Indian Property News on 'February, 2010'

GTC Plot Sold for Rs 591 cr in Mumbai

In a city where open plots have all but disappeared, the last of the vast chunks of land are worth their weight in gold. In yet another big-ticket deal—considered to be the largest in over two years — Mumbai-based company Sheth Developers is learnt to have bought the GTC (Golden Tobacco Company) property in Vile Parle for Rs 591 crore. The deal overshadows last month’s agreement by the Wadhwa Group with Hindustan Composites Ltd (HCL) to buy an 18.18-acre Ghatkopar for Rs 571 crore.

According to people familiar with the deal, the Vile Parle land—spread over 57,000 square metres or approximately 14 acres—is located in a prime area next to Mithibai College and touching S V Road. On paper, the transaction is shown as a joint development between the builder and the Sanjay Dalmia-led GTC. Those in the know say that Sheth Developers will construct on 10% of the land and hand it over to GTC free of cost as part of the deal. The location is ideal for a high-end residential enclave on the lines of the builder’s Beau Monde towers at Prabhadevi. The property has been in the market for several years; one of the other contenders for it was reportedly D B Realty.

The transaction once again proves that in land-starved Mumbai, builders are willing to shell out any amount to corner the last remaining sprawling properties, mainly belonging to industries which have shut down for various reasons. “There are now barely any open plots left in the city with a clear title and no encroachment,’’ said a real estate insider. The GTC land deal is the biggest one after the slump in the property market 18 months ago. The last big transaction was in November 2007 when the Wadhwa Group paid an astronomical Rs 831 crore for a less-than-two-acre plot in BKC. It was a national record for commercial land.

Gujaratis Shifting Base from Mumbai- Ahmedabad Being Preferred for Investment

The Maharashtra Navnirman Sena (MNS) and the Shiv Sena’s campaign against non-Marathis living in Mumbai is beginning to worry the Gujarati community in that metropolis. It is true that the campaign is directed mainly against North Indians in the city but it is sufficiently unpleasant to make many Gujarati Mumbaikars consider shifting to Gujarat for safety. Some Gujaratis from Mumbai have already purchased apartments in Ahmedabad and many others are on the lookout for properties that they can buy. Six Gujaratis from Mumbai, who happen to be cousins as well, recently struck a deal for seven apartments in a housing scheme in the South Bopal area of Ahmedabad. “We have booked seven apartments in South Bopal for our six families,” said Nita Shah.

The 43-year-old Mumbaikar is in government service. Explaining why the cousins had bought so many flats together, Shah said that, apart from their love for Gujarat, they had also been driven by the anxiety caused by the campaign against non-Marathis in Mumbai. “We were born and brought up in Mumbai and we love the city, too,” she said. “But we feel more at home in Ahmedabad because our family originally came from this city. We plan to spend at least six months in Ahmedabad every year after retirement.” She said that following their decision to purchase property in Ahmedabad, many more Gujarati Mumbaikars had started thinking about buying property in their cities of origin in Gujarat.

Another Gujarati Mumbaikar, Sanjay Joshi, is a chartered accountant who currently lives in the Kandivali area of Mumbai. He said he had asked his cousin in Ahmedabad to look for property in the city that he could buy. Joshi is confident that because of the immense contribution of Gujaratis to the development of Mumbai and their substantial presence in trade and industry, the two Senas will not attack Gujarati Mumbaikars. “But our sense of security has been shaken by all that happened in Mumbai in the recent past,” said Joshi. “Some of the recent purchases were made by Gujarati Mumbai kars who are worried by the campaign against non-Marathis in the city,” said a leading real estate developer of Ahmedabad. Jaxay Shah, president of the Confederation of Real Estate Developers Associations of India (Gujarat), said Gujaratis living in Mumbai are thinking about shifting to Gujarat after the MNS launched its campaign against North Indians in that city.

Online Trading Facilities Ease NRI Investments

For non-resident Indians, in particular, the online facility to trade in the Indian markets is a boon. With the markets currently on the lower side and more volatile than a few weeks back, there is the opportunity for the discreet NRI investor to pick on choice stocks to add to his portfolio. To assist him in doing this more easily and with greater control, we have an increasing number of brokerage houses adding new online trading facilities. In the past weeks, ICICIdirect and Geojit BNP Paribas, two leading retail stock brokers with a sizeable presence in the Gulf, have joined the fray. ICICIdirect launched its new online trading platform ‘TradeRacer followed by Geojit BNP Paribas which launched its enhanced online trading platform ‘FLIP’ (Financial Investment Platform).

The platform is available free of cost for its existing customers while brokerage charges remain the same at 0.3 percent for a delivery. FLIP is already available in stock exchanges of Saudi Arabia and Oman. Developed by Geojit Technologies (P) Ltd, a subsidiary of Geojit BNP Paribas, ‘FLIP’ provides features similar to ICICIdirect’s TradeRacer like alerts, research reports, intra-day charts, technical analysis, third party news, customised interface and a mobile edition called FLIP-Me. Both mobile integration options are available through low bandwidth GPRS-enabled mobile phones.

Where FLIP scores is in its tie-up with eight banks, whose customers can access the platform. ICICIdirect does not allow any customer other than its own account-holders (in ICICI Bank) to trade in its online trading platform. In both the platforms, investors can arbitrage which provide multiple watch-lists. ICICIdirect’s ‘TradeRacer’ was initially available only to its sub-brokers. Now it is open to all customers after registration. FLIP integrates with the risk management system offering financial instruments such as equities, derivatives (stock and currency), margin funding, mutual fund units and IPOs. FLIP also provides online fund transfer through multiple bank payment gateways in addition to RTGS/NEFT. FLIP uses FIX adapter to connect to multiple markets to serve different client categories including institutions, retail investors, traders and HNIs.

To mark 74 years of business, the Pune-based Bank of Maharashtra last week introduced “Maha-e-trade”‑‑-online share trading facility in its platinum jubilee year. Maha-e-trade is devised in association with three major trading houses viz., M/s Religare Securities Ltd., Munoth Capital Market Ltd., and Enam Securities Direct (P) Ltd., Maha-e-Trade is a three-in-one integrated account. Bank of Maharashtra helps customer to integrate his/her banking, demat and trading accounts. Customer can trade in shares backed by funds and securities available in their bank / demat account. Trading has been made very easy even for beginners.

Salient features of Maha-e-Trade include delivery based trading, intra day square off, lien marking on funds/ securities, no transfer of funds, investment in shares traded on the NSE and BSE can be made without having to visit the share-broker, all other associated hurdles like tracking of settlement cycles, paying and receiving funds in savings account, paying and receiving shares in Demat accounts have been removed. The Delhi Stock Exchange (DSE) general body too, in its meeting held in December last year decided to introduce an online trading platform. As more exchanges and brokerages take the online route, overseas Indians have a better chance of getting firmer control of their investments not just in stocks, but also in derivatives, commodities, currency and other traded instruments.

Indiabulls to Plan Restructuring of Wholesale Trading Business

Indiabulls Real Estate today said its board would meet on Thursday to discuss restructuring of its wholesale trading business through demerger. In a filing to the Bombay Stock Exchange the company said its board would meet on February 25 to consider a scheme of demerger of its wholesale trading business to Indiabulls Wholesale Services Ltd.

The company had earlier said that the restructuring would unlock value and also streamline the operations and ownership structure of Indiabulls Real Estate. Last week Indiabulls Real Estate had said that its board has appointed advisers and authorised a committee to prepare and present the draft proposal and related documents for the said demerger. Shares of Indiabulls Real Estate were trading at Rs 153.85, up 0.36 per cent on the BSE.

Godrej to Announce Acquisitions

Godrej Consumer Products Ltd may announce some acquisitions as early as in the financial year beginning April, a top official said on Tuesday. The company has been scouting for acquisitions in personal care products, haircare space and household categories. “We are looking at several acquisitions and we hope to announce some early in the next financial year, depending on how the negotiations go,” Chairman Adi Godrej told Reuters via telephone.

The consumer products maker also plans to raise its advertising spend by 25 percent in the coming fiscal but has no plans to raise product prices, he said. The group’s real estate arm Godrej Properties, which recently sold shares in an IPO, is also looking at about 15 more joint venture projects, he said. “Most of our projects are joint ventures with land owners, wherein we share either the profits, the area or the revenue. We have completed at least 15 such joint ventures and we are doing at least 15 more,” he added.

Wadia sells Four-Storey Commercial Building at Worli to Axis for Rs 640 crore

A new four-storey commercial building at Worli is being sold for Rs 640 crore, pitching it as one of the costliest in the country. The Nusli Wadia-led Wadia Group has finalised the mega deal with Axis Bank, which is planning to shift its headquarters to the building.

The deal generated a lot of interest in Mumbai’s property market and some sources in real estate circles had pegged the price at Rs 900 crore. But this was discounted by a senior representative of a leading financial institution who was said to be aware of the nitty-gritties of the transaction. The Wadias were unavailable for comment. A spokesperson for Axis Bank said: “At this point of time we do not have any comments to offer.” The building, Wadia Tower A, located in the Bombay Dyeing Mill compound on Pandurang Budhakar Road, has a saleable area of over 4 lakh square feet. It works out to Rs 16,000 a square foot.

The representative of a global property consultancy firm said: “A deal of this magnitude for a ready building is unheard of. This is by far the largest of its kind.” Axis Bank, one of the three largest lenders in the country, plans to move out of its existing offices in Maker Towers in Cuffe Parade and set up its headquarters in Wadia Tower A. Several financial sector companies have already relocated to new business centres like the Bandra-Kurla Complex and Kalina. The Wadias, considered to be one of Mumbai’s biggest land owners, control 64 acres in prime central Mumbai where they are also developing 1 million square feet of residential space.

DB Realty Fails to Make a Mark

DB Realty, the second property developer to list this year, and Emmbi Polyarns made weak debuts in a choppy market on Wednesday. DB’s disappointing listing was contrary to investors’ expectations of a strong opening, though the stock managed to recoup most of the early losses. The stock, which fell to a low of Rs 412.50 earlier in the day, closed at Rs 455.40, a 3% discount to the issue price of Rs 468. The stock’s backers, such as independent analyst SP Tulsian, feel the market has not understood the company’s prospects well.

“The stock, even at the issue price, is the cheapest of all the listed peers on the basis of its debt-free status, majority of its land under development in Mumbai (around 68%) and execution capabilities,” said SP Tulsian. “It is a long-term hold of at least 12 months.” The Rs 1,500-crore DB issue was subscribed close to three times the number of shares available for sale, though a section of the market felt the issue was priced at the higher end of the valuation band in line with that of the listed counterparts such as DLF and Unitech.

A research analyst, who tracks the real estate sector at a retail brokerage, said the stock would appear attractive at Rs 390-415. “Several investors bought the stock on Wednesday when it fell below Rs 415… I would recommend investors to wait for a broader market correction to accumulate the stock,” he said. The stock got a boost mid-way through the session on Wednesday after Janus Capital bought over 15 lakh shares at around Rs 435 a piece.

The next bout of correction in real estate stocks and the market is expected around the credit policy by the RBI in April, when the central bank is expected to announce measures to mop up more money supply from banks. Investors fear more such steps could result in a rise in lending rates and affect demand for property. Companies that are in the queue to tap the primary market include Emaar MGF, Lodha Developers, Sahara Prime, Lodha Developers, Oberoi Realty, Kumar Urban, Prestige Estates, Vatika, Neptune Developers and BPTP, among others. Emmbi Polyarns had a far more subdued start. The stock closed at Rs 28.20, a 37% discount to the issue price of Rs 45. The company’s initial public offering (IPO) of 1.64 crore shares was subscribed 1.2 times.

Indian Real Estate Sector Cautious about Expansion

It’s at the cusp of a recovery, but India’s usually aggressive real estate sector is being cautious about expansions this time. Excesses by large realty firms—such as aggressive land buying, massive projects with long gestation periods, and venturing into new territories such as power and logistics—as well as the downturn had pushed the sector into a deep slump in 2009. Now, as growth returns, developers are ordering feasibility studies before launching projects, entering into strategic tie-ups for raw material and labour, appointing project management consultants, and outsourcing construction work for quicker delivery, say property consultants.

Such measures are fairly new for a sector dominated by family-run businesses. “Builders are back with a bang,” said Aditi Vijaykar, executive director (residential) at Cushman and Wakefield India, a property advisory. “They want to try out new locations for projects and are trying to test market a product before launching it.” DLF Ltd, India’s largest developer by market value, said it will not buy land in 2010-11 or launch projects until it has regulatory approvals. Its working capital model will depend on cash flow from pre-sales, customer advances and bank debt. “It is difficult to stop speculative buying, but a system like one home per family is required,” DLF executive director Rajeev Talwar said. “The chances of end users exiting projects are less because property investments are usually a lifelong affair for them.”

Mumbai-based DB Realty Ltd, which has aggressive plans in suburban Pune, is conducting feasibility studies on the sizes and pricing of homes to ensure the right profile for its projects. Consultants said this was rarely done earlier. Shahid Balwa, managing director of DB Realty, did not respond to queries. Also, realty firms that are raising money though initial public offerings (IPOs) are aiming to use the funds for ongoing and proposed projects or to retire debt, said J.C. Sharma, MD of Bangalore-based Sobha Developers Ltd. The firms are monetizing land banks and reworking sales strategies to reach a larger clientele, he said. “This is very different from what realty IPOs in 2006 and 2007, including Sobha, did. That time, everyone was raising money only to buy more land,” added Sharma.

In February, Housing Development and Infrastructure Ltd (HDIL), the country’s third largest developer by market value, announced a 1.2 million sq. ft slum redevelopment project valued at Rs2,000 crore. HDIL, which had turned its focus from slum projects to residential development last year, has big-ticket launches coming up this year. It plans to launch another two or three slum projects in the next six-seven months. Hari Pandey, assistant vice-president (finance) at HDIL, said execution has become crucial for the firm. If pre-sales account for more than half the units of a residential project within three months of its launch, it has a high chance of being self-funded, he said.

“We are outsourcing about 80% of construction work to contractors, which we would do ourselves earlier. This is for speedy delivery as we are also scaling up our plans,” Pandey added. Developers are also looking at special purpose vehicles or joint ventures instead of purchasing land outright. Parsvnath Developers Ltd is looking at a month-on-month delivery target for faster completion. The company wants to construct around 45 million sq. ft of space in the next 24 months, and build around 1.25 million sq. ft in the last quarter.

The company has outsourced construction and appointed a project management consultant to keep a check on the work, as well as tied up with vendors for long-term supply of key materials. “We are also looking at a project-on-project basis of funding either through debt or private equity (PE) channels,” said Pradeep Jain, chairman of Parsvnath Developers. PE investors are also enforcing some good practices. Ramesh Jogani, MD and chief executive of Indiareit Fund Advisors Pvt. Ltd, said developers need to ensure their projects are rational in profile. “Even in residential projects, what is the need to build 30-40 storeyed towers which take five-six years to finish?” asked Jogani. “One needs to travel the middle path and offer mid-range products which assure quality.”

Govt as well as Realtors to Focus on Affordable Housing

Last year the Indian real estate market was badly hit by financial turmoil that resulted in low demand and huge amount of debt. However, it didn’t change the fact that by 2010 India will be facing a shortage of over 25 million homes all mostly in the affordable housing space. Industry experts say this year the focus of the government should and would be on affordable housing. The focus should be on home loans, incentivising developers to build low cost housing and to enable funds to be more easily accessible for the sector.

Overall, housing constitutes 70 per cent of India’s real estate sector and employs almost 20 million people and sops for housing are a must. “Housing and infrastructure will be the trigger for growth over the next two decades. Affordable housing should be the focus. PPP projects need to be encouraged and other measures like extending 80(i) b needs to be considered,” said Dharmesh Jain, chairman of real estate body, CREDAI. CREDAI has submitted its recommendations for this year’s Budget to the finance minister. These include raising the limit of principal amount reduction on home loans to Rs 3 lakh from current Rs 1 lakh.

CREDAI has suggested extension of tax holiday for housing projects under Section 80 IB (10) to allow for new Lower and middle income projects. CREDAI has suggested ECBs to be permitted for funding costs of those real estate projects which qualify for 100 per cent FDI. Other recommendations include: reduction of capital gains burden under 56 (B); time limit for notification of Industrial Parks be extended to 31st March 2015; removal of service tax on renting of immovable property, affecting mainly the commercial segment and clearance of REITs as investment vehicles.

“We need to able to give investors an opportunity to invest in commercial property. Measures like REITs need to come into play,” said Pranay Vakil, chairman of Knight Frank. The last couple of years saw an impetus on infrastructure and roads but this year the industry is hoping those roads will lead to affordable housing for all.

Trikona Advisers claims Rs 800 cr damages

Trikona Advisers (TAL), the erstwhile advisor of UK-based, India-focused real estate company Trikona Trinity Capital Plc (TRC), today said it would claim £112 million (Rs 800 crore) in damages from the latter for “unlawful attempt to terminate’’ the management agreement with it. TAL said TRC, a London Stock Exchange-listed company, terminated the agreement six years earlier than the scheduled ending. The agreement was for 10 years, from April 16, 2006, it said.

On December 10 last year, TRC announced termination of the portfolio management agreement with TAL, alleging breaches by the latter. In reply, TAL said it would seek substantial damages if the agreement was terminated on March 16, the scheduled date of termination. TRC has investments in Uppal IT park in Greater Noida, Rustomjee’s township in Mumbai, DB Hospitality and DB Realty, among others. TAL has already moved the London Court of International Arbitration (LCIA) against TRC. In a press statement, it claimed two hedge funds were responsible for the trouble. According to TAL sources, QVT and Carrousel had forced changes in the TRC board and its representatives now had major positions on it.

“For over two years now, TRC has been under attack from two hedge funds. They took a position in the Fund because of the successful performance and returns created under the management of TAL, but are now seeking an exit,” a spokesperson of TAL said. “These hedge funds have a track record of activism and for closing down funds early in the cycle to realise cash for short-term gains, and this is what is happening to TRC,’’ the spokesperson added. TAL cited examples of AIM-listed entities — Treveria plc, the German retail-focused real estate investment company, India’s Hiranandani family’s investment vehicle, Hirco, and South African Property Opportunities — wherein the hedge funds demanded the exit of directors, including incumbent chairmen.

“Our management contract stands in the way of their strategy because it lasts for 10 years, so we are being unfairly treated publicly and falling victim to their strategy,’’ the TAL spokesperson said. It said it had instructed a number of law firms to invoke its contractual rights, including London law firm SJ Berwin LLP, to pursue TRC. However, TRC seems in no mood to budge.