Morley makes Ridgewell head of Asian property

Morley has appointed Nick Ridgewell to a newly-created role as head of its Asian property business as part of the group’s expansion into the Asian markets.

Morley launched its Asia business in April this year and plans to invest $10bn in the region over the next four years.

The company plans to work with multiple joint venture and fund partners in Japan, China, South Korea and India to source developments and properties.

Morley currently has over $60bn invested in property assets in the UK and Europe.

Ridgewell joins from Macquarie, where he was running the group's real estate business in Hong Kong.

This included responsibility for managing listed and unlisted real estate funds and execution of property investment strategy and transactions throughout Asia.

He has previously been CEO of the Macquarie DDR Trust, a REIT listed on the Australian Stock Exchange, and has also worked for Coopers and Lybrand in Sydney.

Source

Tata Realty to set up USD 750 mn real estate fund

Mumbai, Oct 29 (PTI) Tata group company, Tata Realty and Infrastructure Limited (TRIL), will set up a seven-year, USD 750 million real estate fund, a top company official has said.
The real estate fund will comprise long-term investors such as pension funds, insurance companies and government organisations, Tata Realty's Managing Director Dinesh Chandiok, told reporters on the sidelines of the US-India CEO Forum here today.
The company hopes to close the fund in two weeks' time, he said.
On the prevailing real estate prices, Chandiok said demand-supply gap in the industry still existed and hence, realty prices may witness a steady rise.
According to him, the booming stock market and capital inflows into the country might not have much of an impact on realty investment.
"There may be some diversion of funds into the stock market, but the impact on realty investments may not be much," Chandiok said.
Tata Realty is a 100 per cent subsidiary of Tata Sons and is its real estate and infrastructure development arm, focusing on infrastructure projects related to airports, urban infrastructure, roads, bridges, SEZs and logistics parks, among others. PTI

SOurce

Realty boom finds slower rhythm

The real-estate boom is far from over, but is maturing after a frenzied round of activity that has seen developers sprout, projects mushrooms and new areas turning hot.

Despite the slowdown or marginal correction in the secondary market in real estate, prices will rise, albeit at a slower pace, in the near to medium term, leading developers from across the country said at the HT Estates Conclave on Saturday.

As customers are increasingly exposed to world-class products through various sources of information, they are more demanding in terms of accessories and other amenities.

“For quality products, there is a willingness to pay premium,” said Sanjay Chandra, managing director of Unitech Ltd.

Despite the fact that the real estate sector is an engine of growth, growth in the sector is stifled by excessive regulation, said Niranjan Hiranandani, managing director of the Mumbai-based Hiranandani Group. “In the last 15 years of liberalisation, the government has relaxed norms in almost every sector, barring real estate,” he added.

Inaugurating the event, Jaipal Reddy, Union Minister of Urban Affairs said the sector was a big job spinner.

“As per government estimates, the sector needs an investment of Rs 3,50,000 crore over the next five years. Since the government is expected to spend Rs 1,00,000 crore, these investments will be met through the public-private partnership model,” he said.

The issue is not the demand, as there is demand for good and affordable houses everywhere, said Rohtas Goel, chairman and managing director of Omaxe Ltd. “Land, being one of the most critical components, will continue to influence the price, for which the government policy is also important,” he said.

India is a long-term story and the real estate sector is just at the cusp of a new age, and quality drive premiums and price appreciation, said Yash Gupta, joint managing director of Hines India, a wholly-owned subsidiary of Hines Inc, one of the world’s leading developers.

The rise in demand in even ‘B’ and ‘C’ towns is because people want better lifestyles, said Pranav Ansal, director, Ansal API. There are many old B-grade towns such as Jodhpur, which did not even have sewer lines until two years ago and private developers are driving the change, he said.

Given the demand trend, the sector is expected to grow by more than 30 per cent every year, said Anshuman Magazine, managing director of the Indian unit of leading real estate consulting firm CB Richard Ellis, who moderated the session.

Ashish Puravankara, director at south-based Puravankara Projects Ltd, said developers had made super-normal profits in the past three years because of their old land banks, while now they have to buy land at higher rates.

“Their profit margins are getting squeezed as they cannot afford to increase the price exponentially,” he said.

In other words, the real estate boom is for real, but current ups and downs mark a growing up phase.

 

Source

What state govts can learn from de Soto and a market fundamentalist

If capitalism has to work in developing economies, including India, it has to become more inclusive, it has to understand and deliver property rights to more people. That’s what Peruvian economist Hernando de Soto, adviser to 40 governments, told me last week as we discussed the future of capitalism in India. For this, he said, governments need to first study the laws that govern property rights and then change them so as to reflect their country-specific realities. The conversion of squatter rights to legal ones, for instance.

His argument, that that has been the case across the world and one that must be implemented sooner rather than later as the developing world, including China and India, joins the universal globalisation phenomenon, is compelling. Only a small percentage of people, around 20 per cent, in developing economies (no data available for India yet) practically function under the western system of legal rights, he said. The rest of the population functions like the way people in the US and Europe used to, as close as just hundred years ago, with informal or non-legal systems of rights.

But implementing and delivering clean property titles to the poor is a far cry, a very long-term idea that will get no political hearing today, particularly in a fractured polity like India’s. The task gets further complicated when nine out of India’s 10 land titles are under legal dispute in one form or another, as a McKinsey report notes. Take de Soto’s theory a little further and you’ll probably reach a conclusion that like the sub-head of his 2000 book The Mystery of Capital, capitalism may not be able to triumph in India. While the dreamer in me disagrees, my pragmatic side tells me that in some states the bridge towards that triumph is being built in the form of lower stamp duties.

A quick look at another sector shows the positive results of lower transaction costs, unarguably one of the first steps towards efficiency and inclusion. I’m talking about the impact that finance, markets and lower transaction costs, when replicated in the property market, can deliver. As brokerage rates on share transactions fell by 92 per cent, from 2.5 per cent in 1992 to 20 basis points (that’s 0.20 per cent) today, turnover in the cash segment of the Bombay Stock Exchange rose from Rs 45,696 core to Rs 816,074 crore in 2006 (almost an 18-fold jump), the number of trades rose 20 times to over 260 million, and the average trade size rose 8.5 times to Rs 30,911.

This model needs to be urgently cut-pasted on property markets through lowering of stamp duties. Among others, the Delhi government is doing very well on this front. Stamp duties in the city, which had been steady at 8 per cent between financial year (FY) 1981 and FY 2001 jumped 5 percentage points to 13 per cent in FY 2002. In FY 2004, the government brought it back to 8 per cent. The result: between 2003 and 2007, the government’s receipts from stamp duties rose from Rs 382 crore or 6 per cent of total receipts to Rs 850 crore or 8 per cent of total receipts. If the Rs 1,350 crore target (10 per cent of total receipts) for FY 2008 is reached, the state would have seen receipts from stamp duties grow at a compounded rate of almost 30 per cent per annum — almost as fast as corporate India’s net profits.

Other states are learning too. West Bengal, for instance, was an early starter, when in FY 1995, it cut a six-year outrageous 21.2 per cent rate to 14 per cent and then, two years later to 8 per cent. Uttar Pradesh reversed a 10-year 14.5 per cent rate to 10 per cent in FY 1999. On the other hand, Madhya Pradesh, which raised rates from 2 per cent to 11.5 per cent in FY 1980 and Gujarat, which raised rates from 5 per cent to 7.5 per cent in FY 1983 and then further to 10 per cent in FY 2001 are the laggards in the rather painful history of stamp duties in India.

Going forward, the Delhi government plans to reduce it further — the state cabinet has approved a fall to 6 per cent for men and 4 per cent for women — which is good news for all stakeholders: households, the real estate and construction industry and the government. By lowering rates, the incentive to dupe the exchequer of legitimate taxes falls. The average black or unaccounted cash component in Delhi, at between 40 and 60 per cent, remains high, but it’s early days. Marry this fall in stamp duty rates with the way the Central government is trying to plug every possible loophole on the spending side, and the future of unaccounted wealth moves from black to bleak. Scholars have argued that state governments could double their stamp duty receipts if properties were valued correctly.

But like a chicken-and-egg syndrome, I don’t think that’s likely to happen unless, ceteris paribus, stamp duties fall like they have in Delhi, West Bengal and Uttar Pradesh. If stamp duties are looked upon as a service delivered to households to enable their most expensive transaction, which in turn facilitates wealth creation through credit availability and new instruments like reverse mortgages, it should, like brokerage rates in securities transactions, be brought down to levels that match the scale and velocity of such contracts, the net result of which could well be a 1.3 per cent addition to the GDP growth rate, according to McKinsey.

Of course, all these issues — de Soto’s legal, finance ministers’ fiscal, market participants’ transactional, policymakers’ economic, home ministers’ social — need to be resolved simultaneously. But until politics finds a way to work on the rest, let’s learn from the markets and rewrite the transaction cost numbers. If the rising Sensex is a manifestation of lakhs of investor inclusion due to lower costs, it’s about time we replicated the inclusion model for crores of households in property markets and reduced the friction to mass wealth creation. The National Housing and Habitat Policy’s recommended rate: 2-3 per cent; mine: less than 1 per cent; let the debate — and wealth creation — begin.

 

Source

Royal Palms to invest Rs 1,500 cr

MUMBAI: Real estate developer Royal Palms India on Sunday said it would invest Rs 1,500 crore in next three years for developing an eight million sq ft property in suburban Goregaon.
"We would build 5 star, 4 star and 3 star hotels, IT offices, residential properties, villas and a retail mall. We would be roughly investing Rs 1,500-2,000 per sq ft area for construction," Royal Palms India Joint Managing Director Dilawar Nensey said.
The Rs 1,500 crore would include only the construction cost and not the land cost.
Royal Palms has a land bank of 240 acre in Mumbai, 290 acre near Pune and 80 acres in Alibaug.
Of the 8 million sq ft area in Goregaon, the company has got special economic zone (SEZ) status in 6 million sq ft area. So, it would build its IT offices in the SEZ area so that the benefits of SEZ could be passed on to IT players, he said.
Royal Palms has built 600 IT offices till date and would build 400 more.

Source

Decorative stock: Nitco Tiles

Nitco Tiles is a play on the ongoing construction boom and the changing taste of consumers.

Despite strong competitive pressures in the domestic tiles industry, Nitco Tiles has been able to emerge as one of the largest players. The company, which was the fifth largest player about two years ago, is now the second largest player having a diversified product portfolio and a national distribution network.

Nitco, which mainly makes floor ceramic and vitrified tiles, is now charting a new growth strategy, expanding its existing capacities, investing in real estate and planning to increase exports. It wants to acquire increase its market share as well.

Compared to other developed countries, using tiles in flooring is still new as most Indian households still prefer the traditional stone tiling.

However, this is changing because of higher disposable income, strong demand from the retail and commercial real estate and increasing globalisation. Today, the industry is growing at about 20 per cent a year and is expected to do well.

Nitco is a leading brand with a market share of 15 per cent. It offers a diverse range of flooring solutions such as vitrified and ceramic tiles, and marble. Also, it will now leverage its network of 550 dealers and 5,000 retailers while diversifying into products such as wall tiles, sanitary ware and bathroom fittings.

REALTY TILES

Rs crore
FY07
FY08E
FY09E

Sales
413.1
575
790

OPM (%)
15.2
15
15

Net profit
38
51.75
71.1

NPM (%)
9
9
9

EPS (Rs)
17.1
23.3
32

PE (x)
18.9
13.9
10.1

Besides product diversification, Nitco is also looking at exports to the US and Europe. These are considered to be large markets offering high margins.

�As a part of our strategy to enter into the export market, we are in talks with players in Europe for a suitable acquisition or a JV with an established player,� says B G Borkar, CFO, Nitco.

Considering its long term growth plans, it is expanding its capacities. It will double its ceramic capacity at Alibaug to 24,000 square metre a day by March 2008. It is also creating 8,000 square metre per day capacity for vitrified tiles, which will be commissioned by January 2008.

�We currently outsource about 30,000 square metre per day of vitrified tiles form China. With this new facility our total vitrified tiles capacity will become 38,000 square metre per day,� says Borkar. Nitco, which operates at 100 per cent capacity, will be able generate an additional turnover of around Rs 300 crore from new capacities.

Nitco has grown revenues at about 50 per cent over the last three years. However, as the scale is increasing, it may not maintain this growth from the tiles business alone. It expects the tiles business to grow at 30-40 per cent over the next few years. However, to sustain higher growth in future, Nitco has entered into the real estate business.

The company has formed a wholly owned subsidiary Nitco Realties. It currently has land bank of 1.37 million sq ft area consisting of eight projects in south Mumbai, Alibaug and Thane. These properties are valued at Rs 405.2 crore by Knight Frank. Most of these projects will be completed and start reflecting in revenues by year 2010 and 2011.

Nitco has attracted institutional investors such as Promethean, Reliance Mutual and HSBC. At Rs 323, the stock is trading at a P/E multiple of 13.9 times its FY08 estimated earnings and 10 times FY09 earnings. Nitco Tiles can be a good long-term investment to play on India�s booming real estate sector as a supplier to the sector as well as a developer.

 

Source

Demystifying realty

For valuing real estate businesses, the devil sure lies in the detail.

�He who dances close to the graves, always has to be careful he doesn�t fall in.�

This was the last sentence of an article written by the celebrated American real estate investor Samuel Zell, in which he described his strategy of profiting from distressed real estate.

Zell, nicknamed �The grave dancer� after the title of his article, has the reputation of being one of the most successful real estate investors, without ever venturing into the real estate development business himself.

In India, going by the dynamics of the real estate markets, many an investor holding real estate stocks in his portfolio would aspire to get close to Zell. Along with being a smart investor, one also has to be adept at predicting real estate trends to be as successful as Zell.

Investing in real estate has not been too different on this side of the planet either, when it comes to the basics. But it is the basics where we are most likely to falter, while valuing realty businesses � and the pitfalls are plenty.

The haves�
The mad rush to invest in realty businesses due to the rapid appreciation of real estate prices witnessed across the board, has been a mixed blessing of sorts for both real estate developers and investors.

Real estate players found an opportunity to raise money to fund their businesses and investors made a quick buck from the steep appreciation in real estate stocks. The real estate stock rally over the past two years was mainly driven by the skyrocketing real estate prices due to the high demand which in turn was fuelled by easily available home loans.

� and the have-nots
Since the real estate industry is at a nascent stage of getting itself organised, there is hardly any credible historical information available in terms of the demand-supply scenario and prices.

Further, with the vast geographic expanse over which a number of developers have their operations spread, analysts find it difficult to ascertain a precise valuation on their own and are compelled to go by the claims made by companies.

Taking into account a company�s land reserves and the market value of its ongoing projects, analysts therefore, estimate a net asset value (NAV) of the business at the prevailing market price, which is then discounted to arrive at a per-share valuation of the business.

�As the industry is yet to mature, the conventional price-earnings ratios or profitability ratios would be of little help. Therefore, a net asset value (NAV) based approach is taken which gives a fair idea of how much the company is worth at the time the NAV is estimated,� says Ritesh Vohra, director - investments, Saffron Asset Advisors, a real estate fund.

OLD TIMERS

CMP (Rs)
EPS (Rs)*
P/E (x)*

Ansal Housing
165.95
29.04
5.54

Ansal Properties
234.35
12.01
20.57

Mahindra Gesco
573.05
97.10
6.14

Unitech
353.60
7.75
40.25

* Trailing 12-month

�However, this approach is fraught with risks of subjectivity in discounting and many other blind spots,� he adds.

The method...
The NAV method ascertains the value of a realty business by summing up the present values of its assets which are in the form of land bank, existing and ongoing projects � all these translated into a saleable area.

�The assumption of the saleable area could differ from two analysts� points of view because both may differ on the assumptions of the floor-space index (FSI), the developable area over the given acreage and that of the prevailing market price of the assets,� says Sirshendu Basu, associate vice president - research, IL&FS Investsmart Securities.

Manisha Grover, head- strategic consulting and research at the real estate consultancy Jones Lang Lasalle Meghraj (JLLM) adds, �There is no standard practice prevalent to carry out valuations. Different valuers may follow different surveying and valuing standards.�

� and its madness
The biggest pitfall of considering a company�s valuation is the time-sensitivity of the NAV. The NAV of a real estate firm may change every day, as assets are added or sold, or as market prices change. Again, there is no prescribed guideline for realty companies to report the changes in their NAVs at regular intervals. This leaves plenty of room for guesswork on analysts� part.

Developers too, could misuse the NAV in a number of ways. Ramesh Jogani, managing director and chief executive officer, IndiaREIT Fund Advisors throws some light: �Going by the trends in India, a realty business commands a money market multiple of around 1.3-1.5 times on the value of its land bank, that of 8-10 times on projected profits, 10-12 times for the yield from rentals and income from service and maintenance contracts each.�

Jogani further explains, �Even if a real estate company buys land where it does not plan immediate development, the company�s valuation is pumped up by 1.5 times the value of this land. Again, the profit estimates of realty companies are vulnerable to execution risks, but the estimates could result into an immediate gain of 8-10 times the projected profit in the company�s valuation.�

Perhaps, this is the reason why Sebi has barred realty businesses from mentioning their NAV in the red herring prospectus while coming up with an initial public offering.

However, for the curious ones, the draft prospectus, in which most realty companies have mentioned their NAVs so far, are available publicly on the Sebi website.

Is NAV indispensable?
Until the realty industry matures, the conventional valuation metrics of price-earnings multiples, operating profit margins or return on equity will remain weak or unreliable. Till then, there is no alternative but to depend on NAV. �At least the method gives a starting point,� says JLLM�s Grover.

Adds Basu of IL&FS Investsmart, �But one has to consider a large number of firm-specific factors while arriving at a final number. These factors range from what proportion of land reserves is owned or is in the process of being acquired to the revenue model proposed by the firm.�

He gives examples, �For instance, a developer like Orbit Corporation aims to sell prime real estate achieving high realisations, while on the other extreme IVR Prime has a business model of providing affordable housing to the masses.�

IndiaREIT�s Jogani adds, �In addition to the business model, aspects such as the company�s cash reserves to fund timely execution, quality of tenants in case the company is in a build-and-lease model, the capital structure and the cost of capital would also change the rate at which one would discount the company�s NAV.�

The way out
Realty stocks have seen a roller coaster rally up and down over the past few months due to a number of reasons such as the increase and decline of housing loan interest rates, curbs on external commercial borrowings (ECB), high demand in tier-II and tier�III cities, rising cement prices, variations from execution promises and the like.

However, just going by the broader picture of demand-supply mismatch, investor frenzy for real estate IPOs has been evident. The average listing gains of the 16 realty IPOs between August 2006 and August 2007 were 71.5 per cent as compared to 22.6 per cent for all the 134 companies that launched IPOs in the same period, according to the recent FICCI-Ernst & Young report on Indian real estate.

Further, going by the number of issues in the pipeline, the outlook does not appear to be any less promising. However, this does not help investors defy the volatility which has gripped the stocks in this sector. Beyond listing gains, realty stocks are notorious enough to let investors down time and again. So, finally, how should one value real estate business then?

REAL RETURNS?

Market Cap
Rs crore
CMP (Rs)
26-Oct
Issue
Price (Rs)
Gain since
listing (%)
Returns (%)

1-month
3-month
6-month

Akruti Nirman
6640.99
1045.20
540.00
4.44
40.84
88.50
151.27

DLF
148023.60
910.35
525.00
8.58
13.36
36.27
NA

HDIL
14130.04
665.40
500.00
11.72
8.32
13.68
NA

IVR Prime
2636.24
421.00
550.00
-23.97
-3.34
NA
NA

Omaxe
5523.00
320.40
310.00
12.89
-4.97
NA
NA

Orbit Corporation
2152.99
597.85
110.00
16.32
13.22
84.20
199.65

Parsvnath Developers
6377.69
353.85
300.00
75.43
1.83
-7.28
2.54

Puravankara Project
9517.64
444.85
400.00
-9.56
2.25
NA
NA

Sobha Developers
6639.00
929.50
640.00
51.37
3.55
-0.56
-0.72

Keshav Misra, head-real estate investments, Baring Private Equity Partners attempts to answer: �One could go for a project-wise NAV of a realtor, estimating the cash flows from each project individually and then discount it to the cost of capital.

This is the approach taken by real estate investment trusts (REITs) globally.� However, it is possible for REITs to partner with developers at the project level, while retail investors are unable to do so. Further, in India, there are very few companies which operate on a build-and-lease model which entitles the real estate player with a steady stream of rental yields.

In a build-and-sell model, the cash flows are bound to vary according to the completion of projects. Saffron Asset Advisors� Vohra inches closer to the Holy Grail: �One cannot go by execution promises lying too far in the future. One should take a three-five year horizon for the company�s ongoing projects, estimate the resulting cash flows and for the rest, consider the market value of the land owned by the company to arrive at a fair valuation at any point of time.�

Biting the bullet
For the investor, the real question is what to consider while picking stocks. Analysts and fund managers say there is not just one standard tool to analyse the realty business.

Each company is a unique mix of myriad projects such as apartments, group housing, integrated townships, commercial complexes, technology parks, special economic zones and perhaps more. There are complications of part or full ownership, sale or lease, in-house development or contract development etc.

Among the Indian realty players, many companies have a unique proposition that make them interesting investments. DLF has a potential for significant cash flows through lease rentals and service contracts on an annuity basis, which makes the scrip attractive.

Unitech banks on its vast spread, while Parsvnath has execution capabilities to scale up rapidly. Orbit, Sobha, Omaxe and Puravankara aim to cater to premium buyers � an approach which gives them ample price-elasticity, but asks for robust cash reserves and funding abilities.

Akruti Nirman, HDIL, IVR Prime and Vipul try to walk the path in between, attempting to grab a share from both the extremes, thus balancing their project portfolio. Now, all that one has to do is scan through the numbers, estimate one�s own risk appetite and take a pick.

 

Source

Protego brings $400m Indian office fund to market | Business | Reuters

Protego brings $400m Indian office fund to market | Business | Reuters

Affordable urban housing- Hindustan Times

Affordable urban housing- Hindustan Times

Real estate boom devours castor area in AP

International airport, sponge iron units trigger uptrend

---

‘If an acre of land is going at about Rs 1-2 crore, who will grow castor?’

---

K.V. Kurmanath

Hyderabad, Oct 24

The agriculture sector is bearing the brunt of development in the periphery of Hydebard with a few thousand hectares of land falling prey to the real estate boom, triggered by the airport project at Shamshabad.

Hit badly

Castor crop is among to be badly hit. Mahboobnagar, which ranks number one in castor area in Andhra Pradesh, has lost 16,250 hectares so far this year. Against the normal area of 1.42 lakh hectares, castor has been in 1.24 lakh ha during the kharif season, that ended earlier this month.

The total castor area in Andhra Pradesh for the year is put at 2.35 lakh ha this year against 2.02 lakh ha last year. The average for last three years is 2.70 lakh ha.

Though Andhra Pradesh has gained some new castor area in districts such as Kurnool, the loss in the traditional areas has not helped in increasing its national share of 25 per cent. Andhra Pradesh ranks second after Gujarat in castor. Gujarat accounts for 65 per cent of India’s castor production.

The figures for Rangareddy district (in which the airport area falls) and Nalgonda areas are no better. Castor area has shrunk by 30-40 per cent in the last two years in these two districts that surround the State capital.

“If an acre of land is going at about Rs 1-2 crore, who will grow castor?” Mr Rajender Prashad Agarwal, President of AP Oil Millers’ Association told Business Line.

Real estate prices

Spurt in sponge iron units along the Shamshabad-Jadcherla belt and the trigger caused by the Outer Ring Road also resulted in steep hike in real estate prices in the traditional castor growing areas. The situation on the Srisailam road too witnessed sharp raise in real estate prices, he said.

Several grape gardens too gave in to the real estate boom, which seems to have slackened of late, in the last three-four years around the State capital.

“Had the State retained the traditional area, we could have increased our share to at least 30 per cent nationally,” Mr Agarwal said.

The real estate boom has resulted in yet another problem for the castor farmers in other surrounding areas. “They are not able to find labour in these areas as most of them would have gone to the city for work,” he said. “

Source

Property boom is over

With the festive season underway, there has been a spate of advertisements for new property projects. It is important to examine these bids for funds closely, given the current state of real estate. Unless the sector is brought under regulation, it will mop up funds of a dubious kind. Unsuspecting investors can lose money and there could be a rise in loan defaults.
The rise and fall in prices over two years was triggered by excessive liquidity and speculation, caused by a flow of both white and black money. The cycles in the property sector are a result of its peculiarly unregulated nature. As a result, a hype around property becomes easier to create.
After the norms related to secrecy of Swiss banks were tightened a few years ago, black money flowed into this sector due to the lack of regulations. Vested interests would like the property sector to continue in an unregulated fashion.
The last year has seen real estate prices cool off, especially after the Reserve Bank intervened to increase the cash reserve ratio (CRR) of banks and housing finance companies raised interest rates, realising perhaps that they were instrumental in overheating the market. The easing of interest rates on both loan and deposit sides was a correction that was coming.
Housing finance companies and banks gave undue importance to property, vying with each other to extend loans to all and sundry. They created the belief that money invested in real estate will grow at higher rates than in other investment instruments.
The hype around land banks also fuelled the rush into property. When real estate companies talk about developing land banks, they cannot be taken at face value. If one were to calculate the resources required to develop infrastructure and housing in the thousands of acres which some real estate companies have at their disposal, the figure would suggest that they would need 10-15 years to develop these lands into usable habitats. For example, a company which claims to hold about 70,000 hectares in its land bank will need to invest Rs 100,000 crore to develop into viable housing and habitat. That is a tall order even for the big guns. The business models of such companies still work on speculative forces of hoarding and reselling.
Even as new tracts are developed in outlying areas, there are acres of bypassed land closer to town, more than what the housing industry might need for years to come. So much for land shortage.
Some of these companies are in a bind. With huge amounts having gone into buying land, they are short on funds needed to create projects for which bookings and promises have been made. Hence, they are divesting equity to generate funds. The IPO route of collecting funds has slowed down.
Foreign direct investment will not come unless land management laws are regulated at the central level. Black money is needed to purchase land. Political interests will prevent meaningful reforms to change the land management system of states. It remains to be seen whether market forces will push for change.
The sector suffers from a resource crunch and oversupply. With speculators moving out and end-users stepping in, prices should drop, except perhaps in the high-end market in the metros.
The US sub-prime crash was caused by too much money going into mort-gages which turned into defaults. Will India see a similar crisis in the mort-gage market? Are the right products being created for the right end-user?
Will the sector move towards the right fundamentals, or will it remain a speculator’s haven ?
There are indications of change.
The stock market is a more attractive investment option than ever, real estate companies are looking for equity partners, CRR is moving up, interest rates are down, and professional players are moving into real estate sector. The rosy years and months are over. The investor better be careful with his money.
The writer is an architect.

Source

A place for some healthy fun

Are amusement parks the answer to soaring real estate prices? What scope for development do they have in the country and will they ever be able to replicate international theme parks? By Varun Soni

As the real estate sector surges ahead in the country, new formats are being introduced by developers in a bid to offer something new as well as stay afloat in this period of slowdown. One of the more lucrative formats is the concept of new age, world-class amusement parks-cum-malls. There are around 150 parks in India, with 10-15 coming up over the next few years. Worth Rs 3,000 crore, the industry has been growing at 25 per cent per annum during the last five years, according to industry experts.

While a world-class amusement park has already come up in Rohini in north- west Delhi by the name of Adventure Island, the company behind it, IRPPL (International Recreation Parks), is also planning to open the much-hyped Entertainment City in the heart of Noida by the year-end. The Entertainment City, spread over 150 acres and being set up at an investment of Rs 1,100 crore, represents a new class of parks that are under construction or are being planned around the country. The Adventure Island, on the other hand, is spread over 62 acres and has been built with an investment of Rs 200 crore.

Larger, better and with the costliest 'rides' around, they reflect a change in not only how park operators and real estate developers think about amusement parks, but also how state governments perceive them. Other upcoming projects include two planned by ISKCON, one at Vrindavan at an investment of Rs 1,000 crore and spread over 600 acres of land and the other at Bangalore at an investment of Rs 350 crore. The themes for the two parks would revolve around the stories of Krishna. The religious theme is held in common with a Rs 100 crore park being promoted by the Saagar family at Haridwar. Revolving around the epic Ramayana, the park to be called 'Ganga Dham' will be situated on the banks of the Ganga.

Chandigarh too will be getting its own mega park in the next three years. To be developed and operated by Unitech, the park would be spread over 73 acres and have an initial investment of Rs 250 crore. The south too hasn't been immune to the action with the WonderLa park on the outskirts of Bangalore. Built over 83 acres and promoted by the V-Guard group, the park has already been in operation for a year. As far as the scope of the sector goes, Ravi Madan, Director, IRPPL says, "The business potential is enormous. What we have seen up till now are low-standard and low-cost amusement parks, but now the trend is more in favour of internationally-styled, world-class parks. And if malls accompany these parks, it also results in impulse retail and merchandise."

The new leisure class

With growing disposable incomes and consumer aspirations coupled with the enormous tourism potential in India, demand for holiday homes and thus leisure real estate is booming.

According to the World Travel and Tourism Council (WTTC), India is expected to be the third fastest growing country in the world over the next ten years, as far as travel and tourism demand is concerned. That growth potential, coupled with the 19.8 per cent increase in the number of Indians living in India with financial assets of more than US$ one million, (compared to the 6.5 per cent growth worldwide) are important factors in promoting the growth of leisure real estate in India. Leisure real estate means planning mixed-use development and fractional ownership to boost tourism in India.

Leisure real estate also entails owning a second home, which many Indians are going in for today after satisfying their need for a first home. The demand for a second home is more in tourist destinations like Goa, Uttarakhand and Himachal. Says Radhika Shastry, managing director - Indian subcontinent, Group RCI, "With land bank choking in mega cities and people already having fulfilled their requirement of owning a home, the next step is to look for a second home. This comes under the purview of leisure real estate, which also encompasses timeshare/fractional ownership."

As far as the scope of this field goes, Arindam Kumar, general manager, marketing & retail Sales, Mapsko Builders says, "The scope for leisure real estate is very good. People want to enjoy their leisure time and for that they require a few good options. Nowadays, with the growing economy, the income status of the people is growing, leading to a change in tastes and wants. The demand for resorts, amusement parks, etc. is soaring in the market."

Says P K Sanyal, president, OSB group, "Growth prospects of this segment are really good. With customer preferences changing, everyone needs a different option. Therefore, developers have to invest taking stock of the rise in demand."

In fact, property experts opine that this segment will be a key driver of real estate in the country in the coming years.

Adds Prem Adip Rishi, chairman & managing director, MVL- Real Estate division, "One of the key drivers of leisure real estate will be tourism. India is expected to be the third fastest growing country in the world in travel and tourism demand over the next ten years. Hectic lifestyle is leading people to splurge on leisure activities to be able to unwind in the short respite time that they get. Companies have also substantially increased their spending on employee delight initiatives."

In fact, Indian tourism is expected to grow at the rate of 20-25 per cent per annum till 2017, posing a huge opportunity for wealth creation in our country. This makes leisure real estate a good investment option for developers. Says Kenneth May, chairman and CEO, Group RCI, "India is poised for growth in leisure real estate and is at the helm of an explosive economic growth in tourism. The market for leisure real estate today is expected to gain further momentum over the next few years. With growing disposable incomes and consumer aspirations coupled with the enormous tourism potential in India, the time could not be better for the industry to launch new leisure real estate models that will meet the needs of the evolving consumer."

Amitabh Kant, principal secretary (industries and commerce), government of Kerala and former joint secretary, ministry of tourism recently said at a 'Leisure Real Estate Symposium' held in the capital, "With the growing purchasing power of Indians, holidays are evolving into experiential and aspirational experiences for the affluent traveller. Through the Incredible India Campaign, we are focussing on opening up newer destinations and new experiences like rural tourism and medical tourism for both the inbound domestic and international traveller."

A number of small and upcoming builders have already announced projects in places like Haridwar, Rishikesh, Ramgarh, Vrindavan, Solan, Shimla, etc. with bigger developers too getting ready to foray into these areas.

Adds Ranjeev Kalia, DGM - sales & marketing, Ansal Buildwell, "Amusement parks add value to the real estate sector. These parks provide a complete entertainment package to people, leading to an increase in the footfalls of the commercial projects located within the complex. That's why more and more builders are introducing amusement parks in or adjacent to malls."

But, can amusement parks become one of the key drivers of the real estate growth in times to come? Says Kaushik Sengupta, VP - sales & marketing, Eros group, "In fact, amusement parks have already become a key driver in the growth of real estate and will reach even greater heights in times to come. With the opening of the economy and multinational companies entering into joint ventures with their Indian counterparts, real estate development is bound to gain with such collaborations."

Adds K P Singh, DGM-marketing, Pearls Infrastructure Projects, "Seeing the current development in the residential, commercial and retail real estate industry, the need for growth for amusement parks has risen and the increasing demand of the market definitely is leading to its growth. Because of the huge demand, developers are bound to build them. Amusement parks should receive due recognition for their enormous potential as an infrastructural facility for tourism. In terms of employment generation, the new parks are likely to create jobs. In short, it would be one of the major reasons for the growth of the real estate industry leading to the growth of the economy as a whole."

But, does an upcoming amusement park affect the real estate prices in the vicinity? "Definitely," says Madan citing the example of Disneyland, which after its development changed the face of real estate in Florida for times to come. "If such projects are built in suburbs, then they do give a fillip to the area. A similar trend was seen in Rohini, when after the announcement of our project, realty rates went up by 10-15 per cent," he says.

Adds Rakesh Gupta, managing director, RPS Group, "The prices of the surrounding real estate defintely shoots up with the commencement of the amusement parks. Additionally, the prices of surrounding areas rise thereby leading to an overall increase in the standard of living of people. Even for tourists, this place seems to be more entertaining considering the fact that it boasts of having good infrastructural facilities and service apartments."

So, what is the future of amusement parks in India? Is there any possibility of Disneyland ever setting shop in India, considering that it is scouting for a location in China at the moment? Says Madan, "The infrastructure in India is not ready to host Disneyland. Though we are moving towards it, it will be only three-five years down the line that we will be able to match the standards of the biggest amusement/theme park of the world."

Adds Arindam Kumar, general manager, marketing & retail sales, Mapsko, "The future is very bright and we would be in a position to witness many parks in the near future, provided improved technology and international specifications and standards are implemented to beat the existing competition prevailing in the country."

 

Source

Maruthi Housing Announces Real Estate Information Services and Property Portal in Hosur

NewswireToday - /newswire/ - Bangalore, Karnataka, India, 10/23/2007 - Mr. Lakshman of Maruthi Housing, one of the oldest property developers based in Hosur, has announced real estate information services portal hosurproperty.com.

Mr.Lakshman of Maruthi Housing, one of the oldest property developers based in Hosur, has announced a free real estate information services portal hosurproperty.com. Visitors can get information about all properties available in Hosur either for sale, for lease or on rent.
Several happenings are going on in the real estate field in Hosur, and hosurproperty.com provides a neutral and biasless opinion about real estate developments in Hosur. Information about the proposed SEZ near Hosur, the proposed IT park at Hosur, etc can be known by people who want to have a first hand opinion about such happenings in the realty sector.
Green Fields is a villas project being developed by Maruthi Housing. "I want my customers and everybody else who have interest in my projects to have a first hand knowledge about the real estate scenario in Hosur. By educating my customers, I actually help them in making a responsible decision on investments rather than falling into hypes created by rumors", said Mr.Lakshman of Maruthi Housing.
For a novice investor, hosurproperty.com is a one stop portal to know everything he needs to know in order to educate himself about the real estate scenario and property trends in Hosur.
Apart from the real estate news in Hosur and property trend in Hosur, the portal also contains valuable information for investors like vaasthu, a quick guide to Hosur and places to visit in Hosur.

 

http://www.newswiretoday.com/news/25139/

Biggest Property Festival Poperty 2007 - 25th - 28th Oct, MMRDA Grounds, Bandra Kurla Complex, Mumbai.

2007-10-23 13:12:32 - Mumbai, October 16, 2007: Maharashtra chamber of Housing industry ( MCHI) Property 2007 - the only official and largest real estate exhibition of India is back in Mumbai, to brighten up your festivities, offering home buyers a wide rage of properties & home loan options.

Property 2007 - 11th Real Estate & Housing finance exhibition will be held at Bandra Kurla Complex, MMRDA Grounds from 25th - 28th October.
Spread over an area of 25,000 sq. meters consisting of 3 multiple halls, Property 2007 will have leading Property Developers displayed their projects in Mumbai [ South, Central and Western Suburbs ] Thane, Navi Mumbai, Mira Road,

Vasai to Virar, Kalyan to Karjat, and across the country [ Pune , Bangalore, Goa, Hyderabad, Lucknow ] with international property developers from Dubai, Malaysia and other countries also participating. There is a special pavilion for budgets Properties and weekend / Holidays homes too .
Property 2007 will have a Special Exhibition Promotion Scheme being offered to visitors, who purchase properties during the four day event. Buyers stand a chane to win prizes like Life Style Apartments, Branded furniture, home Appliances, Gizmos etc.
Salient Features - MCHI's JOB FAIR
MCHI's 2nd Real Estate Job will offer aspiring professionals a smarter way to enter this industry by getting a first hand opportunity to meet with HR heads, from ‘some of India's leading real estate and township developers. Hence, a quick route towards achieving a rewarding career in the real estate industry.
Real Estate Job fair which will be held from October 27 - 28, 2007 at a Special Pavilion within the exhibition venue
For more information check www.realacres.com/MCHI-property-2007-Mumbai/

pr-inside

Ishaan strikes Rs 1,082-crore deal with K Raheja

MUMBAI: Ishaan Real Estate, the first India-focused real estate fund listed in the Alternative Investment Market (AIM) in London, has acquired 40% stake each in eight real estate projects promoted by K Raheja Corp, for Rs 1,082 crore (£133 million). The properties in which the fund has invested include three IT parks, two Inorbit shopping malls and one hotel property. The Ishaan-K Raheja Corp’s deal could be the first investment by an AIM-listed property fund in the Indian realty space.
Last November, Ishaan had raised about £180 million in its first phase from the AIM market of London Stock Exchange. The entire fund was to be invested in K Raheja’s properties in India. It may look at raising further funds from AIM market , and may look at investing other properties in India, said sources.
Ishaan picked up equity in K Raheja Corp’s Inorbit shopping mall in Hyderabad, Inorbit shopping mall and IT park in Pune, Mindspace IT park in Hyderabad, Mindspace IT park in Navi Mumbai, two Mindspace IT parks in Hyderabad, Commerzone IT park, hotel and retail development in Bangalore, and Viverea residential development at former Hindustan Spinning & Weaving Mills site in Mahalaxmi at Mumbai.
Confirming the development, Ishaan Real Estate chairman Ian Hendersen said: “Investment in the initial portfolio of assets is being completed largely according to a plan and the increased net asset value reflects the strong demand for our properties and the enormous potential of the Indian property market.”
Sources said Ishaan’s current portfolio in India covers a total of 15.4 million sq ft. Ishaan has also secured leasing agreements for over one million sq ft. Currently, in the AIM market , Ishaan shares are trading at around £104.
From the beginning, Ishaan Real Estate works in partnership with K Raheja Corp entities in the western and southern markets. It has also secured leasing agreements with two leading multinational companies for 7,66,000 sq ft of the projects in the initial portfolio.

 

ET

IT firms make a beeline for industrial estates

But not everyone is happy with the trend

— Photo: R. Shivaji Rao

In contrast: The infrastructural shortfalls in industrial estates notwithstanding, they are becoming the preferred destinations for IT companies. A view of an IT complex in Guindy Industrial Estate.

CHENNAI: It’s an address that has been home to small manufacturing units for decades. Over the last five years, it has been making an appearance on the business cards of software professionals — Guindy and Ambattur industrial estates.

The glass and chrome structures of the Information Technology and IT-Enabled Services industry have started to occupy pockets of Chennai’s largest industrial estates. So far, most of the attention was focussed on Guindy, with its prime position near the airport and the IT highway. At least 25 acres are occupied by the IT industry there.

Ambattur has also started attracting IT clients in the last three years, thanks to its proximity to Anna Nagar and other residential areas. About 8 million square feet of IT office space is being created on the Estate. Clients include the who’s who of the software world — HCL, Alcatel, Verizon, HP, Hewitt and MindTree Consulting.

Goldmine

Industrial unit holders in the estates realise they are sitting on a goldmine. R. Ravi, an IT real estate promoter who has built four IT office buildings in Guindy and is constructing another in Ambattur, says he paid Rs.5 lakh per ground in 1993 and Rs.40 lakh per ground in 2004. “Today, they want at least Rs.1 to 1.5 crore per ground. There is no meaning for money here anymore,” he rues.

Apart from the large projects implemented by real estate developers, some unitholders are clubbing their land for joint development themselves. They can charge up to Rs.80 per square feet every month for furnished office space in Guindy. The rate in Ambattur is around Rs.60 per square foot.

With space running out, real estate promoters are eyeing the land held by government-owned institutions such as SIDCO, HTL or the Industries department.

But not everyone is happy about this mushrooming of IT in the estates. It exacerbates the shortage of skilled manpower, says K. Gopalakrishnan, president, Tamil Nadu Small and Tiny Industries Association (TANSTIA).

“For an ordinary tea boy or office peon, they are paying Rs.5,000 to 6,000 per month. Here, even skilled workers are getting only that much in the engineering units. So trained manpower is moving to do menial jobs,” he complained.

SIDCO managing director G. Santhanam says the big buildings and large workforce of the IT firms put heavy pressure on the estate infrastructure. However, large IT firms are willing to shell out money to fund infrastructure improvement on the estates.

 

hindu

Skyline Constructions and Housing Pvt. Ltd, expands its horizons

(PressZoom) - Skyline Constructions and Housing Pvt. Ltd, expands its horizons – Opens marketing & liasioning office in Dubai
Dubai, October 22nd, 2007: Skyline Constructions and Housing Pvt. Ltd., providers of luxury homes in India, today announced the launch of its marketing and liasioning office in Dubai.
Speaking about the need for an office in Dubai, Mr. Avinash Prabhu, MD, Skyline Constructions and Housing Pvt. Ltd., said “There is a significant increase in the number of NRIs in the Middle east region who are looking for investment opportunities in India and also many who want to return to India in the near future. This population believes that real estate is amongst the best investment options available to them but are skeptical about how to go about the formalities of buying property in India. Our office in Dubai hopes to address some of their apprehensions and provide them with an one stop solution to investing with Skyline.”
Addressing the media Mr Rahul Dravid said “Its nice to have been associated with Skyline Construction & Housing Pvt Ltd from Bangalore. I appreciate their quality and commitment towards customers and I have booked an apartment at Skyline Beverly Park .  Since we have many things in common, my association continues with Skyline.”
Skyline has a variety of product offerings in the price range of Rs. 7.5 million and upwards and are present in Bangalore, Cochin, Chennai, Mangalore and Mysore.
Indiareit Fund Advisors Pvt. Ltd. – a leading real estate venture capital fund, managing a corpus of more than USD 300 Million has invested in Skyline Constructions & Housing Pvt Ltd.  Indiareit has also committed a substantial amount for the future projects too.
“Skyline’s standing in the real-estate industry is unparalleled in terms of quality & consistent timely delivery. As one of the most trusted builders in South India, we have provided world-class luxury homes complying with international standards for our Indian customers. Now, with this office we have the capabilities in tapping the opportunities in this region.” added Mr. Avinash.
About Skyline Construction & Housing Pvt. Ltd.:
Skyline Construction & Housing Pvt. Ltd. is a 125 years old family owned enterprise. The foundation of the company began in the late 1800s, when coffee was the fast emerging cash-crop across the affluent Western Europe. In 1983, the family forayed into property development and within a very short span, developed into a leading and trusted player in Bangalore’s property segment. By 1988 Skyline had bevy of prestigious projects, most of them were considered golden landmarks. Over the years Skyline has completed over 60 projects, adding up to over four million square feet in residential, commercial and industrial space. Skyline Construction & Housing Pvt. Ltd ISO 9001 certified company and is recognized by KOAPA has its core strengths of superior planning, design, scheduled completion and financial transactions have lent it an unshakable credibility in providing the best possible dwelling spaces in the world.

 

presszoom

RBI for ban on automatic FDI in realty

Worried over the substantial inflows of foreign funds into the real estate sector, the central bank has asked the government to allow FDI into the sector only after the clearance from Foreign Investment Promotion Board (FIPB).
At present, up to 100% FDI is allowed in realty projects on automatic route with certain conditions like a three-year lock-in on investments and minimum capitalisation of $5 million.
RBI wants real estate removed from the list of sectors where FDI can come in through the automatic route. RBI wants inflows routes like participatory notes (P-notes) and private equity contained. The market regulator Sebi is currently in the process of initiating moves to restrict investments coming in through P-notes.
Sources said the government, which has completely backed Sebi’s action to restrict P-note flows, may now not relent on other suggestions, especially restricting FDI. Also removing one sector from the automatic list, will be seen as a retrograde measure by foreign investors.
The reason for RBI’s concern stems from the fact that the sector witnessed a huge quantum of inflows in first four months of the current fiscal, surpassing the total inflow for the past two years. The FDI inflows in April-July, 2007, stood at $627 million, compared to $38 million in FY06 and $467 million in FY07.
The sector has witnessed substantial investor interest ever since FDI was allowed into the sector in 2005. There are also fears that some of the FDI could be ECB masquerading as FDI.
Since real estate companies are not allowed to raise external debt, there are reports of them using instruments like compulsory convertible debentures and offshore special purpose vehicles for borrowing abroad and then funnelling the funds to the parent in India as FDI.
This is not the first time, RBI has written to the government on the rising inflows into the sector. It had communicated its concern to the government last year as well. But, then it had not suggested any measures for a clamp down.

 

ET

Developers focusing on NRIs to give sales a push

Paul Sharma, 46, a portfolio manager with a hedge fund in London, plans to apply for an overseas Indian citizenship that would let him buy real estate in one of the fastest appreciating real estate markets in Asia.

A building (left) in Bangalore with a helipad

Sharma, who is partly of Indian origin, left India in 1968 and has since been living in the UK. And he is not eyeing India for sentimental reasons alone.

“I am basically from Himachal Pradesh and I would like to buy a property somewhere around my native place,” Sharma says. Though he has property in the UK, he isn’t buying more there.

“I think one of the issues in the UK real estate market is that it is really difficult to track the market. The last time there was a softening in the UK property market, it was for six years—from 1989 to 1995.”

Developers say that even as sales in the Indian real estate market are declining, demand from overseas and non-resident Indians (NRIs), especially in the luxury housing segment, is on an upswing.

The real estate sector in the country has been growing at 30-35% a year to touch $12 billion (Rs47,760 crore) this year, according to consultancy firm Ernst & Young’s report.

In the last six months or so, the real estate market has seen a drop of 60% in sales in the top cities as higher interest rates crimp buying. But demand from the overseas Indian community continues to be strong because it is not facing a similar sharp rate hike in those countries, where the real estate market is more mature and the returns less assured.

“There is a lot of interest in the Indian property market among the Indian diaspora, especially for high-end houses,” says Kunal Banerji, head, international marketing, Ansal API Ltd said.

NRIs account for 20-25% of the company’s sales in the premium housing segment, which consists of houses above the Rs45 lakh mark. The demand is mostly from the West Asia, UK and US regions.

“The housing markets in the US and even in West Asia have hit a low,” Banerji said. “So, buyers cannot expect a good return on investment there.”

In the US in particular, home prices are starting to soften sharply after a series of bad loans to home owners, who had a high risk profile and failed to repay their mortgages on time. Home values have fallen and are now worth less than they were a year ago.

On the other hand, the Indian property market offers a minimum of 15% return on investment a year, even though that is a climb down from a doubling of values seen two years ago.

“Anybody who bought property two years back has made a good return, so this could encourage NRI buyers,” Anshuman Magazine, chairman and managing director of real estate services provider CB Richard Ellis, South Asia, said.

Government policy has also made it easy for NRIs to buy a house in India. Under the present government regulations, overseas Indians can acquire residential property in India, rent it out, transfer or sell it. NRIs can also remit the rental income and capital investment made in Indian property abroad.

Developers are making a special effort to attrack NRI buyers. Ansal, for instance, plans to offer its prospective NRI buyers a special discount at a property exhibition, which it plans to organize in Dubai around the time of Diwali. The amount of discount to be offered has not yet been ­decided.

“We have never really tapped the NRI market. We feel we need to make a conscious effort to tap this market,” Banerji said. Interestingly, this discount is not yet being extended to the company’s domestic buyers.

Omaxe Ltd, another real estate company which predominantly builds high-end homes is seeing a lot of interest from NRIs in Europe and the US. “I can’t put a figure to the demand from NRIs but the response is certainly very positive,” Arvind Parikh, chief financial officer, Omaxe said.

Omaxe has its marketing representatives in Europe, US and West Asia either on its own or through tie-ups with the local real estate agents to tap the NRI market.

While property prices have increased in India by as much as 50-100% in the last three years, making it costlier for NRIs to buy houses, this price increase has not affected the demand from NRIs.

Even a fast appreciating rupee, which is hurting the value of the dollar, isn’t damping demand from the overseas Indians. Since the start of the year the dollar has fallen against the rupee and now fetches only about 39.5 to a dollar compared with about 44.6 in January.

“Yes, it is cheaper to buy homes abroad than in India but NRIs are still investing in the Indian property market with a long-term view,” Magazine said.

livemint

Caisse de Depot Property Unit May Invest C$1.6 Billion in India

Oct. 22 (Bloomberg) -- Caisse de Depot et Placement du Quebec, Canada's biggest pension-fund manager, plans to invest in Indian real estate for the first time and may spend up to C$1.6 billion ($1.7 billion) there in the next five years.

SITQ, the Caisse office-building unit that owns about C$10.6 billion worth of property, may have as much as 15 percent of its assets in India by 2012, Chief Executive Officer Paul Campbell said. SITQ now has no investments in the country.

The fund manager is moving into the world's second most populous nation to boost returns as rising borrowing costs make U.S. assets less attractive. Real estate development in the country is forecast to increase to $90 billion by 2015 from $12 billion in 2005, Moody's Investors Service said in a June report.

``We are really focused on India right now,'' Campbell said in an interview at Caisse headquarters in Montreal. ``This is the future, this is where the growth is going to be. We have no choice but to be there, or our returns over the next 20 years are going to lag.''

Campbell, who plans to travel to India later this month, said SITQ will probably focus on cities such as Mumbai and Hyderabad. The company will work with local partners since Indian law limits foreign control of real estate.

``Our business there will only be development because there is no stock,'' he said. ``We've been spending a lot of time in India this year, and there is nothing to buy.''

India Investors

SITQ posted a record return of 33.4 percent last year, almost double the unit's 10-year average of 17.3 percent. Campbell declined to discuss the company's 2007 performance.

The company is turning to India as buyout firms and venture capital investors are focusing on the country. ICICI Venture Funds Management Co., a unit of India's most valuable lender, unveiled plans last week to raise about $2 billion to create the country's biggest real estate fund.

ICICI Venture follows Housing Development Finance Corp., which raised $800 million in August and Sun-Apollo India Real Estate Fund LLC that got $630 million earlier this year. IL&FS Investment Managers Ltd. and Milestone Capital Partners are in the process of raising 10 billion rupees ($252 million) to invest in hotels, hospitals, warehouses, offices and houses.

``The real estate market is extremely buoyant,'' said Raja Seetharaman, associate director of markets at Jones Lang LaSalle Property Consultants (India) in Mumbai. ``There are at least 50 funds who are looking at India.''

SITQ's office tower holdings are split about evenly between Canada, the U.S. and European countries such as France and Germany. It owns the Paris headquarters of Areva SA, the world's largest maker of nuclear power plants, and New York City's 1515 Broadway, which houses the executive offices of U.S. media company Viacom Inc., owner of the MTV cable channel.

China Market

Besides India, SITQ may buy property in China and Russia. After investing $40 million last year in the Marbleton Property Fund, which focuses on Russia, the company is scouting for property in Shanghai and Beijing, Campbell said.

Closer to home, SITQ owns more than C$1 billion worth of buildings each in New York City and Washington. The company wants to buy more property in those cities as well as Boston and Seattle, while selling real estate in smaller markets such as Tampa, Houston and Denver, he said.

``You will find us increasing our exposure in Seattle, New York, Washington and Boston, which are really our four big markets, and selling elsewhere in the U.S.,'' he said. ``It's a lot easier if you don't have to think about 15 markets in a country of 300 million people. Big markets will go up and down, but there will generally be more liquidity there than anywhere else in the world.''

New York Market

Property returns in New York have been ``tremendous'' in recent years as rents picked up and vacancy rates dropped, Campbell said, declining to provide specific figures. SITQ has a partnership with SL Green Realty Corp., New York City's biggest office landlord.

``The market in midtown has seen the highest rate increases in any market anywhere in the last three years,'' Campbell said. ``Midtown Manhattan is really the financial center of the world and it will be for a long time to come.''

Campbell said he's optimistic real-estate returns will remain ``good'' even as interest rates rise for commercial mortgages. Rates for a 10-year commercial mortgage rose to more than 400 basis points above Treasuries since the end of July, after costing about 150 basis points in the first quarter, according to Bloomberg data.

More expensive debt may benefit SITQ since the company doesn't make purchases using leverage.

As leverage ``gets more difficult to get, it changes the universe for a lot of buyers,'' said Campbell. ``We are not leverage buyers, so if the debt markets are not there for our competition, we should be able to buy more cheaply.''

 

bloomberg

Special Economic Zones: Profits At Any Cost

By C.R. Bijoy

22 October, 2007
Countercurrents.org

No other economic 'reform' in India has seen such a rapid expansion of militant protests and conflicts as Special Economic Zones (SEZs). Local inhabitants, particularly in Raigad (Maharashtra), Jhajjhar (Haryana) and Nandigram (West Bengal) cutting across caste, class and party affiliation rose up in revolt, with Nandigram seeing the most militant uprising leading to at least 14 deaths in police firing on 14 March 2007. These come in the wake of growing struggles against land acquisitions for industries met nonchalantly with deadly state terror, as in Kashipur, Lanjigarh and Kalingangar in Orissa, Singur in West Bengal or Bastar in Chattisgarh turning central India into a war torn zone.

The intensification of the expropriation of livelihood resources of the masses since the 1990s with the launch of the New Economic Policy, followed by what is popularly referred to as ‘globalisation’, which in fact is liberalization, privatization and globalization, facilitated by the troika – the World Bank, International Monetary Fund and World Trade Organisation – has seen an outburst of conflict between the state and the people. The rapid accumulation of capital leading to over-accumulation, the emergence of finance capital as the engine of change and control, and the materialization of the marauding global capital for accumulation through dispossession as a distinct outgrowth for control of resources and market are set to change the political discourse of geographies and her peoples.

SEZ that promises to usher in a new era of rapid growth and employment as never before evoke intense debate. The West Bengal government has put all SEZ's on hold. The plans for a large multi product SEZ in Kalinga Nagar has been dropped by the Orissa government. Rehabilitation policies are being revised by Punjab and Haryana. Maharashtra government is planning to reduce the size of the planned MahaMumbai SEZ. The Finance Ministry and the Reserve bank of India are unhappy with the SEZ policy on grounds that the policy offers excessive exemptions which will lead to revenue loss and spur real estate speculation. The Rural Development Ministry objected to the large-scale acquisition of agricultural land threatening spinning off further food insecurity. The IMF and the Asian Development Bank have criticised the tax exemptions being provided making SEZ ‘business-friendly’ rather than ‘market-friendly’, inherently violating market principles and market reform which they ardently promote.

A number of patch work remedies are proposed. Avoidance of acquisition of prime agricultural land, improvement in the compensation package offered in rehabilitation, offer of shares in the companies in the project to the displaced, compensation for agricultural labourers and sharecroppers besides land owners, ceiling on the area of SEZ's and no land acquisition by the state governments but instead the private developer to buy land at the market price directly from the land owners are some proposed remedies. The Parliamentary Committee on Commerce has demanded a freeze on new SEZs pending a fresh look at the policy, ban on use of irrigated crop land, a ceiling on the extent of land for SEZs and that too on lease rather than purchase. The Commerce Ministry meanwhile issued a new notification making SEZ developers responsible for the rehabilitation of displaced persons “as per the policies of the State government”. At the same time the Commerce Ministry has further liberalized exemption to now include contractors in SEZ units to claim exemptions to further promote SEZs while the Finance Ministry on the other hand is trying to tighten tax exemptions.

The Manufacturing of SEZ, the High-Speed Engine of Growth
However, what is noteworthy is that SEZ policy, followed by SEZ Act and Rules, emerged and established without much parliamentary debate over the last eight years across both the National Democratic Alliance and the United Progressive Alliance regimes. The SEZ has, as its predecessor, the Export Processing Zones (EPZs) which are ‘industrial zones with special incentives to attract foreign investment in which imported materials undergo some degree of processing before being exported again’ (The International Labour Organisation, 1998). EPZs are 'enclaves' dedicated to the promotion of export processing, isolated and insulated from the domestic economy with relaxed and liberal state controls in import, infrastructure and, in some cases, labour laws, simplified bureaucratic procedure, and favoured treatment to foreign and often domestic investors. The investors are to process all intermediate imports within the zone and to export without adversely affecting the domestic economy, attract foreign investment into and promote exports from the industrial and manufacturing sector within these initiatives that are not be extended beyond a specified geographical area, namely a ‘zone’.

EPZs emerged in response to the emergence of finance and global capital as the major economic players, the rapidly accumulating capital that seeks to move out to invest, the growing competition between developing nations to attract foreign direct investment and the thirst of capital to have an unfettered play in the pursuit of profit. Around 1967 Western capitalism was faced with a crisis of stagnation in growth, co-existing with high rates of inflation creating an economic downturn and slump along with the over-accumulation of capital. To snap out of this crisis, capitalism evolved a mechanism where the adjustment process heavily depended on lowering the cost of labour, raw materials and production by migration of capital to the peripheral regions of South Asia in the form of EPZ. This led to the decision of US firms to locate assembly operations in low-cost East Asian locations in the 1960s, particularly South Korea and Taiwan, where the US had particular political and strategic interest besides influence. Both these countries established their first EPZs in 1965 around the same time as India. Now an international phenomenon, EPZs increased from 176 across 47 countries in 1986 to over 3,000 across 116 countries by 2002. This does not include the enormous numbers of industrial parks, free zones and other areas which strongly resemble EPZ's but are not officially declared as such. Three countries in particular –Taiwan, South Korea and China – are often cited as major successes in using EPZ's as part of their industrialisation strategy.

South Korea under US occupation and Taiwan under the Kuomintang had gone through far-reaching land reforms freeing agricultural surpluses for use in industrialization with the virtual elimination of the feudal landlordism. EPZ formed a part of the larger domestic industrial and economic development of these countries through export-oriented strategy. Moreover the EPZs were not central to this strategy.

Taiwan's first export-processing zone was set-up in 1965 in Chien-Jiang, Kaohsiung City, followed by the opening of more zones managed by Taiwan's Export Processing Zones Administration. Average annual growth in exports was high at about 61 percent from 1967-79 but new investment had largely dried up by the early 1980s with infrastructure becoming redundant, duty-free arrangements improving elsewhere in Taiwan, and investment