Monthly Archives: January 2008

RBI’s judgment has spooked real estate cos

MUMBAI: The Reserve Bank of India’s (RBI) assessment not to slash interest rates has spooked real estate business facing the brunt of a housing business slowdown caused by the high cost of mortgage financing. RBI, on Tuesday, decided to keep interest rates unchanged in its third-quarter monetary policy review. Real estate companies were expecting a cut, especially in the background of slowing home sales in most important cities in the past few months.

”High interest rates are a serious concern as far as property market is concerned. There was some hope that the rates would be lowered today. However, the impact will depend upon the section and the demand-supply scenario there. The effect on Mumbai where the supply is limited will be minor,” Godrej Properties managing director Milind Korde said.

Buyer fighting and a sequence of interest rates hikes previous year put the brakes on home sales last year. Middle-class family put off purchases after considering prices break all records in most important metros. ET’s report, on Tuesday, cited RBI data to illustrate that home loan sales fell 39% in April-November 2007 while loans to developers eased by a fourth to Rs 12,563 cr.

Real estate shares fell after the policy. Lower rates help the real estate industry by spurring consumers into buying houses. Realty stocks like DLF, Puravankara Projects, Indiabulls Real Estate fell slightly at about 1%. The hardest hit were companies such as Unitech, HDIL and Omaxe whose shares fell down 5.59%, 5.47% and 2.12% respectively. Sobha Developers on the other side, closed at Rs 772.75, up 2.02% from the previous close.

“We were expecting at least a 25 basis point rate cut on Tuesday so that the feeling of possible home buyers turn positive, which in turn will help the developers to sell more residential units. The home sales are currently down now, but it doesn’t indicate that the developers will slash the prices,” said Director, Runwal group, Sandeep Runwal.

Jones Lang Lasalle Meghraj, chairman & country head, Anuj Puri said as the rate remain sluggish, high levels in interest rates will carry on and the impact will be felt mostly in the residential sector. This may also compel developers in some regions to sell their products at lower rates.

“Because of the subprime disaster in the US, US Fed (the Federal Open Market Committee) reduced the interest rates by 75 basis points. This naturally has created a wide gap between US and Indian interest rates, leading to arbitrage chances in the economy. US investors not only get the currency approval returns, but also higher interest income,” he said.

He added that if it occurs, there will be considerable addition to liquidity in the Indian economy. This may in turn fuel further currency approval, hurting exports. Thus, this was a strong case in favour of limiting
interest rates.

Uppal Public Offer Rs 3000

Uppal Housing Ltd has planned to raise Rs 3000 crore fund through IPO i.e. Initial Public Offering of shares and pre-initial public offering placement this year for its ongoing projects. This plan will come to reality in second half of this year. Mr. Ajay Mangal, Director, Finance, Uppal Group said, “We are looking to dilute around 15-17% stake. But the dilution will not be more than 20%”.

Read More »

Sobha Developers Plan for Residential Projects

Sobha Developers is coming up with a residential project of 156-unit on the outer ring road Hebbal in north Bangalore. The project coming up on a 4.5 acre patch located behind the BEL corporate office on the outer ring road will attract a market-estimated investment of over Rs 100 crore. Mr. Raghav Menon, vice president (Retail), Sobha Developers (SDL), said “People are willing to pay for luxury. We intend to construct about 4,75,000 sq ft of high-end residential space, with apartment sizes varying between of 2,500 sq ft to 5,000 sq ft. The project will be completed in 30 months”. He did not give details about the estimated investment into this project.

The project, Sobha Petunia, will be of 14 floors. Top two floors will be allocated for penthouses. This project contains the facility to provide piped gas to all houses.Sobha Developers Limited has a land bank in excess of 4,000 acres spread across the country. Sobha has completed 41 residential/commercial in-house projects and 105 contractual projects till September 30, 2007.

Parsvnath Developers Spread Wings

21 January 2008, New Delhi: Parsvnath Developers has announced an investment of Rs 60,000 crore in coming five years in diversified areas such as SEZs, airports, express ways and retails business. Mr. Pradeep Jain, Chairman of Parsvnath Developers said, “We shall be bidding for upcoming airports such as Udaipur, Greater Noida, Maharashtra and other states. Besides, SEZs will be another major investment area in the coming three to five years”. Mr. Jain answered about the source of funding, “Funding for new businesses will not be an issue… We shall leverage our huge large land bank”. Read More »

Street Of Dreams Of Emaar-MFG

19 January 2008. Emaar-MGF today introduced its new concept of style guide. This concept is named as “Street of Dreams”. It offers the buyers a preview of their concept villas, penthouse and apartments. Main aim of street of dreams is to provide different varieties to its customers. For this purpose, it has designed a style guide of international designs made by architects across the world for buyers to choose from. They have planned to do road shows for the marketing of this with their marketing supporter Hamptons.

Spread across 3,000 acres (three sectors), Mohali Hills is the flagship project of the group, being developed as an integrated township housing an international school (tie-up with Singapore-based school Raffles), hospital, multiplex, mall and commercial space besides 13-storey group housing units, plots and villas.

The concept villas, spanning across 300 to 500 square yards, have been designed as Andalusian (southern Spain), Mediterranean and Spanish and priced from Rs 99 lakh onwards. The apartments (cost Rs 47 lakh onwards) and penthouses (cost Rs 90 lakh onwards) have a Middle-East feel. Its villas are fetching a good response with about 50 villas having been sold til now in Sectors 108 and 109.

Emaar-MGF corporate communications head Anupama Chopra said that the company would have followed the same strategy as of “Street of Dreams” for its other large projects. The company currently has two large projects in Gurgaon and Hyderabad and it has plans to disclose its other projects in Ludhiana, Amritsar and Jalandhar in Punjab after its initial public offer for Rs 7,000 crore comes up this quarter.

Reliance IPO Gets A Major Start

Jan 15’ 08, Mumbai. Reliance Power’s mega Initial Public Offering (IPO) worth Rs 11,700 crore was fully subscribed within minutes of the start of book building process. In fact, it was oversubscribed. It has received bids five times more than expectations. According to the market analysers, Reliance IPO will start with a busy period of capital raising. Investors are very much passionate about it. Market’s attitude reflects that they are not much keen on looking at the fundamentals or finer details of the issue. For them the Reliance brand is more than enough to trust their money with. The grey market premium for the IPO is at around Rs 450-500 but if you believe the brokers then the listing price would be nothing short of Rs 950-1,000. Experts say the issue is overpriced, as Reliance Power will start earning latest from December 2009 when its first generation unit, phase I of 600 MW Rosa Power project in Uttar Pradesh, goes into stream. That means, the stock until then will trade at zero earnings no matter at what price it will have an effective price-to-earnings multiple (P/E) of infinity. Retail investors can pay 25 percent of the issue price for 225 shares as part payment under the scheme exclusively meant for the retail customer. It works out to around 25 thousand rupees.Mr. Rajesh Jain, vice president of SMC Global, said “It has created an unprecedented euphoria in the market; the issue would be good option for retail investors who are looking for short term gain.”

Indian IPO volumes reached a record height in 2007 when new listings raised USD 8.3 billion from 91 issues, including real estate firm DLF`s USD 2.3 billion issue, which is so far India`s biggest IPO, according to data from Thomson Financial.

Mr. Nikunj Doshi, Investment Manager at Envision Capital, said, “The IPO is going to be very well received in the market, looking at the group`s aspirations and because investors have faith in their execution capabilities,”.

Indian companies are expected to raise USD 15.8 billion from 35 IPOs issues this year, almost twice as much as the record in 2007, according to Thomson Financial data. The standard index of the Bombay Stock Exchange rose 47.1 percent in 2007, recording its strongest growth in four years. It rose nearly 73 percent in 2003, 13 percent in 2004, 42 percent in 2005 and 46.7 percent in 2006. In comparison, South Korea`s Composite Stock Price Index gained 32 percent, China`s Shanghai Composite Index soared 97 percent and Japan`s Nikkei fell 11 percent in 2007.

Ispat Industry Sells Flats in Mumbai

18 January 2008, New Delhi. Ispat Industries is informally entering in to real estate industry. Ispat industry is known as a major steel producer industry and now they are planning to sell its property at Mumbai’s Peddar Road at a rate of about Rs 50,000 per sq. ft. Mr. Vinod garg, Executive director (marketing), has cleared “It is one of the prime locations in the city and we are expecting valuations of about Rs 50,000 per sq ft”. Further he added, “Our strength is steel and power and we want to be restricted to that”. It has mentioned very clearly that company has no plans of getting into the real estate business at present.

The company is planning to either sell the property as duplex flats of 8000 sq ft in 40 crores or as single flats 4,000 sq ft in 20 crore.

The company is in talks with property consultant Cushman and Wakefield for sale of the 112,000 sq ft residential property it has developed. The going rate in the area is close to Rs 50,000 per sq ft and the company hopes to realize similar rates.

It has signed memorandum of understanding (MoU) with the Chattisgarh government for setting up a thermal power plant with a capacity of 1,200 mw and another with Maharashtra for setting up a 1,000 mw power plant. Construction of a 110 mw captive power plant at Dolvi (Maharashtra) plant is underway.

DLF IKEA Joint Venture

DLF is discussing with Ikea, world’s largest home furnishings retailer, for a bid to bring the Swedish brand into India.  The developer is looking into the prospects of a joint venture with Ikea on a sharing ratio that was yet to be decided by the time this information had been published.  The purpose of this joint venture is to bring in foreign retail brands such as Armani, D&G, Gucci, Salvatore Ferragamo, Versace and so on into IndiaVerifying the development, a DLF official reportedly said that discussions were underway with the home furnishings retailer and a tie-up is expected to be finalized soon. “It will be in the form of a joint venture and not a franchisee model. This means that Ikea stores will be set up in any space across India and not just in the DLF’s malls,” he said.

Once confirmed, Ikea is expected to give tough competition to Hometown, home improvement stores launched by the Future Group last year. UK-based Roseby’s is also planning a foray into India soon. Home furnishings stores in India are typically spread over an area of about 80,000 to 2, 00,000 square feet.  Whereas Ikea, whose stores are normally spread over 3, 00,000 to 5, 00,000 sq/ft. Ikea has more than 235 stores in more than 30 countries across the world. The company clocked in a turnover of Euro 20,685 million in 2007.  Business strategy of Ikea is based on offering a wide range of well designed, functional home furnishing products at prices so low that as many people as possible are able to afford them.  Rather than selling costly home furnishings that only a few can buy, the IKEA Concept makes it possible to provide low-priced products that contribute to helping more people live a better life at home. In fact, the Ikea Concept relies on customers to choose, collect, transport and assemble the products themselves. IKEA gives a slogan “You do your part. We do our part. Together we save money” to its customers.

AV Birla Group Starts Private Equity Business

AV Birla Group is entering private equity business. It is expected that the first investment will be made within a fortnight. It is doubtful if the Mumbai based group, with presence in aluminum, copper, carbon black and financial services, will raise capital from outside for the proposed private equity activities. It seems that the initial contribution may come in from Aditya Birla Nuvo, the holding firm for the group’s financial services business. Aditya Birla Nuvo had raised about $1 billion, which may be reserved for PE. Later on, the firm will raise on-shore as well as offshore funds. Mr. Bharat Banka, president and head of corporate finance of the group, will head the PE business. Mr. Banka joined as the CFO when Mr. Sumant Sinha moved over to the retail business a year ago. For business purpose, recruitment of professionals is going on.

Among all multinational company, Reliance Capital has a successful private equity business and Future Group of Kishore Biyani is also in the list.

Real Estate Growth Results In Growth Of Indian Economy

Union Minister of Commerce and Industry, Mr. Kamal Nath said that rapidly increasing real estate sector signifies the varying face of India, while addressing NATCON (National Convention) 2008. He said that in recent years service sector has directed Indian economy. Considering the recent economy growth, Mr Kamal spoke on the requirement of creating international standard infrastructure and housing facility to carry on 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 stated.

Mr. Kamal Nath further said 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. Further he included that the Government is playing its part as the launch pad to the development process and the private sector participation is required to bring technical and managerial expertise in delivering good quality mass housing projects. The fact that many State governments are joining hands with private entrepreneurs in resolving the acute housing problem in urban areas is a good step in this regard. 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.

Foreign Direct Investment might show sharp growth

Real estate is expecting $400-500 million worth of FDI flow. These expectations are being guided by the going on trends in investment industry. Investors and developers are showing their interests in metros as well as in smaller cities too. Investments are going on in Bangalore, Delhi-NCR, Mumbai and Pune because of the high demands. On the other hands, smaller cities like Indore, Nasik and so on, are emerging as big real estate investment destinations for developers and investors because of low land price.

Read More »

Indian Property Exhibition held in Kuwait

Jan 09, 2008: Indian property is now in demand outside the India too. All India property exhibition will be held at the Kuwait Ramada Hotel on Jan 11 & 12, 2008. Various leading builders and housing finance organizations from India will take part. Large number of residential and commercial properties from all over India will be in showcase. This event is being conducted by Indus Fairs & Events (India) Pvt Ltd in association with Danat Al Sultan Kuwait. The main aim of this exhibition is to provide benefit to the customers so that they get reputed builders, best finance option and property information under one roof. Buyers can get home for themselves with ease.

Read More »