Monday, June 1, 2009
Stimulus drivers growth to 6.7%
Stimulus drivers growth to 6.7%
The Financial Express, May 30, 2009, Page 1
The Financial Express, May 30, 2009, Page 1
Q4 GDP growth brings cheer
Q4 GDP growth brings cheer
The Hindu Business Line, May 30, 2009, Page 1
Our Bureau, New Delhi
The Indian economy logged a better-than-expected 6.7 per cent growth in 2008-09 despite the global financial meltdown adversely impacting its output in the second-half of the fiscal year under review.
This growth performance is, however, the weakest in six years and lower than the growth rate of 9 per cent or above witnessed in the previous three years. It is within the 6.5-7 per cent growth range projected by the Reserve Bank of India for 2008-09.
The Central Statistical Organisation (CSO) had in February this year pegged the advance GDP growth estimate for 2008-09 at 7.1 per cent.
The country’s GDP grew a robust 5.8 per cent in fourth quarter of 2008-09, lower than 8.6 per cent in the same quarter in the previous year, according to the data released by CSO today. The third quarter GDP growth performance has now been revised upwards to 5.8 per cent from 5.3 per cent.
The stock markets seemed pleased with the CSO’s revised GDP growth estimates for 2008-09, with the benchmark Sensex going up by 330 points for the day. According to the CSO, the downward revision in GDP for 2008-09, at the revised estimate level, was mainly on account of the lower performance in almost all sectors excluding ‘construction’ and ‘community, social and personal services’ than anticipated.
The sectors that saw growth rates of 5 per cent or more are ‘construction’ (7.2 per cent), ‘trade, hotels, transport and communication’ (9 per cent), ‘financing, insurance, real estate and business services’ (7.8 per cent) and ‘community, social and personal services’ (13.1 per cent). GDP at factor cost at constant (1999-2000) prices in 2008-09 is now estimated at Rs 33,39,375 crore (as against Rs 33,51,653 crore estimated earlier on February 9 this year), showing a growth rate of 6.7 per cent.
For the fourth quarter of 2008-09, GDP at factor cost at constant (1999-2000) prices is estimated at Rs 9,02,924 crore, as against Rs 8,53,785 crore in same quarter in previous year, showing a growth of 5.8 per cent. The sectors that registered significant growth rates are construction at 6.8 per cent, ‘trade, hotels, transport and communications’ 6.3 per cent, ‘financing, insurance, real estate and business services’ 9.5 per cent, and ‘community, social and personal services’ 12.5 per cent.
Meanwhile, Moody’s Economy.com said in a note today that the surprise upward revision of December quarter GDP along with the solid result in the March quarter should inject some confidence back into the Indian economy.
The note highlighted that the rise in expenditure on the election campaign may have boosted India’s March quarter performance. However, the downside effects from the external turmoil have been far too strong to be fully offset by the jump in political spending, it said.
On the monetary policy front, as the Indian economy has held up better than expected, the need for further interest rate cuts has eased. That said, the RBI is expected to maintain a loosening bias as the global storm has yet to come to an end, based on Moody’s Economy.com’s forecast that the US economy will not bottom out until October.
GDP growth beats estimates despite global slowdown
GDP growth beats estimates despite global slowdown
Business Standard, May 30, 2009, Page
BS Reporter / New Delhi
The Indian economy recorded a better than expected growth rate of 5.8 per cent in the fourth quarter of 2008-09, as increased government expenditure compensated for a dip in spending by individuals.
The growth rate in the third quarter (October–December 2008) was also revised upwards by 0.5 percentage points, to 5.8 per cent.
With the growth rate beating the analysts’ estimate of 5 per cent in January–March 2009, economists said the Indian economy had already hit the trough and would recover in the second half of the current financial year (2009-10).
“The higher than expected activity levels suggest greater resilience in domestic demand,” said Pranjul Bhandari and Tushar Poddar, analysts with Goldman Sachs. “Upward revisions to the third quarter numbers suggest that year-on-year GDP growth did not fall below 5.8 per cent through the crisis period of October 2008 to March 2009.”
Fiscal packages driving growth:
Government consumption, which accounted for nearly 14 per cent of GDP, grew at 22 per cent in the fourth quarter ended March 2009. This component alone contributed to more than half the GDP growth rate.
When the global economic crisis began adversely impacting the Indian economy, the government announced a series of measures aimed at boosting demand, including indirect tax cuts and additional plan expenditure of Rs 20,000 crore. Prior to that, the salaries of government employees were increased by implementing the recommendations of the sixth pay commission.
Even as government spending showed a sharp increase, private consumption, which accounts for nearly three-fifths of the total, grew only at 2.7 per cent, indicating that individuals are cutting their expenditure in the background of an uncertain environment.
Surprisingly, fixed investments grew at a much faster rate of 6.4 per cent in the fourth quarter, compared with 5.1 per cent in the previous quarter. This is also cited by economists as one of the reasons to support their view that economy has “bottomed out”.
Third quarter growth rate revised upwards
The upward revision of growth rate in the October-September quarter — the period in which the global crisis impacted the most — by a half percentage point has surprised analysts tracking the economy.
Initially, the Central Statistical Organisation (CSO) estimated the growth at 5.3 per cent in the quarter ended December 2008 — the lowest level in four years — compared with 7.7 per cent in the preceding quarter.
This sharp downward estimate of quarterly growth was one reason why different agencies downgraded their growth projection for India. The World Bank and the International Monetary Fund (IMF) have recently predicted the economy would grow at less than 5 per cent.
Services sector holds, but manufacturing in negative terrain
The financial services sector, among the most affected, grew at 9.5 per cent in January-March 2009, compared with 8.3 per cent in October-December 2008.
The other big component of services — trade, hotels, transport and communication — grew at a faster rate in the last quarter of fiscal 2008-09, compared with 5.9 per cent in the third quarter ended December 2008.
Industry chambers differ over need for fiscal stimulus
Industry chambers differ over need for fiscal stimulus
Business Standard, May 30, 2009, Page 3
Business Standard, May 30, 2009, Page 3
Rebound in realty?
Rebound in realty?
The Hindu Business Line, May 31, 2009, Page 15
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Though it is difficult to say that there is a general revival in demand in the property market, buyer interest in certain projects in specific locations seems to be back.
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Moumita Bakshi Chatterjee
Nearly a year after the demand slowdown, the property market sentiments seem to be improving, according to real estate companies. Builders across the market segment are claiming that the last two months have witnessed a surge in bookings and interest, ending months of anxiety on cash flows that had led to project delays, and left customers fuming.
Adding to the cheer in the market is also the institutional interest in real estate space. A slew of realtors, including HDIL and Parsvnath Developers, are following the footsteps of Unitech and Indiabulls Real Estate to line-up QIP issues in a bid to ease the debt burden.
Difficult to generalise
Analysts watching the real estate space, however, say that with each macro market behaving differently, it is difficult to generalise the mood in the property market. While they admit that buyer interest in certain projects in specific locations seems to be back, they also believe it is too early to term it a “demand revival”.
“We will wait to see the cash flow situation of listed real estate companies at the end of the quarter before cheering the market,” they say. Also, there seems to be unanswered questions on who is really picking up residential inventory.
An industry insider pointed out that in specific cases in North India it is not unusual for brokers to drive-up the demand by cornering housing inventory at steep discounts from players. These brokers then offload the inventory to end-users. “That trend may still be there. So one has to wait and watch before declaring that the end-user demand is indeed back in the property market,” the person said.
Realtors optimistic
Realtors, however, feel that the general sentiments are lifting.
Earlier this week, two realty firms — BPTP and Jaypee Greens — said they received “overwhelming” response to their affordable housing projects in Delhi NCR. BPTP said its bookings were nearly four times more than the number of flats on offer at Faridabad where it is selling ‘BPTP Park Elite Floors’. “Launched on May 9, with an initial target of 1,000 units, booking had to be closed within 15 days due to the heavy demand. By the closing date of May 26, the company had received a booking of 3,700 units,” BPTP said.
Jaypee Greens (a real estate division of Jaiprakash Associates) too said its 3,300 apartments were booked within 24-hours of the launch of its residential project Jaypee Greens AMAN at Noida-Greater Noida Expressway.
And similar sentiments are being echoed in other parts of the country as well. For instance, in its Cosmopolis project in Bhubaneswar, Assotech says that it has signed up 100 booking in the last 45 days alone. The price tag for the project is Rs 27-46 lakh. The company said the demand for its other projects in Gwalior and Rudrapur too are looking up.
“Yes, things are improving. While it is still difficult to gauge the medium-term outlook, the elections and the clear mandate coupled with some improved buying sentiments have resulted in a flow of bookings. Customers in smaller markets, who need a house for their own requirements, are willing to take the plunge. The investors will come in at a later stage,” says Mr Sanjeev Shrivastava, CMD of Assotech Group.
‘Hype about slowdown’
A senior official of Lodha Group — a builder with presence in and around Mumbai and upcoming projects in Hyderabad and Pune — feels that the “hype” about slowdown had been overblown, and that there has been a turnaround post-December 2008.
The company claims that it has sold 2.5 million sq. ft of residential space in the last five months against a third of that level during July-December.
“The demand-supply mismatch still exists, and so there cannot be a prolonged recession in demand for rightly priced homes,” says Mr Abhishek Lodha, Director, Lodha Group.
In April, DLF said it got bookings for 1,356 apartments (2 million sq.ft) in a single day in its project Capital Greens at New Delhi. A presentation by Unitech to its investors earlier this month, put the area sold by the company between April 1 and May 15, at 2.5 million sq.ft.
The company said that the overall sale value of the properties which had been booked will add up to about Rs 850 crore. Unitech has already outlined plans to launch 40 projects across 15 cities, including Delhi NCR, Mumbai, Kolkata, Mohali/Chandigarh, Chennai and Lucknow.
Real estate companies have discovered the market sweet-spot in the affordable and mid-income housing space, and are tuning strategies accordingly, a senior Unitech official recently told Business Line. Though the claims of the real estate companies point towards some recovery in the market, analysts are waiting to see how events unfold in coming months.
At least for now, the jury is yet not out on this one.
Realtors see higher pvt equity investments
Realtors see higher pvt equity investments
The Hindu Business Line, June 1, 2009, Page 1
Moumita Bakshi Chatterjee, New Delhi
Enthused by a strong institutional response to QIP (qualified institutional placement) issues, builders are now anticipating revival of private equity (PE) investments at project level, but real estate funds want to see more sales in the property market before finalising deals.
Mr Pradeep Jain, CMD of Parsvnath Developers, says that PE firms have already started re-entering negotiations.
“With financial institutions responding well to the fund raising by real estate companies, PE firms do not want to be left behind,” he says, adding that Parsvnath would go for PE funding but only if a good opportunity crops up in SEZs and hospitality projects.
Developers argue that return of buyers into the residential market and new launches targeted at affordable and middle-income housing have improved sentiments in the last two months.
This, in turn, is prompting real estate funds to take a fresh look at the sector, they say.
“Yes. The PE firms have started showing interest in the real estate sector. We are in talks with a few of them for project-level funding,” Unitech said in response to an e-mail query.
The company is learnt to be in talks with PE funds for investments in two residential projects. Unitech, last month, had garnered Rs 1,625 crore from a QIP issue, lifting the flagging mood in the property space.
Still a fraction
But PE funds — most of which have not loosened their purse-strings for over six months now — feel that despite all the talk about sales picking up, volumes are still a fraction of the previous euphoric levels.
“The consumer sentiment is looking up but the big question is how much time it would take to translate into sales. Also this time, the PE pie has contracted as many funds are facing balance-sheet problems back home,” says Mr Jagdeep Pahwa, Director, Infinite India Investment Management, which manages $500 million of funds.
Given the tough market reality, the low-hanging fruit would be project-level PE funding. “Investing at the SPV level, particularly residential projects, is easier. Against this, PE investment at company level allows an exit only when the builder goes public, and even then, it carries risk factors like the sales position of the builder and capital market conditions,” Mr Pahwa said, adding that company-level investments also involved more intense portfolio management given that most builders had diverse projects.
According to Mr Om Chaudhry, CEO of FIRE Capital Fund, valuation is another sticky issue that is still holding PE players back. FIRE Capital has not made any fresh commitment in the last 2-3 quarters, and feels that the developers are yet to come to terms with ground realities, where sales cycle is stretched and more effort has to be put into selling of inventories.
“PE funds had made investment in 2007 and early 2008 at high valuation but many are yet to see those projects in development mode. Moreover, I feel that the valuation needs to come down by 50 per cent of 2008 levels, for PE funds to enter the market…What we have seen so far is a 15-20 per cent correction,” he says.
Jaipal Reddy tells realtors to make space for poor
Jaipal Reddy tells realtors to make space for poor
The Economic Times, May 30, 2009, Page 3
Our Political Bureau NEW DELHI
THE private sector real estate players must reset their priorities so as to provide low-cost housing to the middle class and the poor. S Jaipal Reddy made the point clear while taking charge of the urban development ministry for the second consecutive term here on Friday.
“The private sector, which is a major player in the housing sector, must reset its priorities. So far, they had been building apartments for the rich. They must now concentrate on providing accommodation for the middle class and the poor,” Mr Reddy told newspersons after taking over the reins of the ministry.
It’s a measure of the recognition of the good work done by him during his first stint in the Nirman Bhawan that the Congress leadership was constrained to ask him to continue shepherding the urban development ministry. The senior Congress leader, who romped home comfortably from the Chelvella Lok Sabha seat in Andhra Pradesh, spelt out his priorities for the next five years. Admitting that the Centre found itself hamstrung in the housing sector as land was a state subject, Mr Reddy said he would speak to state governments to consider providing land for housing the poor and the middle class. Among other things, his priority is to complete the task of drafting the bill seeking to create an urban regulatory authority for Delhi. “Once we have legislated, it’ll be a model legislation for other states,” he said, adding the ministry had tread cautiously on this matter as “any regulator can also be an obstructor”.
“We must, therefore, evolve a proper shape so that the interests of the consumers are protected,” the minister remarked. The ministry, Mr Reddy told newspersons, was also in the process of negotiating a $3-billion World Bank loan to supplement the efforts of JNURM for creating a better urban inclusive environment. The amount, he said, would be utilised to improve drinking water, sewerage, sanitation and public transportation.
The minister said: “There are still certain issues pertaining to ceiling which need to be addressed. We had taken a few initiatives in the past couple of years. The people appreciated our efforts. That’s why they voted for us twice in past few months.”. The ministry, he added, would also strive to improve infrastructure services. “Our endeavour will be to add to the initiatives taken in this direction by the Delhi government,” he said. The ministry, Mr Reddy added, was also keen on taking the metro to other major cities and expanding its network in Delhi.
The Economic Times, May 30, 2009, Page 3
Our Political Bureau NEW DELHI
THE private sector real estate players must reset their priorities so as to provide low-cost housing to the middle class and the poor. S Jaipal Reddy made the point clear while taking charge of the urban development ministry for the second consecutive term here on Friday.
“The private sector, which is a major player in the housing sector, must reset its priorities. So far, they had been building apartments for the rich. They must now concentrate on providing accommodation for the middle class and the poor,” Mr Reddy told newspersons after taking over the reins of the ministry.
It’s a measure of the recognition of the good work done by him during his first stint in the Nirman Bhawan that the Congress leadership was constrained to ask him to continue shepherding the urban development ministry. The senior Congress leader, who romped home comfortably from the Chelvella Lok Sabha seat in Andhra Pradesh, spelt out his priorities for the next five years. Admitting that the Centre found itself hamstrung in the housing sector as land was a state subject, Mr Reddy said he would speak to state governments to consider providing land for housing the poor and the middle class. Among other things, his priority is to complete the task of drafting the bill seeking to create an urban regulatory authority for Delhi. “Once we have legislated, it’ll be a model legislation for other states,” he said, adding the ministry had tread cautiously on this matter as “any regulator can also be an obstructor”.
“We must, therefore, evolve a proper shape so that the interests of the consumers are protected,” the minister remarked. The ministry, Mr Reddy told newspersons, was also in the process of negotiating a $3-billion World Bank loan to supplement the efforts of JNURM for creating a better urban inclusive environment. The amount, he said, would be utilised to improve drinking water, sewerage, sanitation and public transportation.
The minister said: “There are still certain issues pertaining to ceiling which need to be addressed. We had taken a few initiatives in the past couple of years. The people appreciated our efforts. That’s why they voted for us twice in past few months.”. The ministry, he added, would also strive to improve infrastructure services. “Our endeavour will be to add to the initiatives taken in this direction by the Delhi government,” he said. The ministry, Mr Reddy added, was also keen on taking the metro to other major cities and expanding its network in Delhi.
Jaipal Reddy for further concessions to housing sector
Jaipal Reddy for further concessions to housing sector
The Hindu Business Line, May 30, 2009, Page 10
Rajeev Bhatt
The Minister for Urban Development, Mr Jaipal Reddy, and the Minister of State, Mr Saugata Ray, in New Delhi on Friday. —
Our Bureau, New Delhi
The Urban Development Minister, Mr Jaipal Reddy, on Friday said he will approach Prime Minister and Finance Minister for further concessions for the housing sector. The Minister, who retains his old portfolio, also asked the private builders to reset priorities and “concentrate on middle-income housing”.
“The Government has already announced various concessions in interest rates on housing loans. I will ask PM and FM for more concessions for the housing sector. There are lots of possibilities,” the Minister told newspersons after taking charge.
World Bank loan
He said that the Ministry is also talking to World Bank to obtain a loan for various Urban Development schemes.
“We are negotiating for a $3-billion loan but it is in initial stages. This will be for urban development schemes such as drinking water, sanitation, sold waste management among others,” he said.
Commonwealth project
The Minister today also sought to assure that Commonwealth Games project would be completed on schedule. “The Cabinet has sanctioned the revised project. All the money required for commonwealth project has been sanctioned. So money will not be a problem,” he said.
The Minister said that in the last three years, the Ministry of Urban Development had sanctioned schemes worth Rs 93,000 crore under the JNNURM scheme. He also referred to the second stimulus package under which the Ministry sanctioned 15,000 low-floor, AC and semi-luxuries buses for 56 cities which will be made available in the current calendar year.
Mr Saugata Roy also assumed his charge as the Minister of State for Urban Development.
ON A HIGH RISE
ON A HIGH RISE
The Economic Times, ET Investor’s Guide, June 1, 2009, Page 1
A manifold increase in sales inquiries shows that buyers are willing to come forward and buy as long as the prices are reasonable, says Supriya Verma Mishra
“Land monopoly is not only monopoly, but it is by far the greatest of monopolies; it is a perpetual monopoly, and it is the mother of all other forms of monopoly.”
SAID former British Prime Minister Winston Churchill and that’s the sense of power felt by those who hold land. The thinking of Indian developers is no different. They went on a drive to amass huge land banks, only to see themselves in deep trouble when the real estate market slowed. Nonetheless, amidst all the gloom and doom surrounding the sector, they have managed to survive the slowdown. With the successful closure of a number of qualified institutional placements (QIPs), a number of builders have managed to tide over cash flow problems for now. This has turned the tide in favour of the industry.
Besides, the developers have resorted to measures such as selling non-core assets, cutting down prices, reducing apartment sizes, borrowing from banks, and pledging of shares to keep themselves afloat. Thus it seems that there is light at the end of the tunnel for sector, though the length of the tunnel is still not known.
INDUSTRY SCENARIO
With a stable government in place, the sector may be in for some pleasant surprises. Affordable housing and rural housing are part of the agenda of the new government at the Centre. Leading builders were the first ones to react to this need and launch new projects with prices ranging from Rs 4 lakh (depending on location) to Rs 50 lakh (though not really affordable).
Both listed as well as unlisted developers such as Lodha Developers, HDIL, Unitech, Puravankara, Omaxe, BPTP and DLF made a foray into affordable and midsegment housing. A recent entrant in the affordable housing segment is the house of Tatas, under the brand name ‘Shubh Griha’. Though it is difficult to arrive at a price point for defining affordability, some of these projects have seen good response from the customers. In fact now a number of private equity players are also keen on the affordable housing segment. HDFC Realty, Red Fort Capital and Kotak PE are believed to be eyeing this segment.
THE STORY SO FAR
In the last two months the BSE Realty Index has gained 20% (since 9th March) whereas the benchmark index, Sensex rose by 54%. This surge in the equity market coupled with increased buyer interest has had a positive impact on stock prices of realty companies. The beaten down stocks are again finding favour with investors. Though one still cannot directly say that this will ensure increased sale of units, it reflects the change in investor sentiment about the sector. However, it is only the developers with proven track record and construction capabilities that are benefiting from this change in sentiment.
Sales offices and under construction project sites that bore a deserted look till a few months back are now buzzing with walk-in customers. With a manifold increase in the number of inquiries, it just shows that buyers are willing to come forward and buy as long as the prices are reasonable. This will help them to avoid over leveraged position.
Since it still continues to be a buyers market, customers are not willing to pay a premium for any under construction property. In fact it is for this reason that ready flats are finding more takers. Builders are thus offering easy payment units sold to units launched) compared with Mumbai, Chennai and Gurgaon because the number of new launches in the affordable segment was low in these regions.
FINANCIALS
With over 195 million sq. ft of ready and under-construction property in the market and hardly any takers, residential sales are the saving grace. DLF’s quarterly revenue for March’09 reported a whopping 73% decline. Following closely were HDIL and Puravankara, with a 63% and 56% drop in revenues. Similar was the trend in net profit margins (NPM). Puravankara’s NPM halved to 21.5% compared to the same quarter in the previous year. For DLF and HDIL it was much worse. Almost three-fourth of their profits have been wiped out. Higher sales of low margin mid housing segment were a cause of this drop in margins.
Had it nor been for Reserve Bank of India directing banks and financial institutions to help them restructure their loans, most of them would have defaulted on their loan payments. Cumulatively, DLF, Unitech, HDIL and xx have managed to restructure close to Rs 4,100 crore of debt through commercial banks and mutual funds. DLF has repaid 1,700 crore of debt while Unitech managed to reduce its debt Rs 2,000 crore. This has helped them to not only reduce their debt equity ratio but also interest outflow.
GOING AHEAD
Given the current scenario, the response to various newly launched projects shows that ‘right price’ has played a key role in their success. Realty prices have been rising since the last three-four years. Places like NCR, Bangalore and Mumbai where prices had gone up by 300%, have seen the maximum correction. Still there are few locations where builders have been maintaining absurd prices because of their improved liquidity position. But this would only lead to piling up of inventory, which will further tighten the cash flow position of the builders. With the approaching rainy season, sales would anyway be subdued. If the industry has to come out of this slowdown, dussehra would be an important time. In the six metros, 53 per cent of the 930-million sq.ft (as per Liases Foras) available realty stock is unsold; putting downward pressure on prices and lease rentals. We could thus expect a further 10-15% correction in prices till diwali, depending on the location.
However, it is advisable for buyers to select the property of their choice and budget so that they do not waste useful time in doing the groundwork during the festive season.
The Economic Times, ET Investor’s Guide, June 1, 2009, Page 1
A manifold increase in sales inquiries shows that buyers are willing to come forward and buy as long as the prices are reasonable, says Supriya Verma Mishra
“Land monopoly is not only monopoly, but it is by far the greatest of monopolies; it is a perpetual monopoly, and it is the mother of all other forms of monopoly.”
SAID former British Prime Minister Winston Churchill and that’s the sense of power felt by those who hold land. The thinking of Indian developers is no different. They went on a drive to amass huge land banks, only to see themselves in deep trouble when the real estate market slowed. Nonetheless, amidst all the gloom and doom surrounding the sector, they have managed to survive the slowdown. With the successful closure of a number of qualified institutional placements (QIPs), a number of builders have managed to tide over cash flow problems for now. This has turned the tide in favour of the industry.
Besides, the developers have resorted to measures such as selling non-core assets, cutting down prices, reducing apartment sizes, borrowing from banks, and pledging of shares to keep themselves afloat. Thus it seems that there is light at the end of the tunnel for sector, though the length of the tunnel is still not known.
INDUSTRY SCENARIO
With a stable government in place, the sector may be in for some pleasant surprises. Affordable housing and rural housing are part of the agenda of the new government at the Centre. Leading builders were the first ones to react to this need and launch new projects with prices ranging from Rs 4 lakh (depending on location) to Rs 50 lakh (though not really affordable).
Both listed as well as unlisted developers such as Lodha Developers, HDIL, Unitech, Puravankara, Omaxe, BPTP and DLF made a foray into affordable and midsegment housing. A recent entrant in the affordable housing segment is the house of Tatas, under the brand name ‘Shubh Griha’. Though it is difficult to arrive at a price point for defining affordability, some of these projects have seen good response from the customers. In fact now a number of private equity players are also keen on the affordable housing segment. HDFC Realty, Red Fort Capital and Kotak PE are believed to be eyeing this segment.
THE STORY SO FAR
In the last two months the BSE Realty Index has gained 20% (since 9th March) whereas the benchmark index, Sensex rose by 54%. This surge in the equity market coupled with increased buyer interest has had a positive impact on stock prices of realty companies. The beaten down stocks are again finding favour with investors. Though one still cannot directly say that this will ensure increased sale of units, it reflects the change in investor sentiment about the sector. However, it is only the developers with proven track record and construction capabilities that are benefiting from this change in sentiment.
Sales offices and under construction project sites that bore a deserted look till a few months back are now buzzing with walk-in customers. With a manifold increase in the number of inquiries, it just shows that buyers are willing to come forward and buy as long as the prices are reasonable. This will help them to avoid over leveraged position.
Since it still continues to be a buyers market, customers are not willing to pay a premium for any under construction property. In fact it is for this reason that ready flats are finding more takers. Builders are thus offering easy payment units sold to units launched) compared with Mumbai, Chennai and Gurgaon because the number of new launches in the affordable segment was low in these regions.
FINANCIALS
With over 195 million sq. ft of ready and under-construction property in the market and hardly any takers, residential sales are the saving grace. DLF’s quarterly revenue for March’09 reported a whopping 73% decline. Following closely were HDIL and Puravankara, with a 63% and 56% drop in revenues. Similar was the trend in net profit margins (NPM). Puravankara’s NPM halved to 21.5% compared to the same quarter in the previous year. For DLF and HDIL it was much worse. Almost three-fourth of their profits have been wiped out. Higher sales of low margin mid housing segment were a cause of this drop in margins.
Had it nor been for Reserve Bank of India directing banks and financial institutions to help them restructure their loans, most of them would have defaulted on their loan payments. Cumulatively, DLF, Unitech, HDIL and xx have managed to restructure close to Rs 4,100 crore of debt through commercial banks and mutual funds. DLF has repaid 1,700 crore of debt while Unitech managed to reduce its debt Rs 2,000 crore. This has helped them to not only reduce their debt equity ratio but also interest outflow.
GOING AHEAD
Given the current scenario, the response to various newly launched projects shows that ‘right price’ has played a key role in their success. Realty prices have been rising since the last three-four years. Places like NCR, Bangalore and Mumbai where prices had gone up by 300%, have seen the maximum correction. Still there are few locations where builders have been maintaining absurd prices because of their improved liquidity position. But this would only lead to piling up of inventory, which will further tighten the cash flow position of the builders. With the approaching rainy season, sales would anyway be subdued. If the industry has to come out of this slowdown, dussehra would be an important time. In the six metros, 53 per cent of the 930-million sq.ft (as per Liases Foras) available realty stock is unsold; putting downward pressure on prices and lease rentals. We could thus expect a further 10-15% correction in prices till diwali, depending on the location.
However, it is advisable for buyers to select the property of their choice and budget so that they do not waste useful time in doing the groundwork during the festive season.
States, PEs queue up for Nano homes
States, PEs queue up for Nano homes
The Economic Times, June 1, 2009, Page 4
Sachin Dave MUMBAI
TATA Housing Development Company, a subsidiary of Tata Sons, which recently announced low-cost housing project Shubh Griha, is learnt to be in talks with various state governments for developing similar projects. The houses are priced at around Rs 4 lakh.
Managing director & CEO of Tata Housing Brotin Banerjee confirmed the news. “There have been some proposals from state governments offering us partnerships for affordable housing projects, but we have no announcement to make now,” he said. It is believed that the company may adopt the public-private partnership (PPP) route with the state governments by year-end. It was not possible to ascertain which state governments have approached Tata Housing for these projects. The company is also believed to be in talks with private equity players for its forthcoming projects, which could cost anywhere between Rs 1,500-2,000 crores.
Meanwhile, it’s also learnt that the company would soon announce three more projects with an investment of around Rs 300 crore around Mumbai and Pune. A senior official in the company told ET, “We have the option of 16 land parcels in Mumbai where we can start the projects. Some land deals will be an outright purchase while we will go in for a JV with the land owner in the case of the others,” the official added.
Tata Housing’s Shubha Griha project will come up at Boisar, which is about two-and-half hours by train from Mumbai. This project will be ready in two years. “For the new projects, we would give preference to those who did not get their home in Boisar,” the official said. This project is often referred to as the Nano housing project. The company had earlier said that around 16,000 forms were sold for this project with 5,500 people having applied. Eventually, 1000 houses would be allotted through a random selection of forms or a lottery system.
Earlier, Tata Housing had announced that they would build a total of 16,000 houses within the next two years across the country. Referring to the option of bringing in private equity money, the official said, “In the affordable housing project the return is anywhere between 20% to 25% which is lesser than what normally prevails. We are in talks with PE players who would not mind lesser but secure returns,” the official added.
Tata Housing recently tied up with Micro Housing Finance Corporation (MHFC), a microfinance institute, and intends adopting the same model going forward. “Our customers belong to low-income groups who can buy a house but may not have documents required to obtain a housing loan. The MFIs and other financial institutions we have tied up with understand this and provide loans without these documents,” added Mr Banerjee.
The Economic Times, June 1, 2009, Page 4
Sachin Dave MUMBAI
TATA Housing Development Company, a subsidiary of Tata Sons, which recently announced low-cost housing project Shubh Griha, is learnt to be in talks with various state governments for developing similar projects. The houses are priced at around Rs 4 lakh.
Managing director & CEO of Tata Housing Brotin Banerjee confirmed the news. “There have been some proposals from state governments offering us partnerships for affordable housing projects, but we have no announcement to make now,” he said. It is believed that the company may adopt the public-private partnership (PPP) route with the state governments by year-end. It was not possible to ascertain which state governments have approached Tata Housing for these projects. The company is also believed to be in talks with private equity players for its forthcoming projects, which could cost anywhere between Rs 1,500-2,000 crores.
Meanwhile, it’s also learnt that the company would soon announce three more projects with an investment of around Rs 300 crore around Mumbai and Pune. A senior official in the company told ET, “We have the option of 16 land parcels in Mumbai where we can start the projects. Some land deals will be an outright purchase while we will go in for a JV with the land owner in the case of the others,” the official added.
Tata Housing’s Shubha Griha project will come up at Boisar, which is about two-and-half hours by train from Mumbai. This project will be ready in two years. “For the new projects, we would give preference to those who did not get their home in Boisar,” the official said. This project is often referred to as the Nano housing project. The company had earlier said that around 16,000 forms were sold for this project with 5,500 people having applied. Eventually, 1000 houses would be allotted through a random selection of forms or a lottery system.
Earlier, Tata Housing had announced that they would build a total of 16,000 houses within the next two years across the country. Referring to the option of bringing in private equity money, the official said, “In the affordable housing project the return is anywhere between 20% to 25% which is lesser than what normally prevails. We are in talks with PE players who would not mind lesser but secure returns,” the official added.
Tata Housing recently tied up with Micro Housing Finance Corporation (MHFC), a microfinance institute, and intends adopting the same model going forward. “Our customers belong to low-income groups who can buy a house but may not have documents required to obtain a housing loan. The MFIs and other financial institutions we have tied up with understand this and provide loans without these documents,” added Mr Banerjee.
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