Thursday, June 21, 2007

Indiabulls Real Estate to start two housing projects in Chennai

Mumbai-based Indiabulls Real Estate, through its wholly owned subsidiaries Selene Estate and Fama Land Development; acquired two housing projects in Chennai (India).

Selene Estate, a wholly owned subsidiary of the company, entered into an agreement to acquire 50 acres of land to develop a residential project at Jalladianpet, a suburb of Chennai.

Fama Land Development, a wholly owned subsidiary of the company, entered into an agreement to acquire 241 acres of land to develop a residential and commercial project located near National Highway 5.

Further, the company, through its wholly owned subsidiaries, acquired 396 acres of land in Panvel, near Mumbai, to develop large scale residential projects.

Indiabulls Industrial Infrastructure (IIIL) a wholly owned subsidiary of the company is in discussions with MIDC to finalize its stake in the joint venture, for development of a multi product special economic (SEZ) at Nasik.

The company`s received Rs 2,644.9 million from Ariston Investment and Rs 1,728.9 million from Ariston Investment towards the sale of equity stakes of 7.95% each, in Indiabulls Properties and Indiabulls Real Estate Company.

Shares of the company were last trading up Rs 4.50, or 1.16%, at Rs 392.00. The total volume of shares traded at the BSE was 139,456 (10.00 a.m, Wednesday).

Monday, June 18, 2007

Alliance Gr to launch Real estate TV at Rs 100 cr in July

BANGALORE: The Rs 4,400 crore Alliance Group will invest Rs 100 crore to launch the country's first 24-hour real estate information channel next month.
"It will provide comprehensive, latest and authentic updates on all aspects of real estate, including infrastructure, to viewers all over the country, the south and south-east Asian region and Gulf states where there is a strong NRI presence," Alliance Chairman and Managing Director Manoj Namburu.
Real Estate TV, a pan-India English-language channel was being put together under the guidance of media personality Sashi Kumar by a team of media professionals led by Chief Operating Officer T K Vibhaker, Namburu said.
With news bureaus and studios in Mumbai, Delhi-NCR, Chennai, Bangalore, Hyderabad and Kolkata, a wide information- gathering network across India, and research and analysis facility in Delhi, Real Estate TV will be "the one-stop shop for anything and everything connected with this industry and the large number of other industries connected to it," said Sashi Kumar.

Ajmera to invest Rs 300 cr in Bangalore realty space

BANGALORE: Real estate major Ajmera Group, part of the $450-million Mumbai-based Ajmera Group of Companies, is looking to expand its footprint in Bangalore in a big way. The company’s plans entail investing close to Rs 300 crore on residential developments in the city over the next two years.

To begin with, Ajmera will launch its premium residential offering Ajmera Arista in the city. Located at HRBR Layout, Arista comprises about 20-25 apartments with each unit priced upwards of Rs 1 crore. Further, the company proposes to develop an integrated township in Bangalore — Ajmera Infinity — in close proximity to the city’s IT hub. “The company has acquired an 18-acre patch at Electronic City for the township project. Initially, we intend to develop about 1.8 million square feet of residential space on the property, located 1 km from the Wipro campus,” said Dhaval Ajmera, director, Ajmera Group of Companies.

The group is also in the process of acquiring land in Bangalore for its future projects. “We have zeroed in on a couple of properties in and around the city. We expect to pick up the same in the next six-eight months, after which the group will double its current investment outlay, taking the total investment to roughly Rs 600 crore,” added Mr Ajmera. So far, the group has invested Rs 100 crore on real estate projects in Bangalore.

Infinity is the outcome of a new concept that’s doing the rounds at Ajmera — walk to work. “Commuting within the city is a major hassle these days; and we believe that the ‘walk to work’ concept would be the way forward. Our study revealed that the suburb currently has a shortage of about 4,000-5,000 apartment units. Therefore, it makes sense for us to launch our new concept here,” said Mr Ajmera.

The Ajmera Group forayed into south India in early 2006 with the launch of Ajmera Green Acres in Bangalore, a 5,00,000-square-foot development off Bannerghatta Road. Till date, the company has developed over 1,70,00,000 square feet of residential space across the country. Recently, Ajmera along with its Indian JV partner Mayfair Housing inked at agreement with Bahrain Bay Corporation to develop a $150-million mixed-use project coming up in the Bahrain Bay area.

Sunday, June 17, 2007

London Luxury-Home Price Increases May Slow, Knight Frank Says

June 14 (Bloomberg) -- Luxury home prices in London, the world's most expensive city, may increase at a slower pace this year as more properties come onto a market with fewer buyers, real estate broker Knight Frank LLC said.

The average price of London's costliest houses and apartments probably will climb about 20 percent this year after an almost 29 percent gain in 2006, Knight Frank estimates. That would be the smallest gain since the 8.2 percent advance in 2005.

The number of people who registered with Knight Frank to buy a luxury home in areas including Knightsbridge has dropped 30 percent since March as prices continued to increase, said Liam Bailey, the company's head of residential research, in an interview. In May, prices rose 2.5 percent from the previous month and more than 33 percent from a year earlier, the biggest annual gain since 1979.

`We're turning a corner,'' said Bailey. ``The market's been so incredibly strong that some buyers have sat back to wait and see what happens.''

The prospect of a slowdown follows an 18-month surge driven by bonuses earned by investment bankers, money managers and brokers. An influx of wealthy overseas investors, attracted to London's favorable tax conditions and reputation as a world-class city, have also driven demand.

Price Appreciation

The average price of a luxury house in Knight Frank's monthly index, which draws from seven of London's most expensive districts, is now about 5 million pounds ($9.85 million), with apartments costing 2.5 million pounds. A typical house has appreciated by at least 100,000 pounds, or about four times the average annual U.K. wage, each month since September.

A house worth 100,000 pounds in 1976, when the firm began its survey, would be worth 4.2 million pounds today.

Prime properties sell at 2,300 pounds a square foot, or 5 percent more than nearest rival, Monaco. In New York, comparable homes sell for about 1,600 pounds a square foot and in Tokyo for about 1,100 pounds, Bailey said.

The fastest gains have been for properties in the ``Golden Triangle'' of Knightsbridge, Mayfair and Belgravia, where homes can command 4,000 pounds a square foot.

``Mayfair has doubled in the past 12 months,'' said Paul Davies, an interior designer and developer who also has projects in Monaco, New York and Los Angeles and whose customers include pop star Madonna. ``London is the most international market.''

Overseas Investors

Britain is home to about 68 billionaires, according to an annual survey published by the Sunday Times. Many are overseas investors from emerging economies like China, India and Russia, who have bought homes in London for business purposes as well as the attraction of its security, schools, stores, theaters and restaurants.

A Knight Frank survey of high net worth individuals showed that taxes are the ``single most important feature'' in their choice of where to make a home. Laws allow overseas investors to live in Britain while domiciling themselves overseas for tax purposes to avoid paying levies on their global assets to the U.K.

Brothers Sri and Gopi Hinduja, who own the Hinduja Group with a sibling, last year paid 58 million pounds for a 60-room home on The Mall, according to the Sunday Times. Other overseas residents or home-owners include Norwegian shipping magnate John Fredriksen and Vladimir Kim, chairman of Kazakhstan's biggest copper producer, the newspaper said.

Limited Stock

Foreign entrepreneurs are competing for a limited stock of properties with bankers, hedge fund managers and other finance industry workers who took home record bonuses this year, according to the Centre for Economics and Business Research Ltd.

Next year's bonuses, based on profits generated this year, probably will exceed the record 8.8 billion pounds paid out in 2007 to some 300,000 professionals. That may continue to bolster the realty market, said Jonathan Said, a senior economist at London-based CEBR.

``We can't see prices in London declining for a number of years,'' Said added. ``There's so much activity in London and jobs growth at the top end of the market.''

International Market

The wealth created in London's financial services industry is having a trickle down effect across the city and the surrounding region.

On the St. George's Hill private estate in Weybridge, where Beatles John Lennon and Ringo Starr once lived among rhododendrons and woods 17 miles southwest of central London and 7 miles south of Heathrow airport, prices for mansions have climbed about 20 percent in the past 12 months.

Middle class families, priced out of their neighborhoods of choice in London, are looking at homes they wouldn't have considered a decade ago and gentrifying districts like Wandsworth and Battersea, Davies said.

Because of supply shortages, average house prices in London outstripped gains elsewhere in the U.K. Prices gained 14 percent in the British capital in the 12 months to the end of April, according to government figures. That compares with an 11.3 percent increase for the U.K. overall.

``It always feels we have reached a peak, but then we reach it and push on through,'' said Simon Ashwell, an associate director of real estate broker Savills Plc in Weybridge.

Brokering change

It is common for Chetan Narain to pick up his clients from a plush suburban hotel in his Porsche. And then catch up on the latest business deals over a round of golf.

He also oversees all his client’s legal formalities. Narain is not a hospitality manager, but a real estate consultant. As CEO of Narain Corp, he shatters every stereotype of the paan-chewing neighbourhood broker one dealt with earlier.

The big makeover

“Earlier, the broker’s task involved merely showing clients around sites and then handing them over to the seller,” says Bharat Tolani, Casper Properties. “Today, a consultant’s role begins from this point.” The first meeting is spent identifying the client’s requirements.

“We start with the basics. For instance, where the child’s school will be, what kind of amenities the client needs, proximity to places of leisure and so on. Today, consultants are well-read and pro-active,” says Tolani.

Tolani feels it is the entry of NRIs and expats that has brought some amount of sophistication and corporatisation to the business. “They expect legal and prompt transactions. Large-scale property dealings have proven that we are transparent and reliable. They trust us now because we are involved and keep them updated.”

The neo broker also reaches out by organising seminars and keeping his audiences updated. Narain and Sandeep Sadh, CEO,, write real estate columns for newspapers. Narain is also president of the India Institute of Real Estate (IIRE), which offers a certificate course in real estate.

“The very change of term — from ‘broker’ to ‘consultant’ — illustrates a paradigm shift,” says Rashmi Rohida, director, Aryan Properties. “People now understand that we add value to the earlier service of just
showing every available real estate in the market. It is a consultant’s duty to negotiate with authorities for legal documents, verify the authenticity of the buyer and seller and check loopholes in the lease, if any.”

Almost legal

Harish Pandeya, director, Andromeda Marketing Private Limited, says the profile of the consultant has undergone a sea change as he offers legal expertise that gives him authority throughout the deal.

“We are almost like lawyers now. Buyers are more demanding and having legal know-how saves time and resources. I once faced a situation where a landlady refused to rent her apartment to a non-corporate. She was convinced only when I cited the laws that protected her legal interests.”

Getting the right mix

Real estate consultancy is also no longer a one-man army. The once suspicious broker reluctant to delegate is now scouting for talent and building teams, sometimes with an unusual mix of people.

“My team consists of people from the hospitality industry, airlines and even event management industry. They have great interpersonal skills and a flair for business,” says Narain, who leads a team of nine.

So what goes into making the contemporary consultant? Pandeya says higher education is not a prerequisite but good math skills and the willingness to work on Sundays certainly is.

“I choose people who exude maturity. Customers cannot rely on the judgement of a rookie,” he explains. Narain, though, feels education does lend a touch of professionalism to a consultant’s demeanour. But he cites exceptions too. “I once rejected a highly qualified and competent applicant because he breezily addressed me by my first name.”

Those wanting to make the consultant grade can also avail of training. Associate consultants receive classroom coaching — basics in understanding loans, transactions, phases of payment and handling site visits. Eventually, smaller deals are delegated to them. They get to keep all the incentives on these deals.

Of pdas and databases

Worn-out calculators and dog-eared notebooks do not adorn the broker’s profile anymore. A high-flying corporate and a true techie at heart, he flaunts chauffeurs, laptops and PDA phones with √©lan.

Also noteworthy is the broker’s database-driven approach. “Our profession will be in shambles if it doesn’t acknowledge the need for a strong database. Gone are the days when the broker paraded the entire city to a client. Now, we believe in putting the best wares on display.

There are tailor-made packages for every area to suit every budget. Every inquiry is answered in a matter of hours and the property package list is e-mailed. Verbal communication is confirmed on paper for credibility and to avoid any confusion,” says Rohida.

Tolani seconds this and highlights that a consultant is only as good as his network. He regularly scans his customer database and keeps in touch with old clients as they ensure business on recommendation.

The frills get fancier

There are many other frills and add-ons that Mumbai’s consultant offer. For instance, if you are looking for the best place to buy electrical fittings or get second-hand furniture, who do you call? Your broker.

If you are looking at a checklist that tells you to ensure that there are no leakages and rodents in the house, that all old curtain rods should be replaced and that kitchen cabinets should be repaired — chances are it is from your broker.

Says Sadh, “From waiting for hours when the client wants to rest to choosing home furnishings and buying electric fittings, a consultant does it all.” He recounts the time he stocked an assortment of Italian breads and confectionery in his car for the client’s children who were accompanying them on site visits.

Consultancy, he jokes, is more a PR job — all about managing individual temperaments and being affirmative to demands. Pandeya learnt an important lesson by identifying this role. “A few years back, I forgot to tell an important client to renew his lease because I did not consider it my ‘job’. I cannot afford to overlook that today.”

The road ahead

With multitasking and super-specialisation, their dreams are getting bigger. “The role of a consultant in generating loans will increase. The future will also see us offering specialist legal views, especially to the NRI community.

Though bigger consultants will consolidate, the individual broker will not fade away.” Narain says, “I see fortnightly webcasts of real estate news as my next challenge.”

Wednesday, June 13, 2007

Celebrity broker down to last millions

A South Florida real estate broker Carlos Justo, flamboyant founder of Sol Sotheby's International Realty, is in deep money trouble. Justo, who catered to millionaires and became one himself, says: ``I am considering filing personal bankruptcy. I'm fighting for my financial life.''

He, along with some investors, lost $2.35 million in a deal at 3 Indian Creek Island, he says. He is in foreclosure on another property -- at 40 Indian Creek Island, where he now lives. He bought it in '05 for $6.85 million. The debt is around $11 million with interest. (He's trying to sell the house -- for $14.9 million.)

Justo, 51, is fending off a battery of lawsuits, including one from agent Techrin Hijazi, who used to work for him. His net worth, which he says reached $20 million, has plummeted. He estimates it is now $2 million to $3 million.

''I should have really been in bankruptcy court a year ago,'' Justo says. His attorneys are trying to talk him out of it, but he gave them 60 days to ''settle everything'' or he's filing. ``It's a big mess.''

Complicating matters was the ugly split between Justo and Irving A. Padron, his former business partner and CEO. ''I settled with him,'' Justo says. ``I paid him $500,000. I owe him another $800,000. I have no intention of paying him what I owe him. I will see him in court.''

Justo invested in luxury waterfront properties, in addition to 40 Indian Creek -- 36 Indian Creek Island, and the former George Batchelor estate in the 2900 block of North Bay Road in Miami Beach. ''Between those assets alone, I have a debt of over $30 million,'' he says.

His timing was off, he admits. 'The market is slowing down. Everybody knows what's happening in the Miami market because of the condo oversupply. It's going to be a bloodbath out there. You know what the buyers are saying? `Let me wait, why should I pay $10 million for a house when it might be down to $8 million in a year.' ''

Hijazi, 29, worked at Sol Sotheby's for 1 ½ years and appeared alongside Justo in Million Dollar Agents, a TLC reality show. She is now suing Sol Sotheby's, claiming it stiffed her on more than $300,000 in commissions.

She also alleges financial hanky-panky. ''Justo acquired a significant real estate portfolio for himself,'' says her complaint, filed by attorney Richard J. Diaz. 'By late 2005, Justo became overextended . . . In order to `cover' his personal financial shortfalls, Justo began diverting Sol monies to himself. These monies should have been used to pay commissions due to his sales force.''

Not so, says Justo's attorney, Warren Trazenfeld. ''Techrin is looking for commissions she's not entitled to and did not earn. She is simply trying to ruin Mr. Justo's reputation based upon allegations which she is incapable of proving because they are inaccurate.'' Trazenfeld says he and bankruptcy lawyer Joel Tabas are ``trying to work out Justo's financial difficulties.''

Trazenfeld filed a motion to dismiss Hijazi's suit. A hearing is scheduled for Thursday before Miami-Dade Circuit Judge Sarah I. Zabel.

Hijazi is now with Avatar Real Estate Services and formed her own branding as TechrinEstates. She has the $8.9 million listing for Dwyane Wade's Pinecrest home, and the $19.9 million listing for businesswoman Caroline Weiss' Coconut Grove estate.

Justo says he has worked with celebs including Gianni Versace and Jennifer Lopez. He, too, lived big. He travels by limo, shows properties by helicopter, and, he says, is still tops at selling top-tier real estate. ``I don't care if I go to zero. I'll build it back up again. The king isn't going down.''

India property boom 'here to stay'

Although UK property investors have traditionally opted for nearby and well-known locations such as Spain and France, some of the more adventurous have recently cottoned on to the earnings potential of some of the world's emerging markets.

One such market is India, which has seen rapid growth in real estate prices in recent years, particularly in major cities such as Mumbai, where a new breed of affluent young entrepreneurs and business professionals has emerged.

According to a recent article in the Daily Telegraph, the country has experienced massive economic growth, with a level of nine per cent recorded last year - the second fastest since Britain relinquished its hold and India became independent. The demand for new homes in the country is also expected to be healthy, with 20 million properties sought over the next five years, according to the paper.

Furthermore, the publication predicts that by 2015 the real estate market will have experienced a seven-fold growth - potentially offering a number of very lucrative opportunities for Britons who are willing to invest.

Ashish Jagnani, a Mumbai-based real estate analyst for Citi, predicts that the property bubble is in no danger of bursting, as some analysts have feared it might.

"India's real estate opportunity is genuine, large and will last a long while - a prospect not lost on developers and capital providers," he told the publication.

Certainly one developer is looking to take advantage of this trend, as US real estate management giant Jones Lang LaSalle (JLL) recently confirmed details of a merger with India's Trammel Crow Meghraj. The move, one which is set to boost JLL's interests in a burgeoning market, is perhaps proof of the potential on offer in India, or at least the confidence in it that the big firms hold.

If further evidence is required, the Confederation of Real Estate Developers Association of India and Maharashtra Chamber of Housing Industry (MCHI) are set to host the India Property 2007 exhibition in Dubai over the weekend. Some of the world's most weighty investors are based in the emirate, with the conference showcasing what the market has to offer.

Nainesh Shah, chairman of International Exhibitions for the MCHI, commented: “With the current boom in Indian realty, there is a growing interest among NRIs [non-resident Indians] wanting to buy property back home, not just for residential purposes but as an investment option as well."

Dubai Properties highlights investment opportunities at UAE-South Korea Forum

Addressing government officials, businessmen and decision makers at the forum, Mohamed Binbrek, CEO of Dubai Properties, said: 'With a determined and visionary leadership, the UAE has managed to safeguard the country's development and provide the world a unique atmosphere to do business.

"Our long term strategy is to identify opportunities for investors from both countries. This is in line with the UAE's vision to bridge cultures through commercial initiatives and follows the recent visit of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, and Ruler of Dubai, to South Korea.'

Binbrek observed that South Korean investors have historic links with Dubai, citing the long term presence of companies such as Samsung, LG, Hyundai and others in the UAE. In addition, South Korean real estate developers like Sungwon Corporation and Bando are both developing landmark projects with Dubai Properties at both Business Bay and Culture Village.

South Korea is one of UAE's leading trade partners. Bilateral trade between the countries has doubled from US$7.96 billion in 2003 to US$15.82 billion in 2006.

Dubai Properties also showcased its diversified portfolio of projects including the Business Bay, Culture Village, Tijara Town, The Villa and the Jumeirah Beach Residence at an exhibition that was running concurrently. The exhibition offered Dubai Properties an opportunity to negotiate business development with South Korean investors.

Beating markets like China and India, Dubai deserves to be regarded as a truly remarkable 'Global City, Dubai has a consistently impressive economic growth - 16% last year, he noted.

During the next five years, Dubai Properties will focus on leveraging the full potential gained from close cooperation with corporate partners, investors, and contractors.

'Investors from the GCC and Middle East have consistently looked eastward for viable prospects in sectors such as property development, financial services and trade. We hope to reach out to clients looking to capitalize on our region's dynamic business opportunities and set new targets for growth,' Binbrek said.

During his visit to Korea, Binbrek visited Posco Engineering and Construction and Kumha Engineering and Construction LTD two of leading construction companies in Korea as part of enhancing and developing relations with Korean companies.

India Property 2007 soars to Dubai

The 8th India Property 2007 - Dubai being organized by The Confederation of Real Estate Developers Association of India (CREDAI) and Maharashtra Chamber of Housing Industry (MCHI) will be held at Dubai Renaissance Hotel, Dubai from June 14 – 16, 2007.

India Property 2007, Dubai will have some of the biggest names in the Indian real estate industry, showcasing both residential and commercial properties. Leading developers from places like Mumbai, Navi Mumbai, Pune, Nashik, Goa, Bangalore, and Hyderabad among other places would be participating.

This exhibition is supported by the Ministry of Urban Development, Government of India, with LIC being co-sponsors.

There are an estimated One million Indians residing in the UAE with Dubai being the hub of commerce and industry, and increasingly developing as a major hub for service industries such as IT and Finance. NRIs in Dubai are well placed in society and command the respect of the local people due to their industrious nature and diligence in duty. Asian expatriates account for more than 75% of UAE population with over 40% under 25 years of age. NRIs in Dubai are high net worth individuals, which makes them a potentially rich market for real estate investments in India.

Mr. J.S. Augustine Co-Chairman, International Exhibitions, MCHI said, “India is poised for an unprecedented economic growth. With GDP crossing 9.5% the opportunities for every Indian, NRI and others. The villages have appreciated. Commercial and Residential are yielding high returns. Rentals have grown. There can not be a better time than now to invest in Indian real estate. CREDAI & MCHI facilitating this for NRIs in Dubai is a boon and they can transact with a lot of trust”

Sharing his views on India Property 2007, Dubai, Mr. Nainesh Shah, Chairman, International Exhibitions, MCHI, said, “With the current boom in Indian realty, there is a growing interest among NRIs wanting to buy property back home, not just for residential purposes but as an investment option as well. Moreover, our exhibitions are much looked forward to by Indians settled in Dubai, as they get a wide array of properties to choose, from leading developers and most importantly, the credibility associated with our exhibitions over the years, have made NRIs repose their full faith and trust in us.”

Last years Dubai Property show 2006 was a huge success. The 3 day event saw some very serious and focused visitors at the exhibition, which translated into actual bookings rather than just enquiries. All exhibitors were delighted with the response they received and business generated at the close of the property exhibition.

CREDAI Assurance

CREDAI and MCHI ensure complete transparency and assurance to the customers throughout the entire transaction and guarantee them the amenities and specifications as promised during the deal. In the event of any dispute the consumer can approach CREDAI to assist them in resolving the same.


Confederation of Real Estate Developers Association of India (CREDAI) – is the apex body representing associations of real estate and housing developers from all over India. Its purpose is to promote housing and real estate developments in an organized and cohesive manner and provide a liaison with government bodies to effectively represent the views and needs of the industry. It has more than 3000 members spread over more than 17 states in India.

About MCHI

MCHI is a member of CREDAI and India’s premier housing and developers associations in India. Established in 1982, in Mumbai, the commercial and construction capital of India, MCHI has a membership of 450 leading developers who account for 90% of the housing supply in Mumbai and its vicinity.

Hiranandanis rope in Firdose Vandrevala to head realty co

MUMBAI: Hirco, the newly-floated real estate firm by Mumbai-based developer Niranjan Hiranandani, has appointed Firdose Vandrevala as the chairman and managing director of the company. This makes Hirco the first unlisted real estate firm to appoint a professional from outside the promoter family. Mr Vandrevala resigned from Motorola India on Monday. Confirming the development, Mr Hiranandani said, “Mr Vandrevala is joining as CMD of Hirco Development and will look after the Indian operations. I will continue as the chairman of Hirco, our London-listed entity.” The move could indicate the shift in the management of family-run enterprises, mainly in real estate. Most realty companies in India are closely-held with the equity stakes controlled by family members. Mr Vandrevala is joining the Hiranandani group a year after the Mumbai-based family restructured with the Hiranandani brothers — Niranjan and Surendra — chalking out individual business plans. The two brothers are diversifying and consolidating their business operations in areas such as healthcare, retail, hotels and education. Mr Vandrevala, who earlier headed Tata Power before moving to Motorola, was responsible for developing the US-based telecommunication company’s brand in India. Mr Vandrevala was with the Tata group for over 33 years, with his last position in the Tata group being chairman of Tata Teleservices. He also held positions at Tata Power as its managing director and at Tata Steel as its deputy managing director. Hirco recently raised $750 million in the Alternate Investment Market of London and is developing properties in Navi Mumbai, Jaipur and Chennai. The group has ongoing development activities at Powai and Thane where nearly 400 acres are under development for the past decade. The group turnover is over Rs 1,000 crore. The under-construction 90-storey Marina tower project in Dubai, touted as the world’s tallest residential building, is being handled by Niranjan’s son, Darshan. The Hiranandani group began operations in the early 1980s. The first project was in Versova and later the group developed Powai, then a quarry. It is now considered one of the most upmarket suburbs of Mumbai “Our business is growing so rapidly that to keep pace, it makes sense for different people in the family to look after different projects. We want each of our businesses to grow over 300% in the next few years. The family business restructuring will help us achieve the target,” Niranjan Hiranandani told ET.
The introduction of foreign direct investment in the industry has led major developers to expand operations and pursue larger land parcels including in Tier II cities. The need to acquire large parcels in multiple locations prompted the need for the group to pursue parallel acquisitions with different finance partners. As a result, around a year back the brothers divided their responsibilities to give an individual focus to existing as well as new businesses. However, both brothers look after other businesses activities together, taking individual responsibilities in each business. While Niranjan is in charge of healthcare and education sectors, Surendra focuses on the operations of retail and hotel businesses of the family, which is spread in three firms — Haiko Supermarket, Loft, Culture Shop and Rodas Hotel. Niranjan said Hiranandani Hospitals is in the process of developing five large-scale hospital projects in various parts of India and has tied up with Fortis Healthcare, the hospital business of the Ranbaxy group, to manage the hospitals. Surendra’s Hiranandani Upscale has just launched a 110-acre integrated township in Chennai for Rs 2,000 crores. His group has also identified large-scale projects in southern India in places like Bangalore and Hyderabad. He is also negotiating for strategic tie-ups with financial partners where synergy matches. On the retail front, Surendra said the group’s footwear firm, Loft, is looking for strategic tie-ups to expand its business while Haiko and Culture Shop are scouting for acquisitions.

Govt may curb demand in real estate

New Delhi: The Government on Tuesday indicated it intended to curb demand in the “overheated” housing and real estate sectors.
"Intention is to constraint demand in those sectors where there are signs of what you call overheating and example of that could be real estate and housing. I think in these sectors there is reduction in demand," Finance Minister P Chidambaram told reporters.
India’s industrial output increased 13.6 percent in April compared to 9.9 percent in the same month last year, but the Government is concerned that the economy might be overheating.
The Associated Press reports Chidambaram has warned banks against too much lending in real estate, which experts believe is drawing large amounts of speculative money that could result in a property bubble.
Chidambaram, however, said he had no intention of reducing demand in other sectors. The impact of his statement was immediate on Dalal Street, where nearly all the real estate stocks lost value, notwithstanding a modest 48-point gain in the benchmark index.
All realty stocks gained on Monday when the DLF IPO opened for subscription on a strong note. Unitech, the biggest listed real estate firm, saw its shares plummeting by 3.4 per cent or Rs 17.45 to Rs 490.
Another leading realty developer Parsvnath dropped 1.73 per cent to Rs 312.35 on the Bombay Stock Exchange, while stocks like Ansal Properties, D S Kulkarni, Sobha Developers and Atlanta Ltd also fell sharply.

JLL-TCM merger creates India’s largest real estate consultancy

NEW DELHI, JUN 12: Leading real estate consultancies Jones Lang LaSalle (JLL) and Trammell Crow Meghraj (TCM) announced their merger on Tuesday to form the largest real estate services firm in the country under the name, Jones Lang LaSalle Meghraj.
While the market share of the new entity will be 35% (taking into account all property consultants), it would be 50% of the international property consultants sector.
The total real estate under management under JLL Meghraj will be a colossal 44 million sq ft, combining 21 million sq ft of JLL and 23.2 million sq ft of TCM.
The combined leasing transactions will now be 22 million sq ft, the project and development services would be more than 21 million sq ft.
The total strength of JLL Meghraj will now be 2,800 (expected to grow by 35% by 2009), with offices in 10 locations. With a combined turnover of $70 million for 2007, the target is to cross the $100 million mark by 2009.
“The new entity will offer new services also, like a hotel division, new capital markets as well as asset and shopping center management,” says Anuj Puri, country head, JLL Meghraj. The merger takes place after Meghraj Properties bought back the equity of Trammell Crow and then after contemplating the offers, chose JLL as its partner. Trammell Crow was taken over globally in 2006 by CB Richard Ellis.
“With TCM being a dominant player in the domestic market and JLL having international expertise, the new merged entity will definitely be a force to reckon with in the real estate sector,” says Puri.

Biggies see growth in hotel biz

Mumbai, June 12: In the past, hotels were owned by players like East India Hotels and Taj. More recently, real estate players like DLF, Unitech, Runwal and Raheja got into the business. Apparently, there is room for more and there's money to be made.
Good enough reason for people like Rajeev Chandrasekhar and Vijay Mallya to dig their hands into the business.
Chandrasekhar made a killing in 2005 when he sold his stake in BPL Mobile for Rs 1,200 crore. A part of this money is now being used to invest in the booming business. Hindusthan Infrastructure Projects & Engineering (HIPE), an arm of Chandrasekhar's investment company — Jupiter Capital — has identified a 75 acre property at Chikmanglur in Karnataka.
"We will be buying another 2-3 properties in the current financial year," said an HIPE official.
The company is also looking to partner with state governments to develop large hotel projects. "Though the initial focus is on southern India, we are open to expanding anywhere in India, provided we get good land or a ready resort to acquire," the official added.
A year ago, Chandrasekhar, who also serves on the board of GoAir, had bought a 21 room heritage resort — Surya Samudra — near Thiruvananthapuram in Kerala. More recently, he bought 10-15 acres of land each to build hotels in Mahabalipuram in Tamil Nadu and Kumarakom in Kerala. Then there is the flamboyant Mallya, chairman of the UB group.
While Mallya owns a few resorts in South Africa, sources close to him say he is now keen on spreading his wings in India.
These investments, sources added, will be made in his personal capacity and not through the Bangalore-based UB group that has interests in everything from beer-to-aviation.
Mallya's VJM Resorts is looking at owning resorts in coral island Lakshadweep and mainland Kerala. Mallya's hospitality interests could unlock synergies with his aviation venture.
Then there is Ramesh Mansukhani, promoter of pipe maker Man Industries. He too has been scouting the country for land to set up five star hotels. While all of these people are attempting to set up hotels, there is another breed of individuals like Jerry Rao, Ravi Jaipuria (Pepsi's largest bottler), and Gopal Jiwarjka (promoter of consumer electronics company Salora International), who have pumped in money as investors seeking good returns on their investments.
Jerry Rao, the founder of software company Mphasis, has invested in Royal Orchid Group of Hotels, while both Jaipuria and Jiwarjka have invested in LemonTree, a mid-market hotel chain.
Interests in hospitality business from the corporate world stems from growth rates in the industry as well as forecasts of explosive demand in the future on the back of domestic and international tourists. Clearly, everybody is hoping to cash in on the boom

Subscribe to DLF IPO as a leading property developer

DLF, a leading real estate company, is open for subscription with an initial public offer, IPO of 175,000,000 equity shares of Rs 2 each through a 100% book building process.
The issue would constitute 10.27% of the fully diluted post-issue capital of the Company.
Niche Brokerage report on DLF IPO:
Company Snapshot
DLF is the largest real estate developer in India in terms of the area of completed residential and commercial developments with approx 224 mn sq.ft, including 22 urban colonies as well as an entire integrated 3,000 acre township, DLF City, Gurgaon. DLF’s primary business is in three verticals namely development of residential, commercial and retail properties spanning in all aspects of real estate development such as identification, acquisition of land, planning, execution and marketing of projects, maintenance and management of completed developments. DLF is also expanding its wings by entering into the infrastructure, SEZ and hotel, insurance businesses.
Land Reserve
DLF has land reserve in various regions across India amounting to 10,255 acres with an aggregate estimated developable area of 574 mnsq.ft, which includes 4 mnsq.ft of completed development and 44 mnsq.ft under construction. Of the approx 574 mnsq.ft, nearly 30% is located in or near developed urban areas. The unique feature of DLF land Reserve compared to its peers is that more than 90% of its land reserve is available as large, contiguous plots of land beneficial to develop mega townships.
In addition to the land reserves of 10,255 acres, DLF also has 554 acres of land arrangement. Thus, the current land reserve is sufficient for the planned development of over next 10 years for DLF providing major competitive advantage as well as protection against land price inflation.
Established brand name and reputation for project execution
DLF’s position as a leading property developer is largely due to its established execution capabilities, reputation for providing prompt payment to landowners upon the acquisition of their land, developing and completing projects in a timely manner. Internationally and nationally renowned architectural consultants, such as Hafeez Contractor, the Jerde Partnership Inc. and Mohit Gujral, as well as design and engineering, construction and project management firms are associated with its projects, thus giving brand image and demands premium value for its projects compared to its peers.
New Business- to provide upside
DLF is diversifying into other real estate related businesses such as the development of SEZs, multiplex cinema, super luxury & budget hotels. In order to ensure the high quality of its projects, DLF has entered into joint ventures with WSP to provide engineering and design services and Laing O’Rourke to provide construction expertise. Further, DLF recently acquired an interest in Feedback Ventures to provide management consulting services.
DLF owns only 0.5% of the land reserves
Though DLF and its subsidiaries own 1,160 acres, or 11.3%, of the 10,255 acres that comprise the land reserves as of April 30, 2007, DLF directly owns only 0.5% of these land reserves. The balance 10.8% is held by the subsidiaries of DLF. Of the 1,160 acres that DLF own, 38 acres have been leased to DLF by governmental authorities on a long-term basis and DLF has freehold title to the balance.
The remaining land reserves are subject to agreements to purchase, development rights agreements or memoranda of understanding for acquisition.
Outlook & Valuation
We would recommend investors to subscribe to DLF issue based on its position as a leading property developer along with established execution capabilities. Though, on the face of it DLF’s issue pricing seems aggressive, it does not capture the potential upside from the leasing commercial real estate business model & the huge opportunities related to SEZ, hospitality, hotels and other joint ventures (two mega township projects planned with the Nakheel Group of UAE).

Unitech, Parsvnath Costs Rise as India Curbs Loans

June 12 (Bloomberg) -- Unitech Ltd., India's most valuable real-estate company, and Parsvnath Developers Ltd. will have to pay more for loans because of a ban on overseas borrowing, forcing them to incur the highest interest costs in five years.
The finance ministry's May 18 ruling will push up Unitech's funding charges at least 5 percentage points, Managing Director Sanjay Chandra said. Parsvnath was quoted 14 percent interest on a loan from an Indian state-owned bank, Chief Financial Officer Ravi S. Pani said.
By curbing overseas loans to developers, India wants to cool land prices that have as much as tripled in three years and driven the rupee to a nine-year high. Still, higher costs may deter builders from constructing the 10 million housing units a year India is estimated to need by 2030, according to the Asian Development Bank.
``I don't understand why the government has throttled this avenue and singled out the real-estate industry,'' said N.K. Ahuja, chief financial officer at Eldeco Group, a New Delhi- based developer with at least 35 billion rupees ($860 million) of projects. ``We were looking at raising funds through this route but now we'll end up paying fancy interest rates to domestic lenders.''
Shares of Parsvnath closed down 1.7 percent on the Bombay Stock Exchange after earlier posting the largest decline in two months. Ansal Properties & Infrastructure Ltd. slumped 6.1 percent, the biggest drop in 20 months, while Unitech fell 3.4 percent. Eldeco shares dropped 0.5 percent to a three-month low.
Need Loans
Indian builders need loans to buy land, steel and cement as Asia's fastest wage growth makes homes more affordable. The Reserve Bank of India, the nation's central bank, asked banks to curb loans to the real-estate sector, making it harder for developers to obtain cheap financing.
``The instruction is to constrain demand in sectors where there are what you call signs of overheating, examples of which are real estate and housing,'' Finance Minister Palaniappan Chidambaram said in New Delhi today. ``In those sectors, I think there is some reduction in demand.''
The Reserve Bank has raised its key overnight lending rate six times in the past 1 1/2 years to slow record bank lending. India's central bank also raised banks' reserve requirements three times since December to curb loans growth.
``More than interest rates, the concern for developers is the availability of funds,'' Unitech's Chandra said in an e- mailed response to questions.
Rule Change
Unitech was about to secure an overseas loan when the finance ministry changed the rules, he said.
``Indian banks are not in a position to meet the funding requirements for large projects being undertaken by the bigger developers for various reasons, single borrower limits, high risk weights for real estate lending,'' he said.
Parsvnath, which is building malls at New Delhi's metro rail stations, plans to borrow 20 billion rupees in the next two years to buy land and build homes, Pani said.
He rejected the 2 billion rupee loan offer from the state- run bank because of the high interest rate, he said, without identifying the bank. Overseas rates are lower.
``The rule will force us to compromise on borrowing costs,'' Pani said in an interview in New Delhi, where the company is based. ``It will also impact us as far as timely generation of the funds is concerned.''
Parsvnath plans to raise 5 billion rupees in the next three months, Pani said. The company, which is developing 153 million square feet (14.21 million square meters) of townships, shopping malls and trade zones in 17 states across India, aims to invest as much as 50 billion rupees in the next two years and will meet the remaining 30 billion rupees of capital requirement from its own cash reserves and partnerships with investors, he said.
Home Shortage
India's $12 billion real-estate industry is growing 30 percent a year, according to Ernst & Young LLP. The nation faces a shortage of 24.7 million housing units in urban areas, according to the housing ministry. India's urban population is expected to rise to 461 million by 2025 from 286 million.
Indian companies want to tap overseas lenders because the benchmark rate for companies borrowing in London is more than 3 percentage points lower than the comparable rate in India. The six-month dollar-denominated London Interbank Offered Rate is at 5.33 percent, according to data on the Bloomberg. The comparable money-market rate in India is 8.75 percent.
Chidambaram on April 19 asked state-run banks to slow lending to high-risk businesses including real estate.
``Definitely, the ban will have an impact on the real- estate companies as the Reserve Bank of India has blocked all the avenues for real-estate developers to raise the funds at a cheaper rate,'' said S.N. Gupta, chief financial officer of Era Constructions (India) Ltd. ``We were having certain plans to raise the funds for our real estate company in the overseas market but won't be able to do it now.''
The company plans to raise as much as 6 billion rupees in the fiscal year ending March 31, he said.
To contact the reporter on this story: Kartik Goyal in New Delhi at . Last Updated: June 12, 2007 08:23 EDT

DLF IPO: Should you subscribe?

The much-awaited DLF IPO has finally hit the stands. Founded in 1946, the company is the largest real-estate developer in India and its IPO is poised to be the largest issue to hit the primary markets raising Rs 9,625 crore.With a track record of successfully developing 220 million square feet of real estate projects, DLF is an established brand name with premium positioning in lucrative NCR market.Even though there are no concerns about quality of the management or the company's executing capabilities, questions are being raised on the valuations front. The proceeds of the IPO would be used for acquiring new lands and retiring the long-term debt.First Global, a Mumbai based brokerage house, maintains that the IPO is overpriced based on the Net Present Value (NPV) of the company's business. According to them, at the price band of Rs 500-550, the stock is at a premium of 21-33 per cent where the NPV of DLF's business works out to Rs 413 per share.

What makes it attractive?According to reports, the company should benefit from economies of scale as it has a land bank of around 10,225 acres translating into a developable land area of about 573.8 million square feet.DLF also enjoys major competitive advantage as well as buffer against the land price inflation due to the relatively low acquisition cost of land.Apart from the real estate development, DLF is ramping up business by entering into new growth areas like hospitality, multiplex, insurance and healthcare that are expected to make substantial value addition.Since most of the land reserves is located in and around prominent cities across the country, it augurs well for DLF when rest of the real estate majors are finding it hard to get hold of qualitative lands.The management team of the company is well poised to take the company forward with most of them having over 20 years of experience in the real estate sector at a time of talent crunch in the industry.High valuation?Even though 41 per cent of the IPO was subscribed in the first hour of opening on Monday, questions are raised about valuations and financial performance of the company.Out of the Rs 4,034 crore sales in FY07, sales of about Rs 2,401 crore has been done to the DLF Assets Pvt Limited (DAL) representing a jump in 59.5 per cent of total sales and 59.6 per cent surge in profit before tax.Ironically DAL, a promoter group company has not paid has not paid Rs 2,350 crore as on 31 March and the amount was classified in the balance sheet as Rs 740 crore under debtors and Rs 1,610 core as loans and advances. According to RHP as on May 25, 2007, DLF has received Rs 1,500 crore from DAL.Out of the total debt of Rs 9,932.8 crore, 75 per cent is on a floating rate making the company susceptible to the risks of raising interest rate scenario.With the rising interest rates, retail loans have been growing at a snails pace resulting in reduced off-take of residential properties from the builders. Adding to these worries, regulators are taking regressive steps fueling the concerns of bubble formation in the realty sector.The recent steps taken by the regulators like curbs on external commercial borrowings by the real estate companies, raising the risk on property loans would have dampening effect on the growth prospects of the company in real estate space.If the doomsayers have their way, the current valuation of residential / commercial property might see re-rating, resulting in the reduced enterprise valuation amidst cool-off in property prices in some pockets of the country.Strong momentumHowever, with the kind of growth momentum we are seeing in the economy there is still enough headroom for company to tap growing need for the residential and commercial property space.International private equity funds are chasing the Indian realty growth story and are investing in Indian real estate companies. This renewed interest from overseas would help the realty companies to deliver decent returns in the times to come."The IPO looks attractive at the lower price band of Rs 500, but one has to stay invested for the longer term," said Amitabh Chakraborty, President (Equity), Religare Securities.At the offer price band of Rs 500-550, DLF’s PE works out to 43.9–48.2 times FY2007 EPS. According to Emkay PCG Research, even though this is a considerably high PE, all the other prominent real estate players are trading at higher price to earning multiples.It makes sense to invest in the issue from the long-term perspective as the long-term story of the country is intact. Even though there are concerns about valuations on whether the issue is over-priced or formation of bubble in the realty sector, the company is poised to benefit from the robustness in the Indian economy

New townships in Kolkata to add 250 mn sq ft in five years

A boom in real estate sector across the country has not left Kolkata behind as a number of upcoming townships in city suburbs are attracting investors and mass housing complexes to some hitherto uptapped suburbs.

According to estimates by the Confederation of Real Estate Developers of India, in the next five years 250 million sq feet will be added to greater Kolkata, requiring an investment Rs 37,500 crore.

Rajarhat in the north-east, Dankuni in north-west, Howrah in the west, Diamond Harbour road beyond Joka and Batanagar in the south-west and the Garia-Narendrapur stretch in south-east are areas which will see more than 50 per cent price rise in the next one year, said real estate sector sources.

Two years back, property prices in Rajarhat were not more than Rs 1,200 sq feet.

Prevailing prices are not less than 2,800 per sq feet.

Unitech, which is developing a 150-acre township in the area, is selling at around Rs 3,000 square feet. By the next year, Unitech expects to sell at not less than Rs 4,000 sq feet, says Ranjan Arora, assistant manager (sales), Bengal Unitech Universal.

In Dankuni, a mega township by the DLF group along with a couple of infrastructure projects are pushing up property prices.

The second Vivekananda Setu (across the Hooghly River) and the Belghoria Expressway, which are under construction, will further boost the prices here as Dum Dum airport will only be 20 minutes from Dankuni once the construction is over.

According to Jitendra Khaitan of Pioneer Properties, property prices in Dankuni have escalated by 40 percent over the last year, and about 50-60 percent rise is expected the next one year.

"It is only after two-three months that the exact price rise in the Dunlop area can be anticipated, but the area will see a substantial price rise after the DLF brand," says Himon Sanyal, head, corporate services(east), TrammellCrow Meghraj Property Consultants.

In the west, Howrah is another developing area as it has emerged as a suitable destination for middle-income group housing and small businesses based in Kolkata, says Khaitan.

Along with high-end township, a number of shopping malls and other public-utility service centres, which are coming up in the area are expected to jack up the prices.

The Kolkata West project, a mega township project, is attracting a number of NRI investors in the area. In the south-west, the proposed township on the surplus factory of Bata India at Batanagar is pushing up the prices.

The selling price per square feet area in the township is expected to be around Rs 2,000, whereas the ruling prices in the area is around Rs 900 per square feet.

"It is wrong to say townships are pushing up the prices in a particular area, the he construction cost over the last year has gone up so much, that it is impossible to built houses at less than Rs 1,000 square feet," claims Sumit Dabriwal, managing director of Riverbank Holdings Pvt Ltd, which is executing the Batanagar township project.

In the south-west, Diamond Harbour road stretch also witnessed moderate price rise over the last year, mainly due to the government's proposal to develop a township in Baruipur.

Alongside, Raichak-Kukrahati bridge is expected to drastically cut travel time to Haldia.

Both the projects are scheduled to be built by Indonesian company Salim. However, the fate of the projects appear uncertain as of now because of local opposition to the presence of Salim as an infrastructure developer. In consequence, real estate analysts do not predict substantial price rise in the area over the next year.

"The are has a lot of untapped potential, but at present not much price rise is expected as infrastructure is a problem here," says Sanyal. Garia and Narendrapur in the south are other areas attracting investors and occupiers, as metro rail extension till Garia will ensure easy connectivity to the rest of the city.

The prevailing prices in Narendrapur is around Rs 1,500 square feet. A moderate 15-20 percent rise in price is expected in the coming year. Areas like Patuli, Baishnabghat, Barrackpore, Sonarpur and Barasat are some other upcoming areas drawing the attention of small investors and MIG and LIG occupiers.

Following industrial development in smaller West Bengal towns like Durgapur and Haldia, a number of housing projects are driving real estate sector development in the areas.

As Kolkata appears to be poised for rapid information technology sector led growth in the coming years, many property consultants feel the time is just right to invest in Kolkata.

"It is the right time to invest in property in Kolkata, as at least 50 -60 percent price rise is assured in the some of the developing areas in Kolkata," says Sanyal.

"Suburban locations are witnessing some pressure as increasing interest rates have magnified the outflow for genuine purchasers. While Kolkata market has traditionally been know to be less volatile compared to Mumbai and Delhi, and hence, any investor who is comfortable with the city and moderate long-term returns, can consider this is as a reasonably safe destination." says Kaustuv Roy, analyst at Cushman Wakefield.

Kolkata continues to be a tier-II location in terms of property and land valuation, and most experts think the city will take quite some time to catch up with developed markets like NCR and Mumbai.

"Kolkata is referred to as a Tier II City for commercial growth and as of now does not compare to the real estate prices witnessed by more established markets like Mumbai and NCR, despite Kolkata's recent emergence (or relatively newer emergence) as an IT/ ITES. Furthermore, there is still hesitation amongst new entrants for Kolkata as a destination; hence the demand will be a factor which will act as a deterrent to growth," says Roy Price appreciation has been in the range of 15 per cent to 20 per cent on an average through the past 12–18 months in Kolkata and may remain similar in the next year, he predicts.

Certain areas like New Town Rajarhat where several mass housing projects are nearing completion, the prices may appreciate 5 per cent more than the other areas, he adds.

Similar is the view of Ranjan Arora from Unitech, who says, "The same apartments which we are selling at Rs 3,000 in Kolkata would have fetched around Rs 5,000-6,000 sq feet in Mumbai."

DLF gets bids for 70 pct of IPO on day 1

MUMBAI (Reuters) - India's biggest IPO of $2.4 billion by developer DLF Ltd. received bids for about 70 percent by Monday afternoon on the first day, bankers said, as big investors shrugged off fears of an overheating property market.The institutional portion of nearly 60 percent of the 175 million share offering was fully subscribed within an hour of opening, the company said.Retail investors were slow to put in applications by mid-afternoon on concern the offering was pricey at an indicated band of 500-550 rupees each, but bankers said they were expected to bid before subscription closes on Thursday."I am a bit hesitant, but that does not mean I would not invest," said Priya Chawla, a retail investor who has been buying stocks for three years. "DLF is a good company, but the pricing is high and one has to stay long term to get enough returns."A buoyant Indian economy has boosted demand for office space, shopping malls and houses, but a sharp rise in prices and higher interest rates have pushed buyers to the sidelines.DLF, which built much of the outsourcing hub of Gurgaon on the outskirts of Delhi, merits a premium given its track record and earnings potential with land holdings of more than 10,000 acres (4,000 hectares), analysts said."DLF is the best way to get exposure to Indian real estate, given its size, quality and credentials," broker Edelweiss Securities said in a client note before the IPO opened."We consider the company a default play on Indian real estate as well as a growth story going forward."DLF said it had received bids for the full institutional portion of 104.4 million shares.Before the IPO opened, the order book for the issue was fully covered, a source close to the deal said. Bids still have to be submitted formally once the offer opens, and in India institutional investors have the option to withdraw bids before the issue closes.If the sale is priced at the upper end of the indicative range, DLF would be valued at around $23 billion, ahead of State Bank of India and ICICI Bank and rival Unitech Ltd., which is worth around $11 billion.Analysts said they expected the aggressively marketed offering of 10.27 percent of DLF's enlarged capital to sail through, but concerns remained about the valuation and the prospects for profitability."While demand outlook over the longer term remains intact, primarily driven by the IT sector, mortgage rates have moved up nearly 200 basis points and impacted investor-led demand for real estate projects," said CLSA in a report before the IPO."The slowing pace of sales may impact prices going forward, which remains the key threat for the sector," it said, adding DLF was attractive at the lower end of the indicated price range.The IPO was shelved in May last year after the stock market dropped sharply and amid disputes with minority shareholders. At the time, New Delhi-based DLF hoped to raise over $3 billion.
PRICEY OFFERINGAnalysts have estimated DLF's price band shows a 9-20 percent premium on its "net present value", or NPV, based on its land holdings and prospective earnings."A majority of the global real estate stocks in Hong Kong and Singapore trade at a 10-30 percent discount to NPV," said First Global Securities before the IPO, adding that each DLF share was worth 413 rupees on an NPV basis.However, DLF's smaller rival Unitech commands a 28 percent premium on NPV, while Mahindra Gesco Developers Ltd. trades at a 40 percent discount and Ansal Properties at a discount of about 35 percent, analysts said.DLF, which plans to spend nearly 70 billion rupees to buy and develop property, has offered brokers 200-500 rupees for every application from their clients, against a normal practice of 0.2-0.4 percent commission on allotment, brokers said."We've not heard of this sort of incentive in the primary market," said M.A.A. Annamalai, director at Akshaya & Co. which has been selling IPOs for nearly two decades.The IPO is lead managed by Kotak Mahindra and DSP Merrill Lynch. Other managers are UBS, Citigroup, Lehman Brothers, Deutsche Bank, ICICI Securities, and SBI Capital Markets.

Hot Property

Retail Investors with a horizon of over one year can consider subscribing to DLF’s public issue. The company, which hopes to raise Rs 9,625 crore on the higher end of the band, will use the issue proceeds for land acquisition, development of existing properties and debt repayment.

BUSINESS : DLF is India’s largest real estate company and owns development rights to 574 million sq ft of real estate, of which, 51% is in the National Capital Region (NCR) and 23% is in Kolkata. The company builds and sells residential, office and retail properties. It also proposes to enter hotels, special economic zones (SEZs) and multiplexes. Last fiscal, the company delivered 10.3 million sq ft of property to end users and entered into sale agreements (including advance sales) for about 20 million sq ft. DLF currently has 44 million sq ft of projects under execution, of which, 61% is office space, 22% is retail space and the remainder is residential. One encouraging factor for the company is the advances received from customers — these rose from Rs 590 crore in FY05 to Rs 2,404 crore by end FY07.

FINANCIALS : The company recorded a total income of Rs 4,034 crore in FY07, up 224% over FY06. Net profit stood at Rs 1,941 crore in FY07, up 10-fold over the previous year. Close to 60% of DLF’s FY07 sales were from asset sales to group companies. Debts added up to Rs 9,932 crore by the year end and the company saw an interest outgo of Rs 308 crore, up from Rs 169 crore in FY06. Around Rs 2,500 crore from the issue proceeds will be used to retire part of the company’s debt.

VALUATIONS : Based on last year’s figures, DLF has a trailing P/E multiple of 48. DLF’s valuation is not based on its past cash flows, but on its expected future income. The company’s USP is the land holdings it has in Gurgaon, which were acquired at a lower price, much earlier. This allows DLF a substantial margin on the finished products it sells. Assuming a 20% growth in volumes and a selling price of Rs 6,000/sq ft, the company’s forward P/E multiple works out to 15-16. While DLF got a price of Rs 7,500/sq ft on FY06 sales, most of it was commercial and was in the NCR. Future sales will have a higher share from other areas and will also have a greater share of residential property, which is likely to lead to lower average rates. The company can also benefit from upside in the new businesses it is entering into, such as hotels and SEZs. The fact that DLF is the largest real estate player in the country will also fetch some premium for the company. A slowdown in the real estate sector can impact earnings due to lower sales and prices. Sales have fallen in some cities in recent months, but this should not be a major concern for long-term investors. Rising incomes and a growing economy should ensure strong demand over a longer period of one year or more. This makes DLF a good pick for an investor with a similar horizon.

Worldwide Hotel industry breaks records

Sunday, June 10, 2007

DLF's real estate story

Four years after delisting its shares from the Delhi Stock Exchange, real estate behemoth DLF is knocking at the capital market again selling shares at - hold your breath - 837 times the valuation at which it exited the stock market. Should you buy?
If the country's largest real estate developer DLF had been listed on the bourses over the past four years, it would have delivered a return unparalleled in the history of Indian stock markets.
Promoter K P Singh opted to delist the company in its earlier avatar as DLF Universal from the Delhi Stock Exchange in September 2003 by buying back the public holding, valuing the company at Rs 112 crore. Over the past 45 months, DLF has seen an annualised appreciation of over 500 per cent going by the valuation it is commanding for its latest initial public offer.
The 10-odd per cent public shareholders would have potentially amassed wealth of over Rs 8,500 crore by now had the company remained listed. In a dramatic reversal though, the ace builder is now offering to dilute 10.26 per cent stake earlier bought back by the promoters dirt cheap -- for less than Rs 50 crore, for a minimum of Rs 8750 crore.
"The market would not have forgiven a smaller company for this act but here we are talking about one of India's largest private enterprises and that too at a time when global investors are queuing up to get a share of booming real estate market," says a leading fund manager on the condition of anonymity.
After controversies relating to a small group of minority shareholders who had remained invested in the stock even after the delisting, DLF was forced to withdraw its application for public offer from the capital market regulator last year.
Even as the book building for the IPO constituting 17.5 crore equity shares of Rs 2 each priced in the band of Rs 500-550 begins today, it appears that the delay has ironically played out in favour of DLF with market sentiment much better than a year ago.
The company has utilised the additional time fruitfully by changing its corporate structure and strategy that has helped it inflate profits for the past year over ten times and make it less difficult to justify its aggressive projections.
Valued at the higher end of the price band, the company would be the eighth largest by market capitalisation, post-listing. With negative cash flows and current earnings abysmally low compared with future projections, the company is demanding its price relying solely on its vast land holdings, the value of which is not clear.
Here is the promise. Armed with 10,000-odd acres, DLF plans to build over the next 10 years more than double the area it has developed over the past 60 years. In the next three years, DLF has a target of developing over 70 million square feet or triple the area it has developed till the last calendar.
As a result, investment bankers are forecasting the company's sales at Rs 20,000 crore in fiscal 2009, up from Rs 2600 crore achieved in the last fiscal, and net profit in excess of Rs 11,000 crore, roughly six times that for the year gone-by.
The grand plan
DLF has outlined a three-pronged growth strategy, which includes strengthening its pan-India presence, building up land reserves at strategic locations, and leveraging its real estate capabilities in related areas be it special economic zones or hospitality.
The company will primarily be a developer and sell its properties retaining limited assets to be leased out. The money raised through the IPO would go towards buying more land (Rs 3500 crore), developing existing projects (Rs 3500 crore) and repayment of loans.
Going by the scale of development done so far, DLF is the largest real estate player in the country with land reserves of 10,255 acres or about 574 million square feet (msf) of developmental area. Of this, 171 msf is located in or near developed urban areas while 404 msf is urbanisable.
"About 90 per cent of the total land bank is available as large contiguous plots enabling large integrated development", says, chief executive officer Rajiv Singh.
After being centered around Delhi for many years, the company now has a nation-wide presence across 31cities and towns. It has developed 29 msf of residential, commercial and retail projects and integrated townships spread over 3000 acres in Gurgaon so far. Currently, some 44 msf of development is under progress and projects involving 524 acres is planned over the next few years.
The company intends to focus on its core competence while partnering with leading global players such as Nakheel (SEZs), Laing O'Rourke (construction), ESP (engineering and design), Feedback Ventures (project management) for better execution.
Right from acquiring low cost land to creating a full fledged township to realise the true potential of the land, DLF has amply demonstrated its success in Gurgaon. One key advantage is that DLF's average cost of acquisition of land is fairly low at around Rs 274 per sf which will enable it sit out the cycles and not indulge in distress sale ever.
Some key determinants of profitability for real estate companies apart from the land cost, is the developer's land acquisition and aggregation skills, relationship with the state authorities and reputation � on all these DLF scores highly.
And with its unquestionable capabilities as a successful developer, DLF seems best placed to capitalise on the booming real estate market, which is expected to grow at 20 per cent-plus annually from the current size of $40-45 billion.
Even more, the national capital region, where the company has over 50 per cent of its land holdings, is among the fastest growing markets in the country. Apart from the boom in retail malls and residentials owning to rising disposable income, there are several new vistas opening up for developers which DLF is planning to tap -- for instance, SEZs which offer opportunities to create integrated townships, hotels and serviced apartments, multiplexes, airports and the list goes on.
The risk
A look at DLF's financial performance is hardly inspiring. Last year, the company sold its asset to a group company to get its revenues and profits to a respectable level. Sales to fully owned promoter company DLF Assets Limited (DAL) constituted almost 55 per cent of total revenues and 77 per cent of profits.


(Rs crore)

DLF Unitech
Land bank (acres) 10255 10332
Developable land (sq ft) 574 472
Net debt 9500 2600
IPO cash 8800


Outstanding shares (cr) 170 81
Market-cap 85200/93700 48700
Enterprise value 85900/93600 48700
EV/Square FT (rs) 1498/1631 1032
According to a newly devised strategy, the company would, instead of leasing out commercial projects, indulge in outright sale to potential buyers including DAL. This model rests on the ground that DAL would be able to garner low cost capital by tapping the alternative investment market overseas and pay a higher capitalisation rate for DLF's properties resulting in faster growth in revenues and better margins too.


(Mn Sq Ft)


Under progress

Plots 195 0 46
Residential 19 7 375
Commercial 7 27 60
Retail 3 10 44
Total 224 44 526
Though swift disposal of assets can favourably alter DLF's return ratios, DAL's ability to raise cheap funds is still unclear and poses a threat to DLF's cash flows.
Even otherwise, earnings of developers tend to be less predictable with lumpy revenues and cash flows. And after the phenomenal rise in property prices over the past three to five years and the rise in interest rates, analysts expect a property price correction because of the double whammy.
Though demand for retail malls and commercial estates is currently buoyant, huge supplies are yet to hit the market with most builders planning an aggressive ramp-up, again, increasing the risk of weaker property prices.
On the residential side too currently, investors (or the secondary market) are selling residentials at a price lower than the builder's price in most parts of the country and the demand from investors could dry up if cost of funds continue to be high and properties do not turnaround around quickly. Roughly, a 1 per cent fall in sales realisation cuts DLF's earnings by 2 per cent. If prices were to correct about 10 per cent, a fifth of its earnings could be shaved off meaning stock prices could take a considerable beating.
Is it fair?
So what is a fair price to pay for DLF? Since there is little strength in either its P&L or balancesheet, an investor is essentially betting on the ability of the management to create another Gurgaon and realise the best price for their cheap land. To put a number to this, analysts are looking at the net asset value of the company which is essentially a measure of cash flows of the firm from its entire land bank discounted by its cost of capital (CoC) less the debt in its books.
Various analysts peg the net asset value in the range of Rs 70,000 crore to 95,000 crore. Edelweiss estimates NAV at approximately Rs 88000 crore based on a CoC of 12 per cent primarily assuming that the company would develop the entire land bank only over the next 15 years as against the management projection of 10 years.
This results in fair value of Rs 512-517. First Global estimates NPV at Rs 70,000 crore or Rs 413 per share based on its base case assumptions and says that a majority of global real estate companies in Singapore and Hong Kong trade at a discount of 10-30 per cent discount to NAV.
DLF's investment bankers too estimate NAV to be in the range of around Rs 80,000 crore to Rs 1 lakh crore but they argue that the company deserves to be traded at a premium to its NAV, an argument most domestic fund managers refuse to buy. Property stocks in Hong Kong, China, Singapore, Japan and Australia have traded at earnings multiples upwards of 20 in their early cycle but on this metric again DLF looks grossly expensive.
Apart from property prices, another risk for DLF is that of delays in execution. Edelweiss estimates that for every one year delay in execution would drag down the net asset value by six per cent.
Says Ramdeo Agrawal, managing director, Motilal Oswal, "Although the future seems quite rosy, the stock will face several challenges going forward trying to meet the tall projections that form the basis of current valuations." He adds that there is little margin of safety in buying the stock at current valuations.
Besides, with nearly 112 related entities and the promoter's past track record concerns on corporate governance remain. Although Rajiv Singh reassured investors of good governance standards during the IPO launch, on paper (prospectus) the company has gone out of the way to state that "we cannot assure that our promoters will act to resolve any conflicts of interest (with certain other promoter-owned companies) in our favour or in the best interest of our minority shareholders," signalling that investors better be prepared for negative surprises.
Having said that, the issue looks poised to deliver good returns in the short term. Flush with liquidity from global investors, investment bankers are confident of a huge over-subscription. For the common investor on the Street it is time to make a quick buck. For in the longer term, India's largest builder appears to be on a shaky ground.

Godrej to raise Rs 400-600-cr through IPO

New Delhi: India’s premier conglomerate Godrej group’s real estate arm is ready to float on initial public offer to fetch Rs 400-600-crore for fueling its expansion plans.

Godrej Properties, which is presently developing 2-crore sq.ft of real estate space across the country, will go for an IPO to offload 10 per cent of its equity.

"We will be offloading 10 per cent in the second-half of this fiscal. Currently, Godrej Industries owns 82 per cent stake while the family, 18 per cent in the company," Godrej Group Chairman, Adi Godrej, told PTI.

With the offloading, Godrej Industries' holding will come down to 75 per cent and the family's to around 15 per cent, Godrej said, adding that merchant bankers would be appointed shortly.

"We are in discussions with 3-4 of them and a decision will be taken very soon," he said, without revealing their identities.

While Godrej declined to reveal the issue size, saying "it is too early to talk about this", industry sources say the issue could be anywhere between Rs 400 and Rs 600-crore.

While not totally ruling out any pre-equity placements, Godrej, however, said that it was not on the radar presently.

Elaborating on the company's expansion plans, Godrej said property development would be a thrust area for the group and in five years Godrej Properties could emerge as the largest player within the group.

Hines is a towering influence on Houston landmarks

In the mid-1960s, developer Gerald Hines started two major real estate projects unlike anything he had ever done before: a 50-story skyscraper in downtown Houston for a major oil company and a multilevel indoor mall with an ice-skating rink in the middle.

It was a chaotic time for the young developer, who until then had built mostly small office and warehouse properties.

"The time when we built One Shell and the Galleria at the same time with a small net worth — that was crazy," said Hines, who didn't get much sleep in those days. "I'd get up at 3 and 4 o'clock in the morning."

His son, then about 12, remembers it as a stressful time for his father. Having everything on the line "made him feel very uncomfortable."

"I think the ranch was bet," said Jeff Hines, president of the Houston-based real estate firm founded by his father, now chairman. "Luckily, the two projects came off well."

In the year of the company's 50th anniversary, Hines recently took a rare driving tour of many of the local landmarks he created here over the past five decades.

It's hard to imagine this city without a Galleria, Williams Tower, JPMorgan Chase Tower, Pennzoil Place or any of the number of Hines buildings designed by world-renowned architects I.M. Pei, Cesar Pelli and the firm Skidmore, Owings & Merrill. His collaboration with the late Philip Johnson resulted in a showcase of buildings that some say was the architect's best work.

"Gerald Hines put us on the map in terms of great buildings," said Barrie Scardino, executive director of the local chapter of the American Institute of Architects. "Architecturally, Houston would be pretty poverty-stricken without him."

Hines raised the bar by showing that quality and financial success can be mutually attainable.

He was one of the first developers to hire world-famous architects, believing tenants would flock to top-quality buildings, even in a down market.

And architects appreciated his vision.

"Many developers just want to tell the architect what they want," said Gyo Obata, a founding partner of HOK, the company that designed the Galleria. ''I think he's one of the few developers that really listens to the architect."

That's not to say he's not a demanding client.

Hines said he rejected Philip Johnson's first four designs for Post Oak Central, an office complex on Post Oak, because "they didn't make sense economically and real estatewise."

Consummate salesman

On a recent overcast morning, Hines stepped into a Lincoln SUV outside the Williams Tower, where his company is headquartered, to return to his roots.

Dressed in a tailored brown suit with a patterned olive tie, the 81-year-old has an understated presence. When speaking, he chooses his words carefully, and his voice is soft enough that you almost have to lean in to hear him.

He hardly seems the type to dream up complex, city-shaping real estate projects or persuade institutional investors to fork over billions to spend at his discretion.

But few developers have amassed the real estate portfolio Hines has.

His privately held firm of 3,150 employees — with 618 in Houston — owns or has an interest in 167 properties worth about $16 billion and has offices in 96 cities, including 29 outside the U.S. It also manages another 129 properties for third parties valued at about $13 billion.

Since launching the company as a one-man shop in 1957, Hines has completed more than 590 projects worldwide, acquired 140 properties and has another 95 under development. The firm would not reveal rental income or revenue.

Those close to him say he's the consummate salesman.

"He has the ability to listen to people and hear what they have to say, or perceive what they're not saying," said Louis Sklar, a retired executive vice president with Hines. "It's the characteristic of any good salesman. He's just better at it than most people."

Financial pioneer

Completing the Galleria and One Shell Plaza sent Hines' star soaring.

One Shell Plaza was the world's tallest reinforced concrete structure when it was completed.

The Galleria, built on what was then a prairie, was striking in a different way.

Modeled after Milan's Galleria Vittorio Emanuele, its success made it the model for many mixed-use complexes in the U.S. and abroad, according to the Houston Architectural Guide.

The ice-skating rink was added to increase lease rentals on the basement floor by drawing traffic to it, Hines said.

It also gave the mall a distinct identity.

"That's what you're trying to do as a developer, differentiate your product," Hines said.

After both projects were completed by 1971, Hines' newly elevated reputation allowed him to enlist partners with deep pockets so he wouldn't have to shoulder all the risk.

Some of his early investors were Deutsche Bank, Royal Dutch Shell Pension Fund and the PGGM pension fund. Today, they include the California Public Employees' Retirement System, GM and the New York State Common Retirement Fund.

Though he handed over the company reins to his son in 1990, Hines' desire to create is still evident.

A few minutes after leaving the Williams Tower, Hines revealed with some excitement that his company had just put in a bid topping $1.5 billion for a development in London called Chelsea Barracks that would be the largest project it's ever done.

The deal would involve redeveloping a 13-acre British military site into a high-end residential complex.

'An area in transition'

Jaser Harris Jr., who runs a driving service and has driven for Hines and his company for about 18 years, started the tour in Midtown, where Hines began his real estate career by purchasing a building. The 3,000-square-foot structure at 1309 Anita is gone, replaced by new town homes.

Hines' words trailed off as he looked out the window at how the neighborhood has changed.

"It's an area in transition, which we have lots of in our city," he said.

He's pleased with the way Houston has developed but thinks more housing would be good for downtown. "I think dead cities at night are dangerous and cause all kinds of problems and lead to rapid deterioration," he said.

Going global

Hines has a home in River Oaks, but he lives in London full time. He moved there more than a decade ago to concentrate on international operations as his son took over running the Houston-based business.

"I think he's doing a fantastic job," Hines said. "I think we have a lot of outstanding executives."

He also met his wife in Europe. In his second marriage, he wed German-born Barbara Fritzsche in 1981. The former French and English teacher attended New York's prestigious Pratt Institute and has been involved in architecture, interior design and painting. The couple has two children, Serena and Trevor. Hines and his first wife, Dorothy Schwarz, had two children, Jeff and Jennifer, before divorcing.

Living overseas helped Hines expand worldwide.

Lately his focus has been on the Middle East and on India, where developing means dealing with complex governmental controls and shifting leadership.

"We like problem areas because other people will normally try to avoid those and we'll try to figure it out," Hines said.

The next stop on the tour was Richmond Avenue, where Hines developed about a dozen 1960s-style buildings.

Hines' memory sharpened as he talked about these early projects, recalling the tenants that have occupied them and when each was built.

When he saw a big, blue sign on one of his early buildings, he winced.

"That's so awful," he said, lamenting that the city doesn't have strict sign regulations.

Lifestyle change

Whether pioneering a concept for a shopping mall or skiing 60 days the year of his 80th birthday, Hines isn't the type to do things half-heartedly.

When diagnosed with a heart condition at 50, he radically changed his diet and lifestyle.

He became a "living example" of how a largely vegetarian diet, exercise and meditation can reverse coronary heart disease, said health guru Dean Ornish, author and founder of the nonprofit Preventive Medicine Research Institute in Sausalito, Calif.

When Ornish was in medical school at Baylor, Hines helped him fund a study on the subject and recruited others to do the same, leading to larger grants to expand his research.

"It wouldn't be an overstatement to say that none of this would have happened without him," Ornish said. "In a very real sense, many, many people's lives will be healed and saved, most of whom he will never meet but will be indebted to him for that."

Learning early on

Hines' legacy includes setting a standard of quality. He's obsessive over small details, such as the weight of a door, the feel of a handle or the look of a sign.

Hines learned about building early on in his career.

After graduating from Purdue University, not far from his hometown of Gary, Ind., with a degree in electrical engineering, he took a job with American Blower Corp. and was soon transferred to Houston. A couple of years later he joined Texas Engineering.

After learning about building systems, he decided to take the leap to development.

Though those who know him well say he's an expert in every discipline of development, he's best when he's conceiving a project and working with architects.

"He gets so ginned up and loves it so much," said Jeff Hines, 51. "In a session with Cesar Pelli and David Childs you can just see the passion come out."

Jeff Hines experienced that early on. He recalled when his father drove him to school: "We'd leave at 5 or 6 in the morning and go look at construction sites."

Meeting the developer

As the tour came to an end, Hines was back at the Williams Tower standing by the 64-foot water wall nearby.

He looked across the street to the site of a future high-rise and called over to a man in a suit to ask him about the project.

The man recognized Hines and rushed over to shake his hand, introduce himself and ask what the legendary developer thought about his proposed building.

The brief exchange was like a fledgling actor stopping a celebrity for an autograph or a bit of wisdom.

Hines is slowed by some of the ailments that brought him to Houston. He was in town for medical reasons, which included a hip replacement and an unexpected heart bypass.

Once he's recuperated he'll spend some time at his home in Aspen and then go back to England.

Though the company eventually lost out on the Chelsea Barracks bid, there's plenty to do.

Hines has 50 projects under development outside the U.S. and is considering opening an office in Turkey.

But that doesn't mean his bond to Houston is any less strong. When asked whether he'll ever return here to live, he answered quickly.

"Oh yeah," he said. "Houston was where I planted my flag in 1948, and it's still my hometown."