Indian Property News on 'March, 2008'

Home Loan Rates may go up Soon

Home loan rates have begun to harden. IDBI Bank has withdrawn the 0.5 per cent cut in rates of home loans and other debt it had announced on Wednesday. Many other banks, say industry experts, are likely to follow suit.

Inflation is at a 12-month high of 6.7 per cent, making it costly for banks to raise funds.This burden will have to be passed on to borrowers through higher interest charged on their loans.

Apart from IDBI, HDFC, State Bank of India, Canara Bank, Bank of Baroda, Bank of India, Allahabad Bank and Union Bank of India had cut loan rates since February 1. Banking sources, requesting anonymity, confirmed they are seriously considering raising loan rates but are waiting to see which way inflation heads now.

Confirming inflation is the trigger, IDBI’s chief financial officer R.K. Bansal “Our decision is in line with market trends. We may reconsider after 10 days.”

A rise in interest rates was expected after benchmark security yields rose by 0.13 per cent to 7.91 per cent in the government securities market.

M.S. Sundara Rajan, chief of Indian Bank, said: “It’s too early to predict upward movement in interest rates…” Added a senior banker: “We can wait till the Credit Policy next month to decide.”

Revised jantri may impact Gujarat`s Realty

Aimed at bringing the much-needed transparency in Gujarat’s real estate, the revised Jantri prices — a ready reckoner for stamp duty — may further put pressure on realty prices.

There is a mixed opinion on whether Gujarat’s real estate sector, which is showing signs of a slowdown, would see a price correction. However, a group of developers believe this may happen in the next three months.

Developers say the crash in the stock market may affect realty market in the coming days. And, the revised jantri rates may only make things worse as it will result in higher stamp duty making the transactions costlier.

As such, very few major land deals had been struck in the last one year or so, sources said.

In some distant pockets of Nikol and Vastral, the new jantri prices are 40-50-fold higher than the existing rates.

“There are some land parcels here where the actual price is Rs 119 per sq yard but the revised jantri puts it at Rs 4,000 per sq yard. Our business will get impacted due to this,” said Motibhai Prajapati of Madhav Group and member of the Eastern Builders Association.

Vijay Shah, a city-based developer said, last year in February, jantri prices were revised by 50 per cent and every April this was hiked by 5 per cent.

“There is no logic for such a steep hike in many places is it at Surat, Vadodara, Rajkot or Ahmedabad. The sector will itself see a correction of 15-20 per cent within the next three months,” he felt.

However, the revised jantri, would keep away speculators and see a rise in actual buyers, said Shrenik Shah, CEO of Space Management. “The number of transactions will come down and supply side will go up,” Shah added.

In a residential scheme, the number of investors is about 70 per cent, according to market estimates.

Some investors, who have been allotted residential properties in the upcoming schemes at a discount by the builders, are now exiting at a price, which is lower than what is being quoted by the builder, sources said.

Deutsche Bank picks up 40% stake in Ramprastha

Deutsche Bank has picked up close to 40% stake in Ramprastha Promoters and Developers, a group company owned by Delhi-based Ramprastha Group for $80 million. Ramprastha Promoters and Developers have been primarily engaged in developing housing projects in the national capital region (NCR).

Confirming the deal, Ramprastha group director Arvind Walia, “We signed the agreement with Deutsche Bank recently.” Mr Walia didn’t specify the stake Deutsche Bank has bought, but he said it was less than 40%. Ernst & Young advised Ramprastha on the deal.

In the largest private equity deal in real estate sector, Deutsche Bank had picked up around 25% stake in a special purpose vehicle (SPV) owned by Mumbai-based developer Lodha Group for Rs 1,700 crore, last year. Currently, the real estate developer: Ramprastha Promoters and Developers are developing a 200 acre township in Gurgaon. The land for the project has already been acquired.

The real estate group promoted by Balwant Singh and family has taken up several housing projects in NCR. The developer has completed two township projects – 110 acre Ramprastha Colony and 80 acre Rampuri – in Ghaziabad and is implementing another 100 acre township in the same area.

Last year, the group had received foreign funding from South Asian Real Estate (SARE), a private equity fund based out of the Isle of Man. The real estate developer formed a 50:50 joint venture with the PE fund to implement a 150 acre township. The project will develop 11 million sq.ft of residential housing, commercial and IT parks.

The Ramprastha Group has also entered into an equal joint venture with Gurgaon-based engineering company, Punj Lloyd. The JV company is developing over 29.5 acre township in Vaishali, Ghaziabad.

The group so far has been focused on the Ghaziabad region, but it is fast spreading its operations to Gurgaon. Despite global recessionary trends, the Indian real estate sector seems to be attracting investments from private equity. Currently, several big players like DLF, Unitech and Omaxe are also looking at raising money through PE route.

Builders join Hands, Float National Association

In the first week of March, seven city real estate associations signed bilateral agreements with the newly formed National Association of Realtors – India (NAR- India), which in turn has forged an alliance with National Association of realtors, USA to give itself an international appeal.

NAR-India has also kick-started the process of training estate agents for transnational referrals. While Bangalore hosted the first workshop, come June Pune – which is the largest contingent in NAR-India at 193 members – will host a similar workshop and the next year’s national conference as well. Currently, Pune estate agent Kishen Milaney is the secretary of NAR-India.

“Earlier to make transnational referrals, one needed to either have branch offices or know the client. With an accredited network, we have a list of agents in the other country that the client can be referred to, and get a guaranteed deal,” said Ravi Varma, president elect of NAR-India for next year and current president of the Estate Agents Association of Pune. Under the accreditation of NAR-India, estate agents hope to enjoy the benefits of having multi-city branches and get a guaranteed commission for making referrals.

In a statement, NAR-India has said that it “aims to achieve transparency, accountability, fair dealing, and ethical practices in the industry. Besides providing skills, education and best practices to its members, the NAR India are involved in activities such as market research, dissemination of information, lobbying with government at the local and national level, and conducting conferences and exhibitions.”

Since the launch, Farook Mahmood, the current president of NAR-India and head of the Bangalore chapter, said that there had been many enquiries from agents across the country to join NAR-India. He said that NAR-India would help in extending the business market of city agents across the country. “Local networking will become more important. With more employee mobility among companies within the country, one can refer clients to agents in other cities,” Mahmood said.

As NAR-India is yet to form a corpus, the California based South Asia real Estate Association of America will subsidize the activities of NAR-India for the initial two years. Within the first two years, the association expects to reach out to 15 cities and build a sizeble corpus from over 2000 brokers.

DAMAC Properties Signs Up 60 Real Estate Agents Across India

DAMAC Properties – the largest real estate developers and luxury lifestyle provider in the Middle East signed up with 60 agents in India across metros and tier one cities. DAMAC Properties has taken this initiative to market and sell their regional properties to the Indian investors keeping in mind its philosophy of customer care.

Commenting on this initiative, Mr. Hussain Sajwani, Founder & Chairman, DAMAC Holding said, “We are proud to have signed on 60 agents in India; as the demand is high; we wanted to touch each corner of India through an experienced network of agents. We will regularly provide our agents all the necessary information and training to sell our properties. We have an agent’s relationship department who provides all the necessary support to the company’s agents.”

The DAMAC Agents Academy – a unique project initiated by DAMAC Properties, offers world-class sales training for its agents. The academy offers Agent Partners an opportunity to hone their selling skills to international standards.

“The main purpose of the training that DAMAC provides its agents is to equip agents with product knowledge- DAMAC brand and its value, the sales process, luxury property selling skills; raising the bar and setting a service benchmark in the real estate market,” stated Mr. Peter Riddoch, CEO, DAMAC Properties.

DAMAC Properties, will market its Dubai based- ‘Ocean Heights’, the 82-storey award-winning marvel in Dubai Marina, ‘Lotus Heights’ located in the bustling Business Bay, ‘Park Towers’ at DIFC , and several recently launched high end luxury living options through its agents.

DAMAC Properties envisages being the largest luxury lifestyle provider in the world. Luxurious developments from DAMAC Properties also include projects from various countries such as Egypt, Jordan, Saudi Arabia, Lebanon, Qatar and UAE and are spread across 500 million sq. ft. of luxury, with over 11,500 customers.

An Upside Down Club Coming to NCR

The NCR will soon boast of an upside down building. Looking at the building from outside, one could be forgiven for thinking the world has suddenly been inverted. The architectural marvel will be built by Meriton group at its up-market housing project, Orange County, in Indirapuram.

Director of Meriton Group, Avnish Agrawal, got the idea of constructing such a building when he went to the United States of America on a tour.

WonderWorks, a US-based real estate developer, already have two ‘inverted’ structures in Florida and Tennessee respectively. “These structures are amusement parks equipped with extreme experience zones like the disaster zone, the challenge zone, space, sound and light zones and laser tag zones, among others,” explained Agrawal.

Agrawal was so impressed with the building that he decided to build a similar structure for his project in India. He finally decided to use the concept to build a club house for a luxurious condominium project in Orange County, Indirapuram.

This, he said, will help in boosting the image of Indirapuram. “At present, Indirapuram is looked at as a mere junior cousin to Noida, despite the fact that the former is better connected to Delhi. In Orange County, the group is selling apartment’s worth up to Rs 1.25 crore, fitted with modern gadgets like Jacuzzis and cubical showers. Over 80 per cent of the 700 apartments have already been sold,” said Agrawal.

After the construction of the clubhouse, which will be housed in the inverted structure, Agrawal declared, Indirapuram will emerge as a destination in itself—a part of the itinerary of the tourist coming to visit NCR.

“Located only a few kilometers away from the Commonwealth Games site, Meriton club will soon become a landmark in Delhi and NCR. The club building is the first of its kind in India,” Agrawal said. The club will be named ‘Caracalla Club,’ after the first club built by ancient Romans. The name will be inscribed in lower part of the ‘inverted’ building.

The club will be the third ‘inverted’ building in the world. To give the impression that it has fallen from heaven, inverted pillars and some part of its walls and roof will be given a broken look outside. The interior, however, will not only look right side up but will also be stronger than many other clubhouses, Agrawal said.

The exclusive country club for Orange County residents will provide top quality facilities. The club will be equipped with the latest recreational facilities, such as relaxing spas and saunas, a fully modernized gym and a Jacuzzi. It will also have an elite bar as well as massage and yoga centers.

Realty Mutual Fund’s income to be out of Tax Net

The uncertainty over the tax-treatment of real estate mutual funds is set to end soon. The government will exempt from tax the income generated by mutual funds which float schemes which aim to invest mainly in the stocks of realty firms. According to a senior revenue department official, real estate MFs and other MFs that invest in shares of realty companies will be spared of paying tax on all income. The dividend income of unit holders who buy these products to reap the gains of a realty boom will also be tax-free.

“Sebi-registered real estate mutual funds will be given a tax pass-through status if they invest the money raised from investors in shares of real estate companies. So will be the case for all mutual funds investing in shares of realty companies,” said the official.

Securities market regulator Sebi had approved the launch of real estate mutual funds almost two years ago. But the operational guidelines or norms are yet to be unveiled. Now, with greater clarity on valuation norms and the calculation of net asset value (NAV), the regulator may soon prepare the ground for the launch of real estate MFs, an official said. Real estate MFs are expected to be close-ended, and the units of these funds will be listed on the exchanges. Such funds invest in both listed and unlisted securities of realty firms. They offer an opportunity to investors to take an exposure to a sector which offers reasonably attractive capital gains and steady dividend income. However, the Reserve Bank of India (RBI) has not been comfortable with more investment flowing into realty given the dangers of an asset price bubble.

While real estate mutual funds will stand to gain due to favourable tax treatment, Real Estate Investment Trusts (REITs) that directly buy and sell property including apartments and shopping malls could be denied such benefits, a senior revenue department official said.

Connaught Place has the 8th Highest Rentals in the World

Till the other day Connaught Place epitomized the pride of the country. Today, this central Victorian market of New Delhi has climbed up global indices to become one of the most attractive and expensive markets in the world.

Synonymous with rising economy of the country, the market speaks volumes of India’s performance in the rapidly transforming global economic sphere.

The November 2007 endorser of global real estate consultancy firm CB Richard Ellis has declared our very own Connaught Place as the eighth most expensive space in the world in terms of rentals.

All this has further consolidated the market’s claims on the international price index, placing it even costlier than markets like Manhattan, Los Angeles, New York, Shanghai, Edmonton, Rome and Frankfurt.

Back home, Connaught Place has persistently remained the centre of attraction for financial firms, banks, real estate developers, airlines and other hi-magnitude MNCs vying to set up their nodal offices in this high-profile area.

A time came when in the search of larger spaces companies deserted the market to rush to Gurgaon, Noida, Greater Noida and Faridabad. That was then. Now they are desperate to move back to this mega operations area.

“Except IT and ITES companies, that require massive spaces (8000 sq. ft and more), others want to remain in this central location. And many others, who moved out in a hurry, now want to shift back to this high business district,” says Shikha Sharma, GM (Mktg.), Ansals Housing and Construction.

“Centrality has always remained the key to Connaught Place. The area is touched by the high-profile Lutyen’s Zone. It offers easy access all parts of the capital, be it the North, East, West or South Delhi, as also NCR towns like Gurgaon , Faridabad, Ghaziabad and Noida,” says Shikha.

Besides, easy road connectivity, the area is well connected through rail network with the New Delhi Railway Station in its immediate vicinity. CP offers the finest of hospitality; the best of hotels, institutions, libraries, markets…. the list is endless. You name a service and it is here. The area is also home to the rarest and finest of international chains and outlets.

Lalit Tekchandani, Manager (Corporate Services), Jones Lang Lasalle (JLL) Meghraj, a real estate consultancy firm, says while the Metro rail has fuelled the market’s rental and capital value, it has also gained value because of slow supply of prime office space in NCR. Besides, a number of establishments came here in the wake of sealing carried out by MCD at unauthorized locations.

Delhi Metro came as a godsend for Connaught Place. Metro has added to the area’s picturesque appeal and also pushed up office space rentals. “Metro, has, undoubtedly, enhanced the landscape of the region. People from all areas can come to the place without any hassles.

Added features like Central Park glorify the complete package of the market. Wide roads and beautification have also done their bit in transforming the area that once strived hard to keep pace,” says Sharma. Due to all the factors, realty prices of the region shot up by as much as 30 percent.

Rahejas Challenge Goa Government’s Order to Scrap SEZ

Real estate major K Raheja has challenged the Goa government’s decision to scrap the approved SEZ before the Bombay High Court. “We have already made it clear that our SEZ was non-polluting and as such has no reason for the government to stop it. We have invested a lot of money on the project,” said a senior company official on condition of anonymity soon after filing the petition before Goa bench on the Bombay HC. “We need to know on what ground it was scrapped.”

The company wants the HC to declare the state government order null and void. “The government’s action is in breach of principle of natural justice. We were not given a hearing before taking the decision,” the company said.

The Next Real Estate Boom Town: Greater Noida

Greater Noida will soon dethrone the king of real estate “Gurgaon” in the NCR region and take the hot seat. The Greater Noida Authority is revamping the civic amenities and other infrastructural facilities. Much awaited projects like the international airport at Jewar and 160-km long Noida-Agra Taj Expressway will help in the fast-track growth of the twin cities.

The twin cities offer an entire range of property-options to choose from. The development of Greater Noida Phase-II, spread over 55,000 hectares (which includes 1890 villages), will further lead to an expansion of these cities. The said phase would have 41% area earmarked for greenery, 12% for recreational facilities, 13% for residential, 2.5% commercial, 3.9% institutional and 18.9% devoted for the airport. Also, after completion, the 1483 km long Delhi-Mumbai Industrial Corridor will mark a watershed in connectivity.

This Indo-Japanese project is expected to be completed by 2012. Apart from this, a mega rail-corridor will start from Boraki near Dadri. Foreseeing a surge in demand for office space, many real estate developers have launched various residential and commercial projects at Noida and Greater Noida.

Will this mark the beginning of a shift of the development-axis of builders from Gurgaon to these twin cities? “Every township has its pros and cons. Every township grows and reaches its peak of development and there is stagnation at the top. Gurgaon is passing through stagnation phase.

It grew and grew and left proper planning far behind. Gurgaon boomed in record time. Offices and commercial space came up overnight without any planning or proper infrastructure. Everything was done in a haphazard manner.

Therefore, it’s paying the price for it now,” says M S Aggarwal, managing director, MSX Developers Pvt Ltd. “Moreover , commercial lease rentals in Noida and Greater Noida are at least 40% lower than those in Gurgaon,” he adds.

The UP chief minister’s push for a second international airport at Greater Noida may come as a shot in the arm for realty players. Real estate analysts expect capital value of existing residential, commercial, retail and hospitality projects in Noida and Greater Noida to appreciate in the short term.

The capital price of residential property in greater Noida varies from Rs 23,000 to Rs 28,000 per sq meter, while rentals vary from Rs 2,500 to Rs 8,000 per month. In the relatively posh localities like Alpha, Beta and Gamma, a 3BHK built in area of 200 sq m is priced at Rs 27,000 per sq meter. The 8-lane Expressway connecting Noida-Greater Noida to Agra promises to put the twin cities’ real estate on fast track.

Special economic zones (SEZs), hotels, and commercial and residential complexes coming up on the Noida-Greater Noida Expressway offer great scope for strong and sustained growth for all real estate segments. There are 40 sectors along the expressway that have been divided into four zones under the ‘Noida Master plan 2021′ to ensure balanced development amidst population explosion.

Out of the total length of the expressway which is around 23 kms, three kilometres of the expressway fall under Greater Noida and the rest in Noida. The 321 hectares of Greater Noida land, which is within one km of the expressway, has been a major source of attraction for realtors, IT companies and educational institutions among others.

The authorities have also planned development projects on each side of the expressway in phases to give a boost to ITITeS sectors. The impact of all these developments is clearly discernible, as there is an increasing demand for land by IT companies, triggering real estate boom in these satellite townships.