Real estate giant IREO to invest $500 mn in India

NEW DELHI: Global real estate giant IREO will pump in $500 million in various infrastructure projects in India over a period of seven years, the company said Thursday.

IREO, which has invested $1.5 billion in India, is already one of the largest investors in the country's real estate sector.

"Having already invested $1.5 billion, we still have another $500 million available in cash for further investments in our projects," Lalit Goyal, vice-chairman and managing director IREO, told reporters here.

The company currently has 13 projects and is in the process of constructing an IT SEZ (special economic zone) in Pune.

"We have already commenced construction of a five million square feet IT SEZ (Pune) and a three-million-square-feet housing project," Goyal said.

Added Anurag Bhargava, chairman IREO: "The Pune SEZ should be completed by next year."

The company has projects in many states including Haryana, Punjab, Tamil Nadu, Maharashtra and Delhi.

The company said it would develop an eight-million-square-feet housing project in the next 12 months.

Real estate survey shows silver lining for market

Presently facing a downward trend, the real estate market is likely to recover by 2010 with increase in demand for residential
segment driven by improving affordability, steady economic growth and greater liquidity. These are the findings of a survey carried out in 10 cities, including Chandigarh, by the Crisil Real Estate Research Group.

The report says, “Demand in the residential market is expected to turn positive in 2010 due to these factors, however, a decline in the currently over-priced capital values of all the three real estate segments - residential, commercial and retail would persist through 2009.” “The commercial and retail markets would continue to witness erosion in lease rentals through the next two years,” it states.

The report provided information and analysis of more than 400 acres of land across 88 micre markets in 10 cities - Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai and Pune.

The report indicated that capital values for residential sector and lease rentals for commercial and retail properties have substantially corrected till March this year, due to slowdown in both the domestic and global economies. Cities such as Kochi, Chandigarh and Pune, which have greater investor presence as against end-users, witnessed a greater fall in capital values compared to other cities, the report revealed.

However, Crisil believes that demand for houses would improve in 2010, backed by lower home loan interest rates as well as better job security owing to higher growth in the economy.

Expressing confidence in the report, a leading real estate agent of the city, Sunil Kumar, said, “Apart from the low interest rates on housing, another important factor for the rising demand in 2010 would be the upcoming international airport in Chandigarh. The direct Dubai flight from Chandigarh would also add to arrival of many big business houses here.”

Kumar insisted that these factors would compell more and more tricity tenants to go for owning a property of their budget and choice. “The demand for residential properties would be more in the neighbouring areas like Mohali, Panchkula, Zirakpur, villages across the city and even far-off areas like Derabassi, Kharar and Kurali,” said Kumar.

Cheap housing offers lifeline to Indian developers

"No frills, Simple homes" reads the banner hanging in the Delhi headquarters of Unitech, India's leading property developer.

It's a mantra that has been taken up by realtors across the country with a new-found passion for affordable housing that owes little to their social conscience and everything to their bottom line.

The global economic downturn ended a four-year property boom in India that had largely been driven by the luxury housing segment and saw a near three-fold increase in residential prices in major cities.

Now developers are turning their attention to middle and lower income buyers and low-cost housing that offers lower profit margins but enjoys much greater demand.

"We made a mistake by only focusing on the top two-three percent of India's population," acknowledged Unitech vice president Vikram Datta.

"Now we have to reach the masses by entering into budget and affordable houses," he said.

According to a May 2009 survey by the Associated Chambers of Commerce and Industry of India, there is a nationwide housing shortage among lower and mid-income families of around 20 million units.

With luxury housing projects struggling to find buyers, that kind of demand suddenly seems more attractive.

Unitech has committed to constructing 20,000 affordable houses at a cost of 17 billion rupees (340 million dollars) by 2011 across the country, and others are following suit.

"India desperately needs budget houses. Constructing and selling them is the only way for real estate companies to survive," Rajiv Dash, a senior official at Tata Housing Development Co., told AFP.

In May, Tata launched a low-cost housing project on the outskirts of India's financial capital Mumbai, constructing 1,000 studio apartments which sell for as little as 7,800 dollars.

The targetted buyers are primarily factory workers and small shopkeepers.

By building on cheaper, suburban land and bulk-buying raw material, developers can turn a per-unit profit of around 15 percent which is half the return on luxury houses.

"But less profit is better than no profits," said Sanjay Verma, managing director for real estate consultancy Cushman & Wakefield.

In the last five months more than 65 property developers across the country have announced new projects in the affordable housing segment.

For 32-year-old Amar Singh, a commodity trader living in rented accommodation in New Delhi for over a decade, the new trend has enabled him to realise his dream of buying a home.

"I am now the proud owner of a small, two-bedroom apartment," said Singh, who hopes to move in to his still under-construction home by 2010.

Singh managed to procure a loan from a private bank and arranged the down payment by selling some of his wife's gold ornaments to seal the house deal.

Situated on the outskirts of New Delhi, his affordable housing project with 120 apartments will provide parking space to all residents, a play area for children, a power back-up and a small cafeteria.

Such amenities do not feature in the low-cost sector, where the developer's priority is to maximise the number of units.

"The low-cost houses are just like boxes with a door and few windows, there are no value additions," said Verma.

But while they may be spartan in the extreme, they do provide basic amenities such as water, sewerage, drainage and street lighting which is a major step up for low income settlers living in shanty towns.

The newly-elected Indian government announced a housing scheme in its recent budget as part of a plan to promote a slum-free India in five years.

Such an ambitious target, analysts say, can only be realised with massive private sector involvement.

"Indian property developers should consider themselves fortunate," argued Verma. "They have a new market to do business. The faster they make small houses, the more money they earn."