RBI rate cut may boost demand for real estate

The rise in demand will be mainly in tier II and tier III cities where prices are still affordable, say analysts

Banks have a 67% share of the housing finance market, estimated at `7 trillion as of 31 December. Photo: Hemant Mishra/Mint

New Delhi: The Reserve Bank of India’s (RBI’s) monetary easing could prompt a rise in real estate demand, leading to prices firming up after having dropped around 4% in the recent past, said R.V. Verma, chairman and managing director of National Housing Bank (NHB), the regulator for housing finance firms.

Builders with unsold stock may raise home prices, Verma said on Thursday.

“The Residex (index of property prices in various Indian cities) for January-March could reflect this trend. We are watching it closely,” he said.

RBI cut the key policy rate by 25 basis points (bps) in its 29 January review of monetary policy, and analysts expect it to follow an easy money policy to boost economic growth. Following the RBI rate cut, many banks announced cuts in lending rates, fuelling expectation of a pick-up in retail housing demand. NHB also reduced its prime lending rate, or the rate at which it it lends to other banks, by 25 bps to 9.75% the same day. One basis point is one-hundredth of a percentage point.

The rise in demand will be mainly in tier II and tier III cities where prices are still affordable, said Verma.

“There has been a position of oversupply, which has had a moderating effect on prices. Prices are down 3-4%, primarily in tier II and tier III cities, because this is where the demand for housing loans is concentrated under the slab of Rs.10-25 lakh,” Verma said. “However, because of the increase in positive sentiments and the likelihood of lending rates going down further, the demand may pick up again leading to a price rise in houses by developers which have been under pressure till now.”

Banks have a 67% share of the housing finance market, estimated at Rs.7 trillion as of 31 December. In the Trend and Progress of Housing in India 2012 report released on Thursday, NHB said the housing finance industry could see around 20% growth in 2012-13 from the previous year.

Industry experts said prices are likely to rise in some areas.

“In markets like National Capital Region (NCR) or Mumbai, there have been fewer launches, but pricing has not taken that much of a hit. Prices have been stable or have seen a marginal increase,” said Neeraj Bansal, director, real estate, KPMG. “However, in other parts, where demand has gone down significantly, the developers have been offering good discounts on available prices for ready properties.”

The outlook has become more positive following the cut in interest rates. “There is an increase in positive sentiment, which may lead to an increase in prices in select cities,” he said.

The industry also expects the budget will contain steps that will boost the industry.

“If the industry receives a stimulus, the following quarters post the budget can see more buying from end-users, which will invariably lead to a rise in housing prices,” he said. Bansal said Andhra Pradesh, Mumbai, NCR, Chennai and Bangalore may see house prices increase in the near future. According to some industry estimates, house prices could rise 5-10% in the next few quarters .

For the original post visit: http://www.livemint.com/Companies/3aqV5solvv3EuZXvHnbrYM/RBI-rate-cut-may-boost-demand-for-real-estate.html

UAE-based NRIs guide to property investment in India

Hyderabad, Bangalore, Chennai, Pune, Noida and Navi Mumbai are the top six cities for property investment, says JLL expert

The declining value of rupee may have augmented non-resident Indians (NRI) demand for properties back home. But a real estate expert advices investors to look at key market triggers before taking the realty plunge.

Om Ahuja, Chief Executive Officer – Residential Services, Jones Lang LaSalle India, says, “One has to look at the key market triggers to identify the right markets.”

And these critical triggers are: Existing infrastructure readiness; execution/implementation timelines for new infrastructure initiatives; demand for commercial space in the market (leading to job creation); social infrastructure and price trends.

So which cities should NRIs invest in?

After factoring all these five aspects and considering them against the current market environment, JLL expert’s top six cities for property investment are: 1. Hyderabad 2. Bangalore 3. Chennai 4. Pune 5. Noida, 6. Navi Mumbai

“To a large extent the aforementioned growth drivers are clearly visible to varying degrees in these cities,” Ahuja states.

For UAE-based NRIs, the three-day Indian Property Show, opening today (December 13) at Hall No 3, Dubai World Trade Centre, will have participation from major Indian developers having projects in the aforesaid cities. Properties worth Dh30 billion by more than 90 developers will showcased in the exhibition.

JLL experts believe the on-going trend in their commercial real estate space tends to reflect a serious growth and expansion of various corporate offices.

"There is certainly very healthy demand for Grade A commercial spaces in cities such as Hyderabad, Bangalore and Pune where demand for Grade A commercial real estate exceeds the supply scheduled for the near and long-term future."

In Noida and Navi Mumbai, there are market drivers over and above job creation at play - namely superior infrastructure and affordability.

“Navi Mumbai and Noida are absorbing investor demand from Mumbai and Delhi, where affordability plays important role for investors,” Ahuja mentions.

In the case of Navi Mumbai, one can further extrapolate the investment potential to Kharghar, Kalamboli and Ulwe. For Noida, the extended growth corridors are Noida Extension and Noida Expressway.

Individual employed by IT/ITES and banking, financial services and insurance (BFSI) industries are eventually buyers of a residential apartments.

The current absorption of residential apartments in Bangalore, Hyderabad, Pune and Chennai shows the lion’s share of demand coming from IT/ITES and BFSI employees.

"The average age of buyers range from 27 to 33 years, with the easy availability of mortgages and the desire for a self-owned home apartment before marriage being the key drivers. The highest demand is for apartments where price tags fall within the Dh266,666 to Dh666,666 (Rs4 million to Dh10m) range," Ahuja reveals.

For the original post visit: http://www.emirates247.com/news/emirates/uae-based-nris-guide-to-property-investment-in-india-2012-12-13-1.487006

Chennai outshines Hyderabad, Bangalore in office space absorption

According to a Cushman & Wakefield report, among the three southern cities – Chennai, Bangalore and Hyderabad, Chennai witnessed the highest absorption of office space at 1.32 million sq. ft in the third quarter of 2012, followed by Bangalore which witnessed an absorption of 1.25 million sq. ft and Hyderabad which saw just about 0.50 million sq. ft. In terms of total absorption during the quarter, Chennai’s office market also saw an increase of 35 per cent over the previous quarter – the one that marginally surpassed Bangalore.

The report attributes this trend to global economic conditions, which has affected the uptake of office space in Bangalore. The global economic conditions appear to have cast a shadow on the city’s real estate, particularly the office space market which registered a drop by nearly 50 per cent, says the report.

As per the report, Hyderabad too registered a drop in the office space market by almost 50 per cent. The Cushman & Wakefield report described the absorption as ‘very meager’ in the 2012 third quarter.

Driven largely by the IT and the ITeS sectors, Bangalore and Hyderabad are feeling the impact of rationalisation of space, in addition to an overall cautious approach. These two factors have had emphatic impact this on segment.

The supply side too, in-keeping with the changing scenario, remained subdued as far as the total new supply for the third quarter is concerned.

The third quarter absorption in Hyderabad amounted to 6, 20,000 sq ft; a drop of 31 per cent in fresh supplies over the previous year. The impact of a restrained office market activity is witnessed in the vacancy levels too which remained mostly unchanged over the previous year. The rental values have by and large remained stable for the said period as well.

On similar lines, Bangalore too registered a drop in office space uptake in the first three quarters of this year, as compared to the same period last year. The total absorption recorded till date amounted to 3.95 million sq ft, which is a drop of 54 per cent over the same period last year.

Kanchana Dwarakanath, Magicbricks.com Bureau

Azure Capital to raise Rs 500 cr through a real estate fund

New Delhi: Azure Capital has said that it will raise up to Rs 500 crore through a real estate fund that focuses on commercial properties across top seven cities of India.

Azure Capital, an integrated investment company, will launch of India Realty Fund-II, a rental yield fund that focuses on commercial properties across top seven cities of India, the company said in a statement.

The size of the fund is Rs 250 crore with an additional Green shoe option of Rs 250 crore, aggregating to Rs 500 crore.

The India Realty Fund II would primarily focus on investment grade commercial properties with lease to reputed tenants in the top seven cities of the country such as Mumbai, Delhi-NCR, Bangalore, Chennai, Hyderabad, Pune and Ahmedabad.

"These projects will provide regular returns to investors with an upside of capital appreciation. The valuations presently are quite attractive as developers are increasingly looking at deleveraging their assets," Azure Capital Advisors CEO Shailesh Ghorpade said.

Ghorpade further noted that India Realty Fund-II targets such investors who have a low risk appetite. It will provide recurring yield income coupled with high and stable capital appreciation, diversified portfolio with superior risk - adjusted returns.

The deployment of the India Realty Fund II will be across 10-12 commercial properties with an average ticket size of Rs 25-30 crore.

The fund plans to raise the entire corpus within 9 months from the first close.

The India Realty Fund I had successfully invested in residential real estate projects in Bangalore and other parts of India, the company said.

PTI

Source: http://zeenews.india.com/business/realestate/upcoming-projects/azure-capital-to-raise-rs-500-cr-through-a-real-estate-fund_62546.html

Real estate firms revisit plans for smaller cities

Bangalore/New Delhi: Realty firms are revisiting and tweaking strategies for development in India’s smaller cities in a re-run of what was seen during the 2008-09 economic slowdown.

While some large developers are sticking to bigger cities and discontinuing project plans in smaller towns, some are switching from premium to affordable homes to push sales and mixing retail and hotels with pure residential projects to boost demand and spread the risk.

Early last year, a Crisil Research report said smaller cities are likely to offer better growth prospects and price stability for developers and buyers than large markets such as Mumbai that are showing signs of slowing sales and rising prices. Property analysts said the real estate story of smaller cities hasn’t really taken off, causing developers to shrink real estate projects there.

For its planned special economic zone (SEZ) in Kochi in Kerala, Mumbai-based Housing Development and Infrastructure Ltd (HDIL) is looking for a financial and technical partner both for expertise and because the company doesn’t want to take on huge capital expenditure by itself. In Hyderabad, where it has about 150 acres, HDIL may not develop the land and may exit at some point of time.

“With the way the market is functioning and the balance sheet pressures, projects in smaller cities offer returns over a longer period of time. So our focus will be on Mumbai now,” said Hari Prakash Pandey, vice-president, finance and investor relations, HDIL.

Another Mumbai developer that launched a large project in Mangalore last year at a premium price compared with current market prices, is not planning to develop any more projects in other smaller markets.

“The demand waned after selling the first lot of apartments and in retrospect, the pricing seemed to be too high,” said a person familiar with the development, who declined to be named.

In most cases, when large, known names in the real estate industry have entered a specific market, they have often launched projects at a superior price, or tried to develop a project unique to that city, to cash in on their brand.

However, subsequent research has compelled them to play to the demands of property buyers in that market, and getting the pricing right has been the key challenge on this front.

In Ahmedabad, around a year and a half ago, Ajmera Realty and Infra India Ltd launched a project at around Rs. 5,000 per sq. ft.

Now when it is planning to launch another residential project, and is deciding on the pricing, it is likely to be around Rs. 2,500-3,000 a sq. ft.

“Customers are price-sensitive and while we see good potential in a market like Ahmedabad, the pricing has to be right for that market,” said an official at Ajmera Realty, who didn’t want to be named.

Analysts are not so sure about the future of real estate development in smaller cities, and said that like earlier, local developers in these markets will be dominant.

Though many developers such as DLF Ltd, in the aftermath of the slowdown, said that they will concentrate on their core geographies, many again moved towards smaller cities as larger markets showed sign of slowing.

“Large developers have realized that metros are more experienced and mature markets. I believe most of them would sell land and move away from tier II and III cities,” said Anuj Puri, chairman and country head, Jones Lang La Salle, a property advisory.

Mumbai-based Godrej Properties Ltd, which aims to be a national firm with presence in 12 cities, is particularly focussed on building its presence in markets such as Bangalore, Chennai, the National Capital Region and Ahmedabad, said Pirojsha Godrej, managing director and chief executive.

In terms of in real estate development in these markets, Godrej said its “national brand and joint venture business model” would enable it to capture opportunities.

Real estate consultants also say a lack of funding, particularly from private equity (PE) investors and to some extent, non-banking financial companies (NBFCs), has also restrained developers from taking a leap of faith in these markets.

Mahindra Lifespace Developers Ltd, which has projects in Mumbai, Chennai and Pune, launched a premium residential project in Nagpur this February announcing its entry into that city.

Managing director and chief executive Anita Arjundas said the company has selectively, not actively pursued projects in smaller cities.

“Nagpur was more of a test but the response has been encouraging. But it finally it boils down to cost structures to develop in such cities, and we currently don’t have that kind of depth,” said Arjundas.

A number of northern India-based developers such as Omaxe Ltd, Ansal API, Assotech Ltd and Amrapali Group have gone to smaller cities with residential projects. While earlier, these projects were completely residential, later they shifted to developing commercial spaces alongside.

Noida-based Assotech tied up with hotel chains and launched hotel projects along with residential projects.

The company owns a hotel in Rudrapur in Uttarakhand state under the Radisson brand.

It also has residential projects under a joint venture with another Noida-based developer, Supertech Group Ltd.

Crisil Research’s 2011 estimate was of a robust pipeline of 354 million sq. ft of supply planned for the next three years in emerging property markets.

Tata Housing Development Co. Ltd, known for spearheading the low-cost housing initiative among private developers, wants to take the brand to smaller cities, but will restrict itself to markets such as Ahmedabad, Pune and Bhubaneswar.

“Real estate competitiveness in these markets is low but we are not looking at even smaller Tier III and IV cities,” said Tata Housing managing director and chief executive Brotin Banerjee.

madhurima.n@livemint.com

Source: http://www.livemint.com/2012/09/09232055/Real-estate-firms-revisit-plan.html

Want to buy property? Look for promising destinations

"It is the right time to buy property." Builders and real estate agents never fail to drop in that line every time you check on the property prices with them. Of course, they would also add with some pride that the prices have in fact gone up since you last checked, and it is your last chance to buy a property within the city limits. The current scenario is not any different: the quoted prices are up by 10-20 %, there are widespread delays in completion of projects and there is talk of prices going up further owning to rise in input costs. Obviously, you are confused.

"The current market scenario is not too conducive for investment in properties. Overall, the market has been behaving erratically with no sign of endusers' enthusiasm returning soon. Investors are looking out for sweeter deals as many developers are offering such bargains due to liquidity crunch," says Gulam Zia, national director (research and advisory services ), at Knight Frank India. "Our advice to end-users is to hold on for an impending correction, whereas investors should look around for distressed deals."

"This is certainly not a good time for speculative investment in under-developed areas lacking infrastructure and sufficient market drivers," adds Om Ahuja, CEO, residential services, Jones Lang LaSalle India. However, he is of the opinion that for end-users with a genuine need to buy a home the right time is always now, subject to the availability of a good deal that meets all their needs.

SCOUT FOR PROMISING DESTINATIONS

However, if you are feeling adventurous and wish to bet on property as an investment, you need to carry out a thorough research. The first step would be to identify locations likely to see appreciation in the future. So, which are the cities and towns that fit into this bracket at the moment? "Mumbai is always a good city to invest for the mid-to-long term, though the price points are certainly still prohibitive for smaller investors. I would put special emphasis on Navi Mumbai and Thane. Areas in Navi Mumbai like Ulwe and Kalamboli are very promising," says Ahuja of JLL.

"Pune, Bangalore, Chennai and Delhi NCR are also good options, but one needs to research the available options thoroughly. A blindfold approach will definitely not work." This apart, you can also scan opportunities in emerging locations, especially the ones that are seeing action on the infrastructure development front.

"There have been economic growth initiatives taken by central and state governments like dedicated freight corridor, industrial corridors, special investment regions (not to be confused with SEZs, which are grossly mismanaged) among others," says Zia. According to him, the locations that meet the criteria include Manesar in Haryana, Neemrana in Rajasthan, Dholera in Gujarat, Dadri in UP, Pitampur in Madhya Pradesh and Nashik in Maharashtra.

Source: http://economictimes.indiatimes.com/markets/real-estate/realty-trends/want-to-buy-property-look-for-promising-destinations/articleshow/16293308.cms

Chennai realty rates in for a respite?

There is a lot of curiosity about whether realty prices in Chennai are moving up, down or staying stable. Industry analysts have noted a slump in sales, which has prompted buyers to entertain hopes that prices might soften. Property Plus spoke to industry watchers to gauge the prevailing mood in the residential realty sector.

What everyone agrees on is that Chennai is a stable market where prices are driven by the end-users. “Residential property prices move in accordance with actual sales,” says Badal Yagnik, MD, Chennai & Coimbatore, Jones Lang LaSalle India, adding that “residential property in Chennai is driven more by location than by specifications and amenities.”

Thus, prices have moved up based on the proximity to IT parks. “Many projects are coming up close to the IT parks, which are priced at a higher range,” says Aditya Verma, COO and EVP, Makaan.com. Old Mahabalipuram Road, for example, has been influenced the most due to IT companies setting up base there. “The average price per square foot in this area has appreciated 29.57 per cent in the last one year, moving from an average Rs.2,715 in August 2011 to Rs.3,950 in August 2012,” says Verma. Other localities that have become popular because of the IT boom are BST Road, Sholinganallur, Tiruporur, Tambaram and Oragadam.

In other areas, however, real estate prices might have actually gone down. According to Makaan.com Price Trends, a tool that captures the property prices movement in major Indian cities, Chennai property prices have dropped by approximately 12.6 per cent in the last one year. The average price per square foot has dropped from Rs.4,437 in August 2011 to Rs.3,800 in August 2012. In the second quarter of 2012, prices appear to have stayed stable because of dampening demand.

One of the key reasons affecting realty prices in the city seems to be the scarcity of land and the high cost of premium FSI within the city. “The available options in these locations have shot way past the budgets of even the upper middle class,” says Yagnik. Within Chennai city, prices for a standard flat with minimum or no amenities can range from Rs.1.5 to Rs.5 crore. “Other factors driving capital values in the residential market are increasing construction costs and increasing borrowing costs,” says N. Hariharan, director, Chennai, Cushman & Wakefield.

Given this, developers are looking increasingly at suburban locations. Unfortunately, in these areas, infrastructure development has been abysmally poor. This could be one big reason why prices and sales have remained stagnant.

In the near future, prices do not show an inclination to rise. “In order to uphold sales enquiries, developers might refrain from increasing prices,” says Hariharan.

As Verma points out, developers in many markets such as Chennai, Bangalore and Mumbai are holding property prices to avoid panic among the investor community.

The next few months, before the festive season hits, might prove crucial for the Chennai realty sector. “The realty market is facing multiple head winds that will keep property prices under check at least in the medium term. However, a short-term correction is actually healthy for the market and could attract fence-sitters, thereby boosting sentiments,” says Verma. For buyers waiting for some indicators, this sounds like a small reprieve.

Source: http://www.thehindu.com/life-and-style/homes-and-gardens/article3750833.ece

Despite slowdown, housing prices bullish across cities

According to the residential real estate index prepared by the National Housing Bank (NHB), the housing prices in 16 cities including Delhi, Mumbai, Chennai, Bangalore, Pune, and Kolkata improved in the quarter ending June 2012, compared to the previous quarter ending March 2012.

In fact, in most of these cities, prices improved quarter after quarter since January-June 2009 quarters barring in a few exceptions like Bangalore, Hyderabad , Jaipur, and Indore, where prices have corrected in some quarters.

But when compared to prices in January-June 2009, when the index was first announced , the prices in the latest quarter have shown a significant jump.

It is also because January-March 2009 was the first quarter when the impact ofglobal bank crisis of 2008 was fully realized. In fact, the index of property prices in Delhi continued to fall till January - March 2010, when the index touched 106, from 121 in January-June 2009.

According to the NHB, the prices of residential properties in 16 cities have shown an increasing trend in the range of 1.1% in Kochi to 10.5% in Pune, in April-June 2012 quarter , against the previous quarter.

At the same time, it saw marginal decline in three cities - Jaipur, Hyderabad and Indore. Faridabad remained stagnant in this quarter.

According to the data prepared by the NHB, the maximum increase was observed in Pune, by 10.5%, followed by Bangalore (8.7%), Patna (8.6%), Ahmedabad (6.4%), Ludhiana (5.3%), Lucknow (4.1%), Mumbai (3.7%), Delhi (2.6%), Kolkata (2.6%), Bhubaneswar (1.7%), Bhopal (1.7%), Chennai (1.7%), Surat (1.2%), Guwahati (1.2%), Vijayawada (1.1%), and Kochi (1.1%).

Three cities have shown marginal decline in prices over the previous quarter, with a maximum decline of 2.6% observed in Jaipur, Indore (2.4%), and Hyderabad (1%).

The data has been prepared by NHB RESIDEX, which tracks the movement in prices of residential properties on a quarterly basis, an exercise it has been conducting since 2007.

However, according to the NHB Residential Index, the property prices in the NCR region increased by around 11% in the last one year, while a close look of different micro markets give a different picture.

The property prices in certain developing pockets like Dwarka Expressway in Gurgaon went up by almost 50-80 % in the last one year. Similarly, in other developing pockets like New Gurgaon and Golf Course Extension Road, property prices have gone up by 30-50 %.

In Noida, prices of property on the Noida-Greater Noida Expressway increased by almost 30% since June 2011. In Ghaziabad too, prices in Indirapuram and Vaishali went up by around 30%. In certain pockets like Crossings Republik, where possessions have been given to buyers, the prices have improved by almost 50% in the last one year.

However, prices in the matured markets of Delhi, Gurgaon , and Noida have not appreciated so sharply during the period, as they are already very high. As in the index, when prices of properties located in different areas are taken into account, it does not give a clear picture. But, the index has vastly improved and reveals the prevailing bullish trends in the property markets in the NCR.

QUICK BYTES

Compared to prices in January-June 2009, when the index was first announced , the prices in the latest quarter have shown a significant jump

Source: http://economictimes.indiatimes.com/features/et-realty/despite-slowdown-housing-prices-bullish-across-cities/articleshow/16042170.cms

Realty firm for seniors to complete Rs 500 cr project in 3 yrs

Chennai: A real estate firm focusing on constructing dwellings for retired senior citizens in south India expects to complete Rs 500 crore worth of projects in three years.

The demand for retirement villas and apartments have been growing consistently over the last two years, Covai Senior Care Constructions, Director (Finance and Strategy) P B Anand said.

"Currently we are executing seven projects across South India valued at Rs 500 crore. We expect it to be completed in another three years," he said.

The Coimbatore-based firm is in the final stages of its Rs 50 crore fund raising plan, he said.

"We have investments of Rs 25 crore as equity from an investor based out of United States. We raised another Rs 25 crore through debts. Currently, we are in the fag of it (fund raising plan)" Covai Senior Care Constructions, Director (Finance and Strategy) Anand said.

He said the company is currently doing projects in Bangalore, Chennai, Puducherry and Coimbatore besides planning another project in Kancheepuram.

The company reported revenues of Rs 60 crore in 2011-12 fiscal and aims to register Rs 100 crore this year, he said.

Anand and Covai Senior Care Constructions Managing Director Colonel A Sridharan were here to announce their upcoming two projects at Puducherry and at Sulur near

Coimbatore, both of which are retirment villas and apartments.

Source: http://www.financialexpress.com/news/realty-firm-for-seniors-to-complete-rs-500-cr-project-in-3-yrs/994882/0

Prices on Residential Property Soar in India

Residential property values are on the rise in India. In Chennai they rose by 35 percent. In Greater Noida and Mumbai they skyrocketed 33 percent higher. The increases occurred in a one year period ending in June 2012.

As prices on existing properties went up, housing loan growth went down by 17 percent in June of 2011 to 15.1 percent in June of 2012. These figures come from the Reserve Bank of India.

Price increases are attributed to developers who defend themselves, saying labor and the cost of getting credit force them to get the increased monies needed from the homebuyers. Analysts put it another way saying it is due to the primary market having a high demand and developers being slow to begin new projects.

The manager of one real estate research company claims that developers have deliberately delayed supplies with the intent of keeping property prices high. In fact, in the second quarter there was a 24 percent decline in the beginning of new projects.

Mumbai is a prime example with a 73 percent decrease in the second quarter. Work was started on a mere 1,200 units in that prominent city. This is a huge decrease compared to the 4,460 that were launched in the first quarter. There were only nine projects undertaken in the second quarter.

It seems that there is a pattern, namely, the higher the price on a home, the lower the demand. Mid-range priced homes are still in demand. The prices that increased by 5-10 percent in the first and second quarters are predicted to rise by that much again during the third and fourth.

The developers all blame the cost of land rising. They also cite the price of cement, steel and wages of construction workers. The figures are up in places such as Bangalore, a city that experienced an increase of about four percent. Bangalore’s market is favorable while in cities such as Hyderabad the market is unfavorable, with the exception of the central areas.

A developer located in Bangalore saw a 73 percent increase in net profits. That was for the second quarter, ending in June of 2012. It is attributed to the lower cost to purchase land as compared to Mumbai, where land is sold at a premium price.

Residential property there rose 10 percent but only in specific areas. Other than that, the prices are not fluctuating either up or down.

Source: http://pptymag.com/prices-on-residential-property-soar-in-india/8547/

Leela Palace Chennai readying for November opening

Chennai’s newest luxury hotel, situated on the southern end of the Marina beach, is being readied to welcome guests. Sea-facing, the Chettinad Palace-inspired opulent hotel from Hotel Leelaventure Ltd will open early November, just in time to cash in on the peak-season demand.

Rates at the 326-room property, as per a web booking engine, start at Rs 12,500 per night (deluxe sea-facing room), which is higher than the Rs 11,700 per night rate charged by by Taj at the Lands End, a prime sea-facing hotel in Mumbai.

Though delayed by over a year, the launch of the The Leela Palace Chennai (eighth in the company’s line-up) is one of the half-a-dozen turnaround initiatives planned by promoters to inject life back into the debt-laden company.

As of March 31, total debt on the company’s books stood at nearly Rs 4,300 crore, resulting in a near fourfold rise in net loss at Rs 101 crore in the first quarter this year.

Interest paid during the January-March quarter (Rs 89 crore), which doubled compared to the corresponding quarter last year, was 64 per cent of the revenue earned (Rs 138 crore) during the period. The company’s promoters, the Nair family, has thus put in place a series of measures to tide over the crisis, assuring stakeholders of a certain reduction in its debt.

The company will raise up to Rs 1,000 crore through one or more instruments to meet capital expenditure, expenditure for renovation, expansion, brand building and to pursue new growth opportunities.

Leela has also applied for debt-restructuring under the corporate debt restructuring (CDR) mechanism, to ease out the debt burden though its lenders have still not agreed to reduce the interest rate on outstanding loans. A flash report for restructuring of its debts was approved by the CDR EG (empowered group) in May with January 1, 2012 as the cut-off date. The final restructuring package is under discussions.

“The company is facing a liquidity mismatch as most of its debts are payable in next five years. The company expects to get moratorium on interest and principal repayments for two years and repayment over the next eight years. The company also expects to get reduction of interest rate, even though the lenders would have a right of recompense at the time of exit from CDR,” stated the annual report of Hotel Leela Ventures.

Further monetisation of three land assets and an office space are considered by the company, located in Pune, Hyderabad, Bangalore and Chennai. Valuation of these properties exceeds Rs 700 crore, as per market estimates. Commercial property in Chennai is the Leela Business Park, located next to the luxury hotel.

Four or five-star properties in tier II locations are also being explored by the company. In addition, management contracts for nine new properties are actively considered, including a project in Jaipur where the firm has already signed the contract and in the capitals of Bangladesh and Sri Lanka.

The company also owns land in Agra (facing Taj Mahal) and Ashthamudi, Kerala. At both centres, it has decided to build a luxury hotel and resort, respectively, in collaboration with an investor, though it is yet to finalise the deals.

Though the turnaround plan has been put into motion, market watchers are not excited just yet. A Delhi-based analyst tracking the hotel sector stated several of the recently announced plans by Leela were only a repetition of its earlier promises.

“The company’s debt in March last year stood at Rs 3,800 crore. Even then it had announced sell-off plans of non-core assets such as land and office space. Not only has the debt increased, but it has failed to get a single buyer for its assets. In the meantime, real estate valuations have further strained,” said the analyst.

However Leela’s management successfully sold its Kovalam resort last year for Rs 500 crore (actual gain is Rs 415 crore) to a Dubai-based non-resident Indian Ravi Pillai. Hotel Leelaventure continues to manage the formerly state-run ITDC resort, which overlooks the Arabian Sea.

But unlike the successful deal of Kovalam, the company has failed to execute announced plans of selling preferential shares to private equity companies, which would have fetched it Rs 600 crore. The company had been in negotiations with sovereign wealth funds but the deal has failed to materialise.

Further, a planned qualified institutional placement and foreign currency convertible bond (FCCB) of $200 million (Rs 895 crore) failed to take off due to a depressed equity market while its earlier FCCB of $100 million did not get converted into equity and remained as debt.

Presently, promoters hold 56.6 per cent in the company (though 85 per cent is pledged), while foreign institutional investors hold little more than one per cent. Kolkata-based ITC remains the single largest non-promoter shareholder in Hotel Leelaventure with a stake of 13.98 per cent.

“Leela has limited coverage compared to say ITC, Oberoi or Indian Hotels. They are unable to expand under ownership model because their balance sheet looks quite stressed and banks will thus be reluctant to lend to them. Management contracts can bring only fees and not profits,” said another analyst.

Source: http://www.business-standard.com/india/news/leela-palace-chennai-readying-for-november-opening/484569/

Trump's first project takes off in India

PUNE : US real estate billionaire Donald Trump's first luxury homes project in India has finally taken off. Trump Towers, two 22-floor skyrises, are being built by Panchshil Realty with Donald Trump at Kalyani Nagar, Pune, under a brand licence agreement. With approvals in place, construction has already begun for the 44 five-bedroom flats admeasuring approximately 6,000 sq ft and priced at Rs 12 crore each. Having burnt his fingers twice - the Pune project being his third venture in the past three years - Trump signed the agreement with Panchsil only after the developer got all the statutory building approvals in place, sources said.

Trump is also close to finalizing plans to construct Trump Towers at a three-acre plot close to Boat Club in Chennai and another on a 10-acre plot at Noida. All the three projects are approximately worth Rs 1,500 crore.

Trump's first venture at Bangalore broke off within months while Trump's second project in Mumbai with Rohan Lifescape has not moved further due to regulatory hurdles.

Source: http://timesofindia.indiatimes.com/business/india-business/Trumps-first-project-takes-off-in-India/articleshow/15398221.cms

Migrants build city homes

BHUBANESWAR: People from neighbouring states dominate city realty market's workforce even as workers from Odisha continue to migrate to outside the state in search of work.

While masons from Jharkhand and Bihar rule the state capital's construction works, carpenters are mainly from West Bengal. Those from Andhra Pradesh have a substantial presence in all categories while plumbing work is the forte of local people.

C S Sharma, a labour contractor from Jharkhand who operates from the city, said construction workers from outside Odisha outnumber the locals in Bhubaneswar. "Outside state workers tend to work continuously for months without taking breaks while local people take too many leaves. That is why it is easier to meet deadline with outsiders," said Sharma who currently has around 500 workers under him here, mostly from Jharkhand. Similarly, when Odia workers go for work outside Odisha they work without leave for long, he added.

The industry knows who is good at what. In various components of the semi-skilled works, people from different areas have expertise. "Masons from Bihar and Jharkhand are good at finishing work while there is no match to local plumbers, mainly from Kendrapada and Jajpur districts. Workers from Bengal are good in painting work and carpentry," said Manoj Chandrabanshi, another labour contractor.

Real estate developers said big projects prefer mix of workers. "If one employs workers say only from Odisha, none will be left to work during a festival like Raja. Similarly, those from West Bengal prefer to go home during Durga puja. If the workforce is mixed, work will not suffer," said D S Tripathy, state president of confederation of real estate developers of India (Credai).

Besides hundreds of housing projects by private builders, big-ticket government projects such as All India Institute of Medical Sciences, National Institute of Science Education and Research, Indian Institute of Technology are under construction in city these days. Besides, work for around dozen flyovers and expansion of National Highways are under way here employing a huge workforce.

According to 2001 Census, 16 lakh Odia were listed as seasonal migrants to other states. The cities attracting maximum migration from the state included Kolkata, Surat, Hyderabad, Visakhapatnam, Raipur, Coimbatore, Delhi, Chennai and Bangalore. While thousands of people from Odisha migrate to Nalgonda, Guntur and Vizag, among other areas of Andhra Pradesh to work in brick kilns and as farm labourers, migration from Andhra is also substantial. The 2011 census report on migration is still awaited.

Source: http://timesofindia.indiatimes.com/city/bhubaneswar/Migrants-build-city-homes/articleshow/15111095.cms

Hindujas to foray into India's real estate sector

The Hinduja Group, with a global presence in core sectors like oil and gas, automotive, power, information technology (IT), banking and finance, on Sunday announced a major foray into the real estate sector in India, involving an investment of up to $15 billion.

Just back from a visit to India, Group Chairman S P Hinduja said here that the Indian economy "with its underlying strengths could become a beacon of hope in an otherwise bleak global environment."

The Group has acquired a landbank of over 3,500 acres in metros like Mumbai, Chennai, Hyderabad and Bangalore for development of integrated residential and commercial townships, SEZs, with hospitality, healthcare and related facilities, he said. These projects will involve an investment of $10 billion to $15 billion over the next five years, according to Hinduja.

The group was also looking at a portfolio of 10,000 Mw in the power sector in the medium-term, he said. Implementation of a 1000 Mw project is already under progress, Hinduja said.

Expressing optimism over the state of the Indian economy, Hinduja said its fundamentals remained strong and it had the potential to bounce back to high growth of eight to nine per cent a year. "The slowdown currently experienced by the economy is largely due to external conditions and not, as a section of the business community and media say, by coalition politics, lack of leadership, corruption etc," he said.

Hinduja said the ruling and opposition parties in India were united in their resolve to reverse the present deceleration of growth momentum and make India more competitive in the global economy.

He also noted that India continued to enjoy great credibility in international forums and among global leaders, "which is a major plus."

The leading UK-based industrialist said that non- resident Indians (NRIs) continue to repose confidence in the country with their remittances touching around $60 billion last year, the highest for the developing countries, including China.

He is also confident that India will go for more of economic reforms and liberalisation and will not revert to a state-led model.

Hinduja noted that India had plans for investment of $1 trillion in developing its infrastructure in the next five years.

"It is a win-win opportunity for India and the developed countries. The investment in infrastructure will help in poverty alleviation in India and acceleration of economic growth and jobs creation in the investor countries," he said.

He said India can leverage its rising international status to mobilise investments in the country by foreign investors and NRIs to meet the government's target.

He said the investment priorities should be rural, semi- rural/urban areas.

"This will create employment opportunities where they are needed, helping alleviate poverty without distribution of subsidies, gifts and donations. The consumer market will be enlarged, contributing to increased production and economic growth," he said.

At the same time, Hinduja underlined that one of the conditions for awarding mega projects should be building up of social infrastructure in education, healthcare, water supply etc in adjacent semi-urban or rural areas.

He also demanded that the government should reduce the large number of permissions required for starting up industries or infrastructure projects.

"The key in this regard would be to organise all central, state and local level clearances before the projects are awarded to investors. This would reduce corruption and ensure speedy and timely completion of projects," Hinduja said.

He also said the Indian bureaucracy should be "sufficiently galvanised" with accountability and rewards. "The concerned government departments should monitor the projects with a Project Implementation Review Chart having time-lines for completion of different phases of the projects. An incentive scheme should be in place for rewarding the government officials for timely completion of projects," he said.

Hinduja also highlighted the challenge faced by India from the menace of corruption and black money. "The main causes of generation of black money have been the requirement for funds to meet the expenses of political parties and to fight elections at local/state/national levels; the need for making illicit payments to secure government contracts and influence government policies etc," he said. "This is a cancer which must be addressed. Unstructured, non-institutional political funding is the root of corruption in India. Electoral reforms may be introduced to regularise and make political parties accountable for funds received," he said. He also said that state funding of political parties' election expenditure can be part of a large scheme of political, electoral and taxation reform to stop the flow of money into parallel economy. He pointed out that many developed countries have opted for 20-30 per cent tax to make black money stashed abroad accountable. "India could also consider entering into similar agreements with foreign countries so that the unaccounted wealth abroad can come to India and taxed. Such fhttp://www.business-standard.com/india/news/hindujas-to-foray-into-indias-real-estate-sector/481174/unds could help reduce India's burgeoning fiscal deficit," he said.

Source:

Blackstone eyes biggest realty deal

MUMBAI/BANGALORE: Blackstone Group is set to acquire 36% ownership in the tenanted office space portfolio of southern developer Embassy Property Developments for about $230 million (Rs 1,300 crore), said bankers close to the transaction. This will be Blackstone's biggest real estate deal in India, giving it part ownership of more than 12 million sqft office towers housing prominent technology names that drive the outsourcing economy.

Embassy, one of the top business park builders in the country, is demerging the FDI complaint office buildings in which Blackstone will acquire a significant minority interest. Blackstone has signed a term-sheet with the Bangalore-based developer and is conducting due diligence. The company's commercial play has largely been focused on the development of business parks, of which the two largest—the 100-acre Manyata Tech Park and the 65-acre Embassy Golf Links Business—are situated in Bangalore.

The tenant list of Embassy's office buildings— spread across Bangalore, Pune and Coimbatore—includes IBM, Accenture, Capgemini, Atos Origin, Cognizant, Fidelity, Mercedes Benz and Target. Embassy Group CMD Jitu Virwani and a spokesperson for Blackstone declined to comment. Embassy had shelved a $500-million initial public offering (IPO) last year.

The transaction values Embassy's new holding company for office buildings at $900 million after rolling over Blackstone's earlier investment in one of the projects. Blackstone had acquired HDFC's minority stake in a large business park for $100 million, and the latest deal takes overall investment to about $330 million. The Blackstone investment will cover only tenanted office buildings and not those under development.

Blackstone owns hotels, shopping malls and office buildings primarily in North America and Europe. The PE major has shown appetite for Indian office buildings and struck smaller deals with developers like DLF in the past two years. Blackstone's real estate portfolio, with an estimated worth of $48 billion, include Hilton hotels and the recent acquisition of Motel 6 from Accor.

Private equity firms and global investment houses are allocating a part of their portfolio to risk-free income yielding assets, such as IT business parks, which provide 9% to 12% assured returns besides providing capital value appreciation. Baring Private Equity Partners invested $100 million for a stake in the office space portfolio of another Bangalore developer RMZ Corp earlier this year, while Singapore-listed investment house Ascendas is in advanced talks to buy out an IT SEZ of Shriram Properties in Chennai.

Source: http://timesofindia.indiatimes.com/business/india-business/Blackstone-eyes-biggest-realty-deal/articleshow/14814726.cms

Xander Gr to invest $600 mn to develop about 12 malls in India

New Delhi: Global investment firm Xander Group will pump in USD 600 million (about Rs 3,300 crore) to develop and operate about 12 luxury shopping malls across India by 2017.

Virtuous Retail, the group's retail venture, is at present constructing eight such centres at various places and will develop another 2-4 malls in the coming years.

"The scope and potential of organised retail in India is huge. We have committed USD 600 million for a pan-India retail presence. We think, the amount will be invested by 2017," Virtuous Retail Marketing Director Anupam Yog told PTI.

Virtuous Retail, which is sponsored by the Xander Group, was set up in 2007, and is gearing up to open its first project at Surat in Gujarat by the end of this year, he added.

"Surat is our flagship project, where we are investing around USD 50 million. The total size of the shopping complex will be 6,00,000 sq ft," Yog said.

The company has also adopted the 'Surat Boat Race' to promote it in the global platform, besides starting a three-day story-telling event -- Kahani Festival.

"From the Surat project, VR Surat, we are expecting a rental revenue of Rs 30-40 crore annually," Yog said.

The company will hire 300 people for operating the complex, besides indirectly creating about 3,000 jobs.

Talking about the other projects, Yog said: "At present, eight projects are under various stages of constructions in places like Pune, Mumbai, Bangalore, Kolkata and Chennai. The sizes of the malls will vary between 0.5 million sq ft and 1.5 million sq ft."

The company will launch 2-4 new sopping centres, targeting cities like Delhi, Ahmedabad, Hyderabad and Chandigarh, he added.

"Our concept is to provide a lifestyle. We plan to bring in various global brands into India and give consumers a premium retail experience," Yog said.

When asked about its model of operations, he said the company will own, develop and operate the properties.

"In some cases, we are developing the complexes under joint venture agreement with the property owner. The model will vary in different places, but we will never sell off the developed spaces," Yog said.

Some of the under-developed malls in Bangalore, Mumbai and Pune are mixed-use spaces, he added.

Xander Group has so far invested about USD 1 billion in India since 2005 in various sectors, including infrastructure, hospitality and entertainment.

PTI

First Published: Sunday, July 08, 2012, 15:17

Source: http://zeenews.india.com/business/realestate/latest-news/xander-gr-to-invest-600-mn-to-develop-about-12-malls-in-india_55369.html

Realty demand slow; volumes are down greatly: Godrej Prop

Godrej Properties the real estate development arm of the Godrej Group, has created a Rs 770 crore development fund with a clutch of global investors, including Dutch pension services provider APG and Sparinvest Property Fund II.

Targeting their focus markets of Mumbai, NCR, Bangalore Pune and Chennai, the realty firm aims to develop residential properties in these cities. Godrej Properties has set-up an investment horizon of two years.

"We will fully invest the capital over that period of time and we think the projects would take four to five years from that time to execute, " says Pirojsha Godrej, the managing director and CEO of Godrej Properties.

The total life of the fund will be around six to seven years. He says that while the economic environment in the country is lagging, he feels property is quite a sentiment driven industry and should be fine.

"Property prices are holding up reasonably well. What has happened, however, is that demand is a little bit sluggish and volumes in most markets have dipped considerably," he says.

Below is an edited transcript of his interview. Watch the accompanying videos for more.

Q: What is the mood in the market itself? It is somber when you look at economic development parameters and capex parameters and not quite showing in property prices, certainly not in Bombay. Give us an idea of the markets that you operate and how property prices are behaving?

A: You rightly pointed out that the economic environment generally in the country isn't its strongest currently. But I think property is quite a sentiment driven industry. But that has not really reflected in property prices and that's true of almost all the markets we are in today. Property prices are holding up reasonably well. What has happened, however, is that demand is a little bit sluggish and volumes in most markets have dipped considerably.

My sense is given the way input costs have moved over the last year and given that prices have actually remained quite flat, it's unlikely that there is a room for a huge price correction, because developers' margins are under quite a bit of pressure. But that will depend largely on how the next few months go and whether general economic sentiment improves, because I do think ultimately property is a very sentimentally driven sector.

Q: Today Godrej is higher in terms of trade because of this property fund which you are floating with a group of investors of around Rs 770 crore. Take us through the nuances of it? When exactly would it become active?

A: The agreement on what the initial size of the fund is about Rs 770 crore and what kind of target projects we will do which is largely residential projects in the key cities of Mumbai, NCR, Bangalore, Pune and Chennai has already been put in place. Now what will happen is we will identify the actual project that we will do through this partnership and go out and actually get the land needed for those and start executing those.

We have already started working on identifying suitable projects. The great thing about this platform is it allows us as a developer to scout opportunities for land parcels at reasonable prices and be able to buy those without having to buy them on our own balance sheet, because Godrej Properties has always followed capital efficient land sourcing strategy.

This will allow us to continue to do that, but particularly in market conditions where we think there are some quite exciting opportunities to get land at good valuations this will allow us to add many new projects to our portfolio and we will also get a fee from our partners in this platform. The idea was to agree ahead of time on the types of projects we would like to do, create a platform to invest in those and then go out and do multiple projects with the same set of partners.

Q: Would they largely be Mumbai based projects?

A: We have talked about projects in five cities. The top three cities will be Mumbai, Delhi and Bangalore. The exact ratio of split between those three cities would probably depend on the types of opportunities we identify, but clearly Mumbai for us is one of our most important markets, both through projects under this platform and through our other joint venture development management fee and redevelopment models.

Q: Do you commit to an IRR or Investment Return Rate to your investors in this fund? Also share with us how your fee is structured?

A: There is no commitment or no sort of preferred or guaranteed returns at all in this structure. It's a pure equity partnership. Godrej Properties will put up 29% of the required capital. Our capital partners will put in the remaining 71%. We will get equity returns in proportion to our investments. Godrej Properties for handling the projects will also get a very substantial development management fee which will be calculated on a per square foot basis.

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Q: You do have 29% equity. Give us a sense of who the other investors are and why exactly are you all focusing more on residential projects as opposed to commercial projects? What is the rationale for that in particular? How much are you estimating in terms of investment?

A: The total investment commitment for now is Rs 770 crore and Godrej Properties is liable for investing 29% of that total amount. We have setup an investment horizon of two years. We will fully invest the capital over that period of time and we think the projects would take four to five years from that time to execute. So the total life of the fund will be sort of six to seven years. Of course we have the opportunity to increase the size of committed capital in this platform if all our partners are happy with the outcome. We think there is a good chance that over time this could be increased further in terms of size.

As to why we are focusing largely on the residential space, there are few key answers for that. One, given our capital efficient land sourcing strategy, we think residential is the more appropriate strategy for us, because typically you can sell-off plans in the residential space and your customers can basically fund the construction of the project, which is a little bit more difficult to replicate in the commercial space.

Also depending on the particular year - 70-80% of all demand for real estate in India is in the residential space. So it's fundamentally a bigger market. Lastly we think the Godrej brand while a big source of strength across asset classes is particularly advantageous to us in the residential space. So, that's why you are seeing us focused primarily in the residential real estate.

Q: Give us an idea of how many million square feet or other measures of land will come in for sale in FY13 and FY14?

A: We don't give specific guidance on the numbers in terms of square foot of new projects coming online, but we think this year will be a very robust one for us in terms of new launches. In the last couple of weeks we have launched two projects, one in Mumbai and the other in Pune. We have a launch slated in NCR this month and several launches and new phases of existing projects to be launched during the remainder of the year.

Over the course of FY13, we expect to launch either in terms of new projects or phases in existing projects about 15 as compared to five to six last year. So we do have a fairly robust launch calendar. What is exciting for us about the current environment is that while there are certain challenges with demand being weak due to economic sentiment there are also a lot of opportunities on the business development front.

I think we have been very successful in capturing those and things like the announcement of this investment platform will further our ability to add new projects which in turn will increase the amount of launches we will have over the next couple of years. So I am quite bullish in terms of the number of launches we have got slated in the next two years.

Q: There are some brokerage reports which have pointed that out there is a possibility that the gearing of the company could increase in FY13-FY14 simply because there might be increased outflow of payments going forward. Do you foresee any stress on the balance sheet of the company going forward?

A: In March of this year, in quite difficult market conditions we were able to do India's first ever IPP and through that we raised about Rs 470 crore. At the end of last quarter we actually reduced our gearing level from almost 2:1 at the end of the third quarter to just over 1:1.1 to be precise at the end of quarter four. There may in the short-term be a slight increase in debt as we get into these new projects but certainly we have a very strong focus on ensuring a healthy balance sheet.

Our borrowing costs are amongst the lowest in the industry and we will continue if there ever is a situation where our gearing gets beyond that targeted levels, we will be sure to find way to raise equities to bring that under control as we have recently done in March. For now we think we are quite comfortable in terms of the strength of our balance sheet.

Q: Your revenues in FY12 for instance were about 10-12% higher than the previous year. What could be the run-rate in the current year either in terms of volume of flats you sell or square feet you sell or in terms of the money you expect to make? Your margins were around 23%. Does it go higher? Does it stay there? Give us a broad guidance, I am not asking for specifics?

A: Last year we actually grew revenue bookings and profits from operations all by about 46-50%. Our actual net profit last year declined because of higher input costs affecting margins and because we did lower number of private equity deals for the year, but I think we saw fairly robust growth on most operational parameters last year and certainly we would like to sustain that kind of growth. It will depend a lot on frankly how the overall economic conditions tend to be later this year. We expect things to improve. We do expect further interest rate cuts and if those things happen, we think the kind of growth number I mentioned are quite repeatable this year as well.

Source: http://www.moneycontrol.com/smementor/news/finance-capital/realty-demand-slow-volumesdown-greatly-godrej-prop-725639.html

Investors Clinic witnesses 20% demand rise for Indian properties

DUBAI — Investors Clinic Infratech, a leading real estate marketing and brokerage firm operating under the brand name of “Investors Clinic”, has successfully marked its footprint in the UAE within just six months of starting Dubai operations.

In a short span, the company has successfully served over 1,000 NRI families and have witnessed a strong 20 per cent increase in demand from Indian expats in the second quarter of 2012. The UAE-based NRIs are generally looking for investment property back home (rather than end use) within a price range of Rs7.5 million to Rs15 million with an assured return.

In the GCC alone, an estimated 5.5 million to six million NRIs are working today including semi-skilled and unskilled labourers. According to banks in the Gulf, the average home loan size is Rs3-7 million and the predominant demand revolves around apartments. The overall home loan business in Dubai alone ranges from Rs7.2-8 billion, according to an Economic Times report.

Honey Katiyal, CEO, Investors Clinic, said: “Rupee falling might be a bad news for India but real estate tends to gain from the development. It is the time when Non Resident Indians will benefit the most in Indian real estate market. The real estate market especially in Delhi NCR is vibrant with offerings for every segment. The NCR is the largest residential market in the country by sheer volume of residential units launched. Currently, it has more units than the combined tally of the other five metropolitan cities of Mumbai, Chennai, Bangalore, Kolkata and Hyderabad.”

Source: http://www.khaleejtimes.com/biz/inside.asp?xfile=/data/uaebusiness/2012/June/uaebusiness_June92.xml§ion=uaebusiness

Realty sector hit as IT industry demand goes down

BANGALORE: The commercial real estate market is facing tough times, with office space absorption across India's seven largest cities dropping 12% quarter-on-quarter in the January-March 2012 period due to uncertain economic conditions coupled with the euro zone crisis.

The trend is likely to continue for the next few quarters, with absorption of office space expected to drop by 10-15 % for 2012 due to lower demand from the information technology sector.

Demand from IT/ITES sector has dropped from the peak of 68% in 2005 to 35% at present due to increasing cost pressures faced by these firms. Growth expectations of India's IT sector has been lukewarm so far, with software services exporters complaining of clients' delay in deciding on the technology spend. Compared to around 16% growth in year to March 2012, trade body Nasscom has forecast an 11-14 % growth rate for the year to March 2013. "Things are not as rosy as they were in 2010.

Most corporates are adopting a 'wait-and-watch' policy . The majority of demand in the first half of 2012 was spillover of work-in-progress deals from 2011. The demand thereafter will be influenced by the Indian economic performance and outlook of global markets," said Rohit Kumar, head of research, DTZ India, a real estate consultancy firm. Total commercial office space absorption for Q1 of this year was 7.4 million sq ft, representing a decrease of 12% q-o-q and 15% y-o-y. Vacancies across cities are expected to rise in 2013, except Bangalore," a recent report by DTZ India said.

Currently, demand for Grade A office space is driven by foreign companies from the US and European Union, which contribute a lion's share of lease transactions across major cities in the country. Demand for office space from the US-based companies have been stagnant; these companies have been contributing 48% of the total office space demand in the country, followed by India and European countries.

Larger IT firms such as Infosys and Wipro have projected negative to flattish growth in June ending quarter, and analysts expect at least another 1-2 quarters before the sector hits the growth track, depending on recovery in the US and Europe. "There has been no escalation in realty budget as companies look to reduce operating costs.

IT/ ITeS firms have reduced their real estate budget by 5-8 % this year as they wait for renewal of contract from clients before they can take on additional floor space," said Sridhar Raghavendra, founder of FM Zone India, a real estate and facility management firm representing IT/ITes firms.

Some of the companies, which are looking to occupy large space and are yet to sign deals, are Juniper Networks (500,000-700 ,000 sq ft), Intel (120,000 sq ft), Cyprus (200,000), Volvo (700,000 sq ft) and Eurospace (300,000-500 ,000 sq ft) "There are some larger commercial space requirements floating in the market, but no deals have concluded so far. Decision making by corporates have slowed down since fourth quarter of last year.

Companies are also staggering occupancy time line and do not want to occupy large space at one go," said Naveen Nandwani, director of property consulting firm Cushman & Wakefield at Bangalore.

Source: http://timesofindia.indiatimes.com/tech/enterprise-it/infrastructure/Realty-sector-hit-as-IT-industry-demand-goes-down/articleshow/13390862.cms

Estate South 2012 reviews realty progress

Chennai

With improving transparency and visibility of the real estate markets in the South zone, cities such as Bangalore, Chennai and Hyderabad have attained a place on the global real estate map, a status that was limited just to Mumbai and Delhi in the past.

While South Indian cities constitute nearly 45% of the country’s office space, the stock of 140 million sq ft in these cities is projected to grow at a CAGR of 8% for the period 2012 – 2016, lower than the projected national growth of 11%, according to Jones Lang LaSalle. This implies that the southern cities, particularly Bangalore and Hyderabad, are relatively rationalised in terms of medium term supply of office space, and the cities have chosen a strategy of pursuing selective quality developments over rapid expansion. While this would keep their share in India’s office stock range bound at 37%-40%, the South Zone’s vacancy rate by end-2012 is expected to be 16%, considerably lower than the pan-India vacancy rate of over 20%.

Panelists cautioned that if the office space absorption does not expand in the coming years, there will be a concomitant effect on the residential development as well. This in turn necessitates the need to keep the cost control under constant check.

In a one day seminar titled Estate South 2012 and organised by CII recently at Hilton Hotel in Chennai, experts from the real estate sector have brought out that South India’s retail real estate market has gone through a makeover in the past decade when its retail stock grew from a mere 1.6 million sq ft in 2003 to 13.2 million sq ft in 1Q12. The share of South India’s retail stock to the pan-India stock is expected to record a notable increase from 20% at end-2011 to touch 36% by end-2016.

While demand remains healthy for organised retail spaces, it is polarised towards either successful malls or high streets, which have better footfalls and conversion ratio. As the mall stock in the southern cities sum up to breach the 40 million sq ft mark by end-2016, the vacancy by then is expected to witness a notable decline from the peak levels of 2014 to drop below the national average of 20.5%.

South India’s residential market has been an ardent follower of the ‘affordability’ mantra, with more than 80% of the new launches in the past two years being priced under Rs 4,000 per sq ft. As a result, the residential markets of South Indian cities have remained resilient in the past few quarters, relative to the significant decline recorded in the sales volume of Mumbai and NCR-Delhi. Having exhibited healthy resilience during times of uncertainty, it is imperative for the developers to ensure prudent pricing strategies in the coming quarters to remain competitive as well as sustain the momentum that they have gained during early 2012.

The focus of Indian real estate is shifting from Tier I to Tier II cities, and the southern region is also embracing the same, with secondary hubs developing in Kochi, Coimbatore, Vishakhapatnam and Mysore, that are persistently striving for higher milestones.

On the housing finance front, LIC Housing Finance claims to do 50 per cent of the business from the four southern states. “Chennai is one of the fast growing cities not only in real estate development but also in employment generation”, according to V K Sharma, CEO, LIC Housing Finance Ltd. With a growth rate of over 20 per cent, LICHF’s loan book has posted robust disbursement of over Rs10,000 crore in tier III cities in the south.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/estate-south-2012-reviews-realty-progress