Friday, May 8, 2009
Tatas do a 'nano' in housing
Tatas do a 'nano' in housing
Business Standard, May 7, 2009, Page 4
BS Reporter / Mumbai
Launch houses priced between Rs 3.9 lakh and Rs 6.7 lakh.
The Tata group, which recently launched the low-cost car, Nano, today entered the low-cost housing segment to target industrial workers and other low-wage earners.
Tata Housing Development Company, a unit of Tata Sons, will open from Saturday the sale of application forms for over 1,000 houses under the brand “Shubh Griha”, priced between Rs 3.9 lakh and Rs 6.7 lakh, in Bhoisar, a distant suburb of Mumbai. It would launch around 4,000 such houses in other cities in four years, said Tata Housing Managing Director and Chief Executive Officer Brotin Banerjee.
The Mumbai project is expected to be completed in the next two years and buyers will be barred from selling the house for six to nine months after the purchase.
The company would also launch two to three such projects in Bangalore and the National Capital Region (NCR) in the current fiscal, Banerjee said.
“We believe there is a huge opportunity in this segment as our study has shown that around 48 per cent people in the lower segment are currently staying in a rented accommodation and there is a lot of migrant population in industrial belts in cities,” he added.
The Mumbai apartments will be available in three categories — 283 sq ft, 360 sq ft and 465 sq ft. The company has brought in State Bank of India for sale of applications. The buyers need to book the flats within 20 days of the launch. The initial booking amount is Rs 10,000. Based on a lottery, as done in the Nano’s case, the company will declare a first list and a waiting list within 15 days of the final booking.
Tata Housing is expecting a revenue of Rs 100 crore from the Bhoisar project. It will do a joint development with the land owner, with the latter getting a certain percentage of revenues. It will also follow the joint development model and outright purchase in other planned projects and is talking with state governments across the country in this regard, according to Banerjee.
The Tata move closely follows those of other developers such as Unitech, Omaxe, Raheja and Ansal, who are also planning low-cost projects in suburbs of satellite towns or smaller cities to target the bottom segment and generate more cash.
Unitech plans to launch residential projects in the Rs 5-10 lakh range in metros like Chennai and Kolkata and suburban cities like Gurgaon over the next few months. Omaxe has already launched a sub-Rs 4-10 lakh project at Peetampur and the Dewas industrial area near Indore to target industrial workers. It had sold half the project, a company spokesperson said.
According to a research report released by the Tata housing arm, the country faces shortage of 24.7 million dwelling units, of which more than 70 per cent fall in middle and low income groups.
Business Standard, May 7, 2009, Page 4
BS Reporter / Mumbai
Launch houses priced between Rs 3.9 lakh and Rs 6.7 lakh.
The Tata group, which recently launched the low-cost car, Nano, today entered the low-cost housing segment to target industrial workers and other low-wage earners.
Tata Housing Development Company, a unit of Tata Sons, will open from Saturday the sale of application forms for over 1,000 houses under the brand “Shubh Griha”, priced between Rs 3.9 lakh and Rs 6.7 lakh, in Bhoisar, a distant suburb of Mumbai. It would launch around 4,000 such houses in other cities in four years, said Tata Housing Managing Director and Chief Executive Officer Brotin Banerjee.
The Mumbai project is expected to be completed in the next two years and buyers will be barred from selling the house for six to nine months after the purchase.
The company would also launch two to three such projects in Bangalore and the National Capital Region (NCR) in the current fiscal, Banerjee said.
“We believe there is a huge opportunity in this segment as our study has shown that around 48 per cent people in the lower segment are currently staying in a rented accommodation and there is a lot of migrant population in industrial belts in cities,” he added.
The Mumbai apartments will be available in three categories — 283 sq ft, 360 sq ft and 465 sq ft. The company has brought in State Bank of India for sale of applications. The buyers need to book the flats within 20 days of the launch. The initial booking amount is Rs 10,000. Based on a lottery, as done in the Nano’s case, the company will declare a first list and a waiting list within 15 days of the final booking.
Tata Housing is expecting a revenue of Rs 100 crore from the Bhoisar project. It will do a joint development with the land owner, with the latter getting a certain percentage of revenues. It will also follow the joint development model and outright purchase in other planned projects and is talking with state governments across the country in this regard, according to Banerjee.
The Tata move closely follows those of other developers such as Unitech, Omaxe, Raheja and Ansal, who are also planning low-cost projects in suburbs of satellite towns or smaller cities to target the bottom segment and generate more cash.
Unitech plans to launch residential projects in the Rs 5-10 lakh range in metros like Chennai and Kolkata and suburban cities like Gurgaon over the next few months. Omaxe has already launched a sub-Rs 4-10 lakh project at Peetampur and the Dewas industrial area near Indore to target industrial workers. It had sold half the project, a company spokesperson said.
According to a research report released by the Tata housing arm, the country faces shortage of 24.7 million dwelling units, of which more than 70 per cent fall in middle and low income groups.
Tata Housing Development launches 'Shubh Griha'
Tata Housing Development launches 'Shubh Griha'
The Financial Express, May 7, 2009, Corporates & Markets, PVIII.
By Corporate Bureau
Tata Housing Development Company, a fully owned subsidiary of Tata Sons has forayed into a low cost housing project across 67 acres land in Boisar in Mumbai called 'Shubh Griha', thus launching its first value homes concept.
Addressing a media conference, Brotin Banerjee, managing director and CEO, Tata Housing Development Company said, "Through the value homes concept we will sell about 1,200 apartments in Phase I which will be priced between Rs 3.9 lakh to Rs 6.7 lakh. The area size of flats will be a mix of approximately 465 sq ft, 380 sq ft and 280 sq ft respectively".
Banerjee said the value homes will be sold to home buyers based on the basis of a lottery system wherein flats will be provided only to those home buyers whose names will be chosen through this system by the company. The lottery forms will be available to the homebuyers at select SBI (SBIN.NS : 1312.7 -56.8) banks from May 9, 2009 onwards.
As for the booking process, Banerjee explained that applicants can purchase the application form booklet for Rs 200 from SBI branches. After purchase of the application form booklet, bookings can be made in the next 20 days alongwith the initial booking deposit of Rs 10,000 through bank pay order at select SBI bank branches across Mumbai. He said, "The first list and the waiting list will be declared after 15 days of the final booking after a thorough scrutiny of the submitted application form booklets. The allotted customers would be sent allotment letters from Tata Housing alongwith the payment schedule."
Banerjee added, "Home buyers will be provided possessions of flats only after two years. While we expect revenues to the tune of Rs 100 crore through Shubh Griha, the total project cost of Shubh Griha is less than Rs 100 crore." The value homes by Tata Housing will have a pan India presence with similar projects across Tier I and II cities including Delhi, Bangalore and Kolkata.
As for the rationale behind foraying the value homes concept, Banerjee said, "We observed that since most of the people in the low income bracket live away from their families to earn a livelihood in the big cities, there is a large percentage of migrant population with these people living either in rented or company provided accommodation. Specifically, our study shows that around 48% of people in the lower segment are currently staying in rented accommodation. Shubh Griha initiative is in line with the group's philosophy of commitment to providing quality, innovative products for the common man".
The Financial Express, May 7, 2009, Corporates & Markets, PVIII.
By Corporate Bureau
Tata Housing Development Company, a fully owned subsidiary of Tata Sons has forayed into a low cost housing project across 67 acres land in Boisar in Mumbai called 'Shubh Griha', thus launching its first value homes concept.
Addressing a media conference, Brotin Banerjee, managing director and CEO, Tata Housing Development Company said, "Through the value homes concept we will sell about 1,200 apartments in Phase I which will be priced between Rs 3.9 lakh to Rs 6.7 lakh. The area size of flats will be a mix of approximately 465 sq ft, 380 sq ft and 280 sq ft respectively".
Banerjee said the value homes will be sold to home buyers based on the basis of a lottery system wherein flats will be provided only to those home buyers whose names will be chosen through this system by the company. The lottery forms will be available to the homebuyers at select SBI (SBIN.NS : 1312.7 -56.8) banks from May 9, 2009 onwards.
As for the booking process, Banerjee explained that applicants can purchase the application form booklet for Rs 200 from SBI branches. After purchase of the application form booklet, bookings can be made in the next 20 days alongwith the initial booking deposit of Rs 10,000 through bank pay order at select SBI bank branches across Mumbai. He said, "The first list and the waiting list will be declared after 15 days of the final booking after a thorough scrutiny of the submitted application form booklets. The allotted customers would be sent allotment letters from Tata Housing alongwith the payment schedule."
Banerjee added, "Home buyers will be provided possessions of flats only after two years. While we expect revenues to the tune of Rs 100 crore through Shubh Griha, the total project cost of Shubh Griha is less than Rs 100 crore." The value homes by Tata Housing will have a pan India presence with similar projects across Tier I and II cities including Delhi, Bangalore and Kolkata.
As for the rationale behind foraying the value homes concept, Banerjee said, "We observed that since most of the people in the low income bracket live away from their families to earn a livelihood in the big cities, there is a large percentage of migrant population with these people living either in rented or company provided accommodation. Specifically, our study shows that around 48% of people in the lower segment are currently staying in rented accommodation. Shubh Griha initiative is in line with the group's philosophy of commitment to providing quality, innovative products for the common man".
Banks step up lending to real estate
Banks step up lending to real estate
Business Standard, May 7, 2009, Section II, Page 2
BS Reporter in Mumbai
Banks may be claiming that they are pruning their real estate exposure but data from the Reserve Bank of India (RBI) paints a completely different picture.
According to RBI data, loans to the real estate sector grew 61 per cent on a year-on-year basis, with Rs 90,765 crore (Rs 907.65 billion) outstanding as on February 27, 2009. During the corresponding period in the previous year, the growth was 26.7 per cent.
During the year up to February 2009, the growth for public sector banks was a 79.1 per cent. Credit deployment by foreign banks to real estate companies registered a 41 per cent growth for the 12 months up to February 27, 2009, compared with a 36 per cent decline last year (see table).??
While the balance sheets of foreign banks are much smaller compared to their public sector counterparts, the 40 per cent growth in exposure to real estate firms is significant when seen against the annual growth in total credit by foreign banks, which was 4 per cent as on March 27, 2009.
At the same time, growth in loans from the banking system fell from 12 per cent to 7.5 per cent. But bank executives said the growth in real estate loan flows was based on sanctions before October and growth had slowed down in the second half.
A State Bank of India executive said a majority of lending to the real estate sector took place before October 2008, the time when global financial crisis assumed menacing proportions and sapped liquidity from the system, making banks risk averse.
Similarly, a senior executive of a foreign bank said the high growth in exposure to real estate sector companies was on account of disbursement of loans which had been sanctioned before the sector ran into trouble. However, I dont think we will see the same growth in the current year because builders have also cut back on projects, he added.
Questionnaires sent to Citibank, HSBC, ABN Amro and Deutsche Bank went unanswered.
During the last two years (2006-07 and 2007-08), real estate developers had launched a large number of projects which were initially funded by customers pre-sale contribution, with bank credit utilised over the last six months of construction, said Amit Jain, managing director, strategic clients coverage group at Standard Chartered Bank.
Without giving specific figures, Jain said his banks exposure to the real estate sector had increased in the fourth quarter of financial year 2009 and he expected the trend to continue as the bank met the requirements of a few of its core clients.
Axis Bank and ICICI Bank executives said there was no increase in their real estate exposure during the year. But an executive at a Mumbai-based public sector bank said: Being a crucial sector of the economy, in terms of high employment generation potential and links with various sectors, banks were rushing to fund real estate projects.
The returns were good with adequate securities (collaterals). The growth was seen across residential, office, commercial premises.
On why the pace of public sector banks lending had increased, a Bank of India (BOI) executive pointed out that this was a reflection of the market share and the higher pace of lending in 2008-09 when private and foreign banks had slowed down lending.
BOI's outstanding exposure to the real estate sector rose to about Rs 18,400 crore (Rs 184 billion) at end of March 2009 from Rs 15,600 crore (Rs 156 billion) a year ago. It has restructured real estate portfolio worth Rs 250 crore (Rs 2.5 billion), while total restructured loans stood at Rs 4,800 crore (Rs 48 billion).
Asked about the approach towards lending to this sector, BOI chief financial officer VKR Agarwal said: There is expectation that this sector will show normal growth in the later part of the year (2009-10). It is an important segment which cannot be ignored? would be far more diligent and monitor the real estate account closely.
Rates seen falling on RBI liquidity moves
Rates seen falling on RBI liquidity moves
The Financial Express, May 7, 2009, Page 1
By Sunny Verma, New Delhi
For the first time since August 2007, the Reserve Bank of India has rejected some bids by banks wanting to park excess liquidity with it. Three consecutive partial rejections since Monday and RBI's decision to offer banks only one chance a day to buy or sell funds shows the extent to which liquidity has eased in the money market since the gloomy days of September and October 2008.
RBI's decision to offer its liquidity adjustment facility (LAF) only once a day and the partial rejection of bids at the reverse repo window-where banks park funds at 3.25%-over the past three days could goad banks into lowering interest rates, analysts said. Bank credit fell by Rs 25,854 crore in the fortnight ended April 24, after rising by Rs 1,428 cr in the previous fortnight, according to RBI's latest data released on Wednesday.
HDFC Bank chief economist Abheek Barua said the surplus cash would find its way into the call money and government bond markets as commercial banks reorient their investment portfolio to utilise excess cash. RBI's moves also imply that it does not expect the surplus cash to trigger inflation any time soon. "(The cash) could bring down yields and possibly help lower rates," he said. The yield on the ten-year benchmark government bond fell to 6.17% on Wednesday from Tuesday's close of 6.30%.
RBI cancelled its second LAF from Wednesday, except on reporting Fridays. The central bank launched this facility on September 16, 2008 after the collapse of Lehman Brothers resulted in a global cash crunch and pushed up call money rates. Reliance Infrastructure Ltd CEO and director Lalit Jalan described limiting the LAF operation as a "positive step for industry".
Prime Minister's economic advisory council chairman Suresh D Tendulkar was, however, not optimistic on rates going down further. He told FE that RBI's decision to cancel the second LAF "Would not make much of a difference to interest rates. It is basically because of easy liquidity." Call money rates have been within the LAF corridor for quite some time now, so it's sensible to withdraw this additional facility, he said.
That liquidity has been ample can be gauged from the average Rs 1.5 lakh crore that banks have parked every day with RBI since Monday. "The rejection is miniscule, but the direction is clear: RBI wants banks to kick their bad habit and instead start lending," said a senior banker, asking not to be named.
Industry chambers have suggested capping the amount that can be parked in reverse repo.
"The global credit situation has eased dramatically, but lending rates in India are coming down very slowly," said Jalan. Monetary economist Ajay Shah at Delhi-based think tank NIPFP said conducting single daily LAF is more "mechanics than policy".
The yield on the Reuters benchmark five-year corporate bond was lower at 7.59% on Wednesday, down from Tuesday's close of 7.69%. Rates in the call money market ended at 3.10-15%, down from 3.25-40%, as some of the surplus cash of banks found its way into the overnight market.
Analysts said the fall in government bond yields would not be very steep as government borrowings estimated at Rs 3.62 lakh crore in 2009-10 remain high. RBI will auction Rs 12,000 crore worth of government bonds on Friday, while buying back Rs 6,000 crore of bonds through open market operations on Thursday.
The Financial Express, May 7, 2009, Page 1
By Sunny Verma, New Delhi
For the first time since August 2007, the Reserve Bank of India has rejected some bids by banks wanting to park excess liquidity with it. Three consecutive partial rejections since Monday and RBI's decision to offer banks only one chance a day to buy or sell funds shows the extent to which liquidity has eased in the money market since the gloomy days of September and October 2008.
RBI's decision to offer its liquidity adjustment facility (LAF) only once a day and the partial rejection of bids at the reverse repo window-where banks park funds at 3.25%-over the past three days could goad banks into lowering interest rates, analysts said. Bank credit fell by Rs 25,854 crore in the fortnight ended April 24, after rising by Rs 1,428 cr in the previous fortnight, according to RBI's latest data released on Wednesday.
HDFC Bank chief economist Abheek Barua said the surplus cash would find its way into the call money and government bond markets as commercial banks reorient their investment portfolio to utilise excess cash. RBI's moves also imply that it does not expect the surplus cash to trigger inflation any time soon. "(The cash) could bring down yields and possibly help lower rates," he said. The yield on the ten-year benchmark government bond fell to 6.17% on Wednesday from Tuesday's close of 6.30%.
RBI cancelled its second LAF from Wednesday, except on reporting Fridays. The central bank launched this facility on September 16, 2008 after the collapse of Lehman Brothers resulted in a global cash crunch and pushed up call money rates. Reliance Infrastructure Ltd CEO and director Lalit Jalan described limiting the LAF operation as a "positive step for industry".
Prime Minister's economic advisory council chairman Suresh D Tendulkar was, however, not optimistic on rates going down further. He told FE that RBI's decision to cancel the second LAF "Would not make much of a difference to interest rates. It is basically because of easy liquidity." Call money rates have been within the LAF corridor for quite some time now, so it's sensible to withdraw this additional facility, he said.
That liquidity has been ample can be gauged from the average Rs 1.5 lakh crore that banks have parked every day with RBI since Monday. "The rejection is miniscule, but the direction is clear: RBI wants banks to kick their bad habit and instead start lending," said a senior banker, asking not to be named.
Industry chambers have suggested capping the amount that can be parked in reverse repo.
"The global credit situation has eased dramatically, but lending rates in India are coming down very slowly," said Jalan. Monetary economist Ajay Shah at Delhi-based think tank NIPFP said conducting single daily LAF is more "mechanics than policy".
The yield on the Reuters benchmark five-year corporate bond was lower at 7.59% on Wednesday, down from Tuesday's close of 7.69%. Rates in the call money market ended at 3.10-15%, down from 3.25-40%, as some of the surplus cash of banks found its way into the overnight market.
Analysts said the fall in government bond yields would not be very steep as government borrowings estimated at Rs 3.62 lakh crore in 2009-10 remain high. RBI will auction Rs 12,000 crore worth of government bonds on Friday, while buying back Rs 6,000 crore of bonds through open market operations on Thursday.
Tatas’ hsg project response
Tatas’ hsg project response
The Financial Express, May 8, 2009, Corporates & Markets, PI
A day after the launch of Tata slow cost housing project, Tata Housing was flooded with queries and some even visited the site at Boiser ready with cash to book the flat. Around 400-500 prospecting home buyers, comprising both locals and Bombayites, turned up at the site on Thursday morning. Seeing such rush, the company increased the number of personnel to guide them the procedure of booking a flat. "We have increased the number of personnel on duty at the Boiser site office to facilitate appropriate and speedy information to the people on the allotment procedure and save their time, "Tata Housing's MD and CEO Brotin Banerjee said.
The Financial Express, May 8, 2009, Corporates & Markets, PI
A day after the launch of Tata slow cost housing project, Tata Housing was flooded with queries and some even visited the site at Boiser ready with cash to book the flat. Around 400-500 prospecting home buyers, comprising both locals and Bombayites, turned up at the site on Thursday morning. Seeing such rush, the company increased the number of personnel to guide them the procedure of booking a flat. "We have increased the number of personnel on duty at the Boiser site office to facilitate appropriate and speedy information to the people on the allotment procedure and save their time, "Tata Housing's MD and CEO Brotin Banerjee said.
Nano house | How to make housing a growth driver
Nano house How to make housing a growth driver
The Financial Express, May 8, 2009, Page 6
How to make housing a growth driver
WITH the real estate market showing no signs of revival, afford- ability has become the most important differentiator in attracting new customers. Developers are making a beeline to construct low-cost housing in the NCR, suburbs of Mumbai and in Tier-II and Tier-III cities.
These apartments are priced less than Rs 10 lakh and the coverage area is below 500 square feet. As the slowdown has hit the luxury and HIG category housing the most, developers are even modifying their pre-approved plans to build small-size apartments to cater to the untapped market. Anecdotal evidence suggests that more than 50 large and medium-size real estate companies have lined up affordable housing projects and many are negotiating with various state governments for land at concessional rates to construct low-cost housing under the PPP model as land price accounts for around 70% of the total project cost.
Taking a leaf out of the Nano’s success, Tata Housing launched the Shubh Griha project at Boisarin Mumbai costing between Rs 3.9 lakh and Rs 6.7 lakh (excluding the registration fee) and offers three sizes.
The company reportedly plans similar projects in Bangalore and Delhi.
This is commendable, as the demand for housing will continue to rise due to urbanisation, demographic change and falling household size.
Goldman Sachs estimates that an additional 140 million people will move to cities by 2020 and average household size is likely to continue to decline, which will push up demand for housing. The Planning Commission estimates that there is a shortfall of 24.71 million dwelling units in the country, out of which 99% is for LIG/EWS housing.
Though the government has introduced a series of sops for affordable housing projects, the bureaucracy needs to be transparent and set up a single-window clearance. Typically, a developer now has to take 56 various approvals and the waiting time can be anywhere between six months and two years, enough to derail a potential project.
Construction cost has to be reduced without compromising on quality and use of prefabricated construction material can reduce cost by almost 40%. Developers need to be transparent on pricing, a soften they do not mention additional charges like parking, external development and power backup.
The Deepak Parekh committee on affordable housing estimates that all eviating the urban housing shortage could potentially raise the rate of growth by at least 1-1.5% and will have a decisive impact on improving the basic quality of life. While the real estate sector was one of the main reasons for the financial market meltdown in the US, low-cost housing in India may just offer the down side protection here.
The Financial Express, May 8, 2009, Page 6
How to make housing a growth driver
WITH the real estate market showing no signs of revival, afford- ability has become the most important differentiator in attracting new customers. Developers are making a beeline to construct low-cost housing in the NCR, suburbs of Mumbai and in Tier-II and Tier-III cities.
These apartments are priced less than Rs 10 lakh and the coverage area is below 500 square feet. As the slowdown has hit the luxury and HIG category housing the most, developers are even modifying their pre-approved plans to build small-size apartments to cater to the untapped market. Anecdotal evidence suggests that more than 50 large and medium-size real estate companies have lined up affordable housing projects and many are negotiating with various state governments for land at concessional rates to construct low-cost housing under the PPP model as land price accounts for around 70% of the total project cost.
Taking a leaf out of the Nano’s success, Tata Housing launched the Shubh Griha project at Boisarin Mumbai costing between Rs 3.9 lakh and Rs 6.7 lakh (excluding the registration fee) and offers three sizes.
The company reportedly plans similar projects in Bangalore and Delhi.
This is commendable, as the demand for housing will continue to rise due to urbanisation, demographic change and falling household size.
Goldman Sachs estimates that an additional 140 million people will move to cities by 2020 and average household size is likely to continue to decline, which will push up demand for housing. The Planning Commission estimates that there is a shortfall of 24.71 million dwelling units in the country, out of which 99% is for LIG/EWS housing.
Though the government has introduced a series of sops for affordable housing projects, the bureaucracy needs to be transparent and set up a single-window clearance. Typically, a developer now has to take 56 various approvals and the waiting time can be anywhere between six months and two years, enough to derail a potential project.
Construction cost has to be reduced without compromising on quality and use of prefabricated construction material can reduce cost by almost 40%. Developers need to be transparent on pricing, a soften they do not mention additional charges like parking, external development and power backup.
The Deepak Parekh committee on affordable housing estimates that all eviating the urban housing shortage could potentially raise the rate of growth by at least 1-1.5% and will have a decisive impact on improving the basic quality of life. While the real estate sector was one of the main reasons for the financial market meltdown in the US, low-cost housing in India may just offer the down side protection here.
Things looking brighter
Things looking brighter
ET Realty, May 8, 2009, Page 21
With prices of newly launched apartments coming within the reach of end users, the realty sector has started looking up. ET Realty reports
Prabhakar Sinha
After witnessing an acute slowdown during the third and fourth quarter of 2008, the real estate sector has shown some recovery in the first quarter of 2009 ending March 31. If trends of absorption for the period January-March 2009 are any indication, a report prepared by PropEquity Research suggested there has been a surge in absorption in majority of the cities. A recent study conducted by PropEquity across Mumbai, Bangalore, Chennai, Hyderabad, and Gurgaon in NCR reveals that absorption has been high among the residential new launches in the first quarter of 2009 in Mumbai, Chennai and Gurgaon. The study attributes the success rate in absorption to the price correction and reduction in unit sizes introduced by developers in these cities. However, Bangalore and Hyderabad, which witnessed fewer new launches during the period, experienced a low absorption.
The real estate sector experienced one of the worst kinds of slowdown in demand because of rise in the interest rates in the January-March 2008, by almost 2 percentage points, to 12%. At the same time, the prevailing prices of residential apartments in most of the cities made them unaffordable for most buyers. The situation further worsened after global financial markets got affected due to the failure of banks and b ro ke r i n g houses in the US and Europe. This also affected Indian real estate market very badly and demand plummeted. According to the report, While October-December 2008 saw the nadir with absorption of only 1,113 units in Mumbai, the first quarter of 2009 witnessed the launch of over 14,478 residential apartment units and a corresponding absorption of 5,746 units. As against this, during October-December 2008, 3,096 units were launched, the report said. Similarly, in Gurgaon, during January-March 2009, 815 units were sold while 4,490 units were launched. As against this, in October-December 2008 quarter, only 587 units were sold from 3,708 units launched. Hence, both the absorption and launch figure showed sign of recovery.
The report says the main reason for increase in absorption of the new launched products is drop in the per sq ft rate and the reduction in the size of the units, which brought their prices within the affordable range of buyers. The report says most of these units were launched at a price almost 40% lower than the average pricing of apartments that were available in the first quarter of 2008. The average unit size of these apartments was also lower by almost 35%.
According to Samir Jasuja, founder & CEO of PropEquity, "The increase in this high absorption trend can be attributed to price correction and reduction in unit sizes adopted by developers. This encouraging trend is indicative that the markets are poised for a recovery if proactive measures are adopted by the real estate community to offer the right product at the right price to the consumers."
This trend continued in Gurgaon and Chennai where the new launches have witnessed high absorption after the unit sizes were reduced and average prices corrected by almost 15% to 25%. As anticipated, 61% of the total absorption in Gurgaon and 58% of the total absorption in Chennai in the first quarter of 2009 was constituted by the newly launched residential apartment units.
ET Realty, May 8, 2009, Page 21
With prices of newly launched apartments coming within the reach of end users, the realty sector has started looking up. ET Realty reports
Prabhakar Sinha
After witnessing an acute slowdown during the third and fourth quarter of 2008, the real estate sector has shown some recovery in the first quarter of 2009 ending March 31. If trends of absorption for the period January-March 2009 are any indication, a report prepared by PropEquity Research suggested there has been a surge in absorption in majority of the cities. A recent study conducted by PropEquity across Mumbai, Bangalore, Chennai, Hyderabad, and Gurgaon in NCR reveals that absorption has been high among the residential new launches in the first quarter of 2009 in Mumbai, Chennai and Gurgaon. The study attributes the success rate in absorption to the price correction and reduction in unit sizes introduced by developers in these cities. However, Bangalore and Hyderabad, which witnessed fewer new launches during the period, experienced a low absorption.
The real estate sector experienced one of the worst kinds of slowdown in demand because of rise in the interest rates in the January-March 2008, by almost 2 percentage points, to 12%. At the same time, the prevailing prices of residential apartments in most of the cities made them unaffordable for most buyers. The situation further worsened after global financial markets got affected due to the failure of banks and b ro ke r i n g houses in the US and Europe. This also affected Indian real estate market very badly and demand plummeted. According to the report, While October-December 2008 saw the nadir with absorption of only 1,113 units in Mumbai, the first quarter of 2009 witnessed the launch of over 14,478 residential apartment units and a corresponding absorption of 5,746 units. As against this, during October-December 2008, 3,096 units were launched, the report said. Similarly, in Gurgaon, during January-March 2009, 815 units were sold while 4,490 units were launched. As against this, in October-December 2008 quarter, only 587 units were sold from 3,708 units launched. Hence, both the absorption and launch figure showed sign of recovery.
The report says the main reason for increase in absorption of the new launched products is drop in the per sq ft rate and the reduction in the size of the units, which brought their prices within the affordable range of buyers. The report says most of these units were launched at a price almost 40% lower than the average pricing of apartments that were available in the first quarter of 2008. The average unit size of these apartments was also lower by almost 35%.
According to Samir Jasuja, founder & CEO of PropEquity, "The increase in this high absorption trend can be attributed to price correction and reduction in unit sizes adopted by developers. This encouraging trend is indicative that the markets are poised for a recovery if proactive measures are adopted by the real estate community to offer the right product at the right price to the consumers."
This trend continued in Gurgaon and Chennai where the new launches have witnessed high absorption after the unit sizes were reduced and average prices corrected by almost 15% to 25%. As anticipated, 61% of the total absorption in Gurgaon and 58% of the total absorption in Chennai in the first quarter of 2009 was constituted by the newly launched residential apartment units.
Realty to pick up steam
Realty to pick up steam
ET Realty, May 8, 2009, Page 21
Real estate decisions, at a corporate or personal level, cannot be postponed indefinitely, ET Realty reports
The current slowdown in the economy has affected rentals of commercial space in the country. Rentals are down, by upto 30% in the quarter ending March 2009. However, consultants feel that with positive growth in the country, downward movement in rentals is likely slow down in the coming months. According to a report by global real estate consultancy firm, CB Richard Ellis, "Over the next few quarters, whilst some amount of further correction may not be ruled out, we do not expect the level of decline to be quite as sharp as in the preceding quarters."
Real estate decisions, at a corporate or personal level, the research firm argued, cannot be postponed indefinitely. A report by it said transaction velocity should pick up across most major cities in the medium to long term.
The report says the stimulus packages announced by the government and the slashing of interest rates by the banks sparked hope that real estate activities would pick up in the medium term. "This in turn is expected to provide an impetus for the property market from the downward trend that it has experienced in the last few months, at least in the lowto mid-end housing segment," the report said. Another round of cut by the RBI in its policy rates, set out while announcing its annual credit policy recently, has given hope of further cut in interest rates by banks. This will help in reviving the demand in the interest-rate sensitive sectors like real estate, automobile and retail.
The real estate sector is facing one of the worst times in recent times owing to a global downturn, severe liquidity crunch and high interest rates. Office sector is suffering price and rental correction due to sluggish demand and over supply. Because of a booming economy, developers had overestimated the requirements of real estate in times to come. They launched a number of projects to meet the expected demands, which did not materialise.
The report says that office sector in all the seven major cities like National Capital Region of Delhi, Mumbai, Bangalore, Chennai, Kolkata, Pune and Hyderabad witnessed a drop in both rental and capital values in the first quarter of the current calendar year. "Demand remained sluggish with most occupants, especially from the financial and IT sectors. At the same time, those buildings, which were launched a couple of years back, when real estate was booming, and there was no inclination of any impending slowdown to affect them, are getting completed. This has increased the supply of office space in the market."
However, the situation may improve in the next few quarters. The adverse supply demand mismatch and non-availability of a financing option has resulted in a substantial slowdown in construction activity across the country and most new projects remain on paper, the report points out. This will lead to a reduction in supply in times to come. If the economy revives and the demand picks up again, there will be a situation of demand outstripping supply.
ET Realty, May 8, 2009, Page 21
Real estate decisions, at a corporate or personal level, cannot be postponed indefinitely, ET Realty reports
The current slowdown in the economy has affected rentals of commercial space in the country. Rentals are down, by upto 30% in the quarter ending March 2009. However, consultants feel that with positive growth in the country, downward movement in rentals is likely slow down in the coming months. According to a report by global real estate consultancy firm, CB Richard Ellis, "Over the next few quarters, whilst some amount of further correction may not be ruled out, we do not expect the level of decline to be quite as sharp as in the preceding quarters."
Real estate decisions, at a corporate or personal level, the research firm argued, cannot be postponed indefinitely. A report by it said transaction velocity should pick up across most major cities in the medium to long term.
The report says the stimulus packages announced by the government and the slashing of interest rates by the banks sparked hope that real estate activities would pick up in the medium term. "This in turn is expected to provide an impetus for the property market from the downward trend that it has experienced in the last few months, at least in the lowto mid-end housing segment," the report said. Another round of cut by the RBI in its policy rates, set out while announcing its annual credit policy recently, has given hope of further cut in interest rates by banks. This will help in reviving the demand in the interest-rate sensitive sectors like real estate, automobile and retail.
The real estate sector is facing one of the worst times in recent times owing to a global downturn, severe liquidity crunch and high interest rates. Office sector is suffering price and rental correction due to sluggish demand and over supply. Because of a booming economy, developers had overestimated the requirements of real estate in times to come. They launched a number of projects to meet the expected demands, which did not materialise.
The report says that office sector in all the seven major cities like National Capital Region of Delhi, Mumbai, Bangalore, Chennai, Kolkata, Pune and Hyderabad witnessed a drop in both rental and capital values in the first quarter of the current calendar year. "Demand remained sluggish with most occupants, especially from the financial and IT sectors. At the same time, those buildings, which were launched a couple of years back, when real estate was booming, and there was no inclination of any impending slowdown to affect them, are getting completed. This has increased the supply of office space in the market."
However, the situation may improve in the next few quarters. The adverse supply demand mismatch and non-availability of a financing option has resulted in a substantial slowdown in construction activity across the country and most new projects remain on paper, the report points out. This will lead to a reduction in supply in times to come. If the economy revives and the demand picks up again, there will be a situation of demand outstripping supply.
Owners to sell 7% of DLF,raise 3k cr
Owners to sell 7% of DLF,raise 3k cr
The Economic Times, May 8, 2009, Page 1
Funds To Be Used To Pay Off DAL’s 4.9k cr Outstandings To DLF
Sanjeev Choudhary NEW DELHI
BILLIONAIRE KP Singh and family, the promoters of India’s largest real estate company DLF, are close to finalising a deal with some foreign and domestic institutional investors that might fetch them around Rs 3,000 crore, said people familiar with the negotiations. At Thursday’s closing price of Rs 245, this would mean offloading a little over 7% stake.
DLF CFO Ramesh Sanka denied the promoters had any plan to sell stake. But people familiar with the matter said Deutsche Bank has been given the mandate and a deal may be announced shortly. EThad reported the proposed DLF stake sale on Thursday.
The promoters own 88.55% stake in the company, as per the latest shareholding pattern available on the National Stock Exchange. It is understood that the promoters will plough back the proceeds of the stake sale into DLF Assets (DAL), which will in turn use the funds to pay back DLF for the properties purchased earlier. DAL, which is owned by KP Singh and has investments from UK-based Symphony Capital and USbased hedge fund DE Shaw, buys IT SEZs from DLF. The receivables from DAL amount to Rs 4,900 crore.
Analysts see the rising receivables from DAL as the biggest cause of concern for DLF. The realty giant has been mulling several options to extinguish these receivables from DAL by either merging the company with DLF or converting the receivables into equity in DAL. Meanwhile, DE Shaw is also reportedly looking at exiting DAL, and the promoters may use the proceeds of the stake sale to buy out the hedge fund.
DLF has reported a 93% decline in profit for the fourth quarter and has been forced by home buyers to cut prices in its ongoing projects. The company has deferred several projects and is looking to raise Rs 5,500 crore through asset sale to support ongoing projects.
DLF on Wednesday ended its buyback programme after spending Rs 140 crore for buying 76 lakh shares, a move that attracted criticism from analysts who said the cash could have been used for executing projects.
The Economic Times, May 8, 2009, Page 1
Funds To Be Used To Pay Off DAL’s 4.9k cr Outstandings To DLF
Sanjeev Choudhary NEW DELHI
BILLIONAIRE KP Singh and family, the promoters of India’s largest real estate company DLF, are close to finalising a deal with some foreign and domestic institutional investors that might fetch them around Rs 3,000 crore, said people familiar with the negotiations. At Thursday’s closing price of Rs 245, this would mean offloading a little over 7% stake.
DLF CFO Ramesh Sanka denied the promoters had any plan to sell stake. But people familiar with the matter said Deutsche Bank has been given the mandate and a deal may be announced shortly. EThad reported the proposed DLF stake sale on Thursday.
The promoters own 88.55% stake in the company, as per the latest shareholding pattern available on the National Stock Exchange. It is understood that the promoters will plough back the proceeds of the stake sale into DLF Assets (DAL), which will in turn use the funds to pay back DLF for the properties purchased earlier. DAL, which is owned by KP Singh and has investments from UK-based Symphony Capital and USbased hedge fund DE Shaw, buys IT SEZs from DLF. The receivables from DAL amount to Rs 4,900 crore.
Analysts see the rising receivables from DAL as the biggest cause of concern for DLF. The realty giant has been mulling several options to extinguish these receivables from DAL by either merging the company with DLF or converting the receivables into equity in DAL. Meanwhile, DE Shaw is also reportedly looking at exiting DAL, and the promoters may use the proceeds of the stake sale to buy out the hedge fund.
DLF has reported a 93% decline in profit for the fourth quarter and has been forced by home buyers to cut prices in its ongoing projects. The company has deferred several projects and is looking to raise Rs 5,500 crore through asset sale to support ongoing projects.
DLF on Wednesday ended its buyback programme after spending Rs 140 crore for buying 76 lakh shares, a move that attracted criticism from analysts who said the cash could have been used for executing projects.
DLF scrip up on promoter stake sale speculation
DLF scrip up on promoter stake sale speculation
The Economic Times, May 7, 2009, Page 8
Gaurie Mishra & Abhishek Gupta ET NOW
ITS fourth quarter results have been dismal but shares of DLF, India’s largest real estate company, have risen by 6.4% this week amidst speculation that company promoters are looking to sell a 4-5% stake to raise around Rs 2,000 crore for paying DLF Assets’ (DAL) dues to the listed entity. The DLF spokesperson however categorically denied that any such move was in the offing.
The DLF stock surged a cumulative 13% in the first two days of the week but fell by around 6% on Wednesday. Two persons who claim to have knowledge of the situation said the DLF promoters were in talks with institutional investors to dilute their holding in the company and raise around Rs 2,000 crore.
Two real estate analysts working with brokerages also told ET NOW that the share price appreciation was linked to rumours about the promoters offloading a small portion of their near 90% stake in the company.
DAL, which is owned by the Singh family-the promoters of DLF, houses the IT SEZ projects of DLF, and buys completed IT properties from the real estate company. It needs to pay Rs 4,903 crore to DLF and the company has recently appointed a committee of independent directors to evaluate its options vis-a-vis DAL.
The real estate company has also suspended sales to DAL. DLF vice chairman Rajiv Singh in an analyst call last week said the company hopes to receive Rs 2,000 crore from DAL this year. DAL is co-owned by private equity fund DE Shaw and London-based Symphony Capital.
A UBS reseach report dated May 4 2009 said, “We think the most straightforward option for the promoters to ensure liquidity to DLF is to sell part of their stake in DLF.” But in an e-mailed response, the company spokesperson said: “We strongly deny the stake sale news.”
Some real estate analysts feel that if the speculation of a small stake sale by promoters turns out to be true, it could prove to be a neat way of solving the DAL impasse. The promoters could provide the stake sale proceeds to DAL, which in turn will use the money to reduce its outstanding receivables to DLF thereby addressing a major concern of the investor and analyst communities.
The Economic Times, May 7, 2009, Page 8
Gaurie Mishra & Abhishek Gupta ET NOW
ITS fourth quarter results have been dismal but shares of DLF, India’s largest real estate company, have risen by 6.4% this week amidst speculation that company promoters are looking to sell a 4-5% stake to raise around Rs 2,000 crore for paying DLF Assets’ (DAL) dues to the listed entity. The DLF spokesperson however categorically denied that any such move was in the offing.
The DLF stock surged a cumulative 13% in the first two days of the week but fell by around 6% on Wednesday. Two persons who claim to have knowledge of the situation said the DLF promoters were in talks with institutional investors to dilute their holding in the company and raise around Rs 2,000 crore.
Two real estate analysts working with brokerages also told ET NOW that the share price appreciation was linked to rumours about the promoters offloading a small portion of their near 90% stake in the company.
DAL, which is owned by the Singh family-the promoters of DLF, houses the IT SEZ projects of DLF, and buys completed IT properties from the real estate company. It needs to pay Rs 4,903 crore to DLF and the company has recently appointed a committee of independent directors to evaluate its options vis-a-vis DAL.
The real estate company has also suspended sales to DAL. DLF vice chairman Rajiv Singh in an analyst call last week said the company hopes to receive Rs 2,000 crore from DAL this year. DAL is co-owned by private equity fund DE Shaw and London-based Symphony Capital.
A UBS reseach report dated May 4 2009 said, “We think the most straightforward option for the promoters to ensure liquidity to DLF is to sell part of their stake in DLF.” But in an e-mailed response, the company spokesperson said: “We strongly deny the stake sale news.”
Some real estate analysts feel that if the speculation of a small stake sale by promoters turns out to be true, it could prove to be a neat way of solving the DAL impasse. The promoters could provide the stake sale proceeds to DAL, which in turn will use the money to reduce its outstanding receivables to DLF thereby addressing a major concern of the investor and analyst communities.
Realty MFs hit a rating block
Realty MFs hit a rating block
The Economic Times, May 8, 2009, Page 15
ABSENCE OF INDEPENDENT ASSET VALUERS MAY DELAY LAUNCH OF REALTY FUNDS
Shailesh Menon & Reena Zachariah, MUMBAI
A year after the market regulator, the Securities and Exchange Board of India (Sebi), cleared the deck for real estate mutual funds, some players are showing interest, but the market may have to wait longer for the first realty fund in the absence of independent asset valuers.
While issuing guidelines for real estate mutual funds (REMFs), Sebi had asked rating agencies to make a list of accredited valuers. The market regulator is yet to hear from the rating agencies, people familiar with the matter said. “There is still no clarity as to what progress rating agencies have made in this regard,” said a Sebi official.
As per the guidelines, real estate fund managers have to take the services of a rating agency with accredited valuers to rate the assets. The valuation has to be done by two external valuers and the lowest value suggested by them will be taken into account. The assets in cities specified by Sebi will be rated by valuers once in 90 days.
Top fund houses such as HDFC MF, ICICI Prudential and SBI Mutual Funds as well as a few real estate developers had expressed their desire to float funds that invest in live real estate assets such as apartments and commercial real estate. But adverse market conditions and the crash in real estate prices have forced them to go slow on their plans to launch REMFs. “By end-2008, real estate became a sector no one wanted to touch even with a barge pole. We do not think we’ll be able to collect money to invest in real estate for the next two years,” said the channel head of a fund house that wanted to launch a REMF. A year later, two real estate developers — HDIL Constructions and Kumar Housing Corporation — have come forward and sought Sebi’s permission to float REMFs. The regulator recently asked them to make presentations regarding the finer details of the fund, said a person familiar with the matter.
These companies were asked to elaborate on aspects such as the conduct of fund, safe-keeping of investor money and payout details, he said, requesting anonymity.
The process of getting an in-principle approval will take up to a year, while it will take up to two years before the proposals get the final approval, he said. According to real estate developers, the regulator is not keen to allow builders start REMFs on their own, even though the guidelines state that any real estate firm with five-year project experience can set a trustee board and start a fund.
The Economic Times, May 8, 2009, Page 15
ABSENCE OF INDEPENDENT ASSET VALUERS MAY DELAY LAUNCH OF REALTY FUNDS
Shailesh Menon & Reena Zachariah, MUMBAI
A year after the market regulator, the Securities and Exchange Board of India (Sebi), cleared the deck for real estate mutual funds, some players are showing interest, but the market may have to wait longer for the first realty fund in the absence of independent asset valuers.
While issuing guidelines for real estate mutual funds (REMFs), Sebi had asked rating agencies to make a list of accredited valuers. The market regulator is yet to hear from the rating agencies, people familiar with the matter said. “There is still no clarity as to what progress rating agencies have made in this regard,” said a Sebi official.
As per the guidelines, real estate fund managers have to take the services of a rating agency with accredited valuers to rate the assets. The valuation has to be done by two external valuers and the lowest value suggested by them will be taken into account. The assets in cities specified by Sebi will be rated by valuers once in 90 days.
Top fund houses such as HDFC MF, ICICI Prudential and SBI Mutual Funds as well as a few real estate developers had expressed their desire to float funds that invest in live real estate assets such as apartments and commercial real estate. But adverse market conditions and the crash in real estate prices have forced them to go slow on their plans to launch REMFs. “By end-2008, real estate became a sector no one wanted to touch even with a barge pole. We do not think we’ll be able to collect money to invest in real estate for the next two years,” said the channel head of a fund house that wanted to launch a REMF. A year later, two real estate developers — HDIL Constructions and Kumar Housing Corporation — have come forward and sought Sebi’s permission to float REMFs. The regulator recently asked them to make presentations regarding the finer details of the fund, said a person familiar with the matter.
These companies were asked to elaborate on aspects such as the conduct of fund, safe-keeping of investor money and payout details, he said, requesting anonymity.
The process of getting an in-principle approval will take up to a year, while it will take up to two years before the proposals get the final approval, he said. According to real estate developers, the regulator is not keen to allow builders start REMFs on their own, even though the guidelines state that any real estate firm with five-year project experience can set a trustee board and start a fund.
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