Indian Property News on 'November, 2006'

Gurgaon to have World’s tallest skyscrapers

There is going to be something exceptional about every visit to Gurgaon in the next few years. Visitors will find nothing special except perhaps for the view of the 140 storeys high buildings standing in majestic splendor.

Haryana Government has tightened its seat belt to drive right into the direction of completing the construction of a world class Golden Triangle City Centre in Sector 29 with four tallest buildings in the world by 2010.

On its way to hold the world’s tallest building title at some point of history, the proposed sky scarpers of Gurgaon will overtake the Taiwanese capital of Taipei, home to the world’s tallest man made structure on the planet.

The City Centre will serve as Gurgaon’s prime commercial hub and major tourist attraction. It will have gardens, a hospitality complex, office space and IT parks. All the factors for convenience of general public are taken into account. A fully developed transport system, with Metro and light rail transit links, will connect the centre to major places.

Haryana’s director, town and country planning (DTCP), has finalized the design prepared by a group of East China Architecture and Design Institute (ECADI) and India based Fairwood Consultants. The designs and plans have already been submitted to Airport Authority of India (AAI) for its permission. The Government hopes for the signal to turn green soon.

London AIM Calling Indian Real Estate Players

Listing on the London Stock Exchange, K Raheja gets the credit of setting the trend for other players in the Indian real estate to follow. Following the footsteps is the Hiranandani group who plans to tap the Alternative Investment Market (AIM) with USD 750 million selling shares. The amount is believed to be the highest offering by any Indian realty developer on the LSE, says CNBC-TV18.

Hiranandani plans to use the proceedings to develop 5 upcoming projects in Mumbai, Chennai, and Jaipur as well as including an I-T special economic zone. Furthermore, these projects will be carried out according to FDI compliant norms.

As per the spur of the moment, the Indian Developers requires accessing cheap and quick capital to mobilize their expansion plans, say industry experts. Basics providing the platform to the demand are quite strong and in that environment this is a substitute route many developers have fixated their eye upon.

Such listings offer an excellent alternative to the tight liquidity market in India. Also, London’s AIM put less stringent requirements for selling shares than other stock exchanges as in India and U.S. The sales will give international investors the long awaited as well as desired entry to India’s booming reality sector, with the $775 billion economy poised to expand 8 percent for the fourth straight year.

Atlanta to Roll Out Rs 520 Crore Real Estate Projects

Mumbai-based infrastructure development company, Atlanta has been granted permission to implement the Rs 520 crore construction projects, which aims at developing township and commercial complex in Hyderabad and Mumbai respectively.

The company will roll out a township in Hyderabad at an input of Rs 500 crore and is also planning to float a special purpose vehicle in which it will hold 75% stake. The township project will include the construction of commercial as well as residential blocks and would be completed within 10-12 months.

In Mumbai, the company has decided to enter into a joint venture with Thakural Builders to shape up the construction work of 60,000 square feet commercial complex at Malad. The project, once completed, will cater to the mushrooming demands of developing commercial feasibility in the area, says a company source.

The project will involve a total cost structure of Rs 20 crore, of which only the land contains a price tag of Rs 7 crore. Major construction work is scheduled to begin in January’ 2007 and expected to take atleast 18 months to complete.

The company has also shown a great interest in constructing underground car parkings at Hutatma Chowk, Regal Cinema and Crawford market to help 2,000 parkings initiated by the BrihanMumbai Municipal Corporation (BMC). Also, this tender has been placed on high priority in the line of other tenders to be announced by the BMC by 2008.

Sobha Developers all set to broaden its horizons

After witnessing unprecedented growth and making a substantial presence in the Bangalore real estate, Sobha Developers has sought to spread its wings geographically by mobilizing its construction business in 12 more cities in 2007.

The projects will be developed in the cities including Hyderabad, Mysore, Pune, Chennai, Mumbai, Mangalore, Thrissur, Coimbatore, Jaipur, Goa, and National capital Region.

Reeling in a new phase of growth, this Rs 117 crore conglomerate plans to add to its series of acquisitions by developing hotels, integrated townships, malls, multiplexes, shopping arcades, SEZs, and plot development.

Sobha Developers was recently in the news highlights for hitting the capital market by raising upto Rs 570 crore from its IPO to fund its existing projects, land acquisition, and  repayment of loans. The IPO would offer 88, 93,332 equity shares of Rs 10 each at a price band of Rs 550-640 per equity share through the 100 per cent book building process.

JK Nazerath, director of sales department, SDL, said the company already possesses land reserves aggregating 2,747 acres in Bangalore, Mysore, Pune, Chennai, Kochi, Thrissur, and Coimbatore and is planning about purchasing the land in the left out projected cities.

Also, the company is open to entering into joint ventures, as similar to the special purpose vehicle formed with Reliance Energy to construct business district and trade towers for AP Industrial Infrastructure Corporation in Hyderabad.

Mumbai office market grabbing seventh highest in Asia

Joining the list of top 10 cities in the world with pricey office market is Mumbai with the seventh position behind Moscow but ahead of eight-ranked Paris, says an industry report.  While Tokyo maintains its position as the most expensive city in Asia and second in the world

Nariman Point in Mumbai broke into the roll of expensive markets, and has raised more than 158 percent to 106 dollars per square foot per annum over the past year. Elsewhere in Asia, Hong Kong occupancy costs climbed 35 percent to 116 dollars.

Occupiers of office space in the Tokyo are believed to pay average total occupancy costs (rent, plus property taxes and service charge) of $145.68 (U.S.) per square feet. Indeed, Lutyen’s Delhi is no far behind with eleventh place, rated more expensive than Seoul which was ranked 16.

The Indian capital in particular has gone from strength to strength, rising to 81.87 dollars a square foot per annum from only 18.59 dollars a year earlier.

“The rise in Singapore’s ranking is consistent with the rental growth acceleration experienced over the past six months,” said Moray Armstrong, CB Richard Ellis executive director for office services in the city-state.

Do Foreign Investors really find Indian realty sector worth their money?

Largely fragmented Indian realty sector has been on the upswing and is turning out to be hot attraction for the foreign investors. However, these potential future investors seem to be little baffled about whether the gains are worth the effort necessary to acquire them.

Over $8 billion of foreign investment is estimated to flow in the year 2006-2007, of which 26.5 percent will be in real estate, says study released by the Associated Chambers of Commerce and Industry of India. Such a boom will certainly trigger a change in the direction of economic policy in the country.

Since, the realty sector in India continues to be so hard to navigate, property players doubt the possibilities to get involved here. Adding to woes of foreign investors is a compulsion to obtain necessary approval from the RBI prior to purchasing real estate in India. Along with being an entirely new construction, the location involved should fetch an area more than 50,000 square feet, or 4,650 square meters.

Poor infrastructure of some Indian cities might serve as a bottleneck to further plans of realty developers, who have built on what experts call green field sites. However, this is not an end to the problems. Tax policies in India have forced most Indian owners to divide their property into smaller unit which are further entitled to numerous partners, each holding their individual share.

Experts believe that India will become a very important part of the real estate business. But is very early days in India, and there are a lot of restrictions.

Hiranandani raises $750 million selling shares in London’s AIM

Hiranandani Constructions Pvt, the Mumbai-based real estate developer has decided to raise as much as $750 million selling shares in London next month to finance expansion.

The group plans to raise these selling shares in a property investment firm on the London Stock Exchange’s Alternative Investment Market (AIM). As far as the arrangement of offerings is concerned, HSBC Holdings Plc and Bear Stearns Cos. are the names bearing the responsibility.

Hiranandani is selling shares in an upcoming company, which will invest in potential real-estate projects that can grab the attention of overseas investors.

Unlike other stock exchanges in India or U.S., the London Stock Exchange’s junior venue, AIM does not fall for stringent requirements for selling shares. Companies forwarding their share selling applications to AIM appoint the investment banks or brokerage as a “nominated adviser” who see to audit their financial records thereby eliminating the need for filing financial reports with exchange officials.

This is what has encouraged the renowned realty developers of India including Hiranandani, K Raheja Corp., and West Pioneer properties to turn towards London’s AIM.

Also, it would bring golden prospects for foreign investors who have long kept their eyes on booming Indian realty sector. “The real estate sector is very hot,” said Jayesh Shroff, who helps manage $3.5 billion at Mumbai-based SBI Funds Management Ltd. “Large companies are planning to raise money and a lot of huge development is being planned.”

Both the bankers and company’s sources are keeping their lips closed. As per the data showcased by a Merrill Lynch & Co. report, Indian real estate is expected to surge more than four fold from $12 billion in 2005 to more than $50 billion by 2010.

Indian Realty firms, each moving ahead with own IPO plans

Parsvnath Developer’s, an established player in NCR realty sector has hit the capital market with its public issue and generated the demand for over Rs. 60,000 crore worth shares. This famous conglomerate is planning to use the funds towards development and construction of some of the projects on hand.

Although cashing in on the good times, Indian Property sector is still lacking in making its mark on the Dalal Street – India’s Wall Street, with few realty developers accounting for less than 1% of the country’s overall stock market capitalization.

Other companies are also trying hard to establish their niche by finalizing their plans to emerge as strong players in the capital market. Out of these, fortune of five companies is likely to favor them with their IPO’s on the domestic or international stock exchanges. A collective amount from these offerings is expected to be Rs. 18, 000 crore.

Talking about the established names in Indian realty sector, Unitech and Ansal properties plan to raise their fund either from the international markets or following the continuing trend of making public offerings, which could generate a collective amount of Rs 4,500 crore) from the domestic or international markets. Also, Delhi- based DLF, is all set to come with a second IPO after failing in its first attempt earlier this year.

Looking out for home loan – What lies ahead?

Getting a home loan in India is no more an easy task from now onwards. Reserve bank of India has released strict directives for all the banks to check whether a housing loan is being sought for an authorized structure. Also, the responsibility to ensure that the construction is being carried out in accordance with the sanctioned building plan will fall with these banks.

As a follow up of the orders from the High Court, banks are advised to comply promptly with instructions in this regard without failing while considering the applications for home loans.

These given directives vary according to the type of application. In case of the loan application for buying constructed property, applicant will need to submit a declaration form to the bank stating that the construction of the built up property is going in process with the sanctioned plan.

Likewise, in case of housing loan application for building construction, banks are required to get a copy of the sanctioned plan from the knowledgeable authority in the name of the person applying for such credit facility. Other legal formalities include a signed affidavit cum undertaking by the borrower according to which the borrower shall not violate the sanctioned plan.

RBI may limit bank loans to real estate

The Reserve Bank of India has now begun to review the banks lending huge amount of money for financing real estate projects. Continuous escalation in prices of the property has called for such a tight scrutiny, even as the regulator has followed prudential norms to maintain the flow of bank credit by raising the risk weights for capital allocation.

Issuing new guidelines, the RBI is making an effort to limit the flow of bank credit to realty sector, in accordance with the limits enforced for capital markets. According to the analysts, raising the risk weights on such type of loans is another way to resolve the problem.

Sources say the commercial projects of the realty sector have been put under lens by the RBI but the authorities will take some time to check the flow of credit.

This has certainly cautioned the banks which have started lending to the commercial real estate sector with a discerning eye. Data showcased by the RBI reveals that banks which have shown keen interest in funding commercial real estate sector are not necessarily exposed highly to retail home loans. Moreover, no interconnection has yet been found between the two categories of lending.