Indian Property News on 'May, 2007'

A Mega Retail Event in Bangalore

South India’s first-of-its kind Mega Retail event ‘The Shop’ is held in the country’s IT hub, Bangalore. The two cum conference cum exhibition is the third of the series of regional retail forum which winds up today.

The event aims in shaping up the Indian retail sector that continues to pioneer and set standards.  Also, the meet gives an opportunity to all retail majors to come together under one roof and builds fellowship across industries, says Reliance Retail Lifestyle president and CEO Bijou Kurien, who is also the conference chairman.

The Shop efforts to build a leading organized retail base in South India, for leveraging the benefits of more advanced retailing practices in store operations, management and vendor sourcing.

South India enjoys high literacy rates, brand loyalty, and quality consciousness that offer great scope and potential for retailers.  The developed technology industry by South India can largely contribute to Indian retail industry in backend information management and technology.

Showcasing the best retail practices, the mega retail event provides an in-depth analysis of retail business trends and shows the way to shape up the market by ensuring to introduce a different wining strategy.

Major Builders Invited to Overhaul Dharavi

Five major property developers have been invited to take up the controversial project to redevelop Dharavi, Asia’s largest slum. Spread over an area of 1.75 kms along the Mahim river in Central Mumbai, the slum houses some 57,000 families – about 300,000 people who will be accommodated into free but small 1 bedroom homes in the area.

The drive is decided to clean the land for business and development of exclusive high rise buildings. Dharavi occupies 535 acres between the suburbs of Sion and Kurla on one side and the tiny area of Bandra on the other.

Prominent developers have shown large interest in the project. It includes DLF Ltd., Kalpataru Construction Pvt. Ltd., Group, Unitech Ltd., Hiranandani Developers Pvt. Ltd. and companies belonging to the Reliance Industries group and the Anil D Ambani Group, told a senior officer at Slum Redevelopment Authority (SRA) who did not wish to be named.

The estimated cost of the project is Rs 9,300 crore which has been modified from the earlier estimations Rs 6,000 crore. Maharashtra Government keenly desires a big makeover for Dharavi as a model for other slum redevelopment projects in the city and state.

In 2006, the government planned to issue a global tender for the redevelopment of Dharavi, but it was overturned as the Dharavi dwellers protested fearing displacement. SRA then shelved the project.

The government had raised the floor space index for Dharavi, allowing builders to construct and sell more on the same space. The project has invited the wrath of Dharavi residents who are running self sufficient economy among the narrow lanes of the slum.

The Political Brain – Deciding the Fate of Real Estate

The Munnar Demolition in Kerala has taken on political upheaval between State Chief Minister V S Achuthanandan and CPI (M) State Secretary Pinarayi Vijayan.

Most confrontations occur due to the political stance of different builders indicating the favorites of whom. With a huge amount of foreign investments coming into Indian real estate, the market is becoming lucrative for politicians and in the name of regulating the market, they start putting obstacle, explains a real estate consultant who wished not to be named.

Property issues have always been a bone of contention among politicians. The Munnar Demolition is the latest in such hues that have occurred over property, when the CPI (M) politburo suspended Kerala CM and CPI(M) state secretary Vijayan from the highest policy making body for their public spat in violation of party norms.

Recently, Anil Ambani has become the corporate culprit in a tussle between the newly elected chief minister of UP, Mayawati and Mulayam Singh who favored the Reliance Industries Ltd. multi product special economic zone (SEZ). The government now found out the project not complying with the SEZ rules and has therefore recommended scraping of the 1,200 acre project.

The rules allow an SEZ to have only one entry and one exit point. Contrary to this, the Reliance SEZ was found to have been proposed on two pieces of land with a road dividing between both the plots. The UP government has called a CBI enquiry into the land allotments made in Noida during the previous Samajwadi Party regime.

Then, there are examples of Nandigram incident and Singpur, which made the UPA government draft a specific policy for construction of an SEZ, and most likely under duress from the Left.

KIAC and City Corporation to Form JV Company

Kshitij Investment Advisory Company (KIAC), the real estate arm of Future Group and Pune’s real estate developer, City Corporation are to establish a joint venture for the construction of a 2.8 million sq ft. Market City. The space will come within the Amanora Park Township being developed by City Corporation.

The firm is looking forward to make investment worth $45 million. The amount will be parked in as equity from the combined $430 million corpus belonging to Kshitij Venture Capital Fund and Horizon Realty LLC, both interested to invest in Indian realty.

City Corporation is to float a special purpose vehicle company – City Realty, to make up for another $45 million, reveals Shishir Baijal, the Managing Director and Chief Executive Officer, KIAC.

With Market City projects in cities like Mumbai, Hyderabad, Bangalore and Chennai, the concerned project will be the seventh being built by Kshitij country wide. All these projects are under development.

The Market City will feature the segments including retail, entertainment, commercial spaces, and hospitality. The project is believed to include a 300 hotel room, a convention centre, service apartments, and community centre featuring amphi-theatres.

DLF to Raise Funds through Public Issue

DLF Ltd, a renowned name in Indian real estate, has announced to invest Rs 3,500 crore for development of its land reserves.  The amount is however lower than what the company has earlier decided to invest for the purpose.

The company has plans to raise Rs 9,625 crore through a public issue of Rs 1.75 crore shares in the price band of Rs 500-550 between June 11 and June 14.  The new shares will comprise 10.27 per cent of DLF’s post-sale capital. The sale of shares on offer will push the company’s market value to a mark of $24 billion, more than double Unitech’s, India’s biggest real estate developer.

Of total land bank available with DLF, around 5,269 acres is located in the National Capital Region whereas 2,708 acres in other major cities and 2,278 acres in the rest of the country.

The current land reserves of the company are enough for its planned real estate projects over the next 10 years. The real estate major envisages constructing land reserves at cost effective prices at prospective locations in the country, to gain from them during the upside in the economy, says DLF Vice Chairman Rajiv Singh.

There are 11.3 per cent of the land reserves with DLF and its subsidiaries. The company enjoys sole development rights for 44.6 per cent of the total.

Also, the company has letters of acceptance for 35.9 per cent of the land, whereas the rest are joint developments with partners.

DLF offers an insight into its future plans which includes airport management, financial services, asset management, leisure entertainment and development of hospital properties.

DLF is promoted by billionaire Kushal Pal Singh, whose wealth doubled last year to $10 billion, according to Forbes. Singh, 75, a former Indian Army officer, bought land in Gurgaon, 17 miles (27 km) south of central New Delhi, in the early 1980s.

Kushal Pal Singh, the billionaire owner of DLF, owns 99.5% of parent DLF Universal with his family, is worth $10 billion according to Forbes. Singh, 75, comes from a family of landlord and lawyers. He bought land in Gurgaon, 17 miles (27 km) south of central New Delhi in the early 1980s.

Development of Gurgaon as an important suburb of the NCR owes to DLF, a company which carved out residential plots and condominiums and commercial spaces that house offices and retail outlets.

Indians Generating Demand for the UK Real Estate

Indians have emerged as the largest property buyers in the UK thereby contributing to economic development of the country, as per the data compiled by real estate firms and British Government research.

The group of prospective buyers also includes Russians, Arabs, and South Africans. Together, they are known to be the largest buyers of residential property in the past two years, says Sheetal Chantal Halai, heading the India Desk for realtors Savills in London.

The company has till now provided property solutions for Indian buyers narrowing down on deals ranging from $2 million to $40 million.

Indian companies in UK has pushed corporate activity to a great extent and the Reserve Bank of India (RBI) move to allow investments abroad to the scale of $100,000 are some major factors listed by broking firms.

In 2005-06, India emerged as the third largest investor after the US and Japan. The country move ahead to 2nd position with the $7.6 billion takeover of Corus Steel by the Tatas in October 2006.

Real estate projects from India increased to 76 per cent from mere 11 per cent thereby making India the UK’s third largest investor.

Today, the UK houses more than 400 Indian companies. Of this, around 23 per cent have begun their UK operations in 2006. Officials estimated that India’s business operations in the UK are now worth nearly $35 billion.

Parking money in London real estate is serving as a status statement for most successful Indian entrepreneurs, says Knight Frank India’s Chairman Pranay Vakil. Rich Indians prefer to invest in exclusive central London areas since its financial climate is more stable than India.

ETA Star to Invest USD 923 mn in Chennai

In a bid to tap the growing demand for residential projects in India, ETA Star Property Developers Ltd, a group company of Dubai-based ETA Ascon, has announced to invest USD 923 million to construct an info-tech park in Chennai.

The IT Park, to spread over an area of 100 acres would home leading software companies such as Microsoft, Intel, IBM. Its commercial part will be developed as a part of mega residential project.

This is part of a 350 acre IT Township project which will accommodate residential units spread across 200 acres, says Syed M Salahuddin, managing director, ETA-Ascon Group.

The project will also include 17.5 million square feet for the construction of apartments, row houses, bungalows, shopping arcades, hospitals, schools, hotels, and service apartments.

With this upcoming project, the group’s total property investment in India shoots to Dh16.44 billion so far. The company has introduced its first residential project in Chennai as a part of Dh11 billion investment project in Tamil Nadu.

ETA Star is keenly scouting investment options in India and will narrow down on the best once it gets handful of them, adds Salahuddin.

Another project in the company’s pipeline concerns Jasmine Court residential development. It will commence within next few months offering investors mixed size apartments spread over 4.4 acres of landscaped property in proximity to Chennai International Airport, with an array of facilities including swimming pool, a gym, and a basketball court.

L&T Bullish on Real Estate Projects

The Mumbai based Larsen & Toubro Ltd. is planning to invest a whopping Rs 8,000 crore in Indian real estate and urban infrastructure over next three to five years. The company will make investments through its subsidiary L&T Infrastructure Development Project Ltd (L&T-IDPL).

Taking a cue from soaring demand for commercial and residential projects in India, the company expects to carve out substantial niche for itself in growing market. It envisages leveraging its strength in engineering and construction to build an excellent urban infrastructure. The main focus area will be emerging cities including Chennai, Hyderabad, Vizag, Bangalore, and Kochi.  HDFC has a 25% stake in L&T – IDPL, and would also be contributing to the investment.

L&T Ltd. has already invested Rs 700 crore in real estate and urban infrastructure projects. The management will also be investing an additional amount over Rs 500 crore in the business this year. It’s another subsidiary IDPL, L&T Urban Infrastructure, will take up the urban projects. Different real estate projects are likely to generate revenue of Rs 2,500 crore annually, as per the estimations set by L&T.

The projects will be executed in a phased manner, with each under different special purpose vehicles (SPVs). The company has planned to first make a foray into residential market of Chennai, Vishakapatnam and Colombo. It also has an integrated township in Chandigarh in its pipeline. The project will be taken in association with a local builder.

“We have already bought plot in Nagpur to build a residential project,” says YM Deosthalee, chief financial officer, L&T. The company is working with Bombay Dyeing on constructing a dilapidated building in Mumbai.

Lease Market Filling Investors’ Cup of Delight

Easy tax norms and dropping interest of people for property investments ensure a thrust in rental segment in India. As such, soaring rentals and leasing property are to of the hot topics in real estate today.

Talking about the residential segment, it is witnessing a downside in actual transactions, which has turned out to be beneficial for the lease market. But there are hopes regarding capital values to undergo corrections. Rents will go up by 20-25% because may people are putting themselves off from buying a house. Increasing interest rates on home loans is the main cause behind the scenario. However, rental houses will always remain in demand.

Experts view slowdown in real estate necessary to bring about stabilization in property prices as they were increasing exponentially for the past few years. The situation has weakened the consumers’ affordability who envisage themselves burdened by higher EMIs. For that reason, this is actually a kind of correction.

Rentals in India have picked up the pace in the past two months because of reduced investment in residential property. But, there has also been a significant drop in the actual number of apartments for possession.

A number of real estate projects in India are under construction and will be over by the next two to three years. Lack of capital with builders is one of the major reasons for a sharp fall in the supply of housing units. If the problem of shortage of funds continues to persist in future, the small property developers will be wiped off the scene.

Industry watchers see the increase in Indian rental market as a blow to the unrealistic trends in the sector. Considering ongoing fluctuations in the market, it is difficult to predict the nature of trend in future. One factor which can be kept in a direct relation with rentals is interest rates on home loans. If the rates come down, then the rentals can fall.

Another reason for the increase in rentals and lease market is the 30% tax haven that people benefit from rental income. For that reason, the trend is likely to keep up pace in the coming years.

Govt. to Bring Energy Code for Commercial Buildings

Considering a drastic increase in energy consumption in large commercial buildings, the government has decided to give these establishments a certificate declaring the buildings to be energy efficient if they plan to have a connected power of 500 kilowatts or more.

For the time being, the code will be applicable to new construction commercial buildings as well as integrated townships but a separate code will soon be formulated for reconstruction of old buildings soon.

The Bureau of Energy Efficiency (BEE) has finalized the Energy Conservation Building Code (ECBC) for making an effective use of energy and conservation in buildings. Union Power Minister Sushil Kumar Shinde launched the code.

There are certain specifications for minimum energy performance standards for commercial buildings using smaller glass surface, thermal insulators, windows to maximize natural light, shading devices and separate air conditioning system for areas used for long hours. All the details are listed in the code and compliance with the code will be voluntary to initiate with.

Compulsory enforcement of ECBC will help to save 1.7 billion power units per year. The calculated reduction in energy use for upcoming constructions hovers between 25% and 40%. There are few countries which follow building energy code. The list includes America, Europe, Union countries Japan and Canada, says BEE.

Since 2003, there has been a rise of 12.5% in the amount of electricity consumption in commercial sector. In addition, the office space has grown at the rate of 10%, says Dr Ajay Mathur, Director General, BEE.

Air conditioners in such buildings consume 60% of the total electricity available to them. Offices like call centers which has 24×7 environment can toe the building code and bring a drop in consumption by a significant 40% whereas offices operating in daytime can conserve up to 37 percent energy.