The new property millionaires: February 2008

Tuesday, February 26, 2008

Web 2.0 Real Estate Technologies From Buzz

HONG KONG & PHUKET, Thailand & BARODA, India--(BUSINESS WIRE)--Buzz Technologies Inc. (www.12buzz.com) is pleased to announce the release phase I of its real estate platform, One-2-Property (www.12property.com) offering the latest technology and services to give property owners a market advantage to reach perspective buyers.

It is estimated that almost over 80% of buyers are now looking for new property online. One-2-Property platform allows real estate agents, developers and property owners access to a suite of products and high-tech tools including Search Engine Optimization propriety to Buzz

Anyone using the One-2-Property platform can also host their own virtual show, flash slide show, mapping and the most detailed database yet. The One-2-Property platform has been built to be extremely user-friendly with 24/7 customer support.

One-2-Property is the new way to market property. The service is designed to be one-stop shop for selling, buying, and renting, with listings from both the residential and commercial sectors.

One-2-Property is the latest revolution in the real estate industry because of its global vision, with online content covering four continents and companies currently operating in five countries. Reaching out to our members and users all over the world gives the members full worldwide coverage, One-2-Property's archive and database are fully categorized and best searchable with an online keyword search facilities. One-2-Property does all the full plan marketing for you and your property both online and print media. Buyers and renters come across us in all search engines, national newspapers, real estate magazines and also major events we sponsor. Through its unique approach to real estate, One-2-Property has become the most valuable and powerful tool there is.

One-2-Property offers dedicated real estate news and useful articles, from around the world, carefully selected and assembled by our team of experienced journalists. A complete source of real estate information, contracts and blue-book for each region are provided with an update for members.

About Buzz:

Buzz Technologies, Inc. is a convergent media company with operations ranging from infrastructure development to online retail.

The foregoing press release contains forward-looking statements based on the Company's beliefs as well as assumptions made by and information currently available to the Company, including statements regarding the timing of the introduction of certain products. These forward-looking statements are based largely on the Company's expectations and are subject to a number of risks and uncertainties which are identified and described in the Company's registration statements and periodic reports on file with the SEC, some of which are beyond the Company's control. Actual results could differ materially from these forward-looking statements as a result of a variety of factors including, among others, issues related to the travel and transportation industries, and prevailing economic conditions in general. In light of these risks and uncertainties, or should underlying assumptions prove incorrect, there can be no assurance that the forward-looking statements contained in this press release will in fact transpire or prove to be accurate.

Contacts

Buzz Technologies, Inc.
Sutida Suwunnavid, +1-212-738-9079
7@12buzz.com
http://www.12buzz.com

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Seeking Alpha in Indian Real Estate

As U.S housing prices come down to more sustainable levels after a prolonged boom, one can only wonder if we can expect the same story to be played out in other economies. Maybe there is some alpha waiting to be picked up. One place that stands out from a sustainability perspective is India, where real estate, whether residential or commercial, seems to have completely disconnected from local economic fundamentals.

Imagine the dusty suburbs of Bangalore, Delhi and Mumbai. Imagine neighborhoods with high rises that have no reliable power or water supply, battered roads if at all, no public transport and a shadow of crime such that locked houses aren’t safe even for a day. Now imagine these houses commanding prices that match prices in expensive New Jersey suburbs. Go figure. Or have a look here. Or if you have time, here. Perhaps there are positive returns to be had in a bet on these. But as John Paulson was quoted in the WSJ , “you can’t short houses”. But maybe we can short some of the companies that build and sell these houses.

The Indian equity markets have enjoyed a tremendous bull run over the past few years. In 2007, the Indian markets were up 47%. Real estate was up even more on a frenzy that makes New York and London decidedly tame. Seeing the time to cash in, multiple ‘mega-issues’ or IPOs from real estate developers came out in 2007. Exorbitantly priced to begin with, they did not disappoint their investors. These IPO stocks outperformed the index (the one that was up by 47%!) by a handsome margin. We look at how some of the larger public offerings have done since they were listed. Terrific!

Which brings us to the point of this post. How sustainable are half a million dollar apartments in a country with an average wage of about $1000 (a year)? Sure there are rich people in poor countries. Maybe enough to keep things going merrily forever. But maybe not.

Most people do believe that this is a bubble that is bound to burst. Perhaps it is only a question of when, and not if. But as said Keynes – the market can stay irrational for longer than you can stay solvent. There is no shortage of alpha seekers (and of academics and economists ridiculed on television) that were hurt calling a false top to the real estate market in the US. The same can happen anywhere, but given the fizz going out of the global markets, the Indian bubble may probably be short lived too.

Sourcing alpha

One bet may be to short some or a diversified portfolio of these real estate companies. The Indian markets have already seen a correction in 2008, and that may or may not continue. These stocks do contain significant beta, so to guard against the risk of the general market going up, perhaps a market neutral short position in some of these companies may be desirable. As is the nature of the game, many of these companies have not been listed for too long, so betas that I calculated in the table below are probably unreliable but perhaps not a bad starting point for making an estimate for the future.

Here are some tickers (on nseindia.com, or add .ns after the ticker for Yahoo Finance) with some data. All information is approximate, US dollar conversions have been done using a single rate of Indian Rupees 40 = USD 1. Notice the volatility in the stocks, they go up and down fast for sure. Also look at their fantastic profit margins. Who cares about EBITDA when net income to revenue ratios are straight out of wonderland!

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Profiting from the strategy

For investors in the US, it is not easy to gain non-systematic exposure to a particular company or sector in India. There are a few funds such as The India Fund (IFN), Morgan Stanely India Investment Fund (IIF), iPath MSCI India (INP) and more recently, WisdomTree India (EPI), that provide broad based exposure to the Indian market, but nothing that would specifically target a particular stock or a sector.

However, there are a number of Indian stocks that are listed either on the NASDAQ or the NYSE as ADRs. Many of them are also included in the broader Indian S&P Nifty-50 market index (referred to above). These include the following:

List of Indian stocks listed in the US that are also a part of the S&P Nifty-50 market index:

Dr Reddy's Labs (RDY)
HDFC Bank (HDB)
ICICI Bank (IBN)
Infosys (INFY)
Satyam (SAY)
Satyam Technologies (SIFY)
Sterlite (SLT)
Tata Communications (TCL)
Tata Motors (TTM)
Wipro Ltd (WIT)

The list above covers industry, banking, communications and technology, but does not include any exposure to the real estate sector - except probably with the exception of HDB and IBN that have mortgage lending operations in India.

This opens up an interesting possibility - consider building a synthetic portfolio where one goes short on the entire market using IFN, IIF or INP and simultaneously going long on a portfolio of individual stocks listed above in a way that the net exposure is only to real estate or related stocks. Unfortunately, real estate stocks currently comprise only about 4% of the Indian stock market capitalization, and as of the date of this post only Unitech is part of the Nifty-50. That makes this strategy a bit tricky to achieve but in the coming days, as DLF and other Indian companies get included in the Nifty-50, it would be possible to create a portfolio that is strongly correlated (positively or negatively) to the Indian real estate sector.

If someone has any ideas or suggestions on how this strategy could be refined to target the desired exposure, do send me your comments.

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General Budget - real estate industry want more sops

The real estate tycoons and the developers lobbies have expressed expectations for some workable sops for the real estate business and infrastructure development agencies. According to Nitesh Shetty one of the top developers of the state growing at a pace of 30% annually and with the estimated size of US $ 12 billion, Indian Real Estate sector has emerged as one of the most appealing areas for the domestic as well as foreign investors. With about 250 ancillary industries like cement, steel, bricks etc linked to the real estate sector, it is the second largest employing sector in India and is the major contributor to India’s GDP. We are very optimistic about the Union Budget 2008-09 and expect Finance Minster to address the following areas.

Makaan.com hosted its first property show in Hyderabad

Hyderabad, February 2008:

Real estate portal Makaan.com hosted its first offline property show in Hyderabad at Chiran Fort Club, Begumpet. The two day property fair was inaugurated by Mr. Anupam Mittal, CMD, People Interactive Group with Mr. Prasad Rao, Director, Aparna Developers as the special guest for gracing the occasion.

Hyderabad, February 2008:

The property fair provided 11 leading developers of the country a chance to showcase their properties which included both commercial and residential projects. The show is sponsored by one of the prominent realtors - APARNA developers.

The show which was being held from 5th to 6th January saw more than 11 participants, including real estate developers, realty marketing companies and housing finance corporations. Many prominent developers and others had set up their stalls at the fair bringing some of their best projects to their customers. The visitors at the fair are mainly interested in Residential or commercial property. Stalls at the fair help the formation of a transparent marketing channel between buyers and sellers and on top of this, even real estate brokers attended this event which is the main target segment for Makaan.com .

The event is organized with an aim to bring together real estate business community on a single platform so as to enlarge business prospects and to make customers aware of the latest offerings and technologies. Hyderabad Property Fair offered the opportunity to the prospective participants to showcase their multiple choice quality flats, villas, farmhouses, bungalows, office space etc under one roof. It also promises to create an avenue to the exhibitors to multiply their business proposition by providing an enjoyable experience to the visiting luxury class audience.

Hyderabad has been rated as one of the property hot spot in South India and may global companies have set up their offices in the city. As per the real estate analysts, there is a lot of scope for realtors and investors in the real estate sector in the city.

Elated at the response of the fair, Mr. Anupam Mittal, CMD, People Group, said," In India's fast-growing economy, real estate has emerged as one of the most appealing investment areas for domestic as well as foreign investors. The real estate sector will continue to derive its growth from the booming IT sector, since an estimated 70 per cent of the new construction is for the IT sector. Real estate websites are still in the nascent stage with a total share of just Rs. 30 crore. But in the coming years, this particular sector is projected to increase by 150 to 200 percent every year. I am happy to announce that we have launched Makaan.com four months back and within a short span of time we have managed to have lakh visitors on our site which are the positive signs of the online realty industry."

About Makaan.com
Makaan.com is an online real-estate service promoted by People Interactive; the consumer Internet division of the Anupam Mittal led People Group. This site has been conceived to explore and invent opportunities in the online real-estate space. Makaan.com is committed to helping users make wise and profitable decisions related to buying, selling, renting and leasing of properties, in India and key global geographies.

This user-friendly portal is presently concentrating on the top 13 cities of India, including Delhi, Mumbai, Kolkata, Bangalore, Chennai, Hyderabad, Ahmedabad, Pune, Chandigarh, Jaipur, Indore, Kochi and Ludhiana.

About People Group
People Group was founded in 1997 by Anupam Mittal to explore opportunities in New Media, Information Technology, Communication and Entertainment industries. The group recognized early on that the on going 'content digitization' was fundamentally and dramatically going to change these industries and lead to ultimate convergence. Today the group owns and manages companies in the Internet, Mobile VAS, and Entertainment industries and boasts businesses such as Shaadi.com, Shaadi Point, Fropper.com, Makaan.com, Mauj Mobile, and People Pictures.

The group has grown significantly over the last few years and won the IT People Award Excellence in Information Technology in 2007. In September 2007 Business Today recognized the company as one of the Top 10 Marketers in the country. It was also awarded the Deloitte Technology India Fast 50 as well as the Red Herring Asia 100 Awards in 2006.

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India ’on the brink of property boom’

Market analysts are predicting a seven fold growth in Indian real estate value – from US$12 billion to $90 billion by 2015 – in the wake of the government’s decision to implement a 100 per cent relaxation of foreign direct investment regulations last year.
Martin Bowen, UK Sales Director of Profile Europe (UK) Ltd said, “The residential property market is experiencing exponential growth right across India, but especially in urban areas and those close to the government’s new specialised industrial zones.
“Recent figures cited by the Bank of Baroda’s Chief Economist show properties have appreciated by as much as 60 per cent to 100 per cent over the last 12 months in most towns.”
The ratio of supply and demand is believed to be a key factor in the massive growth. Bowen continues, “There is a shortfall of some 20 million units, this is largely due to 55 per cent of India’s population being under 25 and the fact that the economy is booming and has resulted in a growing middle class, looking for quality accommodation because of growing disposable incomes.
“Add to this the growing mortgage market and declining interest rates which have made property more affordable despite actual property price increases.”
Profile Europe (UK) Ltd comes under the umbrella of the Profile Group, which was established in the UAE in early 2003 with interests in capital, investments, consulting, real estate developments, project management and real estate sales.
For more information visit: www.profileeurope.co.uk

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Navi Mumbai real estate gets dollar boost

City and Industrial Development Corporation's (CIDCO) attempt to attract non-resident Indians (NRI) to the satellite city almost failed after Seawoods Estate Part I. However, thanks to different infrastructure projects that are underway in the city, NRIs interests in settling down in the city have again revived.

This can be seen from the huge numbers of NRI funding projects that are coming up in areas beyond Panvel which are being developed by different corporate firms. Some city-based developers also receive calls from foreign investors daily with the mails clogged with emails enquiring about the plot rates in city. And the investment flowing in the city is between Rs 500 crore and Rs 30,000 crore with plots beyond Panvel along Uran being in huge demand.

One of the senior officials from Hiranandani, who are developing a project near Panvel, said that areas along Mumbai-Pune and Mumbai-Goa highways are developing. "These projects have investment from foreign companies and according to rules FDI to the extent of 100 per cent is allowed now," the official said.

Talking about the enquiries from NRI clients, a senior developer from city Rajesh Prajapati said that there have been many enquiries about any available property in city.

"There are people demanding 100 acres or more anywhere along Mumbai-Goa Highway or near Uran. These areas are a hit among NRIs and even for foreign companies who are searching for property here," Prajapati said.

Meanwhile, an NRI from Hyderabad who is employed as senior manager with an American firm in Saudi Arabia said that he had heard about the infrastructure projects happening in Navi Mumbai which prompted him to own a second home in the city.

"I had some funds and wanted to invest in a property. I wanted to stay close to a city like Mumbai and this was a better option. Second option was to purchase one in Bengaluru but then it is only an IT city and not a cosmopolitan one," said the NRI who is planning to purchase a flat in one of the colonies near Panvel.

A one point information source for these foreign investors is the World Wide Web that gives them access to the most happening destinations, said Senior Marketing Manager of National Builders, Moncy Kurien.

"Apart from websites, exhibitions are frequently held by different associations in India where Navi Mumbai developers do participate," Kurien said adding, mouth to mouth publicity also helps many a times. Also Navi Mumbai is quite famous as the largest planned city abroad developed by CIDCO.

Nerul resident Krishna Chauhan said that his NRI friend has some funds and wishes to own a property in the city. "I have already spotted some property in Ghansoli and Kalamboli. Ghansoli is right now one of the prime properties as Reliance is also situated in the node," Chauhan said.

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Kolkata realty firms make beeline for Chennai

Indrani Dutta

Stability of the real estate market lure the groups

Merlin Group ties up with Rajathi Group

PS Group to invest Rs. 1,500 crore

KOLKATA: Leading real estate companies from Kolkata are making a beeline for Chennai and its vicinities putting projects worth crores of rupees in the pipeline.

The strong growth of the State in areas such as IT, automobile and medical tourism and the stability of its real estate market are some of the factors luring the groups from this part of the country to make a southern foray.

Tier II cities

Projects that are set to change the skyline of the southern capital as well as some of the Tier-II cities in Tamil Nadu are both residential properties and commercial properties like malls with a group planning to set up a 9.5 lakh sq. ft. mall in Coimbatore and a 3.5 lakh sq. ft. mall in Chennai.

Investment by Merlin

One of the many real estate companies which are seeking to mark a footprint in Chennai, the Merlin Group, has tied up with the Rajathi group to build residential and commercial properties.

The Rs. 1,000 crore investment that they have proposed will have an allocation of 75 per cent for townships and 25 per cent for commercial projects.

Land banks

The group plans to develop land banks in East Tambaram, and Sriperumbudur. About 40 acres had already been procured in Sriperumbudur and plans are afoot to buy 300 acres at Ocheri on NH4.

Rajathi Merlin has plans to develop properties in Coimbatore, Madurai and the Tiruchi market. The group feels that the growth of the real estate and infrastructure development offers great opportunities.

Another Kolkata-based group, the PS group, shares this bullishness about the Chennai realty market.

According to its Chairman and Managing Director, Pradeep Chopra, Chennai is now the hardware hub of the country and is fast becoming the most-preferred destination of auto majors. It is also strong in medical tourism.

However, above everything else the stability of the market and the near absence of speculators is what makes it so attractive a real estate market.

“The growth is based on fundamentals and is similar to the eastern region, where people mostly buy for their own use instead of speculators picking up properties for investment. This leads to crashes of the kind seen in the west and the north,” says Mr. Chopra.

Shopping mall

The PS group is planning to pump in Rs. 1,500 crore through various projects, including a shopping mall at Velachery a housing complex on Old Mahabalipuram Road and another next to the Tamil Nadu Inftech Park at Siruseri.

Poovayya & Co.

Poovayya & Co. is a full service law firm headquartered at Poovayya House on Haudin Road in Bangalore, with two more associate offices in New Delhi and Chennai. The managing partner Mr. Sajan Poovayya, a graduate from NLSIU with an LLM from the London School of Economics, founded the firm in 1999 after a brief stint in the UK. The firm has four main verticals of practice: Litigation & Arbitration, Infrastructure & Real Estate, Corporate & Technology and Media & IP with a partner heading each.

Growth has been tremendous and the past four years have seen turnovers increase by 60% to 100% each year. The firm already counts GE, Wipro, Apollo Hospitals, ITC, and Tatas among their clients.

Recruiting an average of four lawyers every year, it recently participated in the recruitment process at NLSIU and NALSAR. The criterion for selection is not remarkable knowledge of law but a strong inclination to learn. It is keen on attorneys who have the capacity to understand commercial transactions. Increments and bonuses are structured in the Firm. Attorneys receive a base retainer and at the end of year, they further get assured bonuses. In certain cases, depending upon the size of the transaction, attorneys also get transaction bonuses. The current strength of the firm is 34, including 19 attorneys.

The Firm has a three-tier structure: Associate, Senior Associate and Partner. A new recruit is hired as an Associate and depending upon his/her ability can move to the position of a Senior Associate in two years and the position of a Partner in three years thereafter. In the recent past, the firm has seen at least four such instances of quick personal growth.

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King Stubb and Kasiva

King Stubb & Kasiva have their headquarters in New Delhi, and other offices in Chennai and Bangalore, as well as associate offices in Mumbai and Kolkata. Over the years, the firm under Jidesh Kumar, the managing partner has made a name for itself for its integrated approach to understanding business environments and legal challenges and for progressive focus on developing successful solutions compatible with client business objectives.

Key areas of work are Corporate, M&A, IP, Capital Markets, Real Estate, Infrastructure, Arbitration, Litigation, etc. Clientele include some big names like Max New York Life, Aviva, Symantec, Temasek Holdings Linked Companies and ICICI.

The lawyers working with the firm are ready to vouch their satisfaction. A fresher pockets almost Rs. 25,000/- per month and to attain a partnership, seven years of quality commitment to the firm is enough. Another significant aspect of the firm is the policy of making an honest effort to meet the working hours of 9.30 AM to 6.30 PM.

In addition to actual pro bono legal work, the lawyers have been active in a wide variety of charitable endeavours.

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Realty investors sail to Gulf, UK as India market is hot plate

High property ownerships and rental prices in India are forcing many Indian real estate investors to acquire properties in the Gulf countries and the United Kingdom to meet their residential and official needs in these Markets. Mohammed S Binbrek, CEO, Dubai Properties told FE, “Indian investors are planning to acquire Jumeirah Beach Residence comprising 36 buildings and 6,500 apartments apart from Business Bay – 64 mn sq ft along world class infrastructure for commercial use and The Villa at Dubailand (Spanish-style Villas). Investors have also shown interest in acquiring apartments in Mudon property (incorporates five individual cities - Baghdad, Beirut, Damascus, Cairo, Marrakech).” Marketing of these properties is being handled by Mumbai-based Morya Housing, which currently has a marketing arrangement with Dubai Properties.

Lobby group wants REITs for affordable housing

The new Securities and Exchange Board of India (Sebi) dispensation under chairman C B Bhave looks all set to carry on from where M Damodaran left off.

On Thursday, senior officials at Sebi met with a team from the real estate committee of the Federation of Indian Chambers of Commerce and Industry (Ficci).

The latter made about 15 recommendations, meant to clarify certain aspects relating to the draft guidelines for real estate investment trusts (REITs) put out by the regulator on December 28, 2007, when Damodaran was chairman.

One of the key recommendations was to make the tax structure on REITs favourable to investors. With REITs mandated to distribute 90% of the income they generate as dividends, the thinking is that there should only be a dividend distribution tax, to be paid by the real estate investment management company, and not the investors.

REITs are essentially instruments that allow one to buy units of various properties and capture returns these properties generate, just like a mutual fund allows one to capture the returns of a pool of stocks.

By definition, REITs are also mandated to invest in income-generating property, as opposed to real estate funds that aim to capture the capital appreciation from projects they invest in.

From that follows the second recommendation. While, according to the Sebi guidelines, income-generating property would confine investments to commercial projects, Ficci has suggested that there be dedicated REITs for affordable housing projects as well, so that it gives a much-needed boost to the housing segment.

Australia's property market seen as second strongest, for now

THE short-term outlook for Australia's property market is second to Singapore's, but China, India and South-East Asia are emerging as big property growth centres.

Exclusive Ventures Releases Annual Real Estate Trend Analysis and Market Research Report on Hyderabad

The Report looks at historic and current real estate rates in different areas and compares with projected rates. The report gives clean analysis the market situation and gives short and medium term Projections. View Details of the Report at: http://www.exclventures.com/2007-08-realestate-report-download.asp

Brazilian Real Estate Set To Benefit From Oil

Brazil is set to join the oil rich nations that have seen their property markets sky-rocket on the back of rising oil prices. Two oil and gas discoveries in the last three months off the coast of Rio de Janeiro will catapult Brazil into the top ten list of oil producing nations. With oil starting to flow in 2010, the economy of Brazil and thus property prices are expected to receive a major boost. Brazil Property Advisors has analysed the most attractive investments in the Brazilian property market and is delighted to discuss the opportunities.

Unitech to invest Rs 9,000 cr in two properties at Hyderabad

Unitech, the country’s second largest realty firm, has bagged two real estate projects in Hyderabad that it would develop over the next eight years at an investment of about Rs9,000 crore.

According to sources, the company has bagged a mixed-use project located at Budvel from Hyderabad Urban Development Authority (HUDA) for development of residential, commercial and retail space over 164 acre of land.

The total investment on this project would be Rs 3,000 crore, including about Rs 664 crore for land, they added.

The company expects to generate a revenue of Rs 6,000 crore from this project, sources said, adding the construction work is expected to start in the next fiscal.

Unitech has also bagged a project from Andhra Pradesh Industrial Infrastructure Development Corporation Ltd (APIIDC) to develop an integrated airport township in Hyderabad on public-private partnership.

The project spread over 350 acre would have a built up area of 30.5 million sq ft with mixed use development plan that includes township, hotels and office space.

The total investment in this project would be around Rs 6,000 crore, sources said, adding that the company would take five years to complete it.

The estimated revenue from this project is around Rs12,000 crore, they said.

Unitech is expanding its presence in Andhra Pradesh and has recently acquired 1,750 acres of land in Visakhapatnam from APIIDC at over Rs 3,300 crore.

The national capital region (NCR), Kolkata and Chennai are the other key markets for Unitech. The company has a land bank of about 15,000 acres, comprising 675 million sq ft of developable area.

Of the total land bank, about 60 million sq ft of area is already under construction.

Unitech has a land bank of about 2,400 acre each in Andhra Pradesh and West Bengal, and 2,100 acres each in NCR and Chennai.

The company has recently made a foray into the Mumbai market by acquiring 50 per cent stake in a firm executing a 97 acre slum rehabilitation project.

Unitech has a plan to launch an initial public offer of its office trust in Singapore, for which it has received the approval from the Singapore Exchange.

The company plans to raise about 700 million dollars through the IPO in Singapore, according to investment banking sources.

Unitech posted a 39% growth in its net profit at Rs525.78 crore for the third quarter of 2007-08 fiscal as compared to the year-ago period. Its turnover rose by 19% at Rs 1,165.11 crore during the review period.

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Realty seeks tax, input price relief

Real estate companies want taxes to be lowered and prices of construction materials controlled in the forthcoming budget.

“We want tax breaks on infrastructure, which were there until last year,” said Vipin Agarwal, executive director of Omaxe Ltd. “Infrastructure development is essential for the development of the country. We should get some incentives in the form of tax breaks to invest in it.”

Realty firms are also worried about the soaring prices of construction materials in India. “The rocketing prices of steel and cement are affecting construction cost,” said Abhinandan Chatterjee, president and chief financial officer of BPTP Ltd.

“The government should try to rationalise prices of construction materials so that the costs of developed properties remain under control and the benefit is passed on to the buyer,” Chatterjee said.

In last year’s budget, finance minister P. Chidambaram had taken a carrot-and-stick policy vis-à-vis cement. He reduced the excise duty on cement by Rs 50 from Rs 400 per tonne if cement was sold at Rs 190 per 50 kg of bag but raised the duty to Rs 600 per tonne on a higher retail price.

Real estate firms want all incomes from rent to be exempted from income and service taxes.

“Service tax should be abolished as it is an unnecessary burden for us,” said Ashish Gupta of Aerens Goldsouk International Ltd. Developers also want a cut in lending rates in construction and housing finance. “I think interest rates on loans should be lowered substantially to make purchasing properties easier,” said Chatterjee. “The demand is low at the moment because of high interest rates,” he added.

However, interest rates are an outside-the-budget decision to be taken by banks.

Most of the developers expect changes in policies regarding external commercial borrowings (ECB) and foreign direct investment (FDI). “Currently there is a ban on ECB in the realty sector. This should be lifted,” Gupta said. “The minimum covered area under development required to bring in FDI should be reduced,” Agarwal said.

Gupta wants it to come down from 50,000 square metre to 10,000 square metre. “We need a lot of funds for our developments. Restriction of foreign equity acts as a hindrance, more so because international investors are keen to invest in India right now. We should take advantage of this interest to develop our sector,” he said.

The Confederation of Indian Industry, in a pre-budget presentation, has said, “Given the large amounts involved in infrastructure projects and an absence of cash flows during construction, Indian firms need to have access to finance of all kinds.” Developers also want the stamp duty on property sales to be reduced as much as possible. They also want reductions in customs duties on construction equipment and service tax exemptions for construction contracts.

Real estate body Confederation of Real Estate Developers Association of India has said, “One-point taxation should be levied so that the heavy burden of multiplicity of taxes is reduced and automatically, the cost of construction of flats will come down drastically.”

Realty, hospitality sectors catch PE firms` fancy

With IT projects taking a backseat on the investment front, private equity (PE) funds are cosying up to residential, commercial and hospitality spaces in south India.

Pragnya, a Mauritius-based private equity fund focussed on the real estate market in India, has so far invested about $40 million in realty projects, including an integrated township project by L&T in south India, and expects its investments to reach $100-110 million this year.

It is also planning to come out with a $150-million Pragnya Fund 2, which will invest in realty and hospitality projects, particularly in the South.

In December 2007, Red Fort Capital, a global real estate private equity fund, announced a Rs 400-crore investment plan for Chennai's realty market over the next six months. It has acquired 10 acres of land for a large residential project in Chennai.

The company has already invested Rs 1,200 crore on projects in Bangalore and Hyderabad.

"The business environment in the South has been congenial with good administration, better law and order, and higher literacy levels. Job creation by the industry has fuelled creation of grade A office space. The subsequent residential development has had a spillover impact on hospitality. If one takes a multi-year view, this process will continue with the positive impact of job creation spreading to places such as Visakhapatnam, Coimbatore, Mysore and Kochi. The momentum this region has developed is the reason why investors are being drawn," Subba Dukkipati, managing partner, Pragnya, said.

Sanjay Chugh, associate director, Jones Lang LaSalle Meghraj, said that PEs are bullish on the South as a potential investment region due to clear titles of land parcels, stable market, developers who are easy to work with, and quick decision-making.

He noted that projects with a capital infusion of Rs 60-200 crore attract PE investments.

PEs are expecting a minimum post-tax IRR of 35 per cent, which had dropped to around 25 per cent a couple of weeks ago, he said.

Asked whether the withdrawal of the Emaar MGF IPO would affect the flow of PE investments into realty projects, Dukkipati said that most PE investors have a multi-year horizon, and developments in the financial markets would have no immediate impact.

"Investors, however, cannot afford to ignore business cycles, and therefore, any slowdown in the economy would colour their outlook. It is our view that high land prices, combined with increasing inputs costs have made it difficult to create sufficient affordable housing. However, the longer term fundamentals are sound and investment activity will continue after market corrections are factored in," Dukkipati said.

Hospitality projects in the region are also attracting private investments. Last month, Sabari Inn, which promoted two boutique hotels in Chennai, secured investments of Rs 62 crore from ICICI Prudential PMS Real Estate Securities Fund to fuel its growth plans.

ICICI Prudential PMS Real Estate Securities Fund, which has about Rs 800 crore under management, is also reported to have lined up investments of about Rs 150 crore in various projects to be announced soon.

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Nagarjuna plans to enter real estate development in Oman

It is reported that India's Nagarjuna Construction Company Limited is planning to enter real estate development in Oman.
A senior Nagarjuna Construction official said that “We have plans to develop a multi storied building in Sohar in partnership with an Omani company. The apartment, which will be constructed at a cost of OMR 3 million, will have several modern amenities, including health club and swimming pool.” He added that the twin tower apartment, which will be ready by 2010, will have 448 flats each.
In the Oman, Nagarjuna Construction is building the dualisation and realignment of Al Amerat Quriyat Road, Wadi Adai Al Amerat road project, a water network scheme in Sohar and initial civil work for Sama Dubai's Yitti residential cum resort project. With a cost of OMR 56.5 million, the 7.5 kilometer long Wadi Adai Al Amerat road will be completed within 18 months. The project involves construction of 6 bridges of varying lengths, 9 box culverts and 1 single lane bridge. The total contract value of all Omani projects of Nagarjuna is around OMR 180 million.

source

Sunday, February 24, 2008

Why do people invest in real estate?

So you are a young Indian who earns well, has spent wisely and drive your own car, live in your own house and are able to meet daily expenses without too much effort.
Now you are concerned with the investible surplus that you have in hand and are confused whether to put it into financial instruments such as mutual funds and unit-linked insurance policies (ULIP) or whether you should buy a second house to capitalise on the current real estate boom.
“Anybody looking at real estate as an investment option is currently at least in the post 35 year age group,” says chartered accountant Raghu Marwah. “In the current scenario, other financial instruments score over real estate as a long-term investment option. The returns in the short and long term are more attractive.”

Portfolio advisor Sanjay Mittal too agrees. “Investment in mutual funds and stock markets is liquid. But investments in the property market are not. Mutual funds yield at least 40% year-on-year returns. One of my investors put in Rs 20,000 per month in the Reliance growth fund and his returns are currently over Rs 3.6 crore in 10 years.”
This is way above that in real estate. In fact, he gives a thumb rule based on the worst performing systematic investment plan mutual fund over the last 10 years. If you have invested for over seven years, returns are normally the amount invested multiplied by the number of years it was invested for.
So why are people investing in real estate at all? Where did all the hype come from? Explains Arun Vikram Goel, CEO of Dewan Housing Finance Venture Capital, “The hype around the real estate market comes primarily from speculative extremely short-term investors. They have bought at launch prices and sold as the values of each subsequent release by the developer was raised and encashed their investment in the short term. These would have yielded very high gains. Nobody who has invested for the long term has contributed to the hype because chances are that they have not exited the market and their computed returns are notional. A long-term investor should not look at hyped gains.”
Explains another property investment adviser, “At the height of the boom, I had advised various investors to put money into multiple projects and to recycle the investments for maximum returns. In fact, I managed portfolios of investors who had up to Rs 1 crore to invest by putting in the 10% that was required to book a property and then to exit when the next instalment was due. The gains were then reinvested in newer launches and the money was constantly increasing.”
But the current scenario is different. Today after almost 8-10 months of slow-down in transactions, developers are completing projects rather than launching numerous new ones. Even the rate of hike of value is steady and therefore the short-term speculator is kept at bay. Goel explains this phenomenon. “Immature markets tend to behave erratically. Initially rental markets are not stable and more users think of purchase rather than rentals.

Once the supply comes in the rental markets pick up and those who do not want to occupy, lease out property. This hike in demand brings in the speculators and short-term buyers. Finally when there is a glut and capital values stop rising, the rentals will rise. But typically yields from residential real estate investments is only 5-6% in stable markets and 3-4% in unstable markets.”
So again why invest in real estate at all? Why not only in mutual funds if you are a retail investor? “To diversify your portfolio,” says Goel. And he has a simple mantra for the retail investor:
Do not make investments on the basis of hype. In a market correction hype comes down and you get a realistic picture.
It is wise to hold a diversified portfolio with real estate as one of the options
Time your entry correctly. The hype typically starts when the peak is reached. If you enter at the peak, you will not get the best rates and you may be part of the slide
During investing for the long-term remember that returns average out. The property adviser who does not wish to be named, maintains that normally even in weak market cycles property values double in five years. So if you are in the 35-plus age group, your property value will at least double every five years and you will never lose out. However, the rate of enhancement of the mutual fund investments are greater in the short term.
Sanjay Mathur of Pearls Infrastructure says long-term returns on real estate investments can be up to 200-300% if you choose your destination correctly. If you invest in what is the periphery of the city today and hence cheaper, andif there is good economic activity there, the returns in the long term are definitely positive. Goel agrees that the choice of investment destination is important. “But real estate decisions are often emotionally driven too.
Aspirational considerations may drive the investors to look at property purchase than yield analysis alone. But if the investor reads the future potential of markets correctly, he can get good returns.
The retail investor has more to look forward too from real estate markets. The Sebi has already issued draft guidelines for Real Estate Investment Trusts (REITS), a sound financial instrument in developed real estate markets around the world. “This will open up a class of investment to the real estate retail buyer that was earlier not possible,” says Goel. He sees younger investor opting more for systematic investments in mutual funds that is more speculative but has greater returns. The REITS, expected to be functional by next year, will attract an older investor who takes less risks, but opts for steady returns.

source

Property issues for the NRI

For many globetrotting Indians, owning property in India may be a cherished dream. For others who have set up permanent homes abroad, selling whatever property they own here might be more meaningful. Few others may have been born under a lucky star to be gifted property; still others may inherit property and may want to pass it on to their grandchildren.

The Hindu Business Line : Property issues for the NRI

Real estate prices seen rising by over 100 %

Real estate prices are seen rising by over 100 percent in the next few months owing to price increases in material, labour, transport, overheads, service connections, as well as the new tax levied by the government where five percent of the total construction cost has to be paid to the UDA even before construction starts.

Real estate prices seen rising by over 100 %

Singapore realty major offers high-returns bait

The Singapore real estate industry has come here wooing Indians with promises of high returns on investments made in the island nation.

Singapore realty major offers high-returns bait

Saturday, February 23, 2008

BJP for real estate regulatory authority

The BJP will represent to Prime Minister Manmohan Singh no the need for setting up the Real Estate Regulatory Authority, in order to prevent fly-by-night builders from cheating innocent people, who put in their lifetime earnings into their dream house project.

BJP for real estate regulatory authority - Newindpress.com

India Bulls' premium project Castlewood launched in Delhi

One of the largest listed real estate companies in India and a leading national player across multiple realty and infrastructure sectors, India Bulls Real Estate Limited (IREL), with projects covering a total land area in excess of 10000 acres launched its premium project in South Delhi-Castlewood, limited edition luxury apartments in Delhi at the Intercontinental Eros yesterday byleading Brand management, promotions & event company-Brandsmith.

India Bulls' premium project Castlewood launched in Delhi

India Property Show expects to close Dh184 million deals

Some Dh184 million (Rs2 billion) worth of purchase contracts for real-estate projects across India are seen to be closed today at the end of the two-day MagicBricks.com India Property Show, in Dubai

Khaleej Times Online - India Property Show expects to close Dh184 million deals

New mantra: Why rent when you can buy

With rents in Mumbai shooting through the roof, more and more people now prefer to buy houses in the distant suburbs rather than seek accommodation on lease. Ameya Bhise finds out how spiralling rents are driving a changing real-estate trend

New mantra: Why rent when you can buy - Sify.com

Friday, February 22, 2008

Discover How Real Estate Investors and Speculators Can Take Their Business Global

Research and Markets (http://www.researchandmarkets.com/reports/c83767) has announced the addition of “The Global Property Investor's Toolkit: A Sourcebook for Successful Decision Making” to their offering.

The real estate boom has gone global, and those successful investors who want to keep up their profits are starting to look at emerging markets on other continents. Markets in South America, Eastern Europe, India, and Asia are currently experiencing the rapid growth that mature domestic markets experienced a few years ago. Based on the author’s personal experience buying and selling dozens of overseas properties, this book provides all the relevant data investors need to evaluate properties and markets anywhere in the world.

The key difference with this book lies in the subtitle: A Sourcebook for Successful Decision Making. Based on the authors first hand experience of building, buying and selling over 100 properties in overseas markets (and researching and writing three books on these markets), Colin Barrow has identified the key source of all the relevant data for all the facts required to evaluate any and every property market in the world. That data is usually available online, almost invariably free and always comprises the latest available facts.

This book helps solve the core problem for anyone buying property overseas: a shortage of reliable information on which to make sound decisions. Property buyers can gather superficial information by attending property exhibitions, talking to brokers and by reading books. But the brokers are often biased, parochial in that they focus on only a handful of areas and are themselves often ill informed.

Author's bio:

Colin Barrow (Hayle, Cornwall, UK) is a non-executive director of two venture capital funds and serves on the UK Government Task Force for Business.

Topics Covered:

Why Buy More Property?

Why Buy Abroad?

The World Property Markets - Segments and Drivers

It’s a Global World: the Coming of Capitalism.

Factors that Drive Property Yields and Returns

Evaluating Economies

Checking the Local Environment

Getting To and Fro

Money Matters

Researching the Legal Environment

Tourism Potential

Property Performance and Appraisal: Narrowing Down your Choice of Country.

Using an Estate Agent-Broker-Realtor

Finding a Property Yourself

Finding and Using a Lawyer

Undertaking Surveys

Renting before you Buy and other Non-ownership Options

Climate Matters

Language Matters

Getting Around the Country

Moving your Effects

Renovating and Building

Going into the Rental Business

Staying in Touch with Home

For more information, visit http://www.researchandmarkets.com/reports/c83767

Contacts

Research and Markets
Laura Wood, Senior Manager
Fax: +353 1 4100 980
press@researchandmarkets.com

We guarantee faster returns

With a target of getting an annual return of 30 per cent, Redfort Capital has come up with Redfort Land and Realty Fund. The company has tied up with two banks for attracting investors. In a candid conversation with our correspondent, company’s director Parry Singh talked about the fund and the future plans of the firm. Excerpts:

Tell me about the newly launched Redfort Land and Realty Fund.
This fund is for the domestic market. We are looking on land banking. We have earlier acquired some land at a better value. And our portfolio will be diversified in a way that we will provide profits to our investors on the basis of land purchased across India.
In India there are no real estate vehicles; our fund is a way to gain diversification. We have received approval from the Sebi for this. For the same we have tied up with the ICICI Bank and ABN Amro Bank.

What is the lock-in period for this fund?
It is for five years.
So what are the exit modes for investors?
There are multiple exit routes. First we buy the land and then sell it at a profit; second, we build corporate campuses under a JV and lease the spaces; and third we make residential apartments in a joint venture with a developer and then sell the units.

How will an investor gain from this?
Investors will be the shareholders in the fund and the fund eventually buys land across India. Investors will then earn profit over the properties purchased. They will earn a dividend annually. For example a high net worth individual based in Delhi might face problems in acquiring land down south as his approach is limited to NCR. But the fund can facilitate this easily as we have a pan-India presence.

What kind of returns are you looking at?
We are looking at an annual return of 30 per cent.

You have decided to be selective about your investors, and you are looking at under-valued land. Why this kind of constraint?
We cannot go to the market. We are looking for investors in the bracket of Rs 25 lakh to Rs 50 lakh. And the land we are looking at is definitely a prime one but they are bought at a lesser value. There is very less liquidity in the market. Nobody can pay such huge price over a piece of land. The price appreciation on a plot is more than that compared to a flat. And we guarantee faster returns than a bank.

How much land bank you have?
At present we have some 1,100 to 1,300 acres of land. These are in patches in cities like Bangalore, Hyderabad, and Chennai. Kolkata would be our very next target, where we are also planning some project.

You will also focus on redevelopment projects in Mumbai. Why have you chosen such projects?
Look, in Delhi there is no constraint on expansion. There are a number of small townships and satellite towns that can be included in the NCR. There is lot of scope for expansion.
And if you talk of Mumbai, only northward areas like Virar, Borivilli, Panwel and Navi Mumbai can be used for fresh development. We take the existing land also because of the FDI rule, which says that developments can’t be done on a land less than 25 acres, which is roughly around 5 lakh sq ft. This much of land is not available in Mumbai. And the value of land is touching a new high everyday. So in Mumbai we are focusing on the redevelopment projects.

You have undertaken deals worth over Rs 7,500 crore till date. Mention some of those.
There are six important ones. There is one residential project in Chennai. Very soon we will launch our project in Kolkata also. We have invested around Rs 240 crore in Hyderabad in a residential project, Indu City on a 100-acre land. For this we tied up with the Andhra Pradesh Housing Board (APHB). Another one is a commercial project on a 20-acre plot in Bangalore. This is the Tech Park Phase II for which we have tied up with Prestige Group. There are two other projects in Bangalore.

Do you think REITs could be a success in India?
Let me first say this that in India many people have misunderstood the REITs. It is actually a tax structure. REITs in India will reduce a level of taxation. For example joint ventures companies should be taxed separately.
But there are problems with implementing REITs. REITS in India are used for investing and building grade A properties. Redfort supports the idea of Sebi that is playing smart by imposing a condition that REITs should not use more than 20 per cent of the money in development. It says that around 80 per cent investment should be in core assets. This provides security. But developers hold the property for long, which is wrong.

Is mezzanine funding a safe mode of investment in India?
Look, mezzanine is in between equity and debt. World over funding is done in debt and mezzanine form and very less equity. For example in US, equity was just 5 per cent during the sub prime crisis. While 95 per cent was through mezzanine and debt. But in India lending has become difficult. So there is more equity. Debt is just 13 per cent in India. Through mezzanine, there is a higher return. There is a big need of mezzanine in India. And when somebody is practicing lending then mezzanine is required. In India, anybody practicing this kind has to get the approval from the Non Banking Financial Corporation (NBFC), which comes under the RBI.

Landlords build fortunes on EMIs

New definitions of haves and have-nots have emerged in the city. Those owning plush apartments are the privileged ones, those staying on rents are cowering. The owner-tenant divide is almost as pronounced as the rich-poor divide.

Shishir Baijal, managing director of Kshitij, the realty fund of Future Group, earns a fat, fat pay package, and yet he stands in the queue of have-nots. Having no home of his own, Baijal is in misery. The 3,500 sq.ft flat, to which he has recently shifted, is his second rented premise. And for it, he has to pay a staggering rent of Rs 4 lakh a month.

If Baijal is sulking, Rakesh Tandon (name changed) is grinning ear-to-ear. Nearly four years ago, in 2004, he had taken the risk of his lifetime, and it has paid off. Tandon went for a plush Juhu flat and the EMI for the home loan had initially looked intimidating. Today, with rentals skyrocketing, he reaps a rich profit even after paying an EMI of almost Rs1.5 lakh. His 3 BHK flat fetches him a rent of Rs 2.9 lakh.

Chetan Narain, CEO of Narains Corp and president of the India Institute of Real Estate, is not at all surprised by the steep rise in rentals. "With high rise in capital values, the rental rise was only expected," he said. "In premium locations like Napean Sea Road, Bandra, Juhu, Andheri and Powai, the rise has been as much as 80 to 100 per cent from the 2006-end rentals."

Experts feel that high home loan interest rates and steep property prices have pushed up the rents. "Rentals are always 5 to 6 per cent of the market value of the property. So, with the steep rise in property prices, it is not surprising that rentals have shot up," says Pranay Vakil, chairman of Knight Frank global real estate consultants.

Things could be worse, says SG Maheshwari, estate broker from south Mumbai. "I do not see rentals reducing till the property rates fall," he says.

But Narain says there is hope for the have-nots. "Not much further rise is expected or deserved. In fact, in case of some properties the owners will have to correct their prices," he says.

Mega income

In 2003, Ramesh Patel, a 50-year-old businessman, bought a 4BHK flat in a plush building on 15th Road in Khar. Now, after five years, Patel not only funds the EMI of his Citibank loan from the rent of the flat but also has a surplus.

“I rented out the flat in 2005 for Rs 3.15 lakh a month. In 2007, I was charging a rent of Rs 3.30 lakh a month. Today I earn Rs 3.75 lakh as rent from the flat. I pay an EMI of Rs1.65 lakh,” said Patel. “The rent not only helps me in paying my EMI but also serves as an additional income for me.”

Double take

Thirty-four-year-old Shyam Sethi, a financial advisor, bought a 2BHK flat in 2004, in a plush tower at Lower Parel near Phoenix mills for Rs75 lakhs. He rented out the flat the same year in 2004 for Rs 65,000 per month.

Today, he earns a rent of Rs1.5 lakh, an increase of more than 100 per cent in three years. Though he has no loan against the flat, if we assume that he had taken a bank loan of 80 per cent of the capital value of the flat for a period of 15 years at a 12 per cent rate of interest, his EMI would have been about Rs 72,000.

Neat deal

Gaurav Patil bought a posh 2BHK flat at Pali Hill for Rs 95 lakh against a loan from the bank. He now pays an EMI of about Rs 70,000 to the bank every month. Patil has rented out the flat and earns a rent of Rs1.2 lakh every month from the flat.

Through the rent that he gets from the flat he not only pays off his EMI to the bank but, at the end of the month, he is left with almost an additional Rs 50,000. Thus, the rentals have become an additional source of income for him.

Under license from www.3dsyndication.com

Need reforms in the real estate industry

We have a list of suggestions and reforms that we expect from our Finance Minister this budget.

1. The newly introduced National Housing Policy, 2008 extensively speaks about affordable housing for the Economically Weaker Section (EWS) or Low Income Group (LIG) Categories. Adding the following sub-clause in Section 10 of the Income Tax Act, 1961 will give a thrust to this initiative.

S 10(43):

a. Any income arising to the real estate developers, who develop exclusive residential housing project for EWS and LIG categories upto 900 square feet, should be exempt from income tax.
b. In case, this housing project comprises EWS, LIG and other commercial units, then the developer should get exemption in proportion to the income arising from housing of EWS and LIG categories.

If introduced, the above provision will provide impetus to the development of housing sector particularly for the middle class.

2. The rental housing should be developed keeping in mind EWS and middle-income group of taxpayers. The Government should provide tax sops (under Section 10 of the Income Tax Act, 1961) to encourage individual taxpayers and corporate taxpayers to undertake rental housing. This amendment to the Income Tax Act would go a long way in increasing the rental housing concept:

S 10(44):
Rental income earned from letting out residential property (on and from April 1, 2008) would be exempt from income tax for five consecutive years if the accommodation does not exceed super built up area of 900 square feet of each such unit. This provision would be applicable only for such residential accommodation, which is ready for occupation only after April 1, 2008.

3. The Securities and Exchange Board of India (SEBI) has come out with detailed guidelines for Real Estate Investment Trusts (REITES). They are expected to come into operation very shortly.
The Government should amend the provisions of the Income-tax Law to provide for tax exemption of the dividend arising to the Real Estate Investment Trusts and similarly the income arising to the unit holder. The long-term capital gains arising on sale of REITES units should be tax exempted while the short-term capital gains should be taxed at 10%. Thus, the provisions relating to REITES and the investor in shares and mutual funds should be at par with the existing tax provisions relating to income of equity-oriented mutual funds. Also the holding period of REITES units should be twelve months so that it is will be considered a long-term gain.

4. The limit of exemption of service tax should be Rs 8 lakh per property. The service tax on commercial property should be made applicable only to properties given on rent on or after April 1, 2007.

5. The stamp duty rates should uniformly be slashed down to 2%. This would result in more revenue collection and would also reduce tax evasion drastically. The stamp duty on real estate purchased by the Real Estate Investment Trusts should be nil.

6. With respect to one self-occupied residential property, the maximum limit of deduction should be enhanced from Rs 150,000 to the actual interest payment without any upper limit. Providing higher tax deduction will give a boost to residential housing.

7. Presently tax deduction as per Section 80GG is granted to an individual taxpayer for rent payment. This deduction is up to 25% of the income but subject to a ceiling of Rs 2,000 per month. This upper ceiling should be scrapped and that the deduction should be restricted up to 25% of the income.

8. Higher rate of depreciation, ie 30% per annum, should be introduced on residential accommodation if an employer builds residential accommodation for its employees. This would inspire the corporate taxpayers to take up massive activity of building housing colonies and buying residential housing for its employees.

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I am confused about the present FAR…

…(floor area ratio) for residential projects in India. What is the current range of FAR prevalent in urban areas, and how is it calculated?
Ashley D’Souza, Panjim, Goa
FAR parameters vary from state to state and are governed by the respective city development authorities. Areas that come under municipal limits are governed by the municipal authorities. The FAR for areas outside municipal limits are decided on by the Town and Country Planning Organisation.
FAR is calibrated according to the nature of the project in terms of the intended usage. Generally speaking, on a plot of 100 square yards with a permissible FAR ratio of 2 allows a total built-up area of 200 square yards — in other words, the plot area multiplied by the FAR is the amount of construction one can have on that plot. FAR for various zones and type of usage is notified by the local Development Control regulations. FAR in restricted zones like, say, Lutyens Delhi may be 1 or even lower, while it may be higher in suburbs.

Which sector of Indian real estate is seeing the highest level of foreign investor focus?
Preeti Saldana, New Delhi
Residential real estate has been foreign investment’s most favoured asset class, since exit from such investments is assured and the internal rates of return meet investor expectations. With the middle-income housing sector is the primary driver, with an anticipated shortfall of close to 25 million housing units by 2010.
Commercial space in India is also in high demand. Rentals for grade A commercial properties in tier-I cities like Mumbai and Delhi have risen by more than 100% over the last two years. The IT /ITeS sector constitutes for the highest absorption of commercial office space, with a projected requirement of 150 million sq ft across major cities by 2010. IT/ITeS is, beyond doubt, a key driver of commercial real estate in India’s metro cities.

The IT/ITeS sector is making enormous waves in Indian real estate. Can this sector continue to deliver competitively even though countries like China and the Philippines are entering in a big way?
B L Harolikar, Kolhapur
India occupies the top slot as a Cost-Sensitive Destination for outsourcing. It is ranked a creditable 3rd in the People and Skills Availability criteria, and the highest amongst the developing countries. With less than 10% of the market being currently addressed, there is still a huge market opportunity for the sector in India, and this will ensure sustained demand-led growth.
Factors like the evolution of the global delivery model, unbundling of large IT outsourcing deals with larger India-based delivery shares, and the large contract values due for renewal are some of the positive indicators for the sector.

Despite India’s ‘developing nation’ status, there is an immense amount of interest in its real estate market. How would you compare India’s property market to those in ‘developed’ countries?
Dr. Nagesh Sirur, Ahmedabad
India’s property market has always seen typified by unorganised and fragmented growth. However, the contemporary scenario seems to state that growth, whether organised or unorganised, is growth nonetheless. India’s real estate sector is seeing a sustained and eminently sustainable boom, fuelled by new projects, superior quality products, new growth corridors, increased infrastructure spending and the common man’s increased spending power.
With the stock market being highly volatile, investment in real estate has begun to look competitive, with typical yields of 10-12% per annum achievable. With increased buoyancy, the real estate market now falls in league with stocks, bonds, mutual funds, gold and commodities, and insurance policies as a viable investment option for investors in all categories - individuals, corporates, and funds.

What is all the trepidation about foreign retail giants coming into India? It would seem to be a good thing for all concerned.
Pradeep Gaekwad, Kondhwa, Pune
Indian retailers have reservations of the global retail giants dominating the local landscape, as they possess a lot of financial muscle vis-à-vis the Indian retailers. However, such fears do not factor in the larger picture — these retail giant houses can bring their better managerial practices and IT-friendly techniques to cut wastage and set up integrated supply chains to gradually replace the present disorganised and fragmented retail market.

I have been following the stamp duty debacle for some time now. Will reducing stamp duty help the real estate sector in any real way?
Brijesh, e-mail
Almost 80% of all buildings are on bank financing, and banks disburse financing on the precondition that the property is registered. The lower the amount of stamp duty, the more buyers will be encouraged to register and pay it. Affordability will increase. In the current scenario, buyers have to avail of personal loans and other sources even if they are getting a loan because of high stamp duty.

I have been advised to model my next residential project in line with the needs of NRI clients. How many other developers are doing likewise, and why?
R T Vashisht, Bangalore
A large number of Indian developers are now gearing up to meet NRI demand for quality residential properties. In metros, the accent is now on development of high-end constructions that meet the parameters of NRIs and the IT/ITeS sector. This is still an emerging market component, but there will certainly be escalated efforts as more transparency comes into the sector. You would do well to consider the advice given to you seriously.

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Make real estate deals more transparent

The success story of the booming real estate market in India coupled with strong economic growth have spelt good news for the country. Nonetheless, reforms are necessary. Reforming the real estate sector in this budget will add to the success story of the country.
So this budget, the Government should further reform and tighten norms for the real estate sector to protect the interests of the investors. This will encourage the actual homebuyers and NRIs who are looking to invest in India. Certain reforms are needed to ensure housing at affordable prices to appeal to the masses.
The developers and builders in India have been having a field day with no control over built up and carpet areas, illegal property documents and constructions, possession related issues and other illegal entanglements. In Mumbai, rules and regulations for re-development of old buildings and the slum rehabilitation should be made more lucrative for investors and builders.
Our expectations from the budget with respect to the real estate sector are as follows:
1. Section 80 IB of the Income Tax should resume. This act gives tax relief to the builders who construct units less than 1000 square ft built up in metros. However, the benefits under this section have been stalled since last year.
A lot of builders have created houses under this scheme and consumers are benefited through the mass construction. The only problem here is that while the builder gets tax relief there is nothing passed onto the consumer.
A majority of home buyers are unaware of this tax respite which the Government had given to the builders. The Government should continue giving this subsidy to the builders as this will encourage them to make more affordable homes. This will also be in line with the Government's 10th Plan estimate where the shortage of housing units is expected to be in the range of 22.4 million square ft. This benefit is the need of the hour but with some rider that the benefit is mandatorily passed on to the consumer.
2. Under Section 24 of the Income Tax, the exemption of the interest on home loans should go up from the present Rs 1.50 lakh to atleast Rs 3 lakh. This is keeping in mind the average size of the apartment price has grown 200% over the past few years.
Also, the tax benefit should be given from the date of booking of the property and not from the possession.

3. Tax deducted at source (TDS) on housing rental income for individual home owners should be brought down from 16.83% to 10%.
A flat slab of 15% or a tax holiday of initial 3 years should be considered on rental income for NRIs. This will boost NRI investment into the country or else they'll look towards other countries for returns on their investment. Also, this will rationalise the prices of rentals in many metros and more people will be willing to rent out properties.
A lot of NRIs lock up their apartments for fear of an upfront deduction of TDS of more than 30%, which affects return. Further, a standard deduction of 30% towards maintenance should be increased to 40% for local residents and 50% for NRI houses.
4. Stamp duty charges should be reduced to 2.5% from the current 5% as it will benefit the property buyers.
5. The interest given on bonds should be linked to bank interest rates on fixed deposits. This is extremely helpful to elderly in ensuring their safety for future. A lot of property owners still are conservative and prefer to invest their money in capital gain bonds and earn a living out of them.

6. The buyers should be allowed to invest in residential properties from the sale of commercial properties and purchase residential properties with the money recieved from the sale of commercial properties.
Buyers should also be allowed to invest in both commercial and residential properties from the proceeds of one single property.

7. The Government should take more steps to curb money made illegaly in the land deals. Cheque transactions will automatically yield in more money flowing out of bank accounts than from hidden lockers.
8. Presently, not many builders are making one Bedroom-Hall-Kitchen (BHK) apartments. The builders should be given incentives to build one BHK of less than 400 square ft carpet area particlaurly in Mumbai.

9. Fringe benefit tax (FBT) for corporate employees who rent properties should be reduced from the current 20% to 5%. This is because they already have an option to get into an individual lease without paying FBT.

10. Individuals, companies and employees of multi national companies should be given 100% tax exemption for the rent paid towards renting a house on leave and license/lease basis. This will help people make a decision to lease the properties and avail tax benefits if they cannot afford to buy the properties.
11. Tax incentive should be given to owners renting out their properties for a minimum lock-in period of 3 years with no right of termination to either the landlord or the lessee, and a built in fixed escalations in the rent price. This will encourage people to change houses once in 3 years.
12. Floor Space Index (FSI) should be increased within city limits with immediate effect to bring down real estate prices. Also, builders should be strictly made to create the required infrastructure to meet the demand for water, electricity, parking and sewage system by using innovative and latest methods available.
14. The Coastal Regulatory Zone (CRZ) should be further rationalised as a lot of prime properties are stuck because of this.
15. Incentive in the form of higher FSI should be given to builders who re-develop housing societies because the prices of real estate are unaffordable.
16. Buyers of real estate should be allowed to exit/sell after a span of two years with a lesser tax slab so that it becomes easier for them to exit. This will curb the black money movement in the market.
An artificial shortage of property is created and prices are hiked because the sellers are unable to sell within a short span and also because they pay higher tax.

17. Real estate brokers / agents should be given proper licensing to practice real estate business. By doing so there will be a decline of unscrupulous transactions.

18. Benefits to be given to developers who adopt area management schemes in and around their complexes for beautification and development of the area and keeping the location neat and clean.
19. The Government should manadate ratings to property developers. A regulatory body should keep a vigil on the activities of builders who create smaller dwellings of less than 100 units a year.
20. An code of ethics should be cerated for real estate developers and agents to help them offer better professional services.
21. Property taxes should be rationalised for leasing both residential and commercial properties.
22. Information Technology (IT) and Information Techonology enables services (ITes) benefits with respect to Software Technology Parks of India (STPI) should continue but with lesser rigid regualtion.
23. Commercial and retail premises given to banks/ATM’s should be exempted from property tax as they are given for longer periods of time and lesser escalations in the license fees.
Real estate sector is a big economy driver and any positive step towards the interest and welfare of the small consumer will have a macro impact on the economy.

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Indian real estate on a roll

The Indian real estate has gained a lot of traction from both within and outside the country in the past couple of years. A huge pent up demand and access to funds were the key drivers for propelling the Indian real estate market into an overdrive.
The industry received the much-needed first shot of funding in 2005 wherein the foreign direct investment (FDI) route was opened up for Indian real estate. Since then the Indian real estate sector has transformed to reach $57 billion in 2007, and has a potential to reach $90 billion by 2012 according to the Eleventh Five Year Plan.
The accelerating growth momentum has paved the way for exciting opportunities for both domestic as well as international investors. The real estate industry has multiple stakeholders right from developers to investors (including private equity funds), financiers, buyers (including Real Estate Investment Trusts) and service providers such as property consultants, contractors and project management companies. A typical consolidation may be triggered by any of these stakeholders.
Consolidation by way of land acquisition by the developer and real estate investor has been going on since ages. But the first real wave of classical consolidation came from the service providers — more specifically the international property consultants when Meghraj entered into a joint venture with Trammell Crow and later Trammell Crow Meghraj merged with Jones Lang LaSalle. Similarly, Colliers Jardine merged with CB Richard Ellis.
Project-specific JVs emanated from the need for real estate developers to get access to technology and requisite funds to carry out large scale projects. This triggered off a series of JVs with both Indian as well as international players.
Some of the large JVs that have taken place include Akruti with DLF, ICICI Venture with Tishman Speyer, Vornado Realty Trust with the Chatterjee Group, etc. In some other cases overseas developers and investors opted for a JV with a local partner as an entry strategy. While the foreign partner provided technical and financial muscle, the local partner provided a better reach in the local market, knowledge and consequent handling of all domestic issues. Some such well known JVs include Emaar with MGF, Walton Street with Sriram properties, Nakheel with DLF.
The market is also witnessing a contrarian approach whereby corporate houses, in order to monetise their real estate assets, have opted to take the de-merger route. These companies have hived off their real estate assets into separate entities (either listed or otherwise) and propose to carry out their future real estate activities under this. Some of the classic examples are India bulls, the Piramal group and Mahindra Lifespaces (formerly known as Gesco Corporation Ltd). Interestingly, certain government departments like railways, port trust and postal department have also indicated their interest in monetising their surplus real estate to enhance their revenue structure.
Another trend witnessed in the real estate transactions side is investments made by Real Estate Investment Trusts. REITs are listed on overseas markets and allowing investors to invest into rental yielding assets in India, for example Ascendas which is listed in Singapore is developing and investing in IT Parks.
Going forward, we expect the Indian real estate market to witness greater M&A activity driven by consolidation and the growing maturity of the market. This activity would ideally be supported by requisite regulatory framework and inherent attractiveness of the real estate sector (which in turn is based on sound market fundamentals and relatively stable economic & political regime).
Moving from a single project/SPV level tie-ups, in terms of JVs between developer and investor companies or local and international developer, developer and funds (private equity/ hedge funds/asset management companies/ financial firms), the industry is likely to move towards portfolio-level and entity-level participation, both from domestic and cross border investors and mergers, forming new entities for undertaking development activity.
From the perspective of investment activity on the funds side, a progression towards takeover of portfolios of existing funds by larger and newer funds is expected as this would be a faster and easier mode of entering the market.
Also, with existing players intending to offload their portfolios to book profits/exiting their buyouts or diversifying into specific region or asset classes, real estate would evolve into a commoditising mode.
In the medium to long term, we foresee some activity towards acquisition of Indian players by international developers, active investment play by PE funds instead of the current trend of being a passive financial investor, and lastly a greater willingness to go for a dilution of equity by developers, construction and infrastructure companies, etc.
Also, once the industry begins to become a more formalised sector, REIT activity would come in taking in individual investor money into circulation along with making the sector more investment savvy in terms of fair and comprehensible valuations and traceability.

Primary Real Estate plans $500 mn fund

Indian fund manager Primary Real Estate Advisors is planning to launch a fund worth as much as $500 million, probably in the second half of this year, but said it will tread carefully as the country's property boom stutters.

Finding Manhattan on India’s real estate map

In the US, the trip might take more than a day, but in Bangalore, anyone can hop from Tribeca to Brooklyn, stop off at the White House, and head out to Melrose in just a few minutes.

The miraculous journey unfolds in a new housing development in Bangalore’s Electronic City named “Concorde Manhattans”, which sits on prime real estate across from a Wipro Technologies campus. While location is the major draw, developer Concorde Group is also betting that its American naming scheme will help attract Wipro’s globetrotting employees.

“Manhattans is a brand associated with grandeur,” said the company’s marketing manager Alok Mishra.

Turns out naming each street and section of the gated community also was an exercise in workplace bonding. “We searched the Net, and everybody gave one name,” said the company’s human resource executive Gangadhar Gowda.

As buyers in India rush to book new suburban luxury flats before ground-breaking—with prices topping Rs45,000 per square foot, according to one report—developers must do more than acquire land and churn out projects: They must generate names by the dozen.

HIGH ASPIRATIONS (Graphic)

While no specific data exists on the subject, observers of the high-rises increasingly gracing the outskirts of cities note that the names tend to be of faraway places or concepts that conjure images of gardens and greens, luxury and exclusivity. Developers describe the process of naming as largely random, turning to the Internet for inspiration or even their own mothers.

But as they jockey to distinguish themselves from the cookie-cutter feel of developments and largely similar floor plans, some are finding they need to brand projects better, starting with the name.

“Many people go with English because they are more aspirational,” said Jagdeep Kapoor, managing director at Samiska Marketing Consultants, as he explains the phenomenon. “If they can’t pronounce it, then it’s very aspirational.”

Gurgaon, the suburb south of New Delhi increasingly defined as a gated community mecca, is filled with such aspirational places. In DLF City, Phase V, residential developments such as Wellington Estate, Princeton Estate and Carleton Estate overlook a landscape that is still defined mostly by construction and open dirt fields. A handful of security guards sit at the entrance to Princeton Estate, keeping track of everyone that comes in and out. Manicured shrubs and short, pruned trees line the paved roads that lead to each of the 20-storey peach-coloured towers that, again, have their own security guards.

The residents, though, aren’t quite sure what to make of the name. When B.K. Sharma first moved to the complex, he was dead set against the name, for example. “Once I had a big discussion with my brother,” said Sharma, who is a retired railways officer. “Our childhood has passed in total Indian culture, but the first name is giving (the idea) that we are living in an alien area.”

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Noida is hub of India's growth as economic superpower

Noida , an acronym for the New Okhla Industrial Development Authority, is located on the left bank of the river and is equidistant from Ghaziabad and Delhi. It was developed near Delhi, across river Yamuna, in the 1970s as a modern industrial city. There has been extensive growth of population in Noida during the last two decades and the population is estimated to be about half a million.

New real estate opportunities include hospitals, logistics warehousing and airport

Traditionally , the major opportunity areas within real estate have been residential, commercial (office ), retail, and integrated townships. But in future, several new opportunity areas are set to open up. Popularly called the "neo-asset classes" , these include medicities , hospitals, logistics and warehousing, airport or portbased business districts, mass housing and slum rehabilitation , and education infrastructure . Let us examine a couple of these new asset classes, and opportunities they offer to the real estate sector, in detail.

Real-ly!

A mobile real-estate agency in Bangalore that breaks several… well… ground rules.

Sevenraj, Bangalore-based realtor.

Ayesha Matthan

I bring real estate to the doorstep as I don’t believe in wasting time,” says Sevenraj, whose agency by the same name terms itself a “mobile estate”.

Sevenraj and his team drive around in a car in the Central Business District of Bangalore. The car is done up in flashy red-and-white colours and has the phone number and Web site spelt across. “It has an inbuilt TV on which clients can view property sites available for sale. It is also loaded with a compass, camera and a laptop.”

Query him about the red-and-white combination dominating his business — his suit, socks, shoes, handkerchief, mobile phone, office, furniture, stationery and cars are all in red and white — and he has this to say, “When I started out, I thought about the whole aspect of brand-building and the public identifying with it.” He came to the conclusion that film stars are largely recognised by their trademark dress code — like the late Tamil superstar MGR with his dark glasses. “At first people used to laugh at my sense of dressing, but it’s easier for clients to identify and stop me,” he says.

Another recurring feature in his business is the number seven. Apart from the ‘seven’ in his name, his blazer has seven buttons and he knows seven languages — Hindi, Kannada, Tamil, Telugu, Malalayam, Marathi and English. “The moment I recognise the language spoken from the accent and tone of the client’s voice, I immediately reply to them in their language,” says this polyglot.

There is an interesting reason behind his name too. As the seventh child, he was named No. 7 by his father, who didn’t want his children to have names indicative of their caste or religion. Hailing from Badagara in Kozhikode district of Kerala, his family later moved to Bangalore. “When my father admitted me at a school, they didn’t accept ‘No. 7’ and changed it to spell ‘Seven’,” he says.

Inspired by his father, an artist who carved figures out of ivory, Seven had enrolled at the Government College of Art, Chennai. But financial troubles forced him to drop out of college and he started dabbling in the world of films. “Raj was a very popular name in the industry — there was a Sathyaraj and a Mohanraj, so I added ‘Raj’ to ‘Seven’ and it has stuck since then.”

After doing small roles in a few Kannada films for about eight months, he was out of work and despaired.

“I used to sleep on the railway track in Chennai in a bid to attempt suicide, but no trains went past!” Then he worked for a General Insurance firm which, he says, made him “a real businessman”.

Sevenraj recalled how when he was in class V or VI a friend’s father had casually asked him for advice on a house to buy. “I pointed to an empty house that I knew and I was rewarded Rs 100!” The memory of this resulted in a real-estate business in Bangalore the late-1970s.

In five years he plans to retire and work at his ashram and charitable trust.

source

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