Facilities management is the next big thing in real estate space

Mumbai/Bangalore: When Jasmer Puri started his company 16 years ago, he used to shy away from telling his friends about his business. Having built Dusters Hospitality Services Pvt. Ltd into a Rs100 crore facilities management services firm, Puri no longer has reason to be embarrassed.

Facilities management refers to the maintenance and care of commercial or institutional buildings such as hotels, resorts, schools, hospitals or office complexes. The services include maintenance of electric fittings such as air conditioners and lighting systems, plumbing, cleaning, housekeeping and security.

With overseas companies increasing their presence in India, the real estate sector undergoing a revival and a growing emphasis on urban development and modernization of office spaces, the business is set for rapid growth, making it attractive for investors.

India’s facilities management market is valued at an annual $3.3 billion (Rs15,411 crore) and is expected to grow at a yearly rate of 25-30% over the next three-four years, according to consulting firm Netscribes (India) Pvt. Ltd.

“It is the biggest growth business in real estate spectrum in years to come,” says Anurag Mathur, managing director of Cushman and Wakefield India Pvt. Ltd, a commercial real estate services firm.

Dusters Hospitality Services counts the Taj and Marriott hotel chains, Four Seasons Hotel and JPMorganChase and Co. among its clients and has a presence in 15 Indian cities. Last month, the firm received Rs35 crore in funding from private equity firm TVS Capital Funds Ltd.

Other investments in this space include India Equity Partners and Beacon India Private Equity Fund’s investment of $33 million in A2Z Maintenance and Engineering Services Pvt. Ltd in October.

“As the property market grows, it will be difficult for the in-house management to handle FMS (facilities management services),” says Naushad Panjwani, executive director, facilities management, and project management, Knight Frank India Pvt. Ltd.

Such activities as housekeeping and maintenance services would be increasingly outsourced to service providers that are able to offer economies of scale and a cost advantage. FMS firms also deploy their own machines and equipment, ruling out the need for a client to buy anything, says Hanmant R. Gaikwad, founder of BVG India Ltd, an FMS firm.

“The advantage of outsourcing the FMS to these organizations is that they can service my needs all the time and I don’t need to worry about replacing people when they are on annual leave or they quit,” says Ranjit Deval, manager of administration at the Pfizer India Ltd office in Mumbai, which outsources its FMS to Knight Frank.

BVG, which received Rs40 crore from the Kotak Private Equity Group (KPEG) in February 2008, handles the facilities management for Rashtrapati Bhavan, Tarapore nuclear power plant and Hindustan Unilever Ltd.

“We were looking at infrastructure-services-related firms as a play and we clearly saw an opportunity in who was going to maintain all these places. We started looking at all the players in the FMS space and zeroed in on BVG,” says Nitin Deshmukh, chief executive, KPEG.

To be sure, FMS firms have no shortage of competition in a sector where entry barriers are low. Around 1,000 firms are competing for a share of the market in India, according to Netscribes. Local service providers often do not comply with statutory regulations, giving them a cost advantage over the organized sector, according to the consulting firm.

Meanwhile, realty firms are beginning to see FMS as a part of their main business. Anuradha Gandhi, business head, Property Solutions India Pvt. Ltd, the FMS business division of real estate firm Kalpataru Group, says, FMS is a natural extension of the core business of property development.

“It adds value and brings great edge to a company. If a property is not maintained well, its value goes down on its own,” says Gandhi.

NCR, Mumbai record strongest demand despiteNCR, Mumbai record strongest demand despite hike in prices hike in prices

The real estate sector has underperformed the Sensex by 16% in the past one month on concerns of the Reserve Bank of India’s (RBI) hawkish stance towards the sector and likely increases in mortgage rates. Our analysis of Mumbai’s apartment registrations data reveals that demand remains strong despite 5-30% rise in prices in the past five months. Thus, while prices in many pockets in the city are at their lifetime highs, registrations in October were the highest in almost two years. This leads us to believe that residential demand in metros has strong tailwinds and is unlikely to be affected materially by a small increase in mortgage rates. Our top picks are DLF Ltd and Housing Development and Infrastructure Ltd.

RBI increased the risk weightage on commercial real estate lending by 100 basis points (bps), which is likely to result in a 50-100bps increase in borrowing costs. Mortgage rates could also come under pressure, owing to inflation-related concerns. Headwinds of higher prices and mortgage rates are likely to weigh on real estate demand.

However, October was the strongest month in almost two years: Apartment registrations turned in strong numbers for the fourth straight month in October. Registrations during July-October were the highest since January-April 2007.

We believe a 50bps increase in mortgage rates will have marginal impact on affordability. This, in our opinion, is unlikely to have a meaningful impact on demand. We prefer developers with city-centre-oriented projects in Mumbai and the National Capital Region—the two metros that have recorded the strongest revival in demand.

ICICI Bank to focus on home-loans as real estate picks up

The country's largest private bank, ICICI Bank, today said it is focussing on the home-loan segment as the real estate segment is witnessing a comeback after the economic slowdown.

"We are focussing on the home-loan segment at the moment as there is a lot of activity in this sector (home) ... people who stopped buying a few months ago, are back again," ICICI Bank's Managing Director & CEO Chanda Kochhar told reporters here today.

The bank had recently launched a home-loan scheme under which 8.25 per cent interstate be fixed for the first two-years for loans sanctioned from December 1, 2009 to January 31, 2010, irrespective of the loan amount. The first disbursement of the loan should be availed before March 31, 2010.

From the third-year onwards, the Lender would charge a floating interest rate depending upon the then prevailing floating reference rate.

India tops Asian real estate investment markets

India leads the pack of top real estate investment markets in Asia for 2010, according to a study by PricewaterhouseCoopers (PwC) and Urban Land Institute, a global non-profit education and research institute.

The report, which provides an outlook on Asia-Pacific real estate investment and development trends, points out that India, particularly Mumbai and Delhi, are good destinations. Residential properties are viewed as more promising than other sectors and Mumbai, Delhi and Bangalore top the pack in the hotel ‘buy' prospects as well.

The study is based on the opinions of over 270 international real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.

Asia-Pacific hold up

Since the global economic meltdown, asset markets in the Asia-Pacific region have been holding up surprisingly well compared with their peers in Europe and the US. While pricing and rentals in the region fell steeply in 2008 and early 2009 in line with those in the West, markets across the region were boosted in the second half of the year by the remarkable resilience of the Chinese economy, which was buoyed by a series of fiscal and monetary stimulus measures.

As a result, many Asian markets have begun to flash positive signals toward the end of 2009. Transaction volumes have rebounded, although from a very low base, led overwhelmingly by China, the report said.

“The relatively stronger fundamentals and the lack of dependence on foreign demand are seen as key advantages as India has managed to mitigate the severe recession that has hit most other Asian countries.

“The recapitalisation by players in equity markets across Asia has been successfully replicated by some Indian developers, which has helped ease the liquidity stresses,” said Mr Gautam Mehra, India Leader for Real Estate Practice, PriceWaterhouse Coopers.

Unlike the US and Europe, distress sale in Asia had been relatively minimal. This was due to several factors, including a relative abundance of liquidity; low loan-to-value ratios, leaving borrowers less vulnerable to loan servicing problems when the prices declined, the report said.

Further, Asian banks remain well-capitalised, having experienced few major losses from derivative investments and also because of the ability of many large investment institutions to recapitalise via the capital markets, (particularly in Australia and Singapore) allowing them to pay down debt.

Tentative rebounds

Despite the recent bullish atmosphere, rebounds in most Asia-Pacific markets (with the exception of China) appear tentative and fragile. Although Asia-Pacific governments will probably be able to sustain high rates of liquidity for the foreseeable future, their near term prospects are probably tied to developments in the West and in particular the US, where de-leveraging is far from over.

“The idea that the recession is likely over gives rise to the widespread notion that global economies will now revert gradually to the same trajectories as in the past, which is normally what happens when recessions end,” said the ULI Chief Executive Officer, Mr Patrick L. Phillips.

He said the aftermath was likely to be different because the imbalances that led to the global downturn remain embedded in the system and could not be quickly eliminated. Moreover, with spending by the Western consumers no longer acting as the primary engine of global economic growth, a new driver was needed to boost the world's economy, and, in turn, the global real estate industry.

Godrej to build India's first green township in city

Godrej Properties Limited (GPL), a real-estate arm of conglomerate Godrej Group, will launch indias largest green township in january.
The eco-friendly project is coming up near Nirma University on Sarkhej-Gandhinagar road.

Adi Godrej, chairman Godrej Group, said that GPL has inked MOU with Clinton Climate Initiative (CCI) programme for the Ahmedabad township project to be developed in a joint venture with local partner Siddhi Group on about 225 acres of land.

Godrej was in town for the company's forthcoming IPO. Interestingly, Godrej Garden City' (GGC) is one of the 16 real-estate projects in the world selected by CCI, for climate positive development. Godrej group is also founder member of Indian Green Building Council (IGBC). The company will avail green building ratings for GGC from leading agencies.

The project will completed in a phase manner over next ten years, ending with 20,000 dwellings in the price ranging from Rs 20 to 35 lakh during the initial phases. However, the company also plans to build smaller flats worth Rs 10 lakh in the later stages, he said. The work for the first phase is expected to finish in the next two years with 500 dwelling units, mostly two and three BHK.

Apart from the use of solar power, water recycling and harvesting, GPL would use fly-ash bricks and develop many gardens, including a 10-acres park, said Milind Korde GPL, managing director. Amenities like sports complex, club house, schools, hospitals and high street shopping areas are also planned, he added.

Hyderabad based MP Rao, a green building expert and member of IGBC steering committee, said that as of now there is not a single green-integrated township in the country. In fact, IGBC is working on a draft for Green Neighbourhood Rating System to give ratings to upcoming townships, said Rao.

Rs10 lakh for a flat in Pune (Assetventures)

When was the last time you heard about a Rs10-lakh flat in the city limits?


President of the Pune chapter of Confederation of Real Estate Developers Association of India (Credai) said that a Rs10-lakh flat was probably sold in the late 1990s, while a few others said it was early 2000.

Forced by the slump in the real estate sector, many builders in the city have turned their focus into affordable housing projects in the price range of Rs10 lakh to Rs13.5 lakh.

Credai vice-president Rohit Gera said builders are just reacting to what the market demands at this moment. "Even a year back, nobody would have thought of a flat in the range of Rs10-12 lakh," he said, adding that with the client base now changing because of the slowdown, the demand for the smaller-sized homes is on the rise.

A recent analysis by property consultant Jones Lang LaSalle Meghraj revealed that the buyers have adopted a conservative approach and prefer budget-friendly homes.

Mohammed Aslam, the Pune head of Meghraj, said while the demand for luxury units is extremely curtailed, there is still a market for I BHK flats in the range of Rs12-16 lakh and 2BHKs to some extent.

Kolte-Patil Developers, known for its high-end projects, is among the constructors entering the affordable housing project. 

"With the recession, we realised the need to concentrate on the lower segment as well," said Gayatri Kunte, manager (corporate communications), at Kolte-Patil Developers. The company plans to begin work on 'Umang Homes' at Wagholi, where flats are being sold Rs11.22 lakh for a 1BHK to Rs14.22 lakh for a one-and-a-half BHK.

Other builders have followed suit. Darode-Jog Properties has launched 'Greenland County', priced at Rs12 lakh and above on the Simhagad Road. "We have always been associated with premium segment and up-market areas in housing in the past," said Sudhir Darode, director of Darode-Jog Properties.

Tricon Builders is launching a 1BHK apartment project at Undric called Sunshine Hills and with 1BHK houses are priced at Rs13 lakh and onwards. "There is a good response for these flats as not many developers were catering to this segment earlier," said Rinku Shewani, partner at Tricon Developers.

Others like Bhandari Associates and Suyog Development Corporation, who have also entered into the affordable housing projects, said the current market situation has forced them to cut rates as well as size.

Magar and other builders explained that most of these projects are coming up on the land banks, located in the fringe areas.

Realty companies resorting to discounts (assetventures)

Realty companies are resorting to discounts to sell commercial properties in 

order to improve cash flows and reduce mounting 
debts. 

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

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

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

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

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

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

In real estate slump, developers pin hope on service apartments (asetventures)

After being launched in cities like Delhi, Bangalore and Pune, service apartments will soon be a reality in Tier II and III cities. 



Considering the growing number of corporate honchos visiting the tri-city, Ludhiana and Amritsar, real estate developers will soon introduce service apartments in these cities. 


Another reason that has evoked developers’ interest in service apartments is the slump in the real estate industry. 



The negligible sale of apartments in the tri-city has forced them to convert these into service apartments. 


Service apartments, which are fully-furnished with all facilities, are an alternative to five-star hotels. Unlike a normal apartment, a service apartment is given only on lease or rent and is a good option for travelling professionals and nuclear families. 

Soon, Omaxe will launch a few limited service apartments in Omaxe Royal Residency on Pakhowal Road, Ludhiana. These apartments, with an area of 650 square feet each, will be launched in July.

“Ludhiana has marked its presence in India as a commercial city. It has many industries, which result in a number of corporate heads visiting this city. These apartments will offer them a nice and cheaper accommodation compared to hotels,” Avneet Soni, director of Omaxe Limited, said. 



Manoj Kashyap, regional director of JLL Meghraj, added: “As there is no movement in the real estate market for the last many months, developers are trying various options keeping in mind the demand. The firm is working on the modalities and research on behalf of several national developers eager to launch service apartments in the region.”

DLF sees property prices firming up Assetventures

DLF Ltd India's largest listed real estate firm, sees signs of recovery in the country's beaten down residential property sector and expects prices to start firming up, a senior official said on Monday.

Still, Rajeev Talwar, group executive director at the developer, said projects needed to be priced aggressively in order to sell.

Talwar told Reuters in an interview a stable government and a view that the economy may be improving would help demand for real estate, after a property slump that analysts said has seen prices crashing by up to half.

"I think we've done a fair amount on price correction, realistic pricing or aggressive pricing as it may be called," Talwar said.

"I think all Indians have imposed their faith to very immediate economic revival, rather than long term," Talwar said.

"I think all Indians have imposed their faith to very immediate economic revival, rather than long term," Talwar said.

Last month's decisive victory by the ruling Congress party-led coalition has fuelled market optimism that reform measures will help drive economic growth.

The main stock index .BSESN is up about 90 percent from an October low.

"So it would stand to reason that 'yes'," he said when asked whether he expected the housing market had bottomed out.

"In fact why only bottom, if demand is rising, prices should be hardening or firming up. At least the trend would be to move upwards, rather than to go downwards," said Talwar, a former member of the country's elite Indian Administrative Service.

Real estate stocks have nearly tripled from their March low, but remain about 74 percent below their early 2008 peak at the end of a three-year bull run in property prices.

The past 18 months have seen a rough run for Indian property companies.

Heavy debt and a slowdown in fund flows to real estate projects in India forced the founders of 63-year old DLF to sell shares to institutions last month to raise funds.

DLF's founders, K.P. Singh and family, raised $783 million by selling 9.9 percent stake in the firm [ID:nDEL155233], which cut their holding to 78.6 percent.

Talwar said the founders intended to maintain their current holding.

"I think what they have announced is that no, there is no further scope of disinvestment," he said.

AFFORDABLE HOUSING

India, which is plagued by homelessness in its cities, needs an estimated 25 million homes, and Talwar said public-private partnership is key to helping bridge that gap.

He said mid-range housing to serve the country's "bustling middle class" would make up the bulk of DLF's residential business.

Recent project launches by DLF have been priced aggressively and sold quickly as a result.

For example, a new development in Delhi sold 1,400 flats within 24 hours of its April launch.

"I think the lesson that we've drawn from the last year, year and a half is that if you price your product appropriately or competitively there is a market which is waiting to lap it up," he said.

"There is a demand if pricing is appropriate, aggressive, and competitive. People need to see the value for money."

DLF sees property prices firming up Assetventures

 DLF Ltd India's largest listed real estate firm, sees signs of recovery in the country's beaten down residential property sector and expects prices to start firming up, a senior official said on Monday.

Still, Rajeev Talwar, group executive director at the developer, said projects needed to be priced aggressively in order to sell.

Talwar told Reuters in an interview a stable government and a view that the economy may be improving would help demand for real estate, after a property slump that analysts said has seen prices crashing by up to half.

"I think we've done a fair amount on price correction, realistic pricing or aggressive pricing as it may be called," Talwar said.

"I think all Indians have imposed their faith to very immediate economic revival, rather than long term," Talwar said.

"I think all Indians have imposed their faith to very immediate economic revival, rather than long term," Talwar said.

Last month's decisive victory by the ruling Congress party-led coalition has fuelled market optimism that reform measures will help drive economic growth.

The main stock index .BSESN is up about 90 percent from an October low.

"So it would stand to reason that 'yes'," he said when asked whether he expected the housing market had bottomed out.

"In fact why only bottom, if demand is rising, prices should be hardening or firming up. At least the trend would be to move upwards, rather than to go downwards," said Talwar, a former member of the country's elite Indian Administrative Service.

Real estate stocks have nearly tripled from their March low, but remain about 74 percent below their early 2008 peak at the end of a three-year bull run in property prices.

The past 18 months have seen a rough run for Indian property companies.

Heavy debt and a slowdown in fund flows to real estate projects in India forced the founders of 63-year old DLF to sell shares to institutions last month to raise funds.

DLF's founders, K.P. Singh and family, raised $783 million by selling 9.9 percent stake in the firm [ID:nDEL155233], which cut their holding to 78.6 percent.

Talwar said the founders intended to maintain their current holding.

"I think what they have announced is that no, there is no further scope of disinvestment," he said.

AFFORDABLE HOUSING

India, which is plagued by homelessness in its cities, needs an estimated 25 million homes, and Talwar said public-private partnership is key to helping bridge that gap.

He said mid-range housing to serve the country's "bustling middle class" would make up the bulk of DLF's residential business.

Recent project launches by DLF have been priced aggressively and sold quickly as a result.

For example, a new development in Delhi sold 1,400 flats within 24 hours of its April launch.

"I think the lesson that we've drawn from the last year, year and a half is that if you price your product appropriately or competitively there is a market which is waiting to lap it up," he said.

"There is a demand if pricing is appropriate, aggressive, and competitive. People need to see the value for money."

Real estate developers homing in on residential projects

While the sudden rise in demand for affordable residential housing in the last couple of months has given the much-needed relief to real estate developers, commercial and retail segments continue to face the heat of oversupply, combined with declining rental rates and lower demand from investors.
As a result, developers have deferred a majority of the ongoing commercial and retail projects, which were scheduled for completion in 2009-10, and are instead focusing on the residential market. In fact, according to real estate consultants Cushman & Wakefield, developers will be forced to defer 41 per cent of the projected office space supply in 2009.
“Out of 76 million sq ft of commercial (office) space projected across eight cities by many developers, only 45 million sq ft is expected to be completed in 2009. In the retail segment, out of the 14.5 million sq ft of projected space, only 3.6 million sq ft is expected to enter the market,” Cushman & Wakefield’s Executive Director Kaustav Roy said.
The supply overhang in commercial and retail segments is expected to continue for another 12-18 months, feel experts. At the same time, a sharp decline in the price of residential units — in terms of per sq ft rate as well as size — has resulted in a sharp increase in demand. As per conservative estimates, 60 million sq ft of residential space has been lined up for launch in 2009. One of the key reasons for this poor demand in commercial and retail segments is the non–availability of Real Estate Investment Trusts (REITs), which could not take off because of complex legal hurdles and the sudden crash in the stock market in 2008.
While many of the real estate companies — such as DLF Asset Ltd, Unitech, Indiabulls Real Estate and Purvankara, among others — were planning to raise resources through REITs’ listing, only Indiabulls successfully raised $286 million by listing its REITs on the Singapore Stock Exchange. The failure of REITs to take off has affected the financial position of developers and, in turn, further delayed the completion of ongoing retail and commercial projects.
“In the past one year, everything has been against the commercial real estate. Private equity vanished from the markets, while the government increased risk rating on the real estate sector. The failure of REITs to pick up added to the financial crunch of the developers,” commercial real estate services company CB Richard Ellis’ Chairman and Managing Director Anshuman magazine said. “Developers are not in a position to complete their commercial projects due to a lack of funds, a demand-supply mismatch and falling rentals,” he added. The country’s largest developer, DLF, has already received an approval to denotify four of its SEZs. In addition, it has also temporarily stopped construction work on nearly 16 million sq ft of office and retail mall space out of the 62 million sq ft of planned construction.

Dubai has seventh costliest office property market globally

According to a report by real estate consultancy firm, CB Richard Ellis, as reported by Emirates Business 24/7, emirate of Dubai falls seventh in the list of costliest office market globally with an occupancy cost of Dh449.90 per square foot per annum.
Three of the most expensive office markets worldwide are Tokyo, London and Moscow, according to the report, Global MarketView Office Occupancy Costs. Abu Dhabi came in at 11th in the rankings, with a cost of $91.21 per sq ft per annum.
Current financial crunch has made huge dent on the world's office markets with the most expensive ones considerably less expensive than six months ago, the report said. Financial service providers have been responsible for driving up the rents of prime office space in recent years, particularly in the dominant global financial centres.

Mumbai slips to No. 6 on global office rental list

Mumbai, which became the second-most expensive office property market globally one-and-a-half years ago at the peak of a real estate boom in the country, has now slipped out of the top-five list, as per a survey of 170 cities by real estate consultant CB Richard Ellis. The city remained at the sixth position among the world’s costliest office markets.
The cooling realty prices have also brought down New Delhi from the number eight position globally in November 2007 to the 12th slot in the latest ranking released on Thursday.
“The latest ranking highlights the decrease in rentals due to a reduction in demand. However, Mumbai continuing in the top 10 list and Delhi being at 12th place globally reflects the shortage of prime office supply in India,” said CB Richard Ellis South Asia, CMD Anshuman Magazine.
Office rentals in Mumbai fell 31% since November 2007 from $189 per sq ft a year to $131 per sq ft now. Similarly, office rentals in New Delhi also fell 31% from $126.7 to $86.9 per sq ft a year. Mumbai ranked fifth in CBRE’s last survey released in November 2008, while Delhi was placed 13th. CBRE conducts the surveys every six month.
Tokyo (Inner Central) tops the latest ranking with a rental of $183 per sq ft. It over took London’s West End that led the pack in November 2007 with $329 per sq ft rental, just ahead of Mumbai then. London’s West End is placed second with rentals almost half of what they were at their peak.

DLF puts Andheri project on the block

DLF, India’s largest real estate firm by market capitalisation, is learnt to have put its commercial property in Andheri, a Mumbai suburb, on the block. This project was being developed with Akruti City, and the asking price for the property is said to be at least Rs 500 crore.
The project is spread over 1 million sq ft in the MIDC area of Andheri. Sources familiar with the development said DLF has approached a couple of Mumbai-based property consultants and brokers to execute the transaction.
According to a senior official at a property consultant firm, the decision to sell the asset was taken a week ago. DLF is also believed to have sounded out prominent builders and individual investors. DLF holds 75% in the project with Akruti holding the rest. This is the second big ticket project that DLF has put on the block in the recent past.
Last month, DLF finalised a deal to sell its stake in Hindoostan Mill in Central Mumbai to a Chennai-based investor for Rs 310 crore.
“DLF, which was developing the project with Akruti, is looking to sell the property for Rs 5,000 per sq ft over the actual cost of construction,” said the official. Interestingly, the prevailing market rate in Andheri is around Rs 10,000 per sq ft.
The rationale behind selling the property at half the price is its size. Currently, the project has only a basement and the ground floor. It is divided into two parts by a road with one part covering 7.16 lakh sq ft, with the balance 2.84 lakh square feet on the other side.
An official with DLF confirmed the deal, though the company spokesperson said, “The company would not like to comment on this issue.” It is not clear whether Akruti too would be selling its stake at this point. When contacted, Vimal Shah, MD, Akruti, refused to comment.
DLF had earlier announced that the project would be ready by the end of this year. The company is believed to be selling it to raise capital to repay its debt of around Rs 14,000 crore. A potential buyer will also have to pay for the construction cost that DLF has incurred. DLF officials had earlier announced that they could raise money by selling portions of the land from their existing land banks.

Fortune Park Hotel launches third property in Bangalore

Fortune Park Hotels Limited, ITC's wholly owned subsidary, on Wednesday launched the launch of its 29th property, 130-room the Fortune Park JP Celestial, in the city.
The hotel, owned by the the JP Group and now managed by Fortune Park Hotel, is a contemporary business hotel that offers state-of-art- conference and banquet facilities, Pawan Verma, Senior Executive Vice President, ITC Ltd-Hotels Division told reporters here on Wednesday.
This is the third Fortune Property in Bangalore and fourth one in Karnataka, he said.
Currently, out of the 29 operational hotels, 14 are in the south, he said.
Fortune, whose properties are all management-contract run, except for a sole owned property, proposes to construct two hotels of its own with a total investment of Rs 100 crore.
"We plan to have our hotel in Bangalore and Coimbatore", he said, adding that they will be subranded under Fortune Select.
"This calendar year we have opened four hotels- Lavassa, Manipal, Jaipur and Bangalore and later this month we will open a hotel in Mussorie", he said.
There were also plans to open hotels later this year in Gnadhinagar, Goa, a second property in Hyderabad and a third property in Mumbai

Indian real estate back as favorites of NRIs and PIOs

With the India Realty Expo 2009 opening in Dubai on Thursday, Indian real estate is back on the radar of NRIs and PIOs, says Zubin Mehta, CEO, Markets cheer election resultsSectors and stocks to look out forPick stocks on fundamentalsFive facts on stock fallsShort-term plans are safe bets MCHI. The reverse is also true, says Sandeep Joshi, CEO of EventPro International. Global property investments are making a comeback, searching for Indian HNIs, who would be willing to buy property abroad.
With slick presentations and smart brochures, backed up by an even better sales pitch, projects in Mauritius, Australia, Thailand , UK and even the USA, are being offered to the Indian HNI willing to buy property abroad, says Joshi.
"With media reports talking of sales picking up in the residential segment, in the past five months, the global property market feels that the Indian HNI has money to invest and their aim is to get a piece of this. The only question is whether the sales pitch would be interesting enough," says Joshi.
At the Gulf Real Estate Conference in Bahrain last year, Manju Yagnik, vice-chairperson of Nahar Group, who pitched investments in Indian real estate, to GCC-based developers, had a cospeaker in her session, who pitched Australia and Thailand real estate options.
"When a Bahraini delegate asked him about returns on investments in these locations, he was candid enough to admit that they were merely projected returns and that no one could guarantee that these would actually happen, within the time-frame suggested in the presentation. The same issue comes up, when Indian HNIs are wooed by global property consultants," she says.
The post-election political stability and continuation of existing pro-reform economic policies, has been a positive for global property sellers, says realtor Bharat Malik. "The global market scenario is bad. India is seen as being economically better off, plus there is the realisation that Indian HNIs have money to invest. So, logically , you would have global projects pitching for Indian investments," he says.
In line with this, Abdul Majeed Ismail Al Fahim, chairman, Pearl Dubai FZ LLC, which is developing the 'Dubai Pearl' , in the UAE, maintains that India would be 'an integral part of our growth strategy'.

Over 100 malls to spring up in India by end-2010: Report

Keen on matching supply with demand, real estate developers may spring up more than a hundred malls spread over 30-million sq ft in the country by end-2010, a report says. 

"Between now and 2010, an additional 31,846,504-square feet of mall space will be created across India through just over 100 new shopping centres," findings from a report titled 'Mall Realities India 2010', said. 

However, 54 per cent of expected mall supply in 2008 was deferred to 2009-10, the report compiled by real estate consultancy firms, Cushman & Wakefield and Jones Lang LaSalle Meghraj, said. 

"As far as retail real estate in the top eight was concerned, as much as 11-million sq ft of expected mall supply in 2008 was deferred to 2009-10, which was a reduction of 54 per cent from the projections made at the beginning of 2008," it said. 

Of the over 30-million sq ft of malls to be added by end-2010, India's north zone is leading with a total of 14,790,000 sq ft. 

"That translates into 45 malls expected in the North Zone with 24 in the Delhi NCR (National Capital Region) itself," it said. 

West Zone is the second-most prolific region in terms of additional projected mall supply of 7,438,504 sq ft through 47 malls, it said. 

South and East Zones total up a projected mall space at 5,865,000 sq ft (through 29 malls) and 3,753,000 sq ft (by way of 13 malls), respectively, it said. 

"Interestingly, while most projects in North, West and South Zones are in and around Tier II cities, in the East, the majority of developments are to open in or around West Bengal's capital Kolkata," the findings said. 

The list of properties scheduled to open in this period are located across metros, mini-metros and Tier II towns, including in Delhi, NCR, Mumbai, Pune, Aurangabad, Raipur, Bangalore and Siliguri, among others.

Rays of recovery - ASSOCHAM sees real estate recovery in 3 months

According to ASSOCHAM, anticipating strong policy measures for real estate in forthcoming Budget, embattled realty majors see positive signs of recovery taking place, within next 3 months as affordable housing rev up demand and improved cash flows address their liquidity concerns.

Mr Sajjan Jindal president of ASSOCHAM said that based on an expert group of 25 real estate firms, found 88% of respondent CEOs sensing a quick revival in the sectoral activity within next 3 months as developer’s strategic shift towards affordable housing and a significant price correction in the housing projects have pepped up the sale of residential property.

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. The policy actions supplementing the robust demand in the housing sector is likely to hold the key for a speedy recovery phase in the sector.

With developers concentrated efforts to target the lower and middle income consumer group during the downturn, 84% of the surveyed CEOs signaled the least impact in the affordable housing segment.

According to the Survey, at a time when luxury housing more than 50%, SEZ 40% to 50%, retail space 30% to 40% and commercial space 20% to 30% were witnessing steep contraction in demand, affordable housing was the single most resilient segment with a minimal contraction of 0% to 10%.

On the policy front, the surveyed CEOs sought single window clearances for all schemes under affordable housing in the line of SEZ clearances to enable fast development of units and achieve the short fall of about 26 million houses at the earliest.

However, a majority of 76% of the ABB respondents viewed the stimuli given to the sector through fiscal and monetary measures as inadequate to help boost the demand to supply scenario. However, of all the measures taken by the RBI and the commercial banks, 64% of the respondent CEOs were of the view that RBI’s allowance to banks to restructure loans to developers has been the most successful in improving the liquidity for real estate sector.

In the present market scenario, 60% of the surveyed CEOs perceived resurgent stock market as the most prominent source of finance to fund the sector’s cash requirement, followed by 28% viewing bank credit as the best viable option. Almost 92% of the respondent CEOs strongly agreed to the need to unify stamp duty on property across all the Indian States. The surveyed developers also sought reduced stamp duty charges to increase revenue and avoid duty evasion.

Among other policy issues, respondents asked for a central regulation body, recognition of real estate sector as industry, further relaxed norms for ECB and FDI along with a need for speedier and hassle free statutory approvals.

The Survey found that metropolitan cities has been the worst affected market segment whereas tier II cities have been seen as the most promising one to boost up the sector as commercial activity moving to these cities and their greater yield has given a tremendous impetus to investment in the these market segments.

Meanwhile, among the 6 metropolitan cities, the financial capital of India, Mumbai has been ranked first as the most saturated in terms of real estate assets followed by Delhi NCR and Bangalore whereas Chennai, Kolkata and Hyderabad were ranked fourth, fifth and sixth respectively.

Real Estate Buyers are ready to come forward to invest if price is right assetventures

Land monopoly is not only monopoly, but it is by far the greatest of monopolies; it is a 

perpetual monopoly, and it is the mother of all 
other forms of monopoly.” 

Said former British Prime Minister Winston Churchill and that’s the sense of power felt by those who hold land. The thinking of Indian developers is no different. They went on a drive to amass huge land banks, only to see themselves in deep trouble when the real estate market slowed. Nonetheless, amidst all the gloom and doom surrounding the sector, they have managed to survive the slowdown. With the successful closure of a number of qualified institutional placements (QIPs), a number of builders have managed to tide over cash flow problems for now. This has turned the tide in favour of the industry. 

Besides, the developers have resorted to measures such as selling non-core assets, cutting down prices, reducing apartment sizes, borrowing from banks, and pledging of shares to keep themselves afloat. Thus it seems that there is light at the end of the tunnel for sector, though the length of the tunnel is still not known. 

Industry scenario 

With a stable government in place, the sector may be in for some pleasant surprises. 

Affordable housing and rural housing are part of the agenda of the new government at the Centre. Leading builders were the first ones to react to this need and launch new projects with prices ranging from Rs 4 lakh (depending on location) to Rs 50 lakh (though not really affordable). 

Both listed as well as unlisted developers such as Lodha Developers , HDIL, Unitech, Puravankara, Omaxe, BPTP and DLF made a foray into affordable and midsegment housing. A recent entrant in the affordable housing segment is the house of Tatas, under the brand name ‘Shubh Griha’. Though it is difficult to arrive at a price point for defining affordability , some of these projects have seen good response from the customers. In fact now a number of private equity players are also keen on the affordable housing segment. HDFC Realty, Red Fort Capital and Kotak PE are believed to be eyeing this segment. 

The story so far 

In the last two months the BSE Realty Index has gained 20% (since 9th March) whereas the benchmark index, Sensex rose by 54%. This surge in the equity market coupled with increased buyer interest has had a positive impact on stock prices of realty companies. The beaten down stocks are again finding favour with investors. Though one still cannot directly say that this will ensure increased sale of units, it reflects the change in investor sentiment about the sector. 

However, it is only the developers with proven track record and construction capabilities that are benefiting from this change in sentiment. 

Sales offices and under construction project sites that bore a deserted look till a few months back are now buzzing with walk-in customers. With a manifold increase in the number of inquiries, it just shows that buyers are willing to come forward and buy as long as the prices are reasonable. This will help them to avoid over leveraged position. 

Since it still continues to be a buyers market, customers are not willing to pay a premium for any under construction property. In fact it is for this reason that ready flats are finding more takers. Builders are thus offering easy payment schemes to instill confidence in the minds of people. For e.g., in some projects buyer needs to pay only 20% of the value of the flat and the rest 80% (through EMI) would start only after the property is delivered . Data shows that new launches with reduced prices and smaller size apartments are seeing higher sales now. Bangalore and Hyderabad registered a low absorption rate (ratio of units sold to units launched) compared with Mumbai, Chennai and Gurgaon because the number of new launches in the affordable segment was low in these regions. 

Financials 

With over 195 million sq. ft of ready and under-construction property in the market and hardly any takers, residential sales are the saving grace. DLF’s quarterly revenue for March’ 09 reported a whopping 73% decline. Following closely were HDIL and Puravankara, with a 63% and 56% drop in revenues. Similar was the trend in net profit margins (NPM). Puravankara’s NPM halved to 21.5% compared to the same quarter in the previous year. For DLF and HDIL it was much worse. Almost three-fourth of their profits have been wiped out. Higher sales of low margin mid housing segment were a cause of this drop in margins. 

Had it nor been for Reserve Bank of India directing banks and financial institutions to help them restructure their loans, most of them would have defaulted on their loan payments. Cumulatively, DLF, Unitech, HDIL and xx have managed to restructure close to Rs 4,100 crore of debt through commercial banks and mutual funds. DLF has repaid 1,700 crore of debt while Unitech managed to reduce its debt Rs 2,000 crore. This has helped them to not only reduce their debt equity ratio but also interest outflow. 

Going ahead 

Given the current scenario, the response to various newly launched projects shows that ‘right price’ has played a key role in their success. Realty prices have been rising since the last three-four years. Places like NCR, Bangalore and Mumbai where prices had gone up by 300%, have seen the maximum correction. Still there are few locations where builders have been maintaining absurd prices because of their improved liquidity position. But this would only lead to piling up of inventory, which will further tighten the cash flow position of the builders. With the approaching rainy season, sales would anyway be subdued. If the industry has to come out of this slowdown, dussehra would be an important time. 

In the six metros, 53 per cent of the 930-million sq.ft (as per Liases Foras) available realty stock is unsold; putting downward pressure on prices and lease rentals. We could thus expect a further 10-15 % correction in prices till Diwali, depending on the location. 

However, it is advisable for buyers to select the property of their choice and budget so that they do not waste useful time in doing the groundwork during the festive season.

Stir at Gole Mkt over eviction plan

Plans to conserve Gole Market as a heritage building means 27 

establishments located there will now have to shut shop. 


On Wednesday, shopkeepers of Gole Market protested the move to evict them. They claimed they had not been provided with alternative space to shift. The shop owners have demanded that alternative space be provided to them which were similar in size and of same rent as the ones leased out to them in Gole Market. Some of the well known establishments in the area are Galina Restaurant, Gujarat Fishery and Sagar Restaurant. 

"Gole market is a heritage building and we want to restore it. Hence no commercial activity can be allowed there. Even the traffic department has said a market there disturbs traffic circulation besides adding to nuisance value for local residents. We might build a small museum there in the future but giving the market back to the traders is out of question. The traders want a new site at the same rate which is not possible. We have already taken possession of eight shops,'' said a senior NDMC official. 

Said Narayan Shamnani, president of Gole Market Merchant Association: "NDMC had promised to rehabilitate us elsewhere. But now they are asking us to vacate without providing us with alternative space. We will not accept this. We have been functioning from Gole Market for over 60 years now. If need be we will organise a protest march at Jantar Mantar on Thursday.'' 

He added: "In reply to an RTI filed by us, NDMC in 2006 had said it was not dislocating us but proposing to shift each shopkeeper to a vacant plot available in the complex for a period of 54 weeks. Afterwards, we were given alternative spaces to shift out in. But the sizes of shops were so small and these shops were allocated in areas like a subway in Palika Bazaar or Sarojini Nagar, where it is impossible to open up restaurants or meat shops. When we did not accept their alternative, they sealed four shops.'' 

Traders in Gole Market pay anything between Rs 200 and Rs 2000 as rent for prime rental property. Said Raj Kishore Bansal, who owns Royal Store: "My family has been functioning from here since 1937. We can't just be expected to vacate and leave." 

Due to the dilapidated state of Gole Market, the building had been declared dangerous. One of Delhi's oldest surviving colonial markets, it was constructed in 1912 and unauthorised construction along with lack of proper maintenance had led to part of the heritage beauty of the building being destroyed, said NDMC officials. 

Apart from facade restoration, NDMC is also planning interior restoration and upgradation of the surrounding structure. The project cost which was initially estimated at about Rs. 6.31 crore has now escalated to about Rs 8.53 crore