Residential market grows in Guduvanchery-Thiruporur Road, Chennai

Chennai

Strategically located on the Grand South Trunk Road (GST), Guduvanchery has always been a preferred a residential location in Chennai owing to its excellent connectivity and immediacy to SEZz. However, the buyers’ focus is now shifting towards the road stretching from Guduvanchery to Thiruporur. This is a result of escalating residential values in the locality owing to increased guideline values along the GST road. Thus, Guduvanchery, once considered amongst the affordable locations of Chennai suburbs, has become relatively expensive now.

The Guducanchery-Thiruporur stretch has been brimming with real estate activity for quite sometime now with pace of construction and sales picking up in the last six months. “Several developers have completed their projects here while others are under construction,” says Abdul Kasim Tariq of Smart Choice Realty, a city based firm. “Nearly 2000 apartments,” continues Tariq, “have come up on this road of which about 1000 are completed while the remaining would be given possession in another 2-3 months.” Some of the developers to have set base here include Lancor Developers, DVS Developers and Sriram Shankari Developers among others.

Demand on this stretch is being driven by the two SEZs. Guduvanchery falls between the Mahindra World City and MEPZ, both located 13-15 km away. “The maximum demand exists for 2BHKs followed by 3BHK units which are available for a price range of Rs 2,400- 3,000 per sq ft,” informs Tariq.

At present the Guduvanchery-Thiruporur road is generating a lot of interest from the investors. Talking about this Tariq says, “Nearly 60 per cent buyers are investors who either invest for long term returns or for rental returns. Only about 30-40 per cent demand comes from the end users.” The stretch has seen an average appreciation of nearly 40 per cent in capital values of projects in the last 2 years thus promising good return on investments. There is also a huge demand for rented units from the professionals working in the SEZs. The rental values vary between Rs 8000-9000 per month for a 2BHK units and it ranges from Rs 10000-12000 per month.

Source: MagicBricks.com

Property show at Hitex centre

HYDERABAD, FEB. 5: The real estate portal IndiaProperty.com will host the ninth edition of its property show Gruhapraveshm 2013 during February 8-10 at Hitex Exhibition Centre here.

Ganesh Vasudevan, Chief Executive Officer of Indiaproperty.com, in a statement said the growth of IT and ITES sectors and the cosmopolitan nature of the city is slowly becoming a choice of residence for many.

“The attractive real state prices and new infrastructure projects are giving a push to the residential and retail investments in the city,” he said.

The show provides an extension of the online support to buyers and developers and provides an opportunity for potential home buyers to interact with one another at a common platform. The event will showcase over 200 new properties.

The company stated that Hyderabad is basically a services sector growth driven market with preference for gated community ventures and projects offering quality amenities. Areas such as Gachibowli, Kondapur, Madhpur and Miyapur close to the IT hubs are popular.

The portal is providing ‘Call n List’ service to enable customers to list property online by providing information through a toll-free number.

rishikumar.vundi@thehindu.co.in

For the original post visit: http://www.thehindubusinessline.com/news/real-estate/property-show-at-hitex-centre/article4382871.ece

Green spots to be reclassified as industrial zones

CHENNAI: In a move that will bring down the city's green cover to a mere 3%, the Chennai Metropolitan Development Authority (CMDA) has decided to reclassify several green zones as industrial zones in the suburbs. Noombal village in Ambattur and several areas in Thiruverkadu that are under threat from rampant real estate development are being reclassified. The concept of protected green belts with construction and development norms was introduced to maintain the greenery and reduce pollution.

A senior CMDA official said they have decided to reclassify Noombal village, near Poonamallee bypass road, from green to industrial category. "Noombal and several green zones in Tirverkadu have lost their green cover. Major developmental and construction work has taken place in these areas. The government as well as private parties have been responsible for the spate of development activities. Noombal was not included in the list of green zones in the CMDA master plan released in 2008," he said.

As per CMDA records, the area has already been turned an industrial or commercial area. "Of course, reclassification will make the area free from regulations," said a CMDA official. "But development has been taking place in all these green zones since the late 1990s," he said. The process of reclassification will require several rounds of consultation with people and experts. The decision is likely to receive objections from environmental groups. Reclassification will make the area free of regulations. Green zones, mostly agricultural lands, are major sources of ground water and balance ambient temperature levels in the summer.

M G Devasahayam, a member with the CMDA monitoring committee, said CMDA has made a disastrous decision. "This is another example of introducing a system to help the real estate mafia. The plan will make Chennai unlivable as temperatures will rise and groundwater will deplete if the remaining green cover is destroyed," he said. "Inviting industries into an already over-crowded region will only make things worse," said a consultant with the state government.

For the original post visit: http://timesofindia.indiatimes.com/city/chennai/Green-spots-to-be-reclassified-as-industrial-zones/articleshow/18342173.cms

What Do Home Buyers Prefer In Real Estate?

Bangalore: What actually buyers prefer in real estate? Do they prefer taking risk and book projects that are still under work or do they go after big banner firms who promise to offer quality products? Well, such questions are important for home buyers who are planning to buy their dream homes, reports Economic Times.

Sunil Jindal, the chief executive officer of SVP developers said that "I can tell you from my experience that customers usually invest in those properties where they find some kind of activity. If they see that work is on, then they invest. Selling flats, floors or plots on barren land is not an easy task. Selling a dream is not that easy unless you back it up with performance on the ground," reports Economic Times.

According to Alimuddin Rafi Ahmed, the chairman and managing director of ILD developers, home buyers avoid making any deal on projects which are under construction, mainly when it comes to their dream home. For instance, if most of the home buyers are to fix any deals in projects which are going through construction work then maximum real estate developers would have just start with the project foundation and easily sell off their projects under the same manner.

"Fact of the matter is, nobody knows which project will create a storm in the market and which one will fall flat," added Ahmed.

For the original post visit: http://www.siliconindia.com/realestate/news/What-Do-Home-Buyers-Prefer-In-Real-Estate-nid-136518.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

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

VGN Developers to invest Rs 1800 cr in new projects

Chennai-based real estate company VGN Developers Pvt Ltd is looking at an investment of around Rs 1,800 crore in the next two years, for land acquisition and development projects. The company is also in talks with some of the major international private equity players to bring in project-level investment, said a senior company official.

VGN, which recently announced the launch of a 20-acre residential project with around 1,166 apartments on city outskirts, has around six projects, including two high-end projects, in the pipeline, said Pratish Devadoss, managing director, VGN Developers.

Of the total investment, around Rs 900 crore would be from equity while the rest would be from debt. However, the company would also look at private equity funding at the project level to control the debt, he added.

“We are in talks with a couple of the top international players. We are interested only in project-level funding in the future four to five projects, and if everything goes fine, we may finalise the financial aspects of the deal in 10-15 days,” said Devadoss.

The company is planning a 200-unit high-end apartment project on 2.5 acres at East Coast Road and a 15-20- unit apartment in Nungambakkam, in the city. Another four projects are in the pipeline and is expected to come up with an average of 1,500-2,000 apartments each on 20-40 acres, in the immediate suburbs of Chennai.

“We are expecting a project value of Rs 2,350 crore from these in the near future,” he added. The company has so far completed 10 residential projects and finished another 30-40 residential layouts.

The Rs 400-crore VGN Group would look at a qualified institutional placement to raise funds when it reaches Rs 700-750 crore revenues. However, he refused to reveal more on the plan.

The recently announced residential project at Thirumullaivoyal, on the outskirts of Chennai, is expected to come up with an investment of around Rs 450 crore and an expected project value of around Rs 700 crore.

Source: http://www.business-standard.com/india/news/vgn-developers-to-invest-rs-1800-cr-in-new-projects/484602/

GST Road – A prime destination for real estate development

Chennai

GST Road, in many ways, is the city’s lifeline. Not only is it the gateway to the city, linking it with many important places, it is also gaining ground as an important investment option, as far as residential real estate is concerned. We look at some prominent locations on GST Road that are set to grow even further.

Maraimalainagar

This suburb, located 40km away from the city, has been on the development radar for quite sometime now, both in terms of residential and industrial growth. In the late 70s, when Rajiv Gandhi, the then Prime Minister of India, visited Chennai, he referred to Maraimalainagar as the new face of Chennai and called it the city’s first satellite town. Now, almost two decades later, the area has grown by leaps and bounds in terms of urban infrastructure. The setting up of Mahindra World City, Infosys and the Ford manufacturing plant, to name a few, has helped put Maraimalainagar back on the map. The area is well-connected by rail networks and by roads (Trichy-M a d u r a i – K a nya k u m a r i Highway). It is also for this reason that Maraimalainagar is home to a whole range of factories – TAFE, Ford, Siemens, a few printing presses, engineering colleges like SRM University (Kattankulathur), etc, apart from its proximity to the industrial belts of Oragadam and Sriperambudur. The Chennai Outer Ring Road project, a 30km-long six-lane road connecting Vandalur with Nemilicheri is under construction now; this is expected to fuel more growth in Maraimalainagar.

Oragadam

Oragadam, centrally located between Grand Southern Trunk and NH4, has been touted as Chennai’s largest and the most developed industrial belt. With over 22 Fortune 500 companies (of which six are global car manufacturers), the Sriperumbudur-Oragadam belt has seen tremendous industrial growth in less than four years. The area is well-connected via road and rail, and according to industrial experts, the presence of automobile giants like Renault-Nissan and Ford has triggered growth around Oragadam. Several manufacturing giants such as , Motorola, Dell, Flextronics, Samsung, Nokia, Apollo Tyres, and TVS Electronics, have set up their respective units in the industrial belt stretching from Sriperumbudur to Oragadam. In addition, JCBL Ltd, Essar Steel, BPCL, Delphi TVS Diesel Systems Ltd, GE Bayer, Silicons (India) Pvt Ltd have also set up their businesses in SIPCOT Industrial Park, Oragadam. DHL is also reported to be setting up its first Free Trade Warehousing Zone at Sriperumbudur.

Chennai Outer Ring Road

The Chennai Outer Ring Road will run to a length of 62 km connecting Vandalur in NH-45 (GST) placed in the South-Western edge with Minjur in Thiruvotriyur-Ponneri-Pancheti (TPP) Road in the northern fringe of the city and close to the Ennore Port and other industrial developments in the Northern areas. The road will run via Nazarathpet on NH-4 (Bangalore Highway), Nemellichery on NH-205 (Chennai-Tirupati-Anantpur Highway) and Padayanallur on NH-5 (Chennai-Calcutta). The Vandalur to Nemillichery stretch, a length of 29.65 km is being implemented as Phase-1 of development. The stretch is touted to change the face of Chennai as we know it, and pave way for state-of-the-art infrastructure, which in turn, is expected to promote more real estate activity.

Source: Times Property, The Times of India, Chennai

LICHF begins process of raising funds through QIPs

Chennai: LIC Housing Finance on Friday said it has begun the process of raising funds through Qualified Institutional Placements this fiscal, via issue of 4.06 crore shares valued currently at about Rs 1,100 Crore.

The Board of Directors approved a proposal to raise funds through QIP at the Annual General Body meeting in March this year, LIC Housing Finance Director and Chief Executive V K Sharma told reporters here.

"We have got a one year time period till March 2013. Right now, the process is on. We will take a decision in two to three months (on raising capital)", he said after inaugurating the 15th edition of "Ungal Illam", it's flagship exhibition.

Sharma said the Board had given nod to liquidate 4.06 crore shares (about 2 percent). "The value of capital to be raised will be price of each share," he said, adding that they would consider it when the market is "conducive".

Shares of the company were trading at Rs 263 apiece, down by 2.36 percent in the afternoon BSE.

Sharma said the overall dilution through this proposal would be around two percent, adding, "our Capital Adequacy is 14 percent. Last year, when RBI changed norms for NBFCs and others, we were under the impression that our regulator (NHB) would also change it. But they did not. They have issued clearances".

On the capital raising plan, he said, "We have started the process. It is good to raise capital, particularly when there is a high interest rate (scenario in the market). Ultimately, every year we are growing more than 20 percent".

The company was in very "strong position" (financially), Sharma said, adding that the capital raising proposal would bring "value" to shareholders and to the company itself. "It will be useful for the business purposes", he said.

Total assets managed by LICHF are around Rs 60,000 crore and last year total disbursement was Rs 20,000 crore. "This year we are looking at Rs 22,000 crore with a growth of over 20 percent," he said.

To a query, Sharma said they are yet to appoint merchant bankers for the fund raising proposal and added that this year looks to be a "challenging time" due to uncertain market conditions.

"This year looks to be challenging times (due to high inflation, interest rates). Though the demand (for real estate among individual buyers) has not decelerated, supply is decelerated", he pointed out.

He said that in the commercial business, real estate projects are witnessing a "clear cut slowdown". Ninety five percent of total business constitutes retail lending and the balance real estate developers.

PTI

Source: http://zeenews.india.com/business/realestate/property-frills/lichf-begins-process-of-raising-funds-through-qips_55727.html

'Realty firms postpone shopping mall construction in 8 cities'

Realty firms have delayed the construction of shopping malls in eight major cities due to large vacant space in the existing complexes, according to property consultant Cushman & Wakefield.

"The retail real estate market recorded a deferment of more than 30 per cent of retail mall space against the projected supply for the first half of the year," C&W said in a statement.

The consultant, however, said the deferment was necessary considering the high vacancy rates in the shopping malls and cautious approach adopted by retailers on expansion.

The eight major cities (Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, NCR and Pune) witnessed a fresh mall supply of 2.27 million sq ft during first half of 2012.

"Approximately one million sq ft of expected mall supply was deferred to second half of the year or next year. The overall vacancy rate for the major cities as of H1, 2012 stood at 19.6 per cent, marginally higher than the previous quarter.

NCR saw the highest mall supply deferment of over 80 per cent ensuring the city maintained 28 per cent vacancy levels. NCR saw only 1.2 lakh sq ft of mall supply in H1. Bangalore saw the highest mall supply of 1.5 million sq ft in H1 2012.

"This slowdown in mall construction need not be viewed as a negative growth indicator for the retail real estate segment. The current pace is, in fact, expected to help in maintaining a healthier supply to demand equation; especially for oversupplied micro-markets," C&W India Director Retail Agency Jaideep Wahi said.

"With high vacancy levels as well as cautious expansion plans of retailers, the deferment of supply is a necessary measure to bring stability in the retail market," he added.

According to report, the rental values across most mall destinations within these 8 cities remained largely stable, except for certain micro-markets in Bengaluru, NCR, Kolkata and Mumbai where mall rentals have seen a growth over the previous quarter in the range of 2-13 per cent.

Elgin Road in Kolkata recorded the highest growth in mall rents at 12.4 per cent over last quarter mostly owing to renewals of existing tenants at a higher value.

Some prominent high streets destination recorded higher increase in rental values as against malls, reflecting the bent of interest amongst retailers for high-street.

Select locations across Bengaluru (MG Road, Jayanagar, Koramangala, Vitthal Mallya Road) recorded increase in rental by 8-9 per cent over the previous quarter.

Camac Street in Kolkata saw the highest increase in high street rentals at 25 per cent followed by MG Road in Bengaluru at just over 9 per cent. Gurgaon and Pune also saw increase in high street rents by 7-8 per cent.

Source: http://www.deccanherald.com/content/263504/realty-firms-postpone-shopping-mall.html

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

A Rapid Hike In The Housing Sector

At a time when real estate values started stabilising in and around Chennai, the government of Tamil Nadu has increased the rule values for realty registration functions by hiking the values from sixty per cent to three hundred per cent effective April one. This has sent shock waves among the business and therefore the landowners and property developers are in a piquant state of affairs currently.

The government’s reduction in stamp duty by one per cent has not gone well with the business when the rule values were raised to unexpected levels. The realty sector is in for rebellious times owing to sudden and remarkable hike in guideline values and therefore the worst hit sector are going to be reasonable housing phase.

According to official sources, though the revenue for the 2 month amount (April and May) was up by Rs one hundred crore, the amount of transaction has come back down drastically. business sources say that town space transactions fell through owing to reluctance on the part of consumers to soak up the hike in stamp duty.

In vibrant industrial areas like Whites road, the rule price soared to Rs 16000 higher than the market price. In different town areas like Abhiramapuram, the price for residential property in Chennai is quite the industrial value. The state government in their anxiety to curb the unaccounted cash in realty transaction has sent a wrong signal to the market which can adversely impact the housing development.

Land transactions aren’t happening today not attributable to the steep hike in guideline values alone however owing to the cascading impact of RBI restrictions on bank funding to realty sector, uncertainty in FDI investment, world meltdown, higher expectations of PE funds and soaring land price. What has aggravated the entire situation additional is that the sudden hike in guideline values.

The worst hit within the current situation is that the reasonable housing phase and therefore the common man for whom the dream of owning a shelter can solely get longer. Though official sources claim that the hike in guideline values vary from sixty per cent in suburbs and outermost areas, lack of development and lesser margins for developers won’t encourage them and solely prolong the general development of reasonable housing within the returning months.

Yet another phase that bore the brunt of the hike in guideline values is that the homeowners in exigencies. The distress sale isn’t happening due mainly to the hike in guideline values.

While guideline values within the town are over market values, within the suburbs it’s the reverse, which may be a matter of concern. This disparity is partly owing to the slow growth of realty costs in suburban areas. Though properties are obtainable at lower rates, we’ve to pay a better stamp duty and registration fees there as they’re calculated based mostly on guideline values, that are over market costs.

There is conjointly a region of developers who feel that in some areas, the rule price revision has been so much too steep. With such upward revisions, middle income individuals can realize it troublesome to purchase property in Chennai. Already, several of them are moving to suburban locations. However, so much this argument can cut ice may be a matter of dialogue.

Even when the rule values were low, builders kept apartment costs high, who ended his five-year look for an apartment a month ago.

Source: http://proptigerrealty.wordpress.com/2012/07/05/a-rapid-hike-in-the-housing-sector/

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

Tamil Nadu CM announces various infrastructure projects

CHENNAI: As part of her government's efforts to decongest suburban Chennai, Tamil Nadu CM J Jayalalithaa on Friday announced various infrastructure projects totalling over Rs 230 crore.

A road expansion of upto one km at the busy GST Road connecting southern suburbs to the city, near the airport at a cost of Rs 1.75 crore, was also sanctioned by her.

Further, Jayalalithaa allocated Rs 231.68 crore towards road over bridges and subway at other suburban areas of Tambaram, Velachery and Kolathur, an official release here said.

The release said these efforts would help decongest these parts, which have of late become favoured destinations of real estate activity in Chennai.

Source: http://timesofindia.indiatimes.com/city/chennai/Tamil-Nadu-CM-announces-various-infrastructure-projects/articleshow/14495168.cms

ASK Property closes Rs1000 crore realty fund

Real estate private equity arm of ASK group, ASK Property Investment Advisors, announced the successful closure of its second real estate fund – ‘ASK Real Estate Opportunities Fund’. The fund has successfully raised Rs1000 crore. The significantly large corpus raised by this fund is in sharp contrast to the fundraising constraints witnessed by real estate fund industry and is possibly the highest amount raised domestically by any real estate fund over the last four to five years.

Sunil Rohokale, MD&CEO of ASK Investment Holdings said, “In spite of tough economic conditions ASK has managed to leverage its strong relationships with clients who have yet again reposed their faith in the group. Majority of our investors have been repeat investors from our first fund who have experienced our strategy and our performance.”

“The current environment provides excellent countercyclical opportunities. This opportunity, combined with focused strategy of mid segment housing in top five cities, in partnership with prudent and reputed developers will help us in providing superior risk adjusted returns.

Our first exit is a clear indicator of our potentially sound investment track record” said Amit Bhagat, MD & CEO, ASK Property Investment Advisors. ASK Property investment Advisors (ASKPIA) has managed to record a significant performance in its investments made so far. In March 2012, the company announced its first exit in Noida at a staggering IRR of 54 per cent with a multiple of 2.45.

With this close ASK will have AUM of over Rs1300 crore, making it one of the leading real estate funds with significant capital ready for deployment in the liquidity starved real estate market. The maiden fund of Rs326 crore raised in 2009-10 has been fully deployed in seven investments in four cities. In line with its strategy, the ASK Group has partnered with reputed developers including ATS Infrastructure in Noida, Paranjape Schemes, Amit Enterprises and Darode Jog in Pune, Sushil Mantri Group in Bengaluru, Real Value in Chennai and Rajesh Builders in Mumbai.

In March 2012, ASK Property announced investment from their second fund in Mumbai by forming a partnership through a 49 per cent stake with Godrej Projects Development (GPDPL) for a redevelopment project in Sahakar Nagar at Chembur. This project is worth over Rs700 crore and ASK funds have invested close to Rs100 crore in this project.

For the original post visit: http://www.constructionweekonline.in/article-7882-ask_property_closes_rs1000_crore_realty_fund/

Rough patch for realty

Property developers in all major cities are battling with significant drop in sales of residential properties due to the economic slowdown and delay in approvals

Real estate industry seems to be entering another trough. Property developers in all major cities are battling significant drop in sales of residential properties due to the economic slowdown and delay in approvals. Mumbai and Delhi, which already witnessed a substantial dip in sales of commercial properties in the past couple of years due to excess supply, are now hit by a slump in sales of residential properties.

According to industry officials, the impact on residential sales till December 2011 was marginal, and developers were betting big on projects to ride out the economic slowdown. However, a sudden fall in sales during the January-March quarter has shattered hopes of an early recovery.

While commercial property sales were affected due to oversupply, the residential segment has been hit mainly due to slow approvals as sales are proportionate to new launches, apart from the inevitable impact of a general slowdown and drop in sentiments.

Lalit Kumar Jain, chairman of Kumar Urban Development, told FC Build sales have dropped in cities, especially Mumbai and Delhi. “In the past 18 months, there were very few approvals for new projects in these cities. Since sales are directly proportionate to new launches, we have witnessed a significant dip in absorption of residential properties.”

Jain says the demand is stable in cities like Pune, Bangalore and Chennai since these markets are mostly driven by end users.

Rajeev Talwar, managing director, DLF, agrees, “Sales are down because of slow approvals mainly in Mumbai. In the past 18 months, there has been no supply coming in due to delays in project approvals.”

Real estate experts feel the problem is due to unreasonable increase in property prices along with uncertain economic conditions. Pankaj Kapoor, chief executive officer of Liases Foras, said that in April-June 2009, Mumbai witnessed sales of 21 million sq ft, the highest in past four years, that has now declined to barely 8 million sq ft in the January-March quarter.

“Sales increased in June 2009 as real estate prices corrected during the economic slowdown. However, prices went up steeply after 2009, and now developers are witnessing lower sales due to these unreasonable prices,” said Kapoor.

“The high cost of land is creating another hassle for developers in big cities. They are shelling out huge amounts for acquiring land, that has resulted in price increase of properties,” Kapoor said, adding, “The balance sheets of developers are already stressed, and declining sales would reduce their profitability further.”

PropEquity, a data analytics and research firm, said in a recent report that residential unit absorption numbers in January-March in the national capital region (NCR) and Mumbai metropolitan region (MMR) plunged over 50 per cent due to the economic slowdown enveloping the country.

Surprisingly, Bangalore, the IT-capital of India, has escaped relatively unhurt, and witnessed a drop in absorption by just 18 per cent.

Jackbastian Nazerth, chief executive officer, Puravankara Projects, said, “In the southern markets, the drop in sales is lower than cities like Mumbai and Delhi as the prices are still affordable. In the past one year, property prices have increased by around 15-18 per cent in Bangalore, whereas, in Mumbai and Delhi, price increase is around 30-40 per cent, mainly driven by speculative buying by investors.”

Nazreth said while the Bangalore market is driven by end users, the city requires more houses as 60 per cent of the population still stays in rented houses.

“We are worried that speculative buying should not start in southern region, leading to situations like what Delhi and Mumbai is facing. We don’t sell more than two apartments to individuals, and most of the other developers in the southern region are also following the same so that speculative buying remains under control,” Nazreth added.

Paras Gundhecha, president of Confederation of Real Estate Developers Association of India (Credai), said the main reason for the slowdown in sales are because of unaffordable prices in Mumbai and Delhi, and also a slowdown in economy.

“For developers, the total cost of developing the project has increased significantly in the past two years in these two cities as developers are paying higher interests due to delay in approvals, and also due to very high cost of land. Interest costs have gone up by 30 to 40 per cent for developers due to approval delays. Further, developers are paying very high prices for land acquisition since it is scarce in cities like Delhi and Mumbai,” says Gundhecha.

However, in cities like Bangalore, Pune and Chennai, developers are not paying higher interests as approvals more or less come on time, and land is available at reasonable price. Moreover, these markets are driven by end users and not by investors. Generally, investor-driven markets would see downside risks than end user driven markets, said the report by PropEquity.

According to PropEquity, the total absorption fell just 18 per cent in Bangalore, to 7,704 units in the first quarter, from 9,410 units in the previous year. Mumbai metropolitan region in January-March period saw absorbed of 11,473 units, compared with 27,676 units a year ago. The total supply in this region in the first quarter of the calendar year 2012 was 89,461 units. In Navi Mumbai, 2,709 units were absorbed in the same period, compared with 7,903 units a year ago, whereas, Mumbai witnessed sales of 4,642, compared with 10,915 units a year ago. Thane witnessed sales of 4122 units, compared to 8,858 units a year ago.

In NCR, 15,104 units were absorbed during the first quarter of 2012, compared with 35,420 units during the corresponding period a year ago. Total residential supply in NCR in the same period was 107,731 units.

During the first quarter, Gurgaon witnessed sales of 5,547 units, against 9,242 units a year ago. Noida witnessed sales of 4,848 units, against 9,160 units a year ago. Greater Noida witnessed sales of around 1,050, against 12,163 units a year ago. Faridabad witnessed sales of 446, against 910 a year ago. Ghaziabad witnessed sales of 3,201 units, against 3,433 units a year ago. Delhi witnessed sales of just 12 units, against 512 units a year ago.

Samir Jasuja, founder and chief executive officer of PropEquity, said the take-up rates in key micro-markets have fallen significantly. “In the coming quarter, there would be strong pressure on many micro-markets, and we expect inventory overhang to increase and absorption could continue to slow down. Mumbai and Gurgaon have already seen one of the sharpest falls in absorptions, with Mumbai metropolitan region seeing a drop of 58 per cent, and NCR a drop of 57 per cent. If this trend continues, there could be ‘stage 1’ price correction in the range of 5 to 20 per cent, especially in micro-markets of NCR, Mumbai metropolitan region and Hyderabad. Some micro-markets where inventories have been managed well by developers would be able to overcome this phase,” says Jasuja.

So, the next few months would be crucial for the sector before taking a final choice – either a stabilisation phase, or a ‘stage 1’ price correction.

jharnamazumdar@mydigitalfc.com

Source: http://wrd.mydigitalfc.com/real-estate/rough-patch-realty-445

Also visit http://www.margproperties.com/vishwashakthi/index.php is you are looking to by luxury apartments in Tirupati.

Good times ahead for property buyers as tepid market gives more bargaining powers

A sluggish market brings good tidings for potential home buyers. One, they have ample time to decide which house they want to buy and secondly, they have a vast variety of unsold properties to choose from. Also, since there is little scope for property prices to appreciate and developers need money to continue their projects, they often come up with special offer prices for limited periods. This doesn’t mean that they will not be willing to negotiate further. In fact, if a developer believes you are a serious buyer and not just a ‘window-shopper’ he might be inclined to offer you something extra.

So, if you hone your bargaining skills, you could get a good discount, which is difficult in a bullish market. Says Anuj Puri, chairman & country head, Jones Lang LaSalle India: “Buyers can leverage a flat market and ask for discounts on the stated price, bargain to have the one-time maintenance charge waived or ask for the parking space to be included in the price.”

You could also request for more amenities to be included within the same price. “Developers may not be comfortable doling out cash discounts as it would reflect on the purchase agreement and lead to other buyers demanding similar incentives.

However, they may be willing to offer incentives in kind which are not evident in the agreement, such as a gym membership or discounting the floor rise price,” says Gulam Zia, national director, research and advisory services, Knight Frank India.

It’s best if you research well before starting negotiations. Check how long the property has been on the market. If it’s been there for more than a year, the seller may be more willing to lower his asking price. This will be true again if the seller has to make a distress sale. “In a flat market, you will always come across some sellers who are desperately trying to sell their properties for various reasons. They could be shifting to another city or country, or may be finding it difficult to repay their loans. In such cases, you may be able to finagle a better deal if you are willing to pay a larger portion of the price in cash,” says Ganesh Vasudevan, VP and business head of Chennai-based realty portal IndiaProperty.com.

As the market is expected to continue to be flat for some more time, you can easily outwait a seller.

Rental returns

Generally, a slowdown in property purchases tends to indicate a higher demand for rental housing. Demand for rental properties has been growing, on an average, between 10-13% annually in various pockets of the country.

Annual rentals, which were in the range of 4-5% of the value of the property till five years ago, have now grown to 5-7.5%. “When the market is tepid, home buyers tend to wait and watch, expecting realty prices to come down in the near future. So, the demand for rental properties increases,” says Zia.

However, you shouldn’t rush to buy a house simply to earn a high rental income. There are various factors to be considered. “You need to be sure that the location will continue to be attractive. Rental demand tends to remain high in areas surrounding workplace hubs, where capital values are usually the highest,” says Puri. You should also check for other amenities, such as schools and hospitals, and whether beneficial infrastructure projects are likely to come up soon in the vicinity of the property you want to buy.

Source: http://www.indianrealtynews.com/real-estate-india/good-times-ahead-for-property-buyers-as-tepid-market-gives-more-bargaining-powers.html

IFMR property on the block

The Institute for Financial Management and Research is selling off a 16,800-sq.-ft parcel of land at Nungambakkam, in the heart of Chennai. This is a part of the more than 55,000-sq.-ft campus on which the Institute is located. According to a newspaper advertisement, the plot is ideal for high-end development such as consulates, offices and luxury residences.

According to market sources, the area has emerged as a destination for luxury apartments and individual homes for high net-worth individuals.

Market estimates peg the price of the seven-ground plot (2,400 sq. ft a ground) at about Rs 5-7 crore a ground. An end user looking to build a home in a ‘better part of Nungambakkam' may be willing to look at the higher end in this range. But it is most likely that a developer planning a luxury project may be interested at the lower end of that pricing range, going by market outlook in that area, said a real estate watcher. For instance, a premium developer is constructing a project on a plot close to the Institute. Apartments in the project are being sold at about Rs 20,000 a sq. ft. Also, another similar plot is available along an adjacent road at Rs 5-6 crore a ground.

The Institute has called for bids for the property up to July 20. It is bound to evoke keen interest in the market, said the sources.

Accessing property info made easy

IndiaProperty.com has sought to make house hunting either for purchase or renting easy by launching a mobile application. According to Mr Ganesh Vasudevan, Vice President and Business Head of IndiaProperty.com, a property portal, the customers have three options now. One is register for notifications that will be pushed to them on their mobiles. The other is for ‘augmented reality search' or visual search. If a customer has chosen an area, he can search for about 1 km around that area for properties on a map or as a list.

The third option is to point the mobile camera towards the entrance (of the building) and details of the available properties would be flashed on the screen according to the customer's requirement even before getting in touch with the advertiser. Mr Vasudevan said the since launch of this facility about five weeks ago, the company has been witnessing about 500 downloads a day. Around 15,000 users were using it on their mobiles and about 5,000 searches a day were taking place on mobiles alone. He said, “We were surprised at this number ourselves.”

ADDing a landmark

Archean Design and Development, the real estate arm of $550-million Archean Group, has launched ADD Albatross in Chennai. The luxury residential project, a flagship project for Archean Design, will include three towers of ground floor and 27 floors in the first phase, according to a press release from the company. Leading brands are involved in the project with Architects SRSS Singapore; Meinhardt Singapore handling civil works; IBA New York the façade; Sitetectonix Singapore for landscape; and Windtech Australia for wind-tunnel engineering to craft the 537-apartment project spread over 8.35 acres on the IT highway, Old Mahabalipuram Road, close to the Siruseri IT park.

The towers offer 2.5- and 3-BHK lifestyle apartments, duplexes and penthouses. The construction has started this month with houses targeted for handover in 2015. Some of the unique lifestyle amenities of the project are a learning centre, orchard with camping site, water slides with waterfalls, Tai Chi Garden with an area for the elderly, multiple swimming pools including a 50-m lap pool and simulated gaming arcade.

KG Foundations' residential project

KG Foundations Pvt. Ltd has launched KG Centre Point, a housing project in Poonamallee, a suburb to the west of Chennai. This 7.2-acre project with 644 homes offers studio apartments, two- and three-BHK apartments ranging from 515 sq. ft to 1,295 sq. ft.

As a launch offer, the first 25 apartments will be priced at Rs 2,999 a sq. ft with apartments starting at Rs 15.5 lakh. This project is located between the urban centre of Chennai and the developing industrial and residential areas of Poonmallee, Sriperumbudur and Orgadam.

According to a press release from the developer, the project is close to Chembarambakkam Lake. The project offers amenities such as a 9,000-sq-ft. club house, a swimming pool, jogging track, temple and outdoor sports and games facilities.

Source: http://www.thehindubusinessline.com/features/investment-world/article3536657.ece?homepage=true&ref=wl_home

Why things are looking up for real estate sector

Over the past one month, the BSE Realty index rose over 3 per cent while the BSE Sensex has gained 2.5 per cent. The outperformance of the Realty index could mean that things are consolidating and changing for the better.

Here are some latest developments in the sector:

• No credit bubble: According to the RBI data, the exposure of the banking sector to retail home loans reached an 8‐year low at 9 per cent. This lessens potential concerns of a credit‐led bubble in real estate providing headroom for future growth, says Edelweiss, a Mumbai-based firm. This means banks should lend more to borrowers of new homes.

• Prepayment charges removed: RBI has banned pre-payment penalty charges on floating rate home loans recently. This means borrowers can change their lending bank without having to pay any prepayment penalty. Prepayment and other charges deterred borrowers from switching banks. Analysts expect banks to offer competitive lending rates to home loan borrowers to acquire retail home loan assets.

• Mumbai shows promise: Property registrations for March and April 2012 in Mumbai were 5,830 and 5,150 respectively. This is well above 4,100 reported in January and 4300 in February 2012, according to Edelweiss. The underlying demand for homes in cities like Mumbai Metropolitan Region or MMR is growing. While the year-on-year growth in sales for quarter to March 2012 was flat at 9.13 million square feet (msf), it rose 20.3 per cent over the December 2012 quarter. The focus was on the Thane region which saw over 5,000 homes launched for sale in the quarter to March 2012 out of the total 7,000 in the MMR region.

• So do other markets: The National Capital Region reported a growth of 36.1 per cent to 30.99 msf in the March 2012 quarter. This was largely led by sales in Noida following the resolution of the land row and a pick-up in the project approval process. Over one year to March 2012, residential property prices rose 34 per cent in Pune, 29 per cent in Chennai and 17.2 per cent in Bangalore. The NCR region witnessed property prices jump by 14.8 per cent.

• Companies cut debt: Aggregate debt of listed real estate real estate companies stands at Rs 48,900 crore, rising 2 per cent over December 2011 quarter and 14 per cent over March 2011. DLF accounted for Rs 22,730 crore as of March 2012. Analysts believe that companies are looking to cut their debt. DLF is selling non-core assets actively while Godrej Properties have issued additional equity. Sobha Developers has also cut debt during the year.

Source: http://profit.ndtv.com/News/Article/why-things-are-looking-up-for-real-estate-sector-306283

Debt burden bites real estate bigwigs

Big real estate developers are resorting to desperate measures like selling their land banks, half finished projects and other noncore assets to reduce the burgeoning debt burden. The reason for the debt burden is high interest rates, drying up of cash flow from banks and slowing sales volume.

According to industry estimates, all top 11 listed real estate developers started the year with a net debt of Rs.41,700 crore, which was 14 per cent more than the year ago.

"This is a difficult situation for developers. The debt burden is huge and they have to pay huge amount as interest rate every quarter. If the situation does not improve, they may have to put some of their large portfolio projects for sale," Amit Goenka, national director (capital transactions) Knight Franks India, said.

The country's largest developer DLF Limited accounts for more than half of the debt burden of these listed companies. According to the company's financial report as of December 31, 2011, it had a debt of Rs.22,725 crore. In 2011-12 fiscal, DLF's net profit fell by 27 per cent to Rs.1,200.82 crore from Rs.1,639.61 crore in the previous year. The company paid Rs.603.89 crore as interest in last quarter alone.

Despite asset sales, DLF was able to decrease its debt by only Rs.33 crore. The company has a mandatory debt repayment of Rs.3,900 crore within this fiscal. "Our main focus is to reduce debt by selling noncore assets. The company will focus more on selling non-core assets and is targeting to raise Rs.5,000 crore-Rs.6,000 crore," Rajiv Singh, vicechairman, DLF, said after announcing its financial results.

Even Unitech is resorting to asset sales. According to industry sources, the company is planning to sell some of its noncore assets like IT park and SEZs to pay off debt. The company's last reported debt stood at Rs.5,190 crore.

HDIL, another large developer, had a debt of Rs.4,100 crore as of December 31, 2011. It recently sold a two-acre plot at Andheri, Mumbai, to the real estate arm of Adani Enterprises for Rs.900 crore.

Another National Capital Region-based real estate giant Parsvnath Developers is selling land banks, including its prime property on Kasturba Gandhi Marg. The firm has recorded a debt amount of Rs.1,250 crore. The company also has plans to sell non-core assets in Kochi and Chennai.

Others like Sobha Developers have already managed to reduce their debt. It has sold many of its non-core assets and managed to reduced its debt to Rs.1,183 crore as on 31 March from Rs.1,800 crore.

The situation is set to become worse as land banks have already started shrinking. For example, DLF's land bank was almost halved to 349 million sq ft at the end of December 2011 from 751 million sq ft in March 2008.

Experts say it is just the tip of the iceberg: unlisted developers account for more than double, or 60 per cent, of the debt of listed companies.

Source: http://indiatoday.intoday.in/story/debt-burden-bites-real-estate-bigwigs/1/200344.html