The trigger is a growing environment consciousness among topnotch tenants, particularly the multinationals. In the request for proposals (RFPs) that are coming in, many MNCs are starting to ask the question about the green quotient. “It may not be mandatory today but going forward, many MNCs will make it mandatory,” says Jones Lang Lasalle-Meghraj chairman and country head Anuj Puri. Developers such as K Raheja and RMZ have decided to go all green.

RMZ’s 1.9 million sq ft mall, RMZ Galleria, in Bangalore is currently under construction and will be a green development. So will be K Raheja’s Mindspace projects at Mumbai and Hyderabad, both of which are currently under development. According to CII-Indian Green Building Council (IGBC), 147 million sq ft of green space has been registered in India to date across a total of 239 projects. At the moment, K Raheja is planning and developing around 14.5 million sq ft of green space across the country. “We are looking at the long-term and want to be the first ones to go green in a big way,” says K Raheja associate vice-president Shabbir Kanchwala.

The company has also signed an MoU with CII to train their architects and engineers in green technology, as there is a “dearth of green staff in India,” he adds. M Selvarasu, GM-Projects at RMZ, estimates the payback to be 7-8 years for gold-rated buildings and about 12 years for platinum rating. “The certification level will differ from project to project but all of it will be green,” he says. At the moment, RMZ is developing a gold-rated building in Chennai and platinum-rated building in Kolkata, both of which have been pre-certified by the CII-IGBC, with another 4-5 buildings in the pipeline.

The Lodha Group, though, is getting into it only partially. “Only our commercial buildings will be green,” says Lodha Group senior vice-president Bharat Dhuppar. Lodha has about twelve buildings in the pipeline and most of them will be commissioned between 2009 and 2010.

In their projects, K Raheja expects the cost to be around 7-8% higher. The savings, though, will be considerable. “We are looking at 30-40% power saving and about 20% water saving,” confirms Kanchwala. “Also in construction, we try and use a lot of recycled materials — aluminum and glass — as well as mix fly ash with the concrete that is used,” he adds. The use of glass too is being reduced. “We keep the use of glass to the minimum, to about 35% in commercial and about 20% in retail,” says Selvarasu.

In a world where energy costs are going up by the day and investments in energy are peaking, a green building which saves precious energy and comes at the same rental for the occupier is a decent marketing tool for developers. “Many of our customers are Fortune 500 companies who understand and prefer green buildings,” says Kanchwala. “The future is in sustainability,” says Selvarasu.

Market experts predict further softening of prices. “Even though prices have corrected by 10-20% and even beyond in some regions, it has not yet touched the bottom. It is advisable to wait till at least the year-end to buy homes,” says Jai Mavani, real estate practice head, KPMG.

However, since many developers are holding onto prices and even operating as a cartel in some prime pockets like Mumbai, postponing purchase decisions may not really be a solution. Despite the fact that volumes have fallen sharply, established developers are clearly unwilling to drop prices. According to Kotak Institutional Equities’ research report, home prices in Mumbai market continue to rise since last October.

“Our Mumbai price index shows a 155 increase over the past six months. Indicative prices in key locations in Mumbai vary between Rs 6,500 and Rs 35,000.”

“Many Mumbai developers have raised funds through PE route. The surplus funds these developers have raised allow them to hold on to properties with out releasing the same into the market, thus creating an artificial demand supply mis-match in the system., In Mumbai market, many pocket developers are acting as cartels,” a senior official with a real estate fund said.

Liquidity crunch has already forced developers to go in for high interest loans. While the primary market for real estate has virtually dried up, private equity players are also following a very cautious approach.

Only those developers who have internal cash flows and have not gone for recent land acquisitions will be able to sustain these tougher times. Earlier they were seeking mortgage against property but now credit requirement has forced them to pledge their own shares for securing mortgage, industry officials said.

“The current market meltdown has put downward pressure on sales and further weakened market sentiment. These higher inflationary trends will call for some regulatory moves which will ensure better affordability” said. Sunil Rohokale, head mortgagee & real estate, ICICI Bank.

Though the sector has already factored some of the news impact, there is scope for further correction. Some of the Tier II cities might further see some 5-7% correction, says Vipin Aggarwal, executive director, Omaxe.

Analysts said the construction cost for large commercial projects was Rs 2,000 per square foot, on average.

In the process, developers are facing huge cost overruns. According to analysts, construction cost is growing 20 per cent every year and the developers are carrying a compounded interest burden of 30 to 40 per cent after three years.

Real estate observers believe that cost of the projects has doubled in the last three or four years owing to the rise in input and construction costs, and increase in interest rates. Steel and cement prices, which are the main components in property projects apart from labour, have risen nearly 50 per cent since December 2005.

The reasons for the delays are varied: tardy government approvals, stop-work notices from the municipality, construction delays, labour unavailability and so on.

“All the developers who bought land from NTC had to pay upfront and raised huge sums from the market. Even if they raised money at 10 per cent, the interest rate comes to 40 to 50 per cent compounded after four years,” said Akshaya Kumar, managing director of Park Lane Property Advisors.

Anuj Puri, chairman of property consultancy Jones Lang LaSalle Meghraj, said developers had not been able to take advantage of the property boom in the last three years due to these delays.

“In the coming days, when new supply hits market, prices could soften,” he said. By 2008-end, Mumbai and its suburbs will add 15.4 million square feet of office space, which analysts said will have a sobering impact on property prices. Office rentals in Mumbai’s central business district such as Nariman Point have increased 50 per cent in the last three years and places such as Worli and Lower Parel saw a 30 to 40 per cent increase in this period.

Though developers maintain that their projects are on schedule, in private they blame the delay in getting government approvals.

“In Mumbai, developers need to obtain 56 approvals from environment and forest department, pollution control board and others. It takes over a year to get these approvals,” said a leading developer who is setting up a large project in Central Mumbai.

Adds Pranay Vakil, chairman of property consultancy Knight Frank: “There was a lack of clarity on approvals in the mill land case. Some of the approvals were revoked with retrospective effect which caused delays. Shift in policy stands also resulted some delays,” he said.

For instance, Brihanmumbai Municipal Corporation (BMC)’s stop-work notices in October 2007 to the developers of mill lands for violation of development control (DC) rules and subsequent revoking of notices in early 2008 caused much delay in the development of mill lands. The DC rule allowed mill owners to redevelop or sell their land provided the owner would hand over one-third of the open land on the premises to the BMC and MHADA each.

When asked about delays, a DLF spokesperson said: “Our Lower Parel project is on time and proceeding smoothly. We are not in a hurry to complete the development and we can take our own time to finish the project. We cannot specify any reasons for the delay,” the spokesperson said.

A Matoshree Realtors executive said: “We have decided to sell the land but not finalised the buyers. We received good offers for the land so we did not want to go ahead with development,” she said.

Rajesh Jaggi, managing director of Peninsula Land said: “Due to stop-work notice, our project was delayed three or four months. Beyond that there is no delay.”

The traditional mindset of the people here has resulted in only the properties in established and old areas witnessing a surge in prices. Buyers are still reluctant to move to new areas. “People do not prefer to invest in new areas that are being developed due to the age-old mindset of the people,” said VN Singh a prominent property developer and investor.

The city, well known for zari-zardozi work, weaving and Banarasi sarees, is flush with funds leading to property prices being comparatively higher than other large cities in Uttar Pradesh.

The commercial hubs are Sigra, Mahmoorganj, Ardali Bazaar, Lanka, Gadaulia and Lahurabir. Lease rents for an office space in Sigra range from Rs 40-50 per sq ft a month; Mahmoorganj Rs 30-40 and Lahurabir Rs 25-30. While the lease rent could go much higher — by about 20% — in these areas if the property is located on the ground floor with good frontage. Commercial property rates for outright purchase in these areas range between Rs 3,000 and Rs 5,500 per sq ft.

Availability of commercial spaces for sale is less as owners tend to hold on to their properties only offering it on rent. But all this is set to change with malls such ad IP Mall and JHV Mall. The traditional city of lassi and kachaori-jaleebi is embracing the burgers of Mac Donalds and even the Italian and Israeli cuisine.

The huge tourism market — domestic and foreign visitors — has been a big boost for the top luxury hotel chains in the city. The thriving hotel and restaurant industry is another driver of the real estate market in the city. The luxury hotels are mostly located in the Canttonment, Assi, Lahurabir-Jagatganj areas. Many old palaces are being converted into heritage hotels to woo tourists.

Though the flat culture is slowly catching up in the city it is preferred mostly by the service-class people, majority of whom have shifted from other places. Old havelis and palaces which dot the city are making way for apartment complexes and realty majors have slowly started taking an interest in the city’s development.

Devang Dhawan of Dhawan Property and Real Estate Agents said: “Development and marketing of properties, both residential and commercial, in the city is mostly dominated by the local builders, some of whom have executed large projects and have acquired credibility among the locals. Big names like Unitech, Ansals and Sahara Housing have now started initiating housing projects.”

However, the influx of population in the city due to its thriving business and tourism activity is leading to real estate growth on the outskirts of the city in a well planned manner. The new growth areas are Shivpur, Sarnath, and Rohania.

Though the property market in the country’s financial capital has been rife with talk of a slump for some time now, this is the first time figures prove the extent of the slowdown. Information about residential and commercial property sales from the stamp duty registration office show almost 12,000 fewer transactions during the last financial year compared to the year before. From April 2007 to March 2008, 62,595 flats were purchased in Mumbai as against 74,555 in 2006-07.

Analysts said this could be just the tip of the iceberg as stamp duty registration figures indicate the trend only among genuine homebuyers. There could be more of a downswing in real estate investments as people are backing off from the sector in large numbers.

Sanjay Dutt, joint managing director of Cushman and Wakefield, said that annually there has been a 20-25% increase in transactions since 2001. “The market peaked in 2007. There were glimpses of market correction in certain cities by the end of 2007. But it was only in 2008 that realization on the investors’ part and the stagnation that was until now only a perception became a reality,” he said.

Realty analysts say sales volumes are expected to dive further south as developers persist on holding on to their steep prices and buyers anticipate a further fall with current rates being beyond reach. According to Akshay Kumar, managing director of Parklane Property Advisors, the market is in a corrective mode and the downward drift will continue for another 12 months.

“Between 1992-96, the market ran up the same way it did during 2003-07. Post-’96, the volumes dropped by 50%. This time again it is expected to drop substantially though not so steeply. The demand is now extremely sluggish and customers do not want to stick out their necks and transact at prevailing rates,” he said.

In fact, comparative figures for the month of April since 2006-07 show that there has been a drastic 30% drop in transactions this year as compared to three years ago. There were only 5,289 transactions last month as compared to 7,471 in April 2006-07.

Signs of the sluggish market were visible when a recent auction of plots at the Bandra-Kurla Complex turned out to be a damp squib. Just a year ago, a plot of land in the same place had become the national indicator of the euphoric real estate scenario.

“Developers who are not able to sustain for another six months will set the valuation. Prices have peaked too fast over the last six years, so a correction was inevitable. Besides peaking of values, when global factors showed signs of stress even the investors’ segment started withdrawing towards the end of 2007,” said Dutt.

The government, Dutt said, has now started sending signals to an overheated market by taking measures to curtail liquidity in the market and speculation in real estate. “These include controlling the Foreign Direct Investment in the sector as well as imposing higher interest rates. When the market recovers this time, there will be a healthier and steady growth than the quantum leaps we saw until now,” he said.

Year 2008 has already seen some setbacks in land prices across Mumbai, Pune, Bangalore, Chennai and Gurgaon. Most agree that land rates across cities are coming down and deal volumes have decreased. “There has been a visible downward trend in land auctions that started beginning of this year,” says Anuj Puri, chairman and country head, Jones Lang Lasalle (JLL).

Consultants like JLL claim that land prices at Thane’s Waghale Estate has come down from Rs 20 crore an acre about 6-9 months back for an industrial plot to Rs 15 crore, the asking price today.

Even at Turbhe and Nerul in Navi Mumbai, rates are down from Rs 18-20 crore an acre to Rs 15 crore. A deal for a housing society at BKC’s neighboring Kalina was called off a while back as the Rs 30,000 per sqft price being quoted was too high.

In Pune, where landowners weren’t willing to negotiate on prices, there has been a 10-20% fall in prices in some areas. “Negotiations are happening in some deals. But land prices have not moved up in the last six months,” says a local consultant. Like in most other locations, in Pune too, the number of deals has dropped considerably.

In many cases, landowners are sticking to their rates but negotiating in a different way. “Land prices might not be down on the ground but the development structure has changed in the last few months. There are many more joint development agreements being signed between landowners and developers in Bangalore,” says Praveen Kumar, associate director, land and consulting, JLL.

Though there has been some upward movement in land rates near the new Bangalore airport, places like Whitefield, Bannerghatta Road and Hosur Road have seen a considerable drop in land prices.

According to a prominent real estate consultancy, which has tracked land rates in these areas, Bannerghatta Road has seen a drop of 25%, Whitefield has seen a drop of around 50% and Hosur Road has seen a dip of 10-12% over the last 6-8 months.

In Chennai, prices had gone beyond realistic levels, says a Chennai-based real estate consultant. He says that at Kelambakkam on OMR, land value is down from Rs 10 crore to Rs 7-8 crore an acre. Similarly, at Ambattur, land value is down from Rs 10 crore to Rs 6.5 crore an acre.

“A lot of deals are on hold as a number of landlords are not willing to negotiate at the moment,” he adds. Over the next 6-8 months, the consultant expects a further drop of 10% in Chennai.

Even in Gurgaon, things have slowed. According to a consultant, deal volumes have come down considerably and like some other locations, more and more joint development agreements are taking places. The way things are going, the consultant expects a further 10-15% drop in land values in the next six months.

Overall, there is a feeling that prices are going to drop further. “If the market remains soft for another six months or so, there should be a further drop in land prices,” expects Puri.

The investigation officer A K Singh, who is the assistant director of Enforcement Directorate, has submitted the report in 12 cases and the final outcome is expected in near future. “We have concentrated only on the big cases involving the citizens of Russia and United Kingdom,” Singh told Herald in a telephonic conversation from Mumbai.

He further said that these deals have run into crores of rupees and the Adjudicating Authority would decide on the penalty depending on the nature of the deal.

“If there are any illegalities found the Authority will decide whether to attach the properties,” he said. However, he refused to divulge how many such cases have come to his knowledge during the course of investigation.

He said the RBI and the ED will now start doing the needful in the cases. Asked about the fate of remaining cases, totally 286 in number, Singh said that he has been working on them one by one.

“As you know the foreigners come only during season for hearing and the investigations are on hold for long but we have completed the major job and the reports are likely to be submitted soon,” he replied. According to the RBI guidelines, foreigners can acquire immovable property in India — provided the individual has established a branch office or place of business in India.

Adidas India Marketing Private Ltd’s Managing director Andreas Gellner told reporters, “Rise in real estate prices has been affecting our growth plans in India”.

The company’s was planning to increase the number of retail stores from 325 at present to 450 by the end of 2008. It operates the stores through franchisee route.

Talking about real estate prices, he said that the prevailing rentals were not realistic. Typically, the rentals should be around 15-17 per cent of turnover per square feet.

However, the rentals at the moment were more than 20 per cent per square feet. In some cases it was around 40 per cent per square feet, he said.

Gellner said Adidas was not keen to spend that high an amount since the brand was not new to India. “We are in India for the last 13 years.”