Indian Property News on 'March, 2008'

Genpact India’s Orissa SEZ proposal rejected

The much-awaited SEZ proposal by the IT giant Genpact India for setting up a Special Economic Zone (SEZ) here was rejected by the Centre recently.

This was revealed by Orissa’s Industries Minister Biswabhusan Harichandan today while replying a written question of BJP member Mohan Charan Majhi.

The minister said that Genpact India had proposed to set up an SEZ for Information Technology (IT) and other electronics items over an area of 24.7 acre in Bhubaneswar. “Though the state had forwarded Genpact’s proposal, it was dropped by the Centre,” he said.

Claiming that SEZs would add to state’s financial growth, Harichandan said Orissa government had recommended names of 14 companies for setting up SEZs.

While three of the SEZs were already notified by the Centre, six others were formally approved. Five others got in-principle approval of the Centre. Genpact India was one of the companies which had got in-principle approval of the Centre for setting up the SEZ, the minister said.

Sources said that the SEZ notifications had already been made for Jindal Stainless Limited at Kalinga Nagar for stainless steel and ancillary industries; DLF Universal’s IT and Info Park at Chandaka Industrial Estate in Bhubaneswar and another IT SEZ at Chandaka Industrial Estate by the state-run Industrial Development Corporation (IDCO).

More FDI expected in Indian Realty

A move is afoot within the government to liberalize the norms for foreign direct investment (FDI) in real estate. The department of industrial policy and promotion (DIPP) has circulated a Cabinet note proposing waiver of two conditions—the three-year lock-in on foreign investment and the minimum investment criteria of $5 million for joint ventures or $10 million for wholly-owned ventures.

The waiver has been sought for real estate projects, including hotels, according to a government official. The proposal has been justified on the ground that it would boost tourism and hospitality, sectors identified by the government as vital job creators.

At present, 100% FDI is permitted in hotels and tourism as well as real estate. However, realty FDI faces a three-year lock-in—the investor cannot sell his stake during this period. If one wishes to exit before three years, one will have to take the permission of the Foreign Investment Promotion Board (FIPB).

There are also the stipulations for development of at least 10 hectares of land, and completion of at least 50% of the scheduled construction in five years of obtaining all statutory clearances, in addition to the minimum capitalization norm mentioned above. These conditions do not apply to the hospitality sector.

The proposal, however, may not go down well with RBI and the finance ministry. In fact, RBI wants curbs imposed on FDI in real estate and had written to the finance ministry asking it to make FIPB approval mandatory for foreign investment in the sector. At present, FDI in real estate is via the automatic route.

Moreover, DIPP’s move to exempt pre-IPO foreign investment from the three-year lock-in had faced stiff resistance from both RBI and the finance ministry. The proposal, which was a part of an overall FDI review, was not cleared by the Cabinet. DIPP is planning to take the proposal again to the Cabinet. RBI’s concern over an asset bubble stems from the fact that real estate has witnessed huge inflows ever since it was opened up in February 2005, leading to a manifold increase in property prices.

Water Crisis in Gurgaon ends

The Water crisis in Gurgaon ended on Wednesday as the “normal water supply” was restored in all parts of the city.

About one third of the population which was fed by tube wells was getting normal water supply during the crisis also but on Wednesday the remaining two third populations also got tap water after four days, according to Gurgaon Deputy Commissioner Rakesh Gupta.

He said that the residents of Gurgaon should learn a lesson from this small water crisis and everyone “should learn that water is precious”.

“The small crisis shook the city but what happens if the crisis aggravates due to overexploitation of underground water and misuse continues,” he said and appealed the people not to waste water and each individual should contribute for recharging the underground water by adopting water harvesting system and work for water conservation.

Gupta said presently there was over exploitation of water resources. Giving the figures from the hydrology Department, the Deputy Commissioner said that during October 2007, the water table in Gurgaon block was at 24.98 meters, in Farrukhnagar block it was 15.96 meters while in Patoudi block the water table was at 25.90 meter and in Sohna block it was 20.19 meters.

“If we see the data of October 2003, in Gurgaon block the water table was at 18.08 meters, in Farrukhnagar it was 12.23 meters, in Patoudi it was 21.92 meters and in Sohna 15.84 meters. On comparing these figures, one can easily make out that the water table declined by about 7 meters in Gurgaon block where as by about 5 meters in Sohna block,” he said. Gupta said that this shows that the rate of decline in water table was more in Gurgaon and Sohna blocks where real estate activities were more during the last four years.

Yatra Capital invests Rs 175 cr in Bangalore Property

Despite fears of slowdown, investments in the Indian properties continue unabated. The Euronext-listed real estate investment company Yatra Capital has invested nearly Rs 175 crore in Bangalore-based property developments.

Yatra has invested Rs 111.62 crore in Palladium Constructions, which will develop a mixed complex of retail and residential buildings, for a 30 per cent stake. Yatra has also invested Rs 63.44 crore in another entity Platinum Hospitality Services for a 30 per cent stake. Platinum will develop a hotel in Bangalore.

Yatra has committed Rs 914.62 crore of Rs 1,375 crore of the capital it has raised. The company has invested in nine real estate projects/entities so far. Palladium Constructions will develop a 1.9 mn square feet of mixed use complex of retail and residential buildings. The development will comprise 1.4 mn square feet of retail space and 0.5 mn square feet of residential space. The project cost is nearly Rs 950.12 crore, the company said.

Platinum Hospitality Services will develop a 0.5 mn square feet hotel property, including serviced apartments. The hotel will be built at a cost of estimated Rs 402.62 crore. Construction on both properties is expected to begin in the last quarter of 2008 with the entire project expected to be completed in five years, the company said.

Yatra invested Rs 23.31 crore for 0.47 per cent equity in Phoenix Mills in 2007. Betting on returns of over 25% in Indian properties and stagnancy in realty markets of Western countries, a host of international funds such as Citigroup, Blackstone and Morgan Stanley have invested in Indian properties. According to estimates, nearly Rs 20,000 crore has been invested by international and domestic private equity funds in the Indian property market in 2007.

RBI advises Bankers to give last chance to Defaulter to Repay their Loans

The Reserve Bank proposes to make it mandatory for banks to give loan defaulters one last opportunity to repay before taking possession of the mortgaged property.

In its second draft guidelines on recovery agents released today, RBI said the re-possession procedures should follow the “letter and spirit” of the Indian Contract Act and must provide borrowers a final chance to settle loan dues before sale or auction of the mortgaged property by banks.

The re-possession clause in the mortgage agreement should also include provisions for giving the possession of property back to the borrowers, it said.

The apex bank has sought public comments on the second draft guidelines within 10 days.

The draft proposes that banks should ensure that all calls made by recovery agents to customers and vice versa are recorded for future reference.

The banks will also be required to put up an updated list of recovery agents on their websites, it said.

The institutions, the draft said, should on their level try to address the grievances of the borrowers before transferring the case to recovery agents.

“However, where the bank is convinced, with appropriate proof, that the borrower is continuously making frivolous/vexatious complaints, it may continue with the recovery proceedings,” it stated.

RBI has earlier asked Indian Banks’ Association to formulate, in consultation with Indian Institute of Banking and Finance (IIBF), a certificate course for recovery agents, direct selling and marketing agents.

Zoom Developers tie up with global Realty Firm

Mumbai-based Rs 830 crore real estate developer Zoom Developers has signed a memorandum of understanding with Yoo Holdings, a $10 billion global property development company, to form a special purpose vehicle to execute medium and large-scale real estate projects on a national as well as international level.

Yoo Holdings is a design-focused property development firm founded by international design guru Philippe Starck and property developer John Hitchcox based out of Canada, USA and Israel.

The tie-up for the first time marks the entry of French designer Philippe Patrick Starck into India. Considered to be the most celebrated designer in the world, the creative genius of Philippe Starck has earned him a bonafide rock star status. John Hitchcox, on the other hand, is credited with establishing New York-style loft-living in London.

As per the tie-up, Yoo will hold 25 per cent equity participation in each project that the joint venture company executes, with the remaining 75 per cent being held by Zoom. While the investment for the special purpose vehicle is being worked out, its probable name would be Zoom Yoo India Pvt. Ltd.

“The tie-up will bring in state-of-the-art development in real estate with special emphasis on designing, marketing and branding. While Yoo will take care of the designing and marketing of a project, Zoom will develop it,” said Rumneek Bawa, CEO and president, Zoom Developers.

The special purpose vehicle is looking at developing hi-tech townships in and around Lucknow as well as developing Habitat Centers across the country. Zoom holds a substantial amount of real estate in Mumbai, Bangalore, Indore and Kolkata.

However, with Zoom developing projects in The Phillippines and China, the services of Yoo will also be used in developing them, said Rameet Trehan, Head, Business, Development, Zoom Developers. “The deal is reciprocal. Since Yoo is big in Europe and North America, there will be some projects where we might play the role of a developer, marking our entry into the global real estate arena,” he said.

Kolkata Municipal Corporation goes after Property Tax Evaders

Kolkata Municipal Corporation (KMC) is yet to realize a whopping Rs 1,000 crore as property tax over the last few years. And now, it has planned to crack the whip on major defaulters and go for attachment of their properties.

Prodded by Mayor Bikash Bhattacharya, the civic body is now preparing a list of major defaulters. Under the glare are some nationalized banks, government departments and private commercial estates. According to KMC estimates, around 55 such defaulters owe the civic body Rs 110 crore as property tax, high enough to bore holes into its development plans.

The authorities have decided to issue a distress warrant to all major defaulters, failing which the properties would be attached. A KMC official said the properties of habitual offenders — who have repeatedly ignored reminder notices to clear their dues — would be attached.

That’s not the case for government properties. The civic bosses have decided to go slow on that count after nationalized banks started paying up following an intervention by municipal commissioner Alapan Bandyopadhyay.

Even Central Excise authorities have paid Rs 1 crore and promised to pay at regular intervals.

But a KMC list specified that Rs 22 crore is pending from 11 nationalized banks. Some of the defaulters are Punjab National Bank, Bank of India, and State Bank of India, United Bank of India, Allahabad Bank, Oriental Bank of Commerce and West Bengal Cooperative Bank. Bandyopadhyay conceded that the banks plan to clear their dues. “We have held meetings with the chairpersons, who have assured of all cooperation. Some banks have even started paying the dues,” he added.

Some of the other defaulters include the animal husbandry building on Belvedere Road, the commercial tax building on Beliaghata Road, the KIT chairman’s office on CIT Road, the South Eastern Railway headquarters at Garden Reach or Bengal Chemical’s office on Ganesh Chandra Avenue. According to KMC, outstanding taxes add up to more than Rs 50 crore. However, according to a senior KMC official, some of these defaulters have made partial payments and have promised to pay the rest.

This apart, some private commercial establishments such as a foreign bank on Shakespeare Sarani or an office complex on Park Street are also on the KMC list of defaulters.

Things had earlier changed for the better after former mayor Subrata Mukherjee acted tough with a couple of five-star hotels. The mayor had obtained a go-ahead from the court to snap water supply to the defaulters. The threat worked wonders and the KMC mopped up an additional Rs 50 crore.

Phoenix Mills buys Bangalore land from GKW Ltd

Mumbai-based real estate developer, The Phoenix Mills Ltd, has struck a deal to acquire a 25-acre plot in Rajaji Nagar in Bangalore for around Rs320 crore from beleaguered engineering firm GKW Ltd. And, while it was negotiating the deal, Phoenix Mills and its subsidiary Bellona Finvest Ltd also built a 7.5% equity interest in GKW.

When contacted, Phoenix Mills’ managing director Ashok Kumar R. Ruia confirmed his company had bought some 4.5 million shares of GKW from the market, noting: “We are interested in GKW’s land bank.” As to the specific land deal, Ruia said an announcement about the deal would be made in the “next couple of days.”At the current market price of GKW—Rs90.45 a share—the stake is valued at Rs40.72 crore. It is unclear what Phoenix paid for its shares. GKW chairman K.K. Bangur couldn’t immediately be reached and calls made to his office weren’t returned. He had, however, indicated in the past that his company was looking to sell the plot.

Phoenix Mills is said to have teamed up with a UK-based real estate fund to acquire the Bangalore land. Ruia said he couldn’t disclose the fund’s name. The two paid Rs13-14 crore an acre for the plot, according to people familiar with the deal, though Ruia declined to discuss the price.

The price per acre cited was a reasonable price for land in industrial areas of Bangalore that are being redeveloped, said Manisha Grover, who is a joint managing director of real estate consultant Jones Lang LaSalle Meghraj. She wasn’t talking specifically of the Phoenix transaction.

Elaborating on his company’s interest in GKW’s land bank, Ruia said GKW had large tracts of land in Kolkata, Pune and Mumbai. “They (GKW) are not allowed to sell them at present,” he claimed. “But, if they are cleared for sale in future, we might consider buying them.”

Among the most attractive properties that GKW owns is a 34.5-acre plot in Bhandup in Mumbai and a 74-acre plot on the western fringes of Kolkata.

A little more than a month ago, GKW came out from under the supervision of the Board for Industrial and Financial Reconstruction (BIFR) after its net worth turned positive. The company had told BIFR in July 2005 it would sell its assets and repay creditors.

Employees, however, are opposed to the proposed sale because they fear job cuts. The company has been trying to reach a settlement with them. Formerly called Guest Keen Williams, GKW was the Indian subsidiary of a UK-based engineering company.

Mangalore Special Economic Zone sells over 82 acres to ISPRL

The Mangalore Special Economic Zone Limited (MSEZL), which acquired 1,800 acres of land through the Karnataka Industrial Area Development Board (KIADB) in Mangalore taluk, has sold a portion of the land to a public sector crude oil reserve for a whopping sum of Rs 50 lakh an acre.

The MSEZL, which is the special purposes vehicle for SEZ in Mangalore, has sold 82.62 acres of land for Rs 41.31 crore to a public sector crude oil reserve. In fact, the 1,800 acres was acquired by the MSEZL for the setting up of the first phase of MSEZ which includes MRPL Phase III Refinery, Aromatic Complex, Olefin Complex and allied infrastructure facilities.

The MSEZL had paid Rs 8 lakh an acre for barren land and Rs 8.5 lakh for cultivated land other than R and R packages to the project-displaced families.The 82.62 acres was sold to the Indian Strategic Petroleum Reserves Limited (ISPRL), a subsidiary of Oil Industry Development Board of the Ministry of Petroleum and Natural Gas, for the setting up of a strategic crude oil reserve of 1.5 MMT capacities in Mangalore.

The ISPRL has plans to set up crude oil reserve centers in Vizag and Padur in addition to Mangalore at a total cost of Rs 2,397 crore. The Project Management Consultant M/S Engineers India Limited has finalized the Detailed Feasibility Report for crude oil storages at Vishakhapatnam, Mangalore and Padur.

Noida Invites Bids for Hotels Near Taj Expressway

Noida Authority has invited bids to set up nine hotels near the expressway being built to the Taj Mahal in Agra. The Noida authority plans to set up three 5-star hotels, two 4-star hotels and four 3-star hotels.

The authority has set a reserve price of 77,000 rupees ($1,919) a square meter (10.76 square feet) and will open the qualification bids on April 24. The plots for the five-star hotels have an area of 24,000 square meters, it said.

Demand for houses, offices and hotels in India is growing as economic growth and rising salaries boost the spending power of individuals and companies. Towns around New Delhi, including Noida, Gurgaon, Ghaziabad and Faridabad, are expanding as buyers move there to take advantage of lower prices.

Developer BPTP Ltd. earlier this month won a bid for 95 acres of land for offices and shops at Noida for 50.1 billion rupees. BPTP offered to pay 130,207 rupees a square meter, compared with a reserve price of 77,000 rupees a square meter. Developers such as DLF Ltd. and Unitech Ltd., India’s two biggest real-estate companies, have announced plans to build hotels along with houses, shops and malls. DLF plans about 75 hotels in India in five years.