Banks, FIs step up property buys

Banks, FIs step up property buys

Business Standard, Section II, page 3

ANIRUDH LASKAR Mumbai, 22 January
With real estate prices moving southwards, several banks and financial institutions are buying their own properties and shifting from rented and leased premises.
While the country’s largest financial institution, Life Insurance Corporation of India (LIC), has already bought land and built-up properties during this financial year, the country’s thrid largest private lender Axis Bank is scouting for up to 5,00,000 square feet of space in areas such as Bandra-Kurla Complex (BKC), Worli and Parel.
“Property prices have fallen to attractive levels now.
As we intend to expand our network, we will buy our own properties instead of taking commercial spaces on rent or lease. During the first half of this year, we have bought properties worth over Rs 511 crore across different cities,” said LIC Managing Director Thomas Mathew T.
According to brokers, real estate prices in the country’s commercial hub have fallen 30-40 per cent in the last one year. “ Land at BKC is now available at just Rs 30,000 a square feet now from Rs 40,000- 50,000 a year back. At Worli and Parel, properties are mostly sold on the basis of down-payment. If a buyer agrees to pay within a week or so after identifying a property, the seller offers lower rates. So far, these areas were being mostly offered on lease or rent,” said Mehta, who deals in real estate in Mumbai.
“We have been planning to buy an office space of 3,50,000 -5,00,000 square feet somewhere in BKC or Worli. As the real estate prices have come down significantly, it is the right time to buy our own property for expanding further, instead of looking for lease and rent options. We are close to finalising such a commercial space,” said a senior executive at Axis Bank.
In November last year, foreign lender Standard Chartered Bank had bought about 250,000 square feet of space in BKC for Rs 750 crore. Standard Chartered purchased the property from PD Developers at around Rs 30,000 a square feet, a rate which is over 30 per cent lower as compared to Rs 45,000 about a year back.
LIC intends to buy land and properties worth Rs 1,000 crore this financial year to accommodate its upcoming new branch offices.
The insurer, which currently has 2048 branches and 108 divisional offices, plans to open 500 new satellite offices this year.

LIC intends to buy land and properties worth Rs 1,000 crore this financial year

Axis Bank is scouting for 5,00,000 square feet of space in Bandra-Kurla Complex, Worli and Parel.

Standard Chartered Bank had bought 250,000 square feet of space in BKC for Rs 750 crore
SCOUTING FOR LAND

OMAXE launches PANACHE Homes starting Rs. 12.12 lakhs

Ansal Properties puts on hold Rs. 2K Crore hotel projects

Unitech seeks nod for $1b GDRs

Unitech seeks nod for $1b GDRs

Economic Times, page 8

Promoter Stake Drops 7% to 67.4% in Three Months
Sanjeev Choudhary & Chaitali Chakravarty NEW DELHI
INDIA’S second-largest listed realty company, Unitech, has sought government approval to float global depository receipts (GDR) to raise a maximum of Rs 5,000 crore ($1 billion). If the company were to successfully raise the entire amount using GDR pricing formula, as per Unitech’s application, promoter stake could get reduced to 36.7%. Promoter stake in Unitech has already dropped 7% to 67.4% in the three months to December ‘08. A Mumbai-based real estate analyst, who did not want to be named, said the decline in promoter stake was probably due to sale of pledged shares by financial institutions, which had lent to the promoters. It is widely believed, although not verified, that promoters have much more shares pledged with lenders. Unitech didn’t comment on stake decline or shares pledged with lenders. Unitech’s shares fell 3.4% to Rs 28.30 on Thursday. Unitech earlier announced that the company’s board had approved, on December 22, the issuance of fresh securities to raise Rs 5,000 crore through fresh issuance of securities, including equity shares, convertible preference shares or debentures, GDR and ADR. Now it is believed to have decided to go ahead with a GDR issue. GDRs are shares issued in overseas market to persons who are not residents of India. As per Unitech’s application to foreign investment promotion board (FIPB), the nodal body clearing foreign investment in India, the firm is planning to issue over 40 crore GDRs at a price of Rs 36.78 - calculated as per GDR scheme. The GDR issue will reduce promoter’s stake to 36.71% from 67.45% as of December 31, 2008. Postinvestment, GDRs would comprise 45.57% of total shareholding. Analysts are sceptical about Unitech’s ability to get enough investors to subscribe to the company’s GDRs, given the poor state of markets globally. Unitech’s portfolio of assets, one-tenth of which comprises non-FDI compliant projects, might come as a hurdle for speedy government approval. The company has given an undertaking that GDR proceeds will be used only in the FDI-compliant projects, but it’s unlikely that the government will allow Unitech to induct FDI, without asking it to hive off non-FDI compliant projects. Recently, the government rejected Gurgaon-based Vatika group’s proposal to retain non-FDI compliant assets post-FDI infusion. Real estate developers seek to retain such assets in a bid to keep a higher valuation for the company. Unitech on Monday claimed that it has been able to reduce its debt obligation due by March ‘09 to Rs 600 crore from Rs 2,500 crore through repayment and roll-over. sanjeev.choudhary@timesgroup.com

COMMERCIAL RENTALS DROP

COMMERCIAL RENTALS DROP

Economic Times, ET Realty, p1

With the liquidity crunch, not only have the prices of commercial spaces gone down, there has also been a major dip in demand. ET Realty explores
Rajarshi Bhattacharjee
Companies, which had deferred expansion plans in Delhi and the National Capital Region (NCR) owing to high property prices, can now think of going ahead. Rentals for office and commercial space are on a downhill move following decline in activity levels in the market. According to fourth quarter report (2008) of CB Richard Ellis, rental values have reduced by around 11 percent and capital values have depreciated by 13 percent in the Central Business District (CBD), as compared to quarter one of 2008. "As compared to the previous quarter, rentals of business spaces in Nehru Place have dropped by 20 percent. Markets of Jasola and Saket have also witnessed a decrease of 8 percent in rental values. Capital values, however witnessed a drop of approx 13 to 14 percent in both the markets," states CB Richard Ellis in its latest report. Peripheral markets of Gurgaon and Noida also witnessed a drop of approx 12 and 16 percent respectively in the last quarter, as compared to quarter three of 2008. The decisive factors determining fluctuation in price and demand of commercial spaces have been the closing down of expansion plans by companies and the liquidity crunch. Speaking over the recent dip in demand, Naveen Luthra, Vice-President and Business Head, MagicBricks.com informs, "Most companies from the US plan six months in advance. This decision for further rentals has been deferred from the benchmark December 2008 to March 2009. The spill-over effect of this will be felt within the next 4 to 6 months. By August-September 2009, the effect of slowdown is more likely to be evident." Infact, the CBD witnessed a reversal of trend in the year 2008 as compared to previous year when leasing activity was in a growth phase. No major transaction was concluded in the micro market this year apart from a few smaller space take ups. The upcoming Civic Centre project and redevelopment of railway land is expected to add new supply to CBD after a fairly long time. Another approx 70,000 sq ft is likely to come in the market when an existing building is expected to be renovated and available for leasing. Commercial spaces in Nehru Place maintained status-quo with no new supply and no leasing of Grade-A spaces. Large spaces in Saket, which were initially planned for single users have now been offered for lease. Bulk of leasing activity in Delhi has been concentrated in Jasola District Centre which has quality supply and comparatively lower rentals. Gurgaon has also been slow on leasing for both IT as well as commercial office spaces. Most of the projects have been delayed and few others are awaiting completion certificate. Gurgaon micro market currently has an estimated vacancy of around 11 percent. Noida continues to have abundant competitively priced IT supply but caters mostly to mid and lower level IT companies and has witnessed a vacancy of around 20 percent. "The Indian organised retail sector grew at 25 percent in 2007. Anticipating the growth of retail sector at above 35 percent in the coming years, developers had announced big retail projects. However, owing to economic slowdown, the growth of the retail sector has come down to 15 percent in 2008, resulting in developers deferring their projects for 12-24 months. Lack of funds leading to construction delays has resulted in slow absorption of retail space in malls and other commercial spaces," says VK Jindal, Chairman & Managing Director, SVP Group. Anshuman Magazine, Chairman & Managing Director, CB Richard Ellis, South Asia says, "Unlike the trends noticed in the past few years, fresh commitments and pre-leasing of underconstruction developments, have seen a drop. The next few months are likely to be a time of subdued demand in the short term. However the government's economic stimulus package and attempts by the US to revive the economy are expected to eventually improve activity levels in the market."

Truckers’ strike pushes inflation up to 5.6%

Truckers’ strike pushes inflation up to 5.6%
Economic Times, 23rd January 2009

The hardening of food prices on the back of the recent truckers’ strike brought a halt to the 10-week downward trend in inflation. Wholesale prices for the week ended January 10 inflated by 5.6%. In the previous week, prices inflated by 5.24%, and by 4.36% in the corresponding week last year. Economists say this is a temporary blip and expect the inflation rate to fall to near-zero in a couple of months.

Second relief window soon for realty sector, Economic Times, 23rd January 2008

Second relief window soon for realty sector

Economic Times, 23rd January 2008, Page 15

Rajat Guha NEW DELHI
THE government is considering a second relief package for the real estate and housing sector, which is crumbling under liquidity crisis and a slowdown in demand. Apart from giving real estate an infrastructure status, the measures being looked at include reduction in interest rates from 9.25% to 7.5% for home loans up to Rs 30 lakh, an official in the department of industrial policy and promotion (DIPP) has said. The ministry may also consider a proposal for doubling of income tax rebate on home loan interest to Rs 3 lakh from Rs 1.5 lakh and raising of income tax exemption on rentals from 30% to 50%. Finance secretary Arun Ramanathan is learnt to be finalising a note on required measures for easing liquidity in the housing and real estate sector for the consideration of the Committee of Secretaries (CoS). “The finance ministry is considering demands of the real estate industry which could not translate into reality in the first fiscal package of the government,” a senior DIPP official told ET. The official added that in the meeting of the CoS on economic crisis, held last month, Mr Ramanathan had pointed out that the recommendations made by real estate industry body Confederation of Real Estate Developer’s Associations of India for stimulating the real estate sector, including the housing sector, need to be considered. The recommendations made by the association were forwarded by the urban development ministry to the CoS. Cabinet secretary KM Chandrashekhar had observed that construction activities need to be stimulated as this sector has considerable employment potential. The first stimulus package had left realtors unhappy. They complained that the existing stock of unsold homes cost much more than Rs 20 lakh, so that the interest rate concession on loans up to Rs 20 lakh would not help their sale. Public sector banks are now offering homes loans up to Rs 5 lakh at a rate of 8.5% and up to Rs 20 lakh at 9.25%. Urban development minister Jaipal Reddy has also urged Prime Minister Manmohan Singh for taking steps to rev up the real estate sector. He sought an equal commitment from the sector in the form of pricecuts. “The commitment from the realty sector may include lowering of prices for houses and more and more investments in affordable housing,” Mr Reddy had written to the PM.