Monthly Archives: July 2008

Red Fort Capital Will Invest Rs 40 Billion In India

July 31, 2008 – 11:04 am

Red Fort Capital, a Cayman Islands-based private equity fund focused on real estate development, is in the advanced stages of negotiations with six developers for projects worth Rs 40 billion in the metropolitan areas across India.

The fund will be developing an information technology park in Kolkata with Godrej Properties, with Red Fort holding a 49 % stake. The project, dubbed Godrej Genesis, is expected to generate sales of over Rs 7.50 billion.

“We are in the process of closing a number of transactions in the National Capital Region, Mumbai and Bangalore. We are currently talking to six different developers in these cities,” Red Fort Capital director Kuldip Chawlla said.

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Ishaan Real Estate

July 31, 2008 – 4:44 am

Ian Hendersen, Chairman, Ishaan Real Estate, said, “Investment in the initial portfolio of assets is being completed, largely according to a plan, and the increased net asset value replicates the strong demand for our properties and the huge potential of the Indian property market”. IRE is the holding company of K Raheja Corp floated in order to generate money from overseas markets. IRE leverages the multi-decade experience of the K Raheja Corp. in the Indian real estate sector.
IRE, a real estate fund listed on LSE’s Alternative Investment Market, invested two hundred fifty one million dollars in K Raheja Corp.’s various projects placed in western and southern India. IRE holds forty percent stake in each of Raheja’s eight projects comprising shopping malls, IT parks, and residential projects. The Raheja Group at present has development plans for their residential, IT park projects and SEZs. Apart from that, the company has major expansion plans for Globus stores, one of their retail ventures. They will be spreading to all parts of the country, and have one hundred fifty-two stores by the year 2012, which will need an investment of nearly two hundred million dollars.

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Impact Of Rate Hike On Real Estate

July 30, 2008 – 6:43 am

Real estate companies observes their cost of borrowing rising by 1% age point as the central bank has increased the repo rate by 0.5 % and cash reserve ratio by 0.25 %.
The rate hike will push up the corporate lending rates. This, in turn, is anticipated to further strain the balance sheets of realty companies, already reeling under a fund crisis in the wake of slower property sales, higher lending rates, increase in input costs and the central bank’s measures to check conventional sources of funding.
“The borrowing rates will be 1% higher. The rate hikes will ultimately hurt the balance sheets of real estate companies. The cost of funds for our upcoming power projects will go up drastically,’’ said Ajith Mittal, president, corporate affairs, Indiabulls Group.
Indiabulls’ property arm Indiabulls Real Estate is into residential, commercial and retail realty development. It has ventured into power and is setting up power projects in Jharkhand and Maharashtra.
Hitesh Agrawal, head of research, Angel Broking, said, “We deduce the rate hike impact to be visible not only on the rate sensitive sectors like banking, realty and auto, but also on corporate profitability as a whole as most sectors and companies have embarked on huge capacity growth plans.
Property transactions in the major Indian cities such as Mumbai and Delhi have fallen 10 – 15 % because of higher lending rates in the previous 6 months, limiting the cash flows and execution skills of developers.
“Developers need to think in the hike in lending rates, which will lead to a dip in demand. Nevertheless, a rectification in real estate prices will make up for the dip in demand caused by increase in rates,’’ said Mittal.
The majority of real estate companies have been watchful in buying land and beginning new projects, given the tight monetary picture. Akruti City, another Mumbai-based developer, is concentrating on housing projects.

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Banking And Realty Stocks Likely To Feel The Heat

July 30, 2008 – 6:35 am

RBI decisions to hike two key policy rates are expected to affect stocks of companies from sectors like banking & financial services, and real estate more than any other sector since these sectors are more vulnerable to higher interest rates than others . However, given that most stocks from these sectors are already badly hammered since their January highs, market players do not see much downside from current levels.

Market players said with RBI’s more hawkish view to rein in inflation by tightening the supply of money, interest rates are expected to go up. In a higher interest rate scenario people borrow less from banks and other lenders and these companies face a tough time. In a higher interest rate scenario, banks also have to make higher provisions for their losses in their bonds portfolio which are marked-to market . A note from Religare Securities said that banks like Union Bank of India, Allahabad Bank, Indian Bank would be the most impacted on this account.

Higher interest rates also lead to higher home loan rates that in turn lead to people deferring their home buying and a drop in demand for homes. However, there are silver linings to the auto sector stocks. Market players said when interest rates go up, people initially show some resistance to buying two wheelers and passenger cars, but demand again picks up with a lag of two-to-four months. The scenario for the real estate sector is slightly different since other than rising interest, the slowdown in the sector is also because of over supply. Ambareesh Baliga, VP, Karvy Stockbroking said, “This sector is suffering more because of excesses in the sector, and not much because of rising interest rate”. Baliga added, ” There has also been excessive speculation in the sector during the past few years and now it’s cooling off”.

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Rentals in Pune Up By 300% In Last Three Year

July 29, 2008 – 7:34 am

Pune seems to be gradually losing its cost advantage among software companies. Many think that the rentals in the city are on their way up and could be a big deterrent for further investment.

Sunil Patil, president (Pune region), UBICS, a software company of the UB group, believes that the rentals may spoil the show. “Rentals in Pune for software companies have gone up 300% in three years. We are being offered space at Rs 65 per sq ft, which at $1.50 is the rate in Manhattan,” he said.

He was just echoing the prevailing sentiment among small and medium sized IT product firms that India’s cost competitiveness is slowly getting eroded. The shift in viewpoint clearly underlines the need to graduate to value arbitrage from cost, something many large companies have already achieved.

A CEO of a venture capital-backed software engineering services company tried to put it in perspective: “Outsourcing is a function of costs, in which productivity is a big factor. Overheads in the form of real estate and utilities costs in India are now 25% higher. The economic benefits of working in India are huge, otherwise why would anyone outsource work here? In the past, cost differences used to hover at 40-50%. So, despite the 25% higher overheads, it still made sense to offshore work here.”

Interestingly, he hinted at more of in-sourcing happening, that is work offers being sent back to the US, something which usually surfaces when a major political event in the US is round the corner. But Ganesh Natarajan, chairman, Nasscom, is categorical that India has still not lost her cost advantage. In Tier II cities, it’s all the more visible, he said.

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Delhi Township And Delta Township Real Estate Are New Investments Opportunities

July 28, 2008 – 8:00 am

Delta Township just built a brand new library that recently opened. It has plenty of events being offered this year for all ages. Delta has been a thriving and dynamic community that supports education, planned growth, safety and a positive community.

Delhi Township has mastered the art of balancing development and quality of life. Delta Township describes itself as a superb growing ground for children and teens. Holt School District boasts four Michigan Exemplary Schools, and Holt’s high school was recognized as one of the top 100 schools in the nation.

The housing market has been challenging this year to say the least, however compared to other communities; both Delta and Delhi offer a great selection of homes that will provide a solid long-term investment for the home buyer. They have also held their value better than some areas of the country, considering the numerous media articles that have focused on bank foreclosure filings that make up less than 2 % of the nations homes and 75% of those will never be foreclosed upon due to workouts.

There’s a big difference in buying a home that is for sale and buying a bank foreclosure, which will make another good post at a later date. Right now is a great time to buy a home for long term investment.

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Small Developers Selling Their Land Due To Cash Crunch

July 28, 2008 – 7:59 am

Due to the depressed real estate market, all projects of small developers (grade C & D) are up for sale as no development has started because of severe cash crunch. And the big developers (grade A & B) are said to be scouting for these kinds of projects as they are proving to be more viable for them.
According to sources, this phenomenon is more evident in tier II cities but, slowly moving to metros as well.
Explaining the reasons, the sources said that whatever support was available in terms of short-term financing or private equity is now focused only on large developers with stronger balance sheets because of their ability to hold out longer.
Several smaller developers are so badly hit that they are choosing to sell their land parcels to larger developers. The cities that are witnessing these kind of transactions are Amritsar, Chandigarh, Karnal, NCR, Indore, Mumbai, Pune, Bangalore and Chennai.
In fact, small developers, reeling under the impact of cash crunch, feel that holding onto their projects will bleed them more, and thus they are forced to sell them to larger developers. A number of such damage-control transactions are expected in many smaller cities and metros.“Lack of liquidity is a very serious problem for almost all developers today.
The current environment is like a perfect storm for the developer community, as almost all sources of financing have dried up, at a time when the real estate markets may also be moving southwards. Having said that, it is the smaller developers who are worst affected — so badly hit that they are choosing to sell their land parcels to larger developers,” said Sandeep Singh, director, capital markets group, Cushman & Wakefield India:
A bigger impact of the liquidity crunch is from the bank-debt side. Banks are being very choosy about whom they are lending to and for what kind of project. While large developers are still able to get bank loans, it’s the smaller ones who are having a tough time. Most of the developers expanded so fast in the last three to five years that they do not now have any ability to pump in more of their personal equity in any given project.
Explains Pawan Swamy, MD, Jones Lang Lasalle Meghraj: “In this scenario, the smaller developer has an underperforming project that was not doing well to begin with. Regardless of the state of the market, he would wish to sell it off to a larger developer, since the project is not taking off in the first place. It is a straight forward transaction based on logic rather than the liquidity issue.”

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Ambala Hot Destination For Real Estate

July 28, 2008 – 7:58 am

AMBALA : A historical district of Haryana, may still be longing for true genesis of its nomenclature but the city is slowly opening up to real estate investments that were non-existence till a couple of years ago.

The city, divided between Ambala Cantt and Ambala City, is bringing up a few group housing schemes and commercial projects.The transit city between Chandigarh and Delhi caught the eye of realtors after the six-lane project was initiated.

The city is destined to shorten the travelling distance by around an hour after the road-widening project is completed.

The real estate scene here is expected to heat up further as companies such as Unitech, Reliance Industries and DLF are believed to be acquiring land for their SEZ in Naraingarh.

For the time being, Vatika Group is coming up with its group housing scheme that will be followed by commercial properties. The group has one of the largest land banks of over 170 acres in the city. The group is also into plotting with a rate of Rs 7,500 per square yard.

The plots are available in 240 yards, 300, 500 and 1,000 categories. The Vatika Group is likely to open its group housing project for booking by next month. The residential project, coming up on 10 acres, consists of around 500-700 apartments of three and two bedrooms. As much as 45% of land is to be kept as green space. The group is also planning to set up a multiplex.

A few other realtors are also mulling to set up malls. Colonies are also being developed in areas bordering Dera Bassi of Punjab, which have an approach road towards Ambala district, to cater to the residents in Haryana.

Projects such as Dreamland Colony, Defence City and Omaxe Greens have come up in Punjab even though they are practically an extension of Ambala and accessible from both Ambala Cantt and Ambala City. The new projects have proper wide roads, sewerage, water and street light facilities.

The Centre recently released over 11,00 acres of land falling in the Ambala cantonment to the Haryana government. Over the decades, a major part of the Cantt area remained out of bounds for not just realty players but also for residents who could not undertake new construction as the building structures belonged to residents whereas land was possessed by the Centre.

Haryana Urban Development Authority’s sectors 9, 10, 11 in Ambala city are fetching a price of Rs 8,000 to Rs 11,000 per square yard. The houses are six marla, 10 marlas and one kanal. In Ambala Cantt, private colonies such as Agrasen Nagar, Ekta Vihar and Rani Vihar are being sold at Rs 12,000 per yard. The plots ranges from four marlas (100 square yards) to one kanal (600 square yard).

Between the Cantt and City, HUDA has set up three new sectors — 32, 33 and 34. HUDA has plans to add 30 more sectors as part of its expansion. The going rates of government plot ranges from Rs 8,000 to Rs 10,000 per square yard.

Commercial activities such as shopping malls, arcades, entertainment and fun zones, food courts and restaurants, that have already started cropping up in the city, are likely mushroom in times to come.

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Uppal Group Tied With JW Marriott

July 28, 2008 – 7:55 am

Real estate developer Uppal Group has tied up with hospitality major JW Marriott for developing and managing two five star hotels at an investment of Rs 500 crore.

“We will be investing about Rs 500 crore for developing both properties which will be managed by international chain JW Marriott Hotel,” Uppal Group CEO (SEZ and Hotels) Gian Bansal said.

One of the hotels would come up in Gurgaon comprising 210 rooms, while other hotel in Chandigarh would have 175 rooms. This would be a revenue-cum-profit sharing agreement with the international hotel chain, Bansal said. Both properties would be operational by 2009.

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Suncity Projects To Invest Rs 2000 Crore

July 26, 2008 – 3:54 am

Realty player Suncity Projects today announced its plans to develop four retail cities in the country with an investment of around Rs 2,000 crore by 2011.The retail cities, under the brand name ‘Jewel of India’ would come up at Greater Noida, Indore, Jaipur and Mohali.

The first of these cities would become operational in Jaipur by 2011 and would be spread over an area of 40 lakh square feet. It would house premium retail brands like Lifestyle, Shoppers’ Stop, Pantaloon and Westside among many others.

Beside retail area, these cities would also house hotels, office places and entertainment zones.

Suncity Projects VP (Retail) Vijay Arora told, “This is one of the most ambitious projects in the retail space. ‘Jewel of India’ will house some of the most prominent brands of the country along with local handicraft of the region and will redefine the entertainment criteria for the customer”.

Further he added, The Jaipur retail city would house Johari Bazaar showcasing traditional Rajasthani jewellery, a five star hotel, business suites, food courts, six-screen multiplexes, besides other entertainment segments.

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Stagnation In Chadigarh Real Estate

July 25, 2008 – 5:08 am

Chandigarh real estate is witnessing testing times. On one hand, there are more investments pouring in the segment and on the other side property buyers and sellers are not very enthusiastic about property transactions. Read More »

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Profit Zoom Of Sobha

July 25, 2008 – 5:07 am

The Board of directors of Sobha Developers Limited approved the unaudited financial results of the company for the quarter-ended June, this year.

Sobha Developers recorded a 24% growth in net profit during the first quarter of the 2008-09 financial year. Its net profit for the quarter stood at Rs 50.5 crores, up from Rs 40.8 crores in the same period last year. Its turnover also marked a 30% increase to Rs 348.8 crores from Rs 269.3 crores in the corresponding quarter of the previous fiscal. The operating margins for this quarter were at 29.7% as against 25.5% for the corresponding quarter of last year.

Sobha Developers Ltd Managing Director, Mr JC Sharma said, “The new financial year has started on a good note with Sobha receiving ten million dollars of foreign investment for one of our residential project in Bangalore. In the current financial year we propose to launch projects in Mysore, Chennai and NCR“.

He further added, “Recent developments on the Indian economic outlook have witnessed a tightening of interest rates. Facilitating credit for growth on one hand and containing liquidity to tame inflation on the other is what Sobha is gearing up to face. Identifying customer trends in requirements, adapting to meet them and scalability in project execution results in qualitative and timely delivery at competitive costs. Inflation is translating into high commodity prices that have an impact on the real estate market. But at Sobha we tread the path of cautious optimism for the future as we can promise international quality at competitive prices even in a difficult market scenario”.

To expand the long term resources of the company, the Board unanimously decided to issue shares to existing shareholders of upto thirty-five hundred million rupees on right basis in accordance with the present provisions of Law, Rules & Regulations. The Terms of the above issue of Rights will be considered & decided upon at the ensuing Board meeting of the Company.

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Yatra Capital Invests $7 Million In Kolkata

July 24, 2008 – 5:43 am

Yatra Capital Ltd, the Euronext listed real estate company, has invested $7 million for a 40% stake in Jalan Intercontinental Hotels Pvt Ltd, a company that is building a two hundred room business hotel in Kolkata. The hotel will be supervised by Indian Hotel Ltd under the Taj Gateway brand.
The hotel will be built on a 1.9 acre plot situated at the junction of Rashbehari Connector and EM Bypass in Kolkata. EM Bypass is the main arterial road between old and new Kolkata, connecting Kolkata Airport and eastern parts of the city. The hotel will primarily cater to the requirements of IT/ITES companies located in and around the IT parks and SEZs coming up in the area.
Presently there are close to one thousand five hundred rooms in the premium category in Kolkata.
Occupancy levels have increased at an average rate of 15-18 % over the preceding few years with average annual occupancy levels hovering around 80 %, which is estimated to remain at the same level in the medium term. Almost 60-70 % of guests in the premium category hotels are business travelers.
This will be Yatra Capital’s 14th investment in the country, which includes two other investments in the hospitality sector. Yatra had invested Rs 63.44 crore for a 30 % stake in another firm Platinum Hospitality Services which will develop a hotel in Bangalore at an estimated cost of Rs 402.62 crore. Yatra Capital had also acquired one of the first India-focused property fund Eredene Capital Mauritius for Rs 99.39 crore in 2007.
Ajoy Veer Kapoor, Managing Director, Saffron Asset Advisors Private Ltd, said: “This is Yatra’s third hospitality project and is in line with our commitment to building a strong, diversified portfolio of quality assets. Our investments for Yatra have the potential to deliver across a variety of sectors and locations and we will continue to seek opportunities that will maximize shareholder returns.”

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Developers Rooting For NRIs Seeking To Come Back Home

July 24, 2008 – 5:41 am

Higher rate of returns in real estate investments in India, projects that comply with international standards, greater affordability, apart from emotional reasons like ‘owning a piece of homeland’ were driving the NRI segment growth in the real estate sector in the India.

“Ma, is Chennai like New Jersey”, asks a little toddler in a catchy overseas promotional advertisement campaign launched by a leading real estate brand in India.

The campaign reflects the current market trend among developers to come up with special overseas promotional campaign aimed at targeting the NRI segment that were keen in ensuring that they invested in homes, that were close in design and amenities to those that they lived abroad.

Today with more and more Indians looking at returning home and relocating themselves given better employment opportunities in India, NRIs are now looking at investing in the real estate in the country with a view to make India their future homes.

Those who were making the transition from overseas to India, want to ensure that the transition is smooth, especially for their children, many of whom India would be a new living experience.

A lifestyle match is what these people are looking for when investing in property here.

While some preferred contemporary designs, others were searching for homes that were nostalgic and brought back memories of childhood or times spent in courtyard of a village, where just-rolled out papads lay toasting in the sun, or those ethnic porches where the family sat together enjoying the little ones tumble and roll at play.

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Slowdown In International Real Estate Transactions

July 23, 2008 – 7:10 am

Credit crunch and economic uncertainty have taken their toll on the global property market, with transaction volumes falling by 46% in the first quarter, according to a property report.

Investment throughout Asia and other emerging markets continued to grow, as sales of major commercial properties globally totaled $154 billion (Dh565bn) in first quarter against $283bn of property that changed hands in first quarter of 2007, New York-based Real Capital Analytics said in its latest report.

Property sales figures for April and preliminary results for May show sales in Asia have started to weaken and drop in sales in the United States and Europe have become more severe.

The United Kingdom has led price declines with the United States following behind. Since September, the initial yield on acquisitions of commercial property has increased by more than 25 basis points in the Americas and by almost 40 basis points in Europe.

Cap rates in Asia have continued to fall, reflecting both the growing wave of capital and expected upside for its emerging markets.

Acquisition of land and development rights in Asia has totaled almost $29bn so far this year, making it the most popular target for investors.

Office properties in Europe are a distant second with just under $20bn of transactions, followed by offices in the Americas and Asia with each recording between $15bn and $16bn of transactions through April.

Developable land in Asia posted not only the greatest growth in transaction activity but also the largest gains in pricing in the first quarter. However, all other property types in Asia except apartments recorded gains in both volume and prices. Prices fell lower for all property types in Europe, but several did manage gains in volume. Conversely, no property types posted higher sales volume in the Americas although average prices in the industrial, retail and hotel sectors did increase modestly. Sellers in the United States in particular are opting not to sell at discounted prices, causing volume to plunge while prices for the few transactions that are successfully completed appear rather resilient. However, land prices in the US are falling quickly and have experienced the greatest decline in value so far this year.

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Alpha One Mega Project In Amritsar

July 23, 2008 – 7:08 am

Delhi-based real estate developer and asset management company, Alpha G:Corp, key coalition associate in the pan-India conglomerate. G:Corp, has signed up a joint venture with property-owner in Punjab to conceptualize, design and develop the impressive Alpha One mega project in Amritsar. It will be spread over twenty five acres on G.T. Road. Alpha G:Corp was allotted the mega project status since it submitted the most superior development plan. The initial investment will be two hundred seventy crores rupees in the Ist phase and this is going to be a destination centre encompassing retail, entertainment, luxury hotel and stand-alone boutiques on a total space of 2 million sq. ft. The features in Phase 1 also include a two hundred room luxury boutique hotel under the brand name Ishta from the Ananda group of hotels, which alone will entail an investment of over one hundred crores rupees.

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Pune Real Estate Witnesses Investment Explosion

July 23, 2008 – 7:08 am

Pune property market is one of the most active segments in Western India. Private property developers along with local property builders and civic authorities are pouring in more investments in the city.
Recently, Milestone Capital Advisors announced an investment of Rs300 crore for commercial real estate development in Pune. Milestone is a fund house and focuses on Tier I and II cities. Milestone chose to invest in Pune owing to its sporadic IT sector.
Market reports suggest that commercial property in Pune fetches about 20-25% returns on investment. This makes Pune a favorite destination of investors.
The residential property segment also does well there. These days, Pune builders are focusing on affordable houses. Prominent real estate builders like Kolte-Patil, Gera Properties have announced affordable housing project in the city. The plan is to build one-room set and two-room set accommodation that costs between Rs 10-15 lakh. These builders have outlined that the quality of construction will not be compromised, however these flats/apartments would not have elaborate lifestyle features.

Most real estate builders are now focusing on the bordering areas of Pune. The city centre commands very premium capital and rental values. Hence, most of the users look for affordable accommodation in suburban and bordering areas. And, property builders are trying to cash in on this sentiment on the property seekers. Property in localities like Kothrud, Vanwadi, Oundh are much in demand. These areas were once the extension of villages but are now the hub of property development.

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Real Estate Beauty Festival

July 22, 2008 – 4:28 am

Summer is over but the temperature is still rising, particularly at the Philippine Real Estate Festival as it presents 24 gorgeous young women vying for the title of Miss Real Estate Philippines on July 25 at the SMX Mall of Asia.

The second annual beauty pageant intensely screened over 200 young women before coming up with the list of official candidates who will represent the country’s top real estate builders and developers.

In the process, these young women will immerse in all areas of the real estate industry. They have been busy with a crash course on the state of real estate, and with seminar-workshops that educate them on why real estate industry is a vital in Philippine economy.

During the press presentation of these real estate beauties at the Lancaster Suites in Mandaluyong City, the media had a closer look at each of the candidates as they strutted their stuff and flaunted their curves in skimpy yellow bikinis.

“Believe me, Miss Real Estate Philippines is more than just a beauty pageant. It’s beauty pageant for a cause. The winner will be the ambassadress of real estate industry in the Philippines. She will help and spearhead the outreach projects that will provide homes to the most disadvantage social sector,” PREF chairman Rosemarie Basa said.
Filipino-Australian Rose Cel Aguilar, last year’s winner, will relinquish her crown to the winner who will receive valuable prizes that include cash and a house and lot. She will also represent the country in the first-ever Miss Real Estate Asia pageant that will be held in November.

Miss Real Estate Philippines is just one of the components that anchors the 2008 Philippine Real Estate Festival. The rest of the activities will officially open on July 26.

This three-day spectacular event will commence with an exhibit that will bring together 150 of the country’s biggest and most trusted real estate development companies and projects, finance institutions, suppliers, contractors, and professionals.
Fiesta Pinoy, which serves as the official closing of the festival, will combine indoor games, contest, raffles, disco dancing, mini-parade, and a musical concert for the amusement and entertainment of exhibitors, patrons, and guests.

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REMFs Having Problem Due To Unclear Tax Rule

July 21, 2008 – 4:54 am

At a time when the real estate sector is hard-pressed for funds, the real estate mutual funds (REMFs) are yet to take off, in spite of being granted permission 3 months ago. This is due to unclear rules about their tax treatment.
REMFs, which were touted as key instrument enabling retail investors to take part in the booming realty sector, have been delayed partly because the Securities & Exchange Board of India (Sebi) and the finance ministry are still trying to sort out the tax ability of such scheme.
The Central Board of Direct Taxes (CBDT) has decided to provide it the same tax status as the equity oriented mutual funds, as was requested by the Sebi. This means that the REMFs will be freed from dividend distribution tax and investors spared from paying long-term capital gains while selling their shares.
Yet, as said by the Income Tax Act 1961, equity oriented mutual funds are those which have at least sixty five percent direct investment in securities of the listed companies.
Interestingly, in Sebi’s rules, REMFs must invest a at least of thirty five percent of their funds straight into real estate assets and the rest into mortgage-backed securities, debt and equity instruments floated by the realty companies, thereby making it hard for them to be eligible as equity oriented mutual funds.
“As per the REMF structure laid out by Sebi, these funds would more often than not be akin to debt funds,” an expert said. Unlike equity-linked funds, debt-funds magnetize both capital gains tax and dividend distribution tax. This creates problems as investors are indirectly being denied the tax incentives given to equity oriented funds, the officials said.
“For a clearer understanding and in order to take in REMFs, the finance ministry will have to change the description of equity oriented mutual funds in the IT Act,” A. Krishnan tax partner (real estate), Ernst & Young said.

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Builders Offer Personal Touch To Encourage Buyers

July 21, 2008 – 4:52 am

Faced with a slowdown and increased competition, real estate players are trying to re-invent themselves by focusing on ‘personalized selling’.
Refusing to be lost in the clutter of ‘look-alike offerings’ in the real-estate market, a section of leading developers engaged in constructing properties in Bangalore, Mumbai, Hyderabad, Goa and Chennai is trying to carve out a niche by personally attending to the needs of each and every customer who strolls in to inquire about their projects.
Bangalore-based TSI Ventures director (sales and marketing) Jackbastian K Nazareth said, “The euphoria of inquiries witnessed since the past couple of years has now died down. But there are still quite a few genuine buyers. Now, in order to counter the strong competition and to stand apart from a string of look-alike offerings in the real-estate market one needs to make necessary marketing innovations and concentrate on personalized selling”.
While launching its much-talked about ‘Wave Rock’ project in Hyderabad, TSI has rolled out special cookies imported from New York and had distributed it among those who stepped-in for inquiries. Mr Nazareth said, “In India, buying a home is an emotional process and such personal treatment of probable customers helps in creating a lasting impression in their minds”. Further he added, “We will be launching similar schemes when we launch new township projects in Hyderabad and Chennai in the near future”.
Priti Chand, director (PR & Communications) of the group, which is building 200 villas at Madgaon and high-end apartments about 12 kms from Panjim, said, “Though we know that all inquiries will not materialize, we still design the product as per the requirements and choices so that we get tailor-made villas. We are marketing these projects as second-homes and we are therefore trying to get the homes tailor-made”. Further she added, “We live in a busy world and the time-starved customers expect personalized services such as carpeting, furniture and similar home decor jobs from us”. The Group, while recently launching its hotel projects in Goa, had organized fireworks display, fashion shows and had gifted wine bottles to visitors who graced the occasion. Ms Chand remarked, “We will be organizing similar displays when we launch our properties in Goa”.
Similarly, the Lodha Group which is currently in the process of selling a high-end villa project (each unit costing between Rs 3-3.5 crore) at Lonavala has also taken the ‘personalized’ route.
Lodha Group senior vice-president (marketing) R Karthik said, “We are providing first-hand experience of the villas to our guests. The customer while visiting our project gets an actual feel of the villa he or she is planning to buy”.
Further he said, “The company picks the guests willing to visit project site along with their family in a luxury vehicle. Right from being ushered in; the guest gets treated to the five-star experience which he/she will receive once the final product is ready. For instance, there are maids and butlers on call”. Further he added that the company has incorporated a ‘personal flavour’ while marketing and selling their products.

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Amarapali Group Foraying Into SEZs

July 19, 2008 – 7:07 am

Arrival of boom in real estate has seen mergence of many realtors and builders. Among the front runners, one is Amarapali group. Over a span of 12 years, the group has build scores of residential building, commercial complexes and corporate houses. It is now foraying encouragingly into the extremely challenging space of SEZs. This remarkable success of Amarapali group owes to number of factors namely man, machine and mantra.
Amarapali group is head by its chairman MD Mr. Anil Kr. Sharma, who is great visionary in his own right. After creating a vast repertoire of top class residential projects, malls, SEZs and IT parks, the group the set to take a giant leap by foraying into the high growth hospitality business in the country. In the first phase, the group is going to launch its international class 4-5 Stars hospitality projects in the cities of Virindavan, Bareilly, Jaipur, Udaipur, Indore and Greater NOIDA.

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Investors Are Not Showing Interest Toward Commercial Properties

July 19, 2008 – 7:06 am

India’s emergence as a leading IT and ITES destination has witnessed a huge demand for high quality office space. Again, the dependence on one sector could also have a serious impact. Knight Frank’s Vakil said that there is already a slowdown as far as commercial property is concerned.

The scenario presents a few interesting constituents. Vakil said, “There is no demand for an outright purchase and a lot of people are going for the lease option. In a falling market, that is a more practical solution”. IT and ITES, according to him, account for 80 % of all commercial space in India. Further he added, “Besides, 70% of that industry is dollar denominated”. That’s exactly what is affecting Bangalore, India’s IT capital and to an extent Hyderabad as well.

Retailers themselves are going easy and a lot of large players have been pretty vocal about it. With higher rentals, the pressure on margins is far greater. Retailers form a significant part of the overall commercial scene and that proportion is merely getting larger. Kishore Biyani, managing director, Future Group said, “Ultimately, it is a question of affordability in retail”.

There are not too many ways to get past the zooming commercial rates. Biyani, when questioned about this, points out that his group signed up for properties much before the boom. He added, “To that extent, we were protected. Actually, we have been quite docile over the last six months”.

A significant development was actually when five plots were offered for sale in Bandra Kurla Complex (BKC), Western Mumbai’s business district. That was in March this year. Out of the five plots, two each were for residential and commercial while one was reserved for a clubhouse. One of the commercial plots was picked up by Jet Airways at Rs 3.44 lakh per square meter against a reserve price of Rs 3 lakh. Strangely enough, there was no other bidder in the fray.

Both the residential plots were won by Star Light, a joint venture between the Ajay Piramal Group and Suntech Realty. Here, the price paid was in excess of three times the reserve bid price. The story did not quite end there. The worrying part was that one commercial plot and one for the clubhouse remained unsold. These two plots together had an area of a little over 12,500 square metres with a reserve price of Rs 3 lakh per square meter.

A report put out by Enam Securities after the bidding process was completed makes a clear mention of what could possibly have gone wrong. “The lack of interest among developers for commercial space in BKC, while disheartening, is primarily attributable to the high reserve price.

Indiabulls was another player in the news when a significant amount of mill land in central Mumbai was put on the block. That was in 2005 when the company acquired an impressive 22 acres of land for what was then a massive Rs 720 crore.

Today, with so much of talk on a slowdown in real estate — in more pessimistic quarters, the whispers of a crash as well — it will be interesting to see how the company has viewed that investment. Mr. Gagan Banga, CEO, Indiabulls Financial Services, declared, “We have had an encouraging response. We are getting rental offers at around Rs 300 per square feet which is in line with what we had set out for ourselves”.

He added, “Suburban Bangalore is witnessing a slowdown. Here, there has been a 5-10% drop in rentals”. In the overall scenario, there could be some serious challenges.

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Sahara India Group To Explore Business Prospects In UAE

July 19, 2008 – 7:05 am

Indian company Sahara India Group said it will explore business prospects in the UAE. Subrata Roy chairman of Sahara will be in the UAE to look for prospective projects in different sectors.

Sahara India Group, which puts the market value of its property at more than fifty billion dollar, has diversified business interests in areas like finance, real estate, media and entertainment, tourism, and services.
Roy will meet well-known business people and industrialists of the region and look at a variety of large-scale ongoing projects in the UAE. The focus of his visit will be on discovering business and investment opportunities in UAE as well as in India, company spokesman Abhijet Sarckar said in a statement.

Sahara is a well-known player in the real estate industry of India and owns a huge land bank. It is developing two hundred seventeen townships across India ranging from 100 acres to 300 acres each.
Sahara owns three entertainment television channels, one national news channel, 36 regional news channels and publishes various newspapers and magazines in Hindi, English and Urdu.

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Real Estate PE Deals Higher Than Previous Year

July 18, 2008 – 7:50 am

Real estate and infrastructure management sector saw Private Equity (PE) deals worth $2.32 billion in the first half of 2008, nearly 3% higher than the same period of previous year, even as the average deal size fell over 9% reflecting the sluggishness in the market.

According to Grant Thornton, 33 deals were inked in the first six months of the 2008 compared to 29 deals in the same period of 2007.

PE deals, during the month of June, stood at about $247.5 million, almost half the level seen in May 2008 when about $ 478 million of PE money was infused into different projects.

“The valuations are definitely down as the market is in the midst of a slowdown”.
“With access to capital market out of question and bank debt getting tighter, we see more and more developers tapping PE sources to bridge the fund gap for projects”.

“Although in the short-term PE players may take a careful stance, over a one year horizon, the number of PE deals is likely to go up,” says Mr Subhash Bedi, Director and Partner, Red Fort Capital

Red Fort Capital has concluded seven transactions in the first half of 2008 compared to six deals during entire 2007.

Earlier in June, Lehman Brothers Real Estate Partners had pronounced an investment of seven hundred forty crore rupees ($185 million) for 50 % stake in the initial phase of a Unitech project, located on the Western Expressway of Mumbai.

During the same month, Axis Bank too invested two hundred fifty crore rupees in Lavasa Corporation, a subsidiary of Hindustan Construction Company, in the form of convertible preference shares and convertible debentures.

An industry official pointed out that while investors were still interested in the real estate market, they had adopted a careful approach towards projects.

“With more projects on the negation table now, and given the current market sentiments, PE players will pick and choose. Only those projects which have the required approvals in place would hold their interest,” the officials said.

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First IT/ITES SEZ Of Maytas Properties

July 18, 2008 – 7:49 am

Maytas Hill County SEZ, the first IT/ITES SEZ of Maytas properties, a property development company headquartered in Hyderabad, has been launched.

The company is planning to build two more IT and ITES SEZs, each at Gopannapally and Gundlapochampalli. Coming up in a 74-acre plot at Bachupalli with an investment of Rs 2,500 crore, the Hill County SEZ will have a total built-up area of about 8 million square foot.

The first phase of the project bringing in 1.3 million square feet of built-up area will be ready for occupation by Oct-Dec next year and the company had already signed its first client, Wells Fargo & Co, US, in its incubation center, the first building coming up in the SEZ.

The total incubation space will be 60,000 square feet out of which the first client will have one-fourth area. The entire project to be taken up five phases will take 8-10 years to complete.

Maytas Properties CEO K Thiagarajan said that all the SEZs of the company would have adjoining integrated townships and promote walk-to-work, walk-to-shop and walk-to-restaurant concepts to avoid long commutes to work places and provide more time to spend with family.

Further he said that the Maytas Hill County township, of which the SEZ is a part, offering apartments, villas, retail spaces and entertainment infrastructure, educational spaces, hospitality and medical facilities is fast coming up. Some of the dwelling units are ready for occupation.

On the affordability of living spaces in the township to lower-rung IT staff, the CEO said that the township would have various types of accommodation, including service apartments and rooms.

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