Category: Property Investment

Vishal Retail to enter Real Estate

Vishal Retail is planning to enter real estate sector. Confirming this development Manmohan Aggarwal, CEO, Corporate Affairs, Vishal Retail told Business Standard that the new venture would be launched either in the second half of the current year or early next year.
He revealed that company is also planning to acquire 1 crore sq ft area in next three years which would partly be used for expanding the retail businesses and rest for real estate purposes.
The project is in formulation stage and would take time before it is launched. Meanwhile, Vishal Retail today also announced opening of its 92nd retail store at Pinjore today.
The company aims to open 100 stores in the FY07-08 with new stores in Chandigarh, Mohali and Manimajra.
Having achieved a growth of 100 per cent in the current financial year, Bajaj said that Vishal Retail was looking forward to acquire 25 lakh sq ft area by December 2008 to expand its retail chains. The Vishal Retail at present has 20 lakh sq ft areas in which it operates its different retail operations. The retail operations are spread in 62 cities across India. At present it has 90 hypermarkets and 3 Fashion Marts.

Asipac to launch real estate fund

BANGALORE: Realty marketing and consultancy firm Asipac Projects is close to putting together a real estate fund, in association with a few institutional investors. The move by the company , aimed at widening the scope of the company’s services is part of a series of initiatives that will roll out in the coming months.

According to Bangalore-based Company, the first fund will have an initial amount of Rs 50 crore and will invest in real estate SPVs across the country. “The first fund should be in place in six months. We intend to invest small amounts into SPVs, picking up a 2-3% stake in specific projects,” said Asipac Project’s chairman Amit Bagaria.

Year 2008 will see the company launch two new strategic business units (SBUs) — an investment advisory services group and a construction management consultancy division. “The idea is to be an end-to-end consultancy services company, helping clients (realty firms) raise funds for as well as help reduce material procurement costs,” said Mr Bagaria.

As on date, Asipac Projects represents about 18 real estate firms. The company is also seeming to expand its services to Indian business houses that are in the process of unlocking value from their land holdings.

The Paul Hotels and Resorts to develop South Indian hotel

The Paul Hotels and Resorts plans to develop a five star hotel chain in South India. As part of the first stage, the group will develop business class hotels or resorts across Karnataka, in locations such as Bengaluru, Mysore, Hampi and Coorg.

According to Shelly Thayil, Director – Operations, The Paul Hotels and Resorts, the group wants to tap the state’s immense tourism potential. In addition to this, the Karnataka Government is keen on providing the investors with incentives.

The group has acquired five acres of land for a 180 room hotel in Mysore. It will be developed with an investment of Rs 150 crore. The group is in the process of sourcing 30 acres of land for its 75 suite heritage property in Hampi. It will be developed near the Tungabhadra river at a cost of Rs 30 crore (in the first phase).

The Paul Hotels expects both these properties to be operational within the next two years. “We develop all our properties in phases, as this gives us enough time for trials. This model also helps us to work on our guests’ feedback, after which we make the necessary changes,” offers Thayil. Commenting on the tax holiday for hotels in UNESCO-certified heritage sites in India, Thayil feels that this announcement has come at the right time. The Hampi property is in the drawing board stages.

Noida’s Got A New Hot Spot “Sector 119”

Sector 119 is now becoming center of attraction. Builders as well as People are also getting attracted toward this because all the major facilities are available near by sector 119. Oil Industry Development Board Office Complex is coming close by it. Various Builder groups are coming here with their projects. Read More »

Predicted Features Of The Budget

The key feature of this budget is that this is the last budget to be presented by the present government before it faces the general elections next year. For that reason, it will be targeted at getting votes. This means that it could well be a populist budget with pay-off for voters in terms of lesser taxes. Another possibility is that tax rates are left unchanged for corporate, but there are a host of announcements on increased outlays to social sectors like education and health.
The major challenges that this budget also needs to address certain areas:-
(a) Inflation
(b) The reduced speed in the GDP, mainly in the manufacturing sector
(c) A much tougher global environment and its impact on growth through the external sector in the months ahead
(d) A rising subsidy burden, which does not fully reflect in the fiscal deficit.

As a result, on balance, the entire broking house’s expects that the key features of this budget will be as given below:
1. Reduction in direct tax rates for individuals but not for corporate Some reduction or elimination of dividend distribution tax.
2. Rationalization of excise duties, including the auto sector.
3. Rationalization of exemptions for corporate.
4. Lower customs duties for commodities to contain inflation and rationalization of inconsistencies.
5. Enhanced credit availability for the agriculture sector.
6. A sharp increase in the outlays for social sectors like health and education

So it can be expected that the sectors to be positively impacted by the budget are auto, capital goods, cement, construction, FMCG, logistics, oil and gas, metals, fertilizers and pharmaceuticals. However, it expect largely neutral for the sectors like media, telecom, information technology and  the real estate.

The REIT mode to invest in property

With banks lowering housing loan rates and RBI signaling a downhill fashion in property prices, investors have a cause to smile. After all, they can now go ahead and buy that, in demand piece of property, feeling a little less culpable about not making the investment when rates were much lesser.

For all those who cannot still make a decision if or when to press the play button, there would soon be pools of money like mutual funds, called real estate investment trusts (REITs), to invest in.

REITs invest in properties and earn rental income from them, besides the appreciation in the property rate itself. They could be rolled out by either real estate players who have large rental assets, or by mutual fund houses. The income brought in as rent is given out as dividends.

The properties would be assessed at regular intervals and accordingly, the net asset value (NAV) arrived at, much like in mutual funds. The NAV, however, would not be declared daily, but annually.

The REIT corpus would go into together commercial and residential property. It may also spread the risk into urban, semi-urban and even rural land, thus curbing losses, if any.
Lease or rental agreements on commercial properties are usually spread over several years. As a result, REITs would also have a lock-in of a few years.

In the meanwhile, if you are in need of cash and wish to exit, you would have an option to sell the units. This cannot be sold to the REIT issuer as the money has to grow. But, REITs would be listed on the exchanges and units can be sold there.

SEBI has also issued guidelines for dedicated infrastructure funds, which would be seven-year closed ended funds investing in infrastructure projects. These funds, too, would be listed and would have a Rs1 lakh tax exemption over and above the usual Rs1 lakh of exemption under Section 80 (C).

Ved Prakash Arya, managing director of Milestone Capital Advisors Pvt Ltd, says, “Globally, REIT is the most sought after platform for investment in real estate market by retail households. I expect the same to happen in India as well. Another big benefit of REIT is that it will bring in a very transparent valuation mechanism and will also help remove other anomalies like cash transaction and arbitrary pricing prevailing across the country.”

Cheaper home, consumer durables loans

MUMBAI: Home loan and consumer durables loan borrowers could look forward to softer interest rates. Following the reduction in the cost of funds, banks are reviewing the interest rate structure, according to the Indian Banks’ Association (IBA).

Speaking to the media after the managing committee meeting on Friday, IBA CEO H N Sinor said, “Banks are have seen an improvement in their spreads during the financial year. This is because the incremental credit-deposit ratio this year has fallen to 49% from 130%, seen a year ago. Banks which were forcedto raise a large chunk of funds a year ago through bulk deposits are able to renew liabilities at a lesser rate, with a clear differential of 200 basis points.”

Mr Sinor pointed out this will clearly give banks the leeway to make fresh lending at lower rates. This follows a statement from the Union finance minister a few days ago, expressing concern on the slowdown in the growth in consumer durables and mortgage loans. The IBA managing committee meeting was attended by the heads of 18 banks, of the total 31 member banks.

Bank chairmen who attended the meeting have told the IBA that they will review the rate structure in the forthcoming meetings of their respective asset and liability committees (over the next week to 10 days). So far, State Bank of India, Canara Bank and Axis Bank have lowered their prime lending rates while Bank of Maharashtra has cut rates on home loans and consumer durable loans.

Walton Street of US will invest Rs 1000 crore in realty

MUMBAI- THE US-based hospitality and real estate fund Walton Street Capital (WSC) has decided to invest Rs 1,000 crore in the booming Indian real estate market in 2008. It has already united with property developers for investing Rs 600 crore at the project level. These investments will be made in special purpose vehicles (SPV) floated specially to implement projects.WSC managing director Sourav Goswami told that The fund is in talks with three Indian developers for the residual investments, which is expected in next couple of months.Previous year, the $13 billion Chicago-based WSC invested about Rs 800 crore in a number of SPVs, including 20 percent in Shriram Properties. The fund has invested in retail malls, office buildings, housing and hospitality. Though the real estate sector seems less attractive for investments because of the high interest rates and fall in sales, Mr Goswami said India’s growth story will continue like this, which in turn will help the infrastructure and real estate sectors.Foreign and domestic funds poured $6.8 billion in the real estate and infrastructure sector last year, compared with about $3.5 billion in the previous year. A booming housing sector and surging demand for commercial property has companies guzzling equity and sometimes even debt money provided by the funds.

The US-based global fund has received equity commitments of $3.5 billion from public and corporate pension funds, foreign institutions, insurance companies and banks, endowments and foundations, trusts and high net worth individuals. It has committed to invest in 162 deals in the global real estate, including the development and acquisition of office, hotel, retail, industrial, multi-family, for-sale residential, senior and student housing, and golf assets.through both individual, portfolio and company-level transactions with a gross asset cost of $14 billion.
The year 2007 was the banner year for Indian real estate with estimates of over $5 billion of foreign funds flowing into projects. Another theme for the year was public offerings. With DLF listing, which energised the market, several developers proceeded to go public in India, creating a robust market for retail investors, said industry analysts. “

The picture has never been murkier in 2008. With fears of a looming US recession putting the brakes on worldwide growth and its resulting liquidity, a jerky market seems to be ahead. For fund managers, some will view the confusion as a hint to restrain investing in historically unstable emerging markets. Mr. Goswami told that others will view it as an opportunity to deploy equity into Indian markets which is still optimistic. WSC, in joint venture with Shriram Properties and Starwood Capital Group, is developing a Rs 5,000 crore incorporated township in Kolkata.

Real Estate in Bombay Stock Exchange

Power, real estate, capital goods and oil and gas indices gained over 7 per cent each and led the Sensex rally on Thursday.

The Bombay Stock Exchange’s Sensex recorded the 3rd highest single-day gain of 817.49 points for the duration of the current calendar year, taking the index from 16,949.14 on Wednesday to 17,766.63 points on Thursday.

The power index was the top gainer in percentage terms, appreciating by 8.14 % in a single day. Power Finance Corporation was the top gainer, up by 22.5 % from Rs 150.80 to Rs 184.75 on BSE.

Neyveli Lignite (13.13 %), BHEL (12.63 %), GMR Infrastructure (12.42 %) and Crompton Greaves (10 %) were among the chief gainers, rising by more than 10 % each.

The realty index, which was the 2nd biggest gainer, appreciated by 7.58 % to 10,143.55 (9,428.89).

Unitech, Indiabulls Real Estate, Omaxe and Mahindra Lifespace achieved over 8 % each on BSE. DLF, which won the heading sponsorship rights for the Indian Premier League (IPL), gained 6.12 % to close at Rs 864.85 (Rs 815).

Farallon, LNM Will Invest Rs 1,580 crore

Indiabulls Real Estate has entered into an agreement with FIM and LNM India Internet Ventures, who will mutually invest Rs 1,580 crore. FIM is a foreign venture capital investor managed by Farallon Capital Management LLC and LNM India Internet Ventures is an investment body of LN Mittal group.

The investment will be by way of subscription to equity shares at Rs 66.67 per share in Sophia Power Company, an unlisted subsidiary of Indiabulls Real Estate engaged in the power sector, for a collective of 37.5 % of its post issue capital. FIM will invest Rs 987.50 crore for 23.4 % post issue stake and LNM India Internet Ventures invest Rs 592.50 crore for 14.1 % stake in Sophia Power.

Indiabulls Real Estate has invested Rs 395 crore at Rs 10 per share, and will hold 62.5 % of the post issue capital of Sophia Power. The company has also invested Rs 197.50 crore by subscribing to equity shares of Indiabulls Power Services, another unlisted subsidiary engaged in the power sector. The stakeholders propose merging Indiabulls Power Services into Sophia Power, with Indiabulls Real Estate holding 71.4 % in the merged company, with 17.9 % held by FIM and balance 10.7 % by LNM India Internet Ventures.