Indian Property News on 'May, 2010'

India Moves up on Most Preferred Retail Market List

India has moved five places up on the list of most preferred markets for retailers due to heightened interest from international companies in emerging markets, according to a study which tracks the presence of top retailers worldwide. India moved to the 39th position in 2009 from number 44 in 2008. Nearly 22 per cent of retailers surveyed have presence in India. The UK is number one destination for retailers, while countries such as United Arab Emirates, the US, France and China are in subsequent positions, according to the study.

The study maps the global presence of 294 top retailers across 69 countries. “Emerging markets continue to play a critical role in the global expansion strategies of international retailers. The inherent medium-term growth potential of many emerging markets remains a key strategic magnet, helped by the fact that in some cases, these markets have as yet only been targeted by relatively few international brands,” said Peter Gold, head of EMEA Cross Border Retail, CB Richard Ellis.

According to Anshuman Magazine, chairman and managing director of CB Richard Ellis, the restriction on foreign direct investment (FDI) and lower purchasing power of consumers led to India’s poor ranking on the list. “If the government relaxes FDI norms, I feel India’s ranking will go up substantially. Given the country’s size and business potential, there is no reason why we cannot go up in the list,” Magazine said. Though India allows FDI in cash and carry ventures and 51 per cent in single-brand retail, FDI is barred in multi-brand retailing. “International retailers like to have majority control and quality control when they enter new markets.”

According to the study, 43 per cent of retailers set up stores outside their own region in 2009, compared to 40 per cent in 2008. Real estate is among the key factors for retailers to expand in the international markets. “Finding suitable real estate is a common barrier to entering a new market, and we are finding that the opening of new retail space and shopping centres are key triggers for international retailers, considering a move into particular new markets. The current decrease in the development pipeline is likely to restrict the opportunities for retailers to expand over the coming years,” Gold said.

DLF sees Revival in Commercial Leasing Sector

After several quarters of muted growth, DLF Ltd, the largest real estate developer in the country, sees revival in the commercial leasing sector, especially in the IT and banking space. The realtor is expecting to lease 3-4 million square feet (msf) of commercial office space in fiscal 2011, a growth of 390-520% over 0.76 msf of office space leased out in the last fiscal. The New Delhi-based developer has already started seeing an uptick in lease enquiries as 0.6 msf of the total 0.76 msf of office space was leased out in the last quarter.

Its rental income grew from Rs 540 crore in 2009 to Rs 750 crore in 2010. Caraf, the holding company for DLF Assets Ltd (DAL), has merged into DLF and the integrated entity has combined leased assets of 19 msf. Analysts’ covering the company expect the entity to yield around Rs 1,600 crore of rent in the current fiscal. About 5 msf and 7-8 msf of office spaces in DLF and DAL, respectively, are under advanced stages of construction and most of the project work is complete, while the rest would depend on leasing activity.

The developer does not intend to start new office projects in the near term. The DLF spokesperson was not immediately available to comment on developments. With the commercial leasing market improving slowly, DLF is expecting to float its DAL real estate investment trust in Singapore in the next 6 months. The merged entity has eight rental assets with a leased area of 9.7 msf, current assets of Rs 2,200 crore and debt of about Rs 2,500 crore.

The rentals in Gurgaon are about Rs 50-55 per sq ft, Chennai is at Rs 45-48 per sq ft and Hyderabad at Rs 40 a sq ft. It is looking to lease about 6 msf of office space before approaching the capital markets. The developer is currently generating cash of about Rs 700 crore from projects which it believes would be sufficient for its construction activities and debt repayments.

Service Tax Haunts Flat Buyers

Already burdened by galloping property prices, flat buyers are now faced with another fait accompli. For the past one month, many city builders have been asking purchasers to start paying up the 2.5% service tax announced in the Union budget . For example, if the value of the flat is shown as Rs 1 crore in the agreement, the buyer will now have to shell out an additional Rs 2.5 lakh as service tax.

Despite strong representations made to the Centre by those in the construction industry , the finance ministry is unmoved. Although the official notification from the ministry is expected any day now, market sources say that developers have informed buyers that the possession of their apartments would be held up in case they fail to cough up the amount.

The service tax will be charged on only those residential projects which are still under construction or where a completed building has not received its occupation certificate. A leading developer , not wishing to be identified, admitted that builders were telling buyers to pay this tax. “It has created problems and led to bitterness . But the issue is out of our control,’’ he said.

Buyers say they were not informed of the additional levy when they had booked the flats. “They are fighting with builders but have little choice. As it is, they are forced to pay the builder hefty parking charges, society fees, development charges and various other hidden costs before he takes possession,’’ said a market source.

Sunil Mantri, newly-elected president of the Maharashtra Chamber of Housing Industry (MCHI), said developers were collecting this tax and putting it in an ESCROW account. “As and when the notification comes into force, we will adjust this amount. Today more than 80% of apartments are booked when they are still under construction,’’ he said.

The Confederation of Real Estate Developers’ Associations of India (Credai) opposed the proposed service tax imposition, saying it would ultimately make buying houses more difficult. Credai has stated that such a move will lead to double taxation.

Credai chairman Kumar Gera said, “It is the duty of the builder to collect this service tax from the purchaser and deposit it with the department . The developer is just a postman. It is ridiculous and makes a mockery of the government’s thrust on making housing affordable.’’

Gera further added that the buyer was already burdened with other direct taxes like the stamp duty (5%) and registration charges (1%) on the total value of the flat. A 1% VAT is also in the pipeline. Besides this, the builder has to pay development charges to the local municipal body and this amount could range from anywhere between Rs 100 to Rs 200 a square foot in various towns and cities of the state.

A year ago, Credai had worked out a rough calculation on a pan-India basis to find out the quantum of tax collected by by the local authorities , the state government and the Centre. “We found that on an average price of Rs 2,800 a square foot for a residential property, as much as Rs 850 goes towards various taxes, duties and levies,’’ said Gera.

He added the service tax would not be levied with retrospective effect. “For those who have booked their flats some time back, this tax will only have to be paid on the remaining instalments and not on the entire value of the flat,’’ he said.

Iconic Tower could be fully Residential

After several failed attempts to lease out its six-acre Wadala plot for an iconic tower, the Mumbai Metropolitan Region Development Authority (MMRDA) has tweaked tender conditions, which industry sources say, may help it fetch a record price when bids are opened on Tuesday. With a reserve price set at Rs 1,980 crore and a deferred payment schedule spread over five years with a 10% interest annually, the MMRDA’s tender has suddenly generated a lot of interest among Mumbai’s leading developers.

Till Friday, almost a dozen real estate companies had purchased the tender document. In 2006, Reliance Industries had paid over Rs 1,100 crore for a plot (18 acres) in the BKC. So, what makes this land—which had no takers till recently—turn into hot property? Although earlier earmarked for a mixed-use tower (commercial and other use) for which not many showed any interest, the MMRDA recently said the winning bidder could now even set up an entirely residential project. Further, the authority also permitted construction of multiple towers instead of a single tall skyscraper.

“With a 100% residential potential, it would not be a surprise if it turns out be the largest land deal in the city,” claimed a builder, adding that there will be more takers for residential than commercial. The Wadala plot has a development potential of close to 60 lakh sq ft. It was initially planned as a 101-storey commercial tower, but the MMRDA had to scale it down after it found no takers, besides facing objection from the civil aviation department.

MMRDA will lease out the 25,000 sq m Wadala land for 65 years to the highest bidder. According to the tender document, the land could be used for commercial offices, business centres, shopping malls, star hotels and restaurants, entertainment centre, health, sports facilities and residential. The maximum permissible height of the building shall be subject to limitations, if any, set out from time to time by the civil aviation department. Subject to the provisions of the BMC Act, the allottee will have full discretion to organise inner spaces, both horizontally and vertically, to suit his requirements,” it said.

The plot is situated near the inter-state bus terminal in Wadala and falls along the upcoming monorail line between Jacob Circle and Chembur via Wadala and is close to the Eastern Express Highway. Firms having an annual turnover of Rs 500 crore will be allowed to participate in the auction.

Bombay Dyeing sells Worli building to Axis Bank for Rs 782 crore

In one of the largest transactions in recent times, Bombay Dyeing has sold a four lakh sq feet office building in Worli to Axis Bank for a staggering Rs 782 crore. Axis Bank plans to shift its corporate headquarters from Cuffe Parade to this eight-storeyed tower located within the Bombay Dyeing mills compound. Durgesh Mehta, joint managing director, Bombay Dyeing, confirmed the deal has been struck, but refused to reveal the amount.

“We are bound by an agreement not to disclose the amount, but it is one of the biggest transactions,” Mehta told Hindustan Times. The deal works out to approximately Rs 19,500 per sq feet. Mehta said the construction is nearly complete and the bank would get possession of the building in July. Real estate experts said it’s one of the biggest deals in recent times. “You hardly get such large spaces in the city and the amount is good. It is a good deal for both parties,” said Pranay Vakil, chairman, Knight Frank India, a leading real estate consultancy firm.

The deal was under negotiation for several months before it was sealed this week. Of late, Bombay Dyeing has shifted its focus from textiles to real estate as it has sprawling mills lands in Worli and Dadar. Shree Nath Commercial and Finance Ltd has informed the Bombay Stock Exchange that it is expected to earn Rs 23.5 crore as gross brokerage fee from the sale.

NCR Based Developer LandCraft Announces Launch of Residential Project in Ghaziabad

NCR-based real estate developer LandCraft Developers Pvt Ltd has announced the launch of its second residential project – River Heights Status – on NH 58, which is coming up adjacent to its first project River Heights on NH-58 at Raj Nagar Extn in Ghaziabad, Uttar Pradesh.

The project’s 756 residential units are being developed on an 8-acre prime property comprising of 2 and 3 BHK units. The project is scheduled to be completed within a period of 30 months from the date of commencement of construction work. The project will have 2 & 3 BKH options ranging from 823 sq ft to 1244 sq ft and starting at Rs 3.08 lakh onwards.

Speaking on the occasion, Manu Garg, director, LandCraft Developers, said: “As part of our continuing efforts in creating value for customers in today’s challenging environment, we have done everything possible, based on the feedback from our old and prospective customers, to make this new venture unique in many respects.”

Investors Taking Interest in Real Estate Sector

Real estate financing in India has changed significantly over the past 50 years for both developers and buyers. Real estate developers have seen the universe of funding agencies expanding from unorganised moneylenders to the entire gamut of funding sources, including loans from banks and housing finance institutions (HFIs), private equity, public equity offerings, bonds, and debentures. Buyers have seen the shift from own resource-funded home purchases to bank-funded mortgage finance.

This shift has helped the real estate sector match the fast-growing buyer demand on the one hand, and has boosted the financial flexibility of developers to provide adequate real estate supply on the other. Back in the 1960s, the real estate sector was largely unorganized and was perceived as a speculative and risky segment. Developers were funded mainly by moneylenders, who charged exorbitantly high interest rates – above 36 percent.

Buyers largely funded home purchases through household savings, loans from friends and relatives, sale of property and ornaments, and subsidised housing loans extended by some private and public-sector employers. The banks did not provide mortgage finance to the retail customers until the late 1970s. In the organised sector, the government was the sole provider of housing finance, through its various social housing schemes including low-cost housing. The government implemented its schemes through state housing boards, which were responsible for allotting plotted developments and built flats to individuals.

Techman Buildwell Comes with Pay after Possession Scheme

Techman Buildwell Pvt Ltd, one of the fastest-growing real estate companies in the Delhi NCR region, has launched a new scheme for its Moti Residency project in Raj Nagar Extension. Under the scheme, after the payment of the initial booking amount, the consumers don’t need to pay any EMI till the possession of the flat.

The projects of Techman Buildwell are targeted towards the middle income group consumers. Some of the advantages of the above scheme are: lower size of upfront investment, minimum risk of delay in possession as interest is being paid by the developer, appreciation of the flat blocked in favour of the customer by just paying 10% at the time of booking, and no double burden of paying EMI and rent.

Talking about the scheme, Palash Agarwal, director, Techman Buildwell, says, “Our motto remains to offer the consumers affordable homes with maximum value for money. With this scheme we are sure that the consumers will have greater ease in managing their funds. With no EMIs till possession, the consumers will have more disposable income and seek a better living.”

Techman Buildwell has delivered many projects in Mathura, Agra, Vaishali (Delhi) and is coming up with similar affordable housing projects in places like Faridabad and Ghaziabad, among others.

Ten-fold Increase in SBI’s Loan Limit

State Bank of India (SBI) will increase by ten-fold its loan limit to individuals planning to buy land to build a house as the country’s largest lender makes a greater push into the housing segment. The bank has finalised a proposal under which it will lend Rs 10 crore for buying land for housing against the earlier cap of Rs 1 crore, said a senior SBI official. The bank has eased a rider pertaining to the construction period if the project is undertaken by government agencies. Currently, a project must be constructed within two years.

“Acustomer will also be eligible to avail another housing loan for other housing-related construction on that plot, enjoying the benefit of running both the loans concurrently,” said a senior SBI official. SBI, however, hast set the margin money limit — the amount a customer has to pay upfront for availing a loan — at nearly 35% for loans above Rs 1 crore. For loans up to Rs 75 lakh, SBI has fixed the margin money requirement at 20%. SBI’s latest move to push ahead in the housing sector follows its troubles with excess liquidity and a tepid credit offtake.

“We have a liquidity of over Rs 40,000 crore; schemes such as this will help us achieve our credit growth targets,” the official said. The bank plans to increase its credit growth target by around 22%. Last year, the central bank had revised the credit growth target for commercial banks, the money they lend to customers, to 16% from 18%. SBI has already turned its attention to the housing sector. The bank recently extended its popular 8% home loan scheme, or teaser loans, until June 30. It is also looking at other avenues to increase the credit offtake, though it will take steps to see that the due diligence process doesn’t suffer.

“To minimise fraud risk, two title search reports from different lawyers will be obtained before sanctioning the loan,” the official said. The sharp increase in the loan amount is also expected to boost the real estate sector, which, despite the return of buyers, continues to suffer from a big drop in banking credit. Loans to the realty sector fell 97% to Rs 842 crore for the 11 months to end February against Rs 33,617 from a year ago, say RBI figures. “Schemes such as this will indirectly ensure credit flow to these companies,” said a senior official of a real estate company.

Real Estate Business Gaining Momentum in Gurgaon

What is so special in the sphere of Gurgaon? It is surely the real estate industry that renders people opportunities to reside in this region without any difficulty. What are the common dreams of any individual? It is to reside in a home comprising lush green environ and an assortment of housing companies or residential property builders in the city shape it into concrete form. In the recent years a good difference has also been perceived. The real estate properties in Delhi used to be the most expensive and classy but the creation of housing projects like DLF colonies, group housing societies and also the integrated townships has almost revolutionized the scenario.

Real estate builders and developers are mostly responsible for this, who through commitment and excellence have made many dreams reality. There is hardly any doubt that the market has experienced a paradigm shift with most sought after properties located in the NCR region. Not only this but also a number of MNC\’s and IT companies are having their respective offices in the city since Gurgaon is becoming a business destination bit by bit. This reality has also led to the creation of demand for commercial properties like business centers, office complexes, technology and IT Parks and the real estate scenario gets heightened as a result.

The prominent companies operating in the city include Banshiwala Engineering Services, Estate Developer, Mjbuildvest Pvt. Ltd, Om Properties, Om Properties, Progressive Engineering Services, Prithvi Estates, R.S. Constructions Pvt. Ltd. and according to studies, Gurgaon has a lot real of estate development potentials.

The same has been comprehended by many and hence, investment in realty developments is increasing than ever before. HUDA Gurgaon Development Authority has also played an important role and it is in the charge of looking after the city. For this reason it gets engaged in hiring builders to develop housing solutions or selling land to individuals and bigger builders for mass housing projects.