Latest Real Estate News on 'Mumbai'


Indiabulls buys land in London for Rs 1,550 crore; plans to convert building into luxury residential property

Add comment   |  June 21, 2014

MUMBAI: Indiabulls Real Estate has paid £155 million (Rs 1,550 crore) for a commercial property in London’s Mayfair, marking the third significant realty investment in London by an Indian realtor since November 2013. The Mumbai-based developer has bought a 87,444 sq ft property, 22 Hanover Square, in an auction from the Scottish Widows Investment Partnership, which is now part of Aberdeen Asset Management. Mayfair is an up-market London neighbourhood, home to the significantly wealthy.

Indiabulls is looking to finance the transaction through internal accruals, company officials said. It plans to convert the building — which is currently rented out to international property consultants, JLL — into a luxury residential property. Buyers from India could constitute a significant chunk of apartment owners, company officials said.

The conversion, including the change in end-use, could take over two years, the officials said. Till then JLL would stay on as a tenant. It’s lease on the building is till 2017.

The building was put on block in April this year with H2SO, a property consultant, that recently become part of Colliers International advising Scottish Widows Investment Partnership on the sale. “Indiabulls Group is managing a large capital base of Rs18,000 crore and had made profits after taxes of over Rs 1,800 crore last year. We are now seeking to diversify our investments and profit pool across various geographies and London is a very safe investment,” said Sameer Gehlaut, Chairman, Indiabulls Group while confirming the transaction. Another Mumbaibased realtor, the Lodha Group, bought two properties in London — McDonald House in central London in November last year and a building on Carey Street in February 2014.

“Over the years, London has demonstrated that it’s a very mature real estate market that has remained stable through economic cycles like the 2008 crisis, since it attracts investments from across the globe — Europe, Asia and the US; and is therefore a very good hedge besides being a reasonable IRR investment,” Gehlaut said.The property is located in a prime part of Mayfair adjoining Bond Street. Given the location, and the fact that the owner also has the title to the land on which the building is located, the auction witnessed significant interest.

Four bidders were selected after the first round of bidding to participate in the final round.

Indiabulls Real Estate has a range of projects including offices, commercial complexes and premium residential developments with over 24 million sq ft of projects under construction in India.

According to a recent report from a UK-based luxury property agent, Wetherell, wealthy individuals from India are among the top buyers of properties in London.

Wetherell says that Indian buyers are now the largest group of overseas buyers in Mayfair, comprising 25% of all purchasers (second only to British-based buyers), and well ahead of Asian and Continental European buyers (19% of all purchasers) and Russians and Middle Eastern buyers, who now comprise just 13% each of all buyers. These Indian investors have so far ploughed £1 billion into the prime central London property market over the last 18 months, and are expected to spend another £500 million on redevelopment in the next five years, the report said.

“Figures from the Land Registry show that overseas based Indian buyers spent almost £450 million purchasing some 221 residential properties in prime central London with the top three most popular locations being Mayfair, St Johns Wood and Belgravia,” the report added.

Source: ET



Internet influencing real estate decisions worth $43billion in India: Google

2 Comments   |  June 18, 2014

NEW DELHI: As more Indians log online to seek information before entering into property deals, Internet today is estimated to be influencing decisions worth about USD 43 billion, search engine giant Google said.

According to a study commissioned by the US-based firm, over 50 per cent of real estate buyers’ decisions are influenced by Internet research.

“This phenomenon of researching online for real estate information before making a decision is not limited to metros but also extended to buyers in tier II cities,” Google India Industry Director Nitin Bawankule told reporters here.

The overall influence of Internet on real estate transaction value of both residential and commercial property including rentals amounts to USD 43 billion (USD 31 billion for residential and USD 12 billion for commercial), he added.

The primary reasons for researching online were easy access to in-depth property information and market trends (60 per cent), large comparison options (52 per cent), easy access to contact details of owners and developers (49 per cent) and financing and document processing information (43 per cent).

The survey, conducted by consultancy firm Zinnov across 15 cities in India included the metros, Pune, Lucknow and Ahmedabad with 6,196 respondents.

Talking about search trends on Google, Bawankule said the number had seen a 3x growth in the last three years.

“There is tremendous opportunity for both online real estate aggregators, brokers and developers to engage the buyers online by providing rich, meaningful and immersive experience to buyers on the Internet,” he added.

According to the study, 62 per cent respondents said aggregator sites (like makaan.com and magicbricks.com) were top sources of information for them on the Internet, followed by websites of real estate companies (52 per cent).

About 45 per cent said they visited broker sites, blogs and forums to find information before making a decision.

An increasing number of people are also using their mobile devices to search for properties online.

“Mobile queries (those originating from mobile phones) are doubling every year and about 40 per cent of total searches came through mobile phones,” Bawankule said.

Also, the study found 73 per cent respondents saying they prefer using their mobile apps for researching for property.

However, a major concern for people researching online was the lack of accurate and updated information.

Respondents said websites of developers and aggregators often lacked availability of in-depth information about property and features like easy price comparison.



Private equity firms exit real estate companies with good returns

Add comment   |  June 13, 2014

BANGALORE/MUMBAI: At atime when the Indian property market is showing sluggishness, some private equity firms have exited their investments in real estate companies and locked in good returns too. Of the total institutional PE capital deployed until March 2014, nearly a fifth, amounting to $6.9 billion, has been exited by PE funds, according to a recent report by Brookfield Financial.

This is in contrast to the perception that private equity funds are stuck with their investments and are finding it difficult to make a profitable exit.

Some experts say this trend could get stronger. “Exits in India will accelerate into the second half of this year and next. I would expect that the renewed interest in India, along with a more pressing intent to exit among existing stakeholders, will lead to more volume of deals in the secondary market while residential projects which have matured will generate cash flows to provide investors with an exit,” said Sourav Goswami, principal-head of capital markets at Red Fort Capital, which has invested $1 billion with several successful exits.

According to Jones Lang LaSalle, a property consultancy, returns from Indian real estate for private equity investments with vintage of 2006 stand at 1.1 times compared with the global average of 0.86 times. Performance in the last six years is even better at 1.34x.

“India fares better compared with other property markets, irrespective of whether the exit has come through a third party or promoter buyback. The factor that matters the most is if the fund has derived good returns from its investment or not,” said Shobhit Agarwal, managing director at Capital Markets at JLL India. Depreciation in the rupee, delays in construction, weak economic conditions and sluggish property sales have restricted realty private equity offshore funds’ fresh capital raising efforts and also trapped their earlier investments. But with improvement in the scenario, the renewed confidence seems to be helping fund houses set more optimistic targets.

“With increased confidence among institutional investors and high net-worth individuals due to clarity in macro environment in the backdrop of a stable government, more profitable exits can be expected now,” said Rubi Arya, director and vice-chairman, Milestone Capital Advisors.

“We plan to return .`1,200 crore in this financial year to our investors, which includes about .`700 crore of capital.” Milestone Capital exited seven investments in 2013 with average returns of 22%. The fund has also made some partial exits since January this year.

According to Brookfield Financial, the residential sector accounted for over 58% of the exits and the office sector 24%. Besides, about 85% of the exits were through promoter buy-backs. Since 2005, $37 billion has been raised and deployed in the Indian real estate sector by institutional PE funds.

“PE interest have gone up and we will see the momentum picking up further in the next 2-3 quarters as market improves. Further definitive policy regime and lowering of interest rates will attract more foreign capital in the country,” said Rajeev Bairathi, executive director, capital transaction group and north India, Knight Frank India.

In the quarter to March, PE funds more than doubled their investment in India’s real estate sector on hopes of an improvement in the country’s economy. In the first quarter of 2014, PE funds invested.`2,800 crore in the country’s real estate sector, an increase of 2.3 times compared with the year-ago period, according property consultant Cushman & Wakefield.

By Sobia Khan & Kailash Babar, ET Bureau



Real estate trusts may tap Rs 90k cr in first year

Add comment   |  June 10, 2014

Real estate investment trusts (Reits), which are expected to get a green signal in the upcoming Budget, could open up a new source of funding for developers battling declining sales and high cost of funds.

Reits, similar to mutual funds that can be listed and traded on exchanges, could attract investments of $10-15 billion (Rs 60,000-90,000 crore) in the first year of operations itself, said Maadhav Poddar, associate director, real estate practice, Ernst & Young.

Reits are tax-free instruments that invest in income-generating assets such as offices and malls and distribute the income as dividend to unit holders.

REALTY BYTES

Reits are tax-free instruments that invest in income-generating assets such as offices and malls and distribute the income as dividend to unit holders
Reits could attract investments of $10-15 billion (Rs 60,000-90,000 crore) in the first year of operations itself
Many in the industry believe even government owned entities which have large portfolios of offices could look at selling them to Reits and leasing them back

They are expected to benefit companies like DLF, Prestige, Phoenix Mills and privately held firms such as Embassy and K Raheja Corp that have a large portfolio of leased assets.

Poddar said companies like Infosys, Wipro and TCS could look at selling their office assets to Reits and taking them back on lease. “When Reits buy large assets from property developers, it helps developers to repay loans. Almost all developers have residential projects stuck over money,” said Poddar. “It will increase liquidity in the sector as a whole,” he added.

Many in the industry believe even government owned entities such as Air India, the Department of Telecom and public sector banks, which have large portfolios of offices, could look at selling them to Reits and leasing them back.

According to Morgan Stanley, India has 400 million sq ft of office and mall properties valued at $60 billion (Rs 3.72 lakh crore).

“Depending on the government policy, we will look at Reits,” said DLF Executive Director Rajiv Talwar. DLF has a rental income of Rs 2,000 crore a year from 20 million sq ft of assets leased out. On the company’s debt reduction plans, he said, “Reits will help if they come with the right laws.”

DLF’s debt stood at Rs 18,500 crore at the end of the fourth quarter of 2013-14 and the company said plans to reduce its debt by half could be delayed by up to two years.

However, regulators, developers and investors are waiting on the government’s view on the tax treatment of Reits.

“It is very important that Reits get the tax treatment of a pass-through vehicle. We have the Reit framework in place, but without tax breaks, the instrument will not take off,” UK Sinha, chairman of the Securities and Exchange Board of India, said on Wednesday.

Atul Ruia, managing director of Phoenix Mills, a Mumbai based developer, echoed Sinha’s views. “A Reit is not a company, it is a trust. While the special purpose vehicle pays full tax, the Reit should enjoy the pass-through status,” Ruia said.

Poddar said the government should also allow foreign direct and portfolio investment in Reits and exempt payment of stamp duty when buying and selling properties.

Source: Business Standard



Pay your property tax in advance, get concession

Add comment   |  June 9, 2014

THANE: The Thane Municipal Corporation (TMC) has restarted its earlier scheme of giving concessions to residents who pay property taxes in advance. Under the scheme, residents who paid the entire year’s property tax in May were given a concession of 5%. Similarly, the TMC will give 4% concession to those who pay the entire year’s tax by June, 3% by July and 2% in August.

For the fiscal 2014-15, the TMC has set a target of over Rs 280 crore for property tax. In 2013-14, the TMC collected property tax of Rs 245 crore.

Senior property tax officials said that the scheme will benefit the residents as well as the civic body, which will garner enough revenue to pay for ongoing development works.

The scheme of giving concessions to residents for paying property tax in advance was stopped in the financial year 2012-13 as the TMC had started issuing six monthly property tax bills to residents. The scheme (of giving concession) was launched in the financial year 2011-12.

Social activists such as Chandrahas Tawde have been asking the TMC to restart the scheme.

“Residents know the property tax to be paid during the budget session itself. If there is no hike in the tax rate, the tax amount remains fixed. So, residents would pay the tax in April itself as the concession of 5% offered by the TMC gives them an opportunity to save some money,” said a social activist.

The civic body, incidentally, would collect up to 90% of the total estimated property tax within the first three months of the financial year.

After the scheme was stopped, unpaid tax bills piled on, resulting in the TMC having to send constant reminders.

At the same time, the civic body is also gearing up its machinery to recover unpaid property tax dues from closed mill owners or management, collapsed buildings and merged villages.

“The money from people who have defaulted on payment of taxes from these sectors must be over Rs 100 crore,” said a civic official.

For instance, over two decades ago, several villages such as Kausa, Mumbra, Diva and Shil Phata were merged with the TMC, but till date the villagers refuse to pay tax to the civic body. Similarly, over one-and-half dozen mills that have closed down in the past have not paid dues to the TMC.

Source: TOI



Affluent Indians over-invest in property

Add comment   |  May 27, 2014

Desi billionaires hold 44 per cent of their wealth in property, while the global average is 24 per cent.

From Africa to America, the rich world-over have their wealth where their heart is — in their homes. Nearly a third of the wealth held by the super-rich (those with over $30 million of assets) in Europe is locked in real estate assets worth $2,391 billion, according to data from Savills, a global property consultant.

The Asians are second, with $1,800 billion, or nearly 27 per cent of their wealth, in property.

Over-investment

The super-rich in India, as expected, beat the global averages by a big margin. Nearly 44 per cent of wealth of the super-rich Indians is invested in property, according to data from Knight Frank. Of this, nearly half is invested in residential property and 30 per cent in commercial property.

Worse, the ‘average’ for rich Indians includes cases where real estate forms nearly 80-90 per cent of the wealth.

“Many wealthy Indians hold a large proportion of their wealth in real estate as there is a belief that the price will never go down,” says Balamurugan, Co-Founder and Director of Metis Family Office Services. He also says that in the past, it was not easy getting a bank loan for business and property was often used as collateral for the loan.

The allocation also tends to be higher in the South when compared with the Eastern and Western regions. For instance, while 80 per cent of the wealth in property is not uncommon in the southern states, the average is closer to 60 per cent in the eastern region and only 40 per cent in the western zone. “There is a more conservative mindset among the older generation and the level of comfort in the capital markets is also lower,” says Rajesh Saluja, MD and CEO of ASK Wealth Advisors.

That said, there may be no ‘ideal’ investment levels. The proportion of property that is preferred depends on a number of factors, including the wealth level, the time period one plans to hold the property and return expectations, says Bikram Sen, CEO of ArthVeda Fund Management.

Upbeat Asian Market

The Asian bias towards property may be understandable, given that property prices in regions such as Hong Kong, China and Singapore were on a tear and government intervention was needed to rein in the property gallop.

According to the Wealth Report’s Prime International Residential Index, property prices in Jakarta and Bali in Indonesia surged over 37 per cent and 22 per cent, respectively, in 2013. But things were sombre on the Indian front.

While the price growth in the Asia-Pacific region was an impressive 13.5 per cent in 2013, Bangalore, the top performing city in India, witnessed a mere 5.6 per cent appreciation.

The slow pace of growth in the property market in India, however, did not dissuade buyers. This bias toward residential property seems to be universal. World over, the super-rich hold multiple second homes and have the bulk of their funds invested directly in property rather than in indirect investment avenues such as funds.

The tepid market notwithstanding, nearly two-thirds of the rich Indians wanted to increase their property investments in 2014. “The high historical returns enjoyed by the asset class and ownership motivation are aiding buyer interest,” says Samanthak Das, Chief Economist, Knight Frank.

Sombre outlook

Still, many factors point to a likely drop in allocations to real estate in the coming years.

Take the case of buying and holding land. There is already a shift away from investing in land, says Balamurugan. This is in spite of the fact that demand for land is robust.

Land price increase has been seen not just in cities such as Mumbai, where land is scarce, but also in cities such as Bangalore. During December 2011 to 2013, the Prime Residential Development Land Index for Bangalore witnessed an appreciation of 26 per cent, according to data from Knight Frank, slightly lower than 35 per cent for Mumbai.

Notable land deals include the purchase of a 0.37-acre plot on Vittal Mallya Road by Sobha Developers, at over ₹22,000 per sq.ft.
Indirect deals

Those who hold land are not keen on direct sale. Instead, they are opting to develop the land by partnering with a builder, to get higher returns. The option of lending money to builders rather than buying property directly is also gaining traction.

“Compared to direct holding, there is better returns and higher degree of transparency in indirect options such as structured deals with builders,” says Kiran Kumar Kavikondala, Director and CEO of WealthRay Securities.

In the last one-two years, there has been an increase in deals with developers who are unable to source funds and are willing to offer attractive interest rates and additional sops.

Branded homes

Sales in the luxury home market have not been robust either. In regions such as Mumbai, Pune and NCR, the concept of ‘branded luxury homes’, wherein developers tie-up with international luxury hospitality or lifestyle brands to create differentiated offering, was launched a few years ago. This segment is growing at a modest 5-6 per cent rate, says Anuj Puri, Chairman & Country Head, Jones Lang LaSalle, an international real estate consultancy.

These homes boast of professionally designed interiors and exteriors, centralised management of facilities and various additional features such as concierge services, high-grade electronic surveillance and security and valet parking. “These factors have high appeal value, especially to buyers who have seen such homes abroad and aspire to live at such levels,” he says.

But he cautions that this segment has challenges, including getting the right brands to come on board, as the international designer labels expect the proposed project to live up to their very high brand standards.

Demand in the housing segment is likely to remain tepid in cities such as Mumbai, Chennai and NCR. A notable exception is Bangalore, where the premium market is ‘expected to remain active’, according to a report by Colliers International, a real estate services company.

Source: Mira Siva for The Hindu Business Line



Realty sector pinning hopes on new govt for revival

Add comment   |  May 27, 2014

The real estate sector is pinning hopes on the new government for revival.

Confederation of Real Estate Developers Association of India (CREDAI) Chairman Lalit Kumar Jain expressed hope that the new government would bring in a positive change to real estate developers and buyers by introducing reforms given the challenges of slump in sales, high prices and liquidity crunch that the sector has been facing.

‘Housing for all’

“We expect the government to take concrete steps to implement its promise given in the BJP manifesto of ensuring ‘Housing for All’ in eight years,” he added.

For an immediate plan of action, Jain suggested efficient and accountable governance in building approval process to be initiated at the Centre and be strictly followed by all states.

He also suggested that realty sector reforms should cover administrative, banking, tax and legal aspects. “It is imperative to go for single window system of approvals and a balanced land policy that will help the farmers as well as developers,” added Jain.

Regulatory approvals

According to global realty consultancy JLL, India’s developers are hoping that the new government will expedite the process of granting regulatory approvals as the chronic lag in this regard has been a major obstacle for most of their projects.

In its latest report, JLL stated that the pending Real Estate Development Regulation & Development Bill is expected to be passed and land acquisition parameters are also expected to be eased so that availability of land is no longer a major constraint.

The report further highlighted that with the slowdown in home sales, developers have been battling a severe liquidity crunch and a rise in their inventory levels.

“Many prospective buyers have abstained from investing in property because of market negativity, high inflation, and high interest rates on home loans. Now, with pick-up in market sentiment, buyers are expected to snap into action. Increased sales, along with availability of funds from both domestic and foreign investors, will bring significant respite to developers and finally bring an end to the liquidity crunch that they have been facing,” the report added.

3 major promises

The three major promises made by the NDA in their manifesto that have direct pertinence to the real estate sector comprise development of 100 new cities, implementing a new land use policy and planning for low-cost housing.

Modi’s pledge to implement an affordable housing policy and thereby provide homes to every Indian family presents a $150-billion business opportunity to the sector. “The real estate industry now also has real hopes of being granted the coveted industry status, which will further ease fund flows,” said Santosh Kumar, CEO-Operations, JLL India.

“Meanwhile, consumers are optimistic about the impact that the new government will have on real estate pricing, and expect a reduction in home loans, implementation of the proposed GST framework and the implied tax benefits to buyers,” he added.

Source: Manish Jhan for The Hindu Business Line



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