Indian Property News on 'December, 2008'

Oversupply in Commercial Real Estate

The over-supply scenario that 2008 had witnessed in the commercial real estate space could well continue in 2009, says the annual year-end report by Cushman & Wakefield, real estate services firm. While some companies, which had committed to larger spaces earlier, have scaled down their absorption as a prudent step to mitigate the cost on real estate others, which had taken up space based on anticipated expansion plans, are considering sub-leasing the excess space.

“With this trend continuing in the coming year, coupled with the additional proposed supply and the already existing increasing vacancy levels, the over supply situation is likely to see no early respite. Hence, rental corrections across micro-markets seem probable over the short term,” says Kaustuv Roy, Director of Tenant Strategies and Solutions at Cushman & Wakefield. The south, central and select suburban locations of Mumbai witnessed rental correction over the year and more recently, Thane Belapur Road (IT) and Malad (non-IT) too recorded a southward movement. Vashi and the non IT-projects in Thane Belapur Road recorded a stable trend. Central and Suburban locations of Lower Parel, Bandra-Kurla, Andheri and Powai are likely to witness a further fall in rentals with all other major markets expected to stabilise. Read More »

Bangalore Continues its Dominance in IT Space Race

Bangalore continues to be the number one destination for IT/ITeS companies in the country. For all those who thought Chennai and Hyderabad were eating into Bangalore’s status as the IT capital of India, here are some facts. The annual year-end report by global real estate consultants Cushman & Wakefield shows that Bangalore witnessed the highest commercial space absorption in the country of 10.4 million sqft - the highest in the country for the fifth consecutive year. Of that, IT and ITeS companies absorbed 88%, followed by automotive, telecommunications and other sectors.

Leading the way was i-Flex Solution, which absorbed 1,100,000 sqft of commercial space in Whitefield, followed by 350,000 sqft of space each by ABB and ANZ IT in Whitefield and the Marathalli-Sarjapur belt. Chennai absorbed only 4.1 million sqft of commercial space of the 9.8 million sqft of supply this year, as against its absorption of 6.5 million sqft of space in 2007. Hyderabad witnessed a whopping 67% drop in commercial space absorption — from last year’s figure of 4 million sqft to only 1.3 million sqft this year. The total supply in the city amounted to nearly 3.8 million sqft. Read More »

Real Estate Prices may Fall in Maharashtra

Indicative property rates, based on which Maharashtra levies its stamp duty in Mumbai and other key cities of the state, may fall marginally for the first time in about a decade as real estate transactions drop, according to sources in the revenue ministry.The property rates in the ready reckoner for Mahrashtra may drop marginally reflecting the subdued sentiments, sources said. A final decision may be taken tomorrow. The property ready reckoner is prepared by the office of the inspector general of registration and stamp duties (IGR) on the basis of transactions in real estate sector in respective areas.

Property prices across key cities of the state have witnessed a decline owing to an economic slowdown that has forced companies to curb expansion plans. Reflecting depressed sentiments property, transactions have also dipped as buyers anticipate a further softening of prices. Still, the assurance given by Minister of State for Revenue Rana Jagjit Singh in the state legislature to maintain status quo has created a piquant situation. Pune-based Maharashtra Lawyers Association’s President M P Bendre this week filed a petition in the Bombay High Court requesting the court to direct the state government to publish rates that reflect the market sentiments. The petition pointed out that the assurance given by Singh amounts to injustice to consumers.

Investment Potential for NRIs in Realty and Infrastructure

As the global financial crisis continues to unravel, the real estate sector around the world continues to take a hit with credit in short supply and consumer demand in housing witnessing record lows. India too has seen real estate values decline while the government undertakes a two-pronged approach of investing in infrastructure and facilitating consumer spending in real estate through interest rate cuts and easing of liquidity norms for banks. However, the slowdown also highlights the great investment potential especially for NRIs in realty and infrastructure. A recent report in the Times of India shed more light on the options and benefits given to NRI investors in real estate.Though government regulations prohibit investments in agricultural land, plantation properties, farmlands etc, those who have inherited them from relatives can retain them.

Their disposal however, has to be according to government regulations. For end users who are planning on eventually returning home, investments in residential property continues to be the best option. Investment in greenfield projects is also an option as it reduces the upfront payment liability and home loans are available through banks which have already branched out in countries with high NRI populations to extend these services.A number of integrated townships are already coming up thick and fast especially around the peripheries of metropolitans and tier II cities in India and provide an investment outlet for those on the lookout for lifestyle projects. Read More »

Steps that can Boost Realty Sector

The Confederation of Indian Industry (CII) has circulated a consultative note that stresses upon the need to give a major push to the country’s real estate sector through primary and supplementary measures. Among other things, the industry body has asked for an extension of municipal limits of the existing cities, simplification of procedures for conversion of land use from agriculture to non-agriculture, offering infrastructure status to township projects and a complete revision of the floor space index policy. “The prevailing high interest rate has dampened the overall demand and has severely affected the affordability, thus making housing a distant dream for the common man. The 5 per cent subsidy, approved by the cabinet for the economically weaker section (EWS) and low income group, is thus a move in the right direction which will serve the twin objective of providing much needed relief to general masses and at the same time boosting demand in the economy,” said Chandrajit Banerjee, director general, CII.

While appreciating the subsidy scheme, which is a part of the holistic approach suggested by CII for augmenting affordable housing, the confederation has called for supplementary measures to further strengthen it. The note said that availability of land the most central issue nagging the realty sector can be eased by extending the municipal limits of the existing cities. However, this needs to be followed with a very committed, time-bound programme to upgrade the infrastructure of the expanded areas, particularly the accessibility through public transport, the note stressed. The CII has also asked for simplification of the process of conversion of land from agricultural to residential or commercial. “The land that is available in the periphery of cities most of the time is agriculture land. For development of a residential project in such areas would require the conversion of land from agricultural to residential/ commercial. This process represents a major procedural bottleneck and needs simplification,” the note observed. Read More »

Hoteliers Suffer Major Setback

The hospitality industry is likely to suffer revenue losses worth Rs 4,000 crore due to the economic slowdown and the Mumbai terror attacks. As per industry estimates and a white paper submitted by HVS Consultants to the tourism ministry, the hotel industry would close 2008-09 with earnings of a little over Rs 13,700 crore, down from Rs 17,709 crore in 2007-08. Occupancy levels have dropped 6-15% across the top 11 cities. In the first six months of 2008-09, Delhi and Mumbai had already registered a drop of 9-10% and the average stood at 64%. But October, November and December saw a further drop, and occupancies in Delhi, Mumbai, Goa and Hyderabad came down to 55%.

The trend may continue through the next three months. The all-India average occupancy level, which was 64.5% till September, is likely to fall to 58% by the end of March 2009. Says HVS India executive director Siddharth Thaker: “The boom of the past two-and-a-half years seems to have been wiped out in the last four months of this year. Revenues, occupancies are all hurting and we believe that no hotel will be able to increase prices in 2009.” He added that the hotel industry might have to further cut rates to attract demand. Read More »

Realty Face to Face with Reality

The five-year boom in India’s realty industry came to a crashing halt in 2008, following an acute liquidity crunch, falling sales and rising interest rates. The year, though, started on a positive note. The Dubai-based Emaar MGF raised $1.64 from the primary market in late January, and two motnhs later, Delhi-based realtor BPTP registered the country’s largest land deal, shelling out over Rs.50 bn ($1 bn) for 94 acres of land in Noida, on the outskirts of the national capital. But after that, the fairy tale run for the industry ended. As apartment prices shot through the roof, and interest rates soared, buyers turned away, which immediately hit sales. Subsequently, over the rest of the year, realty stocks began to get hammered on the bourses.

“Slowdown and higher interest rates started spilling over on the realty sector and the immediate impact was visible in realty stocks,” said Sanjay Verma, managing director of South Asia operations for realty consultancy Cushman and Wakefield. The realty index of 14 real estate stocks was the worst performer and slumped 80 percent, outpacing the 58 percent drop in the Sensex, the benchmark sensitive index of the Bombay Stock Exchange. As a result, valuations of realty stocks of even major developers such as DLF, Unitech, Omaxe and Parsvnath were greatly eroded. DLF, which had raised Rs.100 bn (over $2 bn) in June 2007 in what was then the largest-ever initial public offering (IPO) in India, saw its share value dropping by 79 percent. Read More »

REBI Launches Property Magazine

Real Estate Bank India (REBI), a network of property outlets with a pan-India presence, has launched a property magazine titled Property Guru. The monthly magazine, priced at Rs 60, will offer a comprehensive approach to residential and commercial property and real estate in India. Lakshmi Narayan, president and CEO, REBI, said, “We are currently witnessing an interesting state of affairs in the Indian real estate industry.

At REBI, we are fully geared to effectively address the property needs of customers, and thereby set an upward swing in the real estate market. We have the expertise to offer all property-related services on a single platter.” “We believe this is the most opportune time to launch ‘Property Guru’ as there is an inherent, fundamental necessity for a credible, comprehensive source of real estate information. We are also happy to launch our unique geo reference modeling services to further enable realty information seekers to enjoy enhanced convenience and service.” Narayan added. Read More »

Property Market turns Buyer friendly

The year 2009 will lift the gloom in the real estate market as the property market turns buyer friendly with the cuts in property rates and home loan rates. Developers for their part would benefit as they will focus on creating volumes at affordable price points.

The government move to boost home loans will definitely rejuvenate the low-segment borrowers borrowing loans upto Rs 20 lakh. Public sector banks have made their loans cheaper and private banks and HFCs are expected to follow suit. “The important thing now is for the supply side to catch up with the increasing demand in this segment,” say experts. Read More »

Fund Allocation to Asian real estate sector can benefit India

India may benefit from the increased fund allocation to Asian real estate sector by global investors. Even as total amount raised by Real Estate private equity real estate funds between January and November 2008 fell by a third to $57 billion from a year ago, the allocation towards Asian markets increased to 28% from 19%. As a result, the funds available for investment in Asia has increased marginally from $15.9 billion last year to $16.2 billion.

But dealmakers say this need not necessarily mean immediate deployment of such funds in India as the property prices have still not corrected enough and demand remains weak. Read More »