India Investment Property » Retail Sector

Developers Unable to meet Retail Space Target

Wed, 07 Jan 2009 10:57:08 +0000

DLF, Parsvnath and other real estate developers have lagged behind by 54% in their target to open retail space even as retailers’ vacancy climbed to 16% last year. Cash-strapped real estate developers failed to deliver eleven million square feet of retail space in 2008, according to a study released by Cushman & Wakefield. Out of the proposed 74 malls in key eight cities at the beginning of 2008, only 34 were delivered through the year. Developers in NCR lagged the most with a supply of 4.7 million square feet compared with the earlier target of 7.1 million square feet. Developers may continue to restrict their supply, or go slow on retail space by a similar amount in 2009 across key major cities.

“For any developer, the vacancy level should not cross over 5%. The vacancy level of 16% suggests that most of the malls across India are finding it difficult to manage their operational cost,” said Rajneesh Mahajan, director of retail services at Cushman & Wakefield. The reason for the shortfall was the mismatch between the potential and actual occupancy. The Indian organised retail sector grew at 25% in 2007. Anticipating the growth of retail sector at above 35% in the coming years, developers had announced big retail projects. However, owing to economic slowdown, the growth of the retail sector has come down to 15% in 2008, resulting in developers deferring their projects for 1-2 years. “From the projected supply of 20.8 million square feet space in the first quarter of 2008, we will see a spill over of about ten million square feet development in 2009-10. Lack of funds leading to construction delays and cautious expansion by retailers have resulted in slow absorption of retail space in malls,” said Mahajan.

Olive Group Expanding To IT Sector

Thu, 28 Aug 2008 15:20:59 +0000

After completing 25 years in real estate industry, Mumbai-based Olive Group is expanding to Information Technology (IT) sector.
Speaking to mediapersons here, P V Mathai, Chairman of Olive Builders, said as part of the diversification, it would associate with the USA-based Millennium Consultant Inc, a leading software company, which has operations in Bangalore and Kochi.
The future expansion plan included infrastructure development, hospitality industry and retail sector and the company was setting its footprints in Coimbatore, Chennai, Mysore and Bangalore, he said.
He said with a view to help the poor, the company has started Olive Foundation and was extending financial aid for building homes to them.

Bahrain’s TAIB Bank shells out Rs 216 cr for 26% in Anant Raj

Thu, 24 Jul 2008 11:48:36 +0000

In the midst of a general slow down in the Indian real estate market, TAIB Bank, a leading private bank based in Bahrain, has picked up a 26% stake in Anant Raj Projects for Rs 216 crore. The deal, one of the first Shari’ah-compliant transactions in the Indian real estate industry, puts the valuation of the subsidiary of New Delhi-based Anant Raj Industries (ARIL) at Rs 831 crore.

TAIB Bank has routed the investment through its real estate investment arm Acacia Real Estate. Anand Raj Projects plans to develop of 6,00,000 square feet of retail space which is expected to be operational by first half of 2009. The proceeds of the transaction will be invested in this project. DTZ India, the Indian subsidiary of DTZ Holdings, and International Property Consultant were the advisors to the transaction.

Confirming the development, ARIL executive director Amar Sarin said, “Though the real estate market is passing through a tough phase, the investors are still keen to invest in bankable projects. Our deal with Acacia reinforces the fact that in real estate and, especially, in retail sector, location still remains the fundamental value generator”.

India’s real estate market is experiencing a slow down. Developers are facing a cash crunch due to the slow down in sales as well as tight liquidity conditions. This has perhaps forced them to look at raising funds from PE investors.

Rajeev Bairathi, associate director, investment advisory, DTZ said, “This deal proves that despite prevailing market condition, investors are ready to pay a premium for participating in projects promoted by reputed developers with established track record, adequate experience and expertise in creating quality product”.

RBI Limits Private And Public Sector Banks For NRI Matters

Sat, 28 Jun 2008 07:26:26 +0000

NRI loan interest rate depends a lot on the reason of borrowing. When the reason is to invest in share or commercial immovable property market, the interest rate to be paid is higher than any loan borrowed by the NRI to be invested at an employment generating project.
The RBI has recently prohibited public and private sector banks from lending more than Rs 20 Lakh against the deposits of NRIs. This ban is imposed by the apex bank on doubt that a huge part of such loans is being diverted for speculation in shares and immovable property market. These cautious steps from the apex banking body are aimed at ensuring that bank credit is streamlined towards productive sectors other than the retail sector. It will definitely squeeze the extra investment flow particularly in commercial real estate and capital markets. The hike in standard assets provisioning will lead to a raise in retail lending rates.

Airports to emerge as business hubs

admin — Mon, 19 May 2008 09:39:14 +0000

NEW DELHI: All new airports in the country will emerge as business nucleus with world class office, hospitality and retail space. The modernization and development of airports will not only provide the facelift to respective cities but also improve the real estate sector, said a report by Cushman & Wakefield.
To exploit the trend of rising city centers around airports, the Airport Authority of India has provided huge land for development of commercial realty and retail space. For airports in Mumbai and Delhi, the report said, 50 per cent of the total real estate space has been allocated for commercial development.
India has come into view as one of the most favored destination in Asia-Pacific region for strong performance of businesses, which led to an influx of MNCs. This has sustained the demand for commercial office space in large cities. The high economic growth across the country also made the smaller cities like Lucknow, Kochi, Coimbatore, Mysore, Jaipur and Indore among others attractive destinations to do businesses.
The report said apart from commercial office space supply, these airport projects will also allow time saving between business meetings during the transit/ waiting period with the proposed convention and business centers that form part of the overall development plan.
In the retail sector also, the report said, huge opportunities are awaited. It said, “With changes in airport security, passengers today are required to arrive early, consequently finding themselves with adequate time to spend before departing.” This provides the opportunity to tap the captive consumer base with high spending power.

Rs 600 Crore Revenue Generated By Delhi Metro In Ist Phase

admin — Mon, 19 May 2008 09:38:21 +0000

NEW DELHI: Delhi Metro has produced six hundred crore revenue from the commercial use of its property during the first phase of the Metro project.
The real revenue generation is approximately double the target, thanks to skyrocketing commercial property prices and growing demand from retail sector and IT companies. Buoyed by the excellent response, DMRC officials expect that total revenue from property development would reach Rs 1,000 crore in a few years.
Earnings from commercial use of vacant land constitute around 30% of the total operating revenues generated by DMRC. In 2007-08, the company reported total operating revenue of Rs 327 crore, a 28% increase from Rs 256 crore in 2006-07.
“The revenue generated from the property development in the first phase of the metro project will contribute to our internal accruals, which will be used to finance the next phase of the Metro project. Still, there are some unoccupied areas that can be commercially used under the phase-I and we expect the total earnings from such commercial activity to reach Rs 1,000 crore. In the second phase, similar property development will be undertaken and we have targeted a revenue generation of Rs 405 crore from the same,” said a source.
Property development undertaken so far includes 6-12-year licence awarded for the spaces within station buildings for commercial related vendors such as ATMs, kiosks, refreshment and magazine stalls. Similarly, shopping malls have also been set up through developers on a license basis for the period of 12 years inside station buildings which have larger concourses.
Such malls have already come up at Inderlok, Netaji Subhash Place and Kashmere gate stations. DMRC has set up an IT park at Shastri park station which has been rented out to ITES operators. The company has undertaken some residential and commercial developments outside Shahdara and Inderlok stations through developers on a concession period of 30 years.