Monthly Archives: December 2008

What makes India a good investment hub?

December 6, 2008 – 1:42 am

India is emerging as a giant in the field of real estate due to its incredible architectural developments and breathtaking designs. India is emerging as the international hotspot for property and the demand for real estate is so intense that property prices have increased considerably over last 3-4 years.
The reason behind this growth is that most of these companies have started running their operations from their offices in India due to less labor cost, this has created a lot of jobs in India, which in turn has increased the population in and around India. This increase in population resulted in an increase in demand for real estate. In addition to this, property and real estate laws in India are very simple and requires minimal paperwork in form of a sales agreement. One more factor favoring real estate investments in India is the less tax.

Taking all the above mentioned factors into consideration, there is no doubt why India has gaining the popularity and become the dream destination for real estate. India is ready to set new heights in real estate.

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Sahara to defy realty slowdown

December 5, 2008 – 6:10 am

Though developers in the realty sector are facing an unprecedented pressure due the global economic slowdown and are being forced to think on the lines of reducing prices of their housing projects, Sahara Real Estate is trying to buck the trend and will instead hike the prices with effect from the next year.

Shedding light on the reason for doing so in an otherwise volatile market scenario, Sunderlal, sales head of Sahara’s Real Estate Business revealed that it was part of the company’s long-term business strategy to increase the prices of its projects with effect from next year.

“While the general situation is alarming and most developers are in a mess, we at Sahara Real Estate are slightly better off as because we do not face many of the problems that are being faced by other big players; such as we do not have to pay off any public funding or PE and FI debt. All our lands are mutated and paid for and construction on all our projects is on in full swing. As a result, people continue to buy our properties.

Had we not been selling, or had we too owed debts, we too would have been under the pressure to cut prices,” he said.

Admitting that most developers were walking the razor’s edge due to their pan-India expansions and land-buying spree during the last one and a half year, Sunderlal said the scene has totally changed today.

“It has become extremely difficult for many companies to survive these choppy times and the scene as we see it, may change for the worse, with many players being forced out of the market in another 2 years’ time.”

Stating that he cannot see any player cutting down on the prices of their running projects, he opined that the move would be suicidal. “Those developers who are in deep financial trouble may be forced to cut prices in order to boost demand for housing projects but cutting down prices will be suicidal. The more we reduce, the more confusion there would be regarding the change in the market scenario. People would hold on to buying and expect prices to go down further, forcing the developers to reduce more. That would be a never-ending cycle. And furthermore, how can we reduce prices when the prices of raw materials have not gone down? We will not be able to survive if we do that,” he added.

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Banks want RBI to ease realty NPA norms

December 4, 2008 – 12:40 am

In a bid to avoid classifying advances to troubled real estate companies as bad loans, banks have urged RBI to put in place a uniform norm for restructuring debt to realty companies.

As of now, the moment a loan extended to real estate, capital market or personal loan segment is restructured; the lender has to classify it as a bad loan. At the same time, however, one-time restructuring of loans to any other sector such as steel, textile or cement would not result in the loans being classified as non-performing assets.

In a recent meeting with RBI governor D Subbarao, CEOs of many large banks urged the regulator to relax these restructuring norms. They pointed out that a number of real estate companies have been complaining about the liquidity crunch and have approached lenders to rollover the loan.

However, there is a resistance among banks to give them an additional line of credit or reschedule their loans on the ground that this will add to their pool of NPAs.

Loan restructuring allows banks not to treat the account as an NPA. Banks often indulge in this exercise whenever they sense that the borrower is in stress and the account may turn into an NPA or bad loan.

It enables them to declare a lower NPA ratio — the percentage of sticky loans to total loans — a dead-weight on their books. Also, once an account is deemed as an NPA, the bank has to make some provisions, which affect its bottom-line.

If a real estate company fails to repay loans on a due date, the bank will either accept it as an NPA and restructure the loan or resort to legal action.

Some banks have already come to terms with this and have begun restructuring their real estate loans while a number of banks are looking at ways to reschedule loans to this sector without showing it as NPAs.

Meanwhile, banks have also urged RBI to relax norms on restructuring of loans to manufacturing companies. As of now, when a performing loan to a manufacturing company is restructured for the first time, it can be treated as a standard asset.

However, if the loan to the same company is restructured again, it has to be treated as sub-standard. Banks have urged RBI that given the global turmoil and the slowdown in the economy, banks should be given a second chance to restructure the loan of manufacturing companies while allowing them to classify the same as standard assets.

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Sobha Developers Offering 8% Discount

December 2, 2008 – 8:30 am

Its raining discount here in Bangalore on residential projects being developed by Sobha Developers. Residential demand in Bangalore is currently sluggish. Although the company plans to launch one new project in Bangalore in Fiscal year 2009, given the slowdown in demand, the company has pushed back time lines of its other planned projects. The company is evaluating plans to offer homes with smaller ticket sizes of about 1,000 square feet at an average price of about Rs. 3,200 per square feet.

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EWDPL plans to acquire malls from cash-strapped builders

December 1, 2008 – 4:45 am

Entertainment World Development (EWDPL), a real estate developer, said it plans to acquire malls from cash-strapped builders who are unlikely to finish their projects and may be scouting for a partner.

EWDPL’s move comes at a time when most of the country’s developers have either deferred or slowed down their projects. DLF and Unitech, two of the country’s largest developers, have recently announced plans to defer or sell some of its projects for want of cash.

As many as 60% of the projects embarked upon by small developers are not likely to be completed as retailers cut back on their expansion plans, stock markets tumble and banks curb lending to real estate projects, experts said.

”This is a time for distress sale of assets by small developers,’’ said Manish Kalani, managing director, EWDPL. ”This provides a great opportunity for us, as our company will be able to raise the funds from private equity.’’

EWDPL recently raised Rs 1,300 crore from a German real estate fund, MPC Synergy, by selling equity in the range of 10% – 49% in 21 projects. In February this year, Phoneix Mills, which is also in the business of retail space development, bought a 42% stake in EWDPL for Rs 1250 crore.

EWDPL plans to open 50 malls by 2012 that will make them the biggest mall developer of the country. By the end of this financial year, the company will open malls in Indore, Nanded, and Raipur.

EWDPL plans to tap the retail potential in the tier-II and tier-III cities as big developers have focused mainly in the metros and other key information technology-linked hubs of the country. The growth in smaller towns was largely untapped.

Talking to Business Standard, Kalani said even at the time of economic downturn the retail sector will grow by 15%, which otherwise would have grown by 20% – 25%.

“We reached small towns even before DLF and Unitech,” added Kalani.

”This downturn will help developers like us who also have expertise in mall management. We were the first ones to introduce the revenue sharing model in the country which has becoming so popular among the retailers today,” said Kalani.

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