Tuesday, July 15, 2008

Remote villages catching the fancy of real estate investors

Distance and lack of connectivity are not stumbling blocks


NEW LOCATIONS: Villages are beginning to attract real estate activity. A view of Oorapakkam village.

TAMBARAM: Far from the maddening crowd might be rephrased as “further away…” considering the long distances that people seeking land for building houses and for investment are willing to travel.

Real estate activity, which till a few years ago was restricted to places with good transport connectivity has now spread deep into remote locations and obscure villages.

Villages beyond the southern suburbs of Chennai are witnessing frequent visits by property buyers, apart from small-time and leading players in the business.

And making the most of it are owners of ancestral property who are willing to sell portions of it for princely sums, and the mediators who facilitate these deals.

For instance, villages around Guduvanchery, Urapakkam, Padappai and Maraimalai Nagar are witnessing real estate activity that was, till some years ago, seen only in urban pockets around Tambaram.

With the Grand Southern Trunk ensuring a round-the-clock road network, and adequate suburban electric train services between Tambaram and Chengalpattu, villages not far from railway stations on this sector have become ideal destinations for the middle class and salaried sections with restrictions on their budget to purchase a plot. And today, houses have begun to mushroom in Kayarambedu, Madambakkam and Petumaattunallur near Guduvanchery, Iyanchery and Adhanur near Urapakkam and also in some villages near Maraimalai Nagar and Singaperumal Koil.

Guduvanchery, Urapakkam, Maraimalai Nagar and Singaperumal Koil are well connected by Metropolitan Transport Corporation buses and suburban electric train services and the issue of transport is addressed to.But an important problem faced by new settlers in such villages is inadequate transport services to link their localities with the railway stations and bus stops.

“But it hardly matters to us as most of us have arranged our own mode of transport,” said C. Arumugham, 38, working in a private company and a resident of Madambakkam for about four years now.

But for those, especially, elders who depend on public transport, access is a crucial issue.

And nearly all the new settlers in these places come to work in Chennai and distance hardly counts as long as they have an independent house nestled amidst clean and neat environs.

For many families like Mr. Arumugham’s who have purchased plots in villages that are a few kilometres away from the nearest railway station, distance hardly matters.

Even in rural local bodies such as Mannivakkam and Urapakkam that has become one of the favourite destinations for home seekers, basic amenities are far from satisfactory.


Trichy - Ready to hit boiling point

Tamil Nadu’s fourth largest city and India’s boiler capital, Tiruchirapalli (Trichy) is a fast growing tier II destination where realty scene has seen a gradual shift. Housing Asia’s largest boiler manufacturing facility, it has gained recognition as a hub for power equipment manufacturing, fabrication and ancillaries. Public sector heavyweight BHEL kickstarted the industrial growth and now several players like Ceethar Vessels, GB Engineering and Veesons Engineering have emerged on the national scene.
Recently, it saw the entry of tyre major MRF and auto component Rane Group’s decision to concentrate its activities in Trichy giving a further fillip to its growth momentum. Trichy has easy connectivity to Chennai, Tuticorin, Coimbatore, Kochi, Bangalore and Mangalore.
"The land is fertile. There is no water shortage. The presence of educational institutions has contributed immensely to the knowledge pool. Though IT penetration is gradual, the airport expansion activity has kindled the interest of investors," says Kaveri Medical Centre (KMC) ED S Manivannan.
While realty prices have soared in sparsely-populated areas like Thillai Nagar, Cantonment area and Thiruverumbur, temple town Srirangam is densely populated. The appreciation in this town has been phenomenal as the temple’s serene atmosphere has lured several top-level retirees, besides NRIs and ex-military officials.
Land prices have doubled in the last one year but are still affordable. An acre on the highway costs about Rs 25 lakh. Prices of plots in good location are doubling. For example, a five-acre plot, purchased by a hospital few years ago, has buyers offering 2.5 times than the original price, says a long-time resident. Now customers prefer apartments to independent bungalows. In Srirangam, the rates were ruling at Rs 500 per sq ft three years ago. Now, the prevailing rates are Rs 1,500 per sq ft, industry observers said.
Though Trichy has still not attracted major developers, a handful of recognised builders like Rohini, Mangalam Real Estates, Lavanya Properties, Vignesh and Ganesh Builders dominate the realty scene. Some of them execute the high-priced apartment projects, while others cater to the budget house segment.The development in the region would be more pronounced once the airport expansion project over 50 acres is completed. Salary levels have also been going up, observers said, adding Trichy does not have arterial roads. Even development is confined to some pockets with commercial activity concentrated in Thillai Nagar and Main Guard Gate.
When the Rs 15-crore Rohini group launched its Vaastugram (65 independent two and three-bedroom) housing project on Mellur Road in Srirangam, the rates were Rs 1,450 per sq ft (Rs 20 lakh). Of this, 40 houses were sold for Rs 30 lakh, when the prices touched Rs 2,000 per sq ft, says Rohini Group chief MV Maruthachalam, former head of Trichy Flat Promoters Association (TFPA). Since 1990, TFPA has 55 members in its fold and barring a few, rest have stayed in the realty business, he said.
Describing the Trichy property scene as encouraging and prosperous, he said unlike in other cities, it is recession-free. The growth has been slow, yet steady. Prices have escalated in the last year to touch Rs 4,000 per sq ft for apartments. Commercial rentals have also been going up backed up by a premium advance. Peak rates in NS Bose Road, Big Bazaar area have been Rs 100 to Rs 200 per sq ft, whereas in Thillai Nagar and Cantonment, it has been in the Rs 25 to Rs 75 per sq ft range.
Trichy’s retail landscape is changing with Reliance, More, Joyalukkas and Chennai Silks setting up shops there. Reliance and More have three outlets each, while Spencer’s hypermarket is coming in the Cantonment area on 25,000 sq ft. Apparently, the retail biggie has paid Rs 30 per sq ft.


Growing Economy Makes India A Hotspot

Indian real estate is hotting up, with property prices increasing by 70 per cent in the last two years.


As property prices in India continue to rise, wealth management group Merrill Lynch has predicted a 700 per cent increase in the Indian property market by 2015.
Furthermore, a report by investment bank Goldman Sachs suggests India could overtake Britain as the world’s fifth largest economy within a decade, and by mid-century, may even surpass the US to become the world’s second biggest economy after China.
India is already achieving GDP of US $1.50 trillion, making the world’s second-fastest growing economy. Bolstered by strong domestic demand, economic growth, corporate strength and huge spending on infrastructure, India’s property market is expected to be relatively unaffected by the global credit crisis.
This strong economic growth is partly a reflection of India’s unique demographics; - over half the current population is under 25, meaning that by 2020, the country will be home to the world’s largest population of workers and consumers.
Earnings are on the rise too, making the demand for small apartments likely to mushroom as the country’s young employees seek more independence. This huge mass of ambitious young Indians are already rejecting the traditions of living at home in favour of buying properties of their own.
Investment property specialists David Stanley Redfern Ltd have identified Rudrapur, in the Udham Singh Nagar district of Uttarakhand, as the next buy-to-let hotspot. Properties in the municipality are set to move quickly as investors seek to benefit from an area hoping to attract just some of the 2.5 million students that graduate from Indian universities each year.
Designated a Special Economic Zone by the government, the massive industrial estate on the outskirts of Rudrapur is home to global corporations and an ever increasing number of factories. By December 2008, 50,000 people will be employed here directly and a further 250,000 indirectly, boosting potential rental revenue for homeowners in this part of India.


NRIs home in on India, account for 10% of sales

Home sales in India might have turned sluggish but sales to non-resident Indians (NRIs) are booming. According to Jones Lang LaSalle Meghraj (JLLM), residential sales to NRIs have tripled over the last six months, from 3% to about 10% of the total sales.
"What would happen when one loses his job in the US? The downturn is scaring many NRIs who fear job cuts," says JLLM's Raminder Grover. "There is a renewed interest in selling abroad," says Lodha Group senior VP R Kartik.
Many NRIs have been thinking of coming back to India and "many of them are making safety investments," explains Mr Kartik. Over the last few months, Lodha has seen a 25% increase in its sales to NRIs.
Sobha Developers has seen the share of NRI sales go up from 5% to 10% of its sales. "In the last six months, we have been selling about 25,000 sq.ft. a month to NRIs," says Sobha Developers MD Jagdish C Sharma.

Selling to NRIs though is a very different proposition. "You need a different strategy for NRIs. To service the requirements of NRIs, you need to have your own representation in the target market," says Mr Kartik.
Omaxe has had roadshows in the US, UK, Canada and Dubai to promote its residential projects and have representative offices, too. Omaxe VP marketing Vineet Nanda says, "NRIs made only about 3% of their total luxury apartment sales but today constitute about 10%. A good chunk of their NRI sales comes from Middle East."
For some like Tata Housing, it is a much larger business. "We have not done any formal marketing of our properties in the international market but already 10-15% of our sales are to NRIs. When we start our promotions, we expect this figure to go up to 25-30% of our total sales," says Tata Housing CEO Brotin Banerjee. They have received a tremendous response from the US, UK and Canada for their projects in Bangalore, Gurgaon, Chandigarh and Kolkata.
"Many NRIs would like to have a place in India since the country is expected to tide over this downturn and would be a better place to work in the future," says Mr Banerjee. Propertymixer.com CEO Minal Arora says a lot of NRIs, who are considering coming back, are securing sales in India.
But not everybody thinks so. For Jayesh Desai, head, real estate at Ernst & Young, these are purely investment sales. Well over 50% of NRI sales will be for investment. "With a downturn in the west, India is still a better market for investment. But, if they don't see returns, this segment will start going down too," warns Desai.
According to him, the reality is that the market in India is very tight and Indian speculative investors are out. "The share of the NRI market might be higher because of this," he says. Omaxe ED Vipin Aggarwal, too, subscribes to the same logic. "Most NRIs are buying in India only for investing and not for end-use," he says.
For developers though, it is a good way to catch up on lost sales in the Indian market. With a big push, a number of developers from across the country are embarking on roadshows in markets where there is a large NRI presence. The favourites really are the Middle East, UK and the US markets.


Sunday, July 6, 2008

Financial intelligence makes you wealthy

Chennai: Does money make you rich? The answer is ‘No,’ declares Robert T. Kiyosaki in ‘Increase Your Financial IQ’ (www.landmarkonthenet.com). He bemoans how millions of people go to work every day, work for money, make more money, but fail to become richer.

Rather than the asset, it is the information relative to the asset that ultimately makes a person rich or poor, Kiyosaki decodes. “It is not the real estate, stocks, mutual funds, businesses, or money that makes a person rich. It is information, knowledge, wisdom, and know-how, a.k.a. financial intelligence, that makes one wealthy.”

To explain this, he narrates an example, about a friend who, as a golfing fanatic, spends thousands of dollars a year on new clubs and every new golf gadget that comes to market. “The problem is, he will not spend a dime on golf lessons. Hence his golf game remains the same, even though he has the latest and greatest in golf equipment,” Kiyosaki writes. “If he invested his money in golf lessons and used last year’s clubs, he might be a much better golfer.”

The same nutty phenomenon occurs in the game of money, he frets. “Billions of people invest their hard-earned money in assets such as stocks and real estate, but invest almost nothing in information. Hence their financial scores remain about the same.”

A compulsory read you need to invest in.


Academic incursion

For a long time, the transparency and integrity of American financial markets have served as magnets attracting global financial flows. Alas, much of that trust has now been squandered and will be even more sorely tested in the years ahead, rues Charles R. Morris in ‘The Trillion Dollar Meltdown’ (www.publicaffairsbooks.com).

“To restore credibility, American officials and financial leaders must forthrightly admit the scale of the problem and proceed to purge the absurd valuations, the phony triple-A ratings, the inflated balance sheets, and the hidden liabilities that are marbled through financial balance sheets,” reads the prescription. The cost of not doing so can be far greater than a one-time trillion-dollar asset writedown, he cautions.

A chapter titled ‘bubble land’ recounts that, before the dotcom bust, the decade from the late 1980s to the late 1990s saw three other boom-and-bust cycles. “There was a big crash in residential mortgages in 1994 and two big trading-based crises – the 1987 stock market crash and the 1998 Long-Term Capital Management crisis.”

All three episodes, says Morris, arose from fundamentally new investment technologies, enabled by breakthroughs in desk-top computing and by an influx of mathematics PhDs to Wall Street.

“The new ‘quants’ could carve up and reassemble old-fashioned asset classes so they were custom-fit to investor needs. Large-volume computerised trading could exploit tiny changes in stock prices or interest rates. Very broad new classes of complex, structured investment instruments revolutionised wholesale banking.”

Eerily, though, all the new technologies and strategies harboured dangerous flaws that tended to reveal themselves only at points of great stress, the author observes. He is of the view that bigger, better, even more far-reaching versions of these strategies have now, in 2008, placed the entire global economy at risk.

Alarming addition to the shelves of the finance avid.


Mastering modelling

With organisations now holding more data and requiring simple analysis tools at lower levels, spreadsheet techniques have to be a core managerial skill, says Alastair L. Day in ‘Mastering Financial Modelling in Microsoft Excel’ (www.pearsoned.co.in).

Stating that financial modelling can be applied to a multitude of tasks, ranging from simple sheets to add up expenses to sophisticated risk assessment for projects, Day tries to bridge the gap between academic inputs (that usually provide little guidance in applying Excel to finance problems), and the typical software books (that show how to insert a chart or format a cell but provide little guidance on model development).

“By constructing models, managers should understand better: how individual variables ‘flex’; how to discover new variables which should be included in the calculations; how to isolate key variables for further testing; and how to avoid costly mistakes by testing scenarios and potential cases.”

Recommended for a hands-on study.



Builders feel the pinch as well

CHENNAI: The rise in the interest rate of housing loans has not only left a gaping hole in the pockets of customers, it is also threatening to shake the foundation of many a builder in the city. "With the sales of apartments falling by nearly 30% in the past one year, we do not know where we are heading," one builder said.
Prakash Challa, president of the Tamil Nadu unit of the Confederation of Real Estate Developers' Association of India, said the marketability of projects has been badly hit by multiple reasons in the past one year. "The cost of raw material like steel and cement has skyrocketed. The inconsistent policy of the Central government on foreign direct investments in the real estate sector has almost stopped fund flow into our field. Banks also have virtually stopped project funding. Our only source for funding in such a scenario was from the end buyer," he said.
"Now, with the interest rates going up, people are hesitating to buy. They are not sure as to where the interest rates will stand one year from now. Over the past three years, equated monthly instalment for loans has increased by close to 50%," Challa said.
According to him, those unable to bear the burden of a higher EMI would be forced to stretch their loan repayment for a longer duration.
People with higher dispensable income used to go for more than one housing loan earlier. "Some customers have taken up to three housing loans as their salaries are very high. But, owing to the RBI putting stringent regulations in place, banks are now refusing to give more than one housing loan to an individual, regardless of his repayment capacity," lamented Challa.
Says Jain Housing managing director Sandeep Mehta, "With the floodgates being opened for steep hike in housing loan interest rates, fly-by-night operators in the industry will be washed away in no time. In my opinion, the first-time customers will adopt a wait and watch policy for a short while and once they realise that interest rates are not going to fall, they will take the plunge and buy."
P V Shanmugam, MD of Kgeyes Residency feels it is not the end of the road for builders. "Sales might get hit in the outlying areas of the city, where the infrastructure is lacking. But within the city, there is a huge demand for housing. There are enough people ready to invest if they find a good project in upmarket areas of Chennai. When there is a general slowdown in the real estate sector, land prices might slightly fall in these areas, perhaps by 10 to 15%," Shanmugam said.

More potential in affordable housing

Realty experts point to a shortage of 23 million residential units in India. The rising prices only add to the housing crisis.

But is it possible to develop affordable houses with such high input costs? Affordable housing is possible if land comes at an ‘affordable’ cost, says Mr Irfan Razack, Vice-President - Confederation of Real Estate Associations of India (CREDAI). “Unfortunately, such land is available only far away from the city, and hence government support in the form of necessary infrastructure is vital.”

Mr Kishore Jain, Managing Director, Jain Heights and Structures Pvt Ltd, a Bangalore-based real-estate company, says that affordable housing is the future for the real-estate sector. “Be it the mobile revolution or aviation revolution, the common man was able to benefit. You can see even a villager using mobiles these days, or people from small towns taking flights even till recently. But only in the housing revolution has it not been beneficial for the common man. Affordability is still an issue here,” he says.

SRZ, win-win for all

A notified region, such as special residential zone (SRZ) could be critical to solving the country’s housing crisis. “If the basic policy is formulated, other things, such as tax reliefs, will automatically fall in place,” says Mr A. Balakrishna Hegde, President – CREDAI-Karnataka.

Mr Razack says that large tracts of land should be identified for such purposes; “they can be bid and won by developers,” he adds. But the most important issue for developers would be “quick approvals from the government.”

“If land is available at better rates and tax benefits are also provided, then developers will be able to develop affordable units at rates that would benefit the purchasers or end-users,” says Mr Hegde.

Developers are interested in participating in initiatives such as SRZs if the government makes it a public-private partnership (PPP) level.

“If there can be a PPP for building an airport or laying roads, why not for housing,” asks Mr Hegde. But for us to help in clearing the deficit of housing units, we need certain policy changes, he adds. Foremost among them is softening of the tax component.

SRZs could be a win-win for all, developers feel. While end-users get good-quality houses at affordable rates, developers could also get better returns on investments.

Mr Razack says that quicker approvals mean faster completion of projects, which translates into quicker release of locked funds and thus better returns.

“The profit margins would be low on such projects, but quicker turnaround of these developments means that developers can take up other projects,” he adds.

Affordable housing projects

In what could be termed as a window to future trends, Jain Heights plans to launch an affordable housing project at Toranagallu in Bellary district of Karnataka in October.

“Houses will be available for less than Rs 10 lakh,” says Mr Kishore Jain, Managing Director, Jain Heights. Designs for the project have been finalised, and “we are awaiting approvals,” adds Mr Jain.

The project, which will see 7 lakh sq.ft of development, will have around 1,000 units. Of these, about 60 per cent would be single bedroom units — about 400-600 sq.ft each, and the rest would be two-bedroom apartments — maximum 800 sq.ft.

“The project will be ready in three years, and will be a phased development,” says Mr Jain.

“We plan to make it a self-sustained community. Though there will be a shopping area, much more like a departmental store, inside the complex, other infrastructure, such as hospitals and schools, is in the vicinity of the community,” he adds.

The idea is to promote a ‘walk to work’ culture, as Toranagallu is a mining and industrial town.

Jain Heights also plans to start a similar project in Bangalore, which is in the “conceptual stage now,” he adds. Land has been acquired already — 15 acres on Hosur Road, he says. “We will be able to develop 2 million sq.ft; however, we have not frozen other details yet.” He is hopeful that the project will be launched at the start of the next financial year.

“Bellary will be a pilot project,” Mr Jain says. The Bangalore project would have units at the sub-Rs 20 lakh price band, for, “anything above Rs 20 lakh cannot be termed affordable,” he adds.


Saturday, July 5, 2008

Oragadam indl corridor to get 58-km, four-lane road

Work Will Begin In A Fortnight After Four-Month Delay
M Gunasekaran | TNN

Chennai: With burgeoning industrial activity around Oragadam, fast emerging as a major auto hub, the state government will soon begin upgradation of the Sriperumbudur-Singaperumalkoil and Vandalur-Walajabad roads, converting them from cramped single-lanes to fourlane highways.
    With Oragadam as a junction, the 58-km-long road will be converted initially into four-lane and subsequently six-lane at a cost of Rs 300 crore after acquisition of land, sources in the highways department told The Times Of India.
    Located about 40 kms from Chennai, Oragadam is proving to be the next auto destination, after Sriperumbudur, with auto ancillaries and electronic spares industries setting up shop here.
    In fact the area is bustling with industrial activity with Prime Minister Dr. Manmohan Singh laying a foundation stone for Rs 470-crore Global Automotive Research Centre a year ago and the Nokia Siemens Network investing Rs 300 crore at Oragadam Special Economic Zone.
    Moser Baer’s Rs 2,000 crore plant will come up at Oragandam for manufacturing nano materials and photovoltaic products. Komatsu and Apollo tyres have set up their manufacturing units here too. Huge investments have already been pumped into Oragadam which is witnessing a flurry of activity these days.
    With the hectic industrial activity in and around Oragadam, the existing single lane is proving to be a major bottleneck, sorely inadequate to accommodate the increasing vehicular traffic especially on Sriperumpudur-Oragadam, sources say.
    As the project requires land acquisition to make the two roads six lane highways, the authorities have decided to make them four-lane first. But, land acquisition process will take place simultaneously. Three firms that won the contract for the highways project signed the agreement a couple of days ago. The firms are already in the process of mobilising men and materials to execute the mega project.
    Preparatory works to shift utilities like telephone, electricity poles and water pipes, have already begun. A senior official said that the work had been delayed by about four months as the sole contractor, who was awarded the tender, refused to take up the work citing escalation of raw material costs.
    “We revoked the contract and ultimately the firm forfeited its earnest money deposit of Rs 91 lakh. After the government’s introduction of price adjustment mechanism, the project took off,” a highways department source said. However, the project cost rose to Rs 215 crore from Rs 190 crore in six months.
cross at Oragadam and a grade separator will come up at the junction at a cost of Rs 20 crore.
    Expressing confidence about completing the project in the next 15 months, or by September 2009, an official said there was no major construction work involved in the project except the Oragadam Grade Separator.
    Sources in the Tamil Nadu Road Infrastructure Development Corporation that executes the project confirmed that toll would not be collected from road users. “The project was conceived by the government to give fillip to industrial growth and to lure more investors. So, the government decided not to impose toll,” sources said.
    With industrial activities hotting up around Oragadam there has been a pressure from business houses to expedite the road work and create a smoother passageway to the industrial hub. Though the contractors have been given 15 months to complete the project, highway authorities are confident of completing the work ahead of schedule.
Total length: 58 km
Project cost: Rs 300 crore (including land acquisition)
Period of completion:
15 months
Toll will not be collected
A Rs 20 crore grade separator will come up at Oragadam
Initially the two crisscrossing roads will be
four-lane highways
After land acquisition they will become
six-lane highways


Friday, June 6, 2008

Keeping a ceiling on home prices

India's journey towards a home-owning democracy, and Padmakshi Financial Services' continued recommendation to buy the dominant property financiers leads me to wonder if the Indian and US property markets are in different stages of the same journey.

While the US cycle is in a temporary downturn, if the Indian cycle is behind but revolving in the same direction, it has to be worth a status report.

For that, I delved into the recent Padmakshi Real Estate update.

For the non-NRI (non-resident Indian) investor, there is only so much Sensex volatility you could take.

It is all right for the future residents of India to take the long term view and hold onto the handle-bars of the Sensex roller-coaster.

They are not exposed to currency risk and future lifestyle risks that non- NRI, non-Indian investors face.

Exposed? Consider this: the Sensex advanced around 10 percent in April, but retreated 5 percent in a week when I last looked. While still holding out for a good long-term story, its going to be bumpy.

Rohit Chothani at Padmakshi says: Its vital to temper expectations of equity investors the 16 percent to 18 percent per annum longer term average will be nearer in terms of management of realistic expectation than the 45 percent per annum of the last five years.

The Padmakshi brief reads:


1. Go green is the new mantra adopted by all the leading developers across the country to lure clients through its long-lasting benefits. Chennai is leading with the highest number of existing green buildings.

2. Bangalore, Chennai and Pune markets are witnessing a fair flow, and non-IT space demand continues to ascend.

3. Average gross yields in commercial real estate across the metros range between 10 percent and 13 percent.


1. Demand in the luxury segment in city-center properties continues to outpace the supply in all the metro markets.

2. The domination by a few players is declining and giving rise to competition in developing good quality projects. This is attracting buyers.

3. Average gross yields hovered in a range of 4 percent to 8 percent across these metros.

I recall looking at some fancy Victorian but run-down premises in fairly central Mumbai. Built by the Britishers and run down by time and rules that encourage squatting at low rents. That's all changing, says Chothani.

Property developers are forming a significant voice in India Inc and by degrees we will see the asset class mature.

Supporting the statement, Chothani notes the increasing interest shown by private equity players. The biggest property deal saw a consortium led by Delhi-based BPTP buying a 38-hectare commercial plot in Noida for 50.06 billion rupees (HK$9.11 billion). This is a price per square meter of 130,207 rupees.

What does this all mean for the outlook of Indian property. Chothani is bullish due to strong demand, strong FDI inflow, and the support of government-led infrastructure development.

But he warns: Developers will have to adopt innovative techniques to keep a check on spiralling construction. With finance costs also on the rise, developers and private equity projects will be pressured into delivering affordable housing solutions.

Ian Jackson is the general manager at wealth management consultancy Financial Partners


Top realty players set to enter warehousing

It’s a road less travelled but real estate developers are revving up. After building luxury homes and corporate offices, top-of-the-line property developers such as Akruti City Ltd, Emaar MGF Land Ltd, K Raheja Corp., and Nitesh Estates are planning to build warehouses as organized retail booms and traditional realty market slows.

Organized warehousing, though in its nascent stage, has whipped up a huge demand—nearly 340 million sq. ft is needed by 2015, according to Jones Lang LaSalle Meghraj (JLLM), a property consultancy firm. With international companies coming to India, warehousing is set to change from old-fashioned storage sheds to planned hubs that are designed to serve as inventory management and storage spaces for retail chains.

Retailers ranging from Wal-Mart Stores Inc., the world’s biggest, to domestic firms such as Reliance Retail Ltd, have set aside millions of dollars to pump into the Indian market so they can get in early as organized retail gets set to take off in a country dominated by small stores and street-side selling.

All retailers have said storage, warehousing and logistics is the weakest part of the retail infrastructure in the country that needs development—and realtors see an opportunity. Developer Akruti City, formerly known as Akruti Nirman Ltd, targets building warehouses at 20 locations across the country.

Bangalore-based Nitesh Estates, which is now heading for a national footprint with several residential projects, has announced a Rs2,000 crore plan for warehousing, with space in Chennai, Bangalore and Pune.

Future scope: A ProLogis warehouse in China. The firm is collaborating with an Indian realty group to set up similar warehouses in India.

Future scope: A ProLogis warehouse in China. The firm is collaborating with an Indian realty group to set up similar warehouses in India.

Ours “would typically be areas close to large-sized mandis or markets where there is a huge requirement for storage infrastructure,” said Hemant Shah, chairman of Akruti City, which is investing Rs250 crore in the first lap and is finalizing tie-ups with national and global warehousing firms. And these are not unplanned storage areas that are cropping up. Mahesh Laxman, regional director of south at JLLM, said unused land banks between a metro such as Bangalore and its extended suburbs are ideal places to build warehouses.

With land prices in Indian cities having shot up many times, real estate firms are using their land banks that cannot be currently utilized for residential and commercial development to develop storage spaces. Though analysts said that returns in warehousing may not be immediate, they could be 18-20% on investment if the rentals are around Rs15 per sq. ft, say property consultants.

“Typically, developers with large land banks would get into the business. Not only does the land bring you decent returns, there is a huge demand for storage space with both national and global retail giants expanding their operations in India,” Laxman said.

Developing warehouses needs a bit more work than just building four walls and roof, which was typically how old warehouses were built in the country. “The business is a lot like developing a property but to certain technological specifications,” said R.S. Mani, chief executive officer of Nitesh Estates, which is tying up with an international player for its new venture.

Specifications for warehousing, which could be both technological and design-oriented, incorporate aspects such as flooring, storage space, height and dock-door proportions to move goods in varying sizes. In fact, higher and better the quality of the specifications, higher would be the rentals, said Laxman.

Developers admit that joint ventures and strategic partnerships with global warehousing companies are the best way to go about this new business. This year, the joint venture between Mumbai-based realty group K Raheja Corp. and Colorado, US-based warehousing multinational ProLogis was not only the first partnership of its kind but charted the way for more such tie-ups.

“Warehousing is a specialized, long-term business and real estate developers don’t have the required experience, which is why they would tie up with a warehousing brand like ours,” said Abhijit Malkani, director of India operations at ProLogis.

A brand such as ProLogis, Malkani added, would not only bring the expertise but the huge client base that it has been servicing across the globe. The company, which aims to create 25 million sq. ft of warehousing space globally in the next five years, set its eyes on India after China, both of which are emerging markets for this business.

Mani of Nitesh Estates added that warehousing experts would bring in the latest trends of the business in their projects and would market such projects better.

International experts could customize design elements for every segment, be it automobile or furniture, and most importantly, provide infrastructure to retail and industrial clients to set up such warehousing hubs.

Given the interest shown by several developers and landowners, analysts say that the future of warehousing is being currently written but its long-term success would depend on many factors.

Vivek Dahiya, director of DTZ Holdings Plc., a real estate advisory company, said, “The emergence of professional developers and operators who can create a national-level portfolio, availability of low-cost land near road and rail networks, and continued investments from institutional and private equity investors in this segment would determine the success of this market in India.”


SSI, Unitech consortium to develop township in Chennai


Boston Analytics Launches the India Consumer Sentiment Index


EmaarMGF to invest $3 bn in South India


ValuePROPS.com, a New Portal For Real Estate Deals



Those who want to finalize their real-estate deals now have a new portal to look up to. Kult Infotech has launched its new online real estate bank called valuePROPS.com; it offers service for advanced search and mapping to help to find a preferred property destination.
ValuePROPS offers the service of advanced search for preferred area, mapping via GoogleMaps for exactly identifying the selected destination, financial calculations, blogging space, and other features that can help guide users through the entire process --from buying and selling a property, to completion of transactions.
In addition, valuePROPS.com has a multi-lingual interface available in Tamil, Telugu, Kannada, and Hindi. The website claims to provide access for about 5000 registered agents and transparent dealings along with the revenue sharing model. Currently, the service is limited to properties across the southern cities of Chennai, Bengaluru, and Hyderabad.


Slowdown in Chennai property transactions

A. Srivathsan

CHENNAI: The number of property transactions in Chennai and its immediate neighbouring districts has come down by 10 to 15 per cent in 2007-08.

In 2006-07, the three zones within the city registered about 3.7 lakh documents and netted about Rs.1,384 crore in terms of registration charges and stamp duty. Of these transactions, about 80 per cent was property related. The second half of 2007-08 witnessed a slowdown. Without exception, transactions in all the three zones of city – North, South and Central and the neighbouring Kancheepuram and Chengalpattu districts have come down. South Chennai was the worst hit, a drop exceeding 15 per cent. Chengalpattu followed this with more than 10 per cent. In 2006, these two districts along with Kancheepuram registered high growth in property transactions across the State.

Prakash Challa, President, Confederation of Real Estate Developer’s Associations of India (CREDAI), Tamil Nadu confirms that the property transaction and sale of apartments have come down in the recent times. He attributes the high interest rate, rise in the construction cost and additional charges as reasons. The steep rise in land prices and reduced funding for real estate projects have added to the situation, he said.

In spite of the fall in transaction, the revenue generated for the Government in terms of stamp duty has not come down. An upward revision in guideline values, between 50 and 150 per cent, which have been in force since August 1 last year, helped improve revenue collection.


Foreign investment spurs Dubai real estate growth


International Institute of Real Estate, Investment and Finance


Emerging Real Estate Market Investors Set Sights on USA Market


Affinity Consultant – Helping you in Real Estate Investment in India

Affinity Consultant is a Real Estate Agent in India operating since last 10 years. A team of dedicated professionals is headed by A.K. Jain with more than 10 yrs of experience in real estate services


Friday, May 30, 2008

Dream Houses

Aniruddha Deshpande is aiming to create a new kind of township. Sucheta Dalal and Debashis Basu met him in Pune and heard his interesting plans

A few kilometres from Pune, a new township called Amanora is taking shape. It is the brainchild of Aniruddha Deshpande, a man who was known for a long time as someone who brought Motocross to India in the 1980s and a regular participant and winner of the gruelling Himalayan car rally. Given this background, it should be no surprise that his plans for Amanora are Himalayan in scale. It is a Rs4,500 crore, fully wired, intelligent township that will be controlled by a central data system. All homes will be IT-enabled to monitor everything from the daily vendor system to the security. Every resident will have a portal in the Intranet that will be connected to various vendors. Explains Deshpande: “You can order anything from any shop or any hotel in the township through this portal. If you are going out of town and need less milk, then some simple clicks on a smart screen will allow you to change your requirement from, say two litres to one. The laundry, the housekeeping and any other supplier will be connected to this portal.”

Deshpande calculates that one needs 68 such functions or verticals to run a township and the cost of such a data-centre would be Rs100 crore. It is not viable to spend this amount for constructing a few thousand houses. But then Deshpande is not setting up a few thousand houses; he is creating a township of 30,000 at which the data-centre becomes very profitable. The centre will be set up by a township management company called City Development Corporation, which is controlled by Deshpande.

In fact, the Amanora concept changes the relationship between the developer and the buyer. You don’t get to buy an Amanora property; you lease it for 999 years. Will this be acceptable to buyers? Deshpande’s rationale is: “We will change the customer into a citizen. So we don’t sell you the apartment; we give it to you on lease and we provide you water, electricity, education, healthcare, a marketplace, entertainment, gardens, security – everything that you need. We will be able to offer this at a much lower cost and much higher quality because we will be able to negotiate better terms as a bulk buyer of water, electricity and everything else from the suppliers.” He proposes many novel solutions to ensure that Amanora’s infrastructure remains top-class. One such is a water bank or dam, which he admits is nowhere near being accepted by the government. But, he says, “The government is short of money for irrigation projects. We are willing to spend money to dam the water and sell it to the Pune Municipal Corporation. We want to be able to sell the surplus water at the rate that the irrigation department sets for water.”

How did Deshpande come into this business and develop these novel ideas, when he is neither an architect nor an engineer? It was – as happens with most entrepreneurs – a matter of chance. “Both my parents are doctors and nobody in my family is into business. I have been only in the real estate business so far, except for an automobile dealership that I had for a few years till 1988.” That too happened because Deshpande was connected to automobiles in an indirect way. “I was organising motor sports in India and was vice-chairman of the Federation of Motor Sports in India for a long time, and then of the Pune Automotive Racing Association. I also used to race and won the Himalayan car rally in 1980-81. I also started the Motocross here in Pune and we even hosted the world championship at the Nehru Stadium. I was the executive chairman of that body for a long time – almost eight-nine years. We had collected Rs35 lakh, which was a big amount for a sports body in 1988.” After the world championship was over, there was a lot of infighting and so Deshpande quit. As soon as he resigned in 1988, he stumbled into the real estate business quite by chance.

Deshpande had a friend who had a 5,000 sq ft plot in Bibwewadi in Pune. He asked the friend whether his father would let him develop the plot. He replied, “I don’t think he will, because he is looking for a well-established developer.” Deshpande said, “If we tie up with an architect and a developer, will he give it to me?” This architect was a member of the racing association. Deshpande also knew a developer who had done construction for 10 years. “The idea was that the we would take two flats and the developer would sell the remaining six apartments. All of us went to meet my friend’s father.” He told them, “If you three are going to do it, then I am willing to take the risk; I will give you my plot.” The hitch was that the trio had to make a down payment of Rs120,000 but did not have any money. They suggested that bookings would be announced in six to eight months and once the cash was raised, they would hand over Rs120,00 to the plot-owner. The owner agreed. They completed the project in six months and Deshpande has never looked back ever since. “We did 10 projects in that area alone. Many people saw the quality of the project and approached us with their plots. All the plots were the same 5,000-sq-ft size. That was how I got into this business. It was by default. Nothing was planned until after I resigned from the Pune Automotive Racing Association. Deshpande does not rally anymore but his passion for cars has not diminished. “Every time I go to London, I rush to the automobile showroom on Park Lane to see the gleaming models of classic cars,” he says.

Building small residential projects is one thing but taking on the task of creating a landmark township on a gigantic scale is quite another. How did Deshpande get involved with Amanora? Before Amanora, he was involved with another unique project, called Lavasa, which is a township atop a hilly area, near Pune. Lavasa is today billed as a hill-station where you can live, and travel to work in Pune. When Deshpande started work on it, it was the most unlikely destination. “It had no road, no hospitals, no hotels, no communication facilities, no educational facilities, nothing. For the first one year, we used to get off from our cars and walk for two hours to and from the site each way. No developer would walk four hours a day to buy land, especially six years ago.” Why did he take the trouble? “The only reason was that nobody had built a private hill-station after the British left India.”

Deshpande bought his quota of land and then applied to start a project under the Maharashtra government’s hill-station policy. However, having developed the project up to a point, he has just sold his interest in it to Hindustan Construction Company, of Ajit Gulabchand, who is supposed to be close to Sharad Pawar.

Deshpande claims that the Lavasa project was planned very well and has won prizes all over the world for master planning. “A very sensitive environmental planning was done with the help of the UN Environment Department, because Varasgaon, where Lavasa is located, is one of the 18 bio-diversity hot-spots but was the most degraded. In the first four years, with the help of the government officials, forest authorities and everyone involved, we planted 300,000 trees. The UN officials in Paris were sceptical that we would be able to plant even 100,000 trees – which is what we had promised.” Deshpande sold out his stake in Lavasa when the project became large and banks insisted on his personal guarantees for loans which were growing too large for comfort.

Apart from Amanora, Deshpande has planned two other townships. The next one is at a lower price point (between Rs10 lakh-20 lakh), deploys a new fabrication technology (consumes less of cement and uses a chemical that expands) to lower the cost and will come up in less than 1,200 days. The township will have all basic facilities including and a transport hub to connect Pune. The third project is a golf estate – a very high-end project with only golf villas. It will have 10-12 towers and will offer an unrestricted view of the golf course. Deshpande has already bought the land and will launch the project before the end of the year.

Can Deshpande take his model and learning across the country? No way, he says. He explains: “Real estate in India is not a national game. I have been going to Bangaluru, Gurgaon and Chennai and studying these places for expansion. I have good contacts there through my interest in motor sports. But it is not easy to buy land if you are not a local developer. If you are doing a joint venture with a local developer, then you are not in control. So, Mumbai-based developers cannot easily do projects in Pune or Delhi-based ones in Chennai. I can buy 500 acres of land in an instant in Pune because I know hundreds of people and how they are connected to whom, etc. But I will be at sea in other cities.” In any case, for now, Deshpande’s hands are full – delivering what is aimed to be a showpiece of India’s frenetic real estate development.


Tuesday, May 27, 2008

How to rent a hassle-free house

Almost two years ago, Suneel Padale, 36, a development professional, moved to Delhi from Bharuch, Gujarat, on an assignment. Initially, he stayed with his friends and he acted quickly on their suggestion to look for a house in Mayur Vihar Phase-I. He visited the area and liked it. With friends and newspapers disgorging details of property agents in the area, the house search started.

He was, however, disappointed at the results, as most of the apartments that he checked did not live up to his needs. He stuck with the location in spite of that. Finally, he moved into one that he liked. But, eventually, it turned out to be a sour deal as, Padale says, "The landlord wanted to sell his house and in the intervening period he wanted to get some rent." For Padale, the search process began again.

Happy House Hunting D-I-Y

  • Locality. Select the locality; look for proximity to markets, hospitals, schools and your office, and its connectivity
  • Rent. Look at property portals and find out the reasonable rent in that area
  • Reference. Get references of property agents from people in the locality, or refer to newspapers and property portals
  • Dealer. Check the agent's office; look at the size of his set-up; ask for references of past clients; a service tax registration means he takes his business seriously
  • Details. Shortlist the property agents; tell them about the size of property and the rent that you want to pay; check the security deposit and brokerage fees. Ask the agent to shortlist properties for you a day before you visit the area
  • Property. Check the condition of the property. Make sure it has not been vacant for long
  • Utilities. Check the water and electricity supply; ensure there is no leakage and that all electricity connections work
  • Interiors. Check for warped doors, windows, broken panes; stress on getting a whitewash and pestcontrol done
  • Lease. The terms and conditions should be clearly mentioned in the agreement; get it notified/registered; Comple-te all paper work before you move in

This time, however, he changed his strategy. During his stay he had acquired some new friends, in particular, older residents of the area. From them he took references of property agents. "These agents had a larger supply of flats as compared to the earlier ones," says Padale. Still, it took two months before he found a flat. He summed it up wryly: "The experience is quite painful and time consuming."

The demand. Painful indeed, is the process, especially if you are searching for a house in the April-June period as a lot of job openings are created then. Also, campus placements of most business schools usually ends around that period.

"This adds to the demand for rental properties; primarily, this demand is created in the Rs 5,000- 15,000 bracket," says Prashan Agarwal, business head, www.allcheckdeals.com, India's first, online brokerage for residential real estate.

The effect. It is now established that sales volume of ready-to-move-into properties has taken a beating. The main reason behind this fall is the high cost of real estate, with credit becoming costly. The outcome of this is that many people are effectively postponing buying their dream home.

As a result, this has driven the demand for properties on rent to move upwards. "In the last 6-12 months, rentals have risen, on an average by 15-20 per cent," says Agarwal. For rents to stabilise or fall, volume of property purchase transactions needs to move up. With that not happening, at least in the short-term, rentals will continue to move up. Against this backdrop, if you are rent-bent, you need to look at a few things.

The location. The first step is to zero in on the locality. Then find out the regularity of both the water- and electricity-supply. Check the distance to your office, local markets and other amenities like schools and hospitals. Also, go through the property portals to get an idea of what is the fair rent for that locality.

The agent. Get in touch with the property agents. You could also sound out your office colleagues, in case they are planning to rent out their property, or if they know someone who is willing to do so. This makes sense as, by getting rid of the agent  you save on brokers' fee, which is typically a month's rent.

If you are not that lucky, start short-listing agents. If you know people in the area, take references from them or else check out the classifieds. Bigger property agents usually publish many advertisements for different properties. You can also visit the property portals. Zero in on the agents who have the largest supply.

Once you have identified the broker, visit the office and check if he has a permanent address or not. "A service tax registration indicates that the broker takes his business seriously," says Naresh Malkani, CEO, www.indiaproperties.com. Also, ask the agent if he is a member of any local real estate association or a national association. "At the end of the day, you should use your own judgement," says Padale.

The landlord. Once you have identified the property, the agent arranges a meeting with the landlord. There are a few things that you should clarify. Ask him why the property was vacant. "Given that, ask him what plans he has to move into the property or to sell it," says Agarwal.

The rent. In Delhi-NCR, the landlord would generally ask for two months rent as security deposit (SD) and a month's rent in advance. While advance rent is a prevalent practice, the amount of SD varies. For example, in Mumbai and Bangalore you have to pay up to 10 months rent as SD.

The inspection. "One should always take the meter reading of all utility services during pre-possession walk-through. The readings should be attached as an addendum to the lease and signed by both the parties," says Malkani. Stress on the fact that the landlord must get the electricity connections checked before he hands over the house to you.

Ensure that the wiring is earthed properly and that everything else is where it should be. If any doors or windows are warped, get them rectified. Furthermore, check if locks in the house are in working condition and if you find a faulty one, get it changed.

Finally, ask the landlord for pestcontrol and to get the house whitewashed.

The lease. These are of two types - company and personal. Most landlords are comfortable with a company lease. "A company lease protects the landlord from any potential tenancy holdover provisions," says Malkani. But if you are unable to furnish a company lease, there is the personal lease option. "Convince the landlord that you are a person of integrity," says Agarwal.

Whichever option you choose, certain things have to be stated clearly, especially, the duration of lease and the SD. If it's a personal lease for 11 months, get it notified. On the other hand if it's a company lease for more than a year get it registered with the help of a lawyer. "The lease then becomes a legal document that secures your rights as a lessee," says Agarwal. At the end, pressure the agent to complete all the documentation before you actually move into the property.

Renting may not be an ideal solution, but if you pay attention to a few basic issues, then that can well ensure years of living on rent, trouble-free.


Monday, May 26, 2008

Enticing buyers with freebies

The Hindu Business Line : Enticing buyers with freebies

LIC to buy land worth Rs 2,000 cr

Life Insurance Corporation of India (LIC), which is among the largest property owners in India, is planning to acquire land worth Rs 2,000 crore this year to develop commercial and residential complexes.

This will be in addition to the Rs 1,100 crore it spent last year for purchasing lands across the country.

The public sector insurance giant has identified Kolkata, Jaipur, Agra, Vishakhapatnam and Bangalore as possible cities where it may acquire land and develop it.

LIC had hired consultants, which had identified the growth centres in the country and based on the report, the company intends to invest in real estate. "We will evaluate the locations, which earn higher returns when we invest," a company executive said.

The insurer is next only to Indian Railways in terms of property ownership in the country and, at present, it holds 1,708 properties in the country which are estimated to be worth around Rs 20,000 crore. In the eastern region alone, the life insurer owns 187 properties.

While a part of the real estate has been acquired by LIC in the last five decades of its existence, it also inherited a majority of the properties owned by it at the time of nationalisation in 1956. Most of the inherited real estate is in prime location, typically in central business district in most cities, including the metros.

A bulk of the commercial complex developed by LIC is being used to earn rental income, company executives said.

In Kolkata, for instance, the state-owned company is developing around 700,000 square feet of commercial area opposite the Science City, LIC zonal manager R R Dash said.

The company acquired the five acre plot from the Kolkata Municipal Corporation for over Rs 276 crore through a bidding process and is working on a 50-storied commercial building that may be the tallest building in the eastern city. It has already shortlisted around 10 design consultants for the project that is estimated to cost around Rs 400 crore.

LIC Chief Engineer BK Banerjee said that during the last five years, the PSU's rental income has increased four folds and during 2007-08, in the eastern zone it stood at Rs 22 crore.

"We expect that in the current fiscal the rental income would be close to Rs 30 crore in the Kolkata region. We would like to double this in the next two years," Banerjee said.

LIC to buy land worth Rs 2,000 cr

Online portals an advantage to NRIs

Online portals an advantage to NRIs

Approvals on slow track

The Tamil Nadu Government has to streamline building approval processes in Chennai and the rest of the State to fully realise the investment potential in the real-estate sector. The State has earned an unenviable reputation for delays in sanctioning building plan approvals and clearances — a clearance for a multi-storeyed building could take 18- 24 months, that is almost as long as it takes to construct the building.

Talk to anybody in the construction industry, the complaint is the same: Delay in approvals within the Chennai Metropolitan Development Authority (CMDA) jurisdiction in Chennai Metropolitan Area, and that of the Directorate of Town and Country Planning (DTCP) which is responsible for clearances elsewhere. Just the formalities involved in getting land use conversion — from agriculture to non-agriculture — alone could take nearly a year. Other States such as Karnataka, Andhra Pradesh or Maharashtra have a system for fast-track clearances of projects. Approvals are obtained in about 4-6 months, including land usage conversion.

Need to speed up

The Tamil Nadu Government has acknowledged the need for expediting the clearance procedures and has started taking steps to speed up approvals for IT and industrial buildings.

At a high-level meeting last February, called by the Chief Secretary, Mr L. K. Tripathy, the officials connected with various agencies involved in plan approvals, including the CMDA, DTCP, Chennai Corporation, Municipal Administration, Fire Department, Traffic and industry promotion agencies, had expressed an intention to put in place a system to accord clearances within 60 days for IT and industrial buildings. But the proposal continues to be on paper and is yet to take off.

At the meeting, the Electronics Corporation of Tamil Nadu (Elcot) was identified as the nodal agency that would act as a single window facilitation agency to accept the applications from IT building developers and SEZ developers and coordinate the process of obtaining clearances from various agencies. The Guidance Bureau, the agency under the Tamil Nadu Industrial Development Corporation, created to attract investments into the State, would play a similar role to get approvals for industrial buildings.

The plan was to institutionalise this structure with an appropriate legislation, a draft of which was to have been prepared during the Budget session of the Assembly. The legislation was to provide for a 60-day time limit for building plan approval, 30 days for issue of final building plan clearance by the local bodies and the formation of a single window facilitation authority. However, nearly three months after the proposal there does not appear to be much progress in this direction.

Shortage of space

The State Government has estimated that over 20 million sq.ft. of built-up space for the IT industry is needed within the SEZs over the next 18 months. If building approvals are not given on time, IT investments could migrate to other States where such space is available.

There is also an acute shortage of office and retail space which is driving up the costs. Industry estimates peg the demand for office space in Chennai at about 7-8 million sq.ft. and for retail space about 2 million sq.ft. this year. Developments have to be speeded up to meet the demand.

The Hindu Business Line : Approvals on slow track

CENTURY 21 Real Estate LLC Expands into India

CENTURY 21 Real Estate LLC Expands into India - Franchisewire.com

Khaleeji Commercial Bank raises US$163 million for Indian project

Business Intelligence Middle East - bi-me.com - Khaleeji Commercial Bank raises US$163 million for Indian project - News, analysis, reports

Wednesday, May 21, 2008

Residential rentals in Delhi up 13 pc in 2008

Rentals of residential properties in central Delhi has appreciated up to 13 per cent in the first quarter of 2008 as demand continues to be buoyant despite the capital witnessing saturation in development of new space, a report says.

Global real estate consultant Cushman & Wakefield said central Delhi locations have witnessed appreciation in rentals in the range of 7-13 per cent in the first quarter as demand in these locations was driven by expatriates who have the ability to pay higher rentals.

"Majority of the south Delhi locations registered an increase in the range of 7-11 per cent primarily due to limited scope of development and buoyant demand," the report said.

Leasing activities were active across all micro-markets as the end-users had deferred their purchase decisions due to expected corrections in the prices in near future, it added.

As per the estimates of C&W, the rental values in Noida and Gurgaon rose by 10 per cent and 12 per cent respectively.

The capital values of the south Delhi locations had also risen in the range of 10-34 per cent over the quarter mainly due to limited supply and relatively high demand.

"The suburban locations of Gurgaon and Noida witnessed marginal appreciation of 2 per cent over the quarter. End- users as well as investors have adopted a wait and watch policy in anticipation of correction in apartment prices and home loan interest rates," the consultant firm viewed.


Real estate MFs to draw in more foreign money

Some things make the Reserve Bank of India (RBI) paranoid. The invasion of foreign money in the Indian property market has always been a familiar theme that rang alarm bells on Mint Street — the central bank’s headquarters.
Whenever it sensed an alarm, the regulator moved in to clamp down on such money flows. Even foreign venture capital funds opening shops here are asked by RBI to give an undertaking that the money they raise will not go into real estate.
In the past two years, the regulator had persuaded New Delhi to tighten investment rules that would make it difficult for foreign money to chase Indian properties. Not that it has helped significantly, with smart money managers operating from offshore tax havens finding new ways to side-step the curbs.
But in its battle against “asset price bubbles”, RBI will now face a challenge from an unlikely quarter. A month ago, the Securities and Exchange Board of India (Sebi) had paved the way for foreign funds to take a new route to enter the local property market. This would be through real estate mutual funds (REMFs).
There is nothing that can now stop a foreign institutional investor (FII) registered with Sebi or NRIs to buy units of mutual fund schemes which have invested in real estate assets. Under the new rules, which are carved out of the regular mutual fund guidelines of SEBI, an REMF can invest the entire money that it mops up “directly in real estate assets”.
This could be ready commercial properties earning rental income. In a way, it would help investors as well as developers overcome the present rule that says foreign entities can put money only for construction and development and not in ready properties.
The Sebi notification issued on April 25, ‘08 says that at least 35% of the new assets of the scheme should be invested directly in real estate assets while the balance may be invested in mortgage-backed securities, securities of companies engaged in dealing with real estate assets — a slice of these securities can also be unlisted shares, bonds and hybrid instruments. In other words, an REMF is free to invest as much as 100% of its money in ready properties.
This is a curious situation, where one arm of the government has changed rules to restrict foreign direct investment (FDI), while another regulator has found ways to let fresh money flow into properties. What RBI had done was to push changes in FDI regulations, but now foreign money can come in through the portfolio route, with the government clarifying that FIIs are not subjected to the conditions under Press Note 2 that lay down the norms for foreign investment in real estate.
This, perhaps, was inevitable. Banks are almost barred from giving loans to builders who have turned to foreign investors. The latter found the India property story irresistible, with prices having multiplied in the past few years, and higher interest rates in India compared with overseas markets helped them make a killing on such investments. If REMFs lower the fund cost for builders, it would benefit the industry in the long run.
The downside is new money could further fan property prices. Already some of the fund houses are planning to float REMFs. But these players are looking for some changes that could help REMFs take off. For instance, they want REMFs to be exempted from income distribution tax like equity-oriented MFs, where more than 65% of the assets is equity.
Second, REMFs can invest in real estate assets which are free of litigation. While this is only fair as far as investors are concerned, it could limit the scope for the scheme’s investment.


Tuesday, May 20, 2008

Kotak Eeady to Pay Rs 600 Crore for Contractor House

Yet another large property deal is brewing in Mumbai. The Kotak Mahindra group is in talks with developer Orbit Corporation to buy the ‘Hafeez Contractor House’— a prime commercial property of Orbit—for over Rs 600 crore.
Sources said Kotak may use its property fund Kotak Realty Fund for the proposed transaction. When contacted, Orbit CFO Ramashrya Yadav said: “We are in talks with various interested parties. We cannot disclose names. Once the deal is signed, we will inform stock exchanges.” Kotak Realty Fund CEO S Srinivasan declined to comment.
At present, real estate and retail funds operating in India are trying to buy into commercial properties to improve valuations. Many funds and developers are exploring options to float Real Estate Mutual Funds in India and Real Estate Investment Trusts in overseas market where higher valuations would help.
The Hafeez Contractor House which is located at Lower Parel in Mumbai, measuring 2.05 lakh square feet. The 35 storey commercial building is designed to cater around 500 companies.
Lower Parel is an emerging commercial destination with players like DLF, Indiabulls, Bombay Dyeing, Peninsula Land lining up commercial properties in the Parel-Worli belt.
Earlier, Orbit Corporation had planned to sell Hafeez Contractor House to The Sajjan Jindal Group.
Later, the Jindal Group dropped the idea and acquired Orbit Corporation’s Kalina land-cum-commercial property for Rs 807 crore. Both parties have been negotiating on a valuation of Rs 25,000 per sq.ft, comparatively lower rate than the prevailing commercial property rates in the Parel-Worli belt, sources said. Currently, developers are selling commercial space for Rs 28,000 to Rs 30,000 in Worli.
Close to 7-8 m sq ft Grade A commercial property is available in Mumbai now, with little additions in last three years. “The under construction projects have the potential to increase the commercial stock many fold and this may soften prices,” said an analyst. ..........
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Blackstone to invest $18m into India construction biz

Blackstone to invest $18m into India construction biz | Articles | IndUS Business Journal

Realty needs indices similar to equity market

The Real estate industry in India has been growing by leaps and bounds in the past few years. However, the country still lacks a credible way to cross-check the price swings (real or reported) in the sector. For example, recent reports of residential prices cooling off in major cities of the country could not be verified.

There was no authentic data to indicate such a trend. Thus, property buyers remain confused, not knowing, for instance, whether Mumbai property prices fell more than that of Delhi in the last quarter?

The same does not happen with equity investors. If, at the end of the day, anyone wants to know the day’s market trend, he could visit BSE/NSE website or see next day’s newspaper to know the exact rise or fall of Sensex or Nifty. And nobody questions the authenticity of Sensex or Nifty as a barometer of market sentiment. With years of index publishing, a sort of credibility and association has been built with the equity investors by these financial institutions.

Could National Housing Bank (NHB) replicate the same with various real estate stakeholders — government and policymakers, builders, individuals and housing finance industry? Could it start making its real estate index figures (Residex) public, say every three months?

NHB made a beginning in this direction in 2005 when it launched a project for preparation of the real estate price indices for the residential housing segment, NHB Residex. To start with, the project envisaged compiling the indices for 10 cities — Greater Mumbai, Kolkata, Delhi, Chennai, Bangalore, Hyderabad, Ahmedabad, Kanpur, Jaipur and Patna. It also gave price appreciation figures for major cities at the time of the launch of the index. However, getting data from NHB has been tough for analysts.

With various mutual funds planning to soon launch real estate funds, it is imperative that a reliable index data, preferably from a government body like NHB, is made available to act as a benchmark.

Capturing real estate prices in India has its own challenges. Thanks to different types of housing that are made available by builders, there are large variations in property price in a single locality. It is difficult to put a single price to a locality which has different class of houses, say premium as well as low cost.

However, NHB with its wealth of information on loan disbursements and other crucial figures could do a lot for the industry. Since most financiers would have data on a citywise basis, it could be shared with NHB for internal index calculation purposes. If NHB cracks the same, it could be one big step towards making the industry more competitive.

Realty needs indices similar to equity market- Realty Trends-Real Estate-Markets-The Economic Times

Milestone Capital to raise fund of Rs1000 cr

Milestone Capital Advisors Private Limited will raise a fund of Rs 1,000 crore to invest in the booming real estate sector in tier-II and tier-III cities of Tamil Nadu.    

Milestone Managing Director Ved Prakash Arya said today that the fund, which would be raised under "Milestone Domestic Scheme-III", would be utilised for land development, construction of energy efficient residential buildings and warehouses.    
"We have successfully raised two real estate funds to the tune of Rs 250 crore and Rs 1000 crore respectively. Of the 14 investments we have made out of the first fund, nine are in Chennai," he said adding that Chennai itself had a high demand of residential space to the tune of 15-20 million sqft over the next two to three years.    

Arya said while 40 per cent of the third fund would go for land development, 60 per cent would be used for building low cost apartments and ware housings.

Milestone Capital to raise fund of Rs1000 cr

78mn sq ft to be added from airports

Nearly 78 million sq ft of real estate is expected to be added by 2015 due to modernisation and upgradation of 47 airport projects. The projects cover a total of 40,000 acres of airport area across 40 existing and 7 new airports in the country, according to Airport Realty Report by global property consultancy Cushman & Wakefield.

According to the report, if  the airports are modernised as per the schedule, then non-aeronautical revenues might increase from the current 35 per cent to 54 per cent by 2015. It is estimated that rent from retail, office and hospitality will constitute nearly 45 per cent of  the total non aeronautical revenue by 2015 and the rest of the income would be generated from other non-aeronautical sources like trading concessions, public admission fees and miscellaneous income from advertising, car parking etc. 

Anurag Mathur, joint managing director of Cushman & Wakefield said,"Globally airports derive a large portion of their income from non-aeronautical revenue sources; Heathrow, San Francisco, Vancouver and Brisbane, bring in as much as 50 per cent of their revenues from retail and other non-aeronautical resources. With the greenfield projects in Hyderabad and Bangalore taking their maiden steps, India is soon to replicate this potential revenue earning model."   

According to the estimates, retail space accounts for 18 per cent of the total real estate space projections made for airport projects. Most of this supply is concentrated at tier-III towns and cities as it comprises of tourist destinations. The highest supply is however expected to be in Hyderabad which accounts for 1.8 million sq ft of the total retail space projected.
The study also estimates office space to be more than 50 per cent of the total real estate space projected of the airport projects. With nearly 41 million sq ft office space planned, the three tier-I locations are expected to received 14 million sq ft of office space, where as the five tier II cities expect 13.5 million sq ft by 2015. Tier III locations which include over 35 cities would account for approximately 32 per cent  of the total office space supply amounting to 14 million sq ft.
According to the research estimates, hospitality space accounts for nearly 30 per cent of the total airport real estate space projection. This hospitality space will be spread across roughly 27,525 rooms which includes 10,050 five-star properties, 12,270 four-star properties and 5,205 three-star and other budget properties across the country.

78mn sq ft to be added from airports

Introducing 'Makaan Mobile' - India's 1st pure SMS-based Real Estate Mobile Application

Introducing 'Makaan Mobile' - India's 1st pure SMS-based Real Estate Mobile Application

Harvard examines Indian real estate

Harvard examines Indian real estate | Articles | IndUS Business Journal

RIL makes billion-dollar realty foray with Vornado

RIL makes billion-dollar realty foray with Vornado- Property / C'struction-Services-News By Industry-News-The Economic Times

Starting a diversified journey

Gulfnews: Starting a diversified journey

Real estate business in India

REAL ESTATE sector in India is witnessing a new revolution that is driven by favorable demographics, booming economy and liberalised Foreign Direct Investment (FDI) regime.

A crucial factor behind over all development of any country is considered to be mostly depending on the accelerated growth rate in real estate sector. Dynamic patterns of using land and its multi diverse practices have enabled the economic growth more vibrant than the decade went past. Both commercial and residential properties are more in functional practice to make economic growth of the country easier. Further the development of commercial properties has played a significant role in our Gross Domestic Product (GDP) growth in recent times.

Commercial property is like any type of property that is commercially used for earning profit. The central point of commercial property is targeted towards economic and business activities. Commercial property is always meant for business purposes and revenue generation. Commercial property real estate is specially designed for commercial, industrial and institutional activities.

A wide variety of real estates included into commercial properties are specially used for business and industrial activities. All types of apartments, office buildings, commercial centers, shopping malls, warehouses, institutional buildings and distribution facilities come under the category of commercial properties. Real estates used for scientific research and development activities are also considered as commercial properties.

There are several major elements responsible for such mushrooming growth in real estate commercial sector. Service sector with high growth rate and IT sector, increasing multi-level economic activities and higher public-private participation in industrial sectors are some of the basic reasons behind booming commercial properties in India.

Led by mushrooming information technology industry and organised retail, growth in commercial office space requirement is increasing day by day. For example, Information technology (IT) and Information Technology Enabled Services (ITES) alone is estimated to require 150 million square feet across urban India by 2010. In a similar way, the organised retail industry is likely to require an additional 220 million square feet of land by 2010.

Real estate business in India

Coimbatore realty looks to IT

The expectations are that once the State Government-promoted IT park and the private IT SEZs take off, providing large-scale employment to the techies, the real-estate industry will bounce back.

Awaiting demand from IT growth.

R.Y. Narayanan

Blame it on anything — recession, buyers biding their time, expectations of a price correction — but the real-estate market in Coimbatore is facing slackening demand. Coimbatore shares some of the reasons with other cities — hardening of home loan rates and increase in the cost of land and building materials that have pushed up the price of homes/apartments.

But there are other reasons that are specific to the city. The slowdown in the textile and engineering sectors, the backbone of the city’s economy, because of the increase in the price of their raw materials, has probably made the local people cautious about investment in real-estate, particularly when the prices have gone up steeply.

Though the foundation for the Coimbatore IT park was laid more than a year ago, progress on that front has been painfully slow. There is also a feeling that the infrastructure bottlenecks, such as better roads, underground drainage facilities and assured drinking water supply, are yet to be addressed.

Waiting for IT demand

It is not as if the real-estate sector has written off the potential of the second largest industrially important city in the State. The expectations are that once the State Government-promoted IT park and the private IT SEZs take off, providing large-scale employment to the techies, the industry will bounce back.

Mr V. Mohan, Managing Director, Mayflower Enterprises Private Ltd, Coimbatore, says, in Mysore a prominent IT company was able to buy land at about Rs 10 lakh per acre, but in Coimbatore the price is around Rs 50 lakh to Rs 1.5 crore per acre within a 10-km radius. . This has discouraged the entry of potential IT investors in the city. Earlier, land cost would constitute about 30 per cent of any project cost but now it accounts for nearly 50 per cent of the cost within the city and in the outskirts, it is almost 30 per cent.

He said builders were unable to offer budget flats in the Rs 20 lakh-Rs 30 lakh price range within the corporation limits and the market does not accept such flats outside the city limits. At present around 5,000 flats were under construction and another 5,000 were in the planning stage. Only if the IT industry takes roots in the city might the demand increase.

Mr Mohan said the recession started about six months ago. The builders were able to withstand it and wait for another six months for a reversal in the trend. If it continued beyond that “you may expect a correction in the market” up to 10-20 per cent. The price of apartments has gone up in the past two years by 2-2.5 times fuelled by the increase in land and construction material cost. Because of competition and oversupply, demand has come down.

He said the anticipated infrastructure development has not taken place and the IT sector’s growth has been slow. Most of the industries in the city were not doing well. While textile industry is facing recession, the increase in the cost of iron and steel has hit the foundry sector. The real-estate market does not look at the salary segment for apartments costing above Rs 40 lakh. It is the business class, NRIs and the IT seniors who can afford it.

Putting off buying

Mr Madan Lund, Director, Srivari Property Developers, Coimbatore, said there has been a “considerable degree of slowdown due to various factors.” But in the past two months, more enquiries have started coming in. He said the “slowdown is basically a postponement of buying rather than slack in demand.”

Unlike in 1997, when the economy was doing badly and there was nothing to back any increase in prices, this time “there is a lot of money and the price increase has been backed by money”.

While buyers feel the prices could come down, the sellers, who could not increase the prices, are holding on to their stocks and no transactions are taking place. Along with the slowdown, increased availability of housing stocks has created a mismatch between demand and supply.

He pins his hopes on the IT parks to come up in the city for the revival of demand, which he expects by the end of 2008 or mid-2009. But rates are not likely to go up for at least another year. The increase, if any, could be because of hike in raw material prices and not because of demand. But within the next two years, he anticipates a ‘tremendous change’ in the city when all the IT parks start functioning.

He does not expect a price war in Coimbatore because the “prices are not that high to warrant it.”

While some builders may put off new projects, especially in high-risk places such as the peripheral areas of the city, projects within the city will continue to come up because of demand.

He said the rates for apartments in some of the prime areas in the city are: Avinashi road up to Lakshmi Mills, and Race Course area — Rs 6,200-Rs 6,500/ per sq.ft — the price is still holding up and may rise because of increase in land cost; R.S.Puram — Rs 4,500-Rs 5,000/sq.ft.; Saibaba Colony — Rs 4,000-Rs 4,300/sq.ft.

Delayed approvals

Mr V.S.Venkataraman, Managing Director, Ramani Realtors Pvt Ltd, said apart from the cost of land and materials, the cost of labour has gone up by almost 100 per cent and there is acute shortage of labour.

The company wants to go slow in taking fresh commitments because of cost escalation. The cost increase was so swift that it had hit the projects under construction.

He said if the builders were to survive, the powers to grant permission to special buildings (G + 3) should be vested with the respective urban local bodies since the present rule for approval by DTCP at Chennai takes almost a year for the process to be completed.

He did not anticipate any competition from big builders since they have created land banks outside the city whereas small builders’ focus was inside the city.

The Hindu Business Line : Coimbatore realty looks to IT