Indian Property News on 'January, 2007'

Private Builders to Develop Residential Townships in Delhi

The Group of Ministers cleared Delhi’s Draft Master Plan 2021 earlier this week and the good news for real estate developers is that they will be allowed to build residential apartments and townships on 27,000 hectares of land to be made available soon.

This is a landmark decision, considering the Delhi Development Authority has so far enjoyed the monopoly of acquiring land in the capital for development.

The land is located in the north-west and south west areas of Delhi, accounting for 18% of the city area. Dwarka, Najafgarh and Alipur, which fall in the earmarked zone, will now witness real estate developers pitching in with social infrastructure as well to support the residential apartments they build.

Property developers will be required to acquire at least 10 acres of land to build their townships. They will have to provide for adequate infrastructure like roads, shopping complexes, schools and hospitals, and 35 % of the apartments constructed, (or 15% of the floor area ratio) would have to be built for the lower income group.

The Ministry of Urban Development however, will decide on the profit margins for the builders – an autonomous regulator will be appointed for the purpose, as per the Real Estate Bill. This would pre-empt unrealistic prices being charged by builders.

According to the latest Master Plan, the city’s population is expected to reach 23 million by 2021. This would require an estimated 2.4 million additional housing units.

Where will these units come up? According to planners, 40 percent of them would come up in the already habited area and 60 percent in newly identified areas in north-west and south east Delhi. With the entry of private developers in the city, the skyline of Delhi is sure to change.

DLF appoints four creative agencies in its roster

DLF, the Delhi-based real estate major, now plans to go national. Towards this end, it has added three creative agencies – FCB-Ulka, Capital Advertising and Lintas Personal – to its roster, while retaining the incumbent agency, Percept H. The four agencies will handle different projects for the company. Media duties will be handled by Percept Media, sources close to the development have told agencyfaqs!

When DLF started reviewing its creative and media duties in October 2006, seven agencies participated in the pitch. The company has allocated a media budget of Rs 25 crore, and this could increase in the future. The four agencies have been awarded business for one year, after which the creative and media duties will be reviewed. it is learnt that the company had given the agencies a brief to reposition DLF as a national brand and as a real estate company with innovative excellence and size.

DLF plans to start housing projects across the country as it successfully did in Gurgaon (Haryana), a suburb of the national Capital. The company also plans to get into SEZs and hotels across the country. The real estate giant has also filed a prospectus to enter the capital market through an iPO to raise about Rs 13, 600 crore.

Source From Gurgaoncitynews

Noida’s Real Estate Graph – What turn will it take?

Noida, NCR’s flourishing IT and residential hub shot into the limelight on December 29, 2006 with the serial killings case in Nithari, one of the township’s adjoining villages. Horrified and shaken, Indians are yet to recover from the macabre tales that made headlines for days.

The gory stories emerging from Nithari have brought to light the apathy, unaccountability and sheer brazenness of the police force. The role of the police in controlling crime, and maintaining vigil to provide a secure environment has always been in question, but firm and severe measures have to be taken now to prevent similar incidents in future. Local NGOs like the Manav Sewa Samiti have brought up issues of security and civic conditions in Noida with the authorities.

Will Nithari impact Noida’s real estate? Well, our guess is – in the short term ‘yes’, but in the long run, ‘no’.

There has been a marked drop in rates in the Noida real estate market in the last three weeks since the Nithari case broke out. In Sector 31, land prices were between Rs. 45, 000 per sq. ft to Rs.50, 000 per sq. ft, while Sector 30 commanded over Rs.50,000 as it is better appointed with large commercial spaces and retail malls.

Since the turn of the year, rates have declined by 10% across Noida, and particularly so in Sector 30 and 31. These sectors are just a road across from Nithari village, and the fear factor amongst residents is ruling the property rates.

Noida has had a history of criminal activity ever since it was carved out of Ghaziabad district, U.P in 1976, but the township has prospered as the commercial hub of Uttar Pradesh in spite of it. Its proximity to the capital and the Noida Authority’s planned moves towards a world-class city attracted the IT and ITES industry to set up their corporate offices here. Residential apartments and commercial spaces came up as a consequence, and the real estate market was poised to catch up with, and perhaps surpass its rival Gurgaon this year.

With these advantages still in place, and the administration’s plans for improving the existing infrastructure moving as per schedule, Noida is expected to bounce back, according to some real estate experts. Also, public memory is short, and property developers are banking on this and the “whatever will be, will be” ethic of the Indian psyche to bail them out of this temporary setback.

Story Submitted by Saumya

FDI Flow – to touch $ 8 billion in 2007

The Institute of International Finance (IIF) report on emerging markets tabled earlier this week observed the positive impact of major mergers and acquisitions by corporate giants overseas on FDI in India.

The IIF expects FDI in India to rise to $8 billion in 2007 from $6.5 billion in the last year. Mergers and acquisitions by corporate majors shore up increased investment in growing markets, and India is well poised to avail of their investment plans.

The IIF is the global association of financial institutions with more than 360 members in over 60 countries. Its membership includes some of the world’s largest commercial banks and investment banks, insurance companies and investment management firms.

The report on emerging markets observed high levels of growth in India that have secured formidable foreign investor interest. The healthy upswing in the share market has been encouraging. The bustle in India’s property market has played a crucial role in capital inflows, enthusing financial investors with the confidence to reap the benefits of the boom.

The low interest rates and increasing financial integration has played a constructive role too in facilitating fund inflow. But, the report warns, there are potential downside risks in emerging markets’ finance, which require more vigilant risk-management approaches by investors and sustained sound economic policies by the government.

While net direct investment into India is rising, the IIF report pointed out that on the outflow side annual investment is set to jump nearly three-fold to $3 billion as Indian firms set up production, marketing and distribution networks overseas to achieve global scales.

No Tax Sops for Non-Premium Housing?

Real estate developers may have to dig deeper into their pockets if the Government withdraws the income tax benefits they are currently enjoying under Section 80-1B (10) of the Income tax Act. This is likely to be enforced from the next fiscal year, 2007.

Property developers in Mumbai and Delhi enjoy tax exemptions on profits on residential property up to 1000 sq.ft in area, and up to 1500 sq.ft. in other cities. March 31, 2007 is likely to be the deadline for availing this benefit.

Sources in the urban housing ministry believe that private sector investment in real estate has matured as on date, and builders are earning handsome profits on their money. Incentives can be withdrawn at this stage, as the real estate market has achieved the stability to manage on its own.

The misuse of this tax benefit by most developers in Delhi and Mumbai to construct apartments just short of 1000sq. ft is also probably why the Government is re-considering this facility. Moreover, credit in the housing sector is rising higher than desired levels, and the RBI has had to step in with higher interest rates to curb the flow.

On the other hand, the National Housing Board (NHB) has been found inadequate in meeting housing needs of the low income groups. The shortfall has been accumulating since 1999, when only 27,000 LIG homes were built as against a target of 44,000. The Economically Weaker Sections (EWS) category is even worse off – only 28,541 dwelling units were constructed as against a target of 96,571 units.

Indian property developers are unhappy over the government’s proposal to remove sops, and threaten to exit the category if these concessions are removed. Being a highly capital intensive industry, and funds management always a constraint, they are demanding extension of benefits for another five years. Without incentives in the mass housing sector, shortfalls in targets will never be met, warn developers.

Your own Slice of Paradise!

Having a holiday home is not just the perquisite of the rich and famous any more. A study of real estate in Goa would reveal a plethora of apartments being bought up by young corporate executives who love the thrills that this seaside town provides.

Goa is a favourite holiday resort for youngsters with its beaches, yuppie culture, cafes and seafood joints. Holiday-makers make as often as four trips a year. With hotel rates shooting sky high -25% since 2005 – investment in property in Goa becomes a more lucrative option for many, as it offers very good appreciation.

Cottages or bungalows being difficult to maintain for the outstation owner, apartments are the obvious choice. These residential apartments are equipped by the property developer with swimming pools and gymnasiums, with maintenance and security also provided for.

The apartments in Goa not only have good resale ability, they fetch high rents too. A well located, sea-facing apartment can get the owner Rs.1 lakh a month, which would probably take care of his loans on the investment in no time! Moreover, property taxes and stamp duty are lower in Goa than in most other states.

Real estate developers in Goa stealing the show are, amongst others, Acron, which caters to the select holiday-home buyer group, Iona Fernandes Developers Pvt. Ltd and Araujo Home Makers. Peace valley by Sanatan Financiers and Real Estate, Monte Carlo, Meadows, The Palms, Villa Serena, Villa Vera Goa and Villa Paradise are new projects in Goa. Real estate builders operating on a national scale like DLF and Parsvnath have exclusive residences coming up in the city too.

Professionalism and Clarity – Need of the Hour for Indian Real Estate

The Indian property market is slated to leap frog to $102 billion by the year 2010 from its current figure of $14 billion, says Shyam Prasad Reddy, managing Director and Chief Executive Officer of Indu Projects Limited.

Reddy was participating in a panel discussion organized jointly by Ernst and Young Private Limited and the students of the Real Estate Club and the Wadhwani Centre for Entrepreneurship Development at the Indian School of Business on “Indian Real Estate – the Research Imperative”.

Reddy cited the increased purchasing power of Indians, easier funding by housing finance companies and banks as catalysts for growth in the Indian property market.

The Indian property market has a potential of approximately 20 million homes, including 6.7 million in India’s cities and towns. Growth in the retail sector is opening up doors for domestic and global infrastructure developers in India.

The real estate industry in India however still lacks maturity, and a more organized and professional structure is required. There is a lack of research and data in the Indian property market, which could be corrected with uniform laws and transparency in the operations by real estate developers. With foreign investment in real estate picking up, more professionalism is required, emphasized Reddy.

Participants on the panel were Ganesh Raj of Ernst & Young, Arvind Pahwa of JP Morgan Asset Management, Nayan Shah of Mayfair Housing, Kishore Gotety of ICICI Venture Funds Management, Suresh Maramreddy of Citigroup Property Investors, KG Krishnamurthy of HDFC Property Ventures, Neel Raheja of K Raheja Corp., Ramesh Sanka of DLF, Luv Shah of Deutsche Bank REOF, Ramani Sastri of Sterling Developers, Mohit Singh of Shipra Group, Balaji Rao of Starwood Capital India and William Kistler of Urban Land Institute ( Europe).

The discussions identified five core areas of research for the ISB Real Estate Research Lab for the current year.

SEZs play developmental role in Indian economy, affirms Kamal Nath

Special Economic Zones carry multiple benefits of creating jobs, augmenting exports, building infrastructure of international standards and bringing in foreign investment. Kamal Nath, Union Minister of Commerce stressed on the advantages SEZs have at the awards ceremony of the Export Promotion Council for Export Oriented Units (EOUs) on 19th January, 2007

The SEZs will witness rapid growth in labor-intensive manufacturing and services. The minister estimated investment from SEZ developers to touch $60 billion (almost 300,000 crore) by 2012 if all SEZ approved projects are implemented. By the end of the year the minister expects a domestic investment of Rs.75, 000 crore, and an FDI of Rs. 25, 000 in SEZs alone.

The employment figures would proportionately zoom to 500,000 people by the end of 2007. SEZs make local recruitments, and provide training for their operations. The gem and jewellery SEZ in Hyderabad, the textile SEZ of the Mahindras in Chennai, Nokia SEZ in Sriperambedur, Flextronics in Chennai, Apache SEZ in Nellore, Brandix Apparel SEZ in Vishakapatnam, Divi Laboroatories in Andhra Pradesh and the Rajiv Gandhi Technology Park in Chandigarh have created employment in their respective zones.

The Commerce Ministry is investigating the possibility of simplifying procedures governing SEZs, based on the recommendations of SEZ developers. Current rules have been in force for a year now, and some amendments are called for.

The sensitive issue of land acquisition and rehabilitation was also brought up during the address, and the Minister urged State governments to partner the SEZ scheme in this regard.

Bio-IT Park coming up in Vaddodara

Mumbai based real estate developer Akurti Nirman Ltd. is coming up with a Bio tech Park in Savli, Vaddodara. Spread over 708 acres of land and being set up at an investment of a whopping amount, the park will largely focus on organic and agri-products.

Holding 66% equity stake in the concerned project, Akruti Nirman spearheads Chatterjee Group as well as the Gujarat government, each of them which hold 23% and 11% respectively. As per the information provided by the industry sources, this famous real estate player is seeking contribution from different companies to set up facilities at the park.

Akruti Nirman raised over Rs 3.18 billion with the issue of 6.7 million shares as a step to seek the funds to grow and expand its horizons. The cost of each share ranged in between Rs. 475 to Rs. 540. On the second day of the issue, the public offer of shares has been oversubscribed.

The company will use the proceedings to fund different activities including land acquisition or construction costs of various projects to the tune of Rs.1.25 billion.

Akruti Nirman is one of the renowned property developers of Mumbai. The company is primarily into construction business, under the Slum Rehabilitation Scheme (SRS) initiated by the Maharashtra government.

Landbanking – A new arena in Real Estate

The real estate is unfolding new areas of business as it matures into a full-blown organized industry. With developers on a massive land acquisition search across the country for their projects, acquiring land from local farmers or owners is a major challenge for them. Even the state governments find this to be the most ticklish of issues.

However local landlords are coming to the rescue of these developers. In a position to wield more power with landowners and farmers in their area, the bigger landlords are mopping up land in their vicinity and selling it off to the developers who are not familiar with the territory. Such landbankers, as they are known, even decide which developer will enter a particular territory.

This arrangement has both parties happy. Landbankers are paid a hefty fee for the brokerage, while developers find it easier to deal with a single dealer rather than with a host of suspicious and reluctant owners.

Landbanking has acquired a formal status, with organized players entering the stage. Zoom Developers, the Badarwals, Deepvijai promoters and A.K.Constructions in Northern India hold properties running into hundreds of acres for sale to builders.