Indian Property News on 'November, 2006'

Unitech Plans £360-m LSE listing

After the Rahejas and Hiranandani, it’s now the turn of the Unitech, one of India’s leading real estate development companies, to tap the overseas markets to seek new capital for growth and expansion.

Unitech plans to raise as much as Rs. 3100 crore (£360 million) on the Alternative Investment Market (AIM) which is created by London Stock Exchange to enable small companies to raise capital with relaxed policies. The Unitech scrip dropped 0.05% on the BSE to close at Rs 491.90 on Wednesday.

Unlike other stock exchanges in India or U.S., AIM offers an easy procedure for selling shares thereby eliminating the need for the interested companies to follow stringent rules. Perhaps this is what is encouraging the Indian realty developers to seek overseas assistance, say head of a global firm, who didn’t wish to be quoted.

The listing of UCP, based in the Isle of Man is learnt to aid Unitech in raising funds to get hold of major stakes in six major real estate projects, including four IT SEZs, one IT Park in the NCR and an IT SEZ in Kolkata. It would jointly invest with Unitech and its affiliates in portfolio assets.

Unitech will try for land acquisition plans whereas the UCP is likely to offer property development services, says Atul Kapur, chairman-elect of UCP. The company is more inclined towards focusing its attention towards growth markets of IT and ITeS sectors which are believed to yield the most attractive future prospects.

Indian realty companies are looking forward to raise capital through the AIM as an alternative source to fund their growth profile, says Hong Kong-based senior property analyst Matt Nacard.

Unitech enjoys the status of being the largest listed realty developer by market value in India, with a market cap of around $8.9 billion.

PE players to create wealth through Indian Real Estate

Private equity (PE) players are showing keen interest in including Indian real estate investment in their overall investment portfolio. Morgan Stanley and CVC are two of the big fishes among PE companies that are all set to take a dip into booming “silver” real estate sector through the single project route. Industry analysts believe these deals to roll out in between the range of $20-50 million.

Real estate is probably the hottest market in India. With a majority of real estate companies having poor corporate governance, single project ventures ensure PE investors regarding their being playing it safe with their investments from the beginning, says head of a global private equity firm. PE players are all set to

Although, the boom in Indian realty sector is grabbing the attention of investors, most PE players are inclined to invest in 100-acre integrated townships and other specific real estate projects. Indeed, both global and local PE players are keen on taking this route, according to head, Enam Securities, S Subramanium.

The age old notion of the realty sector being driven by the big players no longer exists. The trend has expanded its offerings to both small and mid size real estate companies as well. A few months back, HDFC Realty Fund had taken 33% equity in an SPV floated by Ansal API for developing an IT SEZ in Greater Noida.

Hong Kong’s AEA to invest in Indian Real Estate

Hong Kong based AEA Holdings announced that it plans to invest more than $2 billion over the coming years in Indian realty projects.

India’s realty sector is undoubtedly on a high growth path and emerging as global investors’ choice. In this climate, AEA Holdings can serve as a catalyst to bring about a change within the industry, say Bill Owens, Chief executive and chairman of AEA Holdings Asia.

AEA Holdings Asia, a private equity fund formed after the merger of New York-based AEA Investors and Hong Kong’s Aetos Capital. The firm deals with investments in commercial real estate and hedge funds.

According to the data showcased by recent property surveys, India holds ninth position among retail markets in the world with organized retailing growing at the rate of 30 percent per annum.

AEA Holdings is searching for the efficient partners to expand its business horizons and wants to grab the deals and opportunities aggressively and quickly, says industry source.

The company enjoys the reverend status in the Chinese market where it has made a mark with the investments to the tune of $400 million and planning to invest additional $100 million by the end of this year.

NOIDA plot fetches higher than the one in Hong Kong and Thailand

A 136 sq metre plot in Sector 18, NOIDA has fetched a record price of Rs. 6.11 lakh per sq metre at an auction held on 27th November’2006. The plot is bought by Manoj Kumar Punjabi at a whopping price of Rs. 8 crore 31 lakh. The reserve price of the plot was only Rs. 4 lakh per sq metre.

Busting the previous record of commercial space in the township, this prohibitive plot is believed to have made the biggest leap that would come as an eye opener for the prices of property in the Delhi and other close by areas. Another plot that succeeded in attracting the second-highest bid was also a 136 sq metre plot at N-16, which was sold at the price of Rs 4.51 lakh per sq metre.

The other land plots went up for the auction were 96 sq metres and the 11 plots in all sold between Rs 3.81 lakh per sq metre (for plot N-24) and Rs 6.11 lakh per sq metre. The reserve price of these plots was ranging between Rs. 3.30 lakh per sq metre and Rs 4 lakh per sq m. NOIDA Authority has been able to earn Rs. 53.52 crore from the selling made at the auction.

Such a tremendous hike in prices of Noida’s plots marks the growing popularity of the place. Also, these prices are believed to be far higher than those in Hong Kong and Thailand, the pioneering real estate markets in Asia, says NOIDA Authority Manager (Commercial) LP Singh.

Often touted as the township’s Connaught Place in recent times, Sector 18 is believed to be the most sought after destination in Noida. Also, it is the most happening commercial place that boasts of a Mall, a multiplex and the Radisson Hotel. An entertainment city is on its way to come across the road soon.

Goldman Sachs to invest $1 billion in Indian Real Estate

Goldman Sachs, one of the world’s most prestigious global investment banks, will invest as much as $1 billion in the Peninsula Realty Fund (PRF) promoted by Ashok Piramal in next couple of years as it oversees unparallel growth prospects for Indian real estate.

The company is planning to launch the PRF soon. However as a part of the policy, the company is not yet ready to disclose any speculative news to media. The proceedings are in fairly advanced stages of development and the two conglomerates are expected to sign a deal early next month, say industry sources.

PRF is all set to float Rs. 1500 crore special purpose vehicle to put in FDI compliant realty and infrastructure projects in India. There has been a rumour going around regarding Goldman Sachs to invest in this SPV.

PRF, launched by Peninsula Land Ltd, the flagship company of Ashok Piramal Group aims at promoting investments in the rapidly increasing and promising Indian realty sector. The company plans to float two separate schemes.

One of the proposed schemes will provide the domestic investors with the prospects to invest whereas the other scheme will seek the contributions in FDI compliant SEZ and industrial parks projects.

Driven by positive growth in the economy, real estate in India is booming, and is on everyone’s mind today. This is what encouraging this global investment bank to invest such a huge amount in this productive sector, says Goldman Sachs India LLC CEO L Brooks Entwistle.

He added that the Indian market is vitally important to the company as it holds great value and drastically changing its image. Goldman Sachs is also looking forward to begin its own investment banking and securities business in India after breaking a decade-long alliance with Kotak Mahindra in March, where it held stake in two of the bank’s financial services, Kotak Mahindra Capital Ltd and Kotak Securities Ltd.

Ansal properties gets shareholders nod to raise Rs 2,500 cr

Ansal Properties & Infrastructure Ltd (APIL), promoted by the Delhi Based Ansal group, today said that its shareholders have given their nod enabling the firm to raise up to Rs. 2500 crore through the issue of securities.

The company told the BSE that its shareholders have approved to raise the amount through the issue of various securities on public issue, rights, Qualified Institutions Placement (QIP) or any other basis.

The company also plans to issue worth Rs. 8.19 lakh zero coupon secured Redeemable Optionally Convertible Debentures (ROCD) of 100 each to HDFC Ventures Trustee Company Ltd at Rs 610.01 each on preferential basis.

APIL would also issue up to 28.83 lakh equity shares of Rs 5 each to some known corporate workgroups including Bahrain-based Citicorp Banking Corporation, Citigroup Venture Capital International Growth partnership Mauritius Ltd. and to its Co-Investment Trusts at Rs 610.01 per equity share on favored basis. The company’s shares were trading down 5% at Rs 875.10 on the BSE.

Bangalore Realty Market Prone to Price Drops

The ongoing realty boom in Bangalore seems finally to have ended now. The growth in prices in the commercial property market, which has experienced boom since between 2003 and 2006, has dropped precipitously. Data showcased by various property surveys show that the average price rise in the apartment costs is no more than 5% to 10% whereas it was 40% to 50% before. Bangalore had faced short-term drop that were followed by quick recoveries but not an across-the-board drop.

As for downturns, the most dramatic slide occurred in some known locations like Whitefield that had experienced fair hike in prices of the commercial property whereas those in other locations are climbing at a constant clip. However, the North Bangalore is able to maintain its price run ups that are believed to be propelled by the end users buying and investors’ sentiments.

Far more common is a decline in the South Bangalore’s property prices where buyers’ response is now less than enthusiastic and the plunge is crystal clear by low absorption and flattening growth rate of capital values, says Manish Grover, national director in property consultancy Jones Lang LaSalle India. The growth in average capital values has abridged to about 5% during the current year.

People are more interested in buying the property with the intention to sell it within a few months to make good profits. This is what causing the phenomenon of speculative buying to loose its impetus, with investors supposing Bangalore market going high. Earlier, such speculative buying was able to drive the gains when prices were peaking at over Rs 50/sq ft a month. But, the procedure is loosing its pace now.

Commercial sector of Bangalore, which once was the hottest selling projects, has its own inconsistencies. Here, demand continues to be good, supply has kept moderate pace, and in some locations has surpassed demand. However, industry experts predict Bangalore area commercial property prices will soften but not sink.

Tier-III cities to witness next realty boom

So far, it has been the metros that have undergone a paradigm shift in terms of growth in the real estate sector with investors considering them good place for the future business prospects. The boom soon may extend to Tier-III cities, making them one of the preferred investment destinations for overseas realty players.

Opportunities triggering action will knock at the door of locations including Jaipur, Coimbatore, Ahmedabad, and Lucknow.
The property sector surveys predict that growth of Tier III cities is also expected to grab the attention of technology sector players who have been waiting so long to expand their operations into these previously untapped areas and markets.

At present, Tier III cities are believed to offer cost advantages of 15%-30% over Tier I and II cities through lower labor and real estate costs. Of the leading Tier III cities, Jaipur and Lucknow are likely to see huge growth in the coming years.

Enhanced operating costs, real estate supply constraints and socio-political risks are the known entities hampering growth of any area. Tier 1 cities including Delhi and Mumbai will focus on the development of suburbs and peripheral locations, say industry experts.

Contrary to this, destinations like Bangalore and Gurgaon are categorized under fast growing metropolis and the locations witnessing spearheaded improvement in every phase. Also, they are poised to emerge as excellent resources offering large human resource potential as well as availability of quality real estate.

Although, population of large occupiers in these locations is yet to reach optimum, Tier III cities feature primarily on the investment map.

Bangalore builders expect to mine profits soon

With Bangalore realty sector rising by leaps and bounds, it is soon to witness next realty boom. Nearly 1.4 lakh apartment units are under construction and likely to get ready within two years. Of this total unit, the budget segment and mid-segments encompass 30 per cent each and the left out share makes up for the high-end segment.

For the past two years, real estate sector in the garden city has been growing at around 30 percent and is likely to grow at the same pace in the next year as well.

The demand for residential units has been largely driven by an expansion in the IT sectors, says Balakrishna Hegde, president of Karnataka Ownership Apartments Promoters Association (KOAPA) while holding a press conference on ‘Realty 2006’.

Bangalore is witnessing hectic demand for 30-32 million square feet (30,000 apartment units) of residential space annually. And it’s so hectic that the city is all set to leave metros like Mumbai and Delhi behind in the race.

In the past years, most population of the Bangalore used to consider Rs. 15 Lakh as affordable money to get an apartment. Growing economy of the city has modified this figure to Rs. 25 lakh today which shows a great improvement in the financial status of different income groups. The mid-segment has also reached to a stage where Rs 35 lakh to Rs 60 lakh is also deemed as reasonable amount, says Hedge.

However, a continuous rise in property and prices have brought hoard of rogue builders and fly-by-night operators into the real estate sector who focus on employing sharp practices to cash in on this demand. Out of 400 builders, only 100 of them would be there who are governed by its ethics and code of conduct.

Starwood to invest $300m in Indian Real Estate

Leading US based global real estate fund, Starwood Capital will invest as much as $300 million in Indian real estate in the next 18 months, seeking to tap demand for the property in top 20 cities of the country which happens to represent Asia’s fourth largest economy. Of that target, a major portion is likely to be invested in the tier-2 and tier-3 cities.

Wishing to bring its realty world expertise in India, the company is initially geared to fund mid-sized projects ranging between 1-3 million sq ft of space. The first investment will be made in development of the projects that are certain to witness high growth rate including IT parks and residential projects, says the company’s source.

The company is looking at properties across the range which can provide it with the best possible returns on the investment. For that reason, Starwood is also in the process of incorporating its new acquisition with hotel brands in the country – Hotel de Crillon, the luxury brand, ‘I’- the ecotel brand and the budget chain, Campanile. Of these, Hotel de Crillion is on the verge of launch first as a part of a global push.

The company has currently about $2.5 bn in capital under management. It has invested over $5 bn in equity and $14 in debt so far.

Starwood Capital has no plan to enter into ever changing Indian realty sector solely. For that reason, it is in a look out for the partners with whom it can develop a property jointly in addition to investing as a fund.