Indian Property News on 'May, 2009'

Realtors Plan Low Cost Housing for Poor

The private sector real estate players must reset their priorities so as to provide low-cost housing to the middle class and the poor. S Jaipal Reddey made the pint clear while taking charge of the urban ministry for the second consecutive term here on Friday.

“The private sector, which is a major player in the housing sector, must reset its priorities. So far, they had been building apartments for the rich. They must now concentrate on providing accommodation for the middle class and the poor,” Mr Reddy told newspersons after taking over the reins of the ministry.

It’s a measure of the recognition of the good work done by him during his first stint in the Nirman Bhawan that the Congress leadership was constrained to ask him to continue shepherding the urban development ministry. The senior Congress leader, who romped home comfortably from the Chelvella Lok Sabha seat in Andhra Pradesh, spelt out his priorities for the next five years.

Admitting that the Centre found itself hamstrung in the housing sector as land was a state subject, Mr Reddy said he would speak to state governments to consider providing land for housing the poor and the middle class. Among other things, his priority is to complete the task of drafting the bill seeking to create an urban regulatory authority for Delhi. “Once we have legislated, it’ll be a model legislation for other states,” he said, adding the ministry had tread cautiously on this matter as “any regulator can also be an obstructor”.

“We must, therefore, evolve a proper shape so that the interests of the consumers are protected,” the minister remarked . The ministry, Mr Reddy told newspersons, was also in the process of negotiating a $3-billion World Bank loan to supplement the efforts of JNURM for creating a better urban inclusive environment. The amount, he said, would be utilised to improve drinking water, sewerage, sanitation and public transportation.

The minister said: “There are still certain issues pertaining to ceiling which need to be addressed. We had taken a few initiatives in the past couple of years. The people appreciated our efforts. That’s why they voted for us twice in past few months.”

The ministry, he added, would also strive to improve infrastructure services. “Our endeavour will be to add to the initiatives taken in this direction by the Delhi government,” he said. The ministry, Mr Reddy added, was also keen on taking the metro to other major cities and expanding its network in Delhi.

Indian Developers to cut supply of Retail Space

As the liquidity crunch forced Indian retailers to curtail their expansion plans, real estate developers have also been forced to reduce the supply of retail space that was supposed to come up by 2010 by as much as 87 per cent according to a report by India Shopping Center Forum.

In 2007, around 800 mall projects were announced by different developers. However due to the steep reduction in demand, just over 100 new malls will enter the market by 2010.

The opening of 100 malls will add around 30 million square feet of new shopping center space.

“Developers are now more keen on matching supply to demand, place themselves in strategic locations and offer greater differentiation,” says the report.

Indian companies Line Up QIPs Worth 30K cr

With investors regaining their appetite for risk, Indian companies are hoping to make the most of it. Companies have lined up qualified institutional placements (QIPs) worth around Rs 30,000 crore and these issues should sail through without any trouble, provided the mood in the stock market remains positive, merchant bankers say.

Companies eyeing the QIP route include Adani Enterprises (Rs 1,500 crore), Essar Oil (Rs 10,000 crore), HCC (Rs 1,500 crore), HDIL (Rs 3,000 crore), JSW Steel (Rs 5,000 crore), Karnataka Bank (Rs 500 crore), Parsvnath (Rs 2,500 crore) and Sobha Developers (Rs 1,500 crore). Funds raised through this process would be used to finance capex requirements, retire expensive debt and clean up the balance sheet in general.

QIP is a process by which a company sells securities other than warrants, which are issued to qualified institutional buyers (QIBs) on a discretionary basis at an agreed price. QIBs could be public and financial institutions, foreign venture capital and institutional investors registered with Sebi, scheduled commercial banks, mutual funds and various other categories, as defined in Sebi DIP guidelines.

From a promoter’s perspective, the advantage of a QIP is that it can be priced close to the prevailing rate of the share. Also it is cost, process and time effective and far less onerous than GDR process or that of an IPO.

“There is a clear revival of interest among institutional investors,” said Chetan Savla, ED, Kotak Mahindra Capital. According to Mr Savla, valuations have improved substantially, hence, the increased interest in this route. Kotak Mahindra Capital was one of the global co-ordinators and book running lead managers in the recent PTC India’s QIP worth Rs 500 crore.

JSW joint managing director MVS Seshagiri Rao said the company has included the option of a QIP instrument to reduce its leverages. “It’s one of the options for which we have taken an enabling resolution, as we think that the market is conducive for such an instrument,” he told ET.

The route is also preferred by foreign funds, as they can buy a large chunk of stock without driving up the prices. “It gives an opportunity for such funds to participate in the India growth story again,” said GS Ganesh of Inga Advisors.

The QIP route was introduced in May 2006 and picked up momentum in 2007. It stagnated in 2008 when the market was in a bear grip. Ending the long hiatus was the Delhi-based real estate company Unitech, which saw five large foreign institutions picked up nearly 15% in it for $325 million via a QIP in mid-April. IndiaBulls Real Estate and PTC India followed close behind with their QIPs worth Rs 2,657 crore and Rs 500 crore, respectively.

“Across the world there is a certain belief that when a company chooses to access follow on capital typically, it would be done on an accelerated basis. We did not have that regime until the QIP route was introduced. So now if you are a listed company and you want to raise follow on capital, a QIP would be the most logical thing to do,” said Anshul Krishan, head-India Financing Group, Goldman Sachs.

According to Prime Database, Indian companies had mopped up Rs 32,543.34 crore via 66 QIPs since the guidelines were put in place in May 2006. In 2006, there were 16 QIPs by Indian companies, followed by 41 in 2007. The appetite for QIPs waned in 2008, which saw only 8 placements, as fund raising became challenging in the wake of the global financial turmoil.

NRI Community Comes in Support of the Realty Sector

Notwithstanding the impact of slowdown on realty sector and even after demand for flats up to Rs 30 lakh and 40 lakh and above really hit a new low, thre are still ready buyers for independent houses. These hardy customers don’t take much time to grab an independent house in any good locality and location. These deep-pocketed guys always look for such properties.

According to realty experts, though not many such properties come up for sale, but once they do come up, there are several buyers staking claim over them. And if the house is free from all kinds of disputes and the title is also clear, a seller need not worry he has to wait very long to meet a customer for his house, says Titu Sethi, a South Delhi-based realtor , who has played a key role in sealing many deals involving bungalows and kothies.

Who buy independent houses after paying such huge sums? And another relevant question — whether the new buyer uses the property for his own use? Apparently, the profile of such buyers is mixed.

They may be NRIs, builders, or it is also possible that two or more brothers buy one house in order to live together with their families. While the concept of joint families is disintegrating and disappearing faster from the urban landscape, this fact lends hope that all is not lost for the concept of joint families and there are still many brothers who prefer to live under one roof.

Realtor Pramod Chopra of East Delhi says that he has seen, at least in some cases, where brothers buy one house and then start living on separate floors of the house. Businessman Rajat Dhawan and his elder brother did the same thing. Says Dhawan, “When we sold our family house at Nizamuddin West, we were asked by many friends and relatives if we were separating. We said, no! After selling our house, we purchased a 500 sq feet plot in DLF. Both my brother and myself built a house there and started living with our families.”

Coming back to the brood of happy buyers of big bungalows and kothies, realtors say that small-time builders also don’t miss an opportunity to buy houses in posh areas. Eventually , they convert such properties into flats and floors and then sell them off.

It has been happening in Delhi for many years now. Even in bad times, so far as realty sector is concerned, the large NRI community is also buying independent houses in Delhi and in NCR towns.

A Noida-based realtor says that after attack on Indians in both Kenya and Uganda, some Indian families purchased big kothies in Noida . It may be recalled that the family of a wellknown known Sikh businessman of Uganda, Gurdayal Singh Dhillon, too purchased a big house in Noida and a part of his family settled down there. Dhillon also remained the High Commissioner of his country in the country of his forefathers as recently as a few years ago.

But not all NRIs are buying houses because they are being persecuted in their adopted countries. Thailand-based NRI Surinder S Chawla says the reason his family purchased an independent house in Delhi, in New Rajinder Nagar , was that he and his other family members visit India very often in relation to their business interests as well as for meeting relatives here. And they thought it a better idea to have a house here than spending a bomb on hotels.

As far as NRIs are concerned, they too are buying flats and floors in Delhi and the NCR, even though builders are feeling the pinch in selling their flats. Sunil Jindal, CEO of SVP groups, says that NRIs from the UK, the US, and Canada have played a stellar role in lifting the spirits of realty sector. They are buying up flats, plots, floors and independent houses.

A random survey of New Rajinder Nagar, Jor Bagh, Multan Nagar, Greater Kaliash-II and Har Gobind Enclave reveals that around 12 independent houses were sold in these areas during the last six months. They costed between Rs 4 crore and a mind-boggling Rs 40 crore.

Experts say that for those who have ready cash, this is an ideal time to strike gold. Currently , the property prices are hovering quite low – reason enough for some smart people to grab any possible opportunity in purchasing the a property free from all kind of disputes.

DHFL Plans to develop affordable Housing Projects

DHFL Property Services Ltd has tied-up with various developers and builders across the country to develop affordable projects for low and medium income groups in semi-urban and rural areas.

The company plans to rollout its projects in suburban areas of Ahmedabad, Chennai, Hyderabad and Mumbai.

B K Madhur, CEO, DHFL Property Services Ltd, said, “We have always focused on enabling access to home ownership for the lower and middle income (LMI) groups across India through our mortgage finance company DHFL for 25 years. Our association with Vatsalya Developers for their Dream City project will address the need of proper housing along with other facilities to the LMI segment.”

The company will market 2,400 flats in ‘Dream City’, a project developed by Vatsalya Developers Boisar, located approximately 90 kms from Mumbai. The project which is expected to complete by March 2010, will offer the residents multiple facilities like schools, play area, clubhouse, parking space, theatre, community hall; etc.

The company will launch similar projects other districts of Mumbai- Virar, Karjat and Badlapur.

DHFL Property Services Ltd is a 100% subsidiary of housing finance company Dewan Housing Finance Corporation Ltd (DHFL).

Dewan Housing Finance Limited (DHFL), established in 1984, provides several housing finance products like home loans, home extension loans, home improvement loans, home loans for NRI’S, plot loans, mortgage loans, non-residential property loans, home loan linked insurance plans and reverse mortgage. The company has a network of over 54 branches and 111 service locations.

Stock Preview : DLF, Unitech, Tata Power

The following companies may have unusual price changes in Indian trading. Stock symbols are in parentheses and prices are as of yesterday’s close.

The Bombay Stock Exchange’s benchmark Sensitive Index, or Sensex, rose 186.37, or 1.3 percent, to 14,296.01. The S&P CNX Nifty Index on the National Stock Exchange added 1.4 percent to 4,337.10. The BSE 200 Index rose 1 percent to 1,733.08. SGX Nifty futures for May delivery rose 1.4 percent to 4,337 at 11:08 a.m. in Singapore.

Overseas investors bought a net 4.37 billion rupees ($91.7 million) of Indian stocks on May 27, according to the market regulator.

DLF Ltd. (DLFU IN): India’s largest real estate developer denied a newspaper report that its founders plan to sell an additional stake. The controlling shareholders are planning to sell a 5.5 percent stake for about 20 billion rupees ($420 million) through a qualified institutional placement, the Financial Express reported today. The founder’s family sold a 9.9 percent stake on May 13 for 38.6 billion rupees, it said. “There is no plan to sell any further stake,” Sanjey Roy, a spokesman of DLF, said by telephone. The stock climbed 1.9 percent to 372.80 rupees.

NTPC Ltd.(NATP IN): India’s biggest electricity producer will sign a fuel supply agreement with Coal India Ltd. today, Chairman R.S. Sharma said yesterday. The agreement, approved by the generator’s board on May 22, will cover 90 percent of NTPC’s annual requirement for existing coal-fired plants for the next 20 years, Sharma said. It advanced 2.9 percent to 207.8 rupees.

Ranbaxy Laboratories Ltd. (RBXY IN): Daiichi Sankyo Co., Japan’s third-largest drugmaker, plans to sell bonds to refinance a loan taken for its $5 billion acquisition of Ranbaxy, India’s biggest pharmaceuticals company. Ranbaxy jumped 3.6 percent to 271.20 rupees.

Reliance Power Ltd. (RPWR IN): The unit of India’s third- largest power generator is negotiating with BHP Billiton Ltd. and Rio Tinto Ltd. to set up a joint venture for developing coal mines in India to supply its generation plants, the Economic Times reported, citing a person it didn’t identify. The stock rose 0.7 percent to 180 rupees.

Tata Power Ltd. (TPWR IN): India’s biggest electricity generator outside state control posted a 58 percent increase in fourth-quarter profit. The shares climbed 1 percent to 1,102.15 rupees in Mumbai.

Unitech Ltd. (UT IN): India’s Foreign Investment Promotion Board deferred the approval of a deal between Telenor ASA and India’s Unitech Wireless, a unit of Unitech Ltd., NDTV-Profit reported, citing people it didn’t unidentify. Unitech fell 1.1 percent to 76.25 rupees.

SBI to cut Interest rates

The country’s largest lender, State Bank of India, today said it will consider a cut in interest rates after the bankers’ meeting with Finance Minister Pranab Mukherjee scheduled for early next month.

“As far as interest rates are concerned, we will take a view after (bankers’ meeting with Finance Minister),” SBI Chairman O P Bhatt said after the launch of Defence Salary Package here.

There is enough liquidity. Credit is not strong at this point of time but it is expected to pick up during the year, he said. “There is definitely a softening bias (on interest rates). There is no chance of going up,” he said, adding that “perhaps they (interest rates) would come down.”

With inflation going down and sufficient liquidity make case for rate cut, he said, adding, “how much it will fall and to what extent would depend on the products mix and balance between asset and liability”.

Earlier this week, Mukherjee had said that he will ask banks for a “benign plan of action.”

Mukherjee had said, “Industry and business have been hurt by the cost of finance … The cost and the speed with which finance can be accessed remains a matter of concern.”

“One of the first steps I propose to take is to meet bankers and get them committed to a more benign plan of action,” Mukherjee added.

SBI last reduced the benchmark lending rate by 75 basis points to 12.75 per cent beginning this year. At the same time, the bank is offering home loans at a rate of 8 per cent.

Speaking about the Defence Salary Package, Bhatt said the product offers a bundle of free services to the Army personnel.

The package includes free drafts, free cheque book, free fund transfers to any of the SBI’s Group network of about 15,000 branches and free ATM cards, he said.

Bhatt said, the bank would also offers home, auto and personal loans to Army personnel at 25 basis points lower than the floor rate.

At the same time, bank is contemplating to launch special two-wheeler loan scheme for the Army personnel, he added.

Morgan Stanley Acquires Stake in IndiaBulls Real Estate

Foreign fund house Morgan Stanley has acquired 7.68 per cent stake in Indiabulls Real Estate for about Rs 570.18 crore, through qualified institutional placement (QIP) route. Morgan Stanley & Co International through its various investment arms has acquired over three crore shares, representing 7.68 per cent stake in the realty firm, Indiabulls Real Estate said in a disclosure on the Bombay Stock Exchange. Last week, the company had said it would issue shares on institutional placement basis at the rate of Rs 185 a piece.

Calculated on the basis of the said price, the allotment to Morgan Stanley is worth Rs 570.18 crore. Earlier, the company had raised Rs 2,656.50 crore through issue of 14.36 crore shares on institutional placement basis. Shares of Indiabulls Real Estate closed at Rs 198.20, down 3.67 per cent on the BSE.

Tata Real Estate and Infrastructure Limited Plans 20,000 Crore Investment

TRIL has hired Sanjay G. Ubale, a former IAS officer to head its real estate and infrastructure foray. Tata Realty & Infrastructure Limited (TRIL), a wholly-owned subsidiary of Tata Sons, has unleashed it mega investment plans for the sector. The company, part of a $62.5 billion Tata group, has said that it plans to develop real estate and infrastructure projects of around Rs 20,000 crore in next three years. It has raised a $700 million offshore fund to invest in its real estate project for the same. TRIL has hired a former IAS officer to head its real estate and infrastructure foray. Sanjay G. Ubale, MD & CEO of TRIL, was till recently Secretary, Special Projects with Government of Maharashtra, where he was responsible for redevelopment and transformation of Mumbai. The projects are being developed with various strategic partners. The $700 million fund is based out of Mauritius, and 18-20% of the capital has already been deployed.

The company has also announced several real estate projects it’s developing, which include IT/ITES SEZs at Chennai, Ahmedabad and in Hinjewadi. TRIL is also developing a 7 lakh sq. ft. retail complex in Amritsar, adjacent to which Taj hotels would also open a property. It is also evaluating a residential and mixed use development on a 35 acre plot at Gurgaon. For its infrastructure push, TRIL has partnered with a number of overseas companies. Its focus areas in infrastructure are roads and bridges, urban infrastructure (comprising metro/monorail projects), airports and logistic parks. Some of the projects it is considering are Metro projects (in partnership with Mitsubishi Corporation), New Delhi Railway Station redevelopment (with Grandi Stazioni), Amritsar & Udaipur Airports (with Changi Airports India), and roads & highways (with Atlantia S.p.A).

TRIL has already won its first highway project. Through its subsidiary Navinya Buildcon and partner Atlantia S.p.A, TRIL has been awarded the 4-laning of Pune-Solapur Highway by the National Highways Authority of India (NHAI). Atlantia, one of Europe’s largest toll motorway builder and operator, manages over 3,400 Kms of highways in Italy. The Pune-Solapur highway is a 110 kms long stretch with a project cost of Rs 1400 crore.

Revival in Real Estate Possible in another 3 Months: Assocham

A survey report by the industry lobby said 88 percent of chief executives of real estate firms see a quick revival within the next three months as developers shift towards affordable housing and property prices undergo significant correction. The Assocham Business Barometer report is based on a survey of 25 real estate firms conducted between May 15 and May 25. The survey report said a whopping 92 percent of chief executives considered affordable housing to kindle demand in the real estate sector, with about 84 percent saying this segment had been least impacted by falling demand. It said while the luxury housing segment witnessed a demand contraction of over 50 percent, special economic zones (SEZs) by about 40-50 percent, retail space between 30-40 percent and commercial space by 20-30 percent, affordable housing was the most resilient segment seeing a contraction of 10 percent or less.

The chief executives called for sought single-window clearances for all schemes under affordable housing, as is done with SEZ proposals, to bridge the shortfall of about 2.6 crore dwelling units at the earliest. About 76 percent of the respondents said the stimulus given to the sector through fiscal and monetary measures was inadequate. Of all policy measures, 64 percent of respondents were of the view that the central bank’s move to allow banks to restructure loans to developers has been the most successful in improving liquidity for the real estate sector. Additionally, 60 percent said a resurgent stock market would be the most prominent source of finance for the sector, while 28 percent thought bank credit was the most viable option. Hefty funds raised through the qualified institutional placement route in the stock market (exceeding Rs.8,000 crore) along with debt restructuring would allow the developers to address their liquidity concerns. Mumbai has been ranked as the most saturated in terms of real estate assets followed by Delhi, Bangalore, Chennai, Kolkata and Hyderabad.