Indian Property News on 'August, 2010'

Lalit Suri Hospitality Group Plans Expansion

Lalit Suri Hospitality Group, which runs the Lalit chain of hotels, will invest Rs 2,500 crore by 2014 for expansion across luxury and mid-segment properties. The group’s chairperson and managing director Jyotsna Suri said that it has earmarked Rs 2,000 crore for expansion of luxury hotels and Rs 500 crore for mid-segment hotels. Suri said the group is taking up new projects in the luxury segment in cities, including Jaipur, Chandigarh, Kochi and Ahmedabad but did not share details.

The group has seventeen luxury hotels with 3,600 rooms in the five-star deluxe segment.
She said the company plans to open its hotel in Thailand by 2014, while it has put on hold plans to open a hotel in Dubai due to economic situation there.
Commenting on the group’s plans for mid-segment, she said the first hotel under the ‘Lalit Traveller’ brand will be opened within the next six months with the operationalisation of its property at Faridabad.
“The objective is to promote domestic tourism. There is a need to create hotels in the budget segment, ” Suri said.

Currently there are about eight projects which are at various stages of construction, in places including Bhuj, Jalandhar, Pune, Drass and Faridabad.
“The total room capacity that we expect to have in the mid-segment is 613 rooms,” she said, adding the pricing of these hotels could vary between Rs 2,000 and Rs 6,000 per room per night depending on location.

CMDA comes with New Guidelines to Meet Affordable Housing Demand

In a bid to create housing stock jointly with owners having large tracts of land and to meet the increasing demand for affordable housing in Chennai metropolitan area (CMA), the Chennai Metropolitan Development Authority (CMDA) has framed a new set of guidelines for implementation of the Public Private Partnership (PPP) scheme.

The guidelines comes in the wake of Minister for Slum Clearance and Accommodation Control Suba Thangavelan’s announcement in the Assembly in April that the Housing and Urban Development Department would implement PPP for housing projects in the CMA.

According to these guidelines, landowners or group of individuals or companies or trusts or cooperatives or local bodies holding more than 100 acres of land can participate in the joint venture development with the CMDA to create housing stock. The guidelines also state that landowners shall enter into a memorandum of understanding with the CMDA with a registered agreement supported by general power of attorney with specific clauses enabling the authority to hand over lands earmarked for open space and roads to the local body along with the power to re-allot the developed land to other beneficiaries.

Besides, the agreement shall be provided with the required grievance redressal mechanism, including provision for arbitration and to settle the disputes in jurisdiction courts. But, real estate experts like Marg Properties Advisor and former chief planner of CMDA Subash Chandra, while hailing the scheme, feel that the plan has a limited scope. “Under CMA, getting 100 acres is quite difficult. However, in Kancheepuram and Tiruvallur, such lands are available,” Chandra said.

He feels since it is a pilot project, the government may later reduce the extent to 50 acres or 25 acres. Some realty experts feel that the Directorate of Town and Country Planning in Tamil Nadu should be made the agency to implement the plan as the CMDA doesn’t have any say over the region outside the CMA.

RBI Proposes changes in Private Bank Provisions- Makes it Difficult for Banks with Insurance Ventures to Attract FDI

In an indication of continuing differences over the new foreign direct investment policy, the central bank has proposed changes in the provisions relating to private banks that will make it difficult for them to attract foreign investment if they have insurance ventures. Also, private banks that have sizeable foreign investment will find it difficult to float insurance ventures with foreign partners.

The Reserve Bank of India has proposed that foreign direct investment, or FDI, proposals of private banks that have an insurance joint venture or subsidiary should seek approval of the RBI and insurance regulator IRDA. The central bank has suggested these changes to ensure that 26% foreign investment limit in insurance sector is not breached even indirectly.

“The new rules will ensure that there is no violation of the current (sectoral limit) guidelines for future players,” said an RBI official, adding that the central bank was not decided on the existing insurance ventures of banks that have sizeable foreign investment. This will also mean that private sector banks that have substantial foreign investment will need permission from the two regulators for new insurance ventures.

“Some of these (private) banks have not yet made a foray in the insurance sector. In any case, entrants have to seek permission from their respective regulators,” said a finance ministry official, adding that the ministry supports the RBI move. As per the new FDI guidelines, all downstream investments by a majority Indian-owned and/or controlled by Indian company are considered as Indian investment.

In the case of banks, the policy allows 49% FDI through automatic route and a further 25% through approval of the foreign investment promotion board, taking the total to 74%. Currently, a majority Indian-owned-and-controlled bank can set up an insurance venture with 26% foreign stake. But it would be violating the sectoral limit as its foreign investors will also have a proportionate stake in the downstream insurance venture.

The RBI is keen to preclude such investment beyond the sectoral limit and the proposal underscores the conservative approach of the central bank. In its discussion paper on new banking licences, the central bank has suggested lowering the foreign investment limit in new private sector banks to below 50%. In its paper, the RBI had mentioned that since the objective is to create strong domestic banking entities and a diversified banking sector, the aggregate non-resident investment, including FDI, NRI and FII, could be capped at a suitable level below 50% and locked at that level for the initial 10 years. The suggestion goes against the spirit of the new foreign direct investment policy that has done away with the concept of indirect calculation of foreign investment.

Ambuja to Build City Center Mall at Siliguri

Buoyant over the success of its multi-utility commercial property projects City Centre-I (at Salt Lake) and City Centre-II (at Rajarhat), Ambuja Realty has now come up with its third City Centre, this time round at Siliguri, on the foothills of the picturesque of Darjeeling district. More importantly, it has lined up three more City Centres — all beyond Kolkata and in fact two of them are outside West Bengal.

Harshavardhan Neotia, chairman, Ambuja Realty, said that while City Centre at Siliguri has come up with a capital outlay of Rs 280 crore, the three other City Centres at Haldia, Raipur and Patna would involve an investment of close to Rs 550 crore. Patna City Centre will be ready by the end of the current year, Raipur City Centre will be ready by December 2011 and City Centre Haldia will be up and running by 2012, he said.

Ambuja Realty has already teamed up with leading chains and leading brands like Shoppers Stop, Spencer’s, Big Cinemas, Max Lifestyle, KFC, Hangout — the Food Court, Lilliput World, Planet Fashion, Subway, Crossword, Timezone, Adidas, Aawrun, Bata, Biba, Café Coffe Day, Gini & Jony, Converse, Golden Tips, Hoffmen, Jockey, John Players, Levi’s, L’oreal, Metro, Music World, Moustache, Nike, Peter England, Planet M, Prapti, Samsonite, Tea Junction, Success, Titan, Turtle, Wills Lifestyle, to mention a few. And Neotia’s enthusiasm stems from this.

“Some of them are coming for the first time while others are already there with the existing City Centres. Siliguri, by and large untapped, has tremendous potential as a retail hub. Siliguri is not just a major trading zone; it is also a gateway to the hills of Darjeeling, Sikkim and the Northeast. We are tapping all by offering this new plush retail platform,” he said.

Located in Uttarayon at the city’s Darjeeling Mor, City Centre Siliguri is spread on a sprawling 8 lakh sq ft are, incidentally is the biggest of all the City Centres (existing and upcoming ones). City Centre Salt Lake and City Centre New Town are spread across 3 lakh sq ft and 3.52 lakh sq ft, respectively. “In City Centre Siliguri, we have tried to create an offering that appeals to every aspiration and need of the residents in and around Siliguri. We sincerely hope that City Centre Siliguri with its entire bouquet of offering makes a positive difference to the lives of residents of Siliguri and beyond. We hope it will truly become a family destination,” said Neotia. The developers are in fact extremely bullish about the City Centre-Siliguri and Neotia hoped that it would generate overall business turnover of over Rs 300 crore in the first year itself.

The other advantage is that it is coming up at the entrance of ‘Uttorayan’, the 400-acre modern and integrated township developed by the group. City Centre Siliguri, the first phase of which will be thrown open in December, this year, will house departmental stores, a 4-screen cineplex with a seating capacity of 1,000, food courts, banqueting facilities, fine dining restaurants, gaming zone, kiosks, business centre with state-of-the-art office spaces and over 200 branded and unbranded shops.

“It will also boast of 75,000 sq ft of atrium lobby and an open air entertainment area called ‘Celebration Square’, which promises to be a perfect venue for get-togethers and hangouts. It will also be pulsating with regular events and promotions, designed and executed by our in-house dedicated division and is sure to cater to a large footfall,” said Neotia.

Spread over 10.5 acres, City Centre Siliguri will comprise the mall, office space and a five-star hotel. “While a large part of the mall will be opened in December, it will take another 12 months for the rest of the mall, the hotel and the office space to be fully functional,” said Neotia.
The new City Centre will be architecturally similar to the Salt Lake and New Town ones, which means it will also house AC and non-AC spaces, seamless connectivity and a hangout zone called Celebration Square inspired by the popular kund area.

With an investment of Rs 200 crore, Ambuja Realty is eyeing an annual turnover of more than Rs 300 crore from City Centre Siliguri. The mall is likely to bring a number of international and national brands to the parched Siliguri shopper.
With Shoppers Stop to Subway, KFC to Big Cinemas set to open doors at City Centre Siliguri, it is positioning itself as the one-stop retail and entertainment destination.
Ambuja Realty will next have City Centre malls at Haldia, Raipur and Patna.

Wal-Mart and Carrefour Ask Govt to Allow 51% Foreign Investment in Multi-Brand Retail

Two of the world’s top retailers, Wal-Mart and Carrefour, vying for a cut in India’s organized retail pie, have asked the government to allow up to 51 per cent foreign investment in multi-brand retail. India allows 51 per cent foreign direct investment (FDI) in single-brand retail and 100 per cent FDI in cash-and-carry or wholesale trading.

Wal-Mart has partnered Bharti Group to operate cash-and-carry wholesale stores and intends to continue the tie-up for multi-brand retailing. Bharti Wal-Mart believes that FDI in multi-brand retail should be permitted without any restrictions. They believe it will create conditions for greater flow of investments to the back-end with related benefits for farmers, small businesses and consumers.

Carrefour, which is also drawing up plans to roll out wholesale formats, also supports a more relaxed FDI policy. It feels any cap or restrictions on FDI in this sector may result in potential loss of opportunities of inclusive growth for the retail sector and that the cap should be such that a foreign retailer is entitled to make a minimum of 51 per cent investment with rights to manage the company and bring about efficiency in operations and induct the best industry practices.

Given the state of the supply chain in India, much of the investment in the back-end would be up-front, particularly in the initial years. A fixed percentage of investment on the back-end could therefore, leads to a misallocation of resources and takes away from where they are most needed to create efficient supply chains. Any stipulation for minimum investment of any fixed percentage in the back-end infrastructure, beyond what the foreign retailers are planning to do, would put undue and additional pressure on the profitability margin expected from retail operations and negatively influence the viability of the operations.

Prestige Group to Come up with Premium Residential Project in Bangalore

The Prestige Group has launched a premium residential project — Prestige Silver Oak — in Whitefield, Bangalore. Spread across 17 acres, the project comprises 146 independent villas and 32 low-rise apartments and is set amidst scenic landscapes.
According to the company, the project is all set to give a new meaning to luxurious living in the city and poised to become the next premium luxury destination in the Bangalore city.

Irfan Razack, chairman and managing director of Prestige Group, said, “The Prestige Group has always attempted to create landmarks in Bangalore through our commitment to international quality and design. Over the years, we have created a niche for ourselves in the luxury residences category and Prestige Silver Oak promises to be yet another milestone for the company in this segment. The development reflects an introduction to a popular West Asia type architecture with spatial designs which combines fantasy with the practicality of modern day lifestyle.”

The project promises a unique blend of opulence with signature qualities and is set to become one of the company’s landmark projects, Prestige said in a statement.
The Independent bungalows, ranging from 3,606 sq ft to 5,091 sq ft are double-storied edifices ensconced in their own private gardens. Eight different models of these elegant villas are available, each including four palatial bedrooms.

The apartments spread across four floors, with areas ranging between 1,851 sq ft and 2,411 sq ft have been designed on an outward looking plan to maximise the views to the surrounding serene greenery. Keeping in mind the recreational needs of their residents, Prestige Silver Oak also provides an exclusive clubhouse, which comes with all the required amenities that is a necessity for modern day premium lifestyle.
The development has been designed to accommodate only 178 units in order to provide a sylvan haven to its residents. The land coverage is only 30 per cent to provide extensive landscape areas, Prestige said.

Globevill to Develop Largest Township Project in Chennai

ETA Star, an offshoot of ETA Ascon Group, in association with the state-owned Tidco, has launched — Globevill, which is said to be the largest integrated township development in Tamil Nadu. To come up on the Chennai-Bangalore National Highway and located close to Sriperumbudur, the hottest industrial hub around Chennai, Globevill is spread over 350 acres.

Besides, residential and commercial space, the Globevill township plans to offer a hospital, restaurants, a business hotel, retail and recreational spaces as well as a full fledged school. ETA has tied up with Ryan International School to house the school within the spatce of the project.

ETA plans to develop the Globevill project across phases, extending over five years The first phase of development, involving around 82 acres of land, will offer nearly 2,000 residential apartment units, ranging from 1 BHK, 2 BHK and 3 BHK units to even villas. The residential apartments will come in the range of 600-1,200 sq ft.

“The first phase development will be completed in about 18-24 months. We have now started taking bookings for the first phase and we have announced an inaugural price of Rs 2,200 per sq ft for the residential apartments,” Ahmed Shakir, managing director, ETA Star, said.

According to him, Globevill, situated very close to the Sipcot Industrial Estate that houses the manufacturing units of some of the leading multinational companies, will target the over three lakh employees working in the region.

“Once completed, Globevill is bound to become a landmark in construction and design standards for the industry and is surely going to start a new trend of developing more integrated townships in Tamil Nadu,” says Fayaz Ahmed, director, ETA Star. “Our township will be setting a new trend in the lifestyle patterns for people in and around Chennai,” he added.

ETA Star, which hit the limelight among the property developers in Chennai with the launch of its Citi Centre Mall, has since then moved on to develop residential projects. While it has already completed one project near Poonamallee, another project is under development on OMR, Chennai’s IT Corridor.

Indospace Plans to Spend Rs 500 cr in Developing an Integrated Logistics Park

Indospace Logistics Fund, part of the Sameer Sain-promoted Everstone Capital that invests in logistics and industrial real estate, plans to spend around `500 crore in developing an integrated logistics park in the National Capital Region, according to people familiar with the development.

Indospace Logistics is currently talking to FWS, a Delhi-based logistics developer, to build the facility which will have large warehouses which can be used by retail and consumer goods companies. The proposed implementation of the Goods and Services Tax, or GST, is expected to create the need for large warehouses that will replace the current practice of smaller stockyards in multiple states. This is done to avoid duplication of taxes but will not be required once the GST regime is in place.

If the logistics plan fructifies, this will be one of Everstone Capital’s largest investments after being spun off from Kishore Biyani’s Future Capital earlier this year. Both Everstone and FWS declined to comment for this story. DTZ, a real estate consultancy, is advising FWS on the deal.

“Indospace has been following a model of buying land and developing industrial real estate projects,” said the people cited earlier. “This current deal would be part of that focus,” they added. Everstone Capital was formed after Sameer Sain parted ways with Kishore Biyani, the owner of Pantaloon, in January 2010. Mr Sain formed Everstone Capital along with Atul Kapur, who had worked along with him at Goldman Sachs. Everstone’s Indospace is a $250-million fund that also has a joint venture with Realterm Global, a US-based industrial real estate investment firm.

The fund already has projects underway in Pune and Chennai where it is building warehouses, distribution and storage spaces for use by automotive companies such as Volkswagen, Tata Motors, Mahindra, Daimler and Bosch. FWS is a logistics developer, promoted by Delhi-based businessman Vikas Yadav, that has already leased about 1.5 million square feet of logistics space across the NCR. Its clients for warehouses include companies such as P&G, DHL and the Future Group.

The need for large warehouses is likely to rise once the government’s proposed GST is fully implemented, as the new legislation will have a uniform tax rate. Companies now have to deal with a central sales tax and a state sales tax, which leads to a higher levy as firms with a manufacturing presence in one state have to resort to accounting jugglery to avoid paying dual taxes for sale in a different state.

The GST will encourage companies to sign supply and distribution management contracts with logistics companies. Companies have started to negotiate with large logistics companies to manage their costs. While the government has targeted to introduce GST by April 2011, the schedule is likely to get delayed by a year due to lack of consensus among all states.

Govt to Allow Foreigners Set up LLP in Sectors where 100% FDI is Allowed

The government may soon allow foreigners to set up limited liability partnerships in sectors where 100% foreign investment is allowed, taking a decisive step after much flip-flop over funding guidelines for this form of business organisation, favoured globally for its flexibility.

The department of industrial policy and promotion (DIPP), the nodal agency for foreign investment policy, has written to the finance ministry giving the broad contours of the proposed foreign investment framework for LLPs. It has suggested that foreign investment be allowed in LLPs with prior approval.

“This will give foreign investors flexibility to operate in a simpler environment with minimal compliances and yet be tax efficient,” said Akash Gupt, executive director of consulting firm PwC. LLPs share many of its features with normal partnerships, but partners will have reduced personal responsibility for its business debts as the partnership itself is responsible for such liabilities.

A discussion paper is expected to be put up in public domain soon, said a government official privy to the discussions. This would be third in the series of discussion papers released by the DIPP. The earlier ones were on foreign investment in defence production and multi-brand retail. DIPP had, after initial discussions earlier this year, taken a view against opening up this form of business organisation to foreigners. During those discussions, the Reserve Bank of India had favoured FDI up to 49% in LLPs in select sectors, while the finance ministry was in favour of a more liberal regime, but with prior approval.

As per the policy proposed by the DIPP, foreigners will not be allowed to set up LLPs in sectors such as real estate where conditions such as minimum capitalisation and lock-in period are applicable. It also bars foreigners in sectors where FDI is prohibited or restricted with caps on investment.

Indian companies having foreign investments will not be eligible to make investments in LLPs. Similarly, LLPs having foreign investment will not be allowed to make downstream investments or raise overseas debt, said a senior government official. LLPs incorporate the features of companies and partnerships. The liability of partners is limited to the extent of their stakes in the entity. It also has various advantages over present corporate structures. Unlike private limited companies where number of shareholders is limited to 50, an LLP can have unlimited number of partners.

Compliances relating to meetings and maintenance of statuary records are not applicable for LLPs. Currently, FDI is not permitted in partnerships firms, but is allowed in companies depending on sectoral cap. FDI is allowed up to 100% in a number of sectors such as manufacturing through the automatic route.

Sole proprietorship firms can get non-resident investment on a non-repatriable basis. Globally, 100% foreign investment is permitted in LLPs though they are not allowed to undertake certain sectoral activities in some countries.

Sobha Developers to Start $107 Million Luxury Home Project in New Delhi Suburb

Sobha Developers Ltd., the best performing stock on the Bombay Stock Exchange Realty Index this year, plans to start a 5 billion rupee ($107 million) project in a New Delhi suburb to build luxury homes as the economy expands. “We are entering the golden era in real estate now,” J.C. Sharma, managing director of the company said in an interview. “Residential houses are showing signs of robust recovery. The growth phase has started now.”

The project, located in Gurgaon, on the outskirts of New Delhi, is spread across 150 acres (61 hectares) and will start by March, Sharma said. The government’s focus on building roads, ports and airports, a growing middle class and a rise in factory output are leading to higher economic growth and stoking demand for homes, Sharma said. India’s economy has grown an average 8.5 percent every year during the past five years, doubling per- capita incomes in the period.

Sobha rose 4.3 percent to 387.60 rupees, the highest in more than two years, at the 3.30 p.m. close of trading in Mumbai. The stock, the best performer today on the 13-company Realty Index, has climbed 58 percent this year outperforming a 5.4 percent advance by the benchmark Sensitive Index.