Builders' body asks FM to bring in sops for real estate

MUMBAI: After finance minister P Chidambaram asked realtors to sell off unsold flats at discounted prices, CREDAI, the apex body of real estate developers in the country, put the ball in the minister's court and said he should take immediate steps to boost housing stock supply through special incentives to the affordable segment.

Chidambaram had reportedly asked commercial banks to put pressure on developers to clear their inventory and lower the prices to get the economy running.

CREDAI national president Lalit Kumar Jain said the government has finally realized that "real estate kick-starts economic development". He described the reported figure of unsold housing stock of 500,000 in the country as "unrealistic". "CREDAI appeals to Chidamabaram to look at ways to bring down the cost of construction while taking steps to encourage buyers to have houses of their own," said Jain.

"We ourselves have asked member developers to start selling even at rock bottom prices as long as three month ago as nobody would like to block his capital by sitting on unsold stock and that too in a very high interest regime. On one hand, banks are discouraged to lend to real estate developers while on the other cost of fund from non-banking sources is prohibitively high," said Jain.

CREDAI has also volunteered to work with the Indian Banks' Association on the proposed committee on housing sector, which was mooted by the FM. The organization said for the past two years, liquidity in general and access to bank credits in particular has been restricted due to variety of risks. "Just as any other sector of economy, the real estate sector has also found it difficult to tap bank resources, bank credits," it said. It estimated that funding by commercial banks in the organized real estate industry is negligible.

Banks and finance companies are still wary of financing the real estate sector as RBI always keeps it in the negative list. "It is ironic that while home loans area top priority, the home developers are not," Jain regretted.

Referring to concerns over prevailing high prices of houses, he said it is akin to the typical egg-and-chicken scenario.

"The general sentiments in the market and economy are preventing buyers to move and developers are unable to bring down the prices because of very high cost of construction. Hence the demand-supply mismatch continues with the housing shortage crossing the 26 million mark," he said.The other key factors that add to the high cost of realty are the ever-increasing local municipal taxes, ready-reckoner rates for deciding stamp duty, cess and VAT. For instance, the burden on developers in Mumbai has risen on account of fungible area. The cost of labour has gone up by as high as 60% over the past two years, it said.

Source: http://timesofindia.indiatimes.com/city/mumbai/Builders-body-asks-FM-to-bring-in-sops-for-real-estate/articleshow/15610429.cms

Real estate recovering from the bottom

India’s real estate sector, which has been seeing a prolonged slowing in sales and huge pile-up in property companies’ debts over the last few years, seems to have started recovering from the bottom, says a new report.

Robust demand across micro markets, stabilising debt of realty companies, continued strength in underlying demand in Mumbai and a sharp reduction in exposure of the banking sector to retail home loans are auguring well for the sector, says Aashiesh Agarwal, real estate analyst at Edelweiss Securities, in a report released today. Edelweiss has maintained an ‘overweight’ stance on the sector.

Quoting realty research firm Liases Foras, Agarwal said sales volumes remained robust, except in Hyderabad. The National Capital Region (NCR) and Chennai led the pack among major cities, driven by resolution of the land row in Noida and a pick-up in approval process, respectively. Pune saw an increase in volumes, while Mumbai remained sluggish, he said.

For instance, NCR saw a 14.8 per cent jump in volumes on a year-on-year (y-o-y) basis in the March quarter, while Chennai saw a jump of 29 per cent. Pune saw 34 per cent increase in volume offtake.

Led by strong revival in sales reported by real estate developer DLF, sales volume across the 11 major real estate companies increased 28 per cent quarter-on-quarter and 29 per cent y-o-y in the three months ended on March 31. DLF accounted for 42 per cent of the sector volumes.

The report further said aggregate net debt of top the 11 companies declined marginally to Rs 41,400 crore in the March quarter against Rs 41,700 crore at the end of the previous quarter, driven by a reduction in debt by Sobha Developers Ltd and Godrej Properties Ltd which went in for an institutional placement programme to bring down the promoter stake and reduce its leverage.

Pointing out that “bright spots are emerging” in Mumbai, the report said the pace of percentage decline in property registrations has been losing momentum, indicating signs of bottoming out.

“Property registrations for March and April were 5,830 and 5,150, respectively, well above the January-February numbers of 4,100-4,300, indicating an uptrend in registrations,” it said.

The Maharashtra government’s recent move to introduce amended development control rules for Mumbai is a positive and will spur new launches in city, the report said. Further, exposure of the banking sector to retail home loans has reached an eight-year low, which lessens potential concerns of a credit-led bubble in real estate, while also providing headroom for future growth.

Source: http://www.business-standard.com/india/news/real-estate-recovering-frombottom-/477300/

Now, home buyers can complain by e-mail

CHENNAI: The Confederation of Real Estate Developers' Association of India (CREDAI), a forum of builders, has put house buyers' grievance redressal mechanism on the fast track by introducing an e-based redressal system.

Hereafter, house buyers in Chennai can prefer complaints against builders to CREDAI's grievance redressal forum by e-mail, said N Nandakumar, chairman of mission transparency, an initiative undertaken by the builders' body across the nation to improve the quality of service offered by its members.

CREDAI national secretary T Chitty Babu said here on Monday that the grievance redressal forum in TN, established two years ago, had received 27 complaints and that all those disputes were settled.

Babu said builders could be held responsible for defects like cracks developing in pillars, beams and roofs of residential buildings even after a decade of construction.

Replying to a question on if there was any timeframe for customers to prefer complaints against builders, Babu said, "Builders gives a guarantee for 12 months. The proposed real estate regulatory bill is likely to extend this deadline to two years.

"But in case of major structural defects, there is no timeframe. If a competent agency proves that the quality of construction is substandard and the building is structurally weak, then the builder can be taken to task even after 10 years of construction."

Source: http://timesofindia.indiatimes.com/city/chennai/Now-home-buyers-can-complain-by-e-mail/articleshow/11611175.cms

Hindustan Construction Plans to Sell Part of Stake in Real Estate, Infra Units

NEW DELHI – India’s Hindustan Construction Company Ltd. plans to sell part of its real estate and infrastructure units, as well as aggressively chase outstanding payments with state-run companies to reduce its debt, a senior executive said.

Chief Financial Officer Praveen Sood said the company is looking to raise up to 5 billion rupees through the stake sales.

Friday, the company said it swung to a consolidated net loss of 1.30 billion rupees in the quarter ended Dec. 31, compared with a net profit of 79.4 million rupees a year earlier.

Source: http://blogs.wsj.com/dealjournalindia/2012/01/23/hindustan-construction-plans-to-sell-part-of-stake-in-real-estate-infra-units/

Rupee drop makes realty attractive for NRIs

BANGALORE: Many NRIs are teaming up with like-minded buyers on real estate group buying sites to shop for flats in India. The cheaper rupee and deep discounts offered by developers through these portals has triggered a substantial jump in property-related enquiries from NRIs in the US, UK and the Middle East in the last three months.

London-based Nayan Bhavishi has poured more money into the real estate market in the country than in any other geography or asset category . An avid real estate investor , Bhavishi snapped up two ready-to-move-in flats in Vaastu project in Thane for Rs 1.20 crore through real estate portal Groffr.com. "I was scouting for properties in India and stumbled upon this site offering good discounts. I got 25% discount on my property purchases and the exchange rate at Rs 84 to a pound was a big draw," he said. Bhavishi said he bought the property at Rs 4,200 per sq ft when the rates in neighbouring properties were between Rs 5,800 and 6,000.

In an increasingly tough environment, developers are warming up to group housing portals. Sandesh Wadhwa, cofounder of group-buying portal groupbookings.in, said many people sitting on the fence have swung into action in the last three months. "There is more demand coming from NRIs for mid-sized housing projects in Gurgaon, Bangalore, Hyderabad and Chennai," he said.

Sandeep Reddy, co-founder of Groffr.com, said the website has seen a healthy sales conversion rate in the last two months primarily driven by NRIs. "The mood among NRI investors is buoyant as they now need to spend fewer dollars or pounds for the same property. The sub-Rs 60 lakh properties are most in demand ," he added.

Vaibhav Sharma, assistant professor of finance at Winthrop University in South Carolina, has booked two flats in Gurgaon through groupbookings .in. "If I were to invest in the US, the property value would fetch me a negative return. It's a good time to enter the Indian real estate market, where I think I can expect at least 6% annualized returns in the residential space," he said.

Sharma's purchase decision was also driven by the favourable exchange rate. He bought the flats last September when the rupee was close to 50 to a dollar. "I also received a 10% discount by signing up on the portal. I didn't have to haggle or make several house hunting trips," Sharma added.

Source: http://timesofindia.indiatimes.com/business/india-business/Re-drop-makes-realty-attractive-for-NRIs/articleshow/11532454.cms

Indian Property Investments by Private Equity Rise 69% in 2011

Jan. 11 (Bloomberg) -- India’s property investments by private-equity firms rose 69 percent last year, according to Venture Intelligence, a research company that tracks private equity, and mergers and acquisitions.

Private equity made $2.68 billion of real-estate investments through 53 transactions in the country, Chennai, India-based Venture Intelligence said in an e-mailed statement late yesterday, based on deals that have been announced. In 2010, they spent $1.58 billion on 55 investments, it said.

Indian developers are chasing private-equity funds because of a liquidity squeeze after sales dried up, and banks and finance companies cut funding. Private-equity deals are getting transacted at internal rates of returns, or the yield of the investment, of 25 percent to 30 percent, Amit Goenka, national director of capital transactions at the Indian unit of London- based Knight Frank LLP, said Sept. 15.

The largest investment last year was Jeff Morgan Capital Ltd.’s $320 million in Compact Disc India’s film city project. Other major deals included Warburg Pincus LLC’s 14 billion rupee ($270 million) investment in a residential joint venture with Lemon Tree Hotels and Blackstone Group LP’s $200 million investment in Bangalore’s Manyata Embassy Business Park. Housing projects accounted for 57 percent of the transactions, while commercial projects made up 19 percent, the study showed.

A total of 69 private-equity investments were made in India’s real-estate market in 2011, of which 53 were announced. In the previous year, 55 of the 63 deals were publicly disclosed.

Divestments

Buyout firms made 19 exits last year. A total of 14 were announced with a combined value of $603 million, Venture Intelligence said, compared with eight in 2010, it said.

HDFC Property Ventures Ltd., which accounted for five of the exits, sold its stake in the Embassy Property Developments Ltd.’s information technology park in Bangalore in south India back to the developer for 4.9 billion rupees in a deal funded by Blackstone. HDFC also divested its two-year-old investment in Nitesh Estates Ltd.’s Bangalore mall project back to the developer for 4.5 billion rupees.

Kotak Realty Fund realized $86 million from its stake sale in Peepul Tree Properties Pvt., a commercial information technology park in Mumbai, to Tata Realty Initiatives Fund. Kotak also sold a 20-acre land parcel in the south Indian city of Chennai that it had acquired from the Pentamedia Graphics group in February 2007. Indiareit Fund Advisors Pvt. and Red Fort Capital Advisors Pvt. also reported exits during the year, Venture Intelligence said.

Source: http://www.businessweek.com/news/2012-01-11/indian-property-investments-by-private-equity-rise-69-in-2011.html

International real estate expansion halted for Indian companies

Indian real estate companies who started international ventures in 2006-07 are revising their overseas agenda. With a decline in international realty, many domestic developers are retreating from weak markets or putting on ice global plans.

This re-assessment of development strategies has not come lightly. For example, the Raheja Group has decided to pigeonhole plans to build in Colombo and Mauritius and with the Hiranandi Group, a key player in Dubai real estate halting new enterprise launches to act as a contractual liaison in the completion of existing projects for other developers proves how developers are opting for self-preservation tactics.

Entering Dubai in 2007 with plans to expand into West Asia Omaxe has now entirely pulled out of Dubai. With a joint partnership with Nakheel, Dubai’s World property developer and an investment of Rs 50 crore (US $10,850,000) has now exited from the market due to near dormancy. Despite receiving their investment back, Rothas Goel, managing director and chairman of Omaxe explained that with a Nakheel placing projects on a permanent hiatus Omaxe has no future plans to build outside of India.

But not all companies are weary about the market slump. Tata Housing has plans to embark on projects based in Colombo, Sri Lanka. Already prominent in the Maldives, Tata House has invested Rs 1,000 crore (US $217,000,000) for an array of ventures for 2011-12.

Whether a company is demonstrating precaution in international property development or acting with confidence in continual investments and expansion, it is advised by real estate consulting firm Cushman and Wakefield for companies who have over extended themselves to “focus on their core strength.”

Source: http://www.property-report.com/site/international-real-estate-expansion-halted-for-indian-companies-18130