Indian Property News on 'June, 2009'

CREDAI Seeks Stimulus to Pump up Affordable Housing

The real estate developers in the country are banking on affordable houses to come out of the current crisis which has worsened with a slump in demand from the IT sector. The Confederation of Real Estate Developers Association of India (Credai), the apex body of the builders in the country with over 4000 members, has sought incentives and tax relief from the government in the forthcoming Union Budget for affordable housing sector to encourage builders to take more such projects. According to Credai chairman Mr Kumar Gera, who was here for the formation of Kerala chapter of the association, the price for affordable housing sector in the has been found to be Rs 2700 per sq ft., which would include cost of land, construction, services and infrastructure. “ If we can construct houses 300 to 400 sq ft. then it be would affordable to a vast sections of people in the tier 2 and 3 towns at this price ,'’ he said.

The association has asked for special concession and tax relief for houses up to 1000 sq ft. and to provide the status of infrastructure developer for builders going for special residential zones in more than 20 acres for facilitating access of finance. Raising the tax relief limit to Rs 3 lakh, is another demand, which Mr Gera feels has elicited good response. Decline in the growth in IT sector from a level of 23 % to 17 % has been one of main causes for the meltdown in the realty sector, Mr Santosh Rungta, Credai president said. But in the last two months some positive signals have emerged with a rise in the demand for office space from telecom sector, he told ET. Read More »

25% Upswing in India’s Housing Market

Activity levels are gaining traction in the near moribund housing market as a flurry of interest rate cuts, price drops and the building industry’s focus on affordable housing start to lure buyers back into the market. A cross section of banks, property developers and real estate consultancies that SundayET spoke to confirmed that the rise in activity levels since the start of the year had picked up momentum in the last three months, with some in the sector saying that sales were up by as much as 25-30% since April, after witnessing a growth of 10-15% during the first quarter of 2009. India’s property market started showing signs of serious trouble nearly a year ago with first the American sub-prime crisis and later the Lehman bankruptcy playing havoc. The overpriced projects by builders found few takers which was worsened with the IT industry facing a major setback.

Builders were stuck with high-end apartments which had no takers. There was a severe drop in sales with people wanting to conserve resources. As a result, property prices too fell 30-45% since peak of 2007, according to industry estimates. But today the scenario is different, with builders getting a mix of mid end and affordable housing into their portfolio. Raminder Grover, CEO—Homebay Residential, Jones Lang LaSalle Meghraj, says the revival in sales has been, conservatively speaking, to the tune of around 25% across the mid-to-high income segments, according to his company’s sales records. Rohtas Goel, CMD of Delhi-based Omaxe too says there has been a 30% increase in sales thanks to factors such as a reversal in general economic sentiment after the elections and more options available in affordable housing. Read More »

Downturn Hit Realty Majors Betting Big from Forthcoming Budget

Having been hit the hardest by the economic downturn, embattled realty majors are betting big on the forthcoming Budget, to be presented on July 6, in a bid to revive the sector’s fortunes. Experts say the sector needs government support as well as further stimulus to get out of the current slump. While the government with a clear mandate has provided the requisite stability to the economy, it now needs to focus on retrieving the sluggish real estate which is now facing a severe financial crunch. This is important in view of the fact that real estate in India is the second largest employer next only to agriculture, and growth in the sector has a direct impact on ancillary industries such as steel and cement. “In the backdrop of its importance to the growth of the Indian economy, it is vital for the government to nudge growth in the sector, through fiscal stimulus, to newer heights which would also help make affordable housing a reality and within the reach of the proverbial ‘aam aadmi’,” says Nandita Tripathi, associate director, KPMG.

As a first step, the government should accord ‘infrastructure status’ to the housing sector and appoint a regulator to act as a single window for overseeing and monitoring the affordable housing agenda. “After being hit by the global financial meltdown, real estate developers have now recognized the growing demand for affordable housing. To provide further impetus to this direction of development, the government should consider reinstatement of the tax holiday benefits under Section 80IB-(10) for affordable housing projects,” says Tripathi. Brotin Banerjee, MD & CEO, Tata Housing, is also of the same view. “We seriously believe that the housing sector should be delinked from real estate and be accorded infrastructure status. This will enable easier access to low-cost institutional funds as also allow the sector to tap long-term funds,” he says. Read More »

Real Estate Still a Good Investment Option

The real estate sector plays a significant role in India’s economy. Almost 5% of the country’s gross domestic product (GDP) is contributed by housing alone and an unit increase in expenditure in this sector has a multiplier effect and the capacity to generate income as high as five times the increase in expenditure. According to Dun and Bradstreet Corp., a provider of credit information on businesses and corporations, the total value of real estate development in India was estimated to be around $14 billion (Rs67,480 crore), growing at an annual pace of 30%. This growth is fuelled by the growth in realty development in organized retail, followed by housing and information technology and information technology-enabled services.

While such statistics are praiseworthy, it is also relevant to remember that the ongoing slowdown had started with a bursting of a bubble in US real estate, driven by reckless demand and supply conditions. Real estate in India has been characterized by an increasing presence of a large number of public companies, along with the opening up of this sector to foreign direct investment (FDI) and private equity firms. This has increased the discipline and accountability of businesses undertaking large-scale real estate developments. On demand, Indians have an innate propensity to own homes. This, with rising income levels following India’s rapid growth, has resulted in a phenomenal increase in the demand for homes. Read More »

Mumbai Developers Look to Increase Property Prices

Real estate developers have begun to increase property prices in some pockets of Mumbai like Ghatkopar, Thane and Andheri, after emerging unscathed from a severe liquidity crunch. “I think the correction (in real estate price) has almost bottomed out. In fact in some places I find that real estate developers have started increasing the rates as their cash flows improve,” said R R Nair, chief executive of LIC Housing Finance, a subsidiary of Life Insurance Corporation (LIC).

The government had ensured easy flow of credit to the real estate developers. Banks increased their exposure and also extended repayment period of loans to developers during 2008-09 to help them tide over liquidity crunch. “The demand for real estate has started picking up as people who had deferred their buying decision are now coming forward to buy homes,” said Nair.

Reliance Retail Plans to Purchase Henkel India’s Soap Brand

Mukesh Ambani’s Reliance Retail has put in bids to acquire two of Henkel India’s soap brands, a sign of the big ambitions it has in the fast-moving consumer goods (FMCG) business. Any deal for the male deodorant soap Aramusk and Moloy sandalwood soap, put up for sale late last year, is estimated to be worth about Rs 10 crore. The Henkel brands are unlikely to generate significant revenues at the national level, but they are attractive buys locally, especially in the eastern part of the country. Reliance Industries (RIL), the parent of Reliance Retail, has identified the FMCG sector as the next big growth area, and is planning to set up two or three subsidiaries to manage the business. What started as a private label initiative for Reliance Retail has now grown into a large business idea, said two persons close to the development.

They said the entire business (manufacturing and distribution) will be operated through third parties with Reliance controlling the brand and the technology behind it. The plan is to create consumer brands, acquire them and get into joint ventures with existing companies, a top company official said. Chennai-based Henkel had earlier put four non-core brands on the block, that included Maha Bhringol hair oil and Tuhina skin cream. ET has learnt that Reliance is not interested in acquiring the hair oil brand and Henkel has decided to retain Tuhina as its core brand. The Emami group is also in the race for the Henkel soap brands, but a person close to the deal process said Reliance has bid higher. Mumbai-based consumer goods firm Jyothy Laboratories also considered acquiring the brands, but it couldn’t be ascertained if it is still in the race. Mape Advisory Services is the investment banker for the deal. Aramusk and Moloy were owned by Shaw Wallace India before Henkel acquired them in 1999. Reliance Retail and Henkel India declined to comment. Read More »

Housing Rebound Raises Hope for Asian Property Firms

Asian property firms are beginning to see light at the end of the tunnel and several are positioning for an upturn even as the world economy struggles to recover from its worst recession in decades. The mood among US and European executives at the recent Reuters Global Real Estate Summit was glum, but Asian counterparts were more upbeat with some revealing plans for new projects in anticipation of an upturn later this year. For instance, Chinese commercial property developer SOHO said it has built up a war chest of $1.9 billion to replenish its land bank and intends to start new projects in Shanghai and Beijing in coming months. Indiabulls, India’s third-largest listed property developer, aims to launch six to seven residential projects in the financial year ending in March 2010 on the back of an expected recovery in demand.

‘’The general mood has been cautious, but there is also optimism. Asian companies in general are in much better shape compared to their peers in other regions,'’ said Ayala Land Chief Financial Officer and Asian Public Real Estate Association President Jaime Ysmael. Spurring the optimism in Asia is a recovery in residential markets, with price cuts drawing buyers in China, Hong Kong and Singapore, where saving rates are high and banks are prepared to lend. The volume of transactions in these places are close to levels seen during the bull market of 2007 and residential property values have begun to edge upwards as developers such as Singapore’s City Developments raise prices. Asian property values did not rise as much as in the US and parts of Europe this decade. In dollar terms, properties in countries such as the Philippines are cheaper than before the onset of the Asian crisis in late 1997. Read More »

SBI Increases Disbursement of Home Loans to Rs 1,500 cr a month

State Bank of India’s disbursements on home loans under its ‘New happy home loan scheme’ have grown at Rs 1,500 crore monthly. This is about Rs 400 crore more than the monthly average of Rs 1,100 crore it did in the first two months since the scheme was announced. “Till March we had done Rs 2,348 crore. Subsequently we are sanctioning Rs 1,500 crore every month,” P. Nandakumaran, Chief General Manger, Personal Banking, SBI, told Business Line.

In the first week of February, SBI had announced that it will offer an interest rate of 8 per cent for one year - the lowest so far in the industry. In the second year, the rates applicable will be the prevailing rates then. The bank’s move was to stimulate demand in the housing market at a time when many buyers postponed their purchasing decisions amid economic uncertainty and fear of job losses. The scheme has now been extended till September. The bank also offers other schemes, which will be valid till the month-end. Under this, it offers a home loan between Rs 5 and 20 lakh at a fixed interest rate of 9.25 per cent a year for five years, after which rates will be re-set. Read More »

SBI Increases Disbursement of Home Loans to Rs 1,500 cr a month

State Bank of India’s disbursements on home loans under its ‘New happy home loan scheme’ have grown at Rs 1,500 crore monthly. This is about Rs 400 crore more than the monthly average of Rs 1,100 crore it did in the first two months since the scheme was announced. “Till March we had done Rs 2,348 crore. Subsequently we are sanctioning Rs 1,500 crore every month,” P. Nandakumaran, Chief General Manger, Personal Banking, SBI, told Business Line.

In the first week of February, SBI had announced that it will offer an interest rate of 8 per cent for one year - the lowest so far in the industry. In the second year, the rates applicable will be the prevailing rates then. The bank’s move was to stimulate demand in the housing market at a time when many buyers postponed their purchasing decisions amid economic uncertainty and fear of job losses. The scheme has now been extended till September. The bank also offers other schemes, which will be valid till the month-end. Under this, it offers a home loan between Rs 5 and 20 lakh at a fixed interest rate of 9.25 per cent a year for five years, after which rates will be re-set. Read More »

SBI Increases Disbursement of Home Loans to Rs 1,500 cr a month

State Bank of India’s disbursements on home loans under its ‘New happy home loan scheme’ have grown at Rs 1,500 crore monthly. This is about Rs 400 crore more than the monthly average of Rs 1,100 crore it did in the first two months since the scheme was announced. “Till March we had done Rs 2,348 crore. Subsequently we are sanctioning Rs 1,500 crore every month,” P. Nandakumaran, Chief General Manger, Personal Banking, SBI, told Business Line.

In the first week of February, SBI had announced that it will offer an interest rate of 8 per cent for one year - the lowest so far in the industry. In the second year, the rates applicable will be the prevailing rates then. The bank’s move was to stimulate demand in the housing market at a time when many buyers postponed their purchasing decisions amid economic uncertainty and fear of job losses. The scheme has now been extended till September. The bank also offers other schemes, which will be valid till the month-end. Under this, it offers a home loan between Rs 5 and 20 lakh at a fixed interest rate of 9.25 per cent a year for five years, after which rates will be re-set. Read More »