RICS to set up institute for real estate in India

December 5, 2008 – 6:06 am

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.

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Realtors look at ‘affordable’ flats for cash flows

December 5, 2008 – 1:57 am

After launching mid-income houses, real estate companies are now targeting low-priced homes in the sub-Rs 10 lakh category to improve cash flows and beat the slump in the property market that has been driven by high borrowing rates.

Unitech, the Delhi-based property major, has applied to the Haryana government to develop houses in the Rs 7 lakh to Rs 15 lakh range in Gurgaon. These are high-density, four-storied buildings in the 450 to 800 square feet range.

“Affordable housing is the new mantra for developers now because it is much easier to get loans below Rs 20 lakh,” said Raminder Grover, managing director, Homebay Residential, a subsidiary of Jones Lang LaSalle

India’s central bank counts loans of Rs 30 lakh and below given by lenders to home borrowers as priority sector lending. The classification means that banks can also access refinancing at concessional rates and fulfill norms of directed lending.

The Union government is also expected to promote low-cost housing in its stimulus package for the economy to be announced Saturday. It is expected to give some relief in interest rates for low-cost housing for loans not exceeding Rs 10 lakh.

“The slump in demand in the real estate can be reversed if we provide affordable housing in the range of Rs 20 lakh to Rs 30 lakh. Unitech’s new projects will factor in this and we intend to reduce the ticket size to make the houses more affordable,” said Ramesh Chandra, chairman, Unitech.

The country’s largest listed realtor DLF, on the other hand, is focusing mainly on mid-income, rather than low-income, housing in the Rs 2,700 to Rs 3,000 per square feet bracket, a company official said. The company has sold over 2,600 apartments in this segment in the last six months.

Smaller property companies are not far behind. For instance, Delhi-based property developer Falcon Realty Services has launched apartments priced at Rs 5.5 lakh at its Gulmohar Woods in Global Eco-City near Delhi.

Mumbai-based Matheran Realty launched houses priced between Rs 3 lakh and Rs 7 lakh category in Karjat, nearly 100 km from Mumbai, and is looking to launch similar projects in the central and western suburbs outside Mumbai.

Another Mumbai-based realtor, Sunil Mantri Realty, is launching a housing project in the bracket of Rs 5 lakh to Rs 15 lakh in Gwalior, Madhya Pradesh, in February next year. The developer is also launching projects in the Rs 10 lakh to Rs 15 lakh segment in Sholapur in Maharashtra, Mumbai and the outskirts of Bangalore next year.

Other property majors such as Omaxe and Puravankara have set up separate companies to launch the affordable housing projects. Omaxe has set up National Affordable Housing & Infrastructure Limited (NAFHIL), in which it recently divested a majority stake, and Puravankara has set up Provident Housing.

Matheran Realty saw nearly 66,000 aspiring home-buyers applying for 3,000 apartments to be handed over in mid-2009 in Tanaji Malusare City. The realtor sells houses here at Rs 1,000 to Rs 1,400 per square foot even as it spends Rs 1,200 to Rs 1,300 per square foot on land and construction.

The developer is looking to sell shops and other commercial properties at Rs 5,000 to Rs 6,000 a square foot by way of cross-subsidies on the housing project.

Pravin Banavalikar, chief executive officer, Tanaji Malusare City, Matheran Realty’s Karjat project, said: “There is no dearth of demand for houses below Rs 10 lakh whether it is boom or recession because there is a huge demand-supply mismatch.”

Planning Commission estimates suggest that India has a shortage of 24.7 million homes and economically weaker sections and low income group (LIG) segments account for 99% of that gap. The shortage is expected to touch 26.5 million houses by 2012.

The investment required to bridge the gap at the beginning of the eleventh five year plan was pegged at Rs 1,47,200 crore and is expected to rise to Rs 2,14,100 crore by 2012.

Though margins in low-priced apartments are lower than in mid- and premium housing, companies are eyeing higher volumes to drive the business. Low-cost houses have a margin of 10 to 15%against margins above 25% for higher-priced housing.

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Dubai retreats on just-announced $95B development

December 4, 2008 – 12:40 am

The newly created Dubai developer that unveiled a 95 billion dollar real estate project just 2 months ago says it is reviewing its plans in light of the economic downturn.

Meraas Development says “it has seen that investor demands have changed” and that it must quickly respond to meet these market needs.

The developer says it is reassessing its business strategy and the rollout of its flagship Jumeira Gardens project slated for a central part of Dubai. The company, which was launched in late September, announced the building project at a property expo in October.

Meraas says it expects to have more details on the project by the beginning of next year.

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How fluctuations in rupee affect the investment

December 3, 2008 – 9:27 am

How fluctuation in rupee affects your investment.

  • If the rupee falls in value, the rupee returns on commodities such as gold increase.
  • If the rupee appreciates in value, the rupee returns on gold decline.
  • An investment in overseas assets will fall in value if the underlying currency depreciates, and investors will tend to lose out
  • But a strengthening currency will result in gains for investors in foreign assets such as property and bonds.
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    Market expects speedier, steeper rate cuts

    December 1, 2008 – 6:03 am

    RBI may be forced to cut interest rates earlier than planned and more aggressively than previously hoped, as it comes under pressure to navigate an already faltering economy away from the turbulent economic aftershocks of the Mumbai terror attacks.

    Last week’s attacks, which killed around 200 people, targeted key symbols of enterprise in a city that is widely viewed as the country’s economic powerhouse and a key barometer of business confidence. The attacks and the choice of targets appear at least partly aimed at puncturing investor confidence at a time when the country’s economy is already reeling under slowdown.

    Much like the 9/11 attacks in the US in 2001, hastened the easing of the monetary policy stance — which had been started by the Federal Reserve in response to the bursting of the technology bubble, many in the market are expecting RBI to adopt a similar response to what many are calling India’s version of 9/11. The Fed progressively brought down its key federal funds rate to 1% in the months, following the 9/11 attacks, although no one in India is expecting that aggressive a move.

    “With signs of economic slowdown already staring at us, the terrorist attacks are likely to affect investor confidence. To counter the possibility of still slower capital inflows, the market is hopeful about a sooner rate cut from RBI,” said B Prasanna, MD & CEO, ICICI Securities, a primary dealer in government securities.

    Terror attacks in Mumbai are hardly new, but it’s the first time that it targeted five-star hotels frequented by top business figures and foreigners visiting the city. Analysts say the likely fall out of the attacks could be foreign investors getting worried about the safety of their employees and establishments, which in turn could impact already shrinking capital flows into the country.

    Economic growth this year is expected by most forecasters at less than 7%, down from the 9%-plus of the previous three years, and some analysts expect it to fall further next year. Anticipating this, and helped by a falling inflation rate, the central bank has already switched gears in favour of an easier monetary policy, but analysts say the Mumbai attacks may force it to become more aggressive.

    “Declining inflation and increased downside risk to growth hint that another round of easing by the central bank is imminent. However, the Mumbai attacks could prompt RBI to announce a bigger cut than the 50-basis point we had expected prior to the attacks,” said Rajeev Malik, chief economist with Macquarie Securities in a research report.
    The market is already betting on this. Overnight interest rate swaps, a derivative product commonly used by traders to express a view on interest rates, are trading at a 5-year low, suggesting rate cuts are imminent.

    Amid all this, RBI has been predictably silent on further rate cuts. However, that it remains biased in favour of softer rates is clear by some of its recent actions — it cut a key short-term rate and slashed banks’ reserve requirements in early November and recently extended the time period for its various liquidity enhancing measures to June next year.

    T reported on Saturday that a group of bankers had in a meeting with RBI asked it to cut its reverse repo rates rather than bring down the cash reserve ratio. This, they feel, will give an indication to the market that interest rates are headed south.

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    LAVA Electronics in talks with realty

    December 1, 2008 – 4:45 am

    Sweden-based electronic products maker LAVA Electronics is in talks with real estate firms Ansal API, Omaxe and Parsvnath for a possible India entry through a franchisee arrangement.

    The LCD television maker, which gets 60% of its revenues from the B2B segment, is planning to sell its products to large hotel chains. The company clocked a turnover of e60 million last year. LAVA executives met officials of real estate companies during the weekend.

    LAVA Electronics’ managing director Christian Svantesson said: “We are looking for a suitable franchise partner and aim to enter India by the third quarter of 2009.”

    He said his company will have exclusive outlets to cater to consumers directly but five-star hotels would continue to remain its focus area. “We want to position the company as a high-end brand in India,” he added.

    The firm has an assembling unit in Southern Sweden. While television cabinets, panels and other hardware are imported from Germany, software programming and product designing is done by the company at its Swedish unit.

    The firm intends to replicate similar business models in India. Mr Svantesson said that initially the company would import and sell in India. It will start assembling products in the country after creating a presence among consumers and business houses.

    LAVA sold 50,000 LCD televisions world-wide last year and targets to sell 70,000 sets this year. Currently, the firm has operations in countries such as Hong Kong, Australia, Spain, UK, Italy, France and the US.

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    Terror impact is a temporary setback

    November 29, 2008 – 12:06 am

    Rating agencies and foreign investors do not see any impact on the prospects of the economy because of terror attacks in the financial capital. The meltdown in the global financial markets is still a larger concern.

    Past experience has shown that markets have reacted only temporarily to such extraordinary events. Although some reports do not make a reference to the terrorist strikes, the event is likely to have been factored since the report includes India’s Q2 GDP numbers, which were released on Friday.

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    India’s economic growth falls further to 7.6%

    November 28, 2008 – 10:56 am

    India’s economic growth declined to 7.6% for the second quarter of this fiscal, leaving industry with the hope that policy measures taken over the past month will avert a further fall and help revive manufacturing.

    The country’s growth was 7.9 percent during the first quarter of the fiscal (April-June) and 9.2% during the second quarter of 2007-08 (July-September), as per data on gross domestic product (GDP) released by the Central Statistical Organisation (CSO).

    Prime Minister Manmohan Singh, Finance Minister P. Chidambaram and Reserve Bank of India (RBI) Governor D. Subbarao have projected the Indian economy to expand by 7-8% during the current fiscal year ending March 31, 2009.

    The main reason for the fall in the overall economic expansion during the period under review (July-September, 2008) was a low, 5-percent growth in the manufacturing sector, as opposed to 9.2 percent in the like period of last fiscal.

    Similarly, agriculture also logged a significantly lower growth of 2.7%, as opposed to 4.7%, while hospitality, transport and communications expanded the best 10.8 percent against 11 percent during the second quarter of fiscal 2007-08.

    What has, however, come as a surprise was the 9.7% growth ion construction, as opposed to 11.8% in the corresponding period of the previous year.

    Financial services, realty and business services also registered a notable growth of 9.2%, against 12.4%, given the circumstances where real estate companies have been complaining about a major slowdown.

    “Economic slowdown in India has been on since June. The real impact of global economic slowdown on the Indian economy will be actually felt in third and fourth quarters,” said Sri Ram Khanna, professor and head of department in Delhi School of Economics.

    Dalip Kumar, head of projects at the National Council for Applied Economics Research (NCAER), an economic think-tank, said economic depression in US had begun showing its impact on the overall industrial growth in India.

    “Our industrial growth has been hit and would continue to deteriorate further next year. This has largely contributed to the downfall of India’s economic growth,” Kumar told IANS.

    The Associated Chambers of Commerce and Industry (Assocham) said that the 7.6% growth was satisfactory given the circumstances and expressed confidence that the same would be maintained in the remaining months of the current fiscal.

    “Slowly and gradually, interest rates, inflation and input costs are falling down whose collective reflection will fall on the overall growth of GDP,” the chamber’s president Sajjan Jindal said in a statement.

    Another industry lobby, PHD Chamber of Commerce and Industry, presented a somewhat different picture. “The slowdown in is shows that our economic indicators have started weakening with some segments being affected more than others,” the chamber said.

    “Investment in infrastructure should be increased and an early completion of ongoing projects be effected on a war footing. Attention should be paid on building rural infrastructure to rejuvenate demand in the countryside.”

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    DELHI TO DEVELOP SLUM AREAS SOON: REDDY

    November 28, 2008 – 5:19 am

    Union urban development minister Jaipal Reddy said that the government will soon make available slum lands in New Delhi for re-development. The government will follow the Mumbai model where land is auctioned to the real estate developers for building flats. Certain number of flats will be reserved for the slum dwellers at a minimal price. The developers can sell other flats to customers at the market rate.

    “We are in the advance stage of finalizing the auction process in consultation with the Delhi development Authority (DDA). We would be ready with the guidelines soon,” the minister said.

    The minister informed that the government is also taking suitable steps to increase housing supply for people in middle income group in the Capital. “We have asked DDA to construct large number of flats for middle class population living in Delhi. With land cost hitting the roof and the financial slowdown squeezing the paying capacity of people, the government would take all possible steps to release and develop large chunks of land into affordable residential apartments,” the minister said.

    Mr Reddy also said that the urban development ministry is giving final touches to the long pending bill on real estate regulator. “It would be a model bill that would be mandatory for Delhi and a model for other states to incorporate in their state legislature,” he said.

    Mr Reddy further said that while the government is trying to pep the dying sentiments in the realty sector, the regular infrastructure needs would also be given a very high priority. He informed that the Planning Commission is considering ministry’s proposal to inject more funds into the existing corpus of Rs 50,000 crore. “We have asked for an additional funding Rs 20,000 to take up additional projects under the flagship programmed of Jawaharlal Nehru National Urban renewal Mission,” he said.

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    Unitech plans sale of assets to raise funds

    November 27, 2008 – 12:40 am

    In a bid to tide over the current financial crisis, Unitech, the second largest real estate developer in the country, is planning to raise money by selling some of its assets, such as hotels and commercial real estate.
    The company, which currently has a debt of Rs 8,200 crore, is also planning to rope in private equity funds for residential projects by March 2009. In addition, it will transfer Rs 1,200 crore of debt to its telecom joint venture.
    Talking to Business Standard, Unitech Chairman Ramesh Chandra said the company would raise around Rs 1,500 crore from sale of hotels and commercial space. Besides, it will transfer Rs 1,200 crore of debt to its telecom joint venture and will also realise Rs 300 crore as debt repayment from the joint venture. Unitech had lent Rs 820 crore to the joint venture and given a guarantee for another Rs 1,200 crore.
    “By January, Unitech will raise Rs 2,500 crore through these routes,” said Chandra. The company has also decided to sell its plots to schools and hospitals. The company has around 27 plots, mostly of five acres each, and another 15 plots earmarked for hospitals.
    Unitech is aiming to divest three of its hotels projects that are nearing completion. Depending upon the success of negotiations, these projects may be divested by 2009. It is already at an advanced stage of discussion to sell Courtyard by Marriot, the 199-room budget hotel in Gurgaon, and expects to close the transaction before January.

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