Monthly Archives: August 2008

Sobha Scarlet In Mysore

Sobha Developers Ltd has announced that the Company enters in Real Estate Project “Sobha Scarlet” in Mysore on August 29, 2008. This will be developed in 14.2 acres of Land.

This project will have 83 villas, out of which 49 villas will be in phase 1 of the project with 3 & 4 Bed Room with Study room. Amenties of the project includes Club house with spa, Tennis court, Swimming pool, Gym, Squash court, Multi purpose hall, Cards & Carrom room, Library and others.

KFH To Invest $275 Milliion In Real Estate Project

Kuwait Finance House, the Gulf state’s biggest bank by market value, said it will invest $275 million in a real estate project in China as part of plans to boost its exposure to Asia.
KFH has signed a deal with China’s Nan Hai Corp to invest in the $3 billion Peninsula real estate development through its Asian Fund 2, the Islamic bank said in a statement.
‘This comes as a step from KFH to cement its investments in this vital spot of the world,” the lender said.

Real Estate And Construction

As India continues its scorching pace of economic growth, many sectors that were not historically favoured by the government are gaining prominence. One such sector is real estate, which has a large employment generation potential and is a significant source of tax revenue. Additionally, this sector has attracted a large amount of foreign investment in recent times. Therefore, the government would do well to address the many complexities and ambiguities—on the indirect tax front—that the sector is facing.

Historically, the key indirect taxes that applied on the construction and real estate sector were works contract tax (now VAT) and stamp duty. With the expanding service tax net, various construction activities have been brought within the service tax net, notable among them being construction of commercial and residential complexes and renting of immovable property. The latest addition to this list was service tax on works contract, which was introduced in the last budget.

However, the amount of works contract tax payable, under both service tax and VAT, is anything but clear. The Supreme Court, in K Raheja Development Corporation’s case in 2006, held that if a developer enters into a contract for sale of a residential apartment before construction is completed, it would be a works contract.

If the agreement is entered into after the flat or unit is already constructed, this would be an agreement for sale of immovable property and not a works contract. Broadly, this was based on the reasoning that an agreement to sell a flat that is under construction is an agreement to construct a flat for the eventual buyer of the flat. An agreement to construct a building/ apartment is a works contract.

Although this judgment was in the context of the definition of the term ‘works contract’ under the Karnataka Sales Tax Act, the service tax authorities were quick to adopt the ratio and demand service tax on the labour portion of the ‘works contract.’

Sales of flats would anyway attract stamp duty and registration charges, which typically aggregate to 10% of the sale consideration. Before the Raheja case, the consideration passing from the buyer of a flat to the developer did not attract VAT or service tax. The Raheja decision deems this sale agreement to be a works contract if the flat is under construction.

As India continues its scorching pace of economic growth, many sectors that were not historically favoured by the government are gaining prominence. One such sector is real estate, which has a large employment generation potential and is a significant source of tax revenue. Additionally, this sector has attracted a large amount of foreign investment in recent times. Therefore, the government would do well to address the many complexities and ambiguities—on the indirect tax front—that the sector is facing.

Historically, the key indirect taxes that applied on the construction and real estate sector were works contract tax (now VAT) and stamp duty. With the expanding service tax net, various construction activities have been brought within the service tax net, notable among them being construction of commercial and residential complexes and renting of immovable property. The latest addition to this list was service tax on works contract, which was introduced in the last budget.

However, the amount of works contract tax payable, under both service tax and VAT, is anything but clear. The Supreme Court, in K Raheja Development Corporation’s case in 2006, held that if a developer enters into a contract for sale of a residential apartment before construction is completed, it would be a works contract.

If the agreement is entered into after the flat or unit is already constructed, this would be an agreement for sale of immovable property and not a works contract. Broadly, this was based on the reasoning that an agreement to sell a flat that is under construction is an agreement to construct a flat for the eventual buyer of the flat. An agreement to construct a building/ apartment is a works contract.

Although this judgment was in the context of the definition of the term ‘works contract’ under the Karnataka Sales Tax Act, the service tax authorities were quick to adopt the ratio and demand service tax on the labour portion of the ‘works contract.’

Sales of flats would anyway attract stamp duty and registration charges, which typically aggregate to 10% of the sale consideration. Before the Raheja case, the consideration passing from the buyer of a flat to the developer did not attract VAT or service tax. The Raheja decision deems this sale agreement to be a works contract if the flat is under construction.

If the principle in the Raheja case is uniformly applied to all new apartments that are constructed, there could be an additional 8% (4% due to VAT and 4% due to service tax) impact on the difference between the cost of construction and the sale price of the flats! This is a huge burden that would be passed on to the prospective purchasers of flats, sharply increasing the cost of purchase.

To ensure a steady cash flow and reduce financing costs during construction, all flats are sold while they are under construction. Therefore, this burden would fall on every new flat that is constructed. Further, the VAT authorities can demand back taxes for many years, limited only by the period of limitation prescribed under the respective states’ sales tax laws. The magnitude of this potential tax liability is quite staggering.

However, is an agreement for sale of a flat that is under construction really an agreement for construction of a flat? Or is it simply a financing arrangement, whereby the purchaser books a flat while it is under construction by the developer for himself as an entrepreneurial venture rather than on behalf of and under instructions from the buyer.

The gap in consideration between what the developer pays to the contractor (which is admittedly a works contract) and what the purchaser pays to the developer is clearly attributable to the value of land and the profit for the entrepreneurial risk taken by the developer.

If this amount is subject to up to an 8% additional tax, by considering this to be a works contract, it could almost finish off this industry just as it is about to take off! The sector is facing other disputes on taxability of lease rentals and credit available for inputs against service tax liability on lease rentals, but these are trivial as compared to the main issue on works contracts but also need clarification.

It seems that this industry is too important for the government to take a view that such issues should be left to the industry to sort out through recourse to litigation. Therefore, if the government takes a holistic view of the tax burden on this industry, it can enact appropriate measures to make the tax burden moderate, clear and easy to determine.

Shriram Properties To Develop 15 Shopping Malls And 70-80 Budget Hotels

Shriram Properties, the real estate arm of Rs 25,000 crore Shriram Group, would launch two separate subsidiaries to promote projects in retail and hospitality segments, a top official of the company said.

M Murali, managing director of Shriram Properties, said the company would develop 15 shopping malls and 70-80 budget hotels in the next 3-4 years period. Each mall would absorb an investment of Rs 250 crore while Rs 30-40 crore would be pumped in for each budget hotel.

Initially, the company would develop malls covering two million sq ft with a combined investment of Rs 700 crore in the cities like Chennai, Vizag and Kolkata.

He said, “we are looking at strategic partners who can also bring value to promote mall and hospitality projects.”

SS Asokan, executive director of Shriram Properties, said the company is in talks with global players to promote mall and hotel projects. Without disclosing identities, he said the company held talks with retail and hospitality giants in the US, Europe and Japan. The budget hotels would be promoted both in Tier I and Tier II cities.

In addition, Murali said the company also has plans foray into low-cost affordable housing segment in the near future. For the cities like Bangalore, he said the company would launch projects with housing units in the range of Rs 15 lakh per unit. For Tier II cities, budget homes would be in the range of Rs 10 lakh per unit.

He said the real estate market has already witnessd around 20% dip and it would decline by another 5-10% in the next 6-9 months, but it would pick up once election in the US and India were over in the next year. In the long term, he said the Indian real estate market is reliable. The company, which currently owns a land bank of 1,520 acres across the country, is developing projects covering 73 million sq ft.

Olive Group Expanding To IT Sector

After completing 25 years in real estate industry, Mumbai-based Olive Group is expanding to Information Technology (IT) sector.
Speaking to mediapersons here, P V Mathai, Chairman of Olive Builders, said as part of the diversification, it would associate with the USA-based Millennium Consultant Inc, a leading software company, which has operations in Bangalore and Kochi.
The future expansion plan included infrastructure development, hospitality industry and retail sector and the company was setting its footprints in Coimbatore, Chennai, Mysore and Bangalore, he said.
He said with a view to help the poor, the company has started Olive Foundation and was extending financial aid for building homes to them.

Plaza Centers Signed JV Israel-based Elbit Imaging

Emerging markets property developer Plaza Centers NV said it has signed a joint venture contract with Israel-based Elbit Imaging for developing three projects in India.
The three projects are in the three Indian cities Bangalore, Chennai and Kochi and would have a combined development budget of about 3.4 billion dollars, Plaza said in a regulatory filing to the London Stock Exchange.
As stated by the contract, Plaza would acquire a 47% stake in Elbit India Real Estate Holding Ltd, which already owns around 50-80% stake in the three projects along with local Indian partners.
Three projects, which are in the stages of planning and design, are likely to start in 2009.
“Through this joint venture, Elbit and Plaza are set to take advantage of India’s flourishing economy and thereby mark a new era of growth for Plaza,” company CEO Ran Shtarkman said.
He also added that there is a huge demand in India for high-end residential accommodation, five and four star hotels and western style retail complexes.
“We look forward to meeting some of this demand with the delivery of these large projects, and we will continue to look for parallel opportunities in the future,” Ran Shtarkman said.
The joint venture’s voting rights would be split 50:50 between Elbit and Plaza. Further, Plaza would pay a small amount to the joint venture for a stake.
According to the filing, the JV would also look for development opportunities for large scale mixed use projects in India, predominantly led by either residential or office schemes.
“In addition, Plaza will continue to develop, manage and look for new opportunities for shopping centers based projects in India independently of the JV,” it added.

Ten Billion Dollar Ready To Make India Entry Through FVCIs

Lack of clarity over foreign venture capital investments (FVCIs) in India has led to 83 applications from foreign venture capital firms piling up with the Reserve Bank of India for approval.

Of these, about 28 venture funds (non-real estate funds) which have sought approval have committed close to $10 billion to India, according to lawyers involved with the registration process. Most of these foreign private equity firms have given an undertaking that they would not invest in the real estate sector or in related activities.

According to sources close to the development, policymakers and financial sector regulators are working towards harmonizing the regulations related to foreign venture capital investment, foreign direct investment and domestic venture capital investment.

“RBI is looking into a broad-based policy issue with regard to the foreign venture capital investments in the country,” said Akil Hirani of law firm Majmudar and Co, who is also advising a couple of foreign venture capital funds planning to register themselves with SEBI.

Although policy makers have been wary of venture funds investing in the real-estate sector, regulators have moved on to scrutinize many other applications in order to track the investors behind these funds. Because they believe that these investors are more focused on the returns they earn.

Regulators are concerned about issues such as whether these funds are beneficial for the real economy or even for the companies they seek to invest. RBI’s concerns also relate to impact of large capital inflows into the country especially into the real estate sector, which could fuel an asset price bubble. However, according to market participants, considering that a regime is already established and operational, any policy hiccups ought to be dealt with rather than keeping the proposals of PE funds on hold.

Policymakers are also looking at creating a level-playing field between foreign and domestic venture capital funds by ensuring that same tax rule is applicable to both. Foreign private equity funds now have an edge over their domestic counterparts under the existing tax system of the country as foreign funds registered in Mauritius and Cyprus enjoy the benefits of the double tax avoidance treaty.

Some of the FVCI applications pending RBI approval under the Foreign Exchange Management Act (Fema) include Apax Mauritius, Baring PE Asia, DE Shaw Composite Investments, Fidelity India Ventures, Goldman Sachs, JP Morgan, Sabre Abraaj Infrastructure and TPG Ventures.

According to the data compiled by SEBI, total investments by domestic and foreign venture capital investors amounted to Rs 31,682 crore as on March 31, 2008, of which Rs 16,705 crore comprises FVCI.

The real estate sector saw the highest amount of fund inflow considering it as one of the high-growth areas.

In 2004, SEBI had removed the real estate sector from the negative list, an incentive given by the market regulator to encourage PE funds to register as FVCI.

Warehousing Property Will Become Fifty Plus

The explosion in commodities and retailing will result in Indian warehousing sector increasing at the rate of 35% to 40% yearly to become fifty-five billion dollar industry within three years.

By that time the country would have about forty-five million square feet warehousing space and more than a hundred logistics parks.

As said by the report by real estate consultancy Cushman and Wakefield, Warehousing activities account for about 20% of the total Indian logistics industry and offer incredible growth potential. The turnover of warehousing was twenty billion in previous financial year. Report says, “From a mere combination of transportation and storage services, logistics is fast emerging as a strategic function that involves end-to-end solutions that improve efficiencies”. It is further stated in the report that real estate sector is also set to witness rapid growth following the setting up of warehouses in different parts of the country.

SEZ In Gurgaon By Raheja Developers

Realty firm Raheja Developers said it would invest about four thousan five hundred crore rupees to develop an engineering SEZ in Gurgaon over the next three to five years.
This project, which is expected to create job opportunities for around fifty thousand people (including both direct and indirect) is said to have a potential to generate yearly exports of one thousand crore rupees.
According to Navin M Raheja Raheja Developers Chairman “This is the first notified engineering Special Economic Zone (SEZ) in the northern India. The project cost to develop this two hundred fifty five acre SEZ is about four thousand five hundred crore rupees,”.
The investment would be funded through a mix of debt, equity and internal accruals, he said. “We are also looking at the strategic investors,” Mr Raheja added.
Informing on the land acquisition process Raheja informed that out of the total two hundred fifty five acre, about sixty per cent has been purchased while in the rest of the forty per cent the company has entered into partnership with landowners.
“We are going with the willing partnership of the farmers by paying them competitive prices for their lands. Incase the farmers are still reluctant to sell their lands, we have an option where the landowner can give his land on lease and in return can expect an income of around Rs 2-5 lakh per month, which is much higher with respect to what a farmer would normally earn on an equal stretch of land,” Raheja said.
When asked to comment on the amount of pressure, the growing number of SEZs will put on the limited agricultural land, Mr Raheja asserted that it is not SEZs, but low productivity of agricultural produce, that is an obstacle in the country’s pursuit of producing sufficient food grains.
Raheja, explaining on their SEZ project, said, the first phase of the project that involves the notified two hundred fifty five acre would be completed over the next 3-5 years. The company plans to expand the size of SEZ project and is in talks with landowners.

Bigger Players Are Looking For Trained Agents

With the city’s real estate market being dominated by smaller and unheard of players whose actions could fright away prospective buyers, the bigger players are joining hands to give a professional touch to the realty business. “We need to bring in additional people who are properly trained agents. This can be achieved by having a proper course to train real estate agents,” Puravankara Projects Limited (PPL) director Ashish Puravankara said during an interaction with the media here on Thursday.

The move, in a way, would decrease poaching in the sector. “At present, the industry is being steered by those who have been backed b almost40 years experience in the field. The real estate companies mainly pick employees from other companies in the absence of formal training schools. It is high time we have formal training for those entering the industry.” Puravankara said.

The PPL will pressure the Confederation of Real Estate Developers Association of India (CREDAI) to roll out such training programmes, besides interacting with international experts on real estate.

PPL lately invited research specialist from Real Estate Institute of New York University to study the possibilities of identifying Bangalore as a key competitive city in the global economy.

Pointing to the happenings in Bangalore’s realty market, Puravankara said: “The demand for housing has not gone down in the current times in the backdrop of the global slowdown, but people have delayed their buying plans. With professionals around, these buyers could be converted.”

Agreeing with him, Pamela Hannigan, a research expert and member of Real Estate Institute of New York University, said “Students can lift up the capacity to navigate virgin territory through formal training and that will change the dynamics of the real-estate sector.”

Government Will Acquire Land With The Consent Of The Owners

Tata Group chairman Ratan Tata’s threat to pull the Rs 1,500-crore Nano small-car project out of West Bengal in the face of violence and protests over farmland acquisition has deepened the gloom over the Left Front government’s industrialisation drive, with most of its larger and more ambitious infrastructure projects already on hold over land issues.
Just last week, chief minister Buddhadeb Bhattacharjee had indicated that the government has decided to stop work for the time being for the Salim Group’s proposed Barasat-Raichak Expressway. He had told a public meeting in north Bengal that, henceforth, the government would acquire land only with the consent of the owners.
The Salim Group and the state government had formed a special purpose vehicle, New Kolkata International Development Pvt Ltd, to build a clutch of industrial and infrastructure projects, the largest being around Nandigram, requiring a grand total of 28,500 acres.
The Nandigram chemical hub project had to be abandoned last year in the face of violent public protests. Now it has been shrunk to a location around the existing industrial town of Haldia, with the riverine island of Nayachar included.
The Salim group had earlier committed an investment of almost Rs 20,000 crore over a period of five years in West Bengal.
Next in the queue of casualties was the Rs 33,000 crore DLF township project in Dankuni , in Hooghly district-a public-private partnership project with the Kolkata Municipal Development Authority.
Touted as one of the largest real estate projects in the country, the township is proposed to be spread over 4,840 acres. It will have provision for both residential and industrial projects.
Protests over land acquisition have also put a question mark on the proposed projects like Baruipur and Kalyani townships. Almost 500 acres were acquired by KMDA for the Rs 400 crore project at Baruipur.
According to reports, 2,000 acres were to be acquired in Uluberia for a planned industrial development project. An industrial park over 1,325 acres was also proposed at Sankrail in Howrah. Proposed IT hubs in Kalyani, Durgapur and Haldia are also facing the heat of uncertainty.
The Left Front government’s position is that the state has very little barren land, just 1% of the total land area, and that some farmland will have to be acquired to re-industrialise the state. At present, around 100,000 acres will have to be acquired for the projects on the table. Against this, the total farmland in West Bengal is over 13,700,000 acres.

Merrill Lynch Consolidates Stake In Ansal Properties

Foreign fund house Merrill Lynch Capital Markets has consolidated its stake in real estate major Ansal Properties and infrastructure to nearly 6%.

Merrill Lynch Capital Markets Espana SA SV has acquired as much as 11.63 lakh equity shares representing 1.03% stake in Ansal Properties through secondary market purchase route. Prior to this transaction the foreign fund house had 4.94% stake, which got increased to 5.96% after the acquisition of the 1.03% stake in the company.

Calculated on the basis on the closing share price of Ansal Properties, the deal value amounts to about twelve crore rupees. The company had said that it would invest thirty-six hundred crore rupees for developing two hundred seventy acres IT SEZ and parks in the country. The proposed SEZ would consist of an IT zone, commercial zone, residential zone and a recreational area. Shares of the company closed at Rs 101.60, down 4.38% on the BSE.

Terrorism’s Impact On Real Estate

Human life is unquestionably any terrorist attack’s most tragic casualty. However, the economic impact and impact on real estate is unavoidably in the minds of many in the industry.

After the bomb blasts on July 25 and 26th in Bangalore and Ahmedabad, a number of questions have been raised on how terrorist attacks could have an impact on the real estate markets in India. With worries looming large over similar attacks in other cities, it is time to reflect on some of the short-term global real estate trends which were seen after 9/11 terrorist attacks on the World Trade Centre.

There are two mediums through which terrorism impacts economies. Firstly, terrorist attacks have a direct impact on our economy because they destroy productive physical and human capital. Secondly, terrorism increases the level of fear and uncertainty which could have a larger impact on the overall economy.

After 9/11, office properties in landmark buildings in the proximity had experienced increases in vacancy rates than office properties not located in the nearby areas. The attacks have also drastically increased the perceived risk of large-scale terrorist attacks in Central Business Districts (CBD) and in turn, placed particularly large pressures on major financial centers world over.

In the post 9/11 era, vacancy rates had increased more for buildings with a high perceived vulnerability to large scale terrorist attacks than for buildings that are not perceived as preferred targets. After the WTC attacks, it was anticipated that there would be a flight of occupiers and capital from the CBD areas. Even though this did not happen, new demand was stronger in suburban markets than in CBDs in many cities around the world.
From a short-term perspective, in the face of uncertainty, corporations have delayed their realty decisions. Many companies have only renewed their leases than move to new business premises. Global corporate real estate expansion was slow during the gulf war. Premiums paid for prestigious buildings and the highest floors have also marginally declined.
Many major firms adopted a multi-premises strategy facilitated by technology and favored decentralization. Global firms even considered a greater regional and international dispersal of headquarters activities to avoid business damage. Demand has accelerated for teleconferencing facilities and broadband connections as a substitute for frequent business travel.
Building management costs also increased due to enhanced security measures and higher insurance premiums. Many new projects at that time which were under development were reviewed in terms of building specification and configuration.
The security aspect has also become a differentiating factor for Grade A versus Grade B space. Buildings across the world started following the extensive security practices which were in place only in a few developed countries.

Global Crash Keeps Indian Firms Off AIM

In the wake of a global slowdown in the initial public offerings (IPO) market, Indian companies are losing appetite for listing on the Alternative Investment Market (AIM). Once touted to be a favoured destination for small- and mid-size companies, London’s AIM has managed to get only four companies to list on it so far this year as against 21 companies a year earlier.

AIM had become a lucrative listing platform for companies that wanted to raise capital without being listed in India. Many Indian companies have formed investment holdings in tax havens such as Cayman Islands to tap the London market.

However, with a steep slump in equity markets across the globe, AIM has been no exception. Some of the sectors, especially the real estate, have seen a severe value erosion, dampening the mood of prospective companies towards this market. Indian Film Company and Hirco are trading at 28.49% and 28.20% lower than their issue prices, according to Grant Thornton’s AIM Tracker dated May 2008.

FTSE’s AIM All-Share Index has plunged more than 25% since January this year. Experts also believe that AIM has been facing a tough competition from new junior markets in Asia, especially Singapore’s catalyst, previously known as Sesdaq. One of the problems with AIM is it is less liquid. The monthly average liquidity of AIM was just 6% in 2007 compared with 17% on Singapore’s catalyst. But the volatility on AIM has been quite low, attracting a lot of retail investors. The listing requirements on AIM are very simple, making it easier for companies to qualify. It does not require a track record and neither does it stipulate a minimum market capitalization.

“There are some large investors who take positions on AIM such as hedge funds and pension funds, but since liquidity has been low, their interest has weaned away. For the first half of this year, there have hardly been any companies tapping AIM. But as global markets revive, the condition will improve. Some of the issues have been deferred too,” says Amit Khandelwal, partner, Ernst &Young. There is also a view that weak performance of some of the real estate companies on the London Stock Exchange’s (LSE) junior market is due to a lack of brokerage research on some of the stocks.

Adds Harish H V, partner, Grant Thornton, “Markets had corrected after January, but companies were demanding a premium over current valuations, which was not possible. But now they have come to terms. We are in talks with some 20 companies in sectors such as power, infrastructure and pharma.” As on June 30, 2008, a total of 25 India-focused companies were listed on AIM with a combined market cap of over $7 billion.

Berggruen In A Thousand Crore Rupees Expansion

Berggruen Holdings, a New York-based private investment company, which is setting up a series of three- and four-star hotels under its arm Berggruen Hotels, will invest over Rs 1,000 crore in India till 2012.
This quantum will be funded through a debt-equity ratio of 2:1. The company has tied up with IDFC for a loan of Rs 130 crore in its first tranche to fund the construction of eight properties.
Partha Chatterjee, whole-time director and chief marketing officer, Berggruen Hotels, said, “We are also looking to tie up with other funding agencies.” He said, “The funding for the first tranche from IDFC is in the ratio of 1:1 while it will be in the 2:1 ratio for the second tranche.”
Chatterjee said that the entire quantum of debt will be drawn up according to a need-based blueprint to fund about 38 properties in India till 2012 and will include the cost of land and construction.
So far, Berggruen has spent Rs 150 crore in acquiring land in about 18 cities. It had slowed down its land acquisition spree some time ago, daunted by the spiraling realty costs. In some cities-Mumbai, Delhi, Chennai, Jaipur and Pune, for instance-realty prices shot up by 50-60%, forcing Berggruen and other hospitality players to slow down.
However, now, with the realty market depressed, hoteliers have become bullish again.
The first Berggruen property is likely to start operating from February next year in Thiruvananthapuram, as the company had zeroed in on land there earlier.
Berggruen will fund its overseas ventures according to a need-based plan, like it is doing in India, since there is no point in keeping idle money, Chatterjee said.
But, according to hotel industry analysts, a quantum of about $100 million could be required for such ventures.
The company is also looking at greenfield projects overseas — in the Middle East and North Africa region, South East Asia and South Asia. It is looking at five properties in Morocco, six in the United Arab Emirates and four in Turkey.
In South Asia, Sri Lanka and Maldives are on the radar. In Morocco and UAE, the company will develop greenfield projects through the joint venture route.
In Turkey, it will develop and manage the properties on its own since Berggruen has a large establishment there.

First Engineering SEZ In Haryana By Raheja Developers

Real estate developers Ansal API and Raheja Developers are attempting to tide over the gloom in the real estate sector by pursuing their special economic zone (SEZ) plans. While Ansal has announced plans for six infotech SEZs across three states, Raheja is setting up north India’s first engineering SEZ in Haryana.
While Ansal will pump in Rs 3,600 crore for developing four IT SEZs and two IT parks spread over 270 acres, Raheja plans to invest Rs 4,500 crore in an engineering SEZ to be built over 255 acres. Both the projects are to be completed in five years.
“In addition to an equity component of Rs 1,000 crore, the company will raise around Rs 1,500 crore through debt. The remaining Rs 1,100 crore will be funded through internal accruals,” said Rakesh Jain, executive director (marketing), Ansal. The four SEZs would be located in Greater Noida, Gurgaon, Lucknow and Khopoli in Maharashtra. The IT parks would come up in Lucknow and Noida spread over an area of 18 and 10 acres respectively.
Meanwhile, Rahejas said its engineering SEZ will accomodate complexes for light and medium engineering goods exporters and have approximately seven million sq ft of residential area. “Investors and well reputed business houses from across the globe have expressed keen interest in associating themselves as co-developers and investors in the SEZ,” Navin M Raheja, chairman, Raheja Developers said.
NW18 adds: Ansal API is in talks with both Indian and overseas private equity investors to raise up to Rs 2,500 crore for funding its SEZs and two IT parks.
The company may also dilute its stake in these IT SEZs and parks.

‘Out of the total Rs 3,600-crore investment in the IT SEZs and parks, the company will put in around Rs 1,000 crore. The remaining will be from other investors,” said Jain.
A slowdown in demand, coupled with tight liquidity conditions, has forced realty companies to look for alternative sources of funding with private equity emerging as the most preferred choice.
In July, Ansal API had said it will invest over Rs 900 crore in an engineering-based SEZ in Murthal, Haryana.
Currently, the company has a land bank of around 7,000 acres across residential, commercial, integrated townships, retail, SEZs and IT park projects.

Mantri Developers Bid For Land In Chennai

The Bangalore based Mantri Developers has successfully bid for a 4.9 acre plot of land at Siruseri IT Park on the IT Highway for developing an amenities centre. The price Rs 10.5 crore per acre for a 75-year lease is considered a new benchmark in Chennai’s real estate market.

The plot of land, located at the entrance of the IT Park and adjoining the IT Highway, was originally acquired by the State Industries Promotion Corporation of Tamil Nadu Ltd (SIPCOT). It was handed over to the Tamil Nadu Road Development Company (TNRDC) which develops the IT Highway also known as Old Mahabalipuram Road (OMR) or Rajiv Gandhi Salai on a 99-year lease for developing world-class facilities for the IT and ITES sector as well as the road users.

The TNRDC’s earlier efforts to identify a business partner for the project failed because all were far below the upset price of Rs 10 crore fixed by the company.

When the TNRDC floated a revised bid recently, Mantri offered to pay Rs 10.5 crore per acre and emerged successful. The TNRDC will hand over the land on a 75-year lease to Mantri for setting up a hotel four star or five star and an amenities centre with shopping mall and club house measuring roughly 6.5 lakh sq ft. The developer will be at liberty to identify a viable business proposition.

While sources in the TNRDC and Mantri refused to comment, it is learnt that the two firms are working towards the conclusion of the bid process. Mantri will have to make a one-time payment of Rs 51.45 crore for the plot of land. Mantri’s offer is more than double of what many IT companies have paid for acquiring land from SIPCOT in the Sirusseri park.

However, the commercial value of private properties along the IT Highway between Sholinganallur and Sirusseri range from Rs 15-20 crore per acre. Mantri is also developing a residential project Mantri Synergy at Padur on the IT Highway.

The builder is already promoting luxury and business hotels in Bangalore and Hyderabad and IT space in Bangalore and Pune. The group started by Sushil Mantri with a low capital of Rs 10 lakh in 1999 in Bangalore, has so far completed more than a dozen residential projects in Bangalore.

Real Estate: Safe And Secured Destination Of Investment

The real estate in Indian market is constantly changing and developing at a rapid pace. The most preferred destinations of last year may not be the better options this year, while next year might bring certain unparalleled set of investment destinations in the real estate market of India. As such nothing can be predicted in advance in this sector.
The basic reason for this changing situation is that the real estate is booming which is causing most of the country’s metros and also certain previously popular Tier II towns to modify at an unequalled pace. The prices of the immovable property have actually reached sky heights which might be beyond the reach of the middle class group, but it still forces them to expect a little more abroad each year. The investors assess these trends of migration, examine the magnitude and range of growth and determine certain new towns as the next destination.
The Information technology (IT) companies are these days the capital growth drivers in the real estate market of India and are stunningly not dependent on the central business locations. The core of the entire boom of outsourcing is that it sorts more awareness for the multi-nationals to transfer the functions of back-office and even undergo extensive research processes to India rather than undertaking them in their home countries.
As a matter of fact both the end buyers and sellers of the IT-based services and products are based overseas anyway. This basically means that the IT/ITEs (information technology enabled services) establishments have the potential to function from anywhere in India, as far as there is accession to skilled work force and other required infrastructure.
In fact, these companies can conveniently profit from the asset of cheap real estates while the prices in small towns have made-up the way for the city boom of Tier II/III. However, the IT/ITEs companies basically serve as catalyst for almost every sector of real estate in India and as such the retail, infrastructure and residential sectors would very soon start perking up in those particular localities too.
The main mantra of the real estate investment is however, the emerging localities are actually more preferable than the established and the saturated ones. The established regions sooner or later would reach a eminent altitude in terms of apprehension potential, no matter after that the growth rate may either stagnate or slow down.
It has also been witnessed there is quite a little scope for the new and latest market drivers like malls to get a preferred place in concentrated regions – while, the prices remain high.
However, it can be elaborated that this is actually not a preferable scenario from the profitable investment point of view as the best investments need low entry levels and considerable growth and that also in a realistic time-frame. As such it has been witnessed that though one or more than one destination reaches their peak potential on almost all the accounts, the new destinations obviously come into limelight instantly.
It is also quite worth mentioning that in this quite unstable financial market where unsecured and personal loans charge the sky rocketing interest rates, the rates of interest in loan against property are following the reverse path. This particular situation has geared the growth of real estate in India.
The boom in the retail market actually has a significant impact in the commercial real estate market. In fact, the actual size of the wholesale sector in India is about Rs. 8,10,000 crores and amazingly out of it just 2% is unionized or comply corporate constitution. However the Indian retail sector is steadily growing at a pace of 20% per annum and what is more important, the unionized pie of this sphere was calculated to grow from 2% of the whole wholesale market in 2001 to 22% in 2005.

Lots Of Projects In Chembur

The huge project is being developed and executed in Chembur, Mumbai by GA Builders, an “RNA Corp Group” company that would provide “New Homes” to more than 1950 tenants, according to a media release. The Subhash Nagar Colony, built by MHADA, is about 55 years old and comprises 57 buildings that house 36 members each. On completion of the mass housing project, the tenants would be re-housed in flats with an area of 320 square feet plus 65 square feet in the form of a flowerbed, niche or dry area with all necessary amenities. After obtaining all the requisite approvals for the redevelopment of the project and after setting up the transits for tenements, the company is all set to make its mark in Mumbai real estate sector.
“We have so far built 744 flats for the residents in five buildings, and have finalized plans to build eight more buildings for 546 families who have signed for redevelopment.” Mr. Manoj John, spokesman for RNA Corp said. He added that more than 1300 families out 1950 have accepted their plan to turn Subhash Nagar into mini-township. Mr. John further said “Considering the sheer scale of this project, we have undertaken extensive infrastructure enhancement drive that includes setting up of drainage and sewerage infrastructure, underground water lines, recreation grounds, playgrounds, internal roads. Underground and overhead tanks will ensure uninterrupted water supply with an added provision for piped gas connection.”
Besides the amenities, RNA also provides for a “Zero Maintenance Cost” for the society by ways of issuing fixed corpus to each member of the society. A Fixed deposit of the aggregate of the corpus funds generates monthly interests to take care of the maintenance and also meets other costs to be borne by the society, the release added. Additionally, RNA will also help the tenants during the transit period by providing them with the cost towards brokerage for rental accommodation, the rentals and shifting charges. With over two decades in the construction industry, RNA Corp’s expertise and knowledge of local partners coupled with its strong focus on customer satisfaction, has resulted in gaining an impeccable reputation and setting up a successful track record of performance.

Salim Group’s Expressway Due To Land Acquisition Problem

Days after Chief Minister Buddadeb Bhattacharjee declared that Indonesia-based Salim group’s Expressway was put on hold due to the land acquirement problem, Prasoon Mukherjee, Salim Group’s pointsman and chairman of NKID (New Kolkata Infrastructure Development) expressed confidence that the other jumbo projects of the Group, including the PCPIR, are on track.

Mukherjee said “We have several projects in Bengal and the Expressway is a small part of it. The momentary hold on the Raichowk-Kukrahati project will not affect our other projects, which are bigger in proportion. I have full confidence on the state government and the chief minister regarding the industrial development in the state,”.

In the teleconference, Mukherjee, who is now abroad, said he is till now to get an official order from the state government indicating that the Expressway project is on hold.

“But I have heard of it,” he said. “Regarding the Expressway, we are prepared to wait. Our initial work and land survey is over. Whenever a consensus for land is achieved, we will go ahead with it.”

On the subject of the land acquisition problem in Bengal, Mukherjee said: “People’s consensus is necessary for land acquisition. The people must be made aware of the positive side of development, before one asks for their land. I trust the government is doing just that.”

Mukherjee stressed that all major projects in Bengal, including the PCPIR and township developments projects, are on track and moving on smoothly.

“We already have 13,000 acres and are in a position to claim another 12,000 acres.”

A non-resident Indian, Mukherjee had mediated the deal between the Salim Group and the state government in July 31, 2006, two months after Bhattacharjee took began his second term as the chief minister.

From mid-2006, the mega corp announced three separate projects. The largest, involving an investment of Rs 40,000 crore, was to be implemented by a Special Purpose Vehicle, the New Kolkata Infrastructure Development.

The NKID was to set up two Special Economic Zones, a cluster or industrial estates, a 100-km Expressway and a clutch of townships, involving the acquisition of nearly 37,300 acres.

The NKID project received a setback in 2007, when people of Nandigram violently resisted the government’s attempts to acquire farmland for a chemical industrial estate and an SEZ without consulting them.

The result showed up this year: the CPM was routed in the elections to the three-tier panchayat setup in East Midnapore and South 24 Parganas.

IHCL Will Set Up Four Airport Hotels In The Country

Indian Hotels Company (IHCL), which runs the Taj chain of hotels, has earmarked Rs 1,800 crore for funding inorganic growth in the subsequent 3 years, said chairman Ratan Tata.
Talking to shareholders at the company’s yearly general meeting, Mr Tata said IHCL would set up four airport hotels in the country, including one in Navi Mumbai, over the next few years.
Also, the company is looking at establish its presence in the Andamans and has entered into marketing associations with hotels in Japan and Korea. The company will continue to purchase iconic standalone properties across the world.
IHCL witnessed average room occupancy of 73% last year. The company is likely to hike its room tariffs by 10-15% from September 1. Responding to a shareholder’s query, he said rising real estate prices have made expansion of the low-cost brand Ginger difficult. However, the company is not seeing any liquidity crunch despite the tight money conditions existing in the market. The company last week opened a Ginger hotel at Panaji in Goa.
Commenting on Orient Express Hotel (OEH), he said IHCL would not mount any hostile takeover bid on the Bermuda-based company. Previous year IHCL picked up 11.5% stake in OEH and expressed willingness to strike a strategic alliance to grow business together. The Tata overture was rejected by the OEH management, which also spoke despairingly about the Taj brand.
According to Mr Tata, the group has initiated Tata Realty and Infrastructure and has put IHCL vice-chairman Krishna Kumar at the helm of its affairs. This entity could be listed in the future, Mr Tata added.

TCI To Foray Into Real Estate Sector

Transport Corporation of India, so far engaged in movement of cargo over land and sea, is planning to venture into the real estate sector with pan-India presence.

“We plan to get into the real estate sector as we have land bank all over the country,” TCI Executive Director Vineet Agarwal said.

The company has 200 properties and would develop a number of them for residential and commercial projects.

“We have identified quite a few of our land properties for a foray into the sector. We have even set up a real estate division in our company for the business,” Agarwal said, but declined to give the investment figure for the foray.

Apart from the foray, TCI also plans to build a number of large warehouses across the country. It already has 7.5 million square feet of warehousing facility available which it plans to increase to 12.5 million square feet in the next 2-3 years.

It is also looking at opening offices in China, Thailand and in few European countries in the current financial year.

“We will open offices in the countries with which India has respectable volume of trade. We have recently set up our offices in Indonesia, Hong-Kong and Singapore. Now we are considering China, Thailand and Europe,” Agarwal said.

The company would also be investing Rs 200 crore in the next two years for purchase of trucks and ships.

Kaupthing Pushing Midland Firms To Invest In India

Icelandic investment bank Kaupthing has joined the West Midlands push to woo India.
It has listed an Indian infrastructure fund on the London Stock Exchange’s AIM market and is hoping the move will boost UK investment in its former colony.
Kaupthing Singer and Friedlander managing director Trevor Foster said: “This is an opportunity for discerning West Midlands investors to enter one of the fastest growing economies in the world.
“We hope it will attract those in the region of Indian origin but also interest business people who can see there are excellent returns to be made by taking a global outlook.”
KS and F Midlands chairman Paul Bassi added: “The West Midlands is increasingly seeing great advantages in developing business links with India.
“With on-going business and political initiatives taking place, the timing is right for this infrastructure fund to take off.”
The Kaupthing fund has raised £40 million in equity and bought three assets: a hydroelectric power plant, a toll road and a rail freight siding.
Kaupthing hopes to take advantage of India’s expanding middle class and increased urbanization and industrialization, which has led to the rise in value of infrastructure assets in the emerging market.
The initiative comes as the West Midlands looks to make the most of growing contacts in India.
Birmingham City Council is preparing to send a delegation to India early in 2009.
It will be led by council leader Mike Whitby and follows the recent visit by a Confederation of Indian Industries team to Birmingham and the West Midlands.
This saw Warwick Manufacturing Group, headed by Lord Kumar Bhattacharyya, enhance its links with the CII in order to strengthen work on climate change, high-tech manufacturing and global healthcare.
And recently an action plan to forge new business and academic ties between the West Midlands and India was launched by West Midlands Minister Liam Byrne.
The aim is to establish an India Co-ordination Group later this autumn to unlock potential multi-million pound trade and investment opportunities.
India’s largest industrial group Tata recently paid £1.15 billion to take control of Jaguar and Land Rover. It is also expected to press ahead with a major new multi-million pounds research unit in Coventry.
The Kaupthing fund will be advised by Bridge Capital Realty, a Singapore-based advisory and asset company that specializes in logistics and property in India.
Infrastructure India is headquartered in the Isle of Man and, in particular, is focused on the energy and transport sectors. Its chairman is Rupert Cottrell while investment advisers are Bloomsbury Asset Management.
It is aiming at an internal rate of return of 15% a year, rising to 25%. The hydroelectric power plant project has seen the fund take a stake in Shree Maheshwar Hydel Power Corporation.
The aim is to develop a 400MW unit situated in Maheshwar, in the southwestern region of Madhya Pradesh. It is approaching the final stages of construction and is expected to begin operations next year.
The fund’s pipeline of potential opportunities includes renewable and conventional power stations, roads and airports.
Mr Cottrell added: “The growth prospects for India provide a compelling rationale for investment in the Indian infrastructure sector at this time. We are delighted in the interest that has been shown.”
India was in the top 10 % of countries for GDP growth in 2007, however, that has been constrained by its lack of infrastructure.
The Indian Government’s eleventh five year plan (2007-2012) has set GDP growth target for the period at nine per cent per annum.
That will require around £249 billion in infrastructure spending, which will only be possible if there is a substantial expansion in the private sector contribution.
Recent Indian investments in the West Midlands have included Suprajit Engineering acquiring Tamworth-based CPT Gills Cables safeguarding 140 jobs in the manufacture of automotive cables; Hindalco, a group company of Aditya Birla buying Bridgnorth-based Novelis safeguarding 420 jobs in aluminium foil production; IT company, Enzen Global from Bangalore set up an office in Solihull in 2006-2007; and El Forge owns Black Country-based Shakespeare.
Over the past two years, Indian investment into the West Midlands has more than doubled in terms of the numbers of companies setting up in the region. More than 1,500 jobs have been created since 2006 by sixteen companies, meaning there are now over 30 Indian owned businesses in the region, including the State Bank of India and ICICI Bank.
Home to one of the largest ethnic Indian population in the UK there are well established cultural, community and religious facilities in the region. Around sixty thousand of Birmingham’s one million population claim Indian origins.
Forecasts predict that India will overtake the UK and become the fifth largest economy in the world within the next decade, the third largest behind China and the US by 2025 and the second largest after China by 2050.

Acacia Real Estate Acquires Stake In Mall Development

Acacia Real Estate has acquired a twenty-six percent stake in a retail development mall in India. The retail mall in Delhi was acquired through a joint venture with Anant Raj Group. Anant Raj group is a publicly listed company with a market capitalization of 1.2 billion dollars.
The project is expected to generate a return on equity for investors of eighty-three percent over 3.5 year holding period.
TAIB Bank has been appointed as the exclusive placement agent for the project.
The two hundred twenty million dollars’ retail mall development will consist of six lacs square feet of retail space upon completion.
The mall will be managed by Sandalwood, a JV company of Jones Lang LaSalle and Colonial First State Property Management, an Australian retail management firm.
The joint venture partners are in currently in advanced discussions with the potential anchor tenant of the mall.