Indian Property News on 'October, 2008'

Diwali Boom for Home Buyers

With the festive season of Diwali just past us, developers are going hammer and tongs at wooing prospective homebuyers with more and more special offers. However, if sources are to be believed, these discounts and gifts have only come about because the real estate market is heading for correction in a big way. Sources say developers are finding themselves stuck in a liquidity crunch and are therefore offloading some spaces at lower margins.

On the one hand, most of the big names in the real estate industry today are putting up a brave front. This is because they feel nothing will change significantly because of the year-long slowdown in the market that has been brought about due to a meltdown global finance, the US subprime crisis and the crash on the Indian stock market. On the other hand, right from global property consultants to local estate agents, talk about the correction occurring at ground level has led to a reduction in transactions, an increase in lucrative offers and discounts negotiated with those who are ready to deal in this rough weather. Some unusual offers by a few developers have made ripples in the market. Read More »

DLF Demands Decline in home loan rates

Top DLF officials, including chairman Kushal Pal Singh and vice-chairman Rajiv Singh, on Thursday met finance ministry officials to press for a lowering of interest rates on housing loans to ease the liquidity squeeze in real estate. A source told DNA Money, “The DLF executives were also pushing for declaring real estate an industry rather than just a sector.” Indian real estate is the second-largest employer in the country and the downward spiral of the realty market would severely impact the Indian growth story.” The Delhi-based developer wants the ministry to ask the Reserve Bank of India to ease norms for bank lending to real estate firms.

Most banks have stopped giving loans to developers as they consider the real estate market risky at moment. This has forced realtors to raise funds from private investors and other sources with interest rates as high as 30%, way above the 13-15% they are paying on their outstanding debt to banks. Earlier this month, sources had said DLF is looking at offloading stake in its power venture DLF Utilities and in special purpose vehicles to private equity investors. The realtor plans to raise around $1-1.25 billion from the divestments. Read More »

Real estate crunch Affects IIM Bangalore

Faced with the prospect of escalating real estate costs and the lack of adequate finances, the Indian Institute of Management-Bangalore (IIM-B) is experimenting with “off-campus housing” to accommodate additional students from the next academic year. If the experiment works, it may set a precedent for other IIMs. With its campus in Bannerghatta already brimming, the institute has decided to take 50 apartments (150 rooms) on lease in a nearby residential building called Ajmera Complex. The plan is to lodge students from the one-year full time Executive Post Graduate Programme in Management (EPGP) — to be launched in April 2009 — in the leased apartments.

“Unless we experiment, we wouldn’t know if this is the way ahead,” reasoned Pankaj Chandra, Director of IIM-B, on the initiative. IIM-B may also accommodate some students from the Post Graduate Programme (PGP) and doctoral programme at off-campus locations. The institute is planning a bus service from its premises to the off-campus housing to make it convenient for students to travel. Read More »

Further Slump Expected in Real Estate India Prices

With a slump in the Indian real estate sector due to excessive credit crunch and demand slowdown, home buyers can expect a further correction in real estate prices in the range of 15-20% in next six months. There are several factors working against the Indian real estate sector that can bring about such a price correction. With the Reserve Bank of India (RBI) tightening money supply and increasing interest rates to fight inflation, the developers are facing liquidity crunch. Banks are getting jittery over loan disbursals to real estate developers. Even if the developers manage to get loans from banks, they are hardpressed to keep more collateral with the banks.

“With debt market getting dried up, developers facing the heat of liquidity crunch and PE funds shying away from real estate investments and speculative investments at an all-time low, we can expect a 15-20% correction by the first quarter of 2009,” Jones Lang LaSalle managing director Anuj Puri said. The global credit crunch which has affected the Indian market has taken the sheen off large property firms like DLF and Unitech. The two are seeing their market cap eroding almost completely and their fund raising plans hitting a rut due to unavailability of funds. To further aggravate the situation, the property market has also been witnessing a drop in PE fund flow. Read More »

15% Drop in Real Estate Prices in India

Property prices in India’s metropolitan cities have dropped by 10 per cent to 15pc, says an award-winning Indian builder. This is the right time for people to invest in the real estate market in India, said Mumbai-based National Builders chairman and managing director M C Sunny. The Indian real estate market has experienced a slowdown, following the global economic crisis, he told the GDN.

“It has resulted in a standstill in some areas, with no major transactions taking place,” said Mr Sunny. “In metropolitan cities like Mumbai and Delhi, prices have dropped by 10pc to 15pc. “However, in Kerala, from where there is a large concentration of people working in the Gulf, prices are remaining steady. “Builders are not in a position to reduce prices because of an increase in construction costs.” Mr Sunny said he expected this trend to continue for at least one year.

DLF Denies Job Cut

DLF Ltd., the nation’s biggest real-estate developer, on Oct. 23 denied a report in the Economic Times newspaper that it planned to cut jobs. Companies in India don’t have the option to fire people because of the prevalent labor laws, the Federation of Indian Chambers of Commerce and Industry, or Ficci, another industry grouping, said in an e-mailed statement yesterday.

“The critical question is not how many jobs would be lost, but rather how the growth momentum could be maintained to generate gainful employment for the additional 12 million people who would be joining the workforce annually,'’ the federation said. “Feedback gathered by Ficci shows it is fresh hiring that has gone into a slowdown mode and therefore steps must be taken to revive growth.'’

Developers Likely to Slash Prices

Indian real estate developers are expected to cut prices by 30% and more over the next three to six months. At a recent TiE-Indian Angel Network, summit in the capital, industry players including real estate developers, private equity players and real estate brokers and consultants, all answered in the affirmative when asked whether they see the possibility of a price cut in future. The Indian realty sector has been in a meltdown over the past few months. Prices for both commercial and residential property have come off by 20-25% over the past few months. Industry experts and players say they expect them to go down further.

Real estate builders Kailashnath Group’s managing director and owner Sanjay Khanna says those who are not reducing prices now will be forced to do so in some time. Yet another real estate developer Ashish Mathur, head of business development and marketing for Mahindra World City simply says, “Yes they will”, in answer to Sanjay Bansal’s question on the 30% plus fall for realty prices coming forward. Anil Chawla, private equity head for of DE Shaw & Company, one of the biggest private equity investors in real estate in the country, says he also expects the prices to fall. “I have already begun hearing rumours that some developers are planning major price reduction plans by Diwali,” he says. Similarly Santhosh Kumar, deputy CEO of Jones Lang LaSalle Meghraj, one of India’s leading real estate consultants and brokers, says that there are definite prices discounts available for people who are willing to pay upfront even now. “They may get 30% to 50% discounts even now,” he says. Read More »

Top Realtors seek govt help to Fight Crisis

The doyens of the country’s real estate sector — K P Singh of DLF and Ramesh Chandra of Unitech — recently met top UPA government functionaries to seek higher tax breaks on housing loans and easier lending by banks to the sector. The meeting comes in the wake of these companies seeing a massive erosion in their market capitalisation. Singh and Chandra recently came together to call on a leading UPA minister and top Congress politician to sound him out about the travails of the real estate sector, which has seen realty prices falling and credit for builders disappearing. Both DLF and Unitech, the firms listed on the Bombay Stock Exchange, have seen their scrip dropping over 80-90 per cent since January this year. The duo is expected to meet other authorities too.

At the centre of this lobbying is the developers’ belief that a housing market crash in India would spell further bad news. “The top five real estate developers currently are providing direct and indirect employment to nearly 250,000 people across thousands of sites in the country. The impact of a depressed market will not be only felt on our share values, but also on jobs and the overall economic growth,” said a developer close to the effort to convince the UPA to ease up things for homeowners and developers. The realtors want the UPA to push for policy amendments, which would see banks lowering the risk weight attached to investment in the real estate sector. In 2007, the central bank had increased the amount of money that banks set aside as a proportion of their total lending to the sector. Read More »

Pune Can Become Seventh Metro City

Pune will soon acquire the status of being a metropolitan city in India. According to an Assocham report on ‘The 7th emerging metro city in India’ it owes its upgradation to a fast development pace in the area of infrastructural facilities, friendly business environment, education avenues and employment opportunities. Contributing factors include the high real estate prices and a large population base as compared to other upcoming cities. The study was carried out in four tier II cities including Pune, Ahmedabad, Lucknow and Chandigarh ranking them on eight parameters necessary for a metro city. They included social infrastructure, infrastructure availability, real estate cost and availability, transportation facility (connectivity), presence of quality educational institutes, employment opportunity, facility of financial services and business environment.

Pune occupied first position overall though it needs to improve on transportation, social infrastructure and financial services. Ahmedabad was the second most potential city providing good infrastructure and facilities and connectivity. Lucknow was placed with third rank as it needs to pick up on infrastructure, business environment and social infrastructure. Chandigarh, the smallest city among the four in terms of area size and population was ranked at the fourth position though it was ranked foremost in financial services and business environment. Among the four cities, Ahmedabad occupied first rank on the parameter of social infrastructure. The city with literacy rate of 79.89% has high-grade institutes like IIM, NID, NIFT, EDII etc. The city of Nawabs, Lucknow with a literacy rate of 83.5% and presence of quality educational institutes including IIM, SGPGIMS etc was placed at second position. Read More »

Banks refuse to cut home loan rates

The festive mood has been a little subdued in the realty market this season as home buyers are kept waiting and watching for a cut in loan rates, while bankers citing high deposit rates have decided not to tinker with the rates for now. With rising interest costs and high property prices, buyers were pinning their hopes on loan rate cuts to buy homes this festive season. For developers, who are staring at a demand slowdown, unchanged rates meant they could not prop up the sales in a traditionally busy season. “We will maintain a status quo (on home loan rates). I don’t find any scope to reduce my lending rates unless deposit rates come down,” Canara Bank Chairman and Managing Director A C Mahajan said.

High interest rates have already dented property demand in the past few quarters and expectations were that rates would soften after the Reserve Bank of India (RBI) announced a 100-basis point cut in the repo rate to 8 per cent and another 250 basis points cut in the Cash Reserve Ratio (CRR) to 6.50 per cent. However, the country’s largest bank, State Bank of India, on Monday said it would keep its lending rates, including home loan rates, unaltered. Read More »