As researched by Boston Analytics, the Indian realty sector has undergone an increased supply and pace of development activity which brought an improvement in pessimism associated with the realty prices. A low interest rate on home loans driven by Government’s impetus packages have also catalysed the Indian consumers to buy homes.

“Increased supply, improvement in pessimism related to realty sector rates, and low rates of interest on home loans seems to be encouraging Indian consumers to firm up their home purchase decisions” as said by Shirin Bagga, Economist, Boston Analytics.

The data was collected by conducting a monthly survey that targets 10,000 respondents cross 15 Indian cities—Delhi, Mumbai, Hyderabad, Kolkata, Chennai, Bangalore, Chandigarh, Nagpur , Ahmedabad , Kochi, Jaipur, Lucknow, Bhubaneswar, Patna, and Vishakhapatnam.

According to the recent reports the conviction concerned to speed of construction activity conveys more anticipation with regards to observed change in construction activity in Tier II and Tier III cities relative to Tier I cities.

The real estate projects which are in different phases of completion in all levels of towns and cities appear to be introducing optimism about the expected change in construction activity among respondents across Tiers,” the report said.

As brought into light by Economic Survey of 2009-10, the need of the construction and real estate sector in creation of both financial and physical assets has been amplifying over the years. The construction sector now accounts for 8% of GDP at constant prices, hiked from 7.7% in 2004-05.Equivalently, the share of real estate ownership of dwelling and business services in overall GDP as hiked to 9.2% in 2008-09 from 8.9% in 2004-05.

The company emailed a press statement saying the demerged entity would have properties and investments with a book value of 50 cr rupees. The company has Real Estate properties in metropolitan cities including Delhi, Chennai, Pune, Nagpur, Bangalore, Ahmadabad and many more.

The management said it believes that TCI’s Real Estate & Warehousing undertaking has the potential to develop the company’s existing real estate into commercial ventures and create a focused entity to develop large scale logistics infrastructure projects like multi-modal logistics parks, truck terminals, free trade warehousing zones etc.

By the creation of a separate entity, the management intends to provide strategic direction and raise adequate funds for its development plans on the strength of its future profitability and growth. After the demerger, shareholders of TCI will get one equity share of 10 rupee face value in the transferee company, TCI Developers Ltd, against every 20 equity shares of 2 rupee face value.

The company’s Executive Director Vineet Agarwal was quoted in the press statement, “Investment in real estate & warehousing is more capital intensive and yields return over a longer period of time in comparison to the services model of the logistics business. Going forward, on a long term basis we would look at raising funds from strategic investors and financial institution”.

Neptune group chairman Nayan Bheda confirmed the deal, but refused to share the details, including the amount involved. “We have expanded our operations across India and the money will be invested in upcoming projects,” Bheda added.

In the past few years, Neptune has grown into a pan-India player with projects in Pune, Hyderabad, Chennai, Vishakhapatnam, Kochi and Nagpur, among others.

“It is for the first time that we are investing in the entity-level. The deal will help us get a pan-India presence as Neptune is expanding operations across India,” said Indiareit Fund Advisors CEO Ramesh Jogani.

Indiareit is looking at investments in excess of Rs 200 cr in properties in Mumbai and Hyderabad. It had invested Rs 225 cr in Bangalore-based Skyline Constructions & Housing last year.

Out of the current order book, 56% pertains to government and 44% to private sector. The current order book as on May 2008 is at Rs 30224.6 million.

In order to diversify across real estate and infrastructure development, the company has initiated real estate projects across 3 cities through a wholly owned subsidiary.
The real estate projects are across Pune, Nagpur and Goa all in JV with BSEL Infrastructure.

Going forward, the company expects continued rapid and profitable growth – targeting topline and bottomline growth of more than 40% over the next couple of years.
The order book in March 2009 is expected to grow by more than 50% over that of March 2008.

Company is increasingly focusing on bigger ticket projects. It recently bagged on road project worth Rs 250 crore.

The Mumbai-based firm may need cash for developing a planned special economic zone in Maharashtra and townships in the future, but has enough cash for ongoing projects, Vice-Chairman Arun Nanda told analysts late on Tuesday.

The company has developed a 1,400-acre special economic zone (SEZ) in Chennai, while its second SEZ, spread over 3,000 acres at Jaipur, will start operations by July 2008.

“Chennai has started generating cash, while Jaipur is self sufficient. When we go to Maharashtra, we will need to look for funds,” he said.

The company has planned a 3,000-acre multi-product special economic zone at Karla, near Pune. While it has received approvals, land acquisition for the project may only start later this year, Nanda said.

“There is no intention for Mahindra group to dilute equity. At best, we might bring in some private equity,” Nanda told analysts. “We are a zero-debt at company level and currently hold cash reserves of 250 crores (2.5 billion rupees).”

The Mahindra group holds 51 percent equity in the company.

Last month, the company formed a joint venture with private equity fund ARCH Capital to develop a 55-acre township project, within its Chennai SEZ.

Mahindra Lifespace, which on Tuesday outlined an investment of 5 billion rupees for a 25-acre residential project in Nagpur, is also planning four other large integrated township projects. However, Nanda declined to give details of these projects.

Strutt & Parker Real Estate Financial Service Limited (SPREFS) has been appointed as UK and European placing agent. “Unlike most other real estate investors, the fund will dedicatedly concentrate on tier 2 and tier 3 cities in India.
Four projects in cities of Aurangabad, Jaipur, Indore and Nagpur have been selected for the first phase of investment. Surat is also being considered,” Nick Harvey Jones of SPREF told DNA Money.
“It is a high net worth investor fund which requires minimum investment of $5,00,000 form an individual and $5 million form institutional investors,” he added.
Two deals, consisting of 11 projects and having cumulative worth over $200 million, are in the pipeline.

Main reason behind the change in investment trend is sharp increase in land price in metro cities. The land prices in small cities are much lesser in comparison to metros. So, decision of setting up a hotel in small cities means less investment and larger benefits.

According to Pawan Verma, executive chairman (Operations) ITC, out of the total cost of setting up a hotel in a metro, 40 per cent constituted land-cost. But in small cities, there is more demand for mid segment hotels. When a middle-income group family goes for hotel accommodation, they look for pleasant but affordable place to stay. They mainly look for secure and hygiene accommodation with good food. They don’t want hi-fi facilities. Keeping these points in mind, hotel industry is changing. With this improvement, hotel industry has expanded to middle class also.