Monthly Archives: May 2012

Past, Present & Future of BKC

May 19, 2012 – 5:03 pm

Bandra Kurla Complex was created by MMRDA as an alternate CBD to Mumbai, with the express purpose of halting the further growth of offices and commercial activities in South Mumbai. Currently, BKC has a total stock of 8 million square feet of office space. An additional supply of 2.5 million square feet is expected in 2012 with the completion of The Capital, FIFC and TCG Finance Centres. Over the last few years, BKC’s G Block has gained prominence as the key location within this unique micro-market. The current vacancy level at Bandra Kurla Complex stands at 16%.
Leasing and buying activity at Bandra Kurla Complex continued to accelerate during the last two quarters. The rent correction appears to be complete, with most existing buildings and new projects recording flat rates or slight increases over the prior quarter. The overall stability of the market is a sign that it has bottomed out.

With the Diamond bourse soon to be operational in 2 million square feet of premises, the people churn at BKC will increase dramatically. How the MMRDA will address the management of this sudden onslaught of traffic remains to be seen. Other areas of concerns at BKC include the continued lack of F&B outlets and sufficient public transportation. The Metro project announced in 2008 would be a game changer; however, this project has been drastically delayed. The monorail project, now scrapped, could have been a significant infrastructure boost for Bandra Kurla Complex.

Various infrastructure initiatives like the Santacruz–Chembur Link Road will help adjacent areas around BKC such as LBS Road, Sion, Kurla, Kalina and Mahim to develop, posing competition for BKC. Many senior executives who work in BKC are expected to shift their residence to Bandra, driving up residential prices in Bandra.

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DLF’s Mumbai land-sources May be Bought by the Lodha Group

May 18, 2012 – 4:14 pm

Lodha Group is in advanced talks to buy a plot of land in Mumbai from DLF, the country’s largest listed real estate developer, for about $500 million, two sources with direct knowledge of the situation said.

Sale of the 17-acre plot is seen as part of DLF’s plan to sell some of its assets to pare its debt of about $4 billion. DLF bought the land for about 7 billion rupees ($129 million) in 2005.

Mumbai-based developer Lodha has emerged as the front-runner for the land parcel in central Mumbai said the sources, declining to be named as the matter is not public yet.

DLF declined to comment, while a spokesman for Lodha said the company was not in talks with DLF.

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CREDAI, Fire Department MoU will work or not?

May 17, 2012 – 6:50 pm

Announcement of a memorandum of understanding (MoU) between the Confederation of Real Estate Developers Association of India (CREDAI) and the Karnataka State Fire and Emergency Services (KSFES) Department on fire safety certification has raised quite a few eyebrows in the real estate industry.

While an industry expert questioned how “credible” would the entire process be, if the issuance of a no-objection certificate (NOC) and a clearance certificate (CC), which earlier took months or even years, would now have to be completed within 30 days. “Currently, the KSFES has been manually going through each drawing and then mulling over all the errors and suggestions. This consumes a lot of time. According to our MoU, we will be providing software prepared by a company which would identify the errors in the drawing. It would indicate whether a particular project proposal is in acceptance of the norms by highlighting the faults in red colour. Then at the click of a button, the department can either condone or reject the proposal. The company has provided similar software to civic bodies of other places like Mumbai, Pune, Ahmedabad, Nagpur and other places. Hence, their credibility is established,” asserted Sushil Mantri, under whose President ship CREDAI signed the MoU. He argued that it is important to make this move as almost 90 percent developers are suffering because a handful of builders did not follow norms.

“CREDAI members are responsible for almost 60-70 percent output of the city. Further, to become a member of the confederation, they have to sign a code of conduct which covers all the approvals and rules. By delaying progress of approvals, not only do builders incur losses as production suffers, but also the revenue to the city and BBMP is further delayed,” he said.

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Rift over Code of Conduct Between CREDAI and Builders

May 17, 2012 – 12:48 pm

Several developers declined to abide by the code of conduct laid down by CREDAI initially. Following this, the association has expelled several developers, while some have resigned discontinuing their involvement with the organisation.  Opposing the self-regulation code, the builders refused to sign the association’s code of conduct. The bone of contention for builders was the code of conduct that primarily outlines transparency clauses that builders have to follow.

Ultimately, CREDAI expelled some builders, as they did not comply with the directives despite the body having issued several notices to them. DLF, Hirco and Hiranandani Realtors have been expelled from the Chennai Unit, whereas four builders have resigned from the Bangalore unit. CREDAI has further decided to expel non-compliant builders in NCR and informed the expelled builders that they can be a part of CREDAI unit only if they sign the code of conduct.

 

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Auction of Indian Springs Country Club by Williams & Williams

May 16, 2012 – 6:05 pm

Williams & Williams, the premier brand in real estate auctions, today announced it will auction Indian Springs Country Club in Broken Arrow, Oklahoma. This private club offers a first class experience with an array of amenities and recreational sports, making it an appealing and unique income-producing investment. The live auction will take place on Tuesday, June 5 at 5 p.m. CDT with a nominal opening bid of $250,000. Interested buyers can bid on-site or in real time from anywhere at auctionnetwork.com.

Developed in the 1960s, Indian Springs Country Club was designed to be the focal point of several residential communities. The 38,000+/- square foot clubhouse, which includes an outdoor patio area, is perfect for hosting weddings, birthdays and holiday celebrations for both casual and fine dining occasions year-round.

Indian Springs Country Club features two sprawling 18 hole regulation golf courses including the championship style River Course and the Windmill Course. The River Course features views of the Arkansas River with gently rolling hills, beautiful ponds and streams and challenging elevation fluctuations. The Windmill Course, developed in 1972, tests golfers’ accuracy and iron play with tight fairways surrounded by a variety of lush trees.

The tennis facilities are just as impressive, boasting 10 lighted post tension hard courts and four covered courts. Three swimming areas offer a cool escape in the summer months — two Olympic-size pools with diving boards and slides and a third pool for younger children.

“Indian Springs is more than a county club. For 45 years, it has been a gathering place for family, friends and the community to celebrate important family events, make memories and actively engage in golf, tennis and other social activities,” said DC Roberts, Senior Director of Sales at Williams & Williams. “The sellers have many years of fond memories and look forward to passing the property on to new owners to care for the club for generations to come.”

Broken Arrow and the neighbouring metropolitan area of Tulsa have grown up around this popular country club, although the immediate area still boasts a quiet suburban lifestyle and luxury homes. It is one of the fastest growing communities in the state and has been listed by Family Circle magazine as a top 10 best town for families and included on Money Magazine’s top 100 best places to live.

All club-owned equipment and furnishings will be conveyed with the real estate. For more details about Williams & Williams’ auction of Indian Springs Country Club visit http://williamsauction.com/ISCC. Open public inspections will take place at 16006 East 131st Street South, Broken Arrow, Oklahoma on Friday, May 18, May 25 and June 1 from 11 a.m. to 2 p.m. and two hours before auction.

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Stringent RBI Policy: Buying a House Now is a Benefit or Not ?

May 16, 2012 – 2:26 pm

Zooming interest rates and escalating property prices had forced many prospective buyers to postpone their plans of buying a house. However, the recent easing of monetary policy by the Reserve Bank of India (RBI) has brought them relief in at least one aspect-lowering of interest rates.

Many public and private sector banks have announced a cut in their interest rates by 25 basis points. This means a reduction in the EMI that a borrower would have to pay. Suppose you had taken a home loan of Rs 30 lakh for 20 years at an interest rate of 11%. If the bank cuts its rates by 1%, resulting in a rate of 10%, your instalment will be slashed by Rs 2,000.

While this is undoubtedly a piece of good news, the recent regulation that has been introduced in the real estate sector has the potential to dampen your soaring spirits since it could impact your eligibility as a borrower and, consequently, your home buying decision.

If the interest rates drop, your eligibility as a borrower increases marginally, depending on the percentage of reduction. Says Adhil Shetty, chief operating officer of Bankbazaar.com: “While calculating the borrowing capacity of an individual, it’s typically considered that the EMI will be 40-50% of the net take-home salary. So, if there is a substantial drop in the interest rate, his eligibility goes up.” This is because the borrower will be able to afford a higher EMI or be more comfortably placed to pay the same amount of EMI. However, Shetty says that most banks pass on the benefit only to new loan borrowers.

“If there is a drop of 50 basis points, the average borrowing capacity of an individual goes up by Rs 60,000-70,000, which is not much. Of course, this differs from case to case, but banks consider various other factors before offering a low rate even to new borrowers,” says Pankaj Maalde, head, financial planning, Apnapaisa.com. He also advises that the fall in rates shouldn’t tempt you to prepay a loan. You will have to weigh whether the advantage of a lower EMI is higher than the prepayment penalty you may have to pay.

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Emerging Property Markets on Demand

May 16, 2012 – 1:57 pm

PwC real estate partner, John Forbes, told the 2012 Cambridge Real Estate Finance and Investment Conference that the global financial crisis means that the milestone could come sooner than expected. ‘Back in 2007, we predicted that the GDP of the leading emerging markets would surpass that of the leading advanced economies by 2050. The intervening global financial crisis has slowed growth overall, but the deceleration has been most marked in the advanced economies,’ he said.

Real estate investors need to adapt as emerging markets start to dominate and China, the United States, India and Brazil are set to become the four major economies, it is claimed.

‘The shift in the balance of economic power is therefore happening more rapidly. We expect there to be three dominant economies by 2050 China, the United States and India. Then there will be a significant gap to the country that we expect to be in fourth place, Brazil,’ he explained. ‘We are already standing at a milestone. According to the latest data published by the International Monetary Fund in April, the share of world GDP of emerging and developing economies is expected to overtake that of advanced economies for the first time this year,’ he added.

 

Her told delegates that it is not a question of ‘if’ real estate investors will adapt to this changed landscape but ‘when’ and ‘how’. ‘Emerging market economies will be a major source of investment opportunities but also of capital. Real estate businesses need to address both. In terms of investing in emerging markets, investor concerns need to be considered,’ he pointed out. ‘The providers of capital have become increasingly attentive about a range of governance and transparency issues. This will be a major factor in determining which emerging market real estate businesses will attract international capital,’ he said.

‘Meeting the changing expectations of investors is a challenge for many real estate businesses even in advanced economies. Those in emerging markets are generally starting from a less developed point and for them the journey will be longer,’ he added.

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Farmers Go On Rampage

May 15, 2012 – 7:06 pm

After the Allahabad high court rejected the review petition of villagers in Noida Extension, a small section of farmers unhappy with the order went on a rampage targeting projects of several builders. Other farmers were, however, happy that the Allahabad high court had turned down the plea made by the Greater Noida Authority in its review petition to not dole out hiked compensation and developed plots to non-ancestral lands of villagers.

Soon after news of the order reached Noida Extension, some agitated farmers took to the streets and targeted under-construction properties of developers. They blocked traffic at the Gol Chakkar in Noida Extension for a few hours. The angry crowd was dispersed following police intervention. “After getting news about farmers agitating in the region, we reached the spot and our officials managed to quell the agitation,” said SP (Rural), Ashok
Kumar. The police informed that no case has been filed into the incident of violence. “We are likely to register a case into the matter,” Kumar added.

Farmers’ counsel, Pankaj Dubey, informed that after facing rejection from the high court, where they had sought land to be given back to farmers, they would now challenge the October 21 verdict in the Supreme Court.

Other sections of farmers have expressed happiness over the fact that the plea made by Greater Noida Authority, vide its review petition, in which it had expressed its inability to pay hiked compensation and developed plots to all farmers has been turned down. The Authority had asked for relief from the high court in granting it order to pay compensation and plots only to those farmers who had ‘ancestral lands’ in the region as against ‘non-ancestral lands’ belonging to those who are not originally from the region but own land in different villages.

“The Authority had been trying to make a difference between ancestral and non-ancestral land in the region in giving compensation to farmers,” said Ranveer Pradhan, president of a farmers’ organization, Grameen Panchayat Morcha. “Not only was the Authority shy of giving any developed plots in lieu of acquiring ‘non-ancestral’ lands, they had also been paying 10% less compensation to owners of such lands. It is a matter of great satisfaction that farmers across the board are eligible to get 64% hiked compensation and 10% developed plots now that the high court has upheld its original order delivered on October 21,” said Pradhan.

The Grameen Panchayat Morcha said that there is a vast amount of land in the Noida Extension region which the Authority had classified as ‘non-ancestral’.

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In Pune, India’s Other Growth City Private Equity Likes Real Estate Investing

May 15, 2012 – 4:19 pm

According to Sameer Gholve, Manager of Capital Markets at Jones Lang LaSalle India, Pune has been favoured destination amongst Real Estate PE funds since 2005 – the year FDI opened for real estate.

Most of the funds are based out of Mumbai, which gives Pune obvious preference, as the city’s proximity allows these funds to track and monitor the market – and their investments – easily. Also, Pune is among the most rapidly growing cities in India after Mumbai, NCR and Bangalore.

The total flow of PE funds into Pune until December 2011 was approximately US$800 million. This consisted of both foreign and domestic monies through around 32 major transactions over the last five years. 2009 saw the lowest flow of private equity funds into the city, though Investors regained confidence in 2010 arrived. The renewed investor confidence resulted in a massive recovery of private equity deal closures in Pune

As expected, most of these funds have been invested in the residential property asset class. In fact, residential real estate has proved to be the most consistent and enduring magnet for private equity funds into Pune’s real estate sector. In comparison, investments into SEZs, industrial parks (STPIT) and mixed-use townships have primarily been seen only before mid-2008. From 2010 onwards, the interest in these formats as asset classes has been quite meagre.

Significantly, 61% of the total private equity investments that have been seen in Pune were done in projects located in East Pune. East Pune has the majority of the city’s IT industry developments such as Magarpatta Cyber City in Hadapsar, EON IT Park in Kharadi, CommerZone in Yerawada, Weikefield IT Park on Nagar Road, etc. These IT developments have had a major spin-off effect on the profile of these areas. The higher spending power and commensurate aspirations of the people working in these establishments has caused the arrival of massive malls and also generated a huge demand for quality residential projects. These projects are proving to be the major magnets for private equity investments into Pune’s real estate sector.

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Due to Hit by High Input Costs & Low Demand India Inc.is Leading To Squeeze in Earnings & Revenue Growth

May 14, 2012 – 1:10 pm

Indian firms are being squeezed by rising input costs and cooling demand, resulting in a slowdown in earnings and revenue growth compared to recent quarters.

An ETIG analysis of 600 companies that have announced results for the quarter ended March 31, 2012, shows that net profit, excluding firms in banking & financial services and oil & gas sectors, slid 2.5% from a year ago while revenue growth slipped to 14%, relatively slower than the previous quarters.

Net profit fell for the third consecutive quarter, though the decline was not as marked compared to the 12% fall in the December 2011 quarter and 38% in the quarter prior to that. Revenue growth hasn’t dipped below 15% in the past couple of years.

In the quarter ended September 30, 2011, revenue growth had grown in single digits.

The earnings scorecard for the quarter ended March 2012 was weighed down by the poor showing of industry heavyweights such as Reliance Industries, Bharti Airtel, Sterlite Industries and Sesa Goa, all of which reported a fall in profits and mounting pressure on margins.

Barring some sectors, the ETIG analysis shows, companies are unable to pass on rising expenses to end-users, a fact reflected in the continuing erosion in their operating margins before depreciation. Operating profitability shrank for the eighth consecutive quarter in March compared to a year ago.

Though it was 200 basis points higher than in the December 2011 quarter, at 19% it was still lower than the over-22% registered two years ago when the economy was recovering from the 2008-09 slowdown.

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Demand to Remain Stagnant in Residential Market

May 11, 2012 – 6:15 pm

A recent report by Global Property Consultants CBRE South Asia, India Residential Market View – 2011 states that while the residential markets across NCR and Mumbai witnessed steady escalation in prices during the revival period from 2009 to first half of 2011 (as high as 40-50% in certain micro-markets), the latter half of the year brought in stagnation in overall prices.

Numerous repo-rate revisions by RBI, which led to upward revision of mortgage rates, tighter control on teaser rates earlier being offered by financial institutions to reduce EMI burden in the initial years of loan tenure, and inflationary pressures impacted end user as well as investor sentiment by the end of 2011. This coupled with supply pile-up lead to downward pressures on capital values across various micro-markets in these leading hubs. While the year 2012 started on a positive note with the central bank reducing repo rates by 50 basis points for the first time in several months (after increasing it 13 times in the last 2 years), the impact on demand rejuvenation might be limited.

“During 2011, we witnessed initial buoyancy in the real estate market as investor and developer sentiment improved, riding on the high residential demand wave. However with repeated interest rate hikes, rising prices and prevailing economic conditions, the market saw a dip in sales towards the middle of the year,” said Anshuman Magazine, Chairman & Managing Director, CBRE South Asia Pvt Ltd. This led to a supply pile-up in the key markets of NCR (National Capital Region), Mumbai and Bangalore, leading to capital values remaining flat across various micro-markets in these three leading hubs.

“While the recent rate cut by the RBI has helped generate positive sentiments in the market, stagnancy in demand will continue in the short to medium term unless there is an overall improvement in the economic scenario,” Mr Magazine added The NCR market witnessed considerable appreciation in capital values in the first half of the year, with premium markets witnessing steady demand from expatriates, high net worth individuals (HNIs) and executives from multinationals and Indian companies.

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IL And FS PE Plans New Fund under Euronext-Listed Yatra Capital

May 11, 2012 – 4:47 pm

IL&FS Investment Managers Ltd (IIML), the country’s largest home-grown private equity firm by assets under management (AUM), is planning to launch a fresh fund under the banner of Amsterdam’s Euronext-listed Yatra Capital.

Yatra Capital is an India-focused real estate investment firm, promoted by Saffron Capital Advisors.

Archana Hingorani, chief executive officer and executive director of IIML, told “We are in the process of getting shareholder approval at its upcoming annual general meeting. After the approval comes and depending upon the capital markets, we will be able to raise fresh money for the same.”

IIML would be hoping to be second time lucky.

This involved renaming the existing shares of Yatra Capital as ‘real estate shares’ whereas the new share class was to be christened as ‘infrastructure shares’. This would have developed Yatra Capital as a multi-class fund house with a strategy to invest in Indian infrastructure through debt and equity components, as against its present strategy of primarily equity investments in the Indian realty sector.

Yatra Capital has invested across asset class but its maximum exposure is in the retail segment where it has invested in market city projects of the Mumbai-based realtor Phoenix Mills Ltd. It also has enterprise level stake in Saket Engineers Pvt Ltd and the Phoenix Mills.

After the proposal was submitted, a number of amendments were suggested by the concerned shareholders and the board had later determined that until a final position was reached on the potential amendments to the proposal, it would not be implemented. This happened in spite of the board getting what it called a ‘broad’ investor support.

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Mumbai Land Prices Set to Extend 15% Decline

May 11, 2012 – 4:47 pm

Mumbai land prices, India’s most expensive, may extend their 15 percent decline this year as high borrowing costs force indebted developers to sell real estate, Oberoi Realty Ltd. (OBER) Chairman Vikas Oberoi said. “We are waiting for the right opportunity to buy,” Oberoi, who runs India’s second-largest developer by market value, said in an interview in Mumbai. “I don’t want to waste my bullets. Oberoi, with no debt and about 13 billion rupees ($244 million) in cash, will take advantage of falling prices to buy land, he said. Oberoi Realty reported a 5 percent increase in earnings to 1.43 billion rupees in the three months ended March 31 as the company increased home prices, beating analyst estimates.

 

Analysts have expressed concern that Oberoi isn’t deploying cash to buy land and putting the money to better use. The “missing clarity” on new land acquisitions may be a drag on valuations with “idle cash” offering lower returns, Mumbai-based analyst Tejas Sheth at Emkay Global Financial Services Ltd. said in a note to clients on April 26. Oberoi said he is in the market to buy land. “I am not watching the audience; I am watching my game, not playing for the gallery.” Oberoi said. “I am very interested and very aggressive to acquire land, but aggression can’t be jumping off the cliff, it has to be backed with caution and preparation. After I jump I want to land on my feet not on my head.”

Mumbai’s amended building rules for home construction will spur new projects and increase supply in India’s most expensive property market, where permissions to build had come to a virtual halt, Oberoi said. “The rules have crystallized what one can get, the basic land potential is clear,” Oberoi said. “Discrimination between two developers has now gone as everyone gets the same area. It’s levelled the playing field in a big way, which is fantastic.”

 

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For Allotment Cancellation Competition Commission of India Pulls Up DLF

May 10, 2012 – 6:22 pm

The Competition Commission of India (CCI) has pulled up real estate major DLF Ltd in a recent order for cancelling the allotment of an apartment of a member of DLF’s Park Place RWA, stating that it was in “direct contravention” of its stay order of September 2010.

The order was passed by the commission to prevent the opposite party from abusing its dominant position to the detriment of allottees during pendency of the proceedings. The CCI also severely admonished the builder for discriminatory behaviour towards members of the owners’ association and other allottees/owners.

The cancellation letter for one Vipin Mahajan was issued on January 28 last year when the interim order was in force. According to Mahajan, despite the directions being in force to date, the opposite party issued a letter in January last year, cancelling the booking of his apartment and forfeited a sum of Rs 23,06,778 out of the total amount of Rs 44,89,503.

While the CCI accepted this restoration of status quo and therefore felt that no further direction needs to be passed as far as restitution of Mahajan’s apartment was concerned which had been a great relief for the allottee concerned, the CCI as prescribed by the Competition Act 2002 “is obliged to impose penalty because of the deliberate non-compliance”? This, the order stated, was a violation of Section 42 of the Act.

Also, Section 48 of the Act makes it a liability of every person for penalty, who at the time of contravention was in charge of or was responsible to the company for conducting its business. DLF will now have to disclose the name of the errant persons who were responsible for the misconduct and also give a show cause notice as to why the penalty should not be imposed. The case on the same is up for hearing on May 17. Meanwhile, a spokesperson of DLF Ltd clarified that the company had “restored the ownership of the apartment which was %cancelled due to non-payment of dues by the %allottee”.

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Cognizant Raises Investment in Real Estate Sector By $200 M

May 10, 2012 – 1:18 pm

Cognizant Technology Solutions has increased its real estate infrastructure expansion in India by nearly $200 million. The US-based company, which has large offshore presence in India, has revised its investment plan to a total of $700 million in real estate from 2011 through 2015.

This is to expand its campuses in India by an additional 10.5 million sq ft. This expanded programme includes expenditure on land acquisition, facilities construction and furnishings to build new company-owned IT development and delivery centres in regions primarily designated as Special Economic Zones in India.

In February 2011, the company announced $500 million of investment in its India infrastructure expansion through the end of 2014. However, at the beginning of calendar 2012, the company decided to expand its planning horizon for the India real estate programme to 2015 and beyond, said a company spokesperson. For the first quarter ended March 2012, Cognizant finished with $2.5 billion of cash and short-term investments. It spent around $60.5 million for capital expenditures during the quarter. “During 2012, we expect our capital expenditure to total approximately $370 million,” Ms Karen McLoughlin, Chief Financial Officer, Cognizant, told analysts while discussing the company’s financial results.

Cognizant ended the March quarter with around 1, 40,500 employees globally. Of this, nearly 105,000 are in employed in its India centres.

 

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Rs 250 Crore for Real Estate Private Equity Fund Raised by LIC Housing Finance

May 9, 2012 – 3:34 pm

LIC Housing Finance Ltd, the mortgage unit of India’s biggest insurer, has achieved a first close of Rs 250 crore for its maiden real estate private equity fund. Launched late last year, the fund has a target size of Rs 500 crore, with a green shoe option of Rs 250 crore. This provision will allow LIC Housing Finance Asset Management Company, the manager of the fund, to sell more units than planned.

“We have raised Rs 250 crore so far from institutional investors like banks and corporates,” AK Sharma, chief executive of LIC Housing Finance, told ET. We also have additional commitment of Rs 50 crore and are hopeful to finish fund raising by June end.” The fund has a target net internal rate of return of over 22%. It will invest in urban real estate such as mid-income housing projects, IT parks and warehouses across tier I and II cities. “There is a huge demand for mid income category homes in the range of Rs 1,600-4,000 per sq ft and we will target such opportunities,” Sharma said.

The fund is already looking at various proposals. The asset management arm of LIC has received a commitment of Rs 50 crore each from LIC and LIC Housing Finance. LIC, which earlier targeted retail investors, is now looking to raise the remaining capital from the institutional investors. “Retail investment in private equity is yet to pick up. Retail investors do not understand the risks and rewards associated with the business,” Sharma said. There are at least half a dozen real estate-focussed funds in the market that are trying to scoop up fresh or follow-up funds to invest in Indian real estate. These include HDFC Property Fund, JP Morgan Asset Management, IndiaReit Fund Advisors and Kotak Realty Fund.

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Delhi Government’s Fresh Directive on Sale of Properties

May 9, 2012 – 3:33 pm

Government of Delhi issued a fresh directive to the revenue department asking it to allow sale and purchase of immovable properties only through proper sale and not allow any such transactions by way of General Power of Attorney.

The direction issued by Divisional Commissioner Vijay Dev came as registration of properties at 13 sub-registrar offices across the city had slowed down drastically due to confusion on the issue following issuance of an advisory last month by the government clamping down on property transaction through GPA. “In today’s direction, the government has asked all concerned officials to strictly comply with the Supreme Court order on the issue. The order has been issued to remove the confusion,” said an official.

The government had put restrictions on GPA as a mode of property transfer following the apex court order on October 12 last year but such transactions had been taking place despite the order, prompting the government to issue the advisory. Following the advisory, registration of properties has come down at the sub-registrar offices.

The Supreme Court had on October 12 last year ruled that sale transactions carried out in the name of GPA will have no legal sanctity and immovable property can be sold or transferred only through registered deeds.

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Koramangala, Now a Hot Real Estate Destination in Bangalore

May 8, 2012 – 6:10 pm

Once upon a time localities used to call Koramangala ‘Sollemangala’ (Solle means mosquitoes in Kannada). The area spread over 1,800 acres in eight blocks, was once petrified by mosquito menace and mangroves. It was a village and was considered not a great place to live for a Bangalorean in the 80s and 90s.

Today, it is one of the hottest real estate destinations in India’s Silicon Valley. “I would kill to get a place in Koramangala,” said MR Jagannathan jokingly. The 60-year-old retired employee stays very close to Koramangala. “It used to be in the outskirts of the city when I could afford it. Now, unfortunately I cannot buy a place there.” This is just a glimpse of how much the landscape and aspiration for Koramangala has changed over the years.

“You won’t believe it. I once had an offer to buy a plot in Koramangala for a few lakhs in the 90s. That time if I would have stretched a bit I could have actually owned something in Koramangala, but it was not so good then. This is one decision I regret to have made,” added Mr Jagannathan.

The Rahejas, real estate developers, are often credited with changing the landscape of Koramangala when they come up with mixed-use project called Raheja Arcade. Many companies those days shifted from other parts of Bangalore to Raheja Arcade. Then Forum Mall, which further increased the value of the locality. In fact Forum is one of the earliest malls in the country, which was constructed to meet international standards. Even to this day, it is one of most successful malls in the country.

At present, the rentals for mid-segment residential properties are expected to grow by 5-10 per cent in the Koramangala locality over the next few months. “This is due to good social as well as physical infrastructure, good connectivity to various business districts and availability of premium developments,” said Naveen Nadwani, director South India, for Cushman & Wakefield, a real estate consulting firm.

“Rentals for residential properties in the high-end segment are expected to remain stable while mid-segment are expected to witness further increases on account of persistent demand. While in the commercial office market space as well as in the retail segment, rentals may remain stable in the short to medium term,” added Mr Nadwani

While the rate for land parcels range between Rs 13,000-15,000 per square feet, not much of commercial space is available for sale. “At present, no major land parcels suitable for developers are available in Koramangala. Only a few scattered small plots ranging up to a size of 3,500 sq ft owned by individuals are available,” added Mr Nadwani. The residents of Koramangala are buying whatever is available. Recently, a well-known local businessman bought two adjacent plots in the vicinity. 

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Godrej Properties: After September 2010, it presents Its Worst Ever Quarterly Performance

May 8, 2012 – 5:10 pm

Godrej Properties,  part of the Godrej group and one of the most promising Indian real estate companies, posted its worst ever quarterly performance after the September 2010 quarter when compared year on year. The company has registered a subdued growth of 8% in its consolidated net sales and 17.4% drop in operating profit. The company’s performance was impacted by subdued sales volumes, weak operating margins and a slowdown in execution. Over 60% of its total income during the quarter was accounted for from projects connected to group companies. The remaining projects earned a negligible margin. Certain commercial projects were sold below the break-even cost leading to drop in margins.

Cost escalation and higher share of minority interest also impacted the company’s margins. Growth in sales volumes have not been very encouraging in its Garden City project in Ahmedabad which contributed 16% to the total income compared to 49% in the preceding December quarter. Net debt after excluding the money rose from IPP stood at 1554 crore leading to debt equity of 0.85. This is higher than the ratio of 0.55 at the end of the previous fiscal.

The company’s management though is optimistic about improving margins, ramping up execution and launching 17 new residential projects in FY13. Maintaining the health of its balance sheet is going to be a major priority. However for now, the stock is likely to see some more correction as the Street would knock off the premium built into the realty stock price on account of the company’s asset light model, good track record and reputation of its promoters.

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IL and FS PE Set to Launch Third India Realty Fund

May 8, 2012 – 5:10 pm

IL&FS Investment Managers Ltd (IIML), the country’s largest home-grown private equity firm by assets under management (AUM), is scripting a new realty fund, according to sources close to the development. The public-listed PE fund manager, which has AUM of $3.2 billion, will launch the IL&FS India Realty Fund (IRF) III with a targeted corpus of $500 million in the current financial year.

The targeted size of the new fund is much smaller than the second fund called IRF II, which raised a humongous $895 million. IRF II was launched in 2007 and had a target corpus of $750 million. But it managed to raise a higher corpus when the market was at its peak. The second fund has managed gross returns of 19.9 per cent per annum across two divestments.

A wealth manager privy to the development said, “The Company has decided to raise a smaller fund as managing a large fund has become tough since its average deal size is of $20-30 million.”

According to sources, the company’s management has shared with its investors that the fund requirement in Indian realty is not as large as its peers in other countries and thus, the PE firm would like to stick to small-sized deals.

An e-mail query sent to the IIML spokesperson did not elicit any response.

IML scrip declined 1 per cent to close at Rs 27.15 on the BSE, in a strong Mumbai market on Monday.

The firm had raised its maiden realty fund IRF I in 2006 with a corpus of $525 million, which was fully invested. From the second fund, it has invested in more than 30 deals, spanning projects across the country. Going forward, it wants to invest in the same deal size bracket (up to $30 million) from its next fund.

As per its website, IIML currently has six real estate funds with $2 billion under management. Besides its own funds, it operates a few joint venture real estate funds including IL&FS Milestone Funds I and II, along with Milestone Capital.

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Mumbai Real Estate Market Looks Poised For Some Upward Growth

May 7, 2012 – 5:46 pm

The real estate market in Mumbai looks poised for some upswing after going through a lukewarm phase for the past few months. Evidently, there has been a marked increase in sales in March 2012 when 5,776 properties were registered, which is 37% more than the 3,639 registrations in the month of February 2012.

Similarly, at least 50 projects have been launched in the last three months, which further underlines the positive sentiment in the real estate market. The developers ‘ fraternity is quite upbeat about this encouraging development in the past few months.

Says Bharat Mody, CFO, Hubtown Limited, “The recent registration data is certainly encouraging and we are hopeful of numbers getting better from here on.” Similarly, Diipesh Bhagtani, Executive Director, Jaycee Homes Ltd, says: “It’s always good news when we see higher number of registrations and project launches.” Developers, however, have their own reasoning for this positive trend witnessed in the real estate market. The festive spell in the month of March has also been instrumental in giving a boost to the sales in the residential space, observe developers.

Shailesh Sanghvi – Director of Sanghvi Group of Companies, says: “Auspicious occasions such as Gudi Padwa, Akshya Tritya and Dhanteras give an impetus to booking of flats. As Gudi Padwa fell in the month of March, this worked as a major driver for property registrations.

With several developers attracting homebuyers with significant discounts and incentives the trend will continue to prevail since it is the most favourable day to purchase the flat or to perform their Graha Pravesh puja.

On this festive occasion there is an affirmative sentiment in people and more prospects are keen to buy, a discount offer helps them to take the decision faster, releasing some monetary burden.” In addition to this, bonus and healthy job market have certainly created an optimistic sentiment in the market, he points out. However, according to Mody, this improvement has mostly come from the re-sale property rather than any fresh purchases. “Therefore, things will significantly change only if situation on pending approvals improves drastically. That will create fresh supply in the market and ease the upward pressure on prices and will prove to be win-win for government, home-buyers and developers,” he says.

Additionally, developers aver that the primary reason is that the new Development Control Rules (DCR) that came into effect in January has been instrumental in boosting the sales. The recent bunching up of project launches after the new DCR came into effect in January 2012 seems to have driven the recovery, observe realty experts. “Developers and customers are now certain of what they are buying and investing into. Also, we have made it mandatory for developers to sell flats on carpet pricing, leaving no dispute on clarity of areas.”

Moreover, with the Reserve Bank of India (RBI) cutting interest rates for the first time in three years after raising borrowing costs by record 375 basis points in 13 moves from mid-March 2010, this factor has also been responsible for the spike in purchases. The RBI lowered the repurchase rate to 8 per cent from 8.5 per cent on April 17. Incidentally, Mumbai’s residential home sales recovered from a three-year low in the quarter ended in March.

 

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In Bangalore, Girish Karnad Reflects

May 7, 2012 – 5:46 pm

Few decades ago, people came to Bangalore essentially for the horse races. Once the racing season was over, the city emptied out. Bangalore had little else to offer.

Today the racecourse has been moved out of the city—a former chief minister’s dream of erecting a 100-story commercial tower à la Singapore in the course’s place was foiled by public outcry—and Bangalore throbs through the year with no concern for the seasons. Its roads are chock block with traffic, and its hotels crammed.

Bangalore started its life as a cantonment built by the British to keep a watchful eye on the nearby princely city of Mysore. It was European in its orientation, with wide roads, bungalows with pillared porticoes, and spired churches where everyone spoke English. And nearby was its “native twin,” Bengaluru, congested and cowed, where the lingua franca was the South Indian language of Kannada.

In 1956 the administrative map of India was redrawn on a linguistic basis with each of its nearly 20 languages defining a separate state. And Bangalore found itself the capital of a new Kannada state, at the mercy of political and economic forces it was unprepared for. The first to pour in were bureaucrats who needed offices, houses, and roads to run the new state, their numbers swelled by the philosophy of a socialist economy that led to the setting-up of government-sponsored enterprises, like the telephone and the aeronautical industries. Ancillary enterprises followed, leading to an influx of migrant workers.

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Real Estate Industry: Great Investment Opportunities in India

May 5, 2012 – 6:14 pm

The LiveNRI has announced an upcoming India Property Road Show on May 5th 2012 (Saturday) and May 6th 2012 (Sunday). The timings will be 11am and 7pm (by appointment only). It is an option for investors and home buyers, who are looking for nice property in India. The new solution has been developed to meet the need of the people looking for homes and commercial property in India.

The property will be showcased at the road show, where investors and buyers will be able to see an example and options of property, which will highlight the various options and facilities. It is designed to support an entire investor’s team or just an individual, interested in the property.

About LiveNRI- India Property Service:
LiveNRI represents the top developers in India to offer its clients across the world a wide range of choices within India. The booming real estate market in India affords the opportunity and security of a growing investment.

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Assotech and Sunapollo to Build a Housing Project in Gurgaon worth Rs500cr

May 5, 2012 – 3:55 pm

Real estate Company Assotech and private equity firm Sun-Apollo Friday announced the development of a housing project in Gurgaon at an investment of about Rs 500 crore over the next three years.

Sun-Apollo Real Estate Advisors has invested Rs 75 crore to pick up nearly 50 percent stake in Assotech’s subsidiary firm which would develop this project. Assotech has infused Rs 76 crore for nearly 51 percent stake in the subsidiary. “We are entering into the Gurgaon market by launching a 12-acre housing project in partnership with Sun-Apollo. This is our first project to receive private equity investment,” Assotech Managing Director Sanjeev Srivastava told reporters.

The project, which is located on Dwarka Expressway, has been launched at a price of about Rs 5,000 per square feet. He said the company has bought the licensed land where it would develop about 580 apartments, 23 villas and 102 flats for economically weaker section. “The total investment in this project ‘Assotech Blith’ would be about Rs 500 crore including the land cost over a period of the next three years,” Srivastava said.

Assotech is currently developing many housing and hotel projects in the National Capital Region (NCR), Uttar Pradesh, Odisha, Uttarakhand, Madhya Pradesh and Bihar.

The investment would be met through equity contributions from both the partners, bank loans and advances from customers against sales, he added. Sun-Apollo Principal Alok Aggarwal said: “The two partners are committed to invest more if required for construction activities”. The private equity firm has also invested in real estate projects of Parsvnath Developers and Godrej Properties in north India. “We will do more projects with Assotech in future if there is good opportunity,” Aggarwal said.

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Analysing the Footprint of The Real Sector in South India

May 5, 2012 – 3:55 pm

What a South Mumbai is to Mumbai or a South Delhi is to Delhi could well be South Indian cities to India! The question is – will the southern region become the downtown of India?

Southern India has for long been the silent crusader, building and strengthening its real estate development as one of the most sought after destinations in the country. With improving transparency and visibility of the real estate markets in the South zone, cities such as Bangalore, Chennai and Hyderabad have attained a place on the global real estate map, a status that was limited just to Mumbai and Delhi in the past.

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

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

South India’s residential market has been an ardent follower of the ‘affordability’ mantra, with more than 80% of the new launches in the past two years being priced under INR 4,000 per sq ft (USD1 812 per sqm). As a result, the residential markets of South Indian cities have remained resilient in the past few quarters, relative to the significant decline recorded in the sales volume of Mumbai and NCR-Delhi.

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

 

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