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.

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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.

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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

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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.

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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.”

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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.

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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.

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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

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

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

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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.

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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

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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.

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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.

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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.

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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.

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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.

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Interstate Hotels & Resorts Forms Joint Venture with JHM Hotels to Operate and Invest in Hotels in India

Interstate Hotels & Resorts , a leading hotel real estate investor and the nation's largest independent operator of full- and select-service hotels, today announced that it has formed a 50-50 joint venture partnership with JHM Hotels to operate and selectively invest in hotels in India. JHM Hotels is one of the nation's largest independent developers and owners of hotels. The joint venture, named JHM Interstate Hotels India, will serve as Interstate's platform for all hospitality-related activities in India, primarily focused on securing management agreements on existing and to-be-built hotels. The joint venture is establishing an office in New Delhi, India.

Interstate Hotels & Resorts Forms Joint Venture with JHM Hotels to Operate and Invest in Hotels in India

Grant priority sector status to housing industry

The importance of the Indian real estate sector can be gauged from the fact that it is the largest employment generator in the country after agriculture, and a single component within the industry — housing — contributes roughly 5% of India’s GDP.

Grant priority sector status to housing industry - livemint

Mumbai behind in Monopoly race

Mumbai’s real estate market is blazing-hot, as anyone can tell, with valuations that exceed even the best that Manhattan offers.But in the race to get itself listed as a valuable property market on the board game Monopoly, Mumbai is currently at a lowly 46th place, behind many leading world cities.With just 10 days to go for an online vote to end, Mumbai risks falling off the board, so to speak, unless its netizens wake up and start voting. To vote, you need to go to monopolyworldvote.com, and register; you can vote everyday for up to 10 cities a day.

DNA - World - Mumbai behind in Monopoly race - Daily News & Analysis

Sarovar spreads out as realty prices pinch

With prices of real estate going through the roof, Sarovar Hotels is looking at acquiring land away from city centres and larger towns for Hometel, its budget brand of hotels.Working towards this end, the company has acquired land on Old Mahabalipuram Road, which is 20-30 km away from the city centre in Chennai, and in Sriperumbudur in the south. It is also looking at Bhiwadi in Rajasthan, 50 kms from Gurgaon.The one-acre plot on Old Mahabalipuram Road was acquired for Rs 4 crore and the two acres at Sriperumbudur for Rs 6 crore. “There is enough demand here but no competition,” Ajay Bakaya, executive director, Sarovar Hotels, told DNA Money.“Real estate prices have been rising by about 20% a year. International players are willing to pay a price — in the form of sky-rocketing real estate rates — for entering the booming Indian hospitality market. But domestic players need to be cautious. If they buy land at a high price, these won’t have viability if the market shows a downturn,” said a hospitality industry analyst.

DNA - Money - Sarovar spreads out as realty prices pinch - Daily News & Analysis

FCI may rent out property to unlock realty value

The Food Corporation of India (FCI) is planning to cash in on the rising real estate value of the unutilised property lying with it in form of land and buildings.

FCI may rent out property to unlock realty value

Infrastructure and real estate exposition held

Infrastructure and real estate exposition organised by Gujarat Institute of Housing and Estate Developers (GIHED) was held in Ahmedabad recently. The exhibition involved six core sectors: real estate, SEZ, township, retail and speciality projects, infrastructure, hospitality and education.

Navhind Times on the Web: Business

Bangalore Real Estate Registers Maximum Price Rise in India

Bangalore real estate has registered the maximum increase in prices from 2001 to 2005, as per NHB Residex.
Residex was done in 5 cities of Bangalore, Bhopal, Delhi, Kolkata and Mumbai. The price movements were captured from year 2001 through to 2002, 2003, 2004 and 2005. Bangalore was 100 in 2001 and 275 in 2005 while Delhi moved from 100 to 201 from 2001-2005, Bhopal- 100-179 and Mumbai 100-178.
Speaking at the Credai's NATCON conference, NHB' Kaul said that there was a need to do an index for residential property prices. "Increase in housing finance has been 25 per cent each year. In other sectors of economy we have sophisticated systems of tracking markets whether it is stock markets, consumer goods. But real estate has not been formally tracked and price movements have not been captured. There was a need to develop a system by which real estate markets could be tracked."
The need for Housing Property Index (HPI) was due to urbanization, high economic growth, real estate assets that are a significant component of wealth, increase in bank lending to real estate sector, need for transparency in the market, overall development of the real estate market and policy inputs to government for real estate sector.
Residex will be an authentic indicator of price movements and it also points out areas which have a high growth potential. The project was initiated at the behest of GoI to measure residential property market and gathers information about price movements in residential properties and track reasons behind it- it's the official property index in the country.
Methodology used was the Price Relative Method. The technical advisory group consisted of CSO, NSO, RBI etc- after discussion all methods and practices, price relatives were calculated.
Australia, Canada, US bring out their own indices. Each Indian city was divided into three categories - less than 45 sq m, 45-90 sq m and more than 90 sq m. Sources of information were real estate agents, developers and Resident Welfare Associations. Issues were data collection, authenticity of data, need for cross verification, cost and methodological aspects. The transacted prices were taken and not the registered value of houses to get the realistic picture.

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Builders want tax breaks, higher spending

Indian construction and real estate firms want higher spending on infrastructure, lower interest rates and tax breaks on projects from the federal Budget, industry officials said.

Construction companies that saw tax rates rise after the withdrawal of income tax breaks on infrastructure contracts last year, want it back.

"The government should reduce interest rates for infrastructure projects. Concessions are available only for a few World Bank-funded projects, but this should be extended to all," said Sandeep Reddy, Managing Director of Hyderabad-based Gayatri Projects.

The industry also want a reduction in customs duties on construction equipment, and service tax exemption for construction contracts, said an official at IVRCL Infrastructures & Projects Ltd.

Blocked Ad

Real estate firms, which have seen a slowdown in sales due to soaring prices, have asked for a lower interest rates for home loans and for housing construction projects.

They have also sought a reduction in stamp duties on the housing sector and removal of service tax on rental income to bring down costs for investors.

"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,” the Confederation of Real Estate Developers Association of India, said in a note to the government.

Both sectors have sought more liberal rules for bringing in foreign funding.

"Given the large amounts involved in infrastructure projects and absence of cash flows during construction phase, Indian firms need to have access to finance of all kinds," the Confederation of Indian Industry (CII) said in a pre-budget presentation.

The industry body has asked for reducing restrictions on external commercial borrowings, convertible bonds, and foreign direct investment.

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I’d want infrastructure public-pvt partnership

What are the three things you wish for from the Budget?

Anuj Puri (Abhijit Bhatlekar / Mint)

I think corporate tax and personal income-tax should be lowered. It should be reduced to 25% for both. It is currently at 30%. Secondly, there should be a stricter intellectual property rights regime in India. People are hesitant to do business in India because of this. The Budget should focus more on health care and education.

If you could end one thing, what would that be?

Licence raj. We still are reminiscent of the British Raj. I think there should be more transparency in income-tax in the real estate industry. There is not much transparency in the real estate, banking, telecom and aviation sectors.

If you were finance minister, what would be the one thing outside your industry you would want in the Budget?

Infrastructure. It is the first thing that comes to my mind. In fact, it is somewhat related to my industry. The end-user price of homes is so high because of the high land prices. Land prices are 70% of the total cost of homes. If I can bring it down to 20%, home prices will come down. But for that we need infrastructure. The moment infrastructure is in place, large parcels of land will open up. The restriction in supply of land is because of lack of infrastructure. We don’t have roads, we don’t have bridges. There is no reason for the value of land in Mumbai to be twice of that in New York. The problem is we don’t have infrastructure to decongest the city. From a business point of view, it is a big dampener. It is (lack of infrastructure) impacting the profitability of the gross domestic product of the country.

I would want public-private partnership in infrastructure. There should be more speed in allocation of contracts. The government should bring in innovative models to improve infrastructure.

What is the one thing you don’t want changed?

One interesting thing that I don’t want to be changed in the budget is the government’s approach to foreign direct investment (FDI)—the way it is opening up FDI in sectors. I get so much comfort when I see that the subprime crisis is not going to affect India. Opening up FDI surely and safely is the right way to go. We took a small step in real estate, retail and insurance. We wanted to assimilate and see how it impacts the sectors. We have still not gone ahead with opening up of legal fraternity and to an extent the media sector. There would have been nervousness had the subprime crisis hit India. We would not have been able to handle it.

Which budget disappointed you the most? Why?

I think it is going to be this year’s Budget. It is likely to be an election Budget. We are not going to see any new initiatives. But if you look at the past budgets, I was disappointed when the government came to power four years back. There were a lot of expectations from the finance minister, P. Chidambaram. But...the government got elected in October-November, so they did not have enough time for the budget. It was also a confusing budget because of the banking cash transaction tax and other things.

One proposal you think is shot down in every budget, but shouldn’t be.

A hike in FDI in insurance from 26% to 74%. I think it should not be shot down because a huge amount of capital is required for the insurance sector. It is a large cash outflow business. Because of the current level of FDI in the sector, a lot of burden is on the Indian insurance partner...

What would you consider to be inclusive growth?

Inclusive growth should take along India II and India III. India II are the office boys, drivers, and India III is the guy on the street who does not have a job in office. We have to make sure that education, health and aspirational needs of these people are met.

(Anuj Puri is chairman and country head of real estate consultant Jones Lang LaSalle Meghraj.)

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Wages hiked to retain skilled manpower

Retaining trained and skilled manpower has become a difficult task for real estate developers, which is leading to increase in salaries of more than 100 per cent, industry sources said.

“First it is difficult to get good and skilled people and then retaining them is more difficult than that. We have raised salaries by more than 100 per cent and in some cases by 200 per cent,” a senior executive of a Dubai-based real estate company told Emirates Business on condition of anonymity.

A project manager with six to eight years of experience is now earning between Dh50,000 and Dh60,000 per month compared to Dh20,000 to Dh25,000 per month last year.

“We have announced projects and these need to be completed on schedule. We cannot afford to lose people. We will not see them performing better if they are not happy,” he said.

There are more than 520 developers in Dubai registered with the Real Estate Regulatory Agency, and the list if growing, said Chief Executive Marwan bin Ghalita.

If the industry grapevine is to be believed, senior officials of Indian and Chinese companies have been coming to the UAE to recruit people with experience in the real estate sector.

Senior staff with Gulf Co-operation Council experience can command excellent salaries and have become much more selective as to what type of company they would like to work for, Maggi Johnston, executive director, Team One Recruitment, said recently.

“Real estate is tied to the financial sector and so the increase is higher. There is a lot of activity going on in the real estate sector in the region, especially in Saudi Arabia. There is demand for qualified people so the salary levels will go up. There is a growing shortage of talent and this is a global phenomenon,” she added.

Construction costs in the Gulf have risen by around 30 per cent in the past 12 months and new companies are entering regional markets, making the sector even more competitive.

Rising costs remain the major issue for contractors this year, but, unlike previous years, it is the rising price and dwindling supply of manpower, not materials, that is causing concern, according to the Middle East Economic Digest. With one million labour cards issued in the UAE in 2007 alone, previously there has been no shortage of construction workers in the UAE.

However, Dubai contractors increased wages by 20 per cent following a strike in November 2007 at the emirate’s largest contractor, Arabtec Construction.

In addition, there is competition from the labourers’ home countries. The fall in value of the GCC currencies, due to their US dollar peg, has significantly reduced the attractiveness of the region to workers from the Indian Subcontinent.

The Indian Government is expected to spend $500 billion (Dh1.8 trillion) on infrastructure in the next five years. Similarly, in the Gulf, Abu Dhabi has launched $140bn worth of real estate projects since 2005 and Doha and Saudi Arabia are also at early stages of the development cycle.

“We all recognise that we are in a severely labour-constrained construction market. We run a severe risk of continuing to ignore the problem and expecting everything to sort itself out.  In reality, we need to introduce some fresh thinking into our recruitment and retention processes, as well as adopting some new approaches to overcome the continuing shortages,” said Rod Stewart, Regional Managing Director, Hyder Consulting Middle East.

Nakheel Chief Executive Officer Chris O’Donnell, however, believes there is over-reliance on labour and mechanisation could be a solution. “Although you pay more by hourly rate for skilled individuals but you get a lot more productivity and it allows you to use more mechanisation,” he told Emirates Business.

The Number

100% - Salary increase has been given byconstruction companies in Dubai to skilled workers in an effort to retain them

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India's Primary Real Estate plans $500 mln 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.

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High rise in real estate salaries

Employees in India received an average salary increase of 15.1 per cent in 2007, which is up from 14.4 per cent in 2006, according to the 12th annual Salary Increase Survey conducted by Hewitt Associates, a global human resource services firm. The report also predicts a rise of 15.2 per cent in 2008, making this the fifth consecutive year that salaries have shown a double-digit growth in India.

Real estate or infrastructure leads with highest salary increases leaving traditional leaders like Information Technology and Business Process Outsourcing behind.

While salary increases are largely dictated by talent demand and supply, Hewitt Associates forecasts a gradual decrease in salary increases and a stabilisation of increases to a range of 9 to 10 per cent by 2012. Factors influencing stabilisation include reducing the talent gap, changing the talent model, making training vital and re-engineering talent.

Though the fundamentals of the Indian economy are strong, the recent stock market fall and a strengthening rupee herald uncertainty. For India, the immediate implications of an economic slowdown in the U.S. is not worrying, but this is getting organisations to look at “productivity” as a single most important determinant of long-run prospects, the survey says.

The two fastest growing cost components in India are real estate or infrastructure and talent, and information technology and outsourcing companies, which have more than 75 per cent of production regulated by the U.S. economy. The highest increase in salaries is predicted in the middle management, junior manager and supervisor levels ranging close to more than 15 per cent while the top and senior management are likely to witness a hike of 13-14.5 per cent in 2008. For the general staff and manual workforce, the hike predicted is between 11 to 13.5 per cent.

The study also reveals that an increasing number of organisations are plagued by attrition and retention issues. Attrition rates have reached an all-time high in India with the insurance industry reporting the highest attrition rate at 35.2 per cent. This is followed by IT-enabled services at 28.9 per cent and hospitality industry at 27 per cent. External equity of compensation, role stagnation and limited career opportunities are the most cited reasons for attrition.

Hewitt Associates surveyed 600 foreign-owned, locally owned and joint venture companies this year, analysing information across 19 primary industries and 22 sub-industries.

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Parryware Roca to invest Rs 170 cr, eyeing acquisitions

Sanitaryware and bath accessories manufacturer Parryware Roca Pvt Ltd plans to invest Rs 170 crore in the next 2-3 years to expand its production and enhance its marketing and distribution channels. The Chennai-based company is also eyeing ino rganic growth and would spend an additional amount on acquisitions.

"We plan to invest Rs 50 core in expanding our existing manufacturing facilities in the next 2-3 years. We will also invest about Rs 40 core every year for the next three years on marketing," said the Managing Director of Parryware Roca Mr K E Ranganatha n.

"We are also looking to acquire companies engaged in our line of business, on which we will invest additional money," he said. However, Mr Ranganathan declined to comment on the size or time of acquisition. The company has four factories for manufacturin g sanitaryware products and another one for taps.

The brown-field expansions would take the current capacity of 40 lakh pieces per annum to 60 lakh pieces per annum by 2011. Upbeat on the real estate scenario and the bathroom renovation market in the country, Mr Ranganathan said the company plans to ope n more showrooms for its products.

"The market for sanitaryware and bath accessories is growing at the rate of 15 per cent every year. We plan to take the number of showrooms to 55 by next month from the current 41," he said. The number of Parryware Roca Customer Care Centres, which cater to the renovation market, would also be taken to 30 from the current 20 in next 1-2 years.

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Chennai leads with 67.3 pc of total green building space

Is the south greener than the north? So it seems, as far as construction is concerned. According to a report released by real estate consultancy Jones Lang LaSalle Meghraj on Tuesday, Chennai leads in India in terms of the number as well as the total volume of certified green building space.

Out of the 17 LEED -- Leadership in Energy and Environmental Design, a green building rating system developed by the US Green Building Council -- certified buildings in the country, Chennai alone is home to eight of them. This accounts for 67.3 per cent of the total green building space in India.

The 'India Green Buildings Anthology' report makes another startling revelation. Contrary to what most people think, in the context of the Asia Pacific region, India is ahead of China both in terms of projects certified as well as registered under LEED. While India has 17, China has only 4 certified projects.

However, experts say that the total area of green buildings registered in China exceeds that of India as large township projects as well as the Olympic Games infrastructure are going in for green certification, says the Jones Lang LaSalle Meghraj report.

Coming back to India, Kolkata is second only to Chennai with 15.7 per cent share of the total green building space, even though it has only one green building, the Technopolis.

However, with a total size of 6,50,000 square feet, the project assumes colossal proportions.

Kolkata is closely followed by the National Capital Region in the ranking with a 8.7 per cent share in the total area spread over three projects. Mumbai comes fourth with only one project and a share of 2.9 per cent. Other cities where certified green buildings have been built are Kochi, Hyderabad and Gulbarga.

"This shows that apart from the major metropolitan cities, projects registered for green building certification are spread far and wide across the country in around 12 smaller cities and towns," the report points out.

Also, apart from residential, healthcare and hospitality projects joining the bandwagon, there are some examples of large infrastructure and township development projects also going green.

Of mention are the Hyderabad International Airport Passenger Terminal as well as an integrated township in Asansol that have been registered as green buildings, says the report.

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Non-metros have higher rents, lower rent allowance

The house rent allowance is non-uniform across the country. Residents of metros – Delhi, Mumbai, Chennai and Kolkata – get a higher tax benefit than those in cities like Bangalore or Hyderabad.

However, the rents of Bangalore and Hyderabad are often steeper. Many want a change in this outdated tax law.

“When we were staying in Chennai, rentals were low. We were paying only about Rs 4000. As soon as we shifted to Bangalore, we had to pay Rs 8000, four to five years ago. Now, 10 per cent definitely also impacts,” says a techie, Vivek Tyagi, who now shells out Rs 27,500 every month for his flat in Bangalore’s upscale Indiranagar.

According to Section 10 (13A) of the Income Tax Act, the tax exemption on house rent allowance is 50 per cent of the basic salary for those who live in a metro but only 40 per cent for non-metro residents.

Vivek and his wife Shefali, who've lived in cities like Delhi and Chennai in the past, know that real-estate prices in Bangalore are currently at par if not higher than these metros and they have reason to feel short-changed by the government.

“On the one hand you're paying higher rent here and the deposit, plus you're losing out on the tax difference also with respect to other metros. So if nothing else at least Bangalore HRA tax rule has to be at par with other metros like,” Vivek says.

With real estate prices soaring across many Indian towns, even in NCR’s satellite cities like Noida and Gurgaon, the current yardstick of measuring tax rebates according to the status of metros and non-metros is no longer relevant.

“The government can come up with some sort of cost of living index for the major six or 10 cities and based on that, apply rules which are similar to these cities. In fact, if you see, most of the development has happened in places like Noida and Gurgaon in the last 5-10 years,” Vivek suggests.

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In4velocity to tap northern market for ERMS application

Software solutions provider In4velocity Systems on Tuesday announced its plans to tap the growing real estate market in Delhi and northern India for its Enterprise Resource Management System application.
The application, In4Suite, helps real estate and property development firms automate business process right from land acquisition, legal liaison to engineering, purchase and sales and room rental to property management including mall management, it said.

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Asian REITs market capitalization to be $500bn by 2016

Asian Real Estate Investment Trust (REITs) currently accounts for 10.6% of global REITs and is projected to touch market capitalization levels of $100 billion by 2010. This is expected to grow up to $500 billion in 8-10 years, according to industry chamber Assocham.

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Real estate developer breaks ground on Sobha Daffodil in Dubai

19-Feb-2008

Senior Executives of Sobha Group at Ground Breaking Ceremony, Jumeirah Park, Dubai

Sobha Group, one of the leading real estate developers in India with numerous realty projects in Dubai, has broken ground on its first residential development in Dubai. Building work started on Sobha Daffodil at Jumeirah Village on 28th January, 2008 following a ground breaking ceremony.

Ajay Rajendran, Vice Chairman, Sobha Group, said, “Sobha Daffodil marks our entry into the residential real estate market in the Middle East. We are pleased to celebrate its ground breaking”.

Sobha Daffodil is a 178-apartment real estate development located in Jumeirah Village, Dubai. The 4 and 10-storey complex offers a contemporary living environment with roof top garden, large temperature controlled swimming pool and fully equipped Club House.

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