Latest Property News on 'Real Estate India'

Axis Bank Withdraws its Home Loan Scheme 2 Months before Schedule

The increase in the cash reserve ratio (CRR) has started taking a toll on interest rates, with Axis Bank withdrawing its teaser home loan scheme two months before schedule. India’s third-largest private bank had launched a fixed-cum-floating rate home loan scheme on January 6. It offers 8.25 per cent interest rate for the first two years. Thereafter, the loan is priced 3.5 per cent and 3 per cent less than the mortgage reference rate for loans up to and above Rs 30 lakh, respectively. A senior bank executive said given the emerging interest rate environment, the bank did not want to offer a fixed rate for two years. However, the 8 per cent fixed rate will continue for the first year.

The product was taken off the company’s website today. The sudden withdrawal surprised many. A direct selling agent who has submitted applications under the scheme said, “With Axis Bank suddenly withdrawing its teaser rate scheme, I am approaching other banks.” Axis was one of the last banks to offer such a scheme. Last year, a number of banks, led by the country’s largest, State Bank of India, launched these products. A senior SBI executive said while cost pressures were emerging, the bank would fulfill its commitment and continue to the offer the product till the end of March. Read More »

Real Estate Developers Reviving Big-Ticket Projects in Kolkata

Real estate developers are reviving big-ticket projects in Kolkata after securing a commitment from the West Bengal government that “some kind of incentive” would be offered to help them emerge from the downturn. The projects had been halted for at least 18 months. States such as Maharashtra, Gujarat and Uttar Pradesh have already announced incentives for real estate developers. Maharashtra has raised the so-called floor space index, or FSI, a measure of the amount of covered space that a developer can set up on a plot of land. Uttar Pradesh is asking developers to put up a smaller amount than before at the time of allotment for state government projects.

“Demands (for incentives) from real estate developers are reasonable,” said Asok Bhattacharya, West Bengal’s minister for urban development. “We are examining the legal aspects and hope to announce some kind of incentive soon.” Road to recovery: An under-construction complex in Rajarhat, Kolkata. Consultants say real estate prices in Kolkata have begun to firm up. Road to recovery: An under-construction complex in Rajarhat, Kolkata. Consultants say real estate prices in Kolkata have begun to firm up. Among those restarting construction of key projects in Kolkata are Emaar MGF Land Ltd, which plans to build two 250-room hotels under the JW Marriott and Holiday Inn brands, and local players such as Dhoot Developers Pvt. Ltd, South City Projects (Kolkata) Ltd and Merlin Projects Ltd, which are building large commercial complexes in partnership with the Kolkata Metropolitan Development Authority, or KMDA—an arm of the state government. Read More »

Banks Expected to Take Action over RBI’s Concern on Home Loan Rates

RBI deputy governor Usha Thorat has said the central bank has made clear to banks its thoughts on teaser rates on home loans, and banks are expected to take action. Speaking on the sidelines of a finance conference on Monday, Ms Thorat said: “Banks should have taken whatever message was given,” when asked about further progress on the regulatory front on teaser rates. The central bank has flagged of its concern over teaser rates twice in less than 30 days. Last month, in the second week of January, Ms Thorat had warned banks: “Teaser rates are increasingly being offered which is a cause for concern,” she said.

Last week, another deputy governor, KC Chakravarty, had highlighted RBI’s concern about the lack of uniformity in rates offered to different customers of the same bank. Teaser rates refer to a step-up pricing structure on loans where banks offer a low fixed rate of interest in the initial years of the loan. However, after 2-3 years of the disbursement, the interest rate on the loan gets aligned with the prevailing rates in the market. What this means is that if the interest rate environment does not change, the borrower would end up paying a higher rate of interest after the fixed rate period comes to an end. Such promotional offers are common internationally. Read More »

RBI Rules Out Restructuring of Bad Real Estate Loans

The Reserve Bank of India (RBI), worried about soaring asset prices, has ruled out one more round of restructuring of bad real estate loans which may increase non-performing assets of banks, but bring down prices of homes as developers sell off properties to pay lenders, said at least two people familiar with the matter. “Let them lower the prices and clear their inventory,” a senior RBI official had told bank chief executives ten days back. The banks were seeking permission continue classifying some bad real estate loans as standard assets even after developers failed to pay. One more restructuring would rather be a boon for developers to hold on to prices and profit, while hurting consumers, the official had said.

“Banks are wary of the risk associated with commercial real estate because demand for commercial space such as malls has come down and (at the same time) there is a decline in demand in the residential sector across all income groups,” said AC Mahajan, chairman and managing director of Canara Bank. “This problem cannot be solved by repeated restructuring of loans, but by reviving the market by lowering the price, making property more affordable and showing the customer some economic value in their purchases.” The RBI allowed banks to restructure loans to both manufacturers and developers and continue showing bad loans as standard assets to save banks and developers from financial strain after the collapse of Lehman Brothers in 2008. Read More »

DB Realty Issues IPO at Rs 468 per Share

Real estate developer DB Realty has fixed the issue price of its initial pubic offer (IPO) at Rs 468 per share, the lower end of its price band. Mumbai-based realty firm’s Rs 1,500 crore initial pubic offer (IPO) that closed on February 2, was subscribed nearly three times. The issue would constitute 13.18 per cent of the fully diluted post-issue capital of the company, DB Realty said in a public announcement on Thursday.

DB Realty entered into the capital market with an issue size of 3.20 crore equity shares in a price band of Rs 468-486 a share with face value of Rs 10. The issue, which opened on January 29, was subscribed 4.4 times from the qualified institutional buyers (QIBs) portion. The proceeds of the IPO would be utilised towards new projects, pre-payment of loan and general corporate purposes. Read More »

PE Firm Red Fort to Invest in Greater Noida Project

Red Fort Capital, an India-focussed private equity (PE) firm, on Thursday announced a Rs 200-crore investment to pick up an undisclosed stake in a residential housing project to be developed by Noida-based real estate firm, 3C Company. The funds will be used to develop around 3,500 apartments in the project, spread across 41 acres at Sector 110 in Noida.

ET was the first to report the news in its edition dated February 3. Although the exact stake picked by Red Fort Capital could not be ascertained, a senior executive in the real estate sector familiar with the development said the PE firm bought around 50% equity in the project. Read More »

Real Estate India still has Potential

Rajeev Malik, Head, India and ASEAN Economics, Macquarie Securities Group, gave his views on where to invest money. Well for me personally, real estate in some cases still looks more attractive. At the end of the day, it is very much an individual risk appetite and portfolio requirements as such. Equities would be an important point. Bonds look rather risky in the sense that even if you look at the US, it has already had a pretty good run with the broader dynamics, there, it is difficult to see why yields are not going to go higher, especially with the monetary cycle a few quarters down the line shifting gears.

In India, specifically you come into the broader issue that from a foreign investor perspective, equity markets remain the most open and they have had the best possible run. I also think specifically with equities in India, there is a sizable number of foreign investors who have not had a chance to gain exposure to the extent that they would want for a kind of a secular story and that’s emerging in India, which perhaps might explain why every time you see some correction, 10% or so, it always tends to trigger a bit more buying.

Mumbai Top Real Estate Destinations in Terms of Price Escalation

Property-seekers might think Delhi-NCR has the maximum appreciation potential within a year’s time. However, according to the latest property index released by real estate portal Makaan.com, it’s the Mumbai real estate market which beat all Indian cities in terms of price escalation over a period of 12 months. Mumbai has bucked the economic slowdown by witnessing a whopping 24.7 per cent jump in prices between January and December 2009. During the same period, realty rates in Delhi-NCR rose by 8.8 per cent.

But other emerging residential destinations such as Hyderabad and Bangalore have witnessed a fall of 7.7 and 2.2 per cent, respectively, the index added. However, Pune market gained significantly by 9.9 per cent. The survey revealed that all these five cities — Delhi- NCR, Mumbai, Pune, Hyderabad and Bangalore — witnessed a drop in property prices in the first six months — January to June — due to slump in the market. But the subsequent gain came following the launch of various affordable units. These units have now achieved premium value across India. Read More »

Investors Leaving Mumbai-Gujarat Emerging as More Preferable Destination

Hardik Shah, who deals in real estate in Vapi town of south Gujarat, is a busy man these days. Vapi has been a favourite location for industrialists from Mumbai who want to set up plants in Gujarat because they find the state more investor friendly. On Wednesday, he was with a client near Sanjan trying to identify land for a medium-sized petrochemical unit. “Of late, inquiries from Mumbai have increased substantially for suitable land near Maharashtra’s border with Gujarat. These people are upset with parochialism in and around Mumbai,” says Shah.

Obviously, Amitabh Bachchan is not the only Mumbaikar who is rooting for Gujarat. The shrill tone of ‘Amchi Mumbai’ is driving investments towards Gujarat. S Sukeja, director of a firm which makes cranes, says, “Though we are based in Mumbai and we had planned some expansion in Thane, we have now decided to relocate the new unit to Gujarat.” This, according to government officials, has pushed up realty prices by at least 10 to 15 per cent in just the last two weeks. “Normally, realty deals in Gujarat take place only after Uttarayan. But the trouble in Mumbai has only spurred interest here,” a collector of a south Gujarat district told TOI. Read More »

Foreign Investment in India

The news that in 2009 India produced more Dubai real estate buyers than any other country may not be a big surprise – but it does trigger the question: when will India reciprocate, and allow the rest of the world to easily buy a stake in its real estate? India’s role in Dubai is easy to explain. Firstly, India is an increasingly-wealthy location with plenty of trusts, consortia and individuals wanting to invest, and their demand has always been for high quality and often landmark projects.

Secondly, other markets with long histories of buying in Dubai (chiefly the UK, which produced the second largest group of investors last year) have been hit by their own recessions and credit restrictions. More surprising is that Pakistan and Iran should come third and fourth in terms of nationalities of investors in Dubai. As it stands, a foreign national of non-Indian origin who is resident outside of India cannot buy any ‘immovable property’ (that is, real estate) in India. To be eligible they must be resident for 183 days in a financial year. This figure was chosen as it exceeds the duration of a tourist visa, which is 180 days – and which, incidentally, specifically states you are now allowed to purchase property while in the country under its jurisdiction. Read More »