Monthly Archives: December 2008

Future Group set to buy Le Marche

Indian retail major Future Group is set to buy out Le Marche, the hypermarket business of Fu-Com Retail India. Fu-Com India was set up by Fu-Com International, UAE-based retailing partners of the $30-billion French retail group Groupe Casino.

Fu-Com International operates hypermarkets, supermarkets and convenience stores across West Asia. A person close to the development said that the challenging retail environment in India had forced Fu-Com to rethink its plans. The financial details of the deal are unavailable, but the person quoted earlier said the move indicates that the Future Group is now warming up to acquisitions in the troubled retail environment.

It is still unclear whether Le Marche will be a part of Future Group’s value retailing business Big Bazaar, or moved under Future Ventures, its venture capital arm. Fu-Com’s stores in India were branded Le Marche. Future Group CEO Kishore Biyani said: “We are always looking out for opportunities that make business sense. But I will not be able to comment on this specific deal.” Fu-Com Retail India officials declined to comment.

Fu-Com Retail India was incorporated in August 2005 and the first store, called Le Marche Hypermarket, was launched in March 2007 in the western suburbs of Mumbai. The hypermarket offers an average of 45,000 product lines, including food, grocery, beauty care, apparel and shoes, house ware and equipment, consumer electronics and appliances, etc.

Fu-Com Retail has also leased some prime real estate space, which will now be taken over by Future Group. Future Group’s value retailing business contributes to 62% of the group’s turnover.

Satyam hires Merrill Lynch to review its ‘strategic options’

Satyam Computer Services said that it hired investment bank DSP Merrill Lynch to review its “strategic options to enhance shareholder value,” a hint that the Indian outsourcer is looking to either be acquired or to sell a significant stake to an outside investor.
At the same time Satyam announced it hired DSP Merrill Lynch, the company also delayed a board of directors meeting, previously scheduled for today, until January 10. The canceled meeting was intended to review plans for a share buyback.
On January 10, Satyam’s board will announce its recommendations on options available to the company and review the implications of selling off shares held by the company’s largest shareholders, it said in a statement. The company will also announce steps to improve its corporate governance, a key issue in light of a World Bank announcement last week that Satyam will be excluded from future contracts for providing “improper benefits” to bank employees and failing to document fees paid to subcontractors.
Last week, Satyam issued a statement demanding an apology from the World Bank, but did not dispute allegations made by the bank.
Corporate governance is also an issue following investor criticism over Satyam’s plans to expand into property and infrastructure.
On Dec. 16, Satyam announced plans to acquire Matyas Property and take a controlling stake in Matyas Infrastructure, 2 companies in which Satyam’s founders hold significant stakes, valuing the deal at US$1.6 billion. However, Satyam backed down from those plans the following day, citing “feedback received from the investor community.”

PwC acquires consulting firm ECS for Rs 42 crore

Pricewaterhousecoopers India has acquired ECS, earlier known as Eicher Consultancy Services, according to an industry executive with direct knowledge of the transaction.

PwC India paid around Rs 38-42 crore to acquire the Mumbai-based management consulting company, said the executive. In April 2007, PwC India had acquired the tax advisory practice of Ambit RSM, subsequently renamed Ambit. Earlier this year, the firm was also in the news for adding Mumbai-based chartered accountancy firm Dalal & Shah to its audit network.

PwC India has been looking at expanding through acquisitions for a while. “The integration will help PwC India scale up its business operations and increase its client base. It will also help the firm take advantage of the talent pool and brand name of ECS,” the consultant, who asked not to be named, said. A senior executive with a rival firm said PwC could make more acquisitions, as it was aggressively scouting for smaller players since valuations have become attractive.

ECS provides consulting solutions to over 150 clients in the services sectors, including banking, financial services, IT and ITeS. PwC India provides tax and advisory services to clients across various sectors such as banking, insurance and real estate.

The firm assists clients in business process re-engineering, devising growth strategies and in cost and risk management. PwC India provides tax and advisory services to clients across various sectors such as banking, insurance and real estate. It employs some 5,000 professionals operating in India and plans to double headcount in the next 3-4 years, according to a recent media report.

Firms look for better resources at low packages

Unable to freely hire people like last year and forced by tough market conditions, employers are increasingly taking their pick cautiously. Companies are resorting to what they call ‘upgrading talent’ or getting better resources at existing pays or even lower packages. Recently, a large Delhi-based real estate company roped in a new CFO from a two-wheeler major at almost the same salary to replace the incumbent financial head as it felt the new man had an experience of managing a bigger organization and was known to be a better hand. As it was unpleasant to ask the incumbent CFO to move out, the company sidelined him. He was asked to report to the new hire.

Obviously, he’s now looking for a new job. This is not a rare case. A Mumbai-based hospitality major has asked a top-notch head-hunting firm to find a new HR head as the current boss’ performance didn’t match up to its ‘expectations’. However, the company doesn’t want to pay more.

Head-hunters say a substantial number of their clients are demanding similar upgrades as they think talent is just ‘available’ in the market. While a Delhi-based executive search firm says 10% of its client are looking for upgrades, another search firm, Executive Access, says as many as 30% of its clients have mandated it for such people.

According to EMA Partners International managing partner K Sudarshan, professionals having the experience of handling crisis situations are in big demand now. “If it was about skills in managing growth in a booming economy, it will be about tackling a slowing market where firms would have their eyes now,” he adds.

Organizations feel they have grossly ‘overpaid’ candidates in the past and it’s time to benchmark talent against industry standards. The need gets more pronounced as companies scout for people who can manage slowdown and its impact better.

Marutham Group opens first venture in city

Marutham Group, the new name in the city’s real estate sector, opened its first venture, Marutham Gateway. The group, based in Chennai, has opened its new venture just opposite to the railway station at Pettah here.
The project comes with a number of features. The two and three-bedroom apartments offer maximum use of space and light.
The amenities include elegant, furnished ground floor lobby, furnished air-conditioned guest suites, party area with pantry, health club, sauna, jacuzzi, squash court, playroom, billiards room, amphitheatre, reticulated gas system, drivers’ rest room, caretaker/security room, closed circuit camera, intercom, unitized sub-station and genset with 100% backup for common areas and designated points in all apartments.
Marutham Gateway project was inaugurated by V. Jayachandran, who was chosen as the distinguished guest of the event.
R. Rajendran, chairman and managing director of Marutham Group, P.E.R. Nambiar, senior advocate and partner of the Group, Anil, architect of the project, Shankar, architect, Sadanantham, businessman and S. Jayachandran, chief-projects, Marutham Group, were also present. The launch also saw the distribution of attractive gifts and free coupons.
Marutham Group has projects at Chennai, Coimbatore, Puducherry and Bangalore and has completed more than two million square feet built up area.
It has an untarnished record of handing over all the projects before the stipulated time. The team of professionals blends the age-old tradition of Vaasthu with new age architectural inventions.

Realty stocks continue to haunt investors

Fears of slowdown, delay in project execution and delivery and plunging profit margins continue to haunt investors who have put their money in realty stocks. According to real estate sector report by Religare Securities, there has been a noticeable decline in enquiry numbers for residential property over the past few months.

While terming all real estate investment as ‘high risk’, Religare has set lowered price targets for several realty stocks. DLF is currently trading 4.3% lower at Rs 288.75 (reduced price target: Rs 211), HDIL is down about 9% at Rs 132.70 (price target: Rs 142), Unitech is down over 13% at Rs 36.70 (reduced target price: Rs 34) while Orbit Corporation currently trades around 6% lower at Rs 60.15 (price target: Rs 85).

“Festival season has not sparked home buyer interest. As a result of the credit squeeze, most companies have withheld land acquisition or taking up further projects,” the Religare realty report said.

Another problem faced by developers is the need to delay existing projects as a result of low working capital. “Developers have already begun rescheduling their development plans and push back launch dates. This could enlarge the demand – supply mismatch in the longer run,” the report added.

Analysts expect demand to slump even further as recent rate cuts by RBI have not really rekindled buying interest. “In a slowing economy, when salaries remain stagnant with a downward bias, home buyers will not be keen to take up additional expenses by way of EMIs,” a Mumbai real estate consultant said.

Even if there is a price correction, it will take some time before demand actually pick up; analysts are expecting the lax trend to continue for the next 15 – 18 months.

World Bank bans Satyam

The World Bank on Tuesday confirmed an earlier report that it has barred Satyam Computer Services from doing business with it for eight years, starting September this year, due to data theft and paying bribes to its staff.

However, it’s not clear if the company’s independent directors knew about these allegations. Two independent directors said that the Satyam management had merely informed the board that its contract with the World Bank had ended, without referring to the fact that it has been barred from doing business with the Bank for eight years. The World Bank has been an important client for Satyam, India’s fourth-largest software exporter. The multilateral agency had signed $100-million billing per year contract.

“The World Bank had never complained or informed us… Satyam’s contract with the World Bank had come up for discussions in an earlier board meeting. We were told that as a matter of policy, the World Bank does not renew contracts with the same vendor for more than five years,” said TR Prasad, independent director on the Satyam Board. This was reconfirmed by another independent board member VS Raju. Sudip Mazumder, the World Bank spokesperson said, “Yes, we have banned Satyam from doing business with us”.

He confirmed a Fox News report which had said the World Bank had imposed an 8-year ban on Satyam, the harshest punishment meted out to any company since 2004.

In October this year, Ram Mynampati, president (commercial and healthcare business) of Satyam Computer Services and a member of the Board, also said the World Bank, as a matter of policy, does not renew contracts with the same vendor. E-mail queries to two other directors, Vinod Dham and Krishna Palepu, remained unanswered at the time this story was written.

Since 2003, Satyam had been writing and maintaining all software for World Bank across all locations. This also included maintenance of software in back-end offices. Satyam’s shares plunged as much as 14% to close at Rs 140.40 on Tuesday, amid rumours, subsequently denied, that its founder and chairman B Ramalinga Raju was stepping down from the Board. Further he added, “I have not received any message or intimation from the promoter,” TR Prasad, independent director.

According to the US-based Fox News, in 2005, the Bank’s chief information officer, Mohamed Muhsin, was sacked after being accused of improperly buying preferential stock options from Satyam, even as he awarded the firm major contracts.

After an internal investigation, Muhsin was banned permanently from the Bank in January 2007. But Satyam was allowed to remain in control of the Bank’s information network till early October 2008, a report on the Fox News website said.

The World Bank’s disclosure on Tuesday could be an embarrassment for the company which is embroiled in an unrelated controversy after its scuppered bid to buy two firms linked to its promoter B Ramalinga Raju.

Mr Raju holds an 8.5% stake in Satyam Computer Services which faced a major shareholder rebellion last week after it announced plans to buy two firms linked to the promoter for $1.6 billion. The decision was endorsed by the Board. But within a few hours, the company called off the deal to buy Maytas Infra and Maytas Properties. It has, however, been tight-lipped on key questions on who did the valuation of the real estate firm.

Meanwhile, the registrar of companies in Andhra Pradesh has initiated a probe into Satyam’s proposed acquisition. But the company has not received any communication from Sebi or the US SEC, said a company official, who did not wish to be named. The investment committee of Life Insurance Corporation, Aberdeen, and Reliance Mutual Fund are seeking an explanation from Satyam promoters on the jinxed Maytas acquisition. The institutional investors own a sizeable stake, almost 60%, in the company.

Jaypee Group merges arms with Jaiprakash Associates

Diversified infrastructural industrial conglomerate Jaypee Group is merging its hotel, cement, real estate and construction subsidiaries Jaypee Hotels (JHL), Jaypee Cement (JCL), Gujarat Anjan Cement (GACL) and Jaiprakash Enterprises (JEL) with the flagship public-listed company Jaiprakash Associates (JAL).

The merger will bring the group’s all cement companies under one roof enhancing economies of scale and effectively deal with demand-supply mismatch in different regions, the Delhi-based company said.

The move will also help the company avoid outgo on account of dividend distribution tax (DDT). The real estate, hotels and other construction subsidiaries will be also brought under one umbrella, giving the group a synergy in businesses. The transaction, which will be cashless, will bring down promoters’ stake in JAL from 45.28% to 37.65%. The cross holding of the company shares will be transferred to the trusts being created by the respective companies. The benefit of the shares to be held with the trust shall accrue to JAL.

JAL holds 100% stake in JCL, which is setting up a cement plant in Andhra Pradesh. JCL, in turn, owns 95% in GACL, which is building a cement plant in Gujarat. JCL and GACL are unlisted firms. JP Enterprises, a listed firm, is into civil engineering, construction and real estate. Jaypee Hotels, 72% owned by JAL, owns three hotels in Delhi and Agra. JAL owns a hotel in Mussourie. All hotels in the Jaypee group are run by JHL, which also owns land parcels.

The merger will be effective from April 1, 2008. The share swap ratio for the merger will be 1:11 for GACL (one share of JAL for 11 share of GACL), 1:10 for JCL, 1:1 for JHL and 3: 1 for JEL. Shares of Jaypee Hotel closed up 4.56% at Rs 84.85 on the Bombay Stock Exchange on Monday. The stock has rallied 114% since December 5. Jaiprakash Associates fell 2% to Rs 87.40.

AP grants Rs 121crore project to Maytas Infra

The Congress-led government in Andhra Pradesh has sanctioned a Rs 121-crore project to Maytas Infra, barely two days after the founder and chairman of Satyam Computer Services B Ramalinga Raju’s scuppered bid to buy infrastructure firm run by his son Teja Raju.

The state has issued an order on Saturday sanctioning funds for the road project in Kadapa, the constituency of Andhra Pradesh chief minister YS Rajasekhara Reddy. The order said that the project was awarded to Maytas Infra on a nomination basis and funds will be provided by the state’s irrigation department.

Simply put, there was no bidding for this project, a 30-kilometre road between Mangapatnam and K Sugumanchipalli in Kadapa on state highway 31. The road is meant to provide connectivity to an irrigation project being executed by Maytas Infra.

“I am not aware of the details of the government order,” said principal secretary (irrigation) SK Joshi.
A company spokesperson said Maytas Infra has been awarded the project to construct a new road to replace the existing road. The new road project has to be completed by June 2009, he said. The sanction of funds to Maytas Infra could spark off a controversy, coming as it does just two days after Satyam’s failed bid to pick up a 51% stake in the company.

According to unconfirmed reports last week, Satyam had proposed the deal since some of the promoters and their investment firms had faced margin calls from financiers after having borrowed against stocks.

VV Raju, chief financial officer, Maytas Infra, had said last week that the company had no issues regarding working capital requirements and no immediate capital expenditure needs.

Maytas Infra is the consortium partner in the Rs 12,000-crore Hyderabad Metro Rail project. The company had floated a special purpose vehicle in September last to execute this project. But the project became controversial after the Delhi Metro Rail Corporation chief E Sreedharan had labelled it “a future political scam” and questioned its operational viability. The Hyderabad Metro Rail has since snapped ties with the prime consultant DMRC.

Incidentally, the president and chief executive officer of Maytas Infra PK Madhav was arrested last week on charges of an alleged financial fraud in a different case unrelated to Maytas Infra.

Is dream home affordable?

With PSU banks finally offering attractive interest rates for home loans below Rs 20 lakh, the assumption was that it would spur demand in smaller towns where housing is cheaper.
As getting a Rs 20 lakh home loan just got cheaper at a 9.5% interest rate, buyers flock and builders revel, a welcome break after the long realty slump.
Be it Surat or Indore, realtors as well as potential homebuyers are rejoicing, as apartments in good localities are available for as low as Rs 1300 per square feet.
Swetaang Shree Maali, a Builder, Neo Associates (Indore), said, ”For builders this could rise our liquidity position as people will start buying”.
Buyers too are happy as they feel that now with the government’s move, state banks have reduced rates, so they could fulfill their dream of buying a home.
Well, a look at the rates in emerging IT hub Pune and Bhubaneswar in Orissa reveals that the mood is not quite upbeat despite the attractive package announced by the PSU banks.
A two-bedroom house in both these cities will still mean shelling out at least Rs 30 lakh.
Anup Mohapatra, President of Real-Estate Developers’ Association, said, “20-30% of the bookings come from the single executives and employees in the IT sector but now you can’t expect bookings from them because they are under constant threat of losing jobs.”
He added further that the package won’t help Pune people in any way as the rates of the properties here are so high that one won’t get anything even for Rs 20 lakh.’
Hence clearly, the package is a liquidity pump for builders, hopes for a new home for others, but a significant rest are still wondering whether the special package announced with much fanfare by the PSU banks will help them buy their dream home.

Floating interest rates will come down

Existing floating home loan customers groaning under high interest rates can look forward to a more cheery New Year. After setting interest rates at 9.25% for new home loans between Rs 5 lakh and Rs 20 lakh, rates for existing home loans will be reduced as the PLR (prime lending rate) comes down.

Home minister P Chidambaram, speaking for Prime Minister Manmohan Singh, who now holds charge of finance, told Lok Sabha, “Floating interest rates must come down. The loans for existing home loans will be reset as the PLR is reduced.”

Chidambaram said that steps had been taken to address the liquidity crisis but banks remained risk averse while those seeking home loans were deterred by the 12-13% rates being currently charged. “I am sure that banks will sincerely attempt to reset the floating rates,” said the minister, who till recently held the finance portfolio.

Government’s signaling is significant for political as well as economic reasons. As Chidambaram explained, the housing sector is a critical part of the economy as “it concerns steel, cement, bricks, electrical equipment, labour of various kinds… it is a major driver of the economy”. But also, with general elections not too far off, the government needs to address a constituency which has been grumpy over soaring EMIs and lengthening loan tenures.

In a debate that saw all-around concern over falling employment, Chidambaram sought to assuage fears that the tunnel was growing longer and darker. He said India would still grow at 7% at the end of the next year even though he said the process of structural adjustment would not be painless. “Steel demand is down so it is bound to affect production. If we don’t lift some curbs on exports, people will be thrown out of jobs,” he said.

As he intervened in a discussion on economic situation in the House, Chidambaram largely covered ground that he had already been over previously, taking on the NDA criticism by reeling out growth figures for the years the Opposition had been in power and offering a comparison with UPA’s statistics. He also, as he has before, pointed to massive outlays for the social sector to argue that UPA had done more for farmers and the poor.

Chidambaram said UPA’s flagship schemes were aimed at those who lived in extreme poverty, a number he put at between 250-300 million. He admitted that a programme like PDS suffered from a leakage of 40% while complaints of forged muster rolls hurt the National Rural Employment Guarantee Act, but argued that there was no option but to persevere with such initiatives.

He said the large government spending was helping the economy while the social sector programs were a crucial safety net for the poor. Touching on recent measures to respond to the financial crisis, he said the government had taken some rapid-fire decisions in the last 12 weeks.
He used the opportunity to take a shot at the Left and also, by implication, those in Congress, who had been wary of celebrating India’s growth story for fear of being seen as “anti-poor”. “You must be consistent both ideologically and in your suggestions,” he said as he expressed a sense of satisfaction over “a fall in growth of 1-2% agitating the minds of MPs”.

RIMC enters India in JV with Sahil Group

Germany-based hotel management and consultancy firm, RIMC International, has entered into a 50:50 joint venture agreement with Pune-based Sahil Group of Companies, to manage and operate hotel projects in India. The joint venture company, RIMC Sahil India, aims to operate about 20 properties in the country by 2012. It has earmarked an investment of about three million USD for the same period.

Speaking exclusively with Hospitality Biz, Vinay Phadnis, Chairman and Managing Director, Sahil Group of Companies, stated, “Due to immense potential within the Indian hospitality industry, RIMC wished to have a presence in this market. The alliance will also help to accelerate our company’s growth and presence in the country.” RIMC Sahil India will start operations with six properties located in Mumbai, Pune, Kolhapur, Gurgaon and Jaipur across different categories. Of these, two properties — one each, under the three and four star categories, respectively — in Pune and a three star property in Jaipur are already under construction and slated for operations by mid January 2009. – The Best Real Estate WebSite Of The Year has been chosen India’s best real estate website for the year 2008. The Website of the Year awards are the largest annual ‘people’s choice’ website awards and have organized from last 4 years by MetrixLab, an independent online market research agency, in association with Neilsen Online. More than 1.5 million Internet users from India participated in the poll. A total of twelve websites were nominated in the real estate section. Results of the poll are available at
Although recently launched, has risen above all the real estate websites present in the market and became the most popular real estate website.
These days, people need everything on internet. So it is very much difficult to manage the information in the way that it can reach to the people in the way they need. has understood this and developed the site accordingly. One can view pictures as well as video of property with complete details. A property is described with the help of pictures, floor plans, video, map, nearby landmarks, and a detailed description.
Due to its large number of the features, their appropriate execution and the ease of use, is a perfect online destination for everyone interested in Indian real estate. Sellers, interested in advertising their properties, can logon to

About PropertyWala offers the huge and user-friendly property advertising services free of cost for buyers and sellers in India and overseas. has been developed over a period of two years by its parent company Efextra eSolutions Pvt Ltd (an IT company) after an extensive exposure working with international real estate portals. The site has been developed from the ground up with ease of use and web standards in mind. Within a period of 8 months of its launch, has become top real estate websites in terms of traffic and search rankings.

About MetrixLab
MetrixLab is a global Online Market Research company that specializes in the areas of New Product Development, Brand Communication, E-Business Performance and Satisfaction Research. Over the past nine years MetrixLab has emerged to be one of Europe’s leading online market research companies with offices in Rotterdam, London, Paris, Hamburg and Madrid.

DLF To Pump In Rs 150 Billion For Residential Projects

DLF, India’s major real estate developer, announced that it plans to invest Rs 150 billion over the coming three fiscals to construct various residential projects across the country.

The company has raised Rs 16,750 million as private equity in eight projects in November 2007.

According to sources, DLF Home Developers, the wholly-owned arm of DLF, would develop about 40,000 housing units in the mid-income category.

Despite slump in the housing demand for the last six months, the company has witnessed marvelous response for its mid-income housing projects and sold over 7,000 flats so far in the current fiscal.

DLF has unveiled mid-income housing projects in Bangalore, Gurgaon, Hyderabad, Indore, Kochi, Kolkata and Pune.

Assocham ask RBI to increase cap

ASSOCHAM ask RBI to increase the cap on priority sector home loans from Rs 20 lakhs to Rs 40 lakh. The industry body asks RBI to raise the limit in at least the metro cities including Delhi, Mumbai, Chennai and Kolkata as the property prices are increasing at a faster pace in these places.

Assocham stated that, “The housing loan limit classified as priority sector advances should be increased to forty lakh rupees in case of the metro cities, which account for 94 cent of the capital investment made in the sector.”

Recently RBI has announced the priority sector status for housing loans up to twenty lakh rupees. The apex body said: “Loans granted by banks to housing finance companies for on-lending to individuals for purchase/construction of dwelling units may be classified under priority sector, provided the housing loans granted by HFCs does not exceed twenty lakh rupees per dwelling unit each family.”

RBI has also declared four thousand crore rupees refinance facility for the National Housing Bank. Bankers in the industry feel that though RBI has announced a slew of measures to increase the flow of funds to the sagging real estate sector yet there is a need for an adequate support from the government’s side.

On December 7th, when government announced the fiscal stimulus package, it also said that the public sector banks will soon disclose a scheme for home loans up to twenty lakh rupees. Under the new scheme, home loans up to five lakh rupees are expected to be offered at around 7% while those above five lakh rupees and up to twenty lakh rupees may be granted at around 8%.

Bankers also feel that to facilitate credit flow into the cash-strapped real estate sector by the banks, risk weight on such loans need to be reduced. The officials from real estate, steel, cement, automobile and engineering have said that the government’s fiscal stimulus package is ‘highly inadequate’ for generating demand and jobs in the industry.


Shriram Group has finalized plans to enter the market

Chennai-based Shriram Group has finalized plans to come into the market for low-budget homes aimed at middle-income groups. Shriram is the latest property developer to try and tap into affordable housing segment as demand for real estate slumps in a slowing economy. Bangalore headquartered Shriram Properties will invest Rs. 500 crore over three years to build more than four thousand apartments in Bangalore, Chennai, Kolkata, Coimbatore and Vishakhapattnam cities where the company already has a significant presence, MD M Murali said. Delhi based Omaxe and Bangalore-based Golden Gate, Provident Housing & Infrastructure, Mantri Developers, Ozone Group and Vakil Housing have all outlined plans in recent months to develop low-budget housing project. The companies hope to drive down costs by acquiring land on the outskirts of cities and using modern construction techniques. It also expects to benefit from discounts on bulk purchases of construction materials.

Realtors may cut prices by 30%

DLF, Unitech and other real estate developers may lower prices by 30% by mid-2009 to nudge buyers out of their “wait and watch” stance, according to experts.

The price cut, if implemented by the country’s builders will also push sales higher, especially of the affordable category, property consultants said.

”Many developers will come down on their asking rates after being saddled with unsold stock beyond their ability to hold on,” added Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj (JLLM).

Property prices in the key cities have more than doubled in the past few years helped by a boom in the stock market and a spurt in salaries of home buyers. The subsequent measures of the Reserve Bank of India to cool the overheated economy and a sub-prime crisis coupled with a credit crunch, has tempered growth prospects in the country hurting sales of property developers.

The benchmark sensitive index, the Sensex, has dropped more than 60% from the beginning of the year, eroding much of the investors’ wealth and RBI has increased repo rates by 150 basis points till September this year to curb inflation.

“If you take same time next year, there will be better volumes at lower prices than what they are today. Buyers will be tired of waiting and all the developers realise that price cuts are necessary across the board,” said Pranay Vakil, chairman of property consultancy Knight Frank India.

To boost sales, property developers have been forced to cut prices of real estate but buyers are still adopting a “wait and watch” stance as many feel that even the lower rates continue to be unaffordable.

Property prices in Gurgaon, Noida in the National Capital Region (NCR) have fallen by 25-30% while Mumbai’s distant suburbs have seen 15-20% drop in prices. Now property consultants foresee further price correction of 25-30% in 2009.

“By the middle of 2009, developers will loose holding power and cut prices sharply. Cuts will follow big time after elections,” said Ambar Maheshwari, director of DTZ, an investment advisory.

Experts say that developers are likely to focus on sub Rs 20 lakh flats due to huge demand for such flats and the government’s stimulus package for Rs 20 lakh home loans.

“Earlier, developers thought that there is latent demand for premium homes, but in the current slowdown, that perception has changed. There is always demand for Rs 5 lakh-Rs 15 lakh homes and developers will look towards that,” Maheshwari said.

Unitech Plans for 35 Hotels

Realty major UNITECH LTD plans to invest about Rs 2,500 crore to develop 35 hotels across India over the next seven years. Unitech managing director Sanjay Chandra said the firm would develop 35 hotels in the next six to seven years and already had land in many cities at prime locations.

* The hotels would be located in the national capital region (NCR), Kolkata, Chennai, Goa, Mysore, Bangalore, Hyderabad, Chandigarh, Siliguri and Assam.

* Of the total planned hotels, about 50 per cent would be located in Kolkata and the NCR, Chandra said.

30 mid-market hotels by Landmark

The Landmark Group, which had plans to set up 30 mid-market hotels in India, is learnt to have asked some of the property developers it was in talks with for possible tie-ups to look for new partners.

While announcing its hospitality venture Citymax Hotels India last year, Landmark had said it planned to set up over 30 mid-market hotels in 10 years, with the first four-star hotel to come up in Indore in September 2008. The company confirmed that the new hotel had not come up yet but declined to say if it was delayed or shelved.

IL&FS realty fund mops up 895 million dollars

IL&FS real estate fund has mopped up $895 million (Rs 43,855 crore), promising overseas investors a return as high as 25%. The fund, called the IL&FS India Reality Fund 2, closed on Monday. Nearly 50% of the investment in the fund has come from US-based investors. The money has been raised at a time when hedge funds worldwide are struggling to raise resources with investors pulling out.

Last month, US banking firm Merrill Lynch raised $2.65 billion to invest in Asian real estate, especially in India, Japan, China and South Korea.

“The current market situation and capital scarcity provide valuable opportunities. As investors, we continue to look at investments with cautious optimism since we believe in the underlying strength of the Indian real estate market and remain confident of the long-term prospects of the sector,” Shahzad Dalal, vice chairman and managing director, IL&FS Investment Managers (IIML).

Although real estate stocks have taken a pounding and property prices are softening across India, Mr Dalal is confident about generating the promised returns.

While the new fund attracted investors from the US, Germany, Japan, and the West Asia, contributors to IIRFI, the institution’s first fund, also participated in the new offering. “It’s a significant endorsement of IIML’s track record of investing in the Indian real estate sector. We raised half the funds from the US market a few months ago while the balance were raised from other parts of the globe,” said the IL&FS official.

“Though our target was $750 million, we raised $895 million. This is more than the corpus of our first real estate fund that had raised $525 million in 2006,” Archana Hingorani, CEO and executive director of IIML, said.

JP Morgan plans to invest 1 bn dollars

JP Morgan India Pvt. Ltd. is working on a plan to invest 1 bn dollar in multiple industrial sectors in India.

Kalpana Morparia, JP Morgan India’s chief executive officer, recently revealed that the company has invested nearly 500 mn dollar from the fund in 4 sectors of the Indian economy – real estate, infrastructure, manufacturing and financial – and that it is exploring other investment opportunities in the South Asian nation.

“We have a fund of 1 bn dollars to invest in Indian companies,” Morparia said. “We have committed nearly half the money in real estate, infrastructure, manufacturing and financial sectors.”

Morparia did not identify the companies or projects that JP Morgan India has invested in, but she described funding commitments as “opportunistic,” and said that the company was in no hurry to complete the 1 billion dollar plan because it is investing its own money.

“The moderation in exports, small business output, and real estate related activity could crimp urban consumer spending as employment and household income growth slackens,” JPMorgan said in the Nov. 17 research note.

In September 2008, JP Morgan India said it would double its private-equity investments in the country up to 1 bn dollar, in addition to investing approximately 500 million dollar in its corporate finance and advisory units. Total private-equity investments across India increased 3.2% in the first half of 2008, to about 6.8 bn dollar.

JP Morgan Chase has invested in a variety of private Indian entities since last year, including L&T Infrastructure Development Projects Ltd., Apollo Hospitals & Enterprises Ltd. and Cafe Coffee Day, a Chikkamagaluru, India-based division of Amalgamated Bean Coffee Trading Co. Ltd. Café Coffee Day has more than six hundred cafes in 110 cities across India, making it the country’s largest coffee café.

JPMorgan India has also acquired separate, 50 mn dollar equity stakes in a pair of fast-growing, New Delhi-based real estate developers: Emaar MGF Land Ltd., which focuses mainly on residential, commercial, retail and hospitality projects, and BPTP Ltd., which is currently developing numerous projects, including residential and commercial complexes, retail spaces, IT parks and special economic zones and hospitality ventures.

JP Morgan India’s continued funding for Indian real-estate ventures stands out in a country where developers are struggling to complete ambitious projects. As the global economic crisis has worsened in recent months, local banks have clamped down on lending to the construction industry and a stock market slump has closed off equity raising through initial public offerings

JPMorgan Chase, which launched its India operations in 2001, has approached India’s central bank for licenses to set up four more branches in the country. The branches would be in Delhi, Chennai, Bangalore and one more destination in the south, according to the company.

In addition to its Mumbai banking branch, JP Morgan India currently has back-office operations in Mumbai and Bangalore. It employs more than 11,500 people in the country and plans to increase its headcount there, in spite of the slowing Indian economy.

Realtors say, Just in time

Real estate companies have welcomed the government’s move to ask banks to announce a separate package for borrowers of home loans in the affordable housing segment as part of the overall stimulus plan to revive demand in the economy.

“We welcome various measures announced today by the government in its economic stimulus package. These measures and those announced by the Reserve Bank of India (RBI) yesterday will certainly improve credit flow to the realty sector and also stimulate demand for housing. We as developers will respond by offering affordable housing,” said Sanjay Chandra, managing director of Unitech Ltd, one of the country’s leading real estate developers.

The government today said that public sector banks would shortly launch a package for home buyers. The government expects lower interest rates offered by the public sector banks to trigger similar moves by the private banks and housing financing companies, thereby spurring the demand for homes.

“This is a good move by the government and a cut in the interest rate will definitely spur some activity in the real estate business. In another four weeks, we should see the difference,” said Raminder Grover, CEO, Homebay Residential Pvt Ltd.

According to the government, the contribution of banks to the housing loan market is 20-25%. The package is expected to spur the demand, mainly in smaller towns. As much as 75% of home loans are in the range of Rs 7-7.5 lakh, according to government data.

“The construction industry is very important as there is a large housing shortage in the country. The sector is a large employer and is also connected to cement and steel industries. Banks have a major role to play to accelerate the growth of this segment,” Planning Commission Deputy Chairman Montek Singh Ahluwalia said announcing the package.

Earlier, RBI unveiled plans of the Rs 4,000-crore refinancing facility for the National Housing Bank to ease the liquidity crunch faced by the housing finance companies. The central bank also included loans of Rs 20 lakh and below, given by banks to housing finance companies, to be lent to individuals, under the priority lending category.

The measures are indicative of the strong resolve of the government to serve the need for housing in the country, especially for middle- and low-income groups. Ahluwalia also hinted at an increase in the plan expenditure towards construction of houses for the poor through the Indira Awas Yojana.

According to Rajeev Talwar, group executive director, DLF, the steps announced by the RBI and the government indicates that the sector can be an engine for economic growth as it creates employment and has a multiple effect on industries like steel, cement, ceramic, transportation.

“The government has ultimately realised the problem faced by the second-largest employment generating sector of the country. Once the interest rates touch, say, 8 per cent, there will be a total turnaround in the sector,” said Navin M Raheja, managing director, Raheja Developers Pvt Ltd.

As a further measure of support for this sector, public sector banks will shortly announce a package for borrowers of home loans in two categories — up to Rs 5 lakh and Rs 5 lakh-Rs 20 lakh. This sector will be kept under a close watch and additional measures would be taken as necessary to promote an accelerated growth trajectory.

Real-Estate Sector does not see boost in Government’s Package

The real-estate sector does not see any boost in government’s package. The 4% Cenvat reduction on all non-petroleum products will bring down steel prices by Rs 1,000 to Rs 1,500 which in turn may lower prices in the real-estate sector where steel is a basic input. But real-estate industry today passionately said that the stimulus would not lead to that.
Moreover, the Government has ruled out any interest rate subvention on home loans to boost the dampened housing sector. Planning Commission deputy chairman Montek Singh Ahluwalia said that public sector banks might individually work out a package for home owners as the liquidity situation improves with cut in repo rate and reverse repo rate.
“With the RBI bringing down the cash reserve ratio (the amount banks need to keep with the RBI) the liquidity situation will improve. Interest rate cut will be a normal consequence of repo rate cut,” finance secretary Arun Ramanathan said on rejecting the idea of an interest loan subsidy.
According to government data, only 20-25% of all over housing loan requirements are met by banks. The rest of the money is provided by finance companies. Moreover, the government continues to maintain that 75% of the housing loan requirements have an average size of Rs 7.5 lakh despite the rise in prices over the last two years and the special package being considered by banks for up to Rs 20 lakh will help boost demand.
The government seems to have shelved its plan to extend an interest subsidy of 2.5% aimed at fixing home loan interest rate at 9.5%. According to reports, the government was considering an interest rate subvention on new home loans which would, in turn, provide the stimulus to the housing and construction-related sectors such as steel and cement. The subsidy was being considered on home loans below Rs 25 lakh.

Double-booster may not be enough for corporate

The mood in corporate India, a day before the country’s central bank and the government were to announce measures to boost the economy, is that of skepticism, anger and measured optimism on what the government may do.
“It’s difficult to build in any rational expectations. They have been erratic. In the credit policy review, they did not do anything but when the market fell by 1,000 points, they brought down rates by 200 basis points,’’ said Ramdeo Agarwal, MD, Motilal Oswal Securities.
“There’s no sense of urgency; they have been busy fighting inflation than buying growth. More than specific measures, what will be interesting to see is if there’s a change in this stance. They should seize this opportunity to boost growth,’’ said Agarwal. There’s also anger that despite liquidity, banks are not lowering rates.
“If there’s liquidity, why are banks not bringing down interest rates? They need to bring in sufficient liquidity so that bankers believe that liquidity will remain,’’ said Ajit Gulabchand, chairman, HCC, which builds dams, roads and bridges.

RICS to set up institute for real estate in India

U.K.-based Royal Institution of Chartered Surveyors (RICS), a leading organization of its kind in the world for professionals in property, land, construction, and related environmental issues, on Thursday announced its entry into India and setting up of an institute for the real estate sector in the country.

Over one lakh property professionals working in the major established and emerging economies of the world have already secured the RICS status by becoming its members. In India, RICS has appointed renowned members of the Indian property sector to form a review panel to ensure that RICS membership is awarded to professionals in India who will maintain exemplary standards.