With India being dubbed as the 'next big destination' in real estate here, Israeli real estate firm Fishman Holdings is planning to invest $1 billion in Ludhiana.
According to media reports, the latest investment plan in India comes close on the heels of another project it embarked upon last month in Jaipur to build a township at the cost of $2 billion.
Fishman Holdings' Indian real estate development subsidiary, Mondon Investments Ltd, has signed a Memorandum of Understanding (MoU) to buy a 300 acre plot in Ludhiana for $84 million, the daily said.
Mondon is planning a 2.3 million square metre residential and commercial project on the site, assuming that the entire lot is purchased.
The entire cost, including the land, is estimated to be about $1 billion.
The land was purchased for $280,000 per acre with Mondon reaching an agreement with the seller that if the size of the plot falls below 300 acres, provided that it is no less than 100 acres, the price will be reduced to $238,000 per acre, it added.
The firm is already involved in a number of development projects in India, including residential and commercial projects in New Delhi, Thane, Hyderabad, and another project in Ludhiana.
Tuesday, January 8, 2008
Isreali real estate firm to invest $1 bn in Ludhiana
Centre awaits Goa response on SEZs
The Centre will take a final decision on the three notified special economic zones (SEZs) in Goa only after receiving a formal communication from the state government.
The Goa government had, on December 31, 2007, decided to scrap all SEZs in the state following widespread protests and recommend de-notification of the three notified SEZs.
“We are waiting to hear from the state government. Once we get their letter, we will respond to it and look at it,” Commerce Minister Kamal Nath said on the sidelines of a conference organised by the Confederation of Real Estate Developers’ Association of India (CREDAI) here today. Nath added it was for states to decide if they wanted SEZs or not.
“It is for a state to formulate its own policy. Some states want more, some states want less, some want it differently. The growth process of the state has to be determined by the state itself,” he said.
The three notified zones in Goa are Meditab Specialities, K Raheja Corporation and Peninsula Pharma. Pharma major Cipla has already invested Rs 200 crore in the meditab zone for setting up two units.
After the Goa government’s decision, Commerce Secretary Gopal K Pillai had said there was no provision in the SEZ Act to de-notify a zone. However, Nath later said the de-notification of an SEZ was possible.
When asked about the industry’s demand for lower taxes in the real estate sector to promote low-cost housing, Nath said: “I am in favour of what stimulates demand.”
Speaking at the function, CREDAI Chairman Kumar Gera said taxes constituted 25 per cent of the cost of real estate projects.
“If we take a pan-India average of Rs 2,700 per sq foot, at least Rs 700 goes towards paying taxes,” he said.
REITs may help address hoteliers' fund-shortage woes
The hotel industry has got something to cheer about. The expected introduction of Real Estate Investment Trusts (REITs) by the Securities and Exchange Board of India (SEBI) may now help the industry overcome room shortages.
According to hospitality heads, REITs will not only allow retail investors to participate in the hospitality boom but will also correct the demand-supply mismatch in the hotel sector. In the long run, it will also correct room rates and will have an impact on land prices.
According to hospitality consultancy firm HVS International, with the introduction of REITs, retail investors can participate in the booming hospitality industry registering a 20% YoY growth.
“REITs will provide an alternate source of funding to hotels. Earlier hotels could only look at banks and financial institutions for investments. Then private equity funds came in and now REITs will fund expansion of hotels,” says HVS International associate director Siddharth Thaker.
As per advisory firm Grant Thornton, around $259 million was invested in the hospitality sector in six private equity deals last year. This is 2% of the total PE money invested across various sectors in the country.
REITs would invest directly in real estate projects after raising money through stock markets. “With REITs, liquid funds will be available to fuel hospitality players’ expansion plans. With greater supply of hotel rooms, it will correct average room rates (ARRs) in the long run,” says Sarovar Hotels executive director Ajay Bakaya.
The group is already in discussions with two prospective REIT funds for its expansion. Another fallout that industry analysts foresee is greater financial transparency in the sector. “It will make industry more transparent,” says Mr Thaker.
Choice Hotels India CEO Vilas Pawar says: “It will make relations between operators and owners more professional.” Choice Hotels, a US-based hotel brand, with over 30 properties in India has global exposure to REITs. For instance in Canada, InnVest REIT holds interest in Choice Hotels Canada, a wholly-owned subsidiary of Choice Hotels US.
“In India, we are open to promoters who will have REIT funding,” adds Mr Pawar. Globally, REIT is a popular investment vehicle for hotels. With greater supply coming in, the ARRs may soften, but the already high land prices may witness an upward trend.
“In India, land price is 50% of the total hotel cost whereas in China, it is only 10-15% and in US, it is 20-25%. REITs will increase expansion, pushing the land costs up,” says Lemon Tree Hotels VP-operations Rahul Pandit. For now, the hotel industry is gung-ho about the introduction of REIT and it eagerly awaits SEBI guidelines on the same.
Real estate sector seeks special residential zones
The real estate industry on Monday sought introduction of special residential zones (on the lines of Special Economic Zones), to ensure affordable housing in the country.
“We need SRZs across India with these zones patterned on the lines of SEZ Act entailing similar approvals, the board structure, and monitoring and execution, and also similar concessions in terms of direct, indirect taxes and octroi, amongst others,” Mr Kumar Gera, Chairman of Confederation of Real Estate Developers’ Association of India (CREDAI), said at a conference here.
Mr Gera said that the experience gained from the SEZ Act could be translated to create SRZs, and pointed out that SRZs could ensure affordable housing in India. “To ensure that these SRZs do not become new slums, they need to be supported by proper infrastructure, sustainable development, and a realistic floor space index (FSI),” Mr Gera added.
Goa SEZ issue
Meanwhile, reiterating his earlier stance that SEZ policy could not be “thrust or forced”, the Union Minister of Commerce and Industry, Mr Kamal Nath, on Monday said he is awaiting a written representation from Goa Government, on the SEZ issue.
“We are waiting to hear from them, and once we get letter from the State, we will respond to it. But just now there is no letter,” Mr Nath said on the sidelines of a real estate conference organised by CREDAI here.
Mr Nath had, last week, asked the Goa Chief Minister, Mr Digambar Kamat, to give in writing the reasons for scrapping SEZs in the state.
The Commerce Minister today said that while SEZ policy was not to be thrust or forced on anyone, it was for a State to formulate its own policies.
“Some States want more, some less, some want things differently but the growth process of the State has to be determined by the State itself,” he said.
The Minister also hinted that he favoured moderation in duties and levies to stimulate growth in the real estate sector. “Real estate sector needs stimulation, and the Government has to look at it,” Mr Nath said but did not specify whether his ministry would demand tax concessions for the sector in the upcoming Budget.
Addressing a conference earlier, the Minister said, “We need low-cost houses….Real estate is growing at 13-14 per cent annually, but is still a small portion of the GDP.”
Nath favours duty cuts to aid realty sector
Trade Minister Kamal Nath said on Monday he favoured lowering of duties and levies to help the booming real estate sector sustain high growth.
"I favour what will stimulate demand in the sector. The government has to look at it," Nath said, referring to high duties on building and construction materials.
However, he did not disclose what his ministry would recommend to the finance ministry for the next budget.
Taxes on building materials like cement and steel, stamp duties on purchase of property and other state levies make up almost 25 percent of the total cost of dwelling units.
The Confederation of Real Estate Developers' Associations of India (CREDAI) chairman, Kumar Gera, said the total cost of floor space of an average housing unit was 2,700 rupees per square feet and about 700 rupees comprised taxes and levies.
"These (duties) have to be brought down for housing to be more affordable," Kumar said at a conference on the real estate sector.
Nath said the real estate sector was growing at an annual 13-14 percent and this has attracted foreign investors to the sector.
"With the economy on an upswing, the emphasis and requirement today is on creating international standard infrastructure and housing facility to sustain the growth rate projected in the five year plan," Nath said.
India's real estate sector has pushed up demand and prices of cement, steel and other materials in the last few years, apart from contributing to economic growth.
DEVELOPMENTS IN REAL ESTATE SECTOR, A REFLECTION OF GROWTH IN INDIAN ECONOMY
Shri Kamal Nath, Union Minister of Commerce and Industry, has stated that the developments in the real estate sector symbolize the changing face of India and it is a reflection of the growth in the Indian economy brought about by high rates of GDP and also by India’s integration with the global economy. He was speaking at the “ National Convention ‘NATCON 2008’: Real Estate for All” organised by the Confederation of Real Estate Developer’s Association of India (CREDAI), here today. He also stated that in the recent years, services sector has been the main driving engine of Indian economy’s growth.
“With the economy on an upswing, the emphasis and requirement today is on creating international standard infrastructure and housing facility to sustain the growth rate projected in the 11th Five Year Plan. The Real Estate Development sector has the capacity to pay for itself without straining the limited resources of the State Government”, Shri Kamal Nath said. The Minister further stated that we have already opened construction development sector for FDI and the policy permits wholly owned subsidiary in this sector in India by a foreign company. “Of course, there are conditions regarding minimum area for development and minimum capitalization to be brought in by the foreign investor. A number of global players have entered the Indian market and many more have shown interest. Growth and investment have also created opportunities for investment in real estate sector, he said.
“While the role of the Government is expected to be primarily as a facilitator to the development process, the private sector participation is aimed at bringing technical and managerial expertise in delivering good quality mass housing projects. It is a good sign that many State governments are joining hands with private entrepreneurs in resolving the acute housing problem in urban areas. The private sector and Government has to work in tandem towards a common goal. It is equally important to address the institutional and regulatory aspects as well as strengthen and expand the capacity of financing institutions for further growth of the sector”, Shri Kamal Nath said.
Monday, January 7, 2008
Fire Capital to inject $750 mn in Indian real estate
Private equity firm Fire Capital plans to invest up to Rs 3,000 crore by 2010 to develop over 25 real estate projects across the country.
"By 2010, we expect to invest around 750 million dollars in developing projects in Indian real estate," FireCapital Fund Pvt Ltd CEO Om Chaudhry told PTI.
Of the 750 million dollars earmarked, the firm has already committed the capital of first fund of USD250 million in seven projects - one each in Chennai, Bangalore, Nagpur, Indore, Jaipur, Ahmedabad and Dehradun, he said, adding that the company was now in the process of raising USD500 million.
The company expects the closure of the second fund worth 500 million dollars by February 2008 to start the projects thereafter.
"We will develop about 20 projects utilising the second fund and 250 million dollars are in the pipeline," Chaudhry said, without elaborating on the identified projects.
With the first fund, the Mauritius-based company is developing seven integrated townships in partnership with local developers, which would be completed in 5-6 years, he said, adding "...from these ventures, we expect a realisation of over Rs 16,000 crore."
The seven townships would have 3,400 acres of land area and 75 million sq ft of built-up area. "Besides 30,000 residential units, the complexes would comprise schools, hospitals, hotels and shopping malls," he informed.
The company is developing eight hotels in the townships in various star categories with total capacity of about 2,000 rooms. Jaipur project would have a five-star and a three-star hotel.
Chaudhry said: "Other townships will have three-star hotels comprising 200-250 rooms each."
Asked on tie-ups for managing the hotels, he said that talks were going on and the company preferred local entities instead of "some big brands".
As a part of the each township, Fire Capital would also construct seven hospitals, which would have a combined capacity of 1,500 beds, with those in Jaipur and Bangalore being slightly bigger having about 350 beds each.
"As medical tourism is catching up, we have decided to have bigger hospitals in Bangalore and Jaipur," Chaudhry said.
The CEO of the close-ended fund said that all the hospitals would be multi-speciality ones.
"For running the hospitals, we prefer to tie-up with local partners who will have a feel of the region," he said.
Welcoming the proposal of a real estate regulator for Delhi, he said, "for long-term health and sustainable growth of the industry, this should be implemented strictly."
Sunday, January 6, 2008
Canary Wharf readies war chest for property spree - Times Online
Gibbon believes that investors from the so-called Bric economies � Brazil, Russia, India and China � will emerge as buyers of commercial-property assets. He also predicts that companies from those countries will start to rent space from landlords as they set up satellite offices.Canary Wharf readies war chest for property spree - Times Online
Saturday, January 5, 2008
Friday, January 4, 2008
Residex a benchmark for all stakeholders
You could see it as a Sensex for residential house prices. Residex, India's first housing residential price index compiled by the National Housing Bank (NHB), will give an indicative trend of the prices of properties in different cities and serve as a benchmark for different users. A composite index, it can be used by policy makers, home buyers, brokers, developers, and housing loan companies to take informed decisions on cities or localities.
Being a non-biased reference point to understand the trend in the market, lenders can protect themselves from over-valuing a property and lending greater amounts while buyers can bargain better looking at the index. The index will also give an idea of the parallel economy in real estate transactions and policy makers can use this to reduce stamp duty on transactions to increase compliance, besides other policy interventions. For instance, if the Residex indicates the price at a particular location is Rs 10 lakhs and the stamp duty payable is eight percent i.e. Rs 8,000, a person paying Rs 4,000 would mean the property is being undervalued.
Manoj Vaish, president and CEO, Dun & Bradstreet Information Services India Pvt Ltd, says the index is welcome as there was a big need for authentic information. Reveals R V Verma,executive director,National Housing Bank,it is a granularised model and has a basket of parameters which are factored in and will include the market prices, broker's price, buyer's price, seller's price, ultimately to reflect the trend in prices.
The Sensex tracks India's 30 most valued and transacted companies, while Residex will collect data and track fluctuations in the property market. "This index will remove the opacity in the market and allow for more efficiency in market pricing. It will throw up a uniform kind of approach for determining the prices in different areas and hence allow for a more homogenous property market.The pricing based on demand and supply and other factors will be more efficient and transparent" ,Verma explains.
Right now, the index looks at five cities - Bangalore, Bhopal, Delhi, Kolkata and Mumbai - with two subgroups in Kolkata (Kolkata Municipal Corporation and Kolkata Metropolitan Area) and Mumbai (Greater Mumbai City Corporation and Other Municipalities). NHB proposes to extend the Residex to 63 cities covered under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) scheme and eventually move towards a National Index.
"It is a good way to objectively study the merits and the demerits of this asset class and is also useful in the area of property taxes, which is very litigious" , points out Sanjiv Swarup, president, Synergy Consultants. Elaborating on this he says, currently the government officer assesses the properties at a particular rate and there is an opportunity to make a special case for an individual. With this, there will be less scope for subjective decisions. The whole exercise will be more transparent and sometime in future, we can look forward to property taxes linked to a particular index.
"Ultimately ,the Residex will become an areawise index. Just as initially there was only the BSE-30 index but now you have the IT,Bankex etc for different sector stocks. In property too, you will have an area wise index, to be followed by special sub sets of the index like residential,commercial and retail index.There will also be other competing indices which will appear" , says Akash Deep Jyoti, head, Corporate and Infrastructure Ratings, Crisil.
"The real estate price index in India assumes high importance in view of the contribution of the sector to the national GDP, the large exposure of the banking sector through developer and home loans and the dependence of governments at the Centre (for capital gains), state (for stamp duty) and Urban Local Bodies (for property tax)", he adds. "Most developed countries have similar indices - Singapore (index developed by Urban Redevelopment Authority), USA (index developed by the Office of Federal Housing Enterprise Oversight), Canada (New Housing Price Index) and UK (Halifax index).
"Residex in whatever form is a good beginning and will be helpful for individual or institutional decision makers in evaluating and benchmarking their decisions" , points out Mahesh Gandhi, director advisory, Trikona Capital India, a fund dedicated to investing in real estate in India.
The key difficulties in index development, points out Akash Deep Jyoti, are low accuracy of data due to the sector's heterogenity and illiquidity, high data requirement due to diversity and nonstandardisation of real estate units, and disparate prices for apparently similar properties due to a high degree of volatility. According to Gandhi, "The ultimate usefulness of the index will depend on its accuracy, which will be based on factors including the source of data collection the most accurate source of information would be data collected from the offices of sub-registrar of assurances, where all agreements are registered.
Sampling techniques are very important as are index error tracking and stabilisation, which will take some time" .
The government has to constantly reinforce the need of this benchmark. The whole exercise will start driving the back end of the market,which implies governance of land,registering of land, and mode of registry. As people start relying on this benchmark, the data will become more transparent and sensitive to the market. All this will improve the quality of the benchmark itself.
