Indian Property News on 'July, 2007'

Trikona Cap Takes 33% Stake in Uppal’s 67.5-acre Haryana SEZ

Real estate fund Trikona Capital has acquired 33% stake in real estate company Uppal’s Group’s Haryana SEZ for around $50 million.

SEZ is owned by a special purpose vehicle (SPV), in which the remaining stake has been acquired by Uppal’s Group.

The proposed SEZ has got the approval from Board of Approvals (BoA) and will come up over 67.5 acre in the Shikohpur region of Haryana.

Uppal’s Group informs to have received investment from Trikona Capital and the SEZ has recently been notified by the government. However, the company has not revealed the exact amount but it is nearly Rs 200 crore.

It would be Trikona’s second investment in Uppal’s Projects. The fund has invested $58.3 million for the development of Uppal’s IT Park, which has been developed by Panthera Developers.

Trikona Capital is the asset management company of Trinity and makes investment in real estate through two funds launched in the US and UK.

Uppal’s Group is Delhi’s leading real estate developer in the residential sector. The company also holds interests in development of commercial and office space. The company has most of its real estate projects in tier II and tier III cities in Haryana, Punjab, and UP.

Shedding considerable light on the fund’s investment portfolio, it is attractive enough with the investments made in big Companies such as highway developer IL&FS Transportation Networks, Kapstone Constructions, etc.

IVR Prime IPO to Raise Over Rs 849 Cr

Initial Public Offer (IPO) of the real estate developer IVR Prime has been subscribed 2.16 times on Thursday and is likely to raise over Rs 849 crore.

Fixed at the price band of Rs 510-600 per share, the issue has received bids for 3.05 crore equity shares against 1.45 crore on offer, says the data showcased on the bourses. At the lower end, the company would raise Rs 721 crore.

IVR Prime is primarily interested in taking up development of affordable homes, says the company’s managing director E Sunil Reddy.

The company has earlier taken up residential projects in Chennai and Visakhapatnam to provide homes in the mid range of Rs 18-20 lakh, adds Reddy. There are plans to implement the model in other parts of the country as well.

IVR holds a land reserve of 2,479 acres that is believed to have the development potential of 75.45 million sq ft in Hyderabad, Visakhapatnam, Chennai, Bangalore, Pune, and Noida.

Of the total issue proceedings, IVR will utilize Rs 334.7 crore to meet development and construction cost of its proposed IT Park and shopping mall at Gochibowli and another Rs 57.30 crore for another real estate project in Bangalore.

IVR will repay its loans of Rs 147.1 crore to its parent company and Rs 41.9 crore to Karnataka Bank.

The issue includes 22.06 of the fully diluted post issue paid up capital of the company. The book running lead managers to the Issue are Enam Financial and Kotak Mahindra Capital.

DLF to Develop Rs 850 Cr IT SEZ in Gujarat

Real estate giant DLF has recently announced to develop a Rs 850 crore SEZ in Gujarat. The project will come up over 25 acres at Gandhinagar opposite Infocity.

The company has also unveiled its plans to carry out several other projects in the Gujarat and to put the state among the group’s top 5 investment destinations including the Delhi – NCR and Mumbai-Pune regions. The overall plan will be executed with whopping Rs 6000 crore, informs Rajiv Singh, Vice Chairman, DLF Ltd.

The Gujarat project is likely to create a pool of job opportunities for 30,000 people after completion which would take around 18 months. DLF will invest Rs 3,000 crore in establishing three IT SEZs including Gandhinagar, Ahmedabad, and Vadodara.

The construction work on the IT SEZ at Ahmedabad is scheduled to begin in the next few months. The company is searching 25-30 acres land near Vadodara. Another Rs 3000 crore will be invested in developing at least 5-6 hotels in a joint venture with Hilton in Ahmedabad, Rajkot, Surat, Vadodara, and Jamnagar.

DLF also has plans to come up with an airport in Gujarat involving an initial investment of Rs 5,000.

Prime Urban Developers Plans to Raise Rs 840 Crore

IVR Prime Urban Developers plans to raise Rs 840 crore to fund development of existing properties, repay debt and pay for development rights to IVRCL. Rapid execution of projects in upcoming locations is likely to drive revenues and IVR Prime’s earnings.

BUSINESS: IVR Prime focuses on integrated townships, residential apartments and commercial projects including hotels, retail malls and IT parks. Its land reserves will translate into 75 million sq ft of saleable area, to be delivered over the next 5-7 years.

They have developed approximately 2 million sq ft area, comprising 664 apartments and 125 villas. Chennai accounts for the maximum saleable area (almost 63%), followed by Pune and Noida at 11% and 9%, respectively. The company is also present in other cities like Hyderabad, Visakhapatnam and Bangalore. IVR Prime has an advantage over other real estate developers as it has the execution skills of IVRCL for its project completion. IVRCL has so far developed 15.4 million sq ft of space.

FINANCIALS:The company recorded a turnover of Rs 133.9 crore in FY07, against Rs 133.3 crore in FY06. At Rs 37.6 crore for FY07, its operating margins have increased from 10.2% for FY06 to 28%. This was on account of higher selling prices.

Though the topline was flat, net profit was up by almost 76% at Rs 20.6 crore. IVR Prime has gained from appreciation of property prices, but whether such hikes are sustainable in the long run is a call that investors must take. Almost half of the issue proceeds will go towards repaying debt, which leaves lesser cash for operational purposes.

VALUATIONS: At the higher end of the price band, the company values its development rights at an average price of Rs 512/sq ft. IVR Prime is mainly into residential development. It is present across all categories — horizontal houses, luxury villas and high-rise apartments. The average profit for last year was Rs 528 per sq ft. The company was first awarded the development rights of the sports village, Gachibowli in Hyderabad in ’00. Even though construction was completed in ’02, 9 lakh sq ft was sold in ’06 and another 3.9 lakh in ’07. IVR Prime has mainly been accumulating its land bank at reasonably low prices.

In the next one year, it is likely to look at developing close to 6 million sq ft, which will significantly boost its revenues. Its future development plans look reasonable vis-à-vis other players like Omaxe and Sobha, which are planning to more-than-double their execution. The company has a sound track record in terms of its delivery capability. The company’s new initiatives include a retail mall, IT park and a hotel, which it will execute under the build-and-sell model.

The Indian real estate market is evolving, so the earnings flow will be very different for each year. P/E multiples will not really be effective unless a regular revenue stream starts. The retail boom and a significant shortage in availability of hotel rooms will keep commercial prices high.

Real estate prices have already seen some softening in the residential segment, but the demand for affordable housing still supersedes supply. This makes IVR Prime a good investment bet for investors who believe in the strength of the parent company, IVRCL. Moreover, future development targets are also achievable.

Source from The Economic Times

Goa Real Estate – Game For Correction

If you’re looking to investing in property or to purchase land, then now is probably the right time… Land prices, after sky rocketing for the past couple of months, looks to be assuming some sort of stability.

True, land rates have not fallen but nobody expects that to happen, at least for the next ten years to come. Earlier speaking to GP, Darryl Pereira, CEO, Reira Group had said, “If you are investing in property, then it’s never right to wait. Land prices will always rise.”

Goa has seen an average 8% to 10% growth in land values since 1995. And whist the state, along with the rest of the country, faced a lull period with prices falling from 2000 to 2003; we witnessed a sudden boom in 2004 with prices rising an average 30%. Land value in Panaji has doubled in the last one year while other places across the state have seen a steady 20% increase.

While most builders call this sudden hike in prices as land boom and expect prices to further rise at an increasing rate for another ten years to come; market analysts have a word of caution. The sudden boom was just a correction after the lean period they say, sure prices will increase in Goa but by an average 8% only.

Presently, Panaji is the most expensive place to acquire land. The average cost of a plot in Panaji rose from Rs.25, 000 per sq.m to Rs.35, 000 per sq.m, with prices touching Rs.50, 000 per sq.m in crème locales like Dona Paula and other water fronts.

Calangute and the northern coastal belt comes a close second, with the average start up price for a property being Rs.25, 000 sq.m, costs however increase with proximity to the sea.

But head to South Goa and you’ll sure get a better bargain. The place with its scenic beaches and picturesque locales is at least 30% lower than northern coast with start up rate for a place near Colva beach ranging between Rs. 15, 000 to Rs. 18, 000 per sq.m.

Market estimates points that nearly 75% of Goa’s real estate sales are from people from outside state, mainly north Indians from Delhi, UP and Bihar, who are starved of coastline. Besides, Goa’s cosmopolitan set up coupled with the state being rated as having the ’highest standard of living’ makes it a lucrative option as a holiday home or even a retirement option.

Besides state’s plans to develop SEZs, IT parks and have broadband connectivity will sure add value to any investment.

Source from The Economic Times

Buying a House Vs Renting

Buying a house is certainly a smart decision than building it. Of course, easier said than done, especially in today’s scenario where property prices and home loan interest rates are going out of the reach. Is renting a house better option then?

Factors below can stimulate a few thoughts regarding the final decision:

Advantages and Disadvantages of Buying a House

Buying a house increases your assets and comes with a guarantee to appreciate over a period of time. Also, it gives you a sense of ownership as well as freedom from paying monthly rentals which hardly form the delight cup of any tenant.

With your own house, you have the full liberty to decorate it the way you like without taking any prior permission. But, the responsibility of its maintenance completely falls with you. You have to think a many times before relocating to another place. Then, there are the property taxes waiting for you. In addition to these outstanding expenditures, there is stamp duty, broker’s fee, insurance costs, society charges, registration fees etc.

Buying a house with the help of a home loan is not as easy as it looks to be. Banks and financial institutions never finance your entire home loan. They may take care of 80-90% of your home loan requirement and the remaining amount is to be paid by you.

Advantages and Disadvantages of Renting a House

Renting a house provides you with greater freedom and flexibility of choices, a factor which usually do not come with buying a house. Here, you are free from sharing any kind of house maintenance as this is primarily your landlord’s responsibility.

However, the landlord can send you a notice to vacate the place at any time on violation of any term or condition mentioned in the home rent agreement or increases the rent whenever he/she wants.

Needless to mention are the monthly rental payment which appears no better than the Damocles’ sword hanging over the neck at every month’s end.

Be Your Own Judge

Whether you buy a house or rent is largely based on your personal preference and financial factors. It would finally be a trade-off between capital appreciation and flexibility of choices. If you wish to build assets and make your investment portfolio look attractive, buy a house. On the other hand, opt for renting a house if you desire flexibility.

Ideally, buying a house offers an excellent investment prospect. Going the other way i.e. renting a house generally comes in case of unfavorable financial circumstances. During such an hour, renting a house offers a perfect valid interim plan.

DLF to Buy Gurgaon SEZ Land at Market Rates

Staying in step with what the Haryana Government has asked, India’s top real estate company, DLF Ltd. will offer existing market rates to farmers to buy land for its upcoming multi product SEZ in Gurgaon. This would increase the company’s investment in buying the land.

The market price in the areas allotted for the DLF SEZ is 4-5 times of the floor price in the state which is around Rs 22 lakh per acre. The proposed SEZ is in vicinity to Reliance Industries’ Jhajjar SEZ. Most land pieces in Jhajjar are believed to be infertile.

DLF has recently approached Haryana State Infrastructure and Industrial Development Corporation (HSIIDC) to facilitate acquisition for the project. However, the authority has denied for it till the company has acquired 75% of the total project area, informs an authority official.

The company has asked for the state government’s support in a way of imposing Section 6 of the Land Acquisition Act in some tracts. Using the section, the state governments acquire land from farmers.

According to the law, the state government cannot acquire agricultural land without the farmer’s permission. Contrary to this, if a land is notified for any specific project, the owner cannot apply for bringing any change in use.

Maharashtra Govt. Proposes Draft Housing Policy

The Maharashtra Government, on Tuesday has come up with a draft housing policy in the Legislative Assembly. It endeavors to encourage private investment in the residential sector, facilitate development of Township in cities’ major locations, raising FSI limits, ensures sale of apartments on basis of carpet area.

Other significant measures allow non agriculturists to buy land and there would be no ceiling limits for holding land. The new draft housing policy has been published after consultation and public debate.

Special Township Schemes have proposed to bring more affordable houses for middle class. These schemes will be carried outside the Municipal Corporation Area by raising FSI limit of 0.5 to 0.1 in Urbanisable Zone (U-1 and U-2).  Also, it is proposed to carry out considerable changes in the Development Control Regulations.

State agencies will take up the development of infrastructure facilities through Public Private Partnerships. The list includes Mumbai Metropolitan Region Development Authority (MMRDA), Maharashtra State Road Development Corporation (MSRDC), Maharashtra Jeevan Pradhikaran (MJP), Maharashtra Housing & Area Development Authority (MHADA) and Cities & Industrial Development Corporation (CIDCO).

Maharashtra is flourishing on the back of rapid urbanization especially in Mumbai. Considering the same fact, the Government has decided to lay emphasis on providing the public with better connectivity and means of communication.

The Government will soon open the Mumbai Transharbour Link connecting the Island City of Mumbai to Navi Mumbai up the hinterland around Nhava Sheva. The move has been planned to push construction activities.

HUL Appoints Cushman & Wakefield to Sell Properties

Hindustan Unilever Limited (HUL), India’s largest consumer products company, has recently forayed into the booming Indian real estate. The company has a multitude of residential projects in prime markets like Juhu and Santa Cruz on the block.

HUL has appointed the leading international commercial real estate service Cushman & Wakefield to sell these properties. It is also considering signing joint venture agreements with property developers or a complete sell out of its Bangalore property. The company is in discussions with several property consultants to plan a strategy for the sale.

Many of the properties acquired by the company are in high end markets where realty prices are already touching the skyline. As property prices in Mumbai have already reached over 50% in the last one year, the company is certainly going to earn big money for its Juhu and Santa Cruz properties. Rates for properties in these areas range from Rs 14,000 – Rs 20,000 per sq ft.

HUL is also planning to sell its headoffice, Lever House located in Mumbai. The building is likely to command around Rs 25,000 per sq ft. Besides being a landmark, it features an array of facilities including ample parking space and a garage.

Several top corporates have already lined up to bid for South Mumbai head office and the Bangalore’s property, where the food division of HUL is headquartered.

HUL is bringing all employees under a single umbrella. The sale of prime properties will potentially generate large money and also reduce operational costs.

DLF’s KP Singh Becomes Third Indian Trillionaire

Kushal Pal Singh, Chairman of DLF Group, has become India’s third trillionaire in rupee terms as the share price of DLF, his flagship company, increased and witnessed stunning profit numbers.

DLF made a net profit of a whopping Rs 1,524 crore in the first quarter. However, the figure stands for only ‘accounting profits’ and have not been translated into an equal amount of ‘cash flow’ into company’s books. And, the company continues to work on negative cash flows.

During the quarter, DLF reported a negative cash flow worth Rs 2,270 crore, on account of sundry debtors and rise in inventory.

As per the company’s quarterly filings, sundry debts rose to as much as 150% during April-June in 2007 and stood for over nearly three-fourths of its consolidated net sales during three month period.

This clearly underlines that the DLF has been following a policy of advance booking for its properties. As such, almost all builders take up the same strategy to show a higher top line. In case of DLF, the range seems to have exceeded the normal limit.

DLF’s IPO has actually come to its rescue as the proceeds compensated for almost the company’s complete closing cash balance at the end of the first quarter. The company had raised Rs 9,625 crore from the primary market in June’07.

DLF averred a 100% dividend for all its shareholders as well as the new IPO allotees. Sundry debtors and the rise in inventory account for around 85% of the reported net sales of Rs 3,074 crore. Now, the question is whether DLF has been managing the payout from the IPO proceeds.

In the meantime, the stock continues to make headlines. DLF’s successful bid for the Dwarka convention centre gave a push to the scrip by about 5%. It would account for the growth by the fiscal years 2010 and 2011.

DLF enjoys the status of being India’s largest real estate company and owns development rights to 574 million square feet of real estate. Of this, 51% falls in the NCR and 23% in Kolkata.