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INDEX OF MORTGAGED PROPERTIES VITAL

How this institution helps ensure a property is mortgaged with one lender only

The Finance Minister, in his Budget speech for 2011-12, had elaborated on the establishment of a Central Registry.

The objective of setting up the Central Registry is to prevent more than one loan being taken from different banks for the same property. This Registry became operational on March 31, 2011.

The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), a government company, has been incorporated for the purpose of operating and maintaining the Central Registry under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI Act).

Initially, transactions relating to securitisation and reconstruction of financial assets and those relating to mortgage by deposit of title deeds to secure a loan granted by a bank or financial institution will be registered in the Central Registry.

The records maintained by the Central Registry will be available for scrutiny to any lender or any other person wanting to deal in property. Availability of such records will prevent more than one loan being lent against the security of a property, as well as fraudulent sale of property without disclosing security interest over it.

Under the provisions of the SARFAESI Act, details of any charge creating security interest in a property are required to be filed with the Registry within 30 days from the date of creation. A Central Register will be kept for the purpose of maintaining records of registration of transactions relating to securitisation, reconstruction of financial assets and security interest created over properties. All electronic documents, required to be signed by the Central Registrar, will be authenticated through his digital signature.

If there is a security interest being created in favour of two or more lenders, the details of inter se priority among them and whether they hold it on a pari passu or subordinate basis is to be specified.

All details of transactions maintained in the Central Registry are open for inspection through its website, and during business hours at the Central Registry on payment of a fee.

Banks obtain a mortgage of the property to be funded as the prime security. The mortgage is usually in the form of equitable mortgage or deposit of title deeds which is very simple, convenient, inexpensive and borrower-friendly. One disadvantage of this kind of mortgage is that the mortgage deed is not registered with any revenue authority. Hence, the mortgage details are not depicted in the revenue records. Neither the encumbrance certificate issued by the sub-registrar nor the search certificate issued by an advocate will be able to detect such mortgage details.

Credit Information Bureau of India Ltd (CIBIL) has already introduced ‘Mortgage Check’, in association with the National Housing Bank (NHB), the home finance regulator. The ‘Mortgage Check’ will contain information on properties mortgaged to various banks, details of existing loans and comprehensive information on such properties.

It will help lenders share and access mortgage information. The ‘CIBIL Mortgage Check’ is a database of over six million mortgage records collected from member organizations — banks and housing finance companies. Authorised persons can access the database to check details of a property for which a loan is applied.

QUICK BITES

THE CENTRAL REGISTRY WILL ENSURE THAT A PROPERTY ONCE MORTGAGED WILL NOT BE PUT UP AS SECURITY FOR ANOTHER LOAN

CIBIL HAS A DATABASE OF OVER SIX MILLION MORTGAGE RECORDS COLLECTED FROM MEMBER ORGANIZATIONS – BANKS AND HOUSING FINANCE COMPANIES. AUTHORISED PEOPLE CAN ACCESS THE DATABASE TO CHECK DETAILS OF A PROPERTY.

-TOI

Private equity Investments soar 75% in realty, mutual funds shun sector on rising interest rates

KOLKATA/NEW DELHI: Private equity investments in India’s real estate projects have grown more than 75% over the past year, even as mutual funds and other investors have shunned this sector because of rising interest rates and falling revenues.

Analysts say developers approach private equity players and are more amenable to negotiations during such downturns. That explains why investments in real estate projects by various private equity funds have soared, rising to $1,656 million in 2011, from $944.7 in the previous year, according to accountancy and advisory firm Grant Thornton, while mutual funds reduced their exposure to the sector drastically during this period.

Total investments by mutual funds in real estate stocks declined 63.6% to Rs691.55 crore at the end of September 2011, from Rs1,900.83 crore, according to Delhi-based investment research firm Value Research.

Foreign institutional investors have also reduced their shareholding substantially in real estate firms during this period. At the same time, the private equity arms of HDFC Bank and Kotak Mahindra Bank, among others, have found value in investing in projects of real estate developers.

Analysts say such investments entail much lower risk than investments in stocks. “Project-level investment entails only projectlevel risk while the risk taken by an equities investor is much higher because the company has taken risk in multiple projects,” says Harish HV, partner, corporate finance at Grant Thornton.

Much of the private equity money in 2011 came from domestic private equity funds in the form of high-yield debt with fixed returns that carries lower risk, says S Sriniwasan, chief executive officer of Kotak Realty Fund, which achieved an IRR of 32% on $240 million worth of exits that it has made from real estate projects.

The option of carrying out structured equity transactions, after the recent clarity on guidelines from the Department of Industrial Policy and Promotion, has also spurred private equity investments. Most recent deals have been structured transactions with preferred returns built in, which reduce risk.

“HDFC Property Ventures has been investing in more structured instruments and only a small amount as equity kicker,” says KG Krishnamurthy, chief executive officer and managing director of HDFC Property Ventures. Kotak Realty Fund and many other private equity players are now busy raising both domestic and foreign money to invest in real estate projects across the country.

A fund, of course, has a lot more control on the project than an equity investor does. “If something goes wrong, the fund still has the opportunity to try and help the developer to fix it. What can an equity investor do?” asks Anckur Srivasttava, chairman of property advisory firm GenReal Property Advisers.

Reliance Mutual Fund reduced its investment in real estate stocks to Rs233.96 crore at the end of September 2009, from Rs680.96 crore a year ago. SBI Mutual Fund scaled down its exposure even more drastically, to Rs18.03 crore, from Rs190.56 crore during this period.

Source: http://economictimes.indiatimes.com/markets/real-estate/realty-trends/private-equit-investments-soar-75-in-realty-mutual-funds-shun-sector-on-rising-interest-rates/articleshow/11456518.cms

Real Estate Firms Drop Overseas Plans, To Stay Grounded in India

Real estate companies, which started venturing overseas around 2006-07, are reviewing their global plans. With the slump in international realty markets, many domestic companies are either withdrawing from weak markets or putting their global plans on hold, reports Business Standard. Raheja Developers, for instance, has shelved plans to enter markets such as Mauritius and Colombo. Hiranandani Group, which has a major presence in Dubai, has changed its strategy. It’s stopped launching new projects, and is focusing on completing existing projects for other developers on a contractual basis. Omaxe has already exited Dubai.

Darshan Hiranandani, director and chief executive officer, Hircon International, a joint venture between the Hiranandani group and ETA Star, told Business Standard the company was not launching any new project in Dubai due to the slump. “Our strategy is to complete the incomplete projects for other developers on a contractual basis.” According to him, 23 Marina in Dubai, which was recently completed, has been sold out. However, the launch of Business Bay, which the company says ‘coming soon’ on its website, will not be for sometime. He was optimistic the market would recover soon.

But Nayan Raheja, director, Raheja Developers, is not so hopeful about prospects of the international market. The Dubai market would not recover, at least in the next five years, he said. “Nobody should be looking at the Dubai market as of today,” said Raheja. Raheja Developers, which was evaluating opportunities to enter Mauritius and Colombo, is giving it a miss in the wake of the global economic and realty gloom. “There is negative sentiment internationally. At this point, we are not even considering venturing out,” Raheja said. Tata Housing is one of the few companies looking overseas at this point. After establishing itself in the Maldives, the company is looking at Colombo in Sri Lanka.

Its managing director and chief executive, Brotin Banerjee, said, “We are confident of finalising a few projects in Sri Lanka this financial year — Colombo will be one of the locations. All these international projects are being planned through separate special purpose vehicles formed for each country or project.” Banerjee said the company was in the final stages of due diligence for two mixed-use development projects of two million square feet each in Colombo. Of this, one could be affordable housing. “With peace returning to the island nation, real estate will be a big growth story there,” Banerjee said. Tata Housing has earmarked Rs 1,000 crore for various ventures in 2011-12. “We work on a multi-city strategy and projects targeting all customer segments and hence, a slowdown in some geographies or customer segments does not adversely impact us,” said Banerjee.

Omaxe Group entered Dubai in 2007, with a goal of expanding in West Asia. But after investing Rs 50 crore (the first instalment of a Rs 1,600-crore project) through a joint venture with Dubai World’s property developer, Nakheel, Omaxe withdrew from the market due to a near lull. “We got the investment back, as Nakheel put the projects on hold indefinitely,” said Rohtas Goel, chairman and managing director, Omaxe. And now, the company has no plan of expanding outside India.
According to Sunil Dahiya, managing director of Vigneshswara Developers and vice-president of the National Real Estate Development Council, it is not just real estate developers, but also construction companies, which are withdrawing from the Gulf. “Indian companies in West Asia, especially into construction projects, are experiencing a near lull, as no major work is happening there. The contractors are not being paid,” he said. At least 10 to 15 construction companies present in the Gulf are suffering from the slump. Real estate consulting firm Cushman & Wakefield’s chief executive for Asia Pacific, Sanjay Verma, said, “For those over expanded, it would be a sensible move to focus on their core strength at this point.”

Source:http://www.realtyplusmag.com/rpnewsletter/Fullstory_Newsletter.asp?news_id=18086&cat_id=1

Greater Noida: Great value for low costs

Located in Uttar Pradesh, barely 40 kilometres from New Delhi and 20 kilometres from Noida, the area of Greater Noida is slowly but surely on the path to becoming one of the largest industrial and education centres of the country. Real estate in this area is amplifying at a good pace in wake of its growing importance as a realty destination around Delhi. Like other areas of the NCR, Greater Noida too is home to a number of Indian and foreign companies, which is an advantage for the area. It is on its way to becoming a commercial hub. Real estate in this city has huge potential for development.

The proximity to Delhi and Noida and good connectivity with both cities has been a major catalyst for the growth of the city. The relatively pollution-free environment ranks it higher on the preference list of both developers and investors. The modern infrastructure in keeping with the demands of high quality living and improved living standards has made Greater Noida a destination of choice. In addition, a large number of construction projects offer quality housing and office space equipped with modern amenities, making real estate in the city all the more desirable.

To start with, the unaffordable property rates in Delhi had shifted the attention of developers to Noida, as it offered vast land at reasonable prices. Property in Noida flourished eventually to the extent that the property prices in the city have now skyrocketed. The builders are again in a fix and looking for other feasible options that may extend long term benefits and help cater to the phenomenal influx of population into the region. Thus, property in Greater Noida has come across as the next best option given its location advantage, good connectivity, green environs and the enormous potential fordevelopment.

Source:http://www.indianexpress.com/news/Greater-Noida–Great-value-for-low-costs/891367/

Real estate houses most PE investments in 2011, attracts $1,700 million

Real estate emerged as the popular parking place for private equity funds who invested $1,700 million in the sector during 2011. Power sector that topped the PE charts during the first six months of the year finished third with $892-million investments behind automotive sector that could attract $1006 million private equity funding.

Overall PE investments during the year rose to $7.7 billion through 347 deals, up from $6.2 billion and 253 deals in 2010. However, the country’s total investment in the private sector was a tad lower than last year.

In 2011, PE players signed 29 deals in real estate at a time when the sector found it tough to receive bank funding, a report by consulting firm Grant Thornton says. “Banks have become too cautious to lend to the sector and PE players found a new opportunity. They expect high returns within a year or so,” says Raja Lahiri, partner, transaction advisory services, Grant Thornton India. Of the 100 transactions handled by the firm, more than half are into real estate.

Private equity in real estate projects will fetch considerable returns by next year-end or early 2013, says Vikram Hosangady, partner, KPMG. “Limited partners (who write cheque for funds) expect 15-25% returns from real estate deals. Foreign investors are optimistic about India. All they want is prompt action and friendly policies,” he says.

Automotive, power & energy, banking & financial services and IT & ITes received PE investments of $1006 mn, $892 mn, $816 mn and $783 mn respectively. The sectors were ahead of telecom, metals & mining, pharma & healthcare, hospitality who saw a declining interest from private equity firms.

Bain Capital and Govt of Singapore clinched the top deal of the year of $849 million when they together took 30% stake in Hero Investment. Macquarie SBI Infrastructure Investments, Blackstone and a consortium of Standard Chartered PE (Mauritius), JM Financial and NYLIM Jacob Ballas have invested $200 mn each in separate deals. “Though the outbound deals have seen lesser activity due to weak global conditions, PE firms continue to attract better deals,” adds Lahiri.

The year saw $50.9 billion invested through various forms of private investments like mergers & acquisitions, PE deals and qualified institutional placement (QIP). The invested amount in 2011 was however, lower than $62.2 billion investments in 2010 and so were the number of deals that fell to 961 deals from 971 deals last year.

Source: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/real-estate-houses-most-pe-investments-in-2011-attracts-1700-million/articleshow/11216641.cms

Ansals free up 20% of pledged stock

Promoters of Ansal Properties and Infrastructure have got their equity shares pledged with HDFC released from the financial institution. The shares were pledged as an additional collateral for a loan availed against some properties.

HDFC freed up around 1.47 crore equity shares of the company, resulting in a decrease of 20.11 per cent in the total shares pledged by promoter/promoter group.

With this, the pledged shares of promoters have come down from 97.74 per cent of their total holding in the September quarter to 77.63 per cent now.

A senior company executive said, “The shares were pledged as additional collateral against various loans availed from the financial institution a year-and-a-half ago.”

An increase in the valuation of the properties against which the loan was availed led to the freeing up of the promoters’ equity, which was pledged as additional security.

“We requested the financial institution to get the properties valuated as their worth had gone up significantly compared with the time when the loan was availed. Once convinced, they freed the pledged shares as they were no more required,” said the official.

The promoters whose shares were released are Amba Bhawani Properties Pvt Ltd (22 lakh shares), Apna Ghar Properties Pvt Ltd (17 lakh), Kusum Ansal (64.74 lakh), Sheetal Ansal (39.26 lakh), and Sushil Ansal (4 lakh).

Going forward, the company is planning to adopt a two-pronged strategy for growth — capitalising on the brand equity of the already launched/ completed projects and taking up collaboration route for new projects.

“We are looking at extension of existing north Indian townships in Gurgaon, Lucknow, Sonipat and Panipat to increase returns through economies of scale. Also, we will work in collaboration to avoid huge investments in land aggregation,” said the official.

The company plans to end the current financial year with sales of 16-18 million square feet (msf) worth around Rs 15,000 crore. In the first half of the current financial year, it has achieved sales of 11.16 million sq ft worth Rs 6,130 crore.

The company, which has a total debt of Rs 1,450 crore, is looking to bring it down by Rs300 crore this fiscal.

Source: http://www.realtyplusmag.com/rpnewsletter/Fullstory_Newsletter.asp?news_id=17653&cat_id=1

Nation Housing Bank to raise Rs 4,500 crore for housing

The National Housing Bank will raise about Rs 4,500 crore this fiscal to fund housing activities. It has fixed the refinancing disbursement target for 2011-12 at Rs 12,500 crore against Rs 11,723 crore in last fiscal. The funds will be utilised for refinancing home loans of housing finance companies and commercial banks.

Seminar on Affordable Housing

A 2-day affordable housing seminar will be held in Bangalore Le Meridian on December 14 and 15. Organised by UBM and Property World, the 2-day event will focus on the emerging and dynamic government and regulatory framework, innovative financing models and evolving mortgage financing, construction techniques and materials, power-packed networking opportunities and strategies through solution-focused workshop tailor-made to meet the critical business needs.

Industry speakers will analyse the dynamic case-studies followed by a site visit to a leading affordable housing construction site to gain practical, implementable solutions to the on-the-ground challenges developers face in the overall low-cost housing construction.

Marg to develop agri and rural infrastructure in Karnataka

Marg, a Chennai based developer, has signed a MoU with the Karnataka government to develop and operate various projects and services in agri and rural infrastructure and agri-industry domains in Karnataka with a total investment of Rs 4,000 crore over the next 5-7 years. The MoU was signed recently with the government of Karnataka on the occasion of Global Agribusiness and Food Processing Summit-2011 being held under Bounteous Karnataka.

Source: http://economictimes.indiatimes.com/features/et-realty/nhb-to-raise-rs-4500-crore-for-housing/articleshow/11102361.cms

India’s Kotak Realty fund raises $98 mln

Kotak Realty Fund, a unit of Kotak Mahindra Bank, said on Tuesday it raised 5.23 billion rupees ($98.2 million) from domestic investors for a fund that will mainly invest in high-yield debt instruments of real estate developers. The primary focus of the fund will be on residential projects, it said in a statement.

“The financing constraints facing the real estate sector will help provide the funds with attractive investment opportunities and we expect deal flow activity to remain robust,” said Vikas Chimakurthy, director at Kotak Realty Fund. Kotak Realty Fund currently manages about $700 million across five funds. Indian developers have come under pressure in recent months as rising interest rates deter buyers, even as it becomes more expensive for builders to access funds.

Private equity investment in Indian realty was marginally down in the first nine months of 2011 to about $784 million, from $817 million at the same time last year, according to data from industry tracker VCCircle.com. Domestic property-fund houses including Kotak Realty, and IndiaReit Fund Advisors, a fund backed by UK private-equity firm 3i Group, are in the process of raising about $1 billion in total, in a bet on the long-term case for property in Asia’s third-largest economy. ($1=53.3 Indian rupees)

Source:http://www.reuters.com/article/2011/12/13/kotak-fund-urgent-idUSL3E7ND2YC20111213

Canada Based PE Fund SITQ Decides to Shut Down Indian Operations

Canada-based PE fund SITQ, which had plans to invest up to $1.6 billion in the Indian real estate sector, is shutting down its operations in the country. The fund has not been able to identify deals in the ‘right value’, said a person with direct knowledge of the development. SITQ, which is a part of Canadian business group Caisse de depot et placement du Quebec, merged with Ivanhoe Cambridge, another PE fund of the group, in July this year. The fund manages a portfolio of $30 billion across 24 countries. Its assets include office buildings, business parks, hotels, apartments and retirement homes in cities across Canada, US, France, UK and Germany.

It entered the Indian market in 2007, with a focus on the real estate sector. A year later, the impact of global recession was being felt in local markets leading to a lull in corporate activity and a drop in deal flow right up to 2010. “We did not find the right formula to make direct investments in India and direct investments take time to achieve,” said a company spokesperson over an email response. “As we are always on the lookout to increase our global presence especially in high growth markets such as India, we will keep monitoring the situation and may re-evaluate our position over time.”

SITQ planned to make direct investments in India, and appointed Aditya Bhargava as managing director to devise strategy and scout for investment opportunities. So far, its investments in the country have primarily been routed through the ‘fund of funds’ route, a situation where PE firms invest in other funds that in turn invest in companies. SITQ, which has so far invested in funds of other real estate funds dedicated for the Indian market, plans to continue its investments through the indirect route.

“It is a challenge for the overseas real estate firms to invest in Indian realty firms. Besides the regulatory issue, there is hardly any exit route due to poor capital market and non-availability of the real estate investment trust,” said Yogesh Kapur of Enam Securities. PE funds primarily invest in residential projects, which are self-liquidating at completion.

Around 50% UAE NRI’s Planning to Buy Property in India

Nearly half of non-resident Indians (NRIs) plan to buy property in India for investment purposes, according to a survey released by Sumansa Exhibitions. Conducted amongst 15,000 NRIs across the UAE, the survey revealed that Mumbai and Delhi grabbed the top spots as the extremely viable options for property investments since the cities continued to be the most robust real estate markets in the country.Pune, Gurgaon and Noida have emerged as hotspots for investments making it to the top five list of favourable cities. The study further indicates that NRI’s are not necessarily looking at their hometowns for investments.

Sunil Jaiswal, CEO of Sumansa Exhibitions, organisers of Indian Property Show, said: “The survey result is not surprising as Mumbai and Delhi are the most promising markets as far as RoI (return on investment) and net profitability is concerned. Both these cities enjoy commercial prominence, location advantage and increasing wealth, as such the growth momentum either has continued or is stable even if the world markets have experienced economic crisis. Factoring all the advantages these cities have, the scene will not change in near future. NRI does still consider that investing in these cities will be profitable. Pune, Gurgaon and Noida are in the top 5 as they enjoy the advantage of being in close proximity of the main cities.”

Honey Katiyal, CEO, Investors Clinic, India’s leading real estate consultancy, said: “NRIs are choosing other cities apart from their hometowns and especially Mumbai, Delhi, Pune, Gurgaon and Noida, which reflects the sentiments that the investors are looking for good investment options for increasing their wealth. These cities are favourable as investors can make good profit as the real estate prices in past few years have spiraled enormously and will witness upward trend in future, barring 10-15 per cent correction in some parts of these cities, plus the cities give good rental income. Home loans and other facilities from Banks & Builders can also be availed quickly, all this makes them good options for investment. We as one of the India’s largest real estate management consultancies have seen this trend and expect the same to continue in foreseeable future”.

Katiyal said NRIs stand to gain from the sharp slide in rupee over last two weeks. The rupee has depreciated more than 16 per cent against the US dollar since July 2011. This has made homes in India increasingly cheaper in dollar price terms, an attractive proportion specially at a time the real estate sector in the developed markets remain depressed. Little wonder then, NRI’s have been looking at the homes back home with renewed interest.