Indian Property News on 'December, 2007'

Godrej gears up for real estate with Integrated Development Strategy

After the state government repealed the Urban Land Ceiling (Regulation) Act (Ulcra), The Rs 7,500-crore Godrej group is planning to adopt an integrated development strategy on real estate. “By integrated development, we mean, residential, hospitals, health care, offices, IT, etc,” Godrej group chairman Adi Godrej told TOI. “This may also include revival of the group’s plans to build a world-class exhibition centre, a proposal which has been pending for very long. We have constantly been in dialogue with the government on the same. We are trying to convince them to modernise the regulatory framework.

We can only proceed with these plans once we are clear on the awaited regulatory policy of the government. For instance, we would like a change in the FSI (floor space index) regulations so that it is raised to what exists in other developed cities in the world. We expect this will follow, since Ulcra has been repealed,” said Godrej.

The Godrej group is clear on its strategy and even though owning vast acres of land across the country is not too keen to venture into hotels. Godrej group believes since they don’t have much expertise in this Hotel sector, they would much likely to concentrate on the exhibition centre which would be one of its kind in India, surrounded with services like hotels. This move might open the floodgates of opportunities for other leading hotel giants. To develop the services around the exhibition centre, these leading players could come into play.

Bharti Plans Entry into Real Estate

Bharati is all set to make a mark in the Real Estate sector. The company is having discussions with a lot of real estate companies for obtaining and leasing land for their proposed retail outlets in North India.

Attending a Ficci summit on retail, Mr Rajan Bharati Mittal, MD, Bharati Enterprises said that the company is in talks with Unitech, MGF, DLF and Parsvnath, and is looking at buying and leasing land for retail outlets. He also said that the decision to buy or lease land for the outlets will depend on their needs.

Bharati plans to roll out its retail outlets by the first quarter of financial year 2008-09, and is also likely to operationalise its cash-and-carry tie up with global retail giant Wal-Mart by the third quarter of the same fiscal.

Sobha Developers joins the Real Estate Party

Sobha Developers, which was touted as an underperformer so far, appears promising enough to be a part of the burgeoning real estate.

Real estate stocks are the flavour of the season. The BSE Realty index has secularly beaten the Sensex by a rising margin over the past few months.

Although the visible reason for the sector’s out performance appears to be the recent ULCRA repeal in Maharashtra, the rally has not spared the stocks of real estate developers from other parts of the country as well.

The diminishing realty prices in tier-II and tier-III cities as led to an increase in demand from genuine buyers, keeping the hopes for the sector optimistic as ever.

High demand because of rising industry penetration is influencing regional markets such as the southern cities of Bangalore, Mysore, Chennai and Cochin, or the likes of Ludhiana, Manesar and Faridabad. The time seems to be ripe to look at players likely to dominate such markets due to their concentration in these cities.

Sobha Developers is one such player with presence in Bangalore, Chennai, Cochin, Hosur, Mysore and a few more, with a well-diversified business mix between real estate development and contract construction. A well-situated land bank, promising project portfolio along with a contracting business of repute makes Sobha’s an attractive business.

Although the company’s major real estate hub is Bangalore, the company is now expanding into other southern cities, besides Pune. A large part of its revenues comes from residential real estate construction, and now the company aims to increase the proportion of commercial real estate in its project pipeline.

Strong Prospect ahead for Housing Finance Companies

Housing finance companies have a bright future with strong increase in demand for housing loans and stable real estate prices. Despite the fact that the stocks are not economical, they make good long-term investments.

The US Federal Reserve has slashed rates by 100 basis points in the past three months because of last week’s 25 basis point cut in the interest rate. The cut signifies benign interest rate environment worldwide once again as the US grapples to perk up its drooping economy and prevent the worsening credit crisis. According to industry sources India will also follow the trend of lowering interest rates over the next few months

Real estate prices which have almost doubled in the past 3 years seem to be stabilising now. Anuj Puri, chairman, Jones Lang Lasalle said that they expect prices to hold at current levels.

The demand for housing loans are bound to go up because of falling interest rate and stable prices,. While banks are slowing down their retail loan exposure which mainly comprise home loans, housing finance companies should benefit more.

Moreover, they are optimistic about maintaining or improving the key fundamental indicators such as net interest margins (NIMs) and non-performing assets (NPAs) due to improving incomes and strong recovery mechanisms.

Most housing finance companies have zipped past the Sensex and even the top two banks in housing loans namely ICICI Bank and SBI. Market experts believe that fresh investments should be considered on declines or at the current levels with a one year investment horizon.

Real Estate India Witnesses Sustainable Development

Real Estate India is going the right way with sustainable Real Estate developments taking place, keeping full care of the environment. Concentrating on environmental crisis is a necessity for India. Sustainable real estate presents India with a unique and enormous opportunity to make concrete progress to improve its environment.

Jones Lang LaSalle Meghraj came up with a report titled ‘Sustainable Real Estate Development in India’, which highlights the increasing trend of sustainable real estate growth in India, keeping the environment in mind. Terms such as sustainable development, corporate social responsibility and triple bottom reporting which are becoming a common trend in the real estate sector recently crystallize the greater consciousness towards the environmental crisis in India.

The report also highlights methods that owners and occupiers can take up to reduce the environmental impact of their real estate assets, not forgetting the ROI from their ‘green’ initiatives.

The report further reveals that almost 40 construction projects that are currently underway are registered with the Leadership in Energy and Environmental Design (LEED), with proper support from the Government. Pointing towards the west, the report reveals that despite the ever rising construction activity, awareness towards environment has significantly lagged behind.

Schemes like the Indian Renewable Energy Development Agency (IREDA) for subsidizing capital for installation of solar water heaters, encouragement of energy audits and management schemes, mandatory use of fly ashbased construction material, groundwater and rain water harvesting and most importantly increased monitoring of air and water pollution have been introduced by the Government to encourage sustainability.

Manisha Grover, Head Strategic Consulting & Research, Jones Lang LaSalle Meghraj and also co-author of the paper said, “It is important that developers and occupiers develop an understanding and work together in successfully achieving improved sustainability performance and curbing India’s environmental crisis.”

The main objective of any education and communications program should be to encourage developers and occupiers to follow practices such as energy and water conservation, waste management and improve indoor air quality.

Chief Executive Officer, Jones Lang LaSalle Meghraj, Vincent Lottefier said that Sustainable real estate is not a passing trend but is a new way of doing business in real estate as sustainable buildings provide considerable financial savings.

‘F1′ – Fitch Assigned to Parsvanath Developers

India’s Parsvnath Developers short-term debt programme acquired ‘F1 (ind)’ rating from Fitch whereas its long-term bank loans got an ‘A (ind)’ rating.

The ratings crystallizes Parsvanath Developer’s brand recognition in the real estate market, large geographical and product diversity, long track record in real estate project execution, rapidly growing revenues and the expected growth in the nationwide real estate sector.

The ratings are done on the basis of rigorous analysis of area under construction and already planned to be constructed. Another important criterion in the judgment is the scope for volatility in the real estate sector amidst a backdrop of a sharp rise in real estate prices in the last three to four years.

Although Parsvanath targets to sell at least a portion of the upcoming space in advance considerable risk remains in the system as the absorption of space may vary based on market conditions.

Jones Lang LaSalle plans to invest $5 bn in Property market

The world’s leading integrated global real estate services and money management firm, Jones Lang LaSalle is planning to strengthen its position in India. Seeing the lucrative opportunities in the mushrooming Indian Real Estate market, the firm is thinking of investing $5 billion in the Real Estate sector. Recently, Jones Lang LaSalle merged with Trammel Crow Meghraj, a property consultant based in Mumbai.

Colin Dyer, president and chief executive officer, Jones Lang LaSalle said that they don’t have any presence in India’s investment management service sector and they have lined up plans to bring in the business to the country. He also added that the firm has allocated close to $20 billion for the Asia-Pacific region, and India would get anywhere close to 5% of the amount.

The fund would be deployed in the high growth sectors like real estate, hospitality and infrastructure sectors for investment. For the first time in its 220 years of history, JLL recently hosted in India its global board of directors and global executive committee.

“We are excited by the opportunities that lie ahead for our business, employees and clients in India,” said Mr Dyer. The Indian real estate market is burgeoning and becoming a significant contributor to India’s economic growth. The country is on the radar of many corporations looking at investing or expanding their businesses in Asia and the economic and business outlook is positive.

According to industry experts the merger of Jones Lang LaSalle and Trammel Crow Meghraj in June 2007 to form Jones Lang LaSalle Meghraj has helped the firm to strengthen its presence in the real estate services industry in this booming economy.

Assocham Predicts $30 bn FDI in Indian Realty Sector within a Decade

Industry body Assocham said that Foreign Direct Investment in the Indian realty sector may jump around six-fold to $30 billion in the next 10 years. According to Assocham the sector is expected to grow more than 30 per cent in the next few years.

presently, the flow of Foreign Direct Invest in Indian Realty Sector is estimated at around 5 to 5.50 billion dollars. The domestic real estate market stands at $14 billion, is expected to be $102 billion in the next 10 years, when the FDI inflows to the sector would be about 30 billion dollars.

In a statement Mr. Venugopal Dhoot, President, Assocham said that foreign developers can undertake construction activities on a minimum space of 50,000 sq ft, which may be raised by the government over the years, subsequently resulting in more FDI inflows.

The government needs to do away with the multiple approvals at the central and state levels required for setting up townships. Seeing the instant growth of the country’s IT sector, which would require space of 200 million sq ft and around 20 million dwelling units, the real estate sector is set to grow exponentially, Mr. Dhoot further added.

The rapid increase in purchasing power and exposure to planned retail formats have redefined the consumption patterns for dwelling units due to which retail projects have mushroomed in smaller towns and cities.

The Chamber estimated that nearly 30 million sq ft of organised retail space is currently available, while another 90 million sq ft is likely to be added by 2008 from over 265 mall projects.

Israel Targets Investment in India

India is emerging as a hot Real Estate Investment destination for Israel’s. Leading real estate and development companies from Israel are targeting investments in India and the Far East even as they continue to invest in the local market, which is generating high yields as prices rise.

Dr. Surinder Pruthi, chairman of leading Real Estate Development and management companies in India said that there is a huge market economy developing and a young population fond of spending that will be seeking housing. It is safe to invest in India and today there are multiple choices of public-private partnerships for investment into office, residential, hospitality and other projects.”

CEO of Property & Building Corp, Segi Eitan said “India is the growth engine for us, but you need to have a local partner to diversify risk. We still see potential in the commercial property market in Israel. There are still deals to be made.” He added that the potential of the residential market is more problematic, particularly in the center of the country.

Natan Hetz, CEO of Alony Hetz Properties said that the supply of properties, particularly the center of the country is getting scarcer and scarcer given the immense rise in demand, prices will continue to rise, which will yield beneficial results.

Pointing to the wealth of opportunities being created by the system Mr. Hetz further added that there is a shortage of 80 million flats in India.

Nitesh Group to Invest Rs 400 cr on Shopping Mall

Real estate developers, Nitesh Group declared their venture into the retail sector with the setting up of shopping mall spread across five acres of land in the city at an investment of Rs 400 crore.

The mall, which is being designed by a Seattle-based architecture firm, will be one of the largest in South India. The mall will house some of the most luxurious brands of world and a portion of the mall will also house service apartments.

In a statement Mr. Ashok Ganguly, VP, Marketing and Communications said that the project will be completed by the end of 2009. He further added that the venture is key part of Nitesh Estate’s larger objective to become a premium real estate player in the country.

Speaking on the importance of the venture he also said that it will enhance their basket of offerings tremendously and gives them the momentum to make a much larger impression in the real estate arena”.

Nitesh has already locked up property for rolling out similar initiatives in Chennai, Trivandrum and Cochin in the next six months. The group will also be setting up super premium retail avenues in luxury five star hotels it is building in Bangalore and Chennai.