Monday, August 3, 2009
Amid downturn, banks hiked exposure to realty
Amid downturn, banks hiked exposure to realty
The Times of India, August 3, 2009, Page 17
NEW DELHI: Despite the global financial meltdown owing to overexposure to the housing sector, Indian banks were quite bullish in their investments to the real estate.
The total outstanding credit to the real estate sector by Indian banks, both government-owned and private, at the end of March 2009 was Rs 91,500 crore as against Rs 63,000 crore till March 2008. This was not only an increase of 45% over the previous year but was more than double the amount of Rs 44,000 crore exposure of these banks during the boom period of 2007.
The major portion of this huge lending came from government-owned banks. This despite the fact that RBI had prescribed regulatory limits on banks' exposure to individual and group borrowers as a preventive measure given the sub-prime crisis in the western world. As if it was out to reap the best out of the crisis, Punjab National Bank (PNB) lent more than Rs 11,000 crore from June 2008 to May 2009, registering an increase of at least 389% over the previous year when its total outstanding credit to real estate sector was merely Rs 2,255 crore.
PNB was closely followed by the State Bank of India which extended credit of Rs 10,467 crore till May 2009 as against its Rs 6,062 crore outstanding till May 2008, an increase of 73%, according to finance ministry data.
ICICI Bank was the third in the list of top 10 banks as per their exposure having lent a little more than Rs 4,900 crore till May this year. It, however, registered a negative growth of 14% as in the previous year its total lending to this sector exceeded Rs 5,700 crore. Other banks that figured in the list of top 10 were: Indian Overseas Bank, Oriental Bank of Commerce, Axis Bank, Bank of India, Indian Bank, Central Bank of India and Union Bank of India.
HDFC Bank seemed quite cautious in taking risk, especially during the downturn period. The bank's total lending till May 2009 was Rs 757 crore as against Rs 250 crore till May 2008.
The Times of India, August 3, 2009, Page 17
NEW DELHI: Despite the global financial meltdown owing to overexposure to the housing sector, Indian banks were quite bullish in their investments to the real estate.
The total outstanding credit to the real estate sector by Indian banks, both government-owned and private, at the end of March 2009 was Rs 91,500 crore as against Rs 63,000 crore till March 2008. This was not only an increase of 45% over the previous year but was more than double the amount of Rs 44,000 crore exposure of these banks during the boom period of 2007.
The major portion of this huge lending came from government-owned banks. This despite the fact that RBI had prescribed regulatory limits on banks' exposure to individual and group borrowers as a preventive measure given the sub-prime crisis in the western world. As if it was out to reap the best out of the crisis, Punjab National Bank (PNB) lent more than Rs 11,000 crore from June 2008 to May 2009, registering an increase of at least 389% over the previous year when its total outstanding credit to real estate sector was merely Rs 2,255 crore.
PNB was closely followed by the State Bank of India which extended credit of Rs 10,467 crore till May 2009 as against its Rs 6,062 crore outstanding till May 2008, an increase of 73%, according to finance ministry data.
ICICI Bank was the third in the list of top 10 banks as per their exposure having lent a little more than Rs 4,900 crore till May this year. It, however, registered a negative growth of 14% as in the previous year its total lending to this sector exceeded Rs 5,700 crore. Other banks that figured in the list of top 10 were: Indian Overseas Bank, Oriental Bank of Commerce, Axis Bank, Bank of India, Indian Bank, Central Bank of India and Union Bank of India.
HDFC Bank seemed quite cautious in taking risk, especially during the downturn period. The bank's total lending till May 2009 was Rs 757 crore as against Rs 250 crore till May 2008.
Unitech net dips 63%, to focus on low-cost
Unitech net dips 63%, to focus on low-cost
The Economic Times, August, 02, 2009, Page 1
New Delhi: Unitech, India’s second largest real estate company, plans to launch 30 million sqft of residential space this fiscal, with focus on lowcost homes, even as it recovers from the real estate slump that slashed its profit by 63% and halved its sales for the quarter ended June ‘09. The Gurgaonbased firm, which was at the beginning of the year deep into financial trouble due to its high leverage and meagre cashflow, saw its financial situation significantly improve after it mopped up $900 million in two tranches of qualified institutional placement (QIP). The company’s debt-equity ratio has fallen from 1.2 at Marchend to 0.57 now, a company spokesman said.
The Economic Times, August, 02, 2009, Page 1
New Delhi: Unitech, India’s second largest real estate company, plans to launch 30 million sqft of residential space this fiscal, with focus on lowcost homes, even as it recovers from the real estate slump that slashed its profit by 63% and halved its sales for the quarter ended June ‘09. The Gurgaonbased firm, which was at the beginning of the year deep into financial trouble due to its high leverage and meagre cashflow, saw its financial situation significantly improve after it mopped up $900 million in two tranches of qualified institutional placement (QIP). The company’s debt-equity ratio has fallen from 1.2 at Marchend to 0.57 now, a company spokesman said.
Unitech Q1 net dips by 63%
Unitech Q1 net dips by 63%
The Economic Times, August, 02, 2009, Page 3
Our Bureau NEW DELHI
UNITECH, India’s second largest property company, plans to launch 30 million sqft of residential space this fiscal, with focus on lowcost homes, even as it recovers from the real estate slump that slashed its profit by 63% and halved its sales for the quarter ended June ‘09.
The Gurgaon-based firm, which was at the beginning of the year deep into financial trouble due to its high leverage and meagre cashflow, saw its financial situtation significantly improve after it mopped up $900 million in two tranches of qualified institutional placement (QIP). The company’s debt-equity ratio has fallen from 1.2 at March-end to 0.57 now, a company spokesman said.
The company also raised in the quarter Rs 1,000 crore through sale of assets, including a hotel in Gurgaon, an office building in Delhi and some land parcels. “With this fund raising (QIP and asset sale), the deleveraging exercise is almost complete and the company has a comfortable liquidity position,” the company said in a release.
Unitech had reserves and surplus of Rs 6,409 crore and a total loan outstanding of Rs 8,262 crore as of June 30, as per the release. The spokesman though said the company has been able to further bring down its debt to Rs 7,000 crore in July.
The company’s net profit fell 63% to Rs 158 crore and sales fell 50% to Rs 515 crore for the June quarter on poor demand for homes. The company said that its had launched 17 million sqft of residential space so far this fiscal and claimed that it has been able to sell 7 million sqft of that, an indication that the demand may be returning to the sector.
The company has also launched homes with a price tag of Rs 10-30 lakh under the brand called UniHomes in Noida.
The Economic Times, August, 02, 2009, Page 3
Our Bureau NEW DELHI
UNITECH, India’s second largest property company, plans to launch 30 million sqft of residential space this fiscal, with focus on lowcost homes, even as it recovers from the real estate slump that slashed its profit by 63% and halved its sales for the quarter ended June ‘09.
The Gurgaon-based firm, which was at the beginning of the year deep into financial trouble due to its high leverage and meagre cashflow, saw its financial situtation significantly improve after it mopped up $900 million in two tranches of qualified institutional placement (QIP). The company’s debt-equity ratio has fallen from 1.2 at March-end to 0.57 now, a company spokesman said.
The company also raised in the quarter Rs 1,000 crore through sale of assets, including a hotel in Gurgaon, an office building in Delhi and some land parcels. “With this fund raising (QIP and asset sale), the deleveraging exercise is almost complete and the company has a comfortable liquidity position,” the company said in a release.
Unitech had reserves and surplus of Rs 6,409 crore and a total loan outstanding of Rs 8,262 crore as of June 30, as per the release. The spokesman though said the company has been able to further bring down its debt to Rs 7,000 crore in July.
The company’s net profit fell 63% to Rs 158 crore and sales fell 50% to Rs 515 crore for the June quarter on poor demand for homes. The company said that its had launched 17 million sqft of residential space so far this fiscal and claimed that it has been able to sell 7 million sqft of that, an indication that the demand may be returning to the sector.
The company has also launched homes with a price tag of Rs 10-30 lakh under the brand called UniHomes in Noida.
Unitech to raise Rs 1k cr via QIPs for fresh investment
Unitech to raise Rs 1k cr via QIPs for fresh investment
The Financial Express, August, 03, 2009, Page 3
Kakoly Chatterjee, New Delhi
Unitech, India’s second largest listed real-estate company, is planning its third round of qualified institutional placement (QIP) for about Rs 1,000 crore. But unlike the first two issues, the proceeds from the new round of fund raising will be used for fresh investment instead of retiring its debts, a reflection of growing confidence in the real estate sector.
Unitech expects to price the issue at Rs 125, which will be 39% premium over its current market price of Rs 90.10 on Friday at the National Stock Exchange. However the company denied any such plans in response to an email sent to them.
The fund that is raised through the third QIP is expected to finance the affordable housing schemes that the company has launched in several cities. The Delhi-based company with a marketcap of Rs 24,000 crore has launched affordable housing projects like Brahma and Ananda in Perambur near Chennai and Uni Homes in Noida. The company has already raised Rs 4,325 crore this year through QIPs.
Unitech had last month announced it would invest Rs 1,700 crore to construct 20,000 affordable houses to become India’s top realty company within a year. It is aiming to sell 15,000 flats in the current fiscal year. The company will develop affordable houses across the country with an average price of Rs15 lakh. It will construct such houses whose average construction cost is estimated at about Rs1,000 per sq ft, on a total area of 16 to17 million sq ft.
In the wake of the downturn in the economy in the third and last quarter of 2008-09, Unitech like several other real estate companies had run up a sizable debt overhang. As per its published figures, at the end of the last financial year, the company had a total debt of Rs 9,055 crore. It has announced plans to scale it back to Rs 4,000 crore by the end of 2009-10.
Of the first tranche of Rs 1,625 crore raised in April, Rs 700 crore was earmarked to retire its debts. It is expected that some of the Rs 2,700 crore raised in the second tranche will also be used for the purpose but the company has not announced any figures.
It also has plans to raise Rs 1,230 crore in 2009-10 by selling assets to retire some of the debt. It has already sold a Saket property for Rs 500 crore and Marriott in Gurgaon for Rs 200 crores. Country Inn hotel and a school property is expected to fetch it Rs 160 crore and Rs 100 crore respectively.
The Financial Express, August, 03, 2009, Page 3
Kakoly Chatterjee, New Delhi
Unitech, India’s second largest listed real-estate company, is planning its third round of qualified institutional placement (QIP) for about Rs 1,000 crore. But unlike the first two issues, the proceeds from the new round of fund raising will be used for fresh investment instead of retiring its debts, a reflection of growing confidence in the real estate sector.
Unitech expects to price the issue at Rs 125, which will be 39% premium over its current market price of Rs 90.10 on Friday at the National Stock Exchange. However the company denied any such plans in response to an email sent to them.
The fund that is raised through the third QIP is expected to finance the affordable housing schemes that the company has launched in several cities. The Delhi-based company with a marketcap of Rs 24,000 crore has launched affordable housing projects like Brahma and Ananda in Perambur near Chennai and Uni Homes in Noida. The company has already raised Rs 4,325 crore this year through QIPs.
Unitech had last month announced it would invest Rs 1,700 crore to construct 20,000 affordable houses to become India’s top realty company within a year. It is aiming to sell 15,000 flats in the current fiscal year. The company will develop affordable houses across the country with an average price of Rs15 lakh. It will construct such houses whose average construction cost is estimated at about Rs1,000 per sq ft, on a total area of 16 to17 million sq ft.
In the wake of the downturn in the economy in the third and last quarter of 2008-09, Unitech like several other real estate companies had run up a sizable debt overhang. As per its published figures, at the end of the last financial year, the company had a total debt of Rs 9,055 crore. It has announced plans to scale it back to Rs 4,000 crore by the end of 2009-10.
Of the first tranche of Rs 1,625 crore raised in April, Rs 700 crore was earmarked to retire its debts. It is expected that some of the Rs 2,700 crore raised in the second tranche will also be used for the purpose but the company has not announced any figures.
It also has plans to raise Rs 1,230 crore in 2009-10 by selling assets to retire some of the debt. It has already sold a Saket property for Rs 500 crore and Marriott in Gurgaon for Rs 200 crores. Country Inn hotel and a school property is expected to fetch it Rs 160 crore and Rs 100 crore respectively.
DLF to launch 16 m sqft residential space this fiscal
DLF to launch 16 m sqft residential space this fiscal
The Economic Times, August, 1, 2009, Page 13
Our Bureau NEW DELHI
DLF, India’s largest property firm, plans to launch 16 million sqft of residential space in the current fiscal, even as the company continues to have a cautious outlook. DLF has been able to reduce its debt by over Rs 2,000 crore and has received another Rs 2,000 crore from group company DAL in June quarter giving indication that cash situation at the company may be fast improving.
“We are being a bit more cautious than rest of our colleagues...We will launch not just for selling but for adding value and making reasonable profit,” DLF vice-chairman Rajiv Singh told analysts in a post-earnings conference call, adding that he didn’t think the sector was “completely out of the woods”.
Mr Singh said he saw “reasonable revival in demand” not just for low-cost or mid-income, but also for high-end homes. The company would launch 8 million sqft each in mid-income and luxury housing segments across cities this fiscal.
On the possibility of a price hike, Mr Singh said the current industry conditions didn’t call for a price hike. A price hike could reinvite speculative element in the sector, he said.
The company has reduced its net debt in the June quarter from Rs 14,000 crore to Rs 11,686 crore. It plans to bring down its net debt to Rs 6,000 crore by the end of this fiscal.
As part of its deleveraging exercise, the company has received Rs 500 crore through sale of assets and is close to concluding deals that would generate another Rs 3,000 crore in the second and third quarter of this fiscal. In all, the realty firm expects to raise Rs 5,500 crore, which would be used to repay debt and bring down company’s debt-equity ratio from current 0.5 to 0.3 by March-end. DLF received Rs 2,000 crore from DAL, a privately-held group company, in the April-June quarter bringing down its receivable from DAL to Rs 2,600 crore. Both DLF and DAL are promoted by Rajiv Singh and family and the two companies have been mulling an option for the listed firm to take over the privately-held entity. The proposal of DLF taking over DAL is still under deliberation, Mr Singh said.
“They (DE Shaw) are showing some interest in remaining committed...We will be able to resolve this soon,” Mr Singh said on DE Shaw’s proposed exit from DAL. DE Shaw, which had invested $400 million in DAL two years ago, had expressed interest to exit DAL sometime back.
DLF on Thursday announced a 79% decline in profit to Rs 396 crore and a 57% fall in sales to Rs 1,650 crore for the June quarter. DLF feels demand for offices and malls will take a little longer to pick up. Mr Singh said local enquiries have increased for commercial space, but it may take six months for a significant number of these to be converted into bookings.
Knock knock! Is this property vacant?
Knock knock! Is this property vacant?
The Economic Times, August, 03, 2009, Page 4
Enquiries From Retail Investors & Buys By Institutional Players Signal Revival Of Commercial Realty
Sachin Dave MUMBAI
THE commercial property market, which had seen one of the biggest falls till May, is slowly reviving as higher government incomes and an improving economy are prompting customers to invest in asset classes. Developers, who had slashed prices of their commercial projects by 40-50% due to slow demand, say there are now more enquiries from retail investors, while institutional buyers have closed some deals.
Many developers, instead of trying to sell off properties are signing rental deals with customers and institutional players. In one recent deal, global consultant KPMG signed a deal with Lodha Developers for renting out a 1,30,000 square feet property at Mahalaxmi in central Mumbai, for a monthly rental of Rs 160 per square feet.
“This is one of the biggest deals in the commercial property market this year, not just for us but also for the sector,” said Lodha Developers director Abhisheck Lodha. “Though rates have fallen in the past three quarters, there is now lot of interest from customers.” The company has five commercial projects in Mumbai, in areas such as Parel, Worli and Thane. Recently, Lodha also bid Rs 710 crore for National Textile Corporation’s 10.3-acre Finlay Mill land in central Mumbai.
Similarly, in a recent transaction in the commercial property space, investor C Sivasankaran acquired a 66% stake in a commercial property SPV from DLF for Rs 310 crore. Akruti City is the other investor in the SPV.
Explains Ambar Maheshwari, director investments at DTZ, an international property consultancy firm, “While commercial property rates have been low, customers are slowly returning. Many prominent developers are going for lease rent discounting, which not only helps them raise liquidity but also helps them sell the property at a later stage for better valuation.”
Under lease rent discounting, developers borrow from financial institutions on the basis of an agreement between the owner and the tenant. The rent from the tenant is then directly deposited with the lender and not with the owner.
Industry observers say several realty players, who have commercial projects, have adopted lease rent discounting. Market leaders such as DLF and Unitech are known to favour such a model. Both firms had almost stopped work on their commercial property developments in Mumbai. However, according to people familiar with these companies, work has restarted through lease rent discounting.
Said a Unitech executive, “Commercial properties give better returns but there is lot of risk as rates are volatile. But our company is now better placed to manage these risks as far as funds are concerned.” Delhi-based Unitech recently raised Rs 2,000 crore through a QIP issue, apart from selling off non-core assets to improve its liquidity.
Rates on commercial properties are more sensitive to market conditions than those of residential units, as they depend on returns or rentals. So when rentals in India dropped, so did the rates for commercial properties. Like the office-cum-commercial Bandra Kurla Complex in Mumbai, which enjoyed a premium tag for commercial market. Rentals here were around Rs 450-500 per square feet last year; now, for the same property, the rates are at around Rs 250 per square feet.
Though even as the revival in the commercial property is still beginning, a majority of developers are still cautious. Says Sunteck Realty chairman Kamal Khetan, “Capital values of commercial properties are dependent largely on rentals. We believe rents have bottomed out and are already seeing upward movement. A number of investors have started picking up commercial property as it makes good investment sense; it gives a rental return as well as capital appreciation when the markets pick up,” he added.
CRAWLING BACK
What are the recent big property deals?
Global consultant KPMG signed a deal with Lodha Developers for renting out a 1,30,000 square feet property at Mahalaxmi in central Mumbai, for a monthly rental of Rs 160 per square feet.
Lodha also bid Rs 710 crore for National Textile Corporation’s 10.3-acre Finlay Mill land in central Mumbai.
C Sivasankaran acquired a 66% stake in a commercial property SPV from DLF for Rs 310 crore.
What’s the new trend?
Many prominent developers are going for lease rent discounting, which not only helps them raise liquidity but also helps developers sell the property at a later stage for better valuation.
Under lease rent discounting, developers borrow from financial institutions on the basis of an agreement between the owner and the tenant. The rent from the tenant is then directly deposited with the lender and not with the owner. DLF and Unitech are known to favour such a model. Both these companies have started work on stalled projects using lease rent discounting system.
The Economic Times, August, 03, 2009, Page 4
Enquiries From Retail Investors & Buys By Institutional Players Signal Revival Of Commercial Realty
Sachin Dave MUMBAI
THE commercial property market, which had seen one of the biggest falls till May, is slowly reviving as higher government incomes and an improving economy are prompting customers to invest in asset classes. Developers, who had slashed prices of their commercial projects by 40-50% due to slow demand, say there are now more enquiries from retail investors, while institutional buyers have closed some deals.
Many developers, instead of trying to sell off properties are signing rental deals with customers and institutional players. In one recent deal, global consultant KPMG signed a deal with Lodha Developers for renting out a 1,30,000 square feet property at Mahalaxmi in central Mumbai, for a monthly rental of Rs 160 per square feet.
“This is one of the biggest deals in the commercial property market this year, not just for us but also for the sector,” said Lodha Developers director Abhisheck Lodha. “Though rates have fallen in the past three quarters, there is now lot of interest from customers.” The company has five commercial projects in Mumbai, in areas such as Parel, Worli and Thane. Recently, Lodha also bid Rs 710 crore for National Textile Corporation’s 10.3-acre Finlay Mill land in central Mumbai.
Similarly, in a recent transaction in the commercial property space, investor C Sivasankaran acquired a 66% stake in a commercial property SPV from DLF for Rs 310 crore. Akruti City is the other investor in the SPV.
Explains Ambar Maheshwari, director investments at DTZ, an international property consultancy firm, “While commercial property rates have been low, customers are slowly returning. Many prominent developers are going for lease rent discounting, which not only helps them raise liquidity but also helps them sell the property at a later stage for better valuation.”
Under lease rent discounting, developers borrow from financial institutions on the basis of an agreement between the owner and the tenant. The rent from the tenant is then directly deposited with the lender and not with the owner.
Industry observers say several realty players, who have commercial projects, have adopted lease rent discounting. Market leaders such as DLF and Unitech are known to favour such a model. Both firms had almost stopped work on their commercial property developments in Mumbai. However, according to people familiar with these companies, work has restarted through lease rent discounting.
Said a Unitech executive, “Commercial properties give better returns but there is lot of risk as rates are volatile. But our company is now better placed to manage these risks as far as funds are concerned.” Delhi-based Unitech recently raised Rs 2,000 crore through a QIP issue, apart from selling off non-core assets to improve its liquidity.
Rates on commercial properties are more sensitive to market conditions than those of residential units, as they depend on returns or rentals. So when rentals in India dropped, so did the rates for commercial properties. Like the office-cum-commercial Bandra Kurla Complex in Mumbai, which enjoyed a premium tag for commercial market. Rentals here were around Rs 450-500 per square feet last year; now, for the same property, the rates are at around Rs 250 per square feet.
Though even as the revival in the commercial property is still beginning, a majority of developers are still cautious. Says Sunteck Realty chairman Kamal Khetan, “Capital values of commercial properties are dependent largely on rentals. We believe rents have bottomed out and are already seeing upward movement. A number of investors have started picking up commercial property as it makes good investment sense; it gives a rental return as well as capital appreciation when the markets pick up,” he added.
CRAWLING BACK
What are the recent big property deals?
Global consultant KPMG signed a deal with Lodha Developers for renting out a 1,30,000 square feet property at Mahalaxmi in central Mumbai, for a monthly rental of Rs 160 per square feet.
Lodha also bid Rs 710 crore for National Textile Corporation’s 10.3-acre Finlay Mill land in central Mumbai.
C Sivasankaran acquired a 66% stake in a commercial property SPV from DLF for Rs 310 crore.
What’s the new trend?
Many prominent developers are going for lease rent discounting, which not only helps them raise liquidity but also helps developers sell the property at a later stage for better valuation.
Under lease rent discounting, developers borrow from financial institutions on the basis of an agreement between the owner and the tenant. The rent from the tenant is then directly deposited with the lender and not with the owner. DLF and Unitech are known to favour such a model. Both these companies have started work on stalled projects using lease rent discounting system.
Office realty shows early signs of revival
Office realty shows early signs of revival
Hindustan Times, HT Business, August, 03, 2009, Page 23
Is there a recovery in sight for sagging office spaces hit by the ripple effects of the US financial meltdown? Market analysts say office spaces have started generating buyer interest from corporates, making developers optimistic about the segment.
But industry experts add a note of caution, saying the supply-demand gap is still huge.
“There is a bit more enquiry for office spaces than a few quarters ago, which is a positive sign. However, the deals are not happening at a good pace and there is at least 18-24 months of oversupply in the market,” Sameer Nayar, managing director and head of real estate finance at the Asia Pacific unit of global financial services firm Credit Suisse told Hindustan Times.
Property consultant Jones Lang LaSalle Meghraj said demand is picking up in cities like Mumbai, Bangalore and Delhi driven, not by traditionally strong IT buyers –which have been hit by the downturn in Western economies – but those from other sectors.
“Leasing enquiries have started to show a gradual increase. As the pace of recovery in the global environment improves further, these enquiries are expected to be converted into pre-leases,” DLF mentioned in a presentation made to analysts last week.
“Unlike September-October when demand had hit its bottom, we are receiving enquiries from corporates now,” said Anil Kumar, chief executive officer of Delhi-based Ansal API.
Industry estimates suggest rentals declined between 25-40 per cent from their peak values a year ago. Analysts said rentals continued to remain lower than last year whereas developers insist rentals have started moving upwards.
“Lower rentals are a thing of the past, in Connaught Place rentals are anywhere between Rs 150-Rs 300 per square ft whereas a quarter ago it was at Rs 100-Rs 250 per sq ft,” said Pradeep Jain, chairman, Delhi-based Parsvnath Developers.
“Rentals are down significantly from last year and are nowhere close to moving up,” Nayar said.
Hindustan Times, HT Business, August, 03, 2009, Page 23
Is there a recovery in sight for sagging office spaces hit by the ripple effects of the US financial meltdown? Market analysts say office spaces have started generating buyer interest from corporates, making developers optimistic about the segment.
But industry experts add a note of caution, saying the supply-demand gap is still huge.
“There is a bit more enquiry for office spaces than a few quarters ago, which is a positive sign. However, the deals are not happening at a good pace and there is at least 18-24 months of oversupply in the market,” Sameer Nayar, managing director and head of real estate finance at the Asia Pacific unit of global financial services firm Credit Suisse told Hindustan Times.
Property consultant Jones Lang LaSalle Meghraj said demand is picking up in cities like Mumbai, Bangalore and Delhi driven, not by traditionally strong IT buyers –which have been hit by the downturn in Western economies – but those from other sectors.
“Leasing enquiries have started to show a gradual increase. As the pace of recovery in the global environment improves further, these enquiries are expected to be converted into pre-leases,” DLF mentioned in a presentation made to analysts last week.
“Unlike September-October when demand had hit its bottom, we are receiving enquiries from corporates now,” said Anil Kumar, chief executive officer of Delhi-based Ansal API.
Industry estimates suggest rentals declined between 25-40 per cent from their peak values a year ago. Analysts said rentals continued to remain lower than last year whereas developers insist rentals have started moving upwards.
“Lower rentals are a thing of the past, in Connaught Place rentals are anywhere between Rs 150-Rs 300 per square ft whereas a quarter ago it was at Rs 100-Rs 250 per sq ft,” said Pradeep Jain, chairman, Delhi-based Parsvnath Developers.
“Rentals are down significantly from last year and are nowhere close to moving up,” Nayar said.
Inventory clearance sale in real estate
Inventory clearance sale in real estate
Hindustan Times, HT Business, August, 03, 2009, Page 25
You thought it happened only for shirts and shoes? The glut in the property market and the reluctance of a large number of property buyers to hit the market has now forced real estate developers to clear their built-up inventories at big discounts — something largely unheard of in India.
Royal Palms Estates, a project spread over 240 acres of land in Mumbai’s Goregaon East has announced what it calls “Inventory Clearance Sale” of its ready possession properties at a flat rate of Rs 3,999 per square foot. Brokers say that compares with the going rates in the Goregaon area of Rs 5,000 to Rs 7,000 per sq ft.
Prices had any way corrected by 40 per cent from their peak in 2007, but this is probably the first time that a Mumbai realtor is pushing things down by a further 40 per cent.
Like in basement sales, there is a deadline. The offer ends on August 9. And there are freebies like a club membership.
A project of Royal Palms India, Royal Palms Estate is offering both residential and commercial properties in this sale.
Also on offer are condominiums for weekend stays and corporate leases, shops, villas and serviced apartments.
The cheapest offering is a studio apartment of about 340 sq ft available at Rs 13.59 lakh. A three-bedroom, hall, kitchen flat is available for Rs 49.99 lakh.
“The maximum bargain hunters surface during the slack season and take quick decisions if they find a property worth acquiring either for personal use or for investing,” said Dilawar Nensey, joint managing director at Royal Palms India.
He said it also made sense for the company to offer discounts than sit on high-cost debt.
Analysts say if the offer clicks, other developers may be forced to drop prices amid talk of a property glut.
In March this year real estate research agency Liases Foras said 8 crore sq ft space of fully constructed or projects under execution remained unsold in the Mumbai while there was a stock of 15 crore square feet in the National Capital Region.
Hindustan Times, HT Business, August, 03, 2009, Page 25
You thought it happened only for shirts and shoes? The glut in the property market and the reluctance of a large number of property buyers to hit the market has now forced real estate developers to clear their built-up inventories at big discounts — something largely unheard of in India.
Royal Palms Estates, a project spread over 240 acres of land in Mumbai’s Goregaon East has announced what it calls “Inventory Clearance Sale” of its ready possession properties at a flat rate of Rs 3,999 per square foot. Brokers say that compares with the going rates in the Goregaon area of Rs 5,000 to Rs 7,000 per sq ft.
Prices had any way corrected by 40 per cent from their peak in 2007, but this is probably the first time that a Mumbai realtor is pushing things down by a further 40 per cent.
Like in basement sales, there is a deadline. The offer ends on August 9. And there are freebies like a club membership.
A project of Royal Palms India, Royal Palms Estate is offering both residential and commercial properties in this sale.
Also on offer are condominiums for weekend stays and corporate leases, shops, villas and serviced apartments.
The cheapest offering is a studio apartment of about 340 sq ft available at Rs 13.59 lakh. A three-bedroom, hall, kitchen flat is available for Rs 49.99 lakh.
“The maximum bargain hunters surface during the slack season and take quick decisions if they find a property worth acquiring either for personal use or for investing,” said Dilawar Nensey, joint managing director at Royal Palms India.
He said it also made sense for the company to offer discounts than sit on high-cost debt.
Analysts say if the offer clicks, other developers may be forced to drop prices amid talk of a property glut.
In March this year real estate research agency Liases Foras said 8 crore sq ft space of fully constructed or projects under execution remained unsold in the Mumbai while there was a stock of 15 crore square feet in the National Capital Region.
Escalation in road cost under lens as prices cool down
Escalation in road cost under lens as prices cool down
The Financial Express, August, 03, 2009, Page 1
Surabhi, New Delhi
With prices of key construction materials cooling down, the Planning Commission is reviewing road projects that witnessed a hike in construction cost after the commodity boom last year. Prices of key construction materials such as cement, steel and bitumen went through the roof in 2008.
“With prices of construction material now falling to pre-2008 levels, there may be a need to revise the cost escalation in highway projects last year,” a senior official said. So, the Planning Commission is collecting data on projects where the road transport and highways ministry scaled up the total project cost to accommodate higher prices and is likely to call for de-escalation of these costs.
While there is a clause in road contracts that allows for price escalation based on the Wholesale Price Index, road developers argue it does not fully reflect price hikes. Faced with a steep rise in cost, they had, in fact, threatened to stop construction if the ministry did not reimburse the increased expenses.
In 2008-09, prices of cement, steel and bitumen —which account for about 40% of the cost in road construction—shot up by over 30%. However, in keeping with overall inflation levels, the prices of these three key constituents have cooled down significantly since then. According to data provided by the National Highways Builders Federation, the price for a bag of cement was Rs 235 in January 2008. It reached a peak of Rs 300 in August and September last year. Similarly, steel prices shot up to Rs 52,000 per mt for 8mm bars in July 2008.
So giving in to the demand of road developers and to ensure that highway projects did not get impacted by the rise in prices of construction material last year, the ministry has increased the total project cost by up to 20% in cases where the project was originally assessed in 2005-06.
However, steel prices had come down to Rs 34,500 per mt by March this year, while cement prices cooled down to Rs 260 a bag.
There are 231 national highway projects of over Rs 5 crore that have incurred such time and cost over runs in the last three years, minister of state for road transport and highways RPN Singh had recently informed the Lok Sabha.
Road developers feel that the move by the Planning Commission to review cost will not be justified as prices of steel and cement have fallen only by about 10% since last year. “The total project cost for these roads was based on detailed project reports from 2004-05. Prices of construction materials have been rising continuously since then and these need to be reflected. Otherwise road projects will not attract bidders,” said M Murali, director-general, National Highways Builders Federation. Along with quoting old prices, the total project cost estimated in the DPR is usually lower than the actual costs, he said.
In fact, apart from the credit crisis, one of the reasons why there were few bidders for road projects last year was the low project costs estimated by the ministry, which made road projects unviable, said Murali.
Supply of affordable housing to increase 25% in six months
Supply of affordable housing to increase 25% in six months
The Financial Express, August, 03, 2009, Page 17
Mona Mehta, Mumbai
The overall supply of affordable housing projects in metros, tier-II and tier-III cities is expected to increase by 25% in the next six months as top builders are now planning to double the number of units and offer to home buyers.
The move has come in the wake of the recent announcement made on realty sops by the union finance minister whereby developers of affordable housing projects (units of 1,000-1,500 sq ft) have been granted a tax holiday on profits from projects initiated in the 2007-08 financial year which will have to be completed by March 2012.
Mumbai-based Lodha Group has about 4,500 acre of land just to develop affordable housing projects which will be done much more speedily now. Abhishek Lodha, chairman, Lodha Group told FE, “We have been asking the government to incentivise affordable housing and we are very glad that the FM has finally stepped in after the budget to promote medium interest subsidy and tax holiday. Now, we will look at doubling the number of units of affordable housing to home buyers.”
Industry experts believe that the overall effect will only be noticeable in smaller cities, where homes costing below Rs 20 lakh are still procurable. In larger cities such as Mumbai, residences admeasuring 1000-1500 square feet can by no yardstick be considered ‘ affordable’ in any case.
According to Ashutosh Limaye, associate director, strategic consulting, Jones Lang LaSalle Meghraj (JLLM), “We expect a significant perk-up in transaction volumes in tier-II and tier-III markets; this is significant, because these markets had been perceived as losing steam of late. Therefore, we are once again looking at the prospect of a holistic and balanced growth pattern.”
According to Niranjan Hiranandani, managing director, Hiranandani Constructions, “Any concession is beneficial in today’s difficult times. In fact in China, more rigorous concession is given on lower base rates which is quite beneficial. India is still lagging behind when compared to China.”
As regards interest subsidy of 1% to home loans up to 10 lakh, builders opines, this will make home loans not only cheaper but also affordable particularly for those who have limited means and opt for the small house. This will generate a greater demand for low cost and affordable houses and will be beneficial to the real estate developers.
Navin Raheja, managing director, Raheja Developers said, more and more people particularly from the lower and middle strata of the society will be able to own a house of their own. This will also provide fillip to the real estate as demand for costlier houses is practically not much during the present recessionary state. Its thus time to cheers for certain developers who have been focusing at extended suburbs and certain parts of metros to develop affordable housing projects.
According to Nayan Shah, managing director, Mayfair Housing, “We will be coming up with more affordable housing projects and offer 400 units in new areas, instead of 200 units we are currently offering in extended suburbs of Mumbai and other metros as well.”
IMF sees gradual recovery of US economy
IMF sees gradual recovery of US economy
The Financial Express, August, 03, 2009, Page 18
Press Trust of India
Washington: The sharp fall in the economic output of the world’s largest economy, the United States seems to be ending but the recovery is likely to be gradual as there are still some financial strains, the International Monetary Fund said.
IMF in its annual report on the US said, “As a result of their increasingly strong and comprehensive policy measures, the sharp fall in economic output seems to be ending, and confidence in financial stability has strengthened.”
IMF has projected the real GDP for the United States for 2009 at negative 2.6%, and for the year 2010, it would improve significantly and was pegged at 0.8%.
However, as some financial strains are still round the corner, the recovery is likely to be gradual.
“With financial strains still elevated, the recovery is likely to be gradual, and risks are tilted to the downside,” the IMF report said.
The prospect in the job market, however, remains weak as the unemployment rate for United States is on an uptrend. The unemployment rate for US which was as low as 5.5% in 2004 is likely to touch 9.3% in 2009 and would further deteriorate to 10.1% in the year 2010, IMF added.
As per the IMF executive board assessment, policies under the Financial Stability Plan like-- stress tests, debt guarantees, and capital injections-- have contributed to a significant improvement in financial conditions.
However, incase the downside risks materialise, “Additional fiscal stimulus could also be used, although the immediate focus should be on implementing the current fiscal measures and monitoring their impact,” IMF said.
According to the report the macroeconomic policies are providing significant support to demand, but United States still has to wait for a complete economic recovery.
Interestingly, the IMF executive board has noted that the crisis will have important implications for the role of the United States in the global economy and emphasised on the fact that the other regions will need to play an increased role in supporting global growth.
“The US consumer is unlikely to play the role of global “buyer of last resort”, suggesting that other regions will need to play an increased role in supporting global growth,” they said. The report further said that “A key priority will be to develop comprehensive exit strategies to unwind the extraordinary crisis-driven interventions, once a sustainable recovery is underway.” The US economy has experienced the worst financial crisis since the Great Depression. In the second half of 2008, financial pressures intensified and came to a head with the failure of Lehman Brothers in September, which in turn triggered massive financial instability in the US and global financial markets.
The Financial Express, August, 03, 2009, Page 18
Press Trust of India
Washington: The sharp fall in the economic output of the world’s largest economy, the United States seems to be ending but the recovery is likely to be gradual as there are still some financial strains, the International Monetary Fund said.
IMF in its annual report on the US said, “As a result of their increasingly strong and comprehensive policy measures, the sharp fall in economic output seems to be ending, and confidence in financial stability has strengthened.”
IMF has projected the real GDP for the United States for 2009 at negative 2.6%, and for the year 2010, it would improve significantly and was pegged at 0.8%.
However, as some financial strains are still round the corner, the recovery is likely to be gradual.
“With financial strains still elevated, the recovery is likely to be gradual, and risks are tilted to the downside,” the IMF report said.
The prospect in the job market, however, remains weak as the unemployment rate for United States is on an uptrend. The unemployment rate for US which was as low as 5.5% in 2004 is likely to touch 9.3% in 2009 and would further deteriorate to 10.1% in the year 2010, IMF added.
As per the IMF executive board assessment, policies under the Financial Stability Plan like-- stress tests, debt guarantees, and capital injections-- have contributed to a significant improvement in financial conditions.
However, incase the downside risks materialise, “Additional fiscal stimulus could also be used, although the immediate focus should be on implementing the current fiscal measures and monitoring their impact,” IMF said.
According to the report the macroeconomic policies are providing significant support to demand, but United States still has to wait for a complete economic recovery.
Interestingly, the IMF executive board has noted that the crisis will have important implications for the role of the United States in the global economy and emphasised on the fact that the other regions will need to play an increased role in supporting global growth.
“The US consumer is unlikely to play the role of global “buyer of last resort”, suggesting that other regions will need to play an increased role in supporting global growth,” they said. The report further said that “A key priority will be to develop comprehensive exit strategies to unwind the extraordinary crisis-driven interventions, once a sustainable recovery is underway.” The US economy has experienced the worst financial crisis since the Great Depression. In the second half of 2008, financial pressures intensified and came to a head with the failure of Lehman Brothers in September, which in turn triggered massive financial instability in the US and global financial markets.
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