When contacted, the Pune-based SRK Group’s Chairman and Managing Director K Rasheed Malik said, “We are looking into new areas and different projects. Currently we are talking to land owners to acquire land, but nothing has been finalised yet. In Kerala, we have already identified some projects, which we will be developing in the future.” He, however, declined to comment on the size of the investment the group is planning to put in.

According to the sources, SRK group plans to invest about Rs 2,000 crore in Kerala in five years. It is also likely to launch 3-4 residential projects in the state within the next six months. Apart from Delhi, where SRK Group plans to develop only commercial projects, in all the other cities it will develop both residential and commercial properties.” We are looking to develop about 15 projects in these five new cities with over 100 acres of land in total,” Malik said.

The group, which is currently developing 20 projects in south India, is also planning to construct 100 housing units for Adivasis and poor people in Kerala free of cost, he said.

“We will also be launching healthcare facilities and ambulance services in rural Kerala,” he added.

A developer has put on the block a 200-room hotel project in Ahmedabad that has a management tie-up with a reputed international hotel brand. Work on the project is around 60% complete. Similarly, two mid-size hotel projects in Bangalore, which are in the early stages of construction, and one each in Pune, Chandigarh and NCR have been put on the block. Almost all the projects are mid-size. Some developers are looking at completely exiting the hotel projects while others are looking at stake sale.

“The developers are looking for equity dilution and are now willing to settle for lower valuation in their hotel projects,” says Cushman & Wakefield director (hospitality) Akshay Kulkarni.

Till six months back when the going was good, several realty developers, who had parcels of land at strategic locations, were trying to get into the glamourous hotel business. With hotel room shortage taking room revenue to new levels, the hospitality business looked very attractive. And with foreign hotel chains looking to aggressively expand in India, even small developers could easily tie up with them for a management contract.

“The initial excitement is over. The hotel room rates are sliding. Moreover, the hotel projects are capital-intensive and payback period is very long, compared to other assets such as housing or commercial,” says Knight Frank India chairman Pranay Vakeel. Most of the properties put up for sale belong to small developers, who don’t have the holding power. They are now approaching bigger developers for a buyout. “We have received proposals to buy out a few hotel projects. We will go for it, if we get an attractive valuation,” says a senior executive of a Delhi-based realty firm, which is developing at least a dozen hotels across cities.

In several cases, where actual construction work has not begun, developers have deferred the projects. “Real Estate Developers are now looking at a longer timeframe for their new projects,” says Marriott area vice-president Rajeev Menon. Marriott has six operational properties in India and plans to add 15 by the end of 2009. The company only has management tie-ups with local hotel owners and developers.

“This is a result of desperate measures by most of the developers, and second, stakes are very high as most of the projects are not being sold. Developers have gone aggressive with an increase of 20-35% in the advertising budget due to inflation,” said Noshe Oceanic V-P Rajiv Gupta.

The agency handles accounts of real estate developers like Spaze Towers, Rohtas, AMR Infrastructure. Agreed Spaze Towers director Bharat Kumar: “We have increased our advertising budget by another 20% due to recession in the market as well. Our stakes are high at the moment but things are going to get right in the next two-three months.”

Many players have even bought back their sold-out properties and are re-selling them to make out for the losses. Most of the players are using tactical promotional strategies to be high on the recall value. With inflation on the high and property prices on the rise, developers are desperate. “It’s a do or die situation out there due to high recession in the market. Many developers are buying back their projects and re-selling. It is necessary to make a noise at this time to keep the projects on high visibility radar for those who actively trade on the real estate.

The print media is taking up the major chunk while the rest goes to the outdoors. Out of a scale of 10, together advertising in print and outdoor could be rated as seven,” said Noshe Oceanic president Asheesh Sethi.

Despite a desperate situation, most developers see brighter day ahead. “There has been a minor moderation because of liquidity crunch and many internal and external expenses have been re-budgeted. But I don’t think the overall indications would be visible on an annual basis,” said Parsvnath Developers CEO BP Dhaka.

Developers like Unitech, DLF and Ansal API have not cut down on their advertising budgets. “We have increased our promotional budget and see no reason why we should cut costs here. Moreover, in companies such as ours, the ability to fight recession is inbuilt,” said Ansal API president (international market) Kunal Banerji.

For now, public attention is focused on Jain and his company, due to his latest tie-up with Hotmail founder Sabeer Bhatia for a hi-tech city spread over nearly 11,200 acres in Panchkula, in the vicinity of the landmark city of Chandigarh. Widely perceived as the white knight for Nanocity Haryana Ltd, Jain has picked up a 38 per cent stake in the firm for Rs 41.5 crore and has promised to invest another Rs 400 crore in equity and debt to develop the city.

The partnership had been widely expected. Bhatia has spoken of the project as his dream. In Jain, he has found a stockbroker turned realty developer who has over 210 million square feet under the works within 18 years of having founded his firm. The Nanocity is premised on the dream of developing a knowledge city, and a green-field one at that, next to Chandigarh, which once was seen as the electronics and semiconductor manufacturing hub in North India.

The suburb of Mohali , which abuts Le Corbusier’s famous creation, is home to the country’s oldest and largest chip manufacturing facility — the government-owned Semiconductor Complex Ltd — and the likes of Punwire, Fujitsu Communications and a TV picture tube company among others (some of which have since shut down).

In doing this deal, Jain has also put behind him last year’s disappointment of not having been granted a licence to operate mobile phone services in the country. Knowing Jain, and having heard and seen so much of Bhatia, this may well be the beginning of a partnership that seeks to link the grimy brick-and-mortar world to that of invisible nano-particles.

But in Fitch’s opinion, this slowdown will also aid the process of weeding out some of the weaker entities within the sector, and increasing the relative strength of some of the larger, more established developers.

The rating agency, however, warned that the liquidity risks on account of significant bullet repayments falling due during the course of 2008 remain a key challenge across the board.

Larger, established and well-capitalised companies with access to banks/financial institutions would remain better positioned to manage this risk, while smaller players may end up either refinancing these at materially high rates of interest, or could default on their obligations, it said.

Many want to liquidate their land and incomplete projects by selling them to bigger developers or private equity players even at lower valuations. What’s forcing them to take this step is a stagnant market, with property rates undergoing major correction in some cities. Around 15 deals in real estate sector have fallen through in the past two months with investors developing a cold feet, said industry officials.

World’s two of the fastest growing emerging markets India and China have significantly improved their levels of real estate transparency, an indicator of real supply and demand in the sector, over the last two years, a latest survey says. According to real estate transparency index complied by professional services firm specialising in real estate, Jones Lang LaSalle, the biggest improvers in Asia Pacific are India, China and Vietnam, all of which have received considerably greater attention from investors and corporate occupiers in recent years.

The prefix of shopping-malls just got swapped with entertainment. While shopping very much remains the staple, entertainment options within malls are increasingly becoming the numero uno draw. Gaming, magic shows and events today account for a considerable pie of mall monies.

Industry players estimate the market for mall entertainment at more than Rs 1,000 crore and growing at an average rate of 15%. “By 2010, the number of malls in India is expected to cross the 600-mark and the mall entertainment business is bound to increase at a tremendous pace to attract consumer footfalls,” says Sanjay Prabhu, GM, Inorbit Mall, Malad. Now this calls for a wide swathe of players who provide entertainment and event platforms to these malls.

After making luxury villas and apartments in the heart of town, property firms are now wooing people to exotic spas and resorts.

Redefining business: A 3D rendition of the spa being built by Brigade group in Chikamagalur. Real estate developers are looking at several luxury verticals to expand their presence across the country.

From luxury to leisure, real estate companies such as Brigade group, Omaxe Ltd, Prestige group, Sobha Developers Ltd and Value Designbuild Pvt. Ltd, are entering into the leisure segment to build health resorts and spas in the backwaters of Kerala or amid the plantations of Chikmagalur in Karnataka.

“The huge demand and scope of business in the leisure and hospitality segment are the major drivers for builders like us to get into this vertical,” says Vineet Varma, chief executive officer, Brigade Hospitality Services Pvt. Ltd, a fully owned subsidiary of Bangalore-based Brigade group. “Also, there’s only so much you can do in the residential and commercial sectors and new verticals like these complete our portfolio.”

Brigade group is coming up with a Rs100 crore premium health spa resort in the quiet coffee plantations of Chikmagalur, about a four-hour drive from Bangalore.

While the group will develop the property, it has teamed up with Singapore-based hospitality brands Banyan Tree and Angsana to operate it.

The leisure segment has attracted not just top-of-the-line developers but also new entrants.

Value Designbuild, a five-year-old real estate company based in Bangalore, is also set to develop a spa along with leisure homes.

The company has earmarked a plot of land in Srirangapatnam (Karnataka) for a spa and plans to build high-end, leisure homes in Coorg in Karnataka.

“Spa and health resorts are a south India phenomenon particularly in the Kerala belt where Ayurvedic health treatments are a rage with domestic and international travellers. For us, a spa project is to attract weekend travellers raring to get away from the city,” said Koshy Varghese, managing director of Value Design.

Another Bangalore company, Sobha Developers Ltd, has a full-fledged Ayurvedic spa offering the traditional Kerala Ayurvedic massages, herbal baths in its first integrated township Sobha City in Thrissur in Kerala.

“Tier II or smaller cities offer a lot of variety for real estate development and we want to capitalize on the growing demands for our consumers. With the middle class getting richer, it is imperative to give them choices with projects like these,” says J.C. Sharma, executive director of Sobha Developers.

A lot of developers are looking at spas and resorts because it is a revenue generating business line, says Akshay Kulkarni, Cushman and Wakefield Inc.’s, a property consulting firm, director (hospitality) for South Asia. “Residential developers normally develop, construct and exit a project. A residential asset does not generate consistent revenues whereas spas and resorts do.”

It’s not just south-based builders who are diving into resorts.

Companies such as Delhi-based property developer Omaxe Ltd are also taking active interest in such ventures. Omaxe has tied up with Thai Privilege Spa, often rated by some among the world’s best spa chains, to build spas in the company’s luxury residential projects.

Initially, the agreement is to establish and operate 10 spa outlets of Thai Privilege Spa in Delhi and north India.

Omaxe has also partnered with tennis player Leander Paes-promoted Leander Sports, a wellness concept design company, to design and manage fitness facilities in five of the company’s townships in north India.

Leander Sports will provide the concept and design of health clubs, spas, meditation centres, yoga cells, gym and sports complexes in the company’s townships.

“People living in high-end apartments aspire for a better living,” says Arvind Parekh, director, Omaxe. “There are people who even go on a holiday to Bangkok just to get a spa treatment. There is a demand for spas. Therefore, we thought of providing spas within the townhsips itself.”

Analysts say that though there is a substantial demand for such developments, spas and resorts would be commercially viable only in larger developments when combined with a hotel, retail space or when it is located in a large township development.

Naresh Dandapat, regional director (south) of Knight Frank India Pvt. Ltd, says he believes the resort business in India has not proved to be a success story over the years.

“It is a relatively new phenomenon here and it is too early to say whether it turns out to be a profitable venture for developers in the long run,” Dandapat said.

“The best way for developers to do it now is to tie up with an international name which gives the project great brand value.”

Parekh agrees, “Running a spa is a very specialized business. There are different types of treatments available at spas these days and to provide an international experience you need to have special facilities and trained personnel. This is where an international company can add value.”

Brigade, for instance, is developing a spa at the upcoming Sheraton Bangalore and has signed a management contract with the Angsana Spa brand.

Prestige group, together with hotel chain Marriott group, is developing a Rs1,000 crore spa and golf resort in Nandi Hills, just ouside of Bangalore.

Resort and spa projects in smaller cities towns such as Periyar in Kerala or Manesar in Haryana are location-specific ventures, said Sudeep Jain, executive vice-president of Jones Lang LaSalle Hotels, the hospitality division of property consultant, Jones Lang LaSalle Meghraj.

Dedicated real estate funds are eager to support such venspa and resort ventures, notes Pranay Vakil, chairman of Knight Frank India.

Many want to liquidate their land and incomplete projects by selling them to bigger developers or private equity players even at lower valuations. What’s forcing them to take this step is a stagnant market, with property rates undergoing major correction in some cities. Around 15 deals in real estate sector have fallen through in the past two months with investors developing a cold feet, said industry officials.

Consider a few cases. A mid-sized builder at Chembur in Mumbai has put its 14-floor commercial property in central Mumbai on the block. The developer wants to raise around Rs 150 crore which would help him complete his upcoming project.

A Hyderabad-based real estate group has started advertising to attract high networth investors to generate Rs 50 crore against bulk purchase of its housing project in the city.

A small developer in Mumbai, pushed to a corner on account of mounting payables for construction material, is now offering its project at Juhu-Versova in Mumbai at about 35% discount to the current market price. In Delhi, some developers have approached property consultant to sell their income generating commercial properties to finance some of the unfinished projects.

Real estate funds and established developers admit that they are working on various proposals. “Even in the normal circumstances we used to get offers from mid-sized developers to buy out their projects. But now, the numbers have increased considerably,” said Hiraandani Developers chairman Niranjan Hiranandani.

The Bangalore-based developer Nitesh Estates said that it has received similar proposals, mainly from markets like Pune, Nagpur and Bangalore. “Every second day we are getting a proposal either to pick up equity in the project or to buy out fully. We have not concluded any such deal so far,” said Nitesh Estates chairman Nitesh Shetty. Industry observers said that the commercial property market, stagnant for the past few months, is showing signs of crack, especially in suburban Mumbai and many tier-II & III cities. The volume of commercial property sales has dropped by 30% in the past two months in the wake of rising interest rates.

“Developers, specially small developers, are under pressure now. Fund flow into this sector has begun to dry up. Selling incomplete projects to big developers or private equity firms is an option explored by many such developers,” said a senior official with KnightFrank India, a property consultant. Thanks to tigher fund raising norms and a weak stock market many developers are knocking the ddors of private equity investors who are driving hard bargains on valuation and. Even on a reduced valuation, PE firms are putting various clauses to safeguard their money.

In last May, the finance ministry had said that all foreign funds raised by Indian companies through partially convertible, non-convertible and optionally convertible preference shares, would be treated as debt and would be subject to guidelines applicable for external commercial borrowings (ECBs).

This had made it tough for developers to access foreign funds, since ECBs are allowed only in large real estate projects and the conditions are far more stringent than FDI. “The developers are ready for a compromise on valuations. The risk adjusted returns have gone up by 20-25% during the past few months,”said Starwood Capital India head Balaji Rao.