.

Tata Consultancy Services (TCS), Infosys Technologies, Wipro, HCL and Patni Computer Systems are among Indian tech firms serving telecom, banking and other customers in the West Asia region. Dubai, the biggest commercial hub in the region saw home prices plunge by nearly half from 2008 levels, reflecting the worst real estate slump during the global recession, according to Deutsche AG.

“Global confidence is coming back. We were hoping for more spends. But now the confidence of our customers is shaking. I expect they are going to be a bit more cautious about spends and will not open up so much. Budgets were getting firmed up in December—clients will now relook at the whole thing,” said a senior software executive with one of the firms that was looking at the West Asia and Africa as a growth markets. Publicly, though, few firms are willing to admit to these worries.

While Wipro counts Qatar Petroleum and Road and Transport Authority of Dubai among its top customers, TCS serves Saudi Telecom. Domestic rivals Mahindra Satyam also counts Dubai Municipality and National Bank of Dubai among its key customers in the region.

Dubai debt crisis will have limited impact

Dubai's debt crisis has rattled markets across the world as the problem revived worries about the health of the global financial system. Although the exposure of Indian companies and banks to the Emirate is negligible, concerns linger about the fallout on the broader economy.

Dubai World, the investment conglomerate of the sheikhdom at the centre of the crisis, has a debt of $59 billion — a major component of Dubai's total debt of $80 billion.

Authorities from Dubai to New Delhi have tried to play down concerns, but there is fear a sovereign debt default - should it happen – could have a cascading effect on the global financial markets.

Broking firm Geojit BNP Paribas has a large presence in the United Arab Emirates. Its West Asian joint venture Barjeel Geojit Securities LLC is headquartered in Dubai. Mr C.J. George, CEO of the firm, spoke to Business Line on the likely impact of Dubai World's current debt trouble on Indian markets, NRI inflows and on his own business in the Emirates. Excerpts:

Dubai World's debt crisis impacted the Indian markets on Friday. Will it continue to haunt the Indian markets?

The panic reaction we saw during the opening of the market on Friday was on account of the absence of any firm indication from Gulf markets due to Eid holidays. International investors do not perhaps worry too much about the impact on Indian markets. India has never been bracketed with GCC countries in the past and, hence, there will be more mature reaction in equity markets in the days to come.

Do you expect major selling by FIIs in the Indian market?

One of the most significant outcomes of crisis-ridden global financial markets during the last two years has been a growing recognition of India's uniqueness. FIIs have a more balanced and knowledgeable view of India today than in 2008. Hence, there is unlikely to be major FII selling. If that happens, there are others waiting to buy.

Will the crisis impact the NRI inflows?

There will be increase in inflows in the short-term since NRIs may consider India as a safe haven than domestic bank deposits in UAE and perhaps GCC. However, any protracted crisis can lead to job losses and business closures with impact in the medium term. In the long term, Dubai will continue to attract talent from India apart from unskilled workers, as the city will continue to be the centre of a booming GCC as long as oil is a precious commodity and Dubai is a tax haven with modern infrastructure.

What will be the impact on Kerala given the number of people from the State employed in Dubai and other Gulf countries?

During the last one year we have seen some amount of job losses leading to the return of many NRIs from Kerala. However, as Abu Dhabi started massive construction projects, a large number of them have shifted base from Dubai to Abu Dhabi. Today construction workers are shifting to Saudi Arabia as well where there is a real estate boom driven by real residential demand.

I am of the view that the worst is over for Kerala, as the current crisis is likely to be managed between Dubai and the federal government. The UAE and GCC cannot afford to leave this debt restructuring unsuccessful particularly with ample resources in federal hands.

Is Dubai World's trouble just a trigger? Do you think it could lead to a major crisis? Will it escalate to other Emirates?

Fortunately, the real estate bubble was limited to the Emirate of Dubai only and, hence, I am of the view that this will be the end of crisis for Dubai. The other Emirates are relatively stronger in terms of debt obligations. GCC countries are in better shape today after the recovery in oil prices and, hence, Dubai will continue to retain the position as a global centre in the region leveraging the proximity of Indian sub- continent.

India will be to Dubai what China is to Singapore, unless “one day” Mumbai claims that position. In short, this debt crisis will have only sentimental impact on other GCC countries and limited impact on other Emirates. This observation is on the strong circumstantial evidence that the federal government of UAE will have to support Dubai as the domestic banks have a state guarantee.

How do you see it impacting your business in West Asia?

Barjeel Geojit has been operating in the UAE for the last eight years and the customer segment is predominantly Indian expatriates. We see Abu Dhabi booming, while Dubai slowing down with a neutralising effect. After the global financial crisis we are seeing more Indian investors putting money in Indian assets than before. Hence, if there is any panic there will only be improvement in our business in the short-term. However, in the unlikely event of this development leading to a protracted crisis and job losses at higher levels there will be an impact on our business too.

Will it lead to a liquidity crunch in the global economy, given the fact many central banks are planning to exit from accommodative monetary policy?

If this had happened a year ago it would have been perhaps disastrous than today as the amount involved can now be managed within GCC itself with the bounceback of oil. Moreover, the real estate bubble in Dubai was recognised by global financiers sufficiently long ago when the global real estate market started to crack. There is unlikely to be a second leg of liquidity crunch emanating from this event.

What do you make out of Dubai World's move?

Dubai World's move to restructure the debt should be seen as a genuine effort to restructure both debt and business since the announcement talked about just six month's “standstill” whereas the $60 billion consists of different maturities up to even 2014.

Currently, while the media around the world and international investors are showing panic there is relative calm and confidence internally, perhaps originating from the trust that finally it is a problem of the whole country and not of Dubai alone. Dubai has been growing on the strength of its capability to attract capital and talent globally and they know for sure that Dubai has to continue attracting these scarce resources to remain a vibrant non-oil economy surrounded by oil-rich countries.

Nevertheless, when the stock exchanges open for trading on Monday in Dubai, there will be selling pressure from global investors.

What in your view led to the current crisis?

On the strength of the oil boom in the region, Dubai one among seven emirates of UAE, has been positioning itself as a global centre for finance, trade and tourism due to negligible oil resources at home. During the early years of the current decade seeing growing demand for real estate, the Government started marketing housing projects offering 99 years of residence permit. Such a residence offer for investors in housing projects was neither denied by the Government nor approved. This led to an unprecedented boom in real estate, attracting rich investors from India, Russia, Europe and other places.

Both accounted and unaccounted global money started chasing real estate leading to even “day trading” in real estate.

There were even cases of buying in the morning and selling in the evening! Finally, when the global financial system cracked, the Dubai real estate bubble also crashed. The construction-driven economy was slowing down with highly leveraged projects. Dubai World, the real estate and infrastructure arm of the ruler of Dubai, was excessively leveraged during the boom years and when the demand disappeared had to catch up with debt repayments without positive internal cash flows.

While the boom in real estate collapsed, the federal government finally came out with a clarification that the buyers of real estate can only have six months renewable VISA in place of the highly publicised perception of 99 year's VISA. This was a bolt from the blue which was the last nail.

However, while Dubai was declining, Abu Dhabi, the cash-rich Capital city Emirate started booming on investment-driven by own capital. Abu Dhabi has been a lender of last resort for Dubai with vast oil resources and global financial investments of more than a trillion dollars. Abu Dhabi came out with a landmark announcement a year ago by declaring State guarantee on all bank deposits which led to calm in banking sector.

If Dubai announces any investor-friendly revision of VISA period, it can dramatically change the fortunes of domestic real estate market.

Buying real estate? Read this first!

Traditionally real estate in the form of the house that we live in has been the single largest investment for most of us. This is seen not only in India but across the world. Let us now apply the metrics that we attribute to investments in general to real estate and see the answers that come up.

Current income

If the investment is on the house that we live in ourselves, there is no current income. This is one of the main negatives about the house that we live in. In a financial cash flow perspective given by Robert Kiyosaki, it is not an asset. Because the house is cash flow negative owing to the maintenance activities and tax that we have to pay for it.

Rent from a house or commercial property is a good source of current income. Although at current bank rates the rent from a house is generally only about ½ of the loan EMI, the catching up happens only after the loan is closed. A 1000 square feet house will cost conservatively about Rs 2500/- per square feet (in B class cities like Coimbatore, Kolhapur, Guntur, etc) leading to the house value of Rs 25 lakhs. A loan for 80 per cent of the value (Rs 20lakhs) at current interest rates (9 per cent) and 15 years term will require an EMI of about Rs 20,300. The rent for the same house in the mentioned cities may not top even Rs 10,000.

If we had 5 per cent yearly increment on the rent as part of the agreement with the tenant, the rent will be equal to the EMI in the 14th year.

Another aspect of the real estate property which requires attention is that the cost of maintenance also keeps growing. For example, Akash had to spend Rs 35,000 for a sump rework in a house build by his grandfather. The original cost for the construction of the house itself was only Rs 30,000 including the compound wall, and a fountain in 1967.

So a fully paid up rental property is an asset with good current income otherwise financially it is a liability.

Capital appreciation

Real estate appreciates in capital - particularly the land. The building generally depreciates. Recently the National Housing Bank launched the Residex, an index which will track the capital appreciation of real estate house properties. The data is updated for 3 years now. Over a period of time, the index can be used as a good measure for the capital appreciation of housing properties.

A key aspect of the capital appreciation is that, it can be realised only when it is sold. And generally the house that we live in is the last of the assets that we sell. This has to be factored in before we make the house the largest investment in our lives.

The capital appreciation of the house can favorably be used in the form of a mortgage loan for business purpose or in the form of a reverse mortgage post retirement. The land that cost Akash's grandpa Rs 100/- per cent, is today worth Rs 600,000/- per cent. This is at a compounded annual growth rate of 23 per cent. Other property locations (grandsons) may or may not be so fortunate.


The risk with real estate is that it can go down sharply. The current worldwide economic turmoil is because of real estate prices dropping more than the expectation. The other risk is related to its liquidity itself.

Real estate prices in India do not have a formal/scientific basis for quoting. Brokers are the key pins holding the structure together. The same property may be quoted at different prices by the same broker for selling and for buying. The difference in amount goes to the broker – this, apart from their consulting fees. The pity is that often the difference is more than the profit for the owner of the property itself.

The other risk is that only a portion of the sale price may be registered, the rest is paid as 'grey or black money'. Accepting such deals are counter-productive when we go for the selling as we have to bear the brunt of extraordinary capital gains.

The situation is changing but very slowly for comfort.


Real estate is probably the most illiquid of all common investment avenues. If there is an urgency to sell a property the value could drop drastically. Selling at 'market price' is counted in number of months not days.

Tax treatment

Real estate attracts capital gains tax. The advantage is that we can use indexation benefits to our advantage. The indexation index is announced every year by the Income tax department. This is a number which links the inflation to property values. By using indexation, we can estimate the true appreciation of the real estate after adjusting for inflation.

The tax on the sale of the only house or agricultural property can be brought down to zero by reinvesting the sale proceeds in a new house or agricultural property. The capital gains can also be invested in low interest yielding capital gains bonds.


Real estate has a low level of convenience. It requires a large corpus for investment leading most of us to take up loans. Here are a few smart marketing companies that sell land in installments. However the overall cost for such deals is very high compared to one time payments.

The decision after buying a property cannot be reversed quickly or economically. The cost for registration, brokerage charges and taxes prevent us from getting rid of a wrong purchase quickly.


Traditionally, real estate has been the major investment avenue across the world. The trend is not due for a change as the capital appreciation is good. However the points to be thought about are that:

Capital appreciation can be enjoyed only when the property is sold or when the value is unlocked through a mortgage loan or reverse mortgage.

The house that we live in is not a financial asset as it has negative cash flow.

Rent proves to be a stable and reliable source of income. This however is only applicable to properties that are free from loans.

Overall convenience is low for real estates.

Tuesday, November 24, 2009

Property prices likely to go up in December

If you are looking to buy a house in Mumbai or in the National Capital Region be ready to take a big hit on your pocket. But south India may still hold a bargain or two, reports CNBC-TV18's Sunanda Jayaseelan.

Real estate developers have started hiking prices of their residential projects in Mumbai and the National Capital Region. So, if you are in the market to buy a home, you may want to look elsewhere like South India, for instance. Experts say prices in this region are still stabilising and in some cases, even correcting.

Let's take a look at price movements in the last quarter. Residential property prices in Mumbai rose 3-6% across developers. While NCR saw prices rise between 2% and 19%. Hyderabad, on the other hand, saw no hikes, while property prices in Chennai and Bangalore saw a dramatic correction. In some pockets in Bangalore, prices have fallen by as much as 5%.

Bangalore-based Sobha Developers has seen sales this quarter come in 57% higher that the previous quarter. It expects to have sold 2 million square feet of residential space by the end of this fiscal, and says volumes, rather than price hikes, will help it maintain margins. JC Sharma, MD, Sobha Developers, says, "As far as Sobha is concerned, we have good inventory. We don't see need to hike prices. I see us maintaining prices going forward."

But analysts say this trend may not last long. Anurag Mathur, MD - India, Cushman & Wakefield, says, "Prices are expected to go up by December. Not sharply, but it will still go up. I anticipate that happening at least in prime projects."

So, if you are in the market for a house, you will have to hurry. Industry experts say that developers are actually just adopting a wait-and-watch policy with regard to price increases. DLF for example, has already announced a marginal hike in prices in Bangalore. Experts point out that this could just give other developers the impetus needed to start price hikes again.

Property tax to be levied on vacant plots now Assetventures

LUDHIANA: The local bodies department has started its exercise to levy property tax on city residents, for which officers of the local bodies department held a meeting with their counterparts in municipal corporation (MC) on Monday.

In the meeting that was presided over by additional commissioner Kanwalpreet Kaur Brar and attended by officers of the house tax branch and department representative BR Gupta, a proposal regarding a transparent system under which residents could assess the tax on their property themselves was mulled over.

Talking to TOI, Gupta said the purpose of the meeting was to evolve a strategy for implementation of the tax in a transparent way. The department proposed that the tax would be levied on self-assessment basis under which the person who has to pay the tax would assess his property and himself turn up to the civic authorities on a monthly or annual basis to pay the tax. If he fails to do so, he could be charged 11 times more than the tax.

Sources revealed that the department is considering the idea to levy tax in the state on the lines of that in Ahmedabad, Delhi and Jaipur. According to this pattern, the state would levy tax on plots and constructed houses in the cities on the basis of cost of its construction and that of the land.

Meanwhile, Gupta also asked the civic body officers to give the figure regarding tax collected in the last and present financial years from rented commercial properties. This move was taken to understand feasibility of any new taxes to be levied.

At present, though the state has levied 15% of annual rental value (AVR) on the buildings used for commercial purposes, it is not charging any tax on vacant plots.

Tax dues: Drive to seal properties begins

PUNE: The Pune Municipal Corporation's (PMC) tax collection and assessment department has undertaken a drive to seal properties on which property tax dues have not been cleared despite issuing notices.

On Monday, four properties in Hadapsar and Kondhwa, on which property tax arrears totalling Rs 40 lakh were to be paid, were sealed.

The department's head Vilas Kanade said the drive will continue. "We appeal to citizens to pay property tax to avoid such action," Kanade said.

'Despite downturn, real estate market favourable'

Global economic crisis aside, the local real estate market looks optimistic.

This was the opinion of Thomas Justin, president of the Royal Institute of Chartered Surveyors (RICS). Speaking at the opening on Thursday of the two-day Caribbean Land Conference seminar hosted by the Institute of Surveyors of Trinidad and Tobago (ISTT) at the Crowne Plaza hotel, Port of Spain, Justin said emerging and developing countries were seeing a more promising real estate market than more developed first world countries.

He described the Caribbean real estate market as ’stable’, despite the global downturn.

’According to a global property survey, while most the world’s GDP (Gross Domestic Product) was dropping, office rentals and commercial rentals in countries like China, India, Peru are growing,’ he explained.

Justin, who admitted to being the ’messenger with bad news’ addressed this year’s theme, ’Land Development and Alternative Dispute Resolution in the Current Global Financial Dynamics’, and also shared some insight into the US real estate market.

’Portfolios are sinking. While there is a light at the end the tunnel, it is a long, long tunnel,’ Justin said. He described the past two years in the real estate industry as ’abusive’ even for an organisation as large as the RICS.

’We are one of the largest property organisations in the world, even with 3,381 members, portfolios dropped by 21 per cent per year for the last two years,’ Justin said.

He credited the Government’s Vision 2020 plan for the buoyancy of the local market.

Though he described the local market as a ’loose structure’, he said the continued development of projects like the National Academy of Performing Arts, the second academy in South Trinidad and the gas-powered electricity project for Tobago could only help the local real estate market.

Investors in DLF project want out

Seventy-eight investors have approached an arbiter for permission to exit a commercial complex being built by DLF in Rajarhat.

The eagerness to pull out is in sharp contrast with the haste with which some of them had put in money without reading the fine print and reflects the dramatic fall in the fortunes of real estate projects over the past one and a half years.

The 78 investors have sought their money back from India’s largest real estate developer, which is building the retail-cum-office complex named DLF Galleria.

The investors have filed the demand with the sub-divisional officer of North 24-Parganas, the designated person under the Promoters Act to deal with such real estate disputes. A hearing is expected on Tuesday.

The investors alleged that the project was running behind schedule but added that the prospectus did not mention a specific time frame.

“The project has made little progress. DLF must pay us back with interest,” said Rajendra Kapoor, who has formed an association of investors.

Kapoor said 22 more individual complaints would be filed on Monday and a hearing could take place on Tuesday.

A DLF spokesperson denied the allegation made by the investors. “We have all the approvals in place, construction at the site is in full swing and we are committed to deliver the project on schedule as promised,” the spokesperson added.

Anirudh Jharjharia, another investor, claimed that around Rs 100 crore had been forked out by 223 people for the project. The association represents an investment of Rs 30 crore, he said.

Asked why the prospectus was not checked with diligence, Jharjharia said: “There was so much hype in the real estate market during the soft launch in February 2008. And the developer was the reputable DLF. So everyone rushed in,” he said.

Realty sources said the price crash in the intervening months had buried the hopes of the investors to make a profit.

Kapoor said that if DLF returned the money, the amount would help him buy 80 per cent of a similar property in Rajarhat.


Residential property prices in north India inching up

Demand in the real estate sector has returned . And, with it, developers have raised prices of their products in most of the markets in north India However, prices in cities in south India have stabilised, with the exception of Bangalore, which is still witnessing a slight correction , according to a new report prepared by realty consultant Cushman Wakefield. Even after all this, prices are still lower than what they were a year ago. As the market has revived, a large number of developers have jumped in the fray with new launches.

This is expected to put some downward pressure on price points. However, with cash flow improving, developers may not go for distress selling soon.

According to the report, NCR and Mumbai have seen values climb up with the return of investors
and an end users interest in the realty market in the third quarter ending September 2009. Certain suburban markets like Noida and Gurgaon witnessed even higher growth due to heavily discounted prices in the previous quarter ending June - particularly in the new launches.

After a sharp decline in the last few quarters, capital values have started to strengthen and register marginal appreciation across most micro-markets . Cyclical demand with festive season has resulted in strengthening of prices. The launch of new projects catering to the mid-segment witnessed heightened activity resulting in price escalation. Gurgaon and Noida are the key locations to witness this activity and registered the highest growth, 19% and 16%, respectively, during the quarter.

Gurgaon witnessed the highest growth in capital values in the mid-segment over the last quarter. By September quarter, capital values of apartments in the suburban city are quoting in the range of Rs 4,000 to 6,500 per sq ft. In the periphery of Gurgaon, the prices are as low as Rs 2,400 per sq ft.

After Gurgaon, Noida witnessed the sharpest appreciation in the prices at 16%. This is essentially due to the increase in purchase activity in the new projects catering to the mid-segment , said the report. At present, the prices are in the range of Rs 3,200 to Rs 5,500 per sq ft.

However, values are still below their all-time highs by about 5-12 % in NCR, 10-20 % in Bangalore
, 6-18 % in Mumbai, 10-30 % in Pune, 6-12 % in Chennai, 7-20 % in Hyderabad, and 5-15 % in Kolkata.

Aditi Vijayakar, executive director (residential services) at Cushman & Wakefield said, “The price and the buyer’s sentiment are critical in the current market as key parameters influencing sales. Capital values in select locations in NCR, Pune and Mumbai are likely to see growth in the coming months. However, if prices increase too much too soon, there is a likelihood of them correcting again shortly; the ideal graph representing recovery should be gradual and in line with the demand that calls for a period of considerable stabilization before the hike. In the present scenario, the affordable housing segment holds the largest share of the demand pie and hence, any significant price increase in the high- and mid-segment would lead to another phase of corrections”

The appreciation of the rental values in the high-end residential locations of Delhi in the range of 8-12 % stands testimony to the increase in leasing activities in the region, the report points out. The rental value in suburban locations such as Gurgaon and Noida stabilized over the quarter despite addition of new stock due to latent demand in the region.

HDFC expects rates to firm up by 25-50 bps Assetventures

The country’s largest mortgage company Housing Development Finance Corporation (HDFC) expects interest rates to go up by 25 to 50 basis
points in the first quarter of the next fiscal. This was indicated by HDFC joint managing director Renu Karnad, who also told reporters that HDFC expects loan disbursements to grow by 22 to 25% during the current fiscal.

Speaking on the sidelines of a function marking the launch of the Real Estate Sensitive Index (Ressex), Ms Karnad said there was also concern over the rise in real estate prices which have gone up sharply in the wake of the recovery in capital markets.

In her speech, Ms Karnad said: “Even in today’s ‘affordable housing’ mantra days, the common man has to shell out more than an arm and a leg to buy his home. “In India, housing, if priced correctly, has an enormous demand. Given the acute housing shortage, it is unlikely that there will be any saturation in the market for a long time to come.” According to Ms Karnad, the real estate index, which has been developed by a private consultancy firm Liases Foras, will help consumers and lenders in taking a view of the housing market.

“In the last year alone, which was one of the toughest periods in economic history, the real estate industry in India managed to grow at over 16% YoY. As a contributor to GDP growth, current estimates place the real estate sector at 8.86% of GDP. At the same time, over Rs 230 billion is being proposed to be raised across 8-10 real estate IPOs within the next 6-12 months. The post-crisis events have shown us the importance of transparency, compliance and integrity in the business world, she said.

“The housing industry in particular, which addresses the needs of millions of consumers, requires a greater degree of sophistication in its reporting of accessible and value-adding information,” she said.

Biggest Indian-Canadian landlord eyes India's 'dream' market Assetventures

Canada's biggest Indian landlord Bob Dhillon, who started his company from the back of his car and now owns more than 6,000 rental properties across the country, is set to enter the Indian real estate market.

Dhillon, who has been invited by Prime Minister Stephen Harper to join him during his visit to India beginning Monday, is bullish on the Indian market.

"Despite the current slowdown, I am sure the Indian real estate sector will take off in a big way. We are ready to come here next year," says 43-year-old Dhillon whose Mainstreet Equity is the first Indian-owned company to be listed on the Toronto Stock Exchange.

Dhillon, who started selling homes at the age of 19 and became a millionaire at the young age of 21, says: "Today, India is a realtor's dream. It is the fastest growing real estate market in the world after (western) Canada.

Three things make India a dream destination for him, he says.

"One, 50 percent of India's population is below 25 and they will spur demand for housing. Two, a vast majority of Indians live in rural areas which are set to see a huge housing activity. Third, as prosperity increases, people's hunger for home ownership will also increase.

"These three things are any real estate man's dream," he says.

Dhillon, who was born in Japan and educated in India, keeps a close watch on the Indian real estate market and has made many presentations on it at various fora.

About his inclusion in the prime minister's delegation, he says: "Because the prime minister wants to focus on economic ties with India... He sees that Canada and India have a huge economic future.

"We have a new generation of Indian businessmen in Canada who will bridge these two great economies. We will bring financial and intellectual inputs into this relationship."

Dhillon says the visit of the Canadian prime minister could not have come at a better time as the worst of the economic slowdown seems to be over.

"We have two great like-minded prime ministers. Stephen Harper and Manmohan Singh are both economists and policy driven. The visit will definitely boost our business relationship," he says.

Interestingly, Dhillon's company has boomed even in these troubled economic times. In fact, he has smartly leveraged the current crisis to expand his company to take its fortunes to well over $1 billion.

Explaining it, he says: "We have flourished because of the type of real estate business we do. We own mid-segment apartments mostly in western Canada which was not that badly hit.

"Then we had a lot of cash flow which we used to buy back 40 per cent of shares. Further, we have taken advantage of low prices to buy more properties."

The Indian king of the Canadian real estate considers his upcoming 2,300-acre island in Belize (Central America) the jewel in his crown. He is developing it into a world-class tourist resort for Hollywood celebrities. The island amid pristine blue sea waters will have hotels, golf clubs, casinos, condominiums, high-end houses and other facilities.

The likes of Madonna and Leonardo DiCaprio will be its residents, says Dhillon whose family first emigrated to Hong Kong, then Liberia and finally Canada from Tallewal village near Barnala in Punjab.

Govt may scrap 3-year lock-in for FDI in real estate

To boost foreign direct investment (FDI) in real estate, the government may remove the mandatory three-year lock-in period for overseas investments in the sector.

The department of industrial policy and promotion (DIPP) has proposed this move, with a draft cabinet note on the proposal being circulated for inter-ministerial consultations. Doing away with this lock-in period has been a long-standing demand of Indian developers as well as foreign investors.

The government had permitted 100% FDI in the sector in 2005. However, this was subject to certain conditions such as a minimum capitalization of $5 million by the foreign investor and non-repatriation of the original investment for a minimum period of three years.

The liberalization of the real estate sector led to FDI inflows increasing from $151 million in 2005-06 to $2.03 billion in 2008-09. DIPP now argues that no sector, except defence, has a lock-in period. “Based on experience, this condition no longer seems necessary,” a DIPP official said on condition of anonymity.

Thursday, November 12, 2009

Govt sets real estate regulation law moving Assetventures

After dragging its feet on the issue for two years, the state now looks the most serious it has ever been about enacting legislation to regulate the housing sector.

The proposed law, called Model Real Estate (Regulation of Development) Act, has made little progress so far due to opposition by the builders’ lobby, but now, under pressure from the Centre, the state has set it in motion.

Sitaram Kunte, principal secretary (housing), said: “This will be a mechanism to tackle home buyers' grievances and prevent cheating by developers.” He said the draft forwarded by the Centre is being studied by the state, which will make revisions and table it before the state Cabinet, which will take the final decision.

For years, there has been a demand for watchdog legislation along the lines of the Securities and Exchange Board of India, which regulates the country’s stock markets.

Consumers have accused developers of cheating them by delaying handing over of flats, arbitrarily increasing rates, and illegally chargingfor parking space etc. “We need some checks and balances. Today, anyone can become a builder; there is no accountability at all,” said lawyer Vinod Sampat.

Builders have opposed regulation saying it will impede growth of the sector. “Our industry works on demand and supply — there’s no way to control prices. We buy land in the free market at current rates and sell flats according to existing conditions,” said Sunil Mantri, president elect, Maharashtra Chambers of Housing Industry, an apex body of builders.

Real estate experts have cautioned that care should be taken while framing the law. “Existing laws are enough to tackle consumer grievances; unfortunately they are not being implemented. Care should be taken to ensure the new law does not become a toolfor harassment,” said Ashutosh Limaye, associate director, strategic consulting, Jones Lang LaSalle Meghraj, a real estate consultancy.

Real estate sales picking up in India with warning against price hikes

Low interest rates, a resurgent stock market and growing confidence in the economy is boosting the real estate market in India but analysts are warning that a sharp increase in prices could put investors off.

‘The residential market, including the premium segment, has rebounded quicker than expected.

We are seeing 2007 level prices again and a robust demand for houses in the $1 million range,’ said Anuj Puri, chairman of Jones Lang LaSalle Meghraj.

According to property consultant Ashok Narang the demand is coming from both investors who want to let out their properties and people who want them as homes.

‘Projects in the suburbs are doing very well and buyers have started flocking to even under-construction projects where bookings are taking place. Earlier, banks were reluctant to lend to buyers for incomplete projects,’ he said.

However, he warned that if prices spurted too fast, the market would slow down once again.

Aditi Vijayakar, executive director of Residential Services at Cushman & Wakefield, agreed.

‘The ideal graph should be gradual,’ she said.

Many major developers have already put up their prices this year and the rest of the industry is concerned.

‘If residential realty rates rise at this juncture it will take the market back to a scenario of stalled sales, similar to what was prevalent during the end of 2008,’ warned Pankaj Kapoor, CEO of real estate research firm, Liases Foras.

And realtor Ramprasad Padhi feels that there is not yet a significant revival in the market that could warrant price increases.

‘The marginal improvement in sales has been mistaken by some builders as signs of the next wave.

In reality, it has been a combination of pent-up demand and accumulated stock being disposed off at lower prices,’ he said.

Potential buyers, he says, will and do find the new increased prices unjustified.

’ But developers seem determined to test the market.

‘At present price increases seem to be limited to certain mid to high end projects, in preferred locations.

If the trend percolates down to a wider spectrum of market segments and locations, we may see prospective buyers once again display circumspection and hesitation to buy,’ said Pawan Swamy, MD (west India) at consultants Jones Lang LaSalle Meghraj.

India is at least a year away from the next real estate upswing, according to Chaitanya Parekh of the Soham Group.

‘In the second half of 2008, several developers started reducing the sizes of the units they offered, aiming for a different customer profile.

Now, if there is any increase in the price, the whole objective will be lost,’ he said.

DLF owners to buy out DE Shaw in arm Assetventures

The founding family of India’s largest real estate company has reached a deal with DE Shaw to buy out the hedge fund’s stake in DLF
Asset (DAL), an important step presaging transactions that could lead to a Singapore listing for the DLF affiliate in the first quarter of 2010.

DE Shaw will get a little less than $500 million from KP Singh and his family and privately-held DAL will most likely become a majority-owned subsidiary of listed property developer DLF, two persons directly involved in the transaction said.

DAL, which buys completed commercial assets from DLF, was set up as a Real Estate Investment Trust (REIT) controlled by the Singh family. A Singapore listing for DAL, which was to have happened in 2008, was shelved following the crash in the global equity markets.

The integration of DAL with DLF, which is expected to be completed by December, is being done to give the property developer access to the former’s revenue stream.

KP Singh and his family have bought DE Shaw’s minority stake for around Rs 2,300 crore ($500 million). The hedge fund had invested $400 million, equivalent to Rs 1,600 crore, in early 2006.

Cash-strapped DLF, whose sales fell by over 50% to Rs 1,810 crore during the quarter ended September, has set itself a target of nearly halving debt to Rs 6,500 crore this fiscal year. Revenue from DAL, which at one time accounted for over a third of DLF's sales, has dried up.

DLF expects to get Rs 4,500 crore through the sale of non-core assets and has already raised Rs 1,064 crore in the first half of the current fiscal.

DLF has been working on the integration of DAL with itself for some time, a person with knowledge of the development said, adding the valuation will depend on the report of a panel of independent directors.

A DLF spokesman said the company "does not comment on market speculations."

Since 2006, DAL had acquired commercial assets valued at over Rs 11,000 crore from DLF. It has raised some Rs 5,000 crore ($1.05 billion) from hedge funds and owes DLF around Rs 2,000 crore.

In May, the Singh family mopped up Rs 3,800 crore by divesting a 9.9% stake in DLF to buy out the investment by DE Shaw. But the deal got
delayed due to a tax hitch: since DAL was not a listed entity, the hedge fund was required to pay capital gain tax on the profit. This issue has now been resolved.

After the exit of DE Shaw, a DLF subsidiary will finalise the purchase of the promoters' entire holding in DAL through a complex share swap deal. The deal is being routed through a subsidiary as the promoter holding in DLF is above 75% and any issue of fresh shares to promoters is not allowed under listing norms. This effectively means that DLF will issue fresh shares of its subsidiary to the Singh family, said one of the officials.

A source said that the value of DAL would be around Rs 9,000 crore. After adjusting for DAL's liability to DLF, loans from banks and the investment by Symphony Capital in the form of preference shares, the net value would be around Rs 2500 crore against which the shares of a subsidiary company will be issued to the Singh family.

London-based hedge fund Symphony Capital has invested $650 million in DAL through convertible preference share in two phases.

The company has started discussions with overseas investment banks for DAL's Singapore listing, a banker said.

Commercial, residential realty picks up momentum in city

The price of real estate in the city, which was on a low for most of last year, has stabilised and in fact posted a bit of a rise in select
locations, if recent research by real estate advisory firms are any indication.

Importantly, commercial real estate including retail spaces which took a bigger hit in the wake of the economic slowdown, is also showing an upward trend as demonstrated by the plans of some major world bands to enter the city, the reports said.

The trend is in keeping with developments witnessed nationally. The realty scene in major cities in the country has seen higher levels of activity after the early signs of an economic recovery both in India and internationally, said the quarterly report of realty research and advisory firm Cushman & Wakefield (C&W).

The report for the third quarter of the year (July-September) observed that the market was characterised by a positive sentiment and increased activity was witnessed. "The city witnessed the launch of various residential projects in the third quarter across many micro markets in both mid- and high-end segments. Capital and rental values appreciated across the city in the third quarter," the report observed. However, values are still below their all-time highs by about 10-30 per cent in Pune, the report said.

Aditi Vijayakar, executive director of residential services at C&W said, "The price and the buyer's sentiment are critical in the current market as key parameters influencing sales. Capital values in select locations in Pune are likely to see growth in the coming months. However, if prices increase too much too soon, there is a likelihood of them correcting again shortly after; the ideal graph representing recovery should be gradual and in line with the demand that calls for a period of considerable stabilisation before the hike."

According to Vijaykar, the Pune residential market has started to regain momentum in the past quarter with all locations witnessing marginal increase in rental and capital values by September 2009. Demand has started to move upward largely driven by end users. Pune is highly price sensitive and the current upward trend is largely a result of the correction in values that was witnessed in the last few quarters which have made the values more affordable. Also noticeable is that the large part of the transactions are happening in the newly-launched projects which offer more competitive values.

According to the C&W report, high end areas such as Koregaon park or Bund Garden have shown an 8 per cent rise in prices while elsewhere the rise is 2-6 per cent.

Satish Magar, President of Credai Pune (Confederation of Real Estate Developers' Associations of India) and chairman and managing director of Magarpatta city Development Corporation, told TOI that the rise in residential prices is not very remarkable and in most cases it restricted to Rs 100 per sq ft. Commercial segment on the other hand, has been active again as enquiries from IT firms have gone up.

"IT firms are back in expansion mode and have started hiring, which has triggered the activity in this segment," Magar said, adding that the retail segment too is warming up again as consumer confidence returns and a new kind of leasee-lessor relationship evolves. "From a flat rental agreement, we are now on a fixed plus floating rental basis where a leasee pays a minimum guaranteed rental and shares revenues with the developer. This has reduced the initial burden on the retailers easing their liquidity problems."

"From a near flat level till June this year, we have leased over 4 lakh sq ft space in Magarpatta City till now," Magar said.

Anand Dutta, head (retail) Pune for real estate consultancy Jones Lang LaSalle Meghraj, said retail transactions have picked up noticeably, following a marked upsurge in shopper sentiments and a generalised correction in retail real estate rentals. "An increasing number of retail landlords in Pune's malls and on key high street locations have opened up to the minimum guarantee and revenue-sharing models. The general stance now is that if a retailer is making money, landlords are willing to offer reductions on rentals if the retailer is willing to share his topline.

Wednesday, November 4, 2009

MCD property tax amnesty scheme has few takers

The property tax amnesty scheme launched by the Municipal Corporation of Delhi (MCD) to encourage tax defaulters to pay up their dues
failed to people. Only 27,000 property owners came forward to pay their dues even as the civic agency was expecting at least 20 lakh people to turn up.

Meanwhile, looking at the dismal response, the civic agency decided to extend the date for the amnesty scheme to December 31 the last date before this was October 31. According to MCD officials, all those who fail to pay their property tax by December 31 will be issued showcause notices. Defaulters will have to face harsh penalties like sealing of bank accounts, attachment or auctioning of property and even prison terms, the officials said.

"We were expecting more people to file their property tax as there are approximately 30 lakh properties in the city while only 7.5-9 lakh people pay their tax. We have data on property owners and will issue showcause notices to them. Their properties can be auctioned if they failed to pay up by December 31,'' said MCD commissioner K S Mehra.

The amnesty scheme was launched to get such owners in the tax-net. "We have received Rs 70 crore as property tax from 27,000 people. The Survey of India is also conducting a survey to determine all those property owners who are not in the tax net of the civic agency,'' said an MCD official. The survey was completed in northeast district recently and around 3.5 lakh properties for which tax was not paid were identified in the area, the official said.

"We received a large number of representations from resident welfare associations (RWAs) who said they could not avail of the scheme due to the festive season. They had requested us to extend the last date for paying the tax,'' said Ram Kishan Singhal, chairman of the standing committee.

The civic agency had said that all those who remained defaulters after December 31 would have to pay a penalty of 30%. In addition to this, 1% interest will be levied every month till the amount is finally paid.

Tuesday, November 3, 2009

DLF to develop affordable housing in India Assetventures

India’s leading real estate company DLF is said to be working on plans to build around 1 lakh houses that would cater to middle class in the country.

These houses would be build in all the major cities of the country and would be priced at around Rs. 20 lakhs.

These new housing solutions could be offered under a different brand name in the coming years.

DLF rival Unitech has already announced similar plans to build affordable houses around the country.

The company has officially declined to comment on these reports.

Rentals rose even as capital values of real estate dipped Assetventures

Software engineer Ravi Kumar took a loan from a leading private sector bank and invested in the property market in 2008, at the height of the
realty boom. Today with values lower than what he purchased the property for, selling-out and exiting the sale is not an option for him.

With a stiff EMI to be paid out, renting out the apartment seemed a good idea. Kumar did not complain when he found rental values rising as the property neared completion. Today with high occupancy, the rental values are almost 15-20% higher than in March 2009.

Many people are facing this situation across cities in India. A Brix Research survey over 30 Indian cities showed that while capital values, which fell during the Jan-Mar 2009 quarter, rose from Apr-Sept 2009 but remained either lower than the previous values or at the same level.

However, rental values have registered a sustained rally from April 2009 onwards. Today it is between 15% and 50% higher than the September 2008 levels. A fact that buyers like Ravi Kumar should be happy about.

Says Chintan Patel, senior professional, real estate practice, Ernst & Young, "Rental values in mid-segment properties across prominent cities have witnessed an upward trend. Mid segment properties in key residential micro-markets of Mumbai (western and central suburbs) and NCR (East and North Delhi, Gurgaon) have witnessed sustained rise in rental values, in the range of 15-20%, over the last 5-6 months. Constricted supply of apartments for rent, coupled with strategic location offering good connectivity to prominent business districts of the city, have been instrumental in rising rental trends of some key micro-markets in these cities."

So, what other factors have really triggered this change? Take textile entrepreneur, Sumit Bansal, who was planning to buy a house for himself. The fluctuation in the real estate market since September 2008 has left him confused and he decided to take a house on rent till the markets stabilised.

According to RV Verma, executive director, National Housing Bank, "The real estate market today has shifted from being demand-based to need-based." According to the market researchers and brokers, rental housing has become a popular choice of housing owing to high and unstable capital values.

The Brix Research Quarterly Real Estate Value Analysis Reports have shown that rental values rose since April 2009 across almost all Indian cities. During the Apr-Jun 2009 period, rental values stabilised in most of the cities and recorded an appreciation in values during the Jul-Sep 2009 period.

Rental values for a 2BHK apartment have registered an average growth of 10-15% in most localities in the Jul-Sep 2009 period compared to the previous quarter.

Explains property investment adviser, Ashok Narayan, "Property values dropped 15-35% during the slowdown. Large developers such as DLF and Unitech started by completing existing projects rather than launching new ones. This trend continued across the country and projects which had been sold off drawing-boards saw the light of day. As projects neared completion, values rose by 15-20%. In established city areas property values dropped 10-25% during the slowdown but rose back to the same level when the sentiment improved. In newly-developed properties, rental values are today at least 15-25% higher due to projects being completed and occupied. In the established city areas rental values have risen by about 10-20% over the peak values before September 2008."

The Brix Research report shows that Gurgaon real estate market saw an annual appreciation of 10-15% in rental values in most localities during the Apr-Sep 2009 period as compared to the Jan-Mar 2009 period. According to city broker RB Singh, "This reflects end user demand for rental housing."

Other areas of the National Capital Region (NCR) such as Ghaziabad and Faridabad also registered an increase in apartment rental values. In Ghaziabad, during the Jul-Sep 2009 period, rental values stabilised and increased by around 13% as compared to the Apr-Jun 2009 period. This was due to the increased demand for 2 and 3BHK ready-to-move-in apartments in the city.

In Mumbai, rental values of apartments have risen by around 2-20% during the Jul-Sep 2009 period as compared to the Apr-Jun 2009 period. There has been a corresponding drop in apartment capital values during the same period. In Chennai, the rental values were more or less stable and saw a 5-10% appreciation during the Jul-Sep 2009 period.

The positive trend in apartment rental values has been reflected in smaller cities as well. Chandigarh witnessed a significant fall in capital values of apartments and plots during the Apr-Sep 2009 period but registered a growth in apartment rental values.

In the Jul-Sep 2009 period, rental values increased by around 10-15% as compared to the Apr-Jun 2009 period. Brijesh Bhabsar, a Rajkot-based realtor, said, "The rental segment is showing positive trends and is a preferred housing option among end users."

In the southern region, Kochi registered an increase of 5-37% in rental values post March 2009, as most buyers restrained from making large investments in the property market. Coimbatore and Visakhapatnam experienced a similar trend of 10-20% rise in the rental values of the end user dominated 2BHK segment.

Local broker such as David Bose of Coimbatore maintained that this increased demand for rental homes reflects the end user expectation that capital values will fall further. This is corroborated by retired bank manager RC Gaur, who lives in rented accommodation in Faridabad, wishes to buy an apartment in Delhi, but prefers to wait for the right time to make his investment.

So is it a good time to take up rented property right now? Is there a demand being seen? "Demand for rental space has risen over the last few months. The improvement since April is between 12-15%, depending on the economic drivers of each city. This is generally a good time to rent homes, depending on location-based dynamics," feels Raminder Grover, CEO-Homebay Residential, Jones Lang LaSalle Meghraj (JLLM).

Today the market is driven by the need of end users who are still unsure about capital investment in real estate and are taking the rental option in an unstable market.

Real Estate finding a new track in Indian economy Assetventures

A big impact of recession is seen in the worldwide market, where many big companies posted big losses, asked for a bailout and even filed for the bankruptcy. The recession had such an impact on the world over economy that even a core business of a particular country went in loss with many citizens pulling their hands off from investment part.

Same happened with the Indian real estate market, the most bullish sector where not many hesitated before putting their money forward for an investment related to some plot, flat, office, shop etc.

In the month of September 2008, when recession captured the world with a full grip, the real estate of India suffered a big loss session. All the major real estate players like Jaypee Group, Unitech and DLF came up with the schemes and rebates on flats to attract as many buyers as they can and sell off the reserve as soon as possible.

The cities like Mumbai, Delhi, Bangalore, Kolkata and National Capital Region accounts for big real estate business of the country with many property owners earning big money from the rental income from homes and offices.

One can analyse the downfall of rental income in these cities as many fully constructed buildings are standing with a very less space occupied with them and that too on a small amount of rent in comparison with the rentals of 2007.

This downfall was not limited to the rental part of real estate industry but the pure buying and selling of properties also came to a halt after financial crises reached the Indian economy.

With the global economic crises on one side, leading players of real estate India like DLF and Unitech are focusing more on the repayment of debts as soon as possible.

This has resulted in big real estate players selling their personal office properties, shifting their focus from core property business to some other businesses like insurance and hospitality and selling off some part of the company by getting listed on the capital market.

However, according to the recent study conducted by several industry watchers, the real estate of India is coming back on profitable track with the demand for offices is increasing in major cities like Bangalore and Mumbai, however Delhi and NCR are still far from witnessing growth in demand as many are expecting further fall in rentals here.

Besides the growth factor in office and shop rentals, a slight growth is also seen in the buying and selling transactions of properties.

With the Indian economy coming on track again, the demand for flats are seen rising in past one month. The real estate developers like Amrapali, Parsvanath and Unitech are nor registering some potential bookings on their order books.

The recent festive season has also added some profits to the real estate industry when many were keen on buying a new home.

During the last festive season, a very low rush was seen for the real estate buying but this year, the banks came up with some attractive home loan schemes with the help of rebate provided by Reserve Bank of India.

Anshuman is a professional real estate property consultant in India and investing in Indian real estate from years. To know more about real estate india, reality projects as sheth heights chembur, neelkanth greens thane, please visit: