Monthly Archives: September 2008

Realtors’ Advance Tax Payment Falls Down

Major real estate players including DLF, Unitech, Parsvnath and Omaxe appear to have taken a sharp hit with the slowdown in the economy as their advance tax payments have fallen sharply. Faced with lower sales and liquidity crunch, DLF hasn’t paid any advance tax in September of this financial year, compared to Rs 37 crore in the year-ago period.

“It’s a general slowdown in the real estate sector which is showing in the advance tax figures,” says Omaxe CMD Rohtas Goel. Omaxe hasn’t paid any tax for September quarter as against Rs 37.5 crore in the year-ago period.

The trouble in the realty sector was evident in the stock market on Monday as the BSE realty index fell 5.26%. DLF scrip touched an all-time intra-day low of 329 despite its previous announcement of share buyback.

Unitech‘s advance tax declined by half to Rs 50 crore, while HDIL has paid nothing as against Rs 30 crore last year. Sobha Developers’ tax payment in September fell 60% to Rs 5 crore from Rs 12.5 crore in September 2007. Ansal Properties &Infrastructure paid half the advance tax at Rs 5 crore compared to the year-ago quarter. Parsvnath paid 20% lower tax at Rs 20 crore.

A senior Unitech executive said realty firms operate through hundreds of subsidiaries and so advance tax figure of the parent company may not reflect the health of the group. However, Karvy Stock Broking vice-president Ambareesh Baliga said: “Given the current market scenario when real estate stocks are getting hammered every day, all listed firms would like to show a better profit in the parent company rather than subsidiary.”

One industry executive blames liquidity crunch as one of the reasons for lower advance tax. “Companies may have better profit but not enough cash to pay tax,” he said. Mr Baliga says companies can’t afford to not pay tax despite showing profits. “At best they can defer booking profit to next quarter if they don’t have enough cash to pay tax.”

Meanwhile, DLF’s buyback announcement doesn’t seem to have helped arrest fall in its share price. A DLF spokesman said, “The impact of buyback announcement was not visible on our share price because we have not started the action yet”.

Buy Flat Get BMW Free

Indian real estate sector is going through a big slump. Not only Indian but real estate sectors around the world are facing slump. Property dealers are registering big losses. Biggest example of loss in real estate sector is DLF Group whose share prices have gone down up to 76% on BSE. Because of slump real estate developers are not getting customers for their properties which they have already developed.

So to lure customers they are using various techniques. To attract customers in real estate sector requires great offers from property dealers. And real estate dealers are giving those offers to buyers. Recent case of great real estate offer is in Noida. In Noida, one real estate group is giving free BMW car to customers who buy its luxurious flats in Greater Noida Golf Course Complex. Not only you will get free BMW, you will also get free membership to Golf course and social club along with 2 free car parkings there.

These luxury flats are specially built flats for Indian riches. Flats have been developed keeping in mind CEOs and MDs of big MNCs . The price for these flats ranges from Rs. 3 crore to Rs. 4.50 crore. But there are few requirements to be completed before you get free BMW when you buy flat in Greater Noida. Customer will be asked to pay 40% of the amount to free BMW offer from Noida’s real estate developer. And only those who apply under this scheme will avail this real estate offer. And if you cancel the flat booking after you get free BMW, price of BMW will be taken from your advanced payment and leftover will be given back to you.

So the thing is sure. This is a mean to attract real estate customers at the time when whole real estate sector around the world is going through a big slump.

Indian Realty Wakes Up To The US Meltdown

The recent financial debacle in the US has sent shock waves across the globe and is also projected to impact the Indian real estate sector directly or indirectly. Adequate and timely funding would be a major concern for developers. Already, there are indications of investors withdrawing their funding. While big players consider this shake-up as a temporary phase, most global property consultants anticipate correction in property prices. Buyers are adopting a ‘wait and watch’ policy and the cascading impact of the US financial tsunami might be felt on real estate too in terms of movement in projects, property prices and stocks of real estate companies. We should examine the mixed views on the collapse of major US financial institutions on the Indian realty.

Corporates Float Money To Attain Assets In Property Market

Expecting huge value erosion in the realty space, corporates have started to float new funds to acquire assets in the domestic property market.
Corporates such as the Aditya Birla group, GMR Infrastructure, Akruti City, Bangalore-based Nitesh group and Saffron Advisors have either floated or are in the process of floating funds with corpus ranging between Rs 500 crore and Rs 1,000 crore.
“As far as Indian realty is concerned, for the right projects, funds are still available,” said Saffron Advisors MD Ajoy Kapoor. “Conservative European investors, after conducting extensive due diligence and research, are more comfortable with investing in Indian real estate provided they are able to align with the right partners,” he added.
Munich-based retail aggregator Deutsche Capital Management AG (DCM) has underwritten $20 million for Saffron India Real Estate Fund I (SIREF I), an India-focused real estate fund floated by Saffron Advisors. DCM is raising a specific fund for investing into Indian real estate through Saffron Advisors.
SIREF I is currently raising funds in the US, the UK, Europe, the Middle East and the Asia Pacific. It is a $350- $400 million real estate fund with a maximum limit of $500 million.
Bangalore’s Nitesh group is in the process of floating a Rs 1,000-crore property fund to invest in the group’s real estate arm Nitesh Estates’ upcoming project and to buy assets. “We have initiated talks with many European institutions and HNIs to invest in the fund. The initial response is very positive,” said Nitesh group chairman Nitesh Shetty.
Mumbai-based developer Akruti City is also planning to float a Rs 400-crore fund to acquire more properties as valuations drop across India. “We have got Sebi approval to float a real estate fund,” said MD Vimal Shah. “We have initiated talks with domestic banks to raise the funds,” he added. In the next six months to one year, the property value would fall further which would open opportunities for acquiring cheaper real estate assets, he added.
Tough lending norms, an unfavourable primary market and the US financial worries have started to limit money flow to the domestic property market. The number of real estate deals has reduced and fancy valuations projected by developers witnessed a deep correction, said industry officials.

The Aditya Birla group recently said that it has plans to float a fund for real estate with the corpus likely to be over Rs 500 crore. Industry sources also said that GMR Infrastructure is also planning to float a $1billion infrastructure and real estate fund and that preliminary talk are on with institutions and banks.

Real Estate Bank India Plans Sixteen Outlets In Orissa

Real Estate Bank India is scheduling to set up three thousand franchisees all over the country with sixteen outlets in Orissa within a year. The first property shop will be opened on September 24 in Bhubaneswar. The other property shops will be located at Rourkela, Cuttack, Jharsuguda, Barbil and Jajpur Road.

This would promote inter and intra state real estate transaction. The company is already experiencing the pleasure of its presence in Karnataka, Kerala, Andhra Pradesh, Pune, West Bengal, Delhi and Tamilnadu. Its main business involves property transactions with a retail format and it is planning to deliver all property transaction related services under single roof. This will be the first property shop in Orissa of its type.

Sarda Group Enters Facility Management

The Rs 2,000-crore Sarda Group has taken over asset and facility management brand Talbot and Company in India at an undisclosed sum foraying into the real estate management segment.

Sarda Group Chairman Ghanshyam Sarda said, “We have acquired Talbot and Company which has roots in UK and this acquisition will help us to get headway in facility management services”.

He said, “We have to streamline Talbot’s services in keeping with current trends of globalization. The solutions we offer shall be tailored to meet specific requirements. Talbot will be providing a complete range of commercial real estate services including leasing, acquisition and facility management”.

At present, Talbot and Co has operates in Kolkata with employing about 50-60 people without any property. The Talbot brand is used in several countries, but managed under separate management.

He said the company would expand manpower to 1,000 and the annual turnover of Rs 300 crore in the next three to four years.

Sarda Group has interests in jute mills, chemical and IT business in USA. The IT company is primarily focused on marine software solutions to major liners.

Vakil Latest To Jump Onto Affordable Housing Bandwagon

City-based Vakil Housing Development Corporation has become the latest entrant into the market to develop affordable homes as the real-estate industry tries to cope with a downtrend in demand.

A senior official of the company said that the move is part of its strategy to increase its residential real estate development footprint across the southern metros. To begin with, it plans to launch two low-cost housing projects on the outskirts of Bangalore – close to the airport in the north and off Hosur Road in the south-where it already has banked land, co-director Mohammad Ali Vakil said.

A prominent layout developer, Mr Vakil has so far developed 8.8 million square feet of land in and around Bangalore. “Having weighed various options, we decided to foray into mass housing projects as the space is quite untapped. Almost every developer has projects in the Rs 40-60 lakh bracket, apart from premium housing, and it therefore doesn’t make sense for us to do the same.

The demand for homes priced below Rs 40 lakh is huge and presents a large opportunity for us,” Mr Vakil said. The housing ministry estimates shortage of homes to go up to 26.53 million by 2012, most of it among economically-weaker sections and low-income groups.

A Residential Project By Sobha Developers

Sobha Developers has launched the ‘Sobha Scarlet’ project in Mysore. The project will be developed in 14.2 acres of land and will have 83 villas. It will also have amenities like club house, spa, tennis court, swimming pool, gym, squash court, multi purpose hall, cards and carom room, library and other modern amenities. The company has declared its plans to raise three hundred fifty crore rupees through a rights issue, which it will use for general corporate purposes, including working capital, acquiring land and other needs.

Realty Outlook Positive In Mid-To-Long Term

Describing the current bearish trend of the real estate sector a ‘transitory slowdown’, consultancy firm Ernst and Young said that the outlook of the sector is still ‘positive’ in the medium-to-long term.

“Ernst and Young believes that the market is witnessing a transitory slowdown. However, considering the opportunities present as well as the strong economic fundamental drivers, the outlook for the mid-to-long term is positive,” it said in a report released at a Ficci-organized summit here.

The momentum of the market in the mid-to-long term would be sustained by the emergence of new markets, innovative products, ongoing corporatisation of the sector, integration with global markets, greater transparency and new funding mechanisms, it said.

The real estate sector is set to grow by 100 times in the next ten years as compared with the past 10 years, though profit margin would be less, said Hiranandani Group of Companies Managing Director Niranjan Hiranandani.

“The age of super-profit is over for the real estate sector and developers will have to remain content with low profit margins. If you do not believe in this and keep on waiting, somebody else will take business away from you,” Hiranandani said.

Affordable Housing Is The New Choice

Between 2003 and 2007, the real estate sector, both commercial and residential segments, had a boom, seeing a runaway rise in price, growth and profits. Realty companies were focusing more and more on luxury apartments. The base sizes of houses became larger. Small house segment was ignored completely. High consumer confidence, low interest rates and a belief that the prices will only one-way, led to this euphoria.
Several construction companies raised large sums of money through IPOs. After the January 2008 crash, the real estate stocks are among the worst affected.
Whereas, the stocks were down, the prices of houses and real estate have not seen any appreciable corrections, although precise information is hard to come by on this sector. Business World reports that in Mumbai recently, Bandra Kurla complex, a piece of commercial estate got only Rs 15,000 per square feet against Rs. 40,000 for a similar property in 2007.
One visible indication of the slowdown in the residential segment is the announcement of affordable housing projects by the big builders, who were hitherto only concentrating on the luxury segments. With rising prices and interest rates, the demand for luxury apartments (Above Rs 50 lakh per apartment) has dramatically come down.

Tishman Speyer Plans To Raise 1 Billion Dollar

Property developer and fund manager Tishman Speyer plans to raise up to one billion dollar in a private fund in 8-10 months for Indian realty projects, the managing director for its India unit said.

“We still have some money left over from a previous one and we are already talking to investors for our next fund, though we haven’t started road shows yet,” Revathy Ashok told reporters on the sidelines of a capital markets conference. Read More »

Chandigarh Attracting Realtors

With the saturation of metros and major tier I cities across the country, the focus has now shifted to tier II cities, which has turned to be fruitful for realtors.
Chandigarh has been overwhelmed by the response it got from the realtors who are keen to start their construction activities.
The three operational malls in Chandigarh include Fun Republic, Uppal’s Centra Mall and DLF City Centre.
Other malls that are likely to be operational within next few years are TDI mall and City Emporio Mall. Also Paras Downtown Square mall-cum-multiplex at Zirakpur is likely to be operational year only.
The success of these malls continues to remain a topic of debate for many however people of the city have welcomed such malls as they offer them variety.
They also help in creating employment opportunities for the locals.
According to local realtors one shopping mall creates job opportunities for around 200 people and with more malls opening in Chandigarh, the employment opportunities for local people could be in thousands.
The analysts from global real estate firm Jones Lang La Salle Meghraj maintain that the shopping malls undoubtedly are generating employment opportunities.

Joseph Cyril Bamford India Sees Revenues Flat

Joseph Cyril Bamford (JCB) India, the country’s leading construction equipment manufacturer, sees flat revenues this calendar year due to a slackening of growth in realty and a spurt in input costs.
Over the last four years, the company’s yearly growth has been at an average of 30%. JCB India’s topline increased from Rs 2,100 crore in 2006 to Rs 3,200 crore the next year.
But the firm doesn’t see its revenue growing this year, said Vipin Sondhi, managing director and chief executive, JCB India. “This is because of a combination of a slowdown in the real estate sector and a rise in costs of oil, steel and even in interest rates,” he added. Sondhi, however, added that despite the hike, steel is cheaper in India when compared with the global market.
“JCB will now source 70% more from India than it did earlier,” he said. One of JCB’s two plants in Pune is involved in manufacturing components, 50% of which is exported to the mother plant in the UK.
Asked when he expects the real estate sector to recover from the slump, Sondhi said that would depend on interest rates, which in turn depend on inflation. “I see a turnaround only in the first quarter of the next year,” he said. Sondhi, however, is bullish on the market here.
India is one of the most important markets for JCB as it contributed 24% to its global revenues in 2007. In addition to exporting components, JCB India exports finished equipment. “Last year, we exported 205 tracked excavators manufactured at our Pune plant to dealers in Southeast Asia,” said Sondhi.
JCB also manufactures, among other things, tractors and diesel engines. In India, the firm currently offers 14 products out of its global portfolio of 220.
JCB wants to develop indigenous products suited to Indian conditions but no concrete plans have been firmed up yet. Sondhi said, “Though the made-in-India brand is not exactly the strongest when it comes to heavy engineering, we hope to change that.”
Last year, JCB India invested Rs 800 crore in manufacturing and currently has three plants, two in Talegaon, Pune and one in Ballabgarh, Haryana.

HDFC Funds Look At Troubled Realty Projects

Chairman Deepak Parekh said that the property funds of Housing Development Finance Corp (HDFC) and its asset management unit have more than $1 billion of available funding and will look to buy distressed real estate projects.

The funds are yet to buy any projects, but he said there could be opportunities within six months if the current downturn in the realty sector continued.

Parekh said, “I would like to see both my funds, the international and the domestic fund, play a much greater role in takeovers and buyouts of real estate projects which are facing difficulty”.

He said that India’s top mortgage lender, in which Citigroup holds a stake of about 12%, has an $800 million property fund that was raised overseas, and only a third of it is committed.

Parekh said that its asset management unit raised almost Rs 4,000 crore ($900 million) under its real estate portfolio management services business last financial year and has invested only Rs 300 crore.

Parekh said, “I expect that some of the developers who have bought land at exorbitant prices will not have the wherewithal to complete the development”. Further he said, “We will function like an asset reconstruction fund”.

After five years of boom, real estate firms are battling tepid sales and a cash crunch, with buyers scared away by rising interest rates and some signs of softening in property prices.

He said that a lot of developers flush with funds from the realty boom picked up land without setting aside enough for building the property, as they tended to fund developments out of customer bookings. But now the cycle had been broken.

Parekh said, “For the last 30 years we have been dealing with these builders in good times as well as bad times. We have had times when interest rates were 18% to 18.5%. We still survived and we still supported developers”.

“It is not the end of the world if prices come down 20% or 25%”.

Land Prices Skyrocket In Howrah, Hooghly

KOLKATA: Land prices have skyrocketed on Kona Expressway and stretches of National Highway-2 and National Highway-6. Call it the Singur ripple effect or impact of other projects like the DLF township project in Dankuni and logistic hub on Kona Expressway, land prices have risen at least six fold in the past four years.

Many brokers had even purchased land in the area hoping for the price to shoot up further. An acre of land which cost Rs 24 lakh even five years ago, fetches around Rs 2 crore today.

Property prices have shot up even further on Kona Expressway that serves as a gateway to Singur from Kolkata. Even in 2001, the price per acre there stood at Rs 12 lakh per acre.

“With projects like the Tata Motors small car plant in Singur, the DLF township in Dankuni, Kolkata West International City and the logistic hub on Kona Expressway coming up, it is obvious that property prices would soar. But the delay in these projects and the Singur stalemate are a matter of concern for many,” said Ram Ratan Chowdhury, managing director of Panchadeep Constructions Ltd (PCL). He has been a pioneer in bringing mega projects to Howrah.

If poor infrastructure and lack of development held back real estate prices on the western front of the Hooghly even a few years ago, the upcoming projects are changing the industrial landscape in the Howrah-Hooghly belt, thus pushing up property prices.

Less commuting time, excellent connectivity and ventures by big houses like the Tatas, DLF and the Salim-Ciputra group have made realtors make a beeline for land in the area. The Singur plant is just around 10 kilometre from the point where the Kona Expressway meets NH-6 and NH-2.

Real estate developers and brokers, who have invested in the stretch, are keeping their fingers crossed. For, they feel that the growth of price in real estate will be at a much slower pace if the Tata project shifts from Singur to an alternative location.

“The price of real estate does not change overnight, though there will be an impact on the price of land in that belt in case the Tatas leave. We hope that the Singur stalemate will be solved in a week or so at the most. If the Tatas stay, the price of land is bound to shoot up. Even if they leave, real estate prices will still go up but at a slower pace and rate,” said real estate developer Sumit Dabriwala, managing director of Riverbank Holdings Private Ltd.

Nirmal Lifestyle Ltd Tied Up With The American Tennis Association

Developer Nirmal Lifestyle Ltd has tied up with the American Tennis Association to use the US Open brand for amenities at its projects in India.
“We are building sports infrastructure as part of our lifestyle city projects and are doing a series of global tie-ups,” Chairman Dharmesh Jain said.
Under the 10-year arrangement, the Mumbai-based Nirmal will launch U.S. Open-branded tennis academy, club-houses, fitness centres and villas at its township projects under development.
Earlier this year, Nirmal had publicizde plans to set up five integrated townships at a cost of five billion dollar. It will set up another fifteen townships in the second phase.
Nirmal is presently developing a three million square feet shopping mall in Mumbai and a 1,080-room hotel project, jointly with France’s Accor.

Singur Will Not Discourage Overseas Investors

NEW DELHI: The suspension of work at the Tata Motors’ Nano plant in Singur was unfortunate, but it would not deter foreign investors to India on a long-term basis, Bajaj Auto chairman Rahul Bajaj said.

“It’s a very unfortunate thing that has happened in Singur, but I don’t think that there will be any long-term effect on India’s position as an investment destination,” Bajaj told reporters here on the sidelines of the annual convention of the Society of Indian Automobile Manufacturers.

“I definitely want Tata Nano to come out from Singur and I hope it will come out in October itself,” he added.

Bajaj said West Bengal chief minister Buddhadeb Bhattacharya had worked “very hard” in the last four years to secure investments in his state, and a Tata pullout could prove to be a setback for West Bengal.

To a question that he had vested interest in the issue as Bajaj Auto had plans to launch a rival small car, Bajaj retorted: “Those who say this have selfish interest or are plain stupid. Those who say this are thieves, interested parties or plain stupid.”
“I have always advocated that nobody’s land should be taken without giving a fair price and against their will. I have been saying this for the last four years to the government,” he said.

“Bajaj Motors itself was set up on acquired land. I am nobody to comment against it, but all I am saying that development has to take place but at the same time, people need food security.”

The government had acquired 997.11 acres of farmland in Singur, about 40 kilometres from Kolkata, and given it to Tata Motors to set up the Nano small car plant.

However, from the very onset, the project has faced resistance from various political parties over the issue of acquisition of the land.

From Aug 24, the state’s principal opposition party Trinamool Congress has laid siege to the area surrounding the factory, demanding the return of 400 acres.

As a result, Tata Motors suspended work at the Nano factory for an indefinite period and signalled its readiness to pull out of the state.

Realty Firms Consider Joint Development For Construction Projects

Real estate firms will enter into joint development for construction projects by selling land parcels to other builders, given the drop in sales of apartments and inflationary trends.

Pankaj Jaju, head-real estate practice, Enam Securities told FE, “Metros and Tier II towns having a huge pipeline of projects have witnessed a 60% drop in sales of apartments in the last six months.” Selling land parcels to other builders for joint development will enable land owners to invest in buying more land bank and increasing the supply of properties, he opined.

Rohit Gera, executive director, Gera Developers aired similar views. “The real estate market in Pune has witnessed a 60% drop in sales. If inflationary trends continue till December 2008, land value will undergo a price correction of about 30% by March – April 2008,” he said.

However, this will not impact consumers as developers will not charge a premium from them. Instead, as Gera revealed, “Large, medium and small developers have already started offering land to us for joint development. We are, in fact, waiting for price discounts at which we can borrow land from them for constructing their projects.”

Industry experts believe that real estate prices in Navi Mumbai and Bandra Kurla Complex (BKC) are expected to shoot up further by about 10-15% within the next six months if developers are not able to complete their projects on time.

The scene is not too different in Bangalore and Chennai, where the real estate market has started witnessing a rise in labour costs, mainly due to a crunch in the availability of labour, sources in Puravankara Projects told.

Raw material input costs for construction constitute 40% of total project cost. Since input costs are expected to rise further, the real estate market will witness a further dip in sales of apartments across the country.

3 Day Property Show At World Gujarati Conference

With Gujarat’s realty market showing signs of a slowdown, the Gujarat Institute of Housing and Estate Developers (GIHED) has its fingers crossed that the just concluded 3-day property show at World Gujarati Conference (WGC) will help keep the market afloat by raking in NRI business of around Rs 1,000 crore by March 2009.
The 50-odd Gujarat-based realtors , who displayed nearly 150 projects , are hoping that after having a peek at properties on offer , NRGs winging their way during winter break will buy into Gujarat realty .
While high-end apartments and bungalows were sought after and realtors claimed to have booked 15-20 units, GIHED vice-president Suresh Patel said the basic objective was not just to sell realty but promote Gujarat an investment destination . “Properties are not bought on impulse. It’s just a way to connect with NRGs , who usually get friends and relatives to check out property before they fly down ,” explained Ahmedabad-based Sangath group ‘s Nephal Shah, who claims to have distributed nearly 5,000 brochures .
Added Ahmedabad-based Parshwanath Realty Pvt Ltd director Rushabh N Patel, “There are many NRGs who haven ‘t been to Gujarat in years and are not aware of the rapid development .”
And despite a huge crash in property prices due to the sub-prime crisis and the fact that visitors found property prices at the show ‘inflated’, many showed keenness in buying property in Gujarat thanks to prospects of higher appreciation.
“I am sure prices are negotiable,” said conference participant Sanat Desai hopefully , even as Princeton (NJ) based architect Ramesh Patel was excited about the ‘phenomenal’ appreciation . “If I buy a house worth $ 1 million here, I will get twice the returns in 10 years, while in Gujarat I can expect it to appreciate 10 times,” he said. “Investment is the basic objective. We have a house here and don’t plan to move to India permanently even later,” said businessman Dhiraj Shah.

DLF Is Increasing Pressure On Government For Dankuni Township Project

Singur may be grabbing headlines, but it isn’t the only project where the West Bengal government has ‘landed’ itself in a mess. Another storm is developing just 20 km away from Singur, where DLF is growing annoyed with its proposed Dankuni township.
The real estate giant has threatened to pull out of the thirty three thousand crore rupees project since no progress has been made in the case for months and the company is yet to get ownership of the land. State urban development minister Asok Bhattacharya confirmed that DLF had increased pressure on the government.
“The project is not making any headway and DLF is telling us that they’ll pull out if the situation continues,” he said, pointing out that with the entire district administration in Hooghly focusing on Singur, hardly any other work is getting done.
“There’s also opposition to the Dankuni project at the local level. It would have generated huge employment in the state. We are still trying to convince DLF,” the minister said. The Dankuni township is one of the biggest real estate projects in the country covering over 4,840 acres to be built through public-private-partnership over ten years. It is also the biggest PPP project in the country.
The company has already paid two hundred seventy crore rupees in advance to the government, which is supposed to hand over the land after procuring it.