Photo by nancyarora2020The nationwide poll named ‘Realty Trends 2010’ for metros and Tier II cities across the country, which saw participation from over 4,800 property seekers consisted of Majority of the respondents belonging to the age group of 26- 35 years.

The country capital topped the charts with 34 per cent while Mumbai got 28 percent votes. Bangalore received 11 per cent votes in its favor with particularly south Bangalore being preferred the most.

With the introduction of budget 2010 the economy is improving and property prices are stabilizing, this is attracting the investors who restrained from investing last year to jump into the market with full swing.

The survey showed a large number of people looking to purchase a house want it for self-consumption. The figures tell that 67 per cent of the national property seekers want to buy a house for themselves while only 23 per cent are looking for property options from a long-term investment perspective. Short-term investors have only 10 per cent survey takers.

Surely the Indian Real Estate sector is on a roll.

Photo by Farruska

Europe is once again back into action with an prelude of investment for Kolkata’s real estate in a move deemed “a first” by experts. Expo Real, the largest European B-to-B trade fair for the international property and investment market , is the biggest European commercial property trade fair.this is an annual event that take place since the beginning of October 1998 at the new Munich Trade Fair Centre. The organiser of this EXPO REAL is Messe München International. Exhibition focal points are project development, consultancy, investment and financing in the real estate sector.

In its October meet in Munich, the organizers of Expo Real had a meeting with the Senior Members of Credai’s state chapter they offered a  match-making forum with international investors and tech titans.

Eugen Egetenmeir, the managing director of Messe München GmbH, the organisers of the trade show, told city realtors” The world gawks on India, and we will be keenly interested in taking this opportunity to build the platform between European resources at Expo Real and Indian real estate projects and Kolkata is the good start for us”.

It was a three-day business-driven event that focused on commercial realty — office, retail, logistics, tourism, infrastructural real estate and residential portfolios. The 13th edition is scheduled to take place at the New Munich Trade Fair Centre from 4 of October to 6 this year, and the organisers anticipate to host an exploratory delegation from India for the first time.

“This is a exciting opportunity for the local realty trade to emphasize its strong fundamentals and get benefited by valuable exposure in the European market,” as pointed out by Credai Bengal president Pradeep Sureka.

“We will hopefully hold a fact-finding assemblage of Indian developers to the Munich trade fair this year, and Kolkata should turn up in a appreciable number to join that team.” observed Santosh Rungta, the national president of Credai.

Claudia Boymanns, the exhibition group director quoted,”The Messe München team decided a scoping conference would be the ideal platform to build on, since at Expo Real, Indian realtors will get international “investors and money”. She  flew down from Munich to meet the Calcutta real estate group. She said “Expo Real’s exclusive programme of conference events speakers gives participants insight into the latest trends and innovations in the property, investment and finance market.”

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.

Announcing this at the ASSOCHAM National Conclave on Threat Before Real Estate Sector – What are Solutions? held here today, Housing & Urban Development Adviser in Planning Commission, Mr. Harish Chandra also informed that the Cabinet Secretary has already convened a meeting of all States to seek solutions to revive stressed sectors including that of real estate, without specifying the date for the meeting. He, however, added that the mid term appraisal of Planning Commission will now take place immediately after conclusion of forthcoming Parliamentary Polls.

The new schemes will be unfolded during the forthcoming mid-term appraisal exercise of the Planning Commission even at the cost of deficit financing for which the Commission will enter into series of consultation with industry association like ASSOCHAM, said Mr. Chandra.

According to him, in its recent exercises, the Planning Commission, the RBI and the Finance Ministry have jointly announced series of measures to rebuild confidence in Indian economy and many more such initiatives could also be announced by the Commission after concluding the proposed mid-term appraisal, hinting at further lowering of interest rates for affordable housing.

In the meanwhile, Chief Executive Officers of Omaxe Ltd., Raheja Developers, Pioneer Urban Land & Infrastructure, Jones Lang LaSalle Mehgraj that participated in ASSOCHAM organized conference on Real Estate sector, collectively raised their voice, opposing foreign direct investments in real estate sector.

CMD, Omaxe Ltd., Mr. Rohtas Goel who heads the ASSOCHAM Real Estate Committee said that FDI’s in real estate would neither increase supply and demand for affordable housing. Their entry into it will enhance and shoot up the prices of land and therefore, real estate FDI’s should be discouraged as this will pose a serious challenge to affordable housing.

He demanded that the present model on which real estate sector currently stands crippled, needs to be changed and sought that in its stimulus packages of Rs.40,000 crore for infrastructure development, Rs.10,000 crore should exclusively be allocated for real estate sector as subsidy so that affordable housing becomes a reality.

Mr. Goel said that he has decided to offer affordable housing to people for which the first site identified is that of Indore and subsequently this initiative will spread in other parts of the country like Chandigarh, Ludhiana, Jaipur etc.

Speaking on the occasion, Mr. Navin Raheja, Managing Director, Raheja Developers and Sr. Member of ASSOCHAM Real Estate Committee also opposed FDI’s entry into real estate as it would lead to shooting up of land prices and hardly provide for affordable housing.

According to him, the real estate which is currently under stressed would come out of it in next 2-3 months as developers would have to build houses for all stake holders to stay and survive in the business.

Among others who spoke on the occasion demanding another Stimulus package for real estate sector include ASSOCHAM Secretary General, Mr. D S Rawat, Ex-CMD HUDCO, Dr. P S Rana, Mr. Pankaj Renjhen, Managing Director- North India, Jones Lang LaSalle Mehraj, Mr. Kuldip Chawla, Vice President, Red Fort Cappital and Mr. Shashikant Arora, President, Association of Certified Realtors of India.

In fact, real estate sector is a vital driver of growth of our economy. It is the 2nd largest employer; it provides employment to the real masses and unskilled workers besides skilled workers, with a vast majority of them below poverty line. The sector supports multiple industries, ranging from steel, cement, paint, sanitary ware, light fixtures, glass, aluminum etc. The sector also contributes towards urban development by undertaking public private partnerships including slum rehabs and is a significant contributor to government revenue.

The present situation of the Indian real estate sector reminds the challenging times that the sector faced in the mid nineties. Much of the demand in the early nineties was created by speculative property investors expecting their assets to appreciate in value – an ‘irrational exuberance’ over the short term, without there being a sufficiently wide and deep class of actual buyers of property.

But this time around, the demand was driven by the booming economy. In the last five years, India has grown at a compound annual rate of 8.9%. The high rate of growth dramatically improved the income level of urban Indians and the middle class today has significantly greater buying power than a decade ago. The overall economic development in India has stimulated demand for more and better housing, increase in office space, development of modern retail formats, and demand for more hotel rooms and the need for improved forms of entertainment.

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.

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.

I

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.

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.

Such an exercise enables banks to keep their non-performing assets (NPA) ratios under check and their books clean of the stigma of dud loans. But in a little-known directive issued earlier this year, the central bank has ordered that the moment a loan to a builder is restructured, banks must classify the account as an NPA.

However, for restructured loans in all other sectors, the account can continue to be treated as a so-called ‘standard asset’, thus sparing banks from having to make large provisions in their profit and loss accounts. The inability to restructure loans easily is forcing banks to put pressure on builders to cut prices, sell properties and service loans. Builders are usually left with little choice as an NPA tag will make it difficult for them to approach other banks for funds.

“We are putting pressure on the real estate sector to reduce property prices. In such times, even if they are able to keep their head above water, it would be fine. They have all had a good innings so far. Now, they have to learn to live with thin margins,” said TS Narayanasami, chairman & managing director of state-run Bank of India, and the chief of industry body — Indian Banks’ Association.

“Just banks reducing interest rates will not help in reviving sentiments; builders will have to bring down prices for buyers,” Mr Narayanasami added.

Bankers say demand for home loans has fallen because buyers are waiting for property prices to fall. “Banks have taken the initiative by cutting home loan rates. Prices of cement and steel too have fallen, but builders have not reduced property prices,” said MV Nair, CMD of Union Bank of India.

Although the RBI relaxed some bank lending norms for the building sector last weekend, it has remained quiet on the issue of restructured loans of builders.

Analysts have expressed concerns over the financial health of the real estate sector. City-based retail broking firm, India Infoline, fears the liquidity situation of developers could worsen further if banks refuse to refinance maturing debts of real estate companies and maintain the credit freeze on their accounts.

“We reckon that debt maturing over the next 12 months for developers like Unitech, Sobha and Puravankara is higher than our estimate of these companies’ revenues over the corresponding period. The situation with Omaxe, Parsvnath and Ansals also remains precarious, owing to large land advances and high receivables”, it said in a research note.

The building sector has seen a raft of credit downgrades amid refinancing concerns and bankers say the sector has little choice but to cut prices. “If a builder does not pay, banks would either initiate a recovery proceeding or restructure the loan. A recovery proceeding often results in lower realization. This, hopefully, should indirectly put pressure on builders to bring down price and go for negotiated sales,” said SA Bhat, CMD of Indian Overseas Bank.

This might even force a number of units to close down. The construction sector, which is the second largest employment provider in the country, is facing tough time because of the government policies, says CMD of Parsvnath Developers, Pradip Jain. He says that government must change its policy and allow the flow of funds at low interest rates so that people may buy houses. He said that banks should be allowed to lend directly to developers to meet their construction schedule.

This, he emphasized, will enable the sector to tide over the current crisis and help save the jobs of lakhs of poor construction labourers. Builders and developers feel that interest rates on home loans should be brought down to less than 10% from the present 13% to enable end users to buy houses. Since the global financial crisis came to a head, the banks have been discouraging home loan customers. The floating home loan rates of most of the banks have gone up to 13%. This has affected the affordability of end users.

The EMI of the same amount of loan for 20 years has gone up by almost 50% in the last four years as the interest rates have gone up from 7% to 13%. In fact, a senior developer says the problem arose after the government and the RBI started treating the real estate sector as a den of speculators. He says that instead of finding a remedy for the market crisis, they decided to kill the sector itself by discouraging banks from giving loans to developers.

CMD of Assotech, Sanjiv Srivastava , says that the sector played an important role in the high growth of new economies like IT, BPO and retail by providing them state-of-the-art buildings with all amenities, matching their new requirements. The crux of the matter is that the new economies grew only in those cities where world-class realty development first started.

In the NCR also, after the realty development first kicked off in Gurgaon, it came up as a hub of IT and BPO centres. Later, because of the availability of quality retail space, organized retail in the form of malls also came up, with Gurgaon showing the way, once again. Only after similar quality constructions started in Noida, did all these new economic activities start moving to that suburb.

The realty index witnessed a 24.4% decline, which is more than double the benchmark index Sensex fall of nearly 11%. The index has fallen by 31 per cent in a week, 55.5% in a month and 82% in the past one year.

Real estate companies, which have a presence in the index, saw an erosion of about Rs 20,000 crore in market capitalization.

Unitech lost 51.3% to settle at Rs 30.1 on the Bombay Stock Exchange, followed by DLF, which lost 24% to close at Rs 203.9 a share.

Ansal Infra, Indiabulls Realty, Omaxe, Parsvnath, Sobha Developers, Peninsula Land, Mahindra Lifespace and Phoenix Mills fell by 10% to 20%. HDIL scrips fell 9%.

The steepest fall in the case of Unitech followed media reports that the firm defaulted on payments to Greater Noida Development Authority for a land deal struck in 2006.

Unitech issued a statement to the Bombay Stock Exchange that the authority has revised payment schedule.

“Unitech is currently not in default and was never in default with regard to the payment to the authority,” the statement said.

“We are looking at opportunities to enter into the affordable housing sector, but it is still at the discussion stage. It may take one year to concertise the plan,” Mahindra Lifespaces Managing Director and Chief Executive Officer Pawan Malhotra declared.

Affordable housing is making waves in the realty sector due to high cost of property, dearer home loan and its availability, high inflation and the huge gap between demand and supply.

A mapping of the supply trend of housing from private developers done by Ernst and Young shows that 70%-80% of it caters only to the higher-income groups.

In contrast, the Planning Commission expects that the housing shortage in the country to go up to 26.53 million units over the next four years. Of the total housing shortage, economically weaker sections and low-income groups account for about 99% of the shortfall in India.

Thus, anticipating volumes to make up for lower margins, a number of recognized real estate players, like Puravankara and Omaxe Ltd, have already plunged into the new asset class of the real estate sector.

In addition, Matheran Realty, Indu Projects, Shriram Properties, Jain Heights and Structures, Ansal Properties and Shapoorji Pallonji among others are either entered or are in the wings to enter into the creation of affordable housing.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Experts say the city’s real estate sector started growing much before Ranchi and Jamshedpur and it is poised for a considerable growth in the future as more and more companies open centers here.

“A significant feature of this city is that the rates are realistic as the flats are not used as an investment tool,” says Shekhar Agarwal, a prominent builder of the city who runs Sristhi Builders. “Therefore, there is no scope for speculation,” he adds.

Besides BCCL, Indian Iron and Steel Company (IISCO) have its office here and Tata Steel has mostly underground mines. These companies have developed townships for its employees, with roads, water, and power and sanitation facilities.

Dhanbad has witnessed an entry of a number of branded companies, bank and insurance offices in the last few years. No wonder, Dhanbad, popularly called the ‘coal capital’ of India, has seen construction of about 20 lakh square feet in the last few years.

The City Centre, located at the Combined Building Square, has almost all the major branded shops, making it the hub of the city. The biggest Reliance store of the state was set up in the City Centre around eighteen months ago though now a new and bigger Reliance Mart is coming up at Ranchi.

According to estimates, as many as twenty five building are under construction while some residential colonies are in the pipeline. “The city has seen enough ‘ertical’ growth (apartments). Now there is a big demand for horizontal colonies. With the entry of more and more retail and telecom players, the real estate scenario is set to see a tremendous growth in the city,” Mr Agarwal adds.

During the period, commercial real estate demand was only at 9.74 million square feet as against the supply of 18.07 million sq.ft, commercial real estate services firm Cushman & Wakefield (C&W) said in a report.

“There has been a slowdown in the real transactions, observed in the period 2008 due to a number of factors, primary amongst which is a general slowdown of the economy,” Cushman & Wakefield Director Kaustuv Roy said.

The IT/IteS sector, which has been one of the biggest consumers of commercial real estate, have deferred their expansion plans, leading to a slowdown in the uptake during the period, he said.

Most corporations, both Indian and multi-national, have been adopting a wait-and-watch policy throughout most of the period, he added.

During April-June quarter rental values across major micro markets in the major cities witnessed rental hikes in the range of 3-5 % over the earlier quarter.

Some peripheral locations in NCR and Chennai also saw a correction in rental values largely because of excessive supply as well as deferred development plans of various proposed projects, it said.