Indian Property News on 'November, 2008'

Farmers Complain Forcible Acquirement by Mangalore SEZ

A special economic zone (SEZ) to be co-developed by a state-run oil company in Karnataka has run into trouble, with local farmers complaining of forcible acquisition. However, the Union commerce ministry, which notifies SEZs, has given a clean chit to the developers, saying that the land in dispute is outside the proposed export promotion zone. The issue relates to the acquisition of 15 acres of land belonging to marginal farmers and ‘kudubi’ tribals in Dakshina Kannada, a coastal district of Karnataka. This piece of land was being acquired by the Mangalore Special Economic Zone for relocating a village temple from the zone. “One day, they (referring to Karnataka authorities) came, bulldozed my land which had a standing paddy crop and said that the land had been acquired. I have not been paid any money. Around 80 people depend on that piece of land,” said Sadananda of Permude village, located adjacent to the proposed SEZ.

The Mangalore SEZ is a joint venture between the Oil and Natural Gas Corporation (ONGC), India’s largest oil producer, and the Karnataka Industrial Areas Development Board (KIADB), which hold 26 per cent and 23 per cent stake, respectively. Infrastructure financing firm Infrastructure Leasing & Financial Services and the Kannara Chamber of Commerce and Industry hold the remaining stake in the project, where Rs 35,000 crore is planned to be invested. The commerce ministry, which had ordered a probe into the allegations, maintains that the land is not being acquired for the SEZ, which was notified in December 2007. “The land is being acquired for resettlement purposes. Had it been for the SEZ, we could have intervened, saying that compulsory acquisition for zones is not allowed. However, we have advised ONGC to increase the compensation for people who lost land,” said a commerce ministry official. Read More »

Home Loan Interest Rates can Drop

Most banks have not reduced their prime lending rate (PLR) to the extent the Reserve Bank of India (RBI) has cut the rates. Therefore, analysts expect home loans rates will go down as more clarity comes on the issue. The government is exerting pressure on public sector banks to reduce their lending rates by reducing their spread. Once these banks reduce the rates, private banks are also expected to follow suit thanks to the competition. Liquidity conditions have not improved much even after cutting the cash reserve ratio (CRR), statutory lending rate (SLR) and repo rate. Foreign institutional investors (FIIs) are still taking large amounts of money out from the domestic markets. Experts believe that another rate cut by the RBI is imminent, and hence, it will result in lower home loan interest rates. The inflation rate has come down drastically during the last six weeks. This is another indication for the government and RBI to go for a softer monetary policy.

The GDP growth rate is slowing down due to lower demand and negative consumer sentiments. Lower rates will stimulate demand and result in better growth. Therefore, the industry and experts are exerting pressure on the government and RBI to cut interest rates. Many large manufacturing companies have announced a production cut. This will lead to lesser requirements of money from corporates. This will have indirect effect on consumer loans, including home loans. The demand for loans has reduced significantly due to negative sentiments in the light of the global slowdown. Banks are offering incentives such as lower interest rates to fresh borrowers. Many large countries are initiating moves to control the damage due to the global slowdown. Relief packages and lower interest rates are being announced.

Real Estate Developers Thinking of Rate Cut

Real estate developers in India should lower prices given the general slowdown in the economy, the Confederation of Real Estate Developers’ Associations of India (CREDAI). “Some developers across the country have already reduced prices, CREDAI now requests all its members to do the same,” the real estate body, which counts over 3,500 developers as members. No fixed percentage in price reductions could be recommended due to the vast diversity of prices of real estate across India. The continuing economic slowdown has led to a fall in growth rates and potential loss of employment to many of the 10 million skilled and semi-skilled workers in the real estate sector.

Property prices in India need to decline further before demand picks up, said Adi Godrej, who heads the Godrej group of companies that has interests in property, consumer goods, and electrical and office equipment. There has already been a correction in property prices, he told reporters at the World Economic Forum’s India Economic Summit in New Delhi , without elaborating. The group has real estate projects in Mumbai, Kolkata, Bangalore and Pune, according to its Web site. Property prices are dropping across India as a slowing economy erodes demand for homes and office space. House prices in smaller towns such as Agra, Ludhiana and Kochi dropped an average 15 percent to 20 percent, according to Jones Lang LaSalle Meghraj Property Consultants (India) Pvt. Read More »

Mumbai Refuses to Surrender

Mumbai may be under siege, but the fabled Mumbai spirit will be back in full play when the dark night dissipates and the morning dawns. After all, Mumbai, a city in incessant movement, cannot stop, inherently. The stock, money and commodity markets will probably be up in the morning. The chief minister has already left instructions to the effect. Offices and banks will be buzzing again. And after a gap, everything will be just as intact as normal as before in the financial capital. But one thing will change. The most audacious and direct terrorist attack on the Indian business will see industry too becoming a stakeholder in the anti-terrorism drive of the government.

Rajeev Chandrasekhar, president, Federation of Indian Chambers of Commerce and Industry (Ficci) said, “Indian business and its various stakeholders have, so far, been mute and very detached from this debate on terrorism and tougher approach to terrorism and terrorists, including anti-terror laws. Last night’s attack is a clear and unambiguous attack on the Indian economy and all its participants. It is time we all join this debate on terrorism and demand stronger and firmer leadership and approach to this threat of terrorism, including better laws”. SK Birla, director, Birla Brothers, only complemented the thinking when he called on the corporate world to rise to the occasion. Birla said, “It is high time that all citizens of the country and particularly the corporate world rise to the occasion, shoulder to shoulder, with the government, all political parties and the civil society to give a fitting reply to the terrorists who have attempted to create havoc. It is no more an issue for the government alone. The attack has targeted the hub of the corporate world and we will speak in unison”. Read More »

India’s Expanding Hospitality Industry Bears the Brunt of Attack

The hospitality industry will, doubtless, bear the brunt of the terrorist attacks, with two of the country’s most prestigious hotels being under siege. The damage caused by the firing and blasts inside the hotels will only form a small portion of the overall cost the industry will have to bear. Analysts expect travel advisories to be issued soon. Tourists as well as business travellers are expected to arrive in much lower numbers as a result. But it’s important to note that the Indian hospitality industry has already begun witnessing a slowdown in growth, even before the attacks. With economic activity slowing down across the globe, business travel as well as tourist arrivals have already been hit. Foreign tourist arrivals grew by a healthy 13.8% in July, but the growth rate slipped to 2.8% in October. The terrorist attacks and its negative impact will only make matters worse.

That this comes at a time when the industry has been expanding capacity may only make things worse. One positive factor that may offset some of the negative impact is the sharp depreciation in the rupee. Since luxury hotels charge in foreign currency (primarily US dollars), the depreciation in the rupee results in higher revenues and profitability. But in a scenario where revenues and occupancy rates are expected to decline, that’s little compensation. The negative impact of the slowdown has already been priced in by the markets, with the share price of Hotel Leela Venture Ltd down 77% from its peak, The Indian Hotels Co. Ltd down 73%, and EIH Ltd having 63% of its value from its 52-week high. EIH has fallen the least because rumours of a stake sale by its promoters has buoyed the stock. While Indian Hotels now trades at about eight times trailing earnings, Hotel Leela trades at less than six times trailing earnings. These stocks are expected to correct further to reflect the impact of the terrorist attack, when markets open on Friday.

Attacks can Result into 25-30% loss in Hotel Business

Hotels in India may see a 25-30 per cent drop in bookings by foreign in-bound tourists, following the terrorist strike on luxury hotels and blasts in Mumbai, which claimed more than 100 lives and left over 250 injured. The attack comes at a time when the hotel industry is already suffering from weak demand. Thanks to the credit crunch, companies have decided to curb overseas travels and move to low-cost alternative accommodation. “As a result of the economic slowdown, cancellations were already happening. The terrorist attack will now lead to substantial losses. We expect cancellations to go up by 25-30 per cent,” said SP Jain, president (western region), Hotel and Restaurant Association.

Even though the terror attacks occurred in south Mumbai-based Trident and Taj hotels, tourists in Delhi’s Le Meridean , Shangri La and Taj Mahal were seen cancelling scheduled events. “In the short term, the impact of these attacks on the Indian hospitality industry will be quite visible,” said Manav Thadani, managing director, HVS International-India, a hotel consultancy firm. The flow of foreign tourists has dropped 10-15 per cent in the past few months, most of whom come from the US and the UK, according to Thadni. Read More »

Modern Retail the Next Hot Sector of Indian Economy

As India’s middle class grows and disposable incomes rise, “modern” retail is becoming the next hot sector of the Indian economy. Hundreds of millions of new consumers will join this retail revolution, venturing into supermarkets, department stores and air-conditioned shopping malls for the first time. But instead of just window shopping, many of them will be serious buyers with money to spend. To cater for their needs, established players in the modern retail sector such as Biyani, Raheja and Goenka are being joined by the big names of Indian business - Reliance, Birla, Bharti, Tata etc - who plan to spend billions over the next few years rolling out supermarkets, big-box outlets and specialty stores. At the same time, property developers are getting on with the “malling” of India, and looking for high profile anchor tenants to lure customers.

On the sidelines of this Indian retail revolution are big overseas players such as Wal-Mart, which already has a tie-up with Bharti to provide much-needed “back office” support. But what Wal-Mart really wants is the right to set up its own stores in India. The same goes for Tesco, Carrefour, Metro and other international players.While the macro outlook appears bright, the problems are astronomical for India retail industry. There is no reliable cold chain, transport logistics are appalling, there is a huge lack of managerial talent, there is no consistency for quality and quantity of supply, there is political opposition from groups such as market middlemen, the mom and pop “kirana” corner stores have to be catered for, as do the farmers who grow the produce that is integral to a successful retail revolution. How well will these disparate players cope with the various pressures of a dynamic and fast-moving industry?

Mumbai Terrorist Attacks are a Blow to India’s Retail Industry

The attacks in Mumbai struck at the core of the fledgling luxury-goods industry in India, threatening to dampen the vibrant growth of one of the sector’s key developing markets. Mumbai’s Taj Mahal Palace hotel, the epicenter of the attacks, is the most coveted retail address for luxury goods firms that are tapping into India’s growing numbers of wealthy individuals. European brands Louis Vuitton, Bulgari and Fendi all have boutiques in the hotel, which was the target of various explosions, hostage-taking and a fire. The Oberoi Trident Hotel, which was also hit, houses luxury brands including Salvatore Ferragamo. Some of Ferragamo’s employees were being held hostage, the Italian fashion house said.

Any prospective slowdown in the promising Indian market would come at a bad time for the industry. Luxury goods companies have been relying on new markets such as India, Russia and China to counter sluggish growth in Europe and the U.S., where the global financial crisis has drained appetites for expensive goods. Most experts don’t anticipate a long-term impact from this week’s attacks. And the Indian market is still small in terms of how much it contributes to overall sales at most companies. “Even if [the Indian market] comes down, it’s not significant,” says Neelesh Hundekari, principal at AT Kearney Inc., a management consulting firm in Mumbai. Still, India is important symbolically for many luxury-goods brands, so companies may become more cautious about investing there if the fear of further terrorist attacks intensifies. Read More »

Real Estate Punjab Hit by Global Crunch

The meltdown being witnessed around the world is having a significant effect on the state’s real estate business. Property dealers, who were already seeing a decline in their income, have seen a decline of 60 per cent in their earnings. New deals are hard to come by and deals already finalised are also being called off by buyers due to the liquidity crunch, though the prices remain static. “We have been sitting idle for many days,” said Parminder Singh, a property dealer in Jalandhar. NRI buyers are also not as keen on buying property here as they have been in the past. Kewal Singh, a US-based NRI from Jalandhar, said the recession in USA has made it difficult for NRIs to invest here. “We are unable to manage our own installments in the US as most of the things are bought on loan there,” he said.

The construction sector has also got a hit as NRIs are not investing in big projects and only concentrating on the old projects, according to Anil Chopra of PPR, a leading real estate developer. The number of NRIs visiting India for vacations has also decreased this time as many of them are doing over-time to manage their loans there, said Nihal Singh, another US-based NRI. “The travel expenses are huge and many of our friends who used to come here every year are not coming this time,” said Parkash Raman, a UK-based NRI from Hoshiarpur district. Mohinder Singh, who organises various foreign tours in collaboration with SOTC, a known brand in arranging tour packages, said the travel business too has gone down by more than 50 per cent. Sales manager of Bhabhi Boutique, which has several NRIs as regular clients, said that usually by this time their business would pick up, but their sales have reduced by 50 per cent this year.

Falcon Aims to Redefine Indian Real Estate

Aiming to redefine the Indian real estate landscape by offering the concept of affordable luxury while promoting green living, Falcon Realty Services Private Limited (FRSPL), a company actively involved in land acquisition and land consolidation in India for over two decades and a premier in green building thought processes, today launched its real estate project- Global Eco-City on Expressway (NH-8) in Delhi - NCR. Gulmohar Woods, an affordable housing project with apartments available for as little as Rs 5.5 Lakh, will be the first project to be developed at the Global Eco-City.

Spread over 35 acres, encompassing a judicious mix of executive homes, weekend homes, home for all and premium villas, the project promises to be India’s best ever green real estate project to date. Achieving an eco - friendly real estate development through natural resources like green building, solar energy, organic farming , water recycling, harvesting and plantation of trees, FRSPL aims to provide quality housing, retail and smart work space at affordable prices with its GEC project. “With the urban sprawl getting more difficult to manage, the future is in integrated townships such as Global Eco-City -one of the largest secured, gated and master planned community developments on Expressway (NH-8) in Delhi - NCR. This will provide self sustainable, energy efficient green developments, luxurious and affordable housing, dynamic location and a great investment growth plan,” said Mr. Bhim Yadav, CEO, FRSPL during the launch of the project at the Hotel Ramada Plaza, here today. Read More »