Indian Property News on 'February, 2007'

Property Evaluation & Investment Made Easy

There have been many misconceptions regarding realty valuation and market rates.

But now a handy and reliable tool to evaluate a property and location for property investment is at hand in the form of RESSEX ( Real Estate Sensitivity index).

A synonymous of Sensex, RESSEX analyses price factoring in availability and supply versus actual demand and tracks price elasticity. It is the numeric representation of potential ad variation of real estate industry and covers almost every new real estate development (primary supply). It enables you to view market potentiality in macro perspective.

There are various misconceptions about real estates rates. The efficient rate is one that is absorbed by the market negatively. Ressex enables you to know the market efficiency, demand and supply and would also be able to track rate dynamics.

There is this Efficiency Index, which is the ration of average demand & average rate. In other words, it is demand elasticity and measures the impact on demand given an increase of decrease in real estate rates. Demand Index, on the other hand is average annualized sales of the primary supply where gestation period in sales has been taken as an indicator to estimate the demand. Supply Index measures annualize supply, where total supply of the individual building is distributed over the duration of the building completion. RESSEX can be a very helpful tool for real estate investment. The impact of price variation, interest rat variation, Chang in Govt Policies, etc can be measured through it. RESSEX also represent the relative grading of city, suburb, area, locality, etc.

RESSEX that represents the outlook of real estate industry will cater to consumers, financial institutions, banks, developers, mutual funds and FDI and also to government bodies.

It’s helps the consumers and investors to know the potentiality of the location through efficiency of the location is improving then there is scope of appreciation and vice versa.
Similarly for other segment of the industry including Developers, Funds Company etc. would also be able to know market efficiency and its local perspective along demand and supply situation. Ie given a price what is the impact on demand, to what extent gestation time in sale has gone up with the increase in price.

And for the industry, one will be able to know what has been the impact on the market due to policies, regulations and issues which have hampered the supply like Forest land, TDR Corridor, Environment Clearance, etc.

RESSEX us accessible to the public at propertyscience.com and considering that it will be updated from time to time, it can really prove to be an authentic and reliable tool for property evaluation and investment.

Submitted by Saumya
Source from Real Plus

Next to Come – Hotels Offering Self Service Options to Guests

The current economic growth and an increase in number of business travelers, there is a scarcity of hotel rooms. This rendered a chance to most hotels to increase their tariffs by as much as 100% over the past one year. Developers are coming with a new trend to give a start to another niche in the hospitality sector.

The demand for hotel rooms is going through the roof. Most business individuals find it irksome to find a comfortable room at rates that don’t cost the moon. Two such hotels are leading in this trend that analysts say could spread quite rapidly in Pune.

The Ginger Hotel, in Pimpri, Chinchwad area is part of Indian Hotels Company Limited (IHCL) or the Taj Group. It has been built by Krishna Kumar Goyal of Kohinoor Group. The second, Smart Inn, is coming up on Apte road is being set up by the Talera group.

These hotels will provide self service trend to business travelers. Self service offers guests the liberty to work out things as they want and leave them enough time to be on their own, explains Krishna Kumar Goyal, MD, Kohinoor Group.

These hotels will incorporate an array of facilities including gymnasium, air conditioned rooms, meeting rooms, a cyber café, 24 hour reception, digital safe deposit boxes, as well as wi-fi connectivity in public areas and individual rooms. Some of them may also feature a restaurant. However, these hotels will work on the concept of high degree of automation and self service options. Their idea is to deliver the food to the guests’ rooms from restaurant nearby.

Assotech Bullish on Building Townships

Assotech is on its way to make a mark in Indian residential segment with the development of a mega project like India’s first global city on the proposed Delhi-NCR Ring Road, connected with expressways like NH 24, and Noida-Greater Noida Expressway.

The group envisages to come up with an exclusive township featuring an array of top notch facilities. This plan boasts of building a vibrant new community of mixed uses for families and young professionals, says Sanjeev Srivastav, marketing head, Assotech Group.

Moreover, the plan joins buildings with courtyards, courtyards with linear parks, and linear parks with the central park. This will help in a set up of an organized and logical system.

This mega township will have a commercial mart, hospital, hotel, entertainment city, and institutions including primary schools, colleges, and a university, water bodies and scenic surroundings with metric stadium, fire and police stations.

Assotech Group has another township project in its pipeline that is lined up to come up on NH – 5 and located opposite the upcoming AIIMS institute in Bhubaneswar, Orissa. It would come up at the scenic surroundings of Uday and Khandagiri caves. The group promises to offer a high living experience in this alluring city.

According to Sanjeev Srivastav, chairman and managing director, Assotech Group, stretching over an area of 10 acres, the integrated township will have exquisitely planned residential-apartments with top-notch facilities. Here stresses and struggles of daily life melt away in the bliss of comfortable living, he says.

RBI Restricts NBFCs from Investing in Real Estate

The Reserve Bank of India (RBI) tightened the norms for the banks to lend to real estate. Now, it targets the finance institutions investing in real estate by releasing stringent rules for them as well.

The new policy will enable RBI to monitor the market exposure of finance companies on a monthly basis. The central bank has redrafted the rules for such institutions and come out with deposits and another for those not availing of public deposits.

The new rules try to mark a difference between asset finance companies and loan & investment companies among the deposit-taking NBFCs.

From now, finance companies cannot invest more than 10% of their net worth in land or property, except for its own use. Moreover, the investments in unquoted shares of a company (not a subsidiary) have to be limited to 10% of net worth.

Talking about loan and investment companies, they have been allowed to park funds up to 20% of their net worth in unquoted shares. Current norms need asset finance companies to assure that at least 60% of their loans go to lease and hire purchase of machinery. As for the remaining part, it is used by finance companies to provide funds to the real estate sector.

If a finance company has any land in its acquisition or unquoted shares in exchange of its bad loans, these assets have to be disposed off by the NBFC within three years. Finance companies and Residuary Non Baking Finance Institutions with total assets of Rs 100 crore or above will have to deposit a monthly return on their exposure to capital market within 7 days of the expiry of the month to RBI.

Raised Excise Duty Hurting Cement Makers

The government has proposed to raise the excise duty on cement to limit increasing inflation. It would be done by bringing a differential duty structure on the commodity. From now onwards, it would cost Rs 600 per tonne if the retail price exceeds Rs 190 per bag whereas it is Rs 408 per tonne irrespective of the retail price.

Cement manufacturers are looking upon the move as an unnecessary step. They want the taxes to be simplified. The compliance cost of administering such a difficult framework will defeat the purpose, says Ajit Rande, chief economist, AV Birla Group. Imposing such a heavy excise duty on selling price will make it hard to monitor and will raise too many litigation issues, say industry experts further. Cement prices are already around Rs 200 per bag. This clearly underlines the reason for industry being anxious over the government’s decision.

Firm prices have led to a superb performance by a majority of cement makers, riding on high demand outstripping supply. Cement manufacturers are showing their anguish on government’s moves to indirectly monitor and control cement rates.

Rates have been doubled by 50% in the last one year, but the cement companies are firm on their arguments and saying that it has risen only 5% on a compounded basis in the last 13 years.

As for the weighted average of the input cost, it has shot up by 4.5% in the past eight years. Cement prices have increased from Rs.100 per bag in the year 1993-94 to Rs. 198 last week, says the weighted price index. The cement industry requires an extra capacity of around 120 million tonne in the next 10 years to support the current GDP growth. However, the target could not be achieved without appropriate amount of funds. The industry has hopes just from those cement players who will reinvest their profits. . Even FDI will come in only if the MNCs sense profitability.

Govt. to Set ‘Authority’ to Examine Land Claims for SEZs

With more and more real estate developers investing in special economic zones (SEZs), there is a widespread fear of these innovative development activities to turn into real estate ventures.

This encouraged the government to think about setting up an authority to inspect claims of land sought doer development of SEZs. The team will comprise of bureaucrats and experts to decide the authencity of claims for land by SEZ applicants.

Apart from these developments, land is also required for non core activities like recreation and building hotels. Excessive use of land for SEZs will result in an increase in commercial spaces and industrial houses thereby ignoring other significant constructions that is actually needed at this point of time.

The PM, personally releasing the stringent rules regarding proposed R&R policy. The changes mooted may allay concerns over SEZ as R&R policy addresses the question of displacement by projects of “public purpose” in general.

Congress support restraint on land acquisitions and pressure from Left gave rise to a situation of perplexity for the government to say that R&R policy will address their fears.

IT Sector Expanding Horizons in Tier III Cities

Tier III cities are in realty race and are attracting large interests from real estate developers as well as potential investors. IT/ITes companies and upcoming retailers are jostling hard to make profits on the first mover advantage in these markets. They are counting on the factors like low property rates, availability of vast land, a great workforce, and improving living standards.

The growth of Indian rich and consuming class coupled with dropping rates and other fiscal investments on home loans has been major reasons increasing appetite of the average Indian consumer. This has been further fuelled by growing working population in the age group of 25-55.

Increasing transparency, liquidity in real estate industry is changing the picture of the realty in India.  The cities that are likely to zoom in the wake of new interests from sunrise sectors include the names like Chandigarh, Ludhiana, Lucknow, Jaipur, Ahmedabad, Goa, Vishakhapatnam, Coimbatore, Baroda, Guwahati, Bhubaneswar, Surat, Nagpur, Indore, Mysore, Vijaywada, Mangalore.

Driven by positive growth in the economy and large scale investments in the IT and ITes sectors, real estate in Tier III cities ostensibly flourishing. For example, with the development of Chandigarh Technology Park (CTP), Chandigarh is going to be another hub for IT companies.

Also, an approved SEZ, CTP has attracted biggies like Infosys, Wipro and IBM.  DLF Group has developed DLF Infocity to provide spaces for the tech firms.

Though Chandigarh does not have much to offer in terms of residential development, the report says that the peripheral areas including Panchkula, Mohali, Zirakpur, Dera Bassi and Nada Sahib are seeing a lot of development.

As such, the city of rock garden does not have much to offer as far as residential development is concerned. The development has been shifted to the areas of Pinjore, Zirakpur, and Kharar from Mohali and Panchkula. The size of these colonies ranges from as low as 5 acres to as high as 200 acres.

Bhubaneswar is another place which is offering a conducive atmosphere to IT sector. IT majors Infosys and Satyam are planning to spread their wings here. Apart from Infocity-I, DLF is coming up with IT Park in Chandaka Industrial Estate. Genpact has also announced its plans to set up BPO SEZ in Mancheswar Industrial Estate. A bio-tech park is also on the anvil.

Merlin to Build Rs 200 Crore Office, Sports Complex

Real estate developer Merlin Projects Ltd would shortly start construction of Rajdanga Sports cum Commercial Complex in the eastern fringes of the city.

The total cost of the project is estimated to be Rs 200 crore. Apart from the multiplex, the complex would have a stadium of 5,000 seats, state urban development minister Ashok Bhattacharya said.

The project would have a gym, club and sports facilities for football, cricket and athletes, Bhattacharya said.

Rajdanga Sports Complex will have necessary infrastructure such as green changing rooms, indoor game area, food stalls and parking facilities, he said after laying the foundation stone for the project.

Merlin won the bid floated by Kolkata Metropolitan Development Authority (KMDA) against heavyweights like Bengal Ambuja Housing Development, Bengal Silver Springs Projects and Forts Projects.

The complex is part of East Kolkata area development project being done by KMDA.

Merlin Projects managing director Sushil Mohta said the commercial complex of international standards is being planned by Bentel Associates, a South African architectural firm, along with Edifice Architects, an Insian architectural firm. Structural engineering would be done by Stup Consultants. The mall would have a separate car parking facility for about 750 cars.

The mall would have 4 screen multiplex, dining restaurants, entertainment centres and retail outlets. The area would also house a office tower planned for IT and ITES requirements. Merlin group is targeting knowledge process outsourcing companies.

Mohta said in addition to revenue generated by KMDA, the municipal authorities would get about Rs 12 crore as sanction fees. The project would provide employment to 2,000 people, he claimed.

Source from Business-standard.com

Government to Remove Stamp Duty on Property Deals

The stamp duty on property transactions will soon be removed thereby bringing a joyous time for home owners.

Stamp duty would only be imposed on the first transaction of land, as per the 2006 National Urban Housing Policy. The provision is waiting for the final nod from Cabinet.

According to today’s scenario, societies and housing co-operatives require to encourage the group housing. Stamp duty in such cases at the stage of raw land and first sale thereafter would be imposed on value added basis. This will help the property rates to get stable to the first purchaser and housing land remains a liquid asset.

At present, stamp duty is being charged on both the land and the apartment. However, its percentage varies from state to state as it’s not uniform. For example, Haryana charges 8% stamp duty, Uttar Pradesh has 10% and it is 65 in Punjab.

Land has been held in a company that is not taking up the construction of housing accommodation. This is primarily done to prevent the double incidence of stamp duty. The company acquiring the land transfers the land to the buyer at the time of sale of residential unit.

The shift will bring high profits for property buyers. There is a concept of group housing (also known residential complexes) with the service tax law. They are believed to incorporate more than12 residential units. These units can be apartments or even row house, says Satya Poddar, partner, Ernst & Young.

Westend Greens’ Farmhouse Fetched Rs. 18 Crore an acre

The highest priced farmhouse deal has just taken place in India. A UK based property developer has purchased a 2.5 acre farmhouse in south Delhi’s tony Westend Greens for Rs. 45 crore.

The farmhouse was actually the property of renowned Khanna Jewellers. Such a property at Westend Greens was sold out for Rs. 28 crore, in step with the going rates of Rs. 8-11 crore an acre then.

The deal has certainly taken many people by surprise who opine it to be the most expensive deal in India for a 2.5 acre farmhouse. The Khanna Jewellers’ deal implies a going rate 70% higher than last year’s.

Location plays a pivotal role to decide about the property price. As for the concerned deal, Westend Greens, one of the most sought after sites after Rajokri and Vasant Kunj, is believed to be a key reason behind such a high price. Following in steps are the other locations including Asola, Pushpanjali, and Chattarpur.

Westend Greens is also popular for providing the best connectivity to important places. Being home to a number of heads of diplomatic missions land pioneering industrialists of the country just adds to its significance and appeal. However, the land deals are not frequent in this areas everyone is eyeing at the Delhi-Gurgaon expressway to become functional soon. The rates are likely to spiral up further in Westend Greens as connectivity will improve much. These are some of the reasons why a built up property of only 6,000 sq ft, the farmhouse sold out for such a large amount.