Indian Property News on 'August, 2007'

Chennai Retail Sector Set to Boom

Mall culture in Chennai is all set to exert its full allure, with over 20 glitzy shopping malls planned to come up in the next three years. Some notable upcoming retail projects in the city are to be introduced by reputed builders such as DLF, Shriram Properties, and Prestige Group.

Bangalore based Prestige Group has plans to build a second Forum mall in the city’s artery, Mount Road. The group has recently completed a Forum Mall at Vadapalani in Chennai, in a joint venture with Vijaya Group. Spread over 17 lakh square feet, the mall involves an investment of Rs 350 crore.

Surprisingly, the trend of retail development has overtaken other developments especially the feverish activity of developing residential projects. This has pushed the demand for retail space in areas such as Besant Nagar, Aminjikaral, Velachery, Mogappair, Sirusseri, Semmenchery, and Perambur.

Allied Housing & Development, a prominent real estate developer, is planning a seven lakh square feet shopping mall at Siruseri in Chennai. Following in same footsteps, Ozone Group also has plans to come up with an exclusive 14 lakh square feet shopping mall at its integrated township Metro Zone in Anna Nagar.

Rentals for office space in Chennai are soaring high. The shopping malls in Chennai are entirely dedicated to retail spaces, but the developers are in a look out for the demand to grow.

Marg Constructions will soon develop a jumbo mall at Karapakkam near Chennai. It will have 11 lakh square feet of built up space, including a large packing area. To be develop at an investment of Rs 500 crore, the mall is scheduled to be complete by 2008-end. The company will invest Rs 50 crore, and is searching for potential investors to raise Rs 100 crore. It will raise the remaining money through a mix of debt and equity.

A 225 sq ft house in Dharavi to cost Rs 9 Lakh!!!

Asia’s largest slum Dharavi is seeing a sharp appreciation in its property prices since Rs 9,250 crore plan has been intended for its re-development.  A one-bedroom-hall-kitchen (BHK) house in the congested by lanes of Dharavi is to fetch the same prices as been commanded by an exclusive house in Kandivli or Borvli.

Property prices in Dharavi are believed to have increased by 30-40% in the last couple of months. Surprisingly, the cheapest price range for residential property in Dharavi is starting from Rs 4,000 per sq ft. This means that a 225 sq ft house, in the area would come at a prohibitive Rs 9 lakh.

Spread over a large area of 523 acre, Dharavi accommodates around 60,000 families. The slum is, indeed, bigger than Nariman Point, one of the known locations in Mumbai. Another interesting fact regarding this shanty town is the annual turnover of its industrial base. It is Rs 4,000 crore.

With such a scenario, no one can call Dharavi a poor man’s living area. Property buyers are making a beeline to buy dwellings within the price range Rs 5-6 lakh but cannot find any. The underlying reason for such a hike in property prices here is none other than the area’s makeover plan.

Property buyers are desperately waiting to get a house here and then sell it off at higher price. The house in Khamedo Nagar in Dharavi bought for Rs 9 lakh just three or four months ago is commanding Rs 15 lakh.

Dharavi has always been considered as a nauseating place to live where people earlier looked to sell out property and buy houses elsewhere. Today, no one in Dharavi is ready to sell property, expecting prices to touch roof in future, says a real estate agent in the area.

Once re-developments plans fall in green box, the property prices in Dharavi will touch Rs 10,000 per sq ft. The slum is also seeing preference because of its proximity places such as Bandra- Kurla Complex, one of the prime commercial districts in Mumbai, predicts Anuj Puri, managing director of JLL Meghraj.

HIREF Gets Long Term Institutional Investors

HIREF, the first sponsored international real estate fund by HDFC, gets long term institutional investors to invest a whopping $800 million. Of total amount, $50 million has been put by the HDFC Bank itself.

The fund looks at investing in foreign direct investment (FDI) compliant real estate projects in India to accomplish appreciation in long-term capital, says Renu Sud Karnad, Chairperson of the HDFC Property Ventures Ltd.

HIREF is the second real estate investment fund launched by the HDFC. As far as the first one is concerned, it was launched in 2005 and has a corpus of Rs 1400 crore.  Including corpus of both the funds, HDFC becomes India’s largest international real estate funds principal.

The bank is not rushing the things to deploy the money. It is considering the prospects of investing in IT parks, education complexes and healthcare sectors, explains Karnad.

HIREF will make investments in residential projects, hospitality sector, and education complexes, Karnad adds.

Leading the housing finance sector in India, the HDFC bank wishes to invest on its experience in the sector.

Phoenix Mills Plans Foray into Hospitality Sector

Atul Ruia, owner of the fast-developing Phoenix Mills Ltd. in Mumbai, plans to carve out a substantial niche in Indian hospitality sector with six hotels in Mumbai, Pune, Chennai, Bangalore, and Agra over the next five years.

Of these proposed hotels, the first will come up at the Phoenix Mills property at Worli in Central Mumbai. It would be developed as a 400 key luxury hotel over an area of 430,000 lakh sq ft and is likely to be ready by2009-end.

Phoenix Mills Ltd. has floated a special purpose vehicle, Pallazio Hotel and Leisure Ltd, to tie up with Hong Kong based Shangri-LA Hotels. The development of hotels will involve an investment of around Rs 320 crore.

Other renowned hotels including the Taj Group, Hilton, and Marriott were also in the queue for the management contract.

Worli will see two more hotels – one is a project by Four Seasons and another is to develop by DLF Ltd, which is constructing a luxury mall on the Mumbai Mill property it had acquired last year. DLF had discussions about building a mall-hotel on the property.

Of the five proposed hotels, four will come up at shopping complexes called Market City, to be developed by Phoenix Mills Ltd. And, the fifth hotel will come up at Kurla in North Mumbai.

The company also has plans to introduce budget hotels after its six luxury hotels get operational, informs Shishir Shrivastav, chief executive officer of the company’s hospitality division.

Gurgaon on Track to become a Major SEZ HUB

With 52 Special Economic Zones to come up in Gurgaon, this cyber town is all set to become a major SEZ hub. Around 34% of the agricultural land in Gurgaon will be utilized by these duty free enclaves which boast to generate a huge plethora of job opportunities. Not all of these SEZs will be spread over a large area.

Of total 52 SEZs, only five will be developed as multi-product enclave whereas 36 will cater to IT/ITes. There will be four bio-tech SEZs and three SEZs in the categories of textile and jewellery.

Among the notable SEZs are HSIIDC-Reliance joint venture SEZ to be developed on 25,000 acres, DLF Universal to come over a large area of 20,000 acres, and Emmar MGF covering 10,000 acres.

Investors and developers are being bullish on Gurgaon as the town enjoys strategic location and offers better law and order. However, these SEZs have a fear to suffer from acute water and electricity shortage. This can turn out to be a serious issue and requires to be handled now, says a senior official in the public health department. The total demand of this region requires to be calculated first, he adds.

A SEZ once declared binds the farmer to sell his land only a SEZ licencee. No time limit is there for the licensee to discharge his obligations under the agreement with the Haryana Government. The rule should be changed and the SEZ should be developed in a specific time period, otherwise, the license should be cancelled, says a planner.

NRIs Can Now Save Tax On Homes Bought Abroad

The tax rate on long-term capital gains earned on sale of property is 20%. In case, the value goes over Rs 10 lakh, the tax rate increases to 22.66%. The rule remains same for both Non Resident Indians (NRIs) and India residents.

Serving as a savior, Section 54 of the Income Tax Act exempts those capital gains which are invested in a residential house within a year before to two years after the sale. In case, an investor wants to build a house, the time limit is increased to within three years of the date of sale.

The exemption would be proportional if only a part of the capital gain gets utilized and the excess will be liable to tax. NRIs can benefit from the rule as it is not mentioned that the new house purchased should be located in India. This gives NRIs the liberty to purchase a house in their host country abroad and yet save tax here.

However, this is simply a theoretical possibility based on a plain reading of the law. There are possibilities of extending the exemption offered by Sec 54 to a property bought abroad, says Income Tax Tribunal.

The Mumbai Tribunal verdict in case of Mrs. Prema P Shah vs ITO 282ITR (AT) 211 [2006] is critical to shed the light on the law. Outlined below are the facts of the case:

Mrs. Prema P Shah is a NRI, who sold her house purchased in 1983 for Rs 6 million in 1992. She bought another property in London on 150 years lease, and claimed exemption u/s 54 of the IT Act.

The A.O. did not permit the claim because of following reasons:

• The assessee had only bought the tenancy right.
• Only the individual investing in India can claim the exemption.
• The sale proceedings were not used for buying the residential property.

The argument was rejected by the Tribunal based on the facts of the case.

In the UK, property is granted long term leases rather than being allowed to buy. In the given case, the residential property was taken on a lease of 150 years, which clearly is in perpetuity and the assessee was the property owner.

The same amount of capital gains may or may not be used to purchase the property. Indeed, the assessee is allowed to buy it even on mortgage and is liable to exemption if it complies with the conditions mentioned in Sec. 54. For that reason, the borrower instantly becomes the property owner of properties purchased through mortgage.

Now, NRIs can think about buying property abroad and claiming tax benefits in India.

Oberoi Plans Rs 4,500 Cr for Hospitality Projects in India

The Oberoi Group of Hotels is planning to invest Rs 4,500 crore in new hotel projects for 60% capacity augmentation in national as well as international market. The plans are to take place over the next five to six years.

Of the total investment, EIH Ltd, the flagship company of the Oberoi Group, will contribute Rs 1,000 crore whereas the rest will come from borrowings and partners. The number of rooms during the period would increase to 6,800 rooms from the present 4,100 rooms.

The Group envisages a 50% capacity addition in the country alone. EIH will develop around 1,400 rooms in its Trident Hilton Category projects in Mumbai, Bangalore International Airport, and Hyderabad City, involving an investment of Rs 800 crore.

The development of the 440 rooms Trident Hilton located at Bandra-Kurla, Mumbai, is under development and scheduled to be over by the third quarter of 2008. The Group also has a joint venture project with L and T in Bangalore, which is expected to be finished by 2010.

EIH is believed to be eager to establish its second property in Kolkata in league with a partner. The company also has plans to infuse another whopping 70 crore for new flight kitchens at the international airports at Kolkata and Mauritius.

The travel and tourism industry in India has been displaying massive growth trends for the past years. There is a considerable increase in number of visitors to India resulting in a stiff competition. With a plethora of business opportunities, India has now become an important destination for business travelers. The trend has largely evolved in major metros including New Delhi, Mumbai, Chennai, and Bangalore.

Middle-Income Homes to Get Economical

Private Developers buying land from the Delhi Development Authority (DDA), or any individual holding government land in the National Capital Region (NCR), will have to now reserve a portion of the floor area ratio to construct houses for middle-income families, according to the plans of the Ministry of Urban Development.

The floor area ratio has not yet been decided, says an official. The ministry has already made it compulsory for private builders to reserve 15% of the floor area ratio and 35% of houses built for economically weaker section, if they acquire land from any government agency. In case, developers try to violate the rule, they have to return 35% of the apartments or the occupied 15% of the floor area ratio to the government agency.

Property prices are going through the roof and nothing seem to be economical for the middle class. This has encouraged the government to come up with good proposals for middle-income families.

The demand for affordable housing units is rising among middle class as property prices have spiraled in the last couple of years, raising by 30-100% in the metros and NCR.

Taking the advantage of ongoing trend are some private builders who have announced plans to make economical flats for the middle class. These would be two or three bedroom apartment, either in Tier I or Tier II/III cities.

Nariman Point Fetches the Highest Rental

Multinational companies have made a beeline for acquiring commercial space in Mumbai. None of the constraints seem to deter them from carving out a substantial niche in the city.

The recent lease transaction done by the ABN AMRO Bank is believed to be the most expensive in India. The Bank has renewed its lease agreement for commercial space located on the third floor of 12-storey Sakhar Bhavan at Nariman Point in Mumbai, at a whopping monthly rental of Rs 500 per sq ft.

The highest deal before this took place in Connaught Circus, New Delhi, for Rs400 per sq ft. As such, a few deals close ion the heels of such ones have taken place in Nariman Point and Bandra-Kurla Complex (BKC). However, this is the first time that the mark of Rs 500 per sq ft has been reached.

As compared to Mumbai, commercial rentals in other cities are hovering around Rs 100 – 400 a sq ft. It is Rs 150-200 per sq ft in Bangalore and Rs 60-100 a sq ft in Hyderabad.

Delhi Govt. to Construct Low Price Houses for EWS

The Delhi Government has drawn out a plan to offer flats costing Rs 1 lakh to economically weaker section (EWS). A total of 50,000 such flats have been planned for Khanjawala, Bawana, Samapur and Neb Sarai, announces Manoj Parida, MD, Delhi State Industrial Development Corporation.

Khanjawala and Bawana will see the construction of 20,000 flats whereas Samapur and Neb Sarai will have 7,656 and 700 flats respectively.

To spread over 28 sq m, each flat will command Rs 2 lakh and a financial support of Rs 1 lakh will be provided by the City Government.  The recipient of the scheme will have to pay only Rs 1 lakh, adds Mr. Parinda.

DSIIDC is constructing these economical housing units on the behalf of the Delhi Government. The scheme would be open to EWS and the slum dwellers. However, the low pricing will not mean low quality, he adds.

The cost of these flats will be kept low through technological innovations. The material will include glazed tiles in toilets, single stack plumbing, Kota stone, and conduit copper wiring.

The areas where the flats will be built will illustrate conducive surroundings with parks, schools, dispensaries, boundary walls, milk and vegetable booth and proper roads, confirms Mr. Parinda.