Indian Property News on 'October, 2009'

Ahmedabad Tops the List of Maximum Home Buyers

A recent survey conducted in Indian metros and tier-II cities has revealed that buyers in Ahmedabad will purchase the most property in the country, out of the maximum home-seekers across India, in the coming year. According to the survey, 80% of those who responded will be buying homes by the end of 2009, against the national average of 72% for property seekers. The corresponding figures for the other cities in the study were between 62% and 76%.

The survey was conducted by makaan.com, an online portal, in October and saw participation from more than 3,800 property seekers and 312 leading developers from seven metros and tier-II cities - Ahmedabad, Bangalore, Chennai, Delhi, Hyderabad, Mumbai and Pune. A majority of the respondents were between 26 and 35 years of age. According to officials of makaan.com, the real estate market in India traditionally sees a surge in property buying and selling at the beginning of Diwali. Real estate developers introduce the most attractive offers at this time, and property seekers keep a lookout for these. But considering that the last one year saw property prices undergoing various levels of correction, would developers continue to have these offers this season is the question. Read More »

DLF Records 77% Drop in Net Profit

The country’s top real estate player, DLF Ltd, registered a 77 per cent drop in its net profit during the quarter ended September, as demand for real estate continued to be sluggish compared to last year. The company registered a profit of Rs 439.7 crore during the quarter, compared with Rs 1,934.1 crore during the comparable quarter last year, shows the consolidated results announced by the company today. Sales (and other receipts) during the quarter also dipped 53 per cent to Rs 1,751 crore.

Other real estate companies also saw similar dips in sales and profits. Housing Development & Infrastructure Ltd (HDIL) posted a 44 per cent dip in net profit to Rs 148.6 crore, while Sobha Developers’ net profit was down 38.2 per cent to Rs 27.5 crore during the quarter. Analysts said they were expecting such dips in the numbers, given the fact that the September quarter of last year was considered good for many real estate companies. “The first half of FY2009 was good for many real estate firms. Only from next quarter onwards does it make sense to compare on y-o-y perspective,’’ said Sastha Gudalore, analyst with Alchemy Shares & Stock Brokers. Read More »

82% Growth in Orbit Corporation’s Profit

City-based real estate firm Orbit Corporation has posted an 82% growth in consolidated quarterly profit on 91% rise in sales. The company’s net profit in the September quarter went up to Rs 25 crore from Rs 14 crore in the year-ago period while total income rose to Rs 141.9 crore. Orbit Corporation said it sold 62,650 sq ft in the July-September period as against only 9,599 sq ft in the same period last year, a whopping 550% increase.

The company in a statement to BSE also said that the real estate prices have moved up by around 10-15% in the quarter. The company, which has a major presence in redevelopment activities in Mumbai, said it is looking to increase its footprint in the city.

DLF Plans to Hire People to Sustain Growth

Buoyed by the recovery in the real estate sector, realty giant DLF today said it will hire people to sustain growth of the company. The country’s largest realty company had trimmed staff count last fiscal due to the slowdown. “We are a growing company, we will be hiring people. Nothing very unusual about it,” DLF Chairman K P Singh told reporters here on the sidelines of Assocham function. He, however, declined to give details such as the number of people DLF planned to add and the timeline for it.

“Hiring is a process, which always keeps on happening. Some people go and some people come,” he added. In the 2008-09 fiscal, DLF’s headcount was down by 818 people to 2,882 as on March 31, 2009, from 3,700 exactly a year ago, a drop of 22.1 per cent. Singh, last November, courted controversy when he admitted to laying off of staff only to make a U-turn later. Asked if the recovery in the real estate sector has picked up speed, Singh sounded a cautious note. “This is gradual and is happening (but) it is too early to say anything. The recent Reserve Bank policies will have certain effect on this issue but the fact is, this real estate demand growth will commensurate with GDP growth,” he said. Read More »

DLF, Unitech and HDIL are expecting Quick buck

DLF, Unitech and HDIL are the latest darlings of foreign funds expecting a quick buck, even as they slash holdings in companies such as Infosys Technologies and infrastructure builders due to concerns about order flows and high valuations, a study of latest filings shows. The sudden fancy for real estate among those overseas funds were probably due to the surge in fund raisings by those debt-ridden companies in the recent bull run when most of them sold shares at less than a third of their peak 2007-08 valuations which overseas investors found attractive.

“With interest rates expected to remain benign and stable, some dedicated funds might have bought on hopes of a significant upswing in high-beta sectors like realty,” said Tata Asset Management CEO Ved Prakash Chaturvedi. High beta stocks are those which rise or fall more than the benchmark indexes. As of September 30, 2009, FIIs owned 25% of the aggregate equity capital of 36 realty companies, including industry leaders like DLF, Unitech, Indiabulls Real Estate and HDIL. That is higher than the previous year’s 9.6% and the year before 10.3%. Read More »

RBI’s Credit policy may not affect home loans

The credit policy announced by Reserve Bank of India (RBI) governor Subba Rao on Tuesday may have hints of a tighter credit regime, but it may not have an impact on the interest rate structure for home loans, say experts. Experts say that their opinion is based on two facts. First, the demand for homes and home loans, in turn has gone up in the wake of the soft rate regime put in place by the finance minister early this year as part of his anti-recession measures. Second, the Centre has already expressed concerns about the bankers’ unwillingness to pass on the benefits of the revival package announced by the finance minister.

Shobhit Agarwal, joint managing director for capital markets at real estate research and advisory firm Jones Lang LaSalle Meghraj, tells TOI that the banks will now be a little more cautious while lending to real estate players, however, interest rates are at their lowest in recent times, and even a marginal hike due to this tightening in provisioning, will not affect the overall sector seriously. “The current credit policy has made only two changes that could conceivably affect the real estate sector. For one, the statutory liquidity ratio (SLR) has been increased by one per cent. Secondly, the provisioning for real estate loans has been increased to one per cent from the earlier 0.4 per cent. The impact on the sector is not significant as we see it. Rather, it might help, as the Central Bank is trying to curb the formation of an asset bubble - in other words, trying to control the asset prices for end users,” Agarwal says. Read More »

Developers React on RBI’s Move to Tighten Banks Provisioning For Real Estate Loans

There were mixed reactions to the likely fallout of the RBI’s move to tighten banks’ provisioning for real estate loans. As a result, for every Rs 100 crore advances made, banks need to provision Rs 1 crore. The central bank said in view of the large increase in credit to the commercial real estate sector over the last year and the extent of restructured advances in this sector, it was prudent to build a cushion against likely non-performing assets. A senior banker said it was also applicable to loans given to individuals who purchased more than one apartment.

Mr Kumar Gera, Chairman, Confederation of Real Estate Developers’ Association of India, said it was a detrimental step and would tell upon the cost of funds being made available to builders. While it was difficult to gauge the impact immediately, it was obvious that any cost increase, part of whole, in all likelihood would be passed on to the end-user. Read More »

RBI Hikes Risk Weightage to Commercial Real Estate Loans

The Reserve Bank of India (RBI) on Tuesday cautioned against some sectors, especially the country’s real estate sector, which was just about starting to see a gain in asset prices. The central bank has hiked the risk weightage given to commercial real estate loans. The tools are hammering away once again, the high rises are mushrooming, but so are concerns over asset prices. Just as the commercial real estate industry started to enjoy the benefits of easy money, the RBI has decided to tighten the screws.

In its mid-year review the RBI has hiked the risk weight on commercial real estate loans to one per cent from the current 0.4 per cent. Explaining its decision, the RBI cites a more than 40 per cent increase in loans to commercial real estate and also adds a note of caution on the fact that nearly 14 per cent of commercial realty assets have been restructured by banks. The interest rate impact of RBI’s measures may be minimal for now, but the message from the central bank is clear that asset prices are being watched closely, one reason why most real estate stocks took a beating. Read More »

Commercial Property Prices Expected to Go Up Post RBI Provision

Developers said property prices were likely to go up after the Reserve Bank of India (RBI) increased the provisioning for commercial real estate. This, they said, would increase the cost of funds. Developers expect up to 75 basis points rise in cost of funds after the central bank increased banks’ provisioning requirement for commercial real estate from 0.40 per cent to 1 per cent. “I think affordable housing will become more expensive as banks will raise rates and credit offtake will slow. Availability of bank funds will become a big issue for developers now. We will bank more on our sales and instead of raising additional funds. We will focus more on internal accruals,” said Sarang Wadhawan, managing director of HDIL, a Mumbai-based developer. “Execution of projects will suffer due to lack of bank funds,” said Wadhawan.

A number of property developers such as DLF, Unitech, HDIL and Lodha, among others, have ventured into affordable housing since the third quarter of the previous financial year to beat the slowdown in property sales. The projects are 25-40 per cent cheaper than market prices and carry margins of 15-20 per cent as against the luxury projects’ margins of over 50 per cent. “It will certainly increase our cost of borrowing. We will consider this increase like any other increase in input cost,” said Bharat Mody, chief financial officer of Akruti City. RBI increased provisioning as it felt that credit flow to commercial real estate had risen sharply and there had been large increases in restructuring of loans by developers. Some top developers of the country such as DLF, Unitech and HDIL have restructured loans worth Rs 10,000 crore after RBI allowed banks to do so. Read More »

Govt may not Consider FDI in Multi-Brand Retail

The government plans to expressly clarify that foreign direct investment (FDI) in multi-brand retail is no-go territory, dashing the hopes of Indian retailers expecting that the new rules announced earlier this year would allow them to bring in overseas partners and capital. The commerce and industry ministry wants to ensure that the liberalised FDI policy does not lead to the unintended opening up of multi-product retail, a sector closed to foreign investment now, an official privy to the ministry’s plan said.

The move is likely to stymie the plans of those such as Pantaloon Retail, which is owned by the Future Group and operates the Big Bazaar, Food Bazaar, Pantaloon and Home Town chains of stores. Pantaloon Retail had initiated steps to restructure itself to take advantage of the new norms for counting FDI in the hope that it would be able to attract foreign investment. It was to have converted the listed Pantaloon Retail into a holding company and distributed assets and operations of the group among two subsidiaries. Read More »