Indian Property News on 'September, 2010'

Re/Max India Honoured at Franchise Plus awards 2010

Re/Max India – a part of the world’s largest real estate network has added one more feather to its cap. The Delhi-based Master Franchise has won the prestigious ‘Master Franchisor’ of the Year in Real Estate at Franchise Plus awards 2010.

With about 100 Brokerage Offices in just about a year, RE/MAX India has witnessed high growth across the the country.

Sam Chopra, director of RE/MAX India said: “As a real estate franchising company our biggest strength is the Network Value proposition which facilitates more choice for the customer and reduces the turnaround time.”

Earlier, RE/MAX India was also awarded as the Startup of the Year at Franchise India & Zee Business Small Business awards in Mumbai for registering a 600 per cent growth in the first year of its operations.

RE/MAX is also planning to organize India’s first realty exchange for brokers, which will be a 14 day industry event covering different facets of the industry. This will also include a world class real estate brokerage education chapter to India’s first developer to broker property exposition.

FDI Norms Eased for Wholesale Sector

The government today eased the foreign direct investment norms for sectors like wholesale cash-and-carry trading, non-banking finance companies (NBFCs) and certain segments of animal husbandry, besides bringing about procedural simplifications. There was, however, bad news for foreign tobacco product manufacturers and the real estate sector. The Consolidated Foreign Direct Investment (FDI) Policy, which would be effective from October 1, has been formally included in the list of activities in which FDI is prohibited. The move follows controversy around Japan Tobacco’s entry into the Indian market.

In case of the real estate sector, the government has ruled out any relaxation in the three-year lock-in criteria for now. Instead, for construction development projects, the Department of Industrial Policy and Promotion (Dipp) has clarified that the lock-in period of three years will be applied from the date of receipt of each tranche of FDI or from the date of completion of minimum capitalisation, whichever is later.

At present, 100 per cent FDI is permitted under the automatic route in townships, housing projects, built-up infrastructure and construction development projects. It is, however, subject to a minimum capitalisation requirement of $10 million (around Rs 45 crore) for wholly-owned subsidiaries and $5 million (around Rs 22.5 crore) for joint ventures with Indian partners.

While the original money invested cannot be repatriated before a period of three years from the completion of minimum capitalisation, investors can exit earlier with prior approval of the government through the Foreign Investment Promotion Board (FIPB). “This is going to be extremely negative for the real estate sector and will affect investment into the sector. The government has also failed to clarify on issues in many other significant areas. However, this exercise of reviewing the (FDI) policy every six months should continue, as that will make the policy more flexible in due course,” said PricewaterhouseCoopers Executive Director Akash Gupt.

In case of non-banking finance companies, however, the government decided to ease the norms for downstream investment. It has said NBFCs with 100 per cent foreign investment and a minimum capitalisation of $50 million (around Rs 225 crore), can set up subsidiaries for specific NBFC activities, without bringing additional capital towards minimum capitalisation. For foreign players with interest in the wholesale cash-and-carry segment, there was some good news as the government decided to remove the restriction on internal use. It, however, retained the ceiling, mandating that such companies could at best sell up to 25 per cent of their turnover to group companies.

The move would have implications on several retailers like Bharti-Walmart, Carrefour and Metro Cash and Carry, which had been lobbying for removal of the two restrictions. They can, however, draw comfort from the fact that Bharti Retail, for instance, can sell goods sourced from Bharti-Walmart at its stores.

On procedural aspects, the government has said downstream investments through internal accruals are permissible. “This clarity was necessary as the FDI policy says that for the purpose of downstream investment, the operating-cum-investing/investing companies would have to bring in requisite funds from abroad and not leverage funds from the domestic market for such investments. While this would not preclude companies from making downstream investments through ‘internal accruals’, it had been noticed that, in certain cases, some companies had started accessing the government approval route for downstream investments through internal accruals,” an official statement said.

Sobha Developer to come up with 12 Million Square Feet of Residential Projects

Sobha Developers will launch about 12 million square feet of residential projects this fiscal year and has implemented selective price increases, according to a top company official.

“Prices have been stable. This quarter on, there have been selective price increases on some products,” managing director J C Sharma told the Reuters India Infrastructure Summit on Wednesday.

Of the 12 million square feet projects the company plans to launch, Sobha hopes to sell about 3 million in the year to March 2011, Sharma said.

The company, which has a significant presence in southern India, reported a surge in standalone net profit for the April-June quarter.

Mahindra Lifespace plans Residential Project in Chennai

Mahindra Lifespace, the real estate and infrastructure development arm of the $7.1 billion Mahindra Group, has announced the launch of Californian style apartments at Aqualily, the premium residential community at Mahindra World City, a multi-sector SEZ that has come up about 50 km southwest of Chennai.
Aqualily is being developed by Mahindra Residential Developers — a subsidiary of Mahindra Lifespace Developers — in a joint venture with Arch Capital, an Ayala Group Company, which is said to be the largest diversified business group of the Philippines.

Located on the fast developing GST Road, at Mahindra World City, Aqualily is a combination of luxury villas and spacious apartments spread across 55 acres on the banks of the Kolavai Lake.
Aqualily comprises 151 luxury villas and 610 lifestyle apartments. The first phase of the development comprising villas was launched in November 2009.
The company has now announced the launch of apartments, with a choice of 3BHK and 4BHK units, coming in varied sizes that range between 1,595 sq ft and 2,286 sq ft.

The apartments are designed in Californian style, keeping in mind the luxury and indulgence that customers seek for their lifestyle. Residents can enjoy the multitude of gardens, the 2.5 acre central park and a lake front promenade.
The club house equipped with modern amenities and a lake view lounge are the added features. Residents will also have access to facilities like the Mahindra World School, an Apollo clinic and a commercial complex.

“When the Aqualily project was launched in November 2009, we had committed to provide an international ambience with the complete ecosystem of work, living and learning spaces to an entire gamut of customers. The launch of villas helped us deliver this promise to a section of home-buyers and through the launch of apartments we aim at fulfilling this commitment to a larger section of the community,” said Anita Arjundas, managing director and chief executive officer, Mahindra Lifespace Developers.

According to Arjundas, the 610 apartments will come up over 25 blocks, spread over 18.7 acres, and will offer residential units in varied sizes. These include 3BHK units with an area of 1,595 sq ft and 1,712 sq ft, 3BHK plus study units at 1,947 sq ft and duplex units in the size of 2,286 sq ft and 2,391 sq ft. Overall, the apartments come in the price range of Rs 53 lakh to Rs 83 lakh.
The amenities will include a central part spread over 2.6 acres comprising an amphitheatre, half basketball court, children play area, shadow walk and jogging track.
A club house, spread over 2.1 acres is coming up next to a lake and will have facilities like gym, badminton court, tennis court, swimming pool, multi-purpose hall and outdoor party area.

Rs 1,000 crore green IT SEZ to be Developed in Pune

Developer Kumar Urban Development Limited (KUL) is setting up an IT Special Economic Zone (SEZ) project in Pune with a proposed total investment of Rs 1,000 crore. The company will invest about Rs 400 crore in the first phase of the project, christened as Cerebrum IT SEZ, which is coming up near the first phase of Rajiv Gandhi Info Tech Park, popularly known as the Balewadi Silicon Valley.

“We are in receipt of all necessary clearances, including layout and environmental, for Cerebrum IT SEZ. We will soon start the work on the project,” Lalitkumar Jain, chairman and managing director of KUL, said. According to a press release issued by the company, the project is expected to provide employment about 18,000 people. The project is the first tech park in India to achieve the Leadership in Energy & Environmental Design (LEED) Platinum rating for commercial buildings and only the sixth in the world to get the distinction, it said.

The release said KUL had ensured that the green building principles were adhered to at every stage and sensitivity towards environment had been an integral part of the design. “It will have an ideal living environment with lush green surroundings and aesthetically designed landscaping features. True to our tradition, we will protect the natural topography to preserve the existing beauty while developing the ideal IT destination,” Jain said.

In the first phase, about 1.8 million sq ft, will be developed, of which 400,000 sq ft is expected to be operational by the third quarter of 2011. It will target IT and ITES companies across the world. The release said the project would have two gardens, and rooftop amenities on each tower will include an auditorium with cafe lounge, business centre, spa, yoga centre, swimming pool and restaurants. The SEZ is located 23 km from the Pune airport, 18 from the city railway station and 145 km from Mumbai on the expressway.

Israel Based Real Estate Major Plans to Invest $300 Million in Indian Real Estate Sector

Diversified Israeli conglomerate Elbit Imaging Group could be making a fresh investment of $300 million to acquire raw land assets and invest in new projects in India in the next two to three years as it revives its global real estate investment strategy. It would be eyeing land deals mostly in the four cities of Pune, Bangalore, Chennai and Hyderabad, the VCCircle has reported, citing sources directly familiar with the Tel Aviv-based group’s plans. Elbit, with its group firms listed on global bourses, is sitting on largely untapped development potential of about 40 million sq ft across six locations in Pune, Bangalore, Chennai, Kochi and Thiruvananthapuram.

Now, as the real estate industry reports a sharp recovery, Elbit is rejigging its property development plans along with local partners. The group, spearheaded by its billionaire founder Mordechai Zisser, started investing in Indian real estate five years ago, and quietly scaled up the land bank story till the global economy went into a tailspin. It has spent an estimated over $400 million in acquiring land banks and related investments during the boom period of 2006-08, sources added. Till date, Elbit has worked on developing its two shopping centers and commercial complexes in Pune, including a 1.2 million sq ft mall project and commercial space equally held with Atul Chordia’s Panchshil Group and its shopping center and office tower in Koregaon Park, which would be opened by early Q2 2011.

But, the Israeli giant is now stepping up gas on the bigger projects with the recovery in sentiments in real estate. First off the block will be a mixed-use township on 170-acre land in the suburbs of Bangalore. Elbit and Mantri Developers Pvt Ltd are readying a master plan to start work on the first phase of this project, which will have around 18 million sq ft of developed real estate when completed. The first phase will involve developing high-end residential villas totaling anywhere between 1.25 million and 2 million sq ft over 25 acres. Elbit and Mantri will develop this project, located at Whitefield in a joint venture. The average cost of developments is estimated at Rs 2,000-2,250 per sq ft.

“We should start work on this project within 8-10 months. Large development projects require financing. Our larger projects slowed down as financing dried up during the crisis. And we, along with our partners, waited for the sentiments to improve,” said Ran Shtarkman, Co-CEO of Elbit Imaging. Nasdaq-listed Elbit Imaging and its subsidiary Plaza Centers NV (traded on the Main Board of the London stock exchange and on the Polish stock exchange) are the principal investors in the group’s real estate projects in India.

Shtarkman said, Elbit would go in for opportunistic acquisitions to bolster its land bank in the country. “I will not be able to put an absolute number to this, but we are prepared to spend more on land and developments here. Obviously, we are not going to pay valuations of 2006-08 period for this,” he added. In Chennai, Elbit along with a local developer hold 90-acre land near Siruseri. Elbit has majority stake in this project, which has potential to develop over 9 million sq ft. It has an equal JV with Salarpuria Group for another 8 million sq ft development in Kochi for a township. It is also partnering with Atul Chordia for a 1.2 million sq ft project near Aakulam Lake in Thiruvananthapuram. Elbit’s new moves in Indian real estate comes after it announced setting up a $400-million fund – which can be leveraged to make up to $1 billion investments – in the retail and commercial holdings in February this year, for properties located in the United States.

Real Estate Bubble Building- NHB Cautions Banks

The National Housing Bank (NHB), the regulator for housing finance companies, on Monday advised lenders to exercise caution on lending to high-value properties, even as it warned that a potential real estate bubble was building as residential prices in several regions in the country were breaching their lifetime highs. “There is some sort of real estate bubble building up in the residential property market in several regions. I expect banks and other institutions to show their due diligence before providing high value loans,” RV Verma, chairman and managing director at National Housing Bank, told Financial Chronicle.

Verma, who took over at the helm of NHB recently, also said developers should be cautious not to hike prices and instead should launch more projects that are appropriately priced. In the past three quarters, residential property prices have grown by over 10 per cent in the National Capital Region (NCR), 12 per cent in Kolkata, 13 per cent in Bangalore, 10 per cent in Chennai, 13 per cent in Pune and over 20 per cent in Mumbai, according to real estate consultants Jones Lang Lasalle India.

Verma said a cautious approach was needed to ensure that a repeat of the crisis in the housing market in late 2008 is not repeated. “I expect the real estate firms to be mature and not repeat the mistakes of 2008,” Verma said. The global markets went tumbling in 2008 as sub-prime real estate lending in the US created several defaults forcing the valuation of assets crashing down by over 50 per cent. Several banks and insurance firms were on the brink of bankruptcy including Citibank and AIG. Lehman Brothers has already filed for chapter 11 bankruptcy protections in the US.

In 2008 and 2009, Indian banks put curbs on lending to the real estate sector. The prices of some residential projects in Gurgaon have reached Rs 7,000-8,000 per sq ft, which in some cases is higher than the previous peak seen in the city. In central Mumbai, prices for some projects have risen to Rs 20,000-25,000 per sq ft. Verma said NHB is looking to increase its loans disbursements by about 23 per cent in 2010 to Rs 10,000 crore compared with last year’s Rs 8,160 crore. It announced its annual results for the year ended June 30 and posted net profit of Rs 280 crore.

Vascon Plans to Develop 105 Acre Township worth Rs 2,000-cr in Chennai

Pune-based Vascon Engineers, plans to invest Rs 2,000-crore to develop a 105-acre township in Chennai over six-years, a top company official said. “We plan to develop a 105-acre township, predominantly residential, at Oragadam on the outskirts of Chennai in four phases. In all, we will develop around 10-million sq ft,” Vascon Engineers’ Managing Director, R Vasudevan, told PTI here today. The project will be developed in a joint venture with Balakh Realtors and the association will be on a revenue-sharing basis, Vasudevan said.

“They bring in land and equity and we will do the development,” he said. Construction will start in a year’s time and Phase I of the project will be completed in two-and-a-half years, he said, adding the entire project will be completed in six-years. Funding will be through internal accruals, project collections and some debt, he said. “We expect to realise around Rs 3,500-crore in sales from this project,” he said.

This is the Pune-based company’s second real estate project in Tamil Nadu, the first being Tulips in Coimbatore where Phase I work is on “in full swing”, he said. Apart from residential, this project, spread over 7-acres, will also include a hotel and hospital for which the company is scouting for a joint venture partner, he said, adding “we will ink deals with our partners within the next six-months.” The company will expand its footprint further in the southern state with another project at Madurai in about a year’s time.

“We are planning to develop another 30-acre project in Madurai on which we propose to start work in about a year. It will predominantly be residential but will have a shopping mall and a multiplex,” he said. Investment details are presently being worked out for this project, he said.

Godrej Observes High Growth Rate- Plans to Launch More Projects

Speaking at the Reuters India Investment Summit in Mumbai, Adi Godrej said the company, which is already developing 90 million square feet across India, would announce about five new projects this year in addition to five that have already been announced.” Growth rates are very high, typically in 5 years we have grown at a compounded rate of exceeding 50 percent per annum. It will certainly be higher than that unless regulatory approvals come in the way,” he said.

Regulatory hurdles, which usually delay or halt project growth in India, are unlikely to ease, Godrej said, adding regulatory responses in India should be “logical, reasonably long-term and should not be case-by-case”. The firm will raise some debt for projects financed this fiscal year, but plans to raise equity through a public offering in 18 to 24 months. “For about a couple of years, we could raise more loans and still be comfortable with our debt-equity. After that, we may need to raise equity so our debt-equity ratio doesn’t get out of hand,” Godrej said.

Godrej also called for greater private-sector involvement in infrastructure projects, stressing the need for a regulatory body that was independent of the government. With an economy growing at 8.5 percent and a fast-urbanising population of 1.2 billion, the need to speed project approvals, implement new financing models and lure foreign investors is increasingly acute in India. Still, Godrej was optimistic the Indian economy would grow more than 10 percent annually over the next decade, boosting demand and affordability, and making its real estate business the largest revenue contributor to the group in five years.

Godrej declined to provide details on the new projects, but said the firm would look at larger cities such as Nagpur in the western state of Maharashtra or Kanpur in the northern state of Uttar Pradesh, where it does not have a presence. The firm is also exploring one or two large redevelopment projects in Mumbai and hopes to finalise them this year. Redevelopment projects are becoming increasingly common in major land-starved cities in India, where many buildings are in need of renovation. Residents are provided the means for temporary accommodation while builders raze the buildings to the ground, replacing them with new ones.

Builders are given incentives for redevelopment projects and often make money by creating more floors on the same land. The pressing need for more housing in India’s financial capital has had builders eyeing opportunities for redevelopment after a two-year market slump amid a global economic downturn. “We are interested in redevelopment of a cluster of buildings. I expect there could be several such opportunities in Mumbai,” Godrej said, refusing to give specific details.

Godrej said he hoped supply of “affordable housing” — which the firm defines as accomodation that costs less than 2.5 million rupees or $50,000 — would increase. He added that if prices continued to increase at current supply levels, the Indian residential market could head into a “bubble.” At 12.51 p.m., shares in Godrej Properties, which has risen about 36 percent since it listed earlier this year, were up 0.38 percent at 728.65 rupees in a firm Mumbai market.

Delhi CM Blames Emaar-MGF and DDA for Commonwealth Games Mess

Under fire from all quarters for the mess surrounding the Commonwealth Games Village, Delhi Chief Minister Sheila Dikshit trained her guns on the Delhi Development Authority (DDA) and Emaar-MGF on Monday. The housing agency, which is under the Union Ministry of Urban development with the lieutenant governor as its controlling authority, was tasked to construct the Village. The complex has been developed by real estate major Emaar-MGF. When asked about the ‘progress’in the cleaning operations at the Village, Dikshit said those tasked with the job had been working very hard.

“We received the Village in very poor shape, but things are improving with each passing hour,”Dikshit said. Asked whether her government would be able to meet the Wednesday deadline set by her, she said: “I do hope that all things are alright in the end, but I can’t give you a timeline. “The chief minister didn’t mince her words as she tried to deflect the blame. “There is some seepage in the towers, but the builder and the DDA should have looked at the problem earlier,”she said. Dikshit pointed out that some of the towers built by Emaar-MGF still had stagnant water in the basements and the authorities were finding it very hard to drain it out from there. “Since there is a lot of water in the basement of these buildings, some lifts, too, aren’t working.

If it remains sunny, we may be able to remove the water quickly,”she added. Sources said that the civic agencies feared further breeding of dengue mosquitoes in the stagnant rainwater. “Given the high level of the area’s water table and with the Yamuna overflowing till a couple of days ago, draining the water wasn’t easy. With the sun out now, we’re fast putting our house in order,”a senior civic agency official, who was part of Dikshit’s entourage to the Games Village on Sunday, said. “Now we are cleaning up the rooms, we are cleaning up the public areas, the verandas, corridors and staircases. We have given instructions that all those involved in the job should put in double the effort,”she said.

The Prime Minister’s Office asked the Delhi government to “take charge”of the Village from the DDA and “clear the mess”. It was only after this that the Delhi CM -facing criticism for “passive”leadership -started monitoring the operation personally. Since then a workforce of over 1,400 people, including “borrowed”officials from five-star hotels, has supervised the cleanup of residential quarters, helped catch over 250 stray dogs, overseen the drainage of stagnant water and increased the frequency of fumigation drives. The chief minister first interacted with the media in the morning when she launched a hop on-hop off bus service.

The fleet will commence operations from Connaught Place and target the CWG visitors as it covers all important tourist destinations, monuments, markets and museums across the Capital. Even as the embattled Dikshit tried to restrict her media interaction to queries regarding the bus service for tourists, she faced a volley of questions on the numerous missed deadlines and the messy clean-up operation at the Games Village. When asked about owning up the responsibility for the apparent “failure”of the leadership, she passed the buck to the builder and the Union urban development ministry for the sorry state of the Village.

The civic officials, who have visited the Games Village and had a first-hand look at the operations, said that they may be able to complete the work in the nick of time, just before the Games open. “What we have been asked to do now in a matter of two weeks is something which should ideally be done over a period of at least two months. If the weather remains good, we may still meet the October 2 deadline, only just,”a senior civic agency official said. Incidentally, Dikshit and the other Games-related organisers have earned the dubious distinction -both within the country and abroad -of setting new deadlines on the eve of the expiry of the previous one. The chief minister’s deadline-shifting first began almost three months ago when the government missed the initial July 31 target to complete the Games-related work.

Subsequent deadline announcements were made for finishing the work by August 31 and mid-September. But these, too, were overshot. However, this time it is a now-ornever situation.