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Ambience to invest Rs 1,950 cr on two new housing projects

1 Comment   |  November 11, 2014

NEW DELHI: Realty firm Ambience today said it will invest about Rs 1,950 crore over the next four years to develop two luxury housing projects in Gurgaon and Noida.

The Delhi-based company will develop over 1,030 apartments in these two projects launched today.

Ambience has presence in Delhi and Gurgaon property markets. It is developing a 150-acre project ‘Ambience Island’ in Gurgaon that comprises premium homes, ‘Leela Ambience’ hotel with over 400 keys and a huge shopping mall.

In Delhi, it has a ‘Kempinski Ambience’ hotel comprising 480 keys and a shopping mall at Vasant Kunj.

“We are coming up two new projects in Noida and Gurgaon. We are entering into the Noida market for the first time,” Ambience group Chairman Raj Singh Gehlot told reporters here.

Asked about the investment, he said the project cost for both Noida and Gurgaon residential complexes would be about Rs 1,950 crore and would be financed through internal accruals, and loans from banks and HDFC Ltd.

That apart, Gehlot said: “In 2010-11, we had raised Rs 170 crore in form of equity in Gurgaon project from private equity firm Indiareit.” However, he did not disclose the stake divested in the Gurgaon project.

Ambience Group had planned Rs 1,300 crore initial public offer (IPO) in 2010-11 but had to shelve the plan because of bad market conditions.

Asked whether the company would revive IPO, Gehlot said “there is no such plan at this moment”.

Elaborating on the project, Ambience Director Aman Gehlot said the company will build 280 flats in the 3.5 acre Noida project ‘Ambience Tiverton’ at a cost of Rs 465 crore.

In Gurgaon, he said over 750 flats would be constructed on 14.5 acre project ‘Ambience Creacions’ at Rs 1,480 crore cost.

Ambience has fixed the selling price in both projects at Rs 9,000 per sq ft. The cost of the flats would be in the range of Rs 2 crore to Rs 4.5 crore.

The construction work on both the projects have started and the completion is expected in four years.

At present, Ambience group has about 1,000 acres of land bank, including 350 acre in Panipat where the company plans to develop a township.

Source: ET

Real-estate firm asked to pay over Rs 11 lakhs for deficiency of service

1 Comment   |  November 6, 2014

NEW DELHI: The Delhi state consumer panel has asked real estate firm Omaxe Buildhome Pvt Ltd to pay over Rs 11 lakh to a retired Indian Airlines official after holding the realty firm of “deficiency of service” in the allotment of a flat at Greater Noida in Uttar Pradesh.

The Delhi State Consumer Disputes Redressal Commission (SCDRC), presided by judicial member S A Siddiqui, asked the firm to pay Rs 11.14 lakh to Secunderabad resident Pradeep Chaudhary.

Chaudhary had approached the Commission alleging “unfair trade practice” and “deficiency of service” on the firm’s part and said that despite his strong opposition, the company, on its own, changed the location of the flat booked by him.

He had further alleged that the firm first asked him to take the flat in other Tower and on being refused to accept, it later illegally forfeited the deposited money after canceling the allotment.

The panel, in its order, said that in case of cancellation of the allotment, the firm should have returned the balance amount after deducting the forfeited money. However, it failed to do so and it amounted to “deficiency of service”.

“We are of the firm view that complainant (Chaudhary) was entitled to refund of the amount deposited,” it said.

The Commission, however, said that Chaudhary had defaulted in payments and hence, the firm was entitled to forfeit a sum of Rs 6.56 lakh.
“The complainant has also been subjected to a lot of harassment inconvenience mental pain and agony and therefore in our considered view he is further entitled to get Rs one lakh as compensation. He will further be entitled to get Rs 20,000 towards costs of litigation,” it said.

Chaudhary had said that he had applied for allotment of a flat in the firm’s upcoming project at Greater Noida in September 2006 by paying Rs 6,40,000 as initial payment.

He paid Rs 16.51 lakh, out of total Rs 42.43 lakh, over a period of a few years to the firm, the plea said, adding that the firm changed the location of allotted flat.

Chaudhary later came to know that allotment of his booked flat had been cancelled and the firm forfeited the money. The firm opposed the plea saying it was not maintainable.

Source: ET

Japanese realty major to build townships in India

Add comment   |  November 5, 2014

New Delhi, Nov 5 (IANS) Japanese real estate company TamaHome Corporation has entered into a joint venture with Developer Group to create townships in India, the company said Wednesday.

The first two township projects in India will come up in Visakhapatnam in 50 acres and the second in Ludhiana in 150 acres. Both will be in collaboration with Developer Group India Pvt. Ltd.

“Building the highest quality homes at the lowest cost, regardless of income scale, offers a more comfortable lifestyle. We have fought to build homes that eliminate common real estate practices and decrease conventional costs in half without reducing quality,” said Yasuhiro Tamaki, president and chief executive officer of Tama Home.

Developer Group is a Japanese investor-promoted real estate company in India backed by leading Japanese corporates and institutions.

TamaHome has sales of Rs.10,000 crore and builds 10,000 homes a year in Japan.

According to a report by the commerce ministry-promoted India Brand Equity Foundation (IBEF), India’s construction sector, including townships, housing and built-up infrastructure, has attracted foreign equity worth nearly $25 billion since 2000.

The market size of real estate in India is expected to increase at a compound annual growth rate of 11.2 percent during 2008-2020, according to IBEF.

Add comment   |  November 4, 2014

Weeding out black money from real estate: What government should do to make housing affordable

I recently met a real estate developer who joked that the engine of real estate in India has two wheels: one is white money that comes from genuine buyers and the other is black money. And, currently, both wheels have stopped turning. He wasn’t joking.

Today, the market is stagnant because most genuine buyers can’t afford to buy their dream home as the market is overpriced. The investors who were pumping in black money have also paused as prices have stagnated.

Curiously, the escalation of prices itself has happened because of the large inflows of black money into realty. Even though no official figures are available, it is safe to assume that anywhere between 30% and 40% of real estate transactions — be it the purchase of land or an apartment in a metro — involve black money.

Of course, higher the price tag of an apartment, bigger is the black money component. For instance, there is hardly any black money involved in an apartment priced between Rs 15 lakh and Rs 20 lakh but in a luxury apartment priced above Rs 3 crore, the black money component could go up to 60%.

Chain of Transactions

So, where does the problem start? It starts right at the time land is purchased, let’s say for the construction of an apartment. In a city like Mumbai, virgin land isn’t available. So, invariably developers have to buy land in outskirts or villages outside the city limits, where the ready reckoner rates (or circle rates) are low.

Often, the people who own the land ask for a significant part of the payment in black, sometimes as much as 25-30%, so that they can avoid getting taxed. The next step is getting approvals, which invariably involves getting building approvals from local civic bodies which in turn are controlled by politicians and bureaucrats. That again involves significant amount of unaccounted money.

All these underthetable payments mean that a developer has to have a significant kitty of black money. So, the developer starts putting price tags on things he isn’t legally allowed to sell, parking in apartments, for instance. It is this chain of black money transactions that has raised the launch prices of apartments, resulting in the fact that most genuine buyers can’t afford a home.

The only ones who can afford a home are, unfortunately, not the salaried class but traders and other dubious buyers who have a steady flow of black money. Given that Indian tax norms favour people who are buying a second or third house more than a first-time buyer, most people who can indulge in inflated real estate transactions are investors who have black money. They have unyielding capital that they choose to park in real estate.

Between 2001 and 2005, real estate in India boomed. Interest rates were low, housing was affordable and first-time buyers were entering the market. One could understand a bump-up in prices then. But between 2009 and 2013, something strange happened. Despite the fact that there wasn’t a great wave of buying from first-time buyers, prices went upwards sharply. Most of this was fuelled by investors who invested in the premium and luxury segments and most of them involved black money transactions.

Slew of Reforms Needed

State governments have responded by reducing ready reckoner rates to almost the same level as market value but that alone hasn’t been enough. If the government is serious about achieving its stated goal of housing for all by 2022, then it will have to make a few systemic changes. One, incentivize first-time buyers.

Two, make the process of getting approvals transparent. Make the process automated. Cut off all political discretions when it comes to granting approvals or buying land.

The Real Estate Regulation Bill is a first step towards that. But in its current form, there are some loosely defined terms in the draft and oversights which can be misused. For instance, approval authorities are not brought under the purview of the Bill. Most delays of housing projects happen because of delayed approvals.

India has a shortfall of 18.7 million homes — over 95% of this is in the economically weaker section. Only 1.4% of that demand is being met. If we want India’s real estate sector to blossom again, this menace of black money needs to be weeded out.

Source: ET

Easier FDI in real estate means govt is inflating India’s urban housing bubble

Add comment   |  November 1, 2014

India’s relaxed rules for foreign direct investment (FDI) in construction will make it easier for foreigners to invest in real estate. While the move has surely been cheered by the real estate sector, for it will bring in much needed capital for those steeped in debt, it could bring more pain for home buyers. Reason: more foreign money in realty means higher property prices. Simple demand-supply logic.

Current urban realty prices represent affordability for a microscopic few, while the average home buyer will have to exchange 20-30 years of future earnings to afford a house.

Under earlier rules, the government allowed 100 percent FDI in real estate development but with strict riders, including a lock-in period of three years during which the investment cannot be repatriated. Under the new rules, the minimum built area for projects in which foreign investment is allowed will be reduced to 20,000 square metres from 50,000, the government said in a statement late on Wednesday. For “serviced plots”, there is no minimum land requirement now, compared to 10 hectares earlier, while the minimum capital investment by foreign companies has been cut to $5 million from $10 million.

“The announcement literally comes in the nick of time for Indian real estate. Construction, housing and real estate segment’s share in total FDI had further slipped from 5 percent in the previous year to under 3 percent as of the current fiscal until August. In fact, its share has been consistently falling over the last six years since 2009-10, when it stood at over 20 percent. Meanwhile, developers continue to reel under high levels of debt, even as the channels of funding have shrunk. The easier rules will help faster completion of projects delayed by a squeeze on funds due to elevated debt levels,” said Anuj Puri, chairman and country head at Jones Lang Lasalle India.

But a back-of-the-envelope calculation by Vallum Capital Advisors shows that an FDI-compliant project sale of $150 million requires a peak investment (except land and approval) of not more than $20 million, implying that private equity (PE) investment is not needed to support the project. It is possible to fuel prices by creating a stock of inventory, diverting money to other projects and investing to build land banks for future projects. This essentially defeats the very purpose of allowing FDI in the real estate sector for making housing affordable. (Read the entire report here)

The reduction of minimum requirements for built areas and capital will now allow investment to flow into South Mumbai or central Delhi. Till now investment was going to the outskirts because it was tough to find large areas to develop or construct 50,000 square metres. So the new rules will encourage the development of smaller projects, especially in urban areas, where the availability of land is limited.

More construction in prime areas does not imply that property prices here will come down. In fact, buyers are most likely to see more Rs 60 crore prices for 2 BHK flats in tony areas of south and central Mumbai areas like Worli or Peddar Road. This is because demand for houses in posh areas far exceeds supply and builders will cater to this snob requirement rather than construct ‘affordable flats’ in south Bombay or south Delhi.

The lower area requirement is also expected to result in more interest in smaller towns as the reform would now allow foreign investors to invest in smaller projects spread over land parcels of about three to four acres. This means that speculation in real estate is once again bound to rise and spread to smaller towns. “Allowing easier FDI in construction only spells bad news for home buyers because it is expensive capital seeking high returns,” says Pankaj Kapoor, MD of real estate research firm Liases Foras.

Once the government allows more hot money to come in, investor expectations from returns on investment rise without any consideration for affordability. If builders have to ensure that investors get bang for the buck, they have no choice but to prop up realty prices. How else will they manage to deliver 25 percent RoI?

“Take the case of the NRI investor battle against ICICI. Investors have sued them for not delivering 25 percent returns as promised from the investment in a property fund. This is the case with most investors and, by easing the investment norms for them, the government is in essence creating an investor’s market rather than a buyer’s market. FDI in construction will kill the property market and I am seriously thinking of filing a PIL against the new norms, ” said Kapoor.

The real devil lies here: While an investor will be allowed to exit on completion of the project, or after three years, from the date of final investment, whichever is earlier, the government may also permit repatriation of FDI or transfer of stake by one non-resident investor to another non-resident investor, before the completion of the project.

Such a move will not only make it easier for investors to repatriate profits, but also increase speculation in the market since investors will once again trade in properties like they do in stocks, which in turn will make houses even more unaffordable for both middle class and masses.

And the permission to sell completed projects to foreign investors will help builders get much-needed liquidity to trim their debt and hoard more inventory for longer.

For the benefit of consumers, there is just once clause which makes it mandatory for developers with foreign funding to only sell “developed plots”. This means tracts that have trunk infrastructure, including roads, water supply, street lighting, drainage and sewerage. The fine print, otherwise says the real winners are the builders and investors once again.

In 2013, PE money started returning abroad as investors had stayed invested for seven to eight years. This marked the beginning of a slowdown in FDI in real estate. Builders increased prices to accommodate investors at every stage of the development, thereby creating a false sense of price appreciation. With a steep slowdown in genuine sales (both Delhi and MMR currently have the highest unsold inventory), they are stuck in a catch-22 situation. By opening the floodgates to investors once again, the government is doing the exact opposite of deflating the housing bubble.

Source: First Biz, First Post

FDI in real estate may double after easing of rules: NAREDCO

Add comment   |  October 30, 2014

NEW DELHI: Foreign direct investment (FDI) in the real estate sector could jump over two-fold in the next one year with easing of FDI rules in the construction sector, realtors’ body NAREDCO said today.

Real estate developers and consultants were of the view that this move would give fillip to cash-starved realty sector, which is reeling under a slowdown since last 2-3 years. It will help developers in raising funds to complete projects.

Yesterday, the Cabinet relaxed FDI rules in construction sector by reducing minimum built-up area as well as capital requirement and easing the exit norms.

“Reduction in minimum built-up area to 20,000 sq meters from 50,000 sq meters and reduction in capital investment to $ 5 million from $ 10 million has the potential to more than double FDI inflows into housing, commercial real estate, hotels and townships in the next one year,” NAREDCO Chairman Navin Raheja said in a statement.

In 2013-14 fiscal, the FDI in construction development, which include housing and township, was $ 1.22 billion. During April-August period of this fiscal, the sector has attracted $ 446 million worth FDI.

Hailing the move, India’s largest realty major DLF Group Executive Director Rajeev Talwar said: “Praise to the Finance Minister for being so prompt in meeting the requirements of this industry in his budget announcement, then approval for Real Estate Investment Trusts and now relaxation in FDI norm. There will be huge amount of FDI inflow in this sector”.

Unitech MD Sanjay Chandra said this would “surely provide a boost to the real estate industry and go a long way in fulfilling Prime Minister Narendra Modi’s dream of creating smart cities throughout the country.”

Permission to sell completed projects to foreign investors will help Indian developers get much needed liquidity into the system, Chandra added.

Parsvnath Developers Chairman Pradeep Jain said: “We are thankful to government for this move. The sector is reeling under acute funding pressure. The foreign investment in real estate has also gone down in last few years. Hence, this move has sent a positive signal for the real estate sector”.

Terming the decision as a positive development, realty consultant CBRE South Asia CMD Anshuman Magazine said: “Real estate and infrastructure industry is starved of funds. This announcement will widen the base of investors, especially mid-sized financial institutions.”

It would also encourage new development projects in prime areas of large cities and in tier II towns, Magazine added.

Property consultant Cushman & Wakefield said the move is likely to give fillip to real estate sector. This step would be beneficial for the next phase of urban development.

SAT to decide on letting DLF sell fund investments

Add comment   |  October 30, 2014

MUMBAI (Reuters) – An appeals court on Thursday paved the way for DLF, the country’s biggest property developer, to sell its mutual fund investments, providing relief to a debt-laden firm reeling after regulators stopped it from tapping capital markets for three years.

The three-member Securities Appellate Tribunal (SAT) asked DLF (DLF.NS) to submit an affidavit by Monday stating the amount it wished to redeem in mutual fund investments. In its appeal document, DLF said it had more than 20 billion rupees ($325 million) invested in these funds.

The tribunal said it would examine the request for redemptions and give approval next week, if there was no objection from the markets watchdog, the Securities and Exchange Board of India (SEBI).

Redemptions could help sustain the company’s cash flow until Dec. 31, Chief Financial Officer Ashok Tyagi told Reuters after the hearing, without specifying how much the company might raise.

However, the SAT has yet to give a final ruling on DLF’s appeal against SEBI’s ruling on Oct. 13 barring the developer and its executives from capital markets for three years because of suspected violations in its 2007 listing disclosure.

The SAT said it would hold its next hearing on Dec. 10. DLF is requesting temporary access to equity and debt capital markets while the appeals process continues.

“They (DLF) will still need to accelerate their asset sale programme. They are hardly generating any cash, and their cash-flow shortfall is so large that they will have to resort to large-scale asset sales if there is no interim relief on fund raising,” said Anubhav Gupta, sector analyst at Maybank Kim Eng India.

As part of the appeals process, the tribunal also needs to decide if the company would be allowed to raise 50 billion rupees in non-convertible debt.

DLF has argued SEBI’s ruling should not apply to this fund-raising, since it was approved by its board prior to the regulator’s ban.

The developer has $3.6 billion in debt and may be forced to sell assets – even unfinished projects – to meet debt obligations if it loses the appeal or if the process drags on, bankers and analysts have said.

DLF’s cash to short-term debt ratio was 0.32 at end-March, Thomson Reuters data showed, which suggests its cash is not sufficient to repay debt maturing within a year.

The developer had free cash flow of 5.18 billion rupees for the fiscal year ended March 31, the lowest in four years, Thomson Reuters data showed.

Source: Yahoo Finance

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