Bengal Peerless Housing plans Rs. 400-cr project

Bengal Peerless Housing plans Rs 400-cr project
The Hindu Business Line, August 15, 2009, Page 17

Manish Basu

Bengal Peerless Housing Development Company Ltd, a joint venture between the West Bengal Housing Board (WBHB) and the Peerless General Finance and Investment Company Ltd (PGFIC), plans to develop in phases a residential-cum-commercial project near the Eastern Metropolitan Bypass in the city at an estimated investment of Rs 400 crore, its Managing Director, Mr Kumar Shankar Bagchi, told Business Line here.

The project, to come up on 15 acres near Ruby Hospital close to its existing housing project Avishikta, would have 1,600 flats with a total residential area of 10-11 lakh sq. ft and about 3.5 lakh sq. ft. of commercial and office space, he said. Half the residential units would be for the high-income group, and the rest for middle and low-income groups.

“Land has been acquired on the E.M Bypass, near the Avishikta project,” Mr Bagchi said, adding that the project, still in the designing and planning stage, would be placed before the municipal authorities for approvals soon.

In 3 phases

“We plan to invest Rs 300-400 crore in three overlapping phases each of about 30 months,” he said, adding that the first phase of the residential project would be delivered within two and half years from the zero date.

The project, to be launched under a new brand, would be funded from internal accruals, he added.

Completion date

The whole project might take nearly seven years to complete and the commercial area would be delivered in the final phase, he said.

While the project might not have a shopping mall, it would have an integrated commercial and office spaces, he said. The construction might start soon, he said, without giving out further specifications.

Bengal Peerless is a joint sector company in which WBHB and PGFIC hold 49.5 per cent stake each while the balance one per cent is held by promoters and State Government nominees.

Real Estate Intelligence Service, Monday, August 17, 2009

Affordable housing: realtors’ next concrete step to growth

Affordable housing: realtors’ next concrete step to growth
The Financial Express, August 15, 2009, Page 10

Out from the dumps, the real estate sector has just started aiming big again. Studies in this regard show that affordable housing would be the unique selling point realtors would adopt.

Market watchers, however, feel that prospective buyers are still locked in the wait-and-watch mode, nullifying the efforts of the developers to hard-sell affordable housing projects. On the other hand, buyers-in-the-waiting refuse to buy the theory of affordability, stating that it could not be a one-way bridge.

The global property consultancy firm, Knight Frank has estimated that affordable housing requirement would be in excess of 2 million units across key cities in India and 80% of demand is expected to emanate from the Rs 3-5 lakh income group. Significantly, over 32% of the potential buyers are looking at making a purchase in the next 6-12 months. In a recently released a first-of-its-kind research paper on affordable housing, Knight Frank said the real estate sector is realigning its focus towards affordable housing and projected a whopping market size of over Rs 3 lakh crore by 2011.

Meanwhile, in its latest overview on Mumbai residential market, Cushman and Wakefield said improvement in overall economic sentiments and increasing liquidity due to recent upward swing in the stock markets have marginally renewed confidence of both investors and end users in residential market. As a result, after witnessing a slump over the last six to nine months, Mumbai witnessed some increment in demand in the residential sector. Additionally, increasing focus on affordable housing for low and middle income groups resulted in the launch of several affordable housing projects in 2Q 2009, most of which are concentrated in far peripheral locations of Mumbai.

Commenting on the emerging scenario, Chennai and Hyderabad managing director Ramesh Nair, a global real estate intelligence service provider Jones Lang Lasalle Meghraj (JLLM) told FE that in order to realise affordable housing, both the government and developers have to initiate certain bold measures. The government has to provide approvals and other pre-requisite clearances without much hindrance besides strengthening public-private sector partnership in housing projects. Also, extra attention needs to be paid to cost-subsidy aspect, he added.

As for developers, the optimum and proper utilisation of technology in the projects is likely to effectively curb wasteful expenditure. Another key point is the incorporation of the value-engineering products and effective scheduling and executing of the projects. "Inordinate delays are likely to spark cost-escalation which is likely to hamper the whole concept of affordable housing," Ramesh said.

According to Knight Frank, the mammoth scope of the realty sector is expected to arise from housing requirement of over 2 million units by 2011. While the Rs 3-10 lakh income group would drive this demand, the research findings further indicate that the largest contributor to this market size is expected to be the group earning Rs 3-6 lakh annually. Buyers in the Rs 8-10 lakh income group quoted a more conservative budget than those in the Rs 3-6 lakh group, which reflects the extremes on which higher income group consumers operate during boom and recession periods. The study also revealed that the household purchase of these potential buyers are over 32% between 6-12months and about 7% within the next 6 months.

According to the report, though a number of affordable projects have been announced, the locations do not have adequate social infrastructure which was of utmost importance for the proper development and successful implementation of the project. The report revealed that good connectivity to work places is the most important factor influencing a buyer's decision in selecting the location of their residence. This is followed by good infrastructure and good potential for future development'. And while choosing a project, uninterrupted water supply, power backup and high-level security systems are the basic amenities preferred over gymnasium, swimming pool, modular kitchen and interior fixtures.

Cushman and Wakefield said that while softening of home loan interest rates and correction in capital values many developers are anticipating an increase in demand from both end users as well as investors in near future. Mumbai is likely to witness restricted supply in short term due to slowdown in construction activity and phase wise development by most developers. This is likely to result in stabilisation of capital values for both mid and high end housing. Additionally, many developers are focusing on the compact and efficient apartments aimed at middle income group. Some peripheral locations in Mumbai could emerge as hot spots in near future due to increasing focus on affordable housing projects.

Affordable housing now on radar of PE funds

Affordable housing now on radar of PE funds
The Hindu Business Line, August 17, 2009, Page 3

New Delhi: Builders are not the only ones climbing onto the 'affordable housing' bandwagon. With premium housing and commercial realty market still in near comatose, the affordable housing projects are now catching the eye of dedicated real estate funds and private equity (PE) firms which are chasing opportunities in this emerging space.

"There is a strong PE interest in the affordable housing category. We are open to such investments in individual projects, but we will not dilute stake at the corporate level," said Jayakar Jerome, Managing Director of Provident Housing.

Jerome indicated that Provident (a wholly-owned subsidiary of Puravankara focusing on affordable housing) is open to offering up to 20-25 per cent equity in project level Special Purpose Vehicles (SPVs) to interested players.

The trend is visible even among large players. Unitech, for instance, is in talks with PE players for investment into its low-cost affordable housing initiative - Uni Home. A spokesperson for the company said that apart from PE funds, Unitech is also negotiating with a large international affordable housing player, for investment in 'Uni Home' projects.

Real Estate Investment Fund-Millennium Spire, anticipates maximum demand to come at the Rs 20-30 lakh housing space. "We have signed-up a few transactions and are close to announcing a new deal involving a project where the base price per unit is Rs 21 lakh onwards," said Ashish Bhalla, the Managing Director of Millennium Spire.

A top official of a large realty fund, who did not wish to be named, said that the sweet-spot for his fund are the Rs 20-50 lakh ticket-size units. "We see huge unsatisfied demand in the top 10 cities in this segment," the official said while adding that although his fund had not yet taken equity position in such projects, it was "closely evaluating" them.

The property market had gone into a near tailspin in the aftermath of global economic slowdown and weak consumer sentiments, but builders have lately re-oriented their strategy by focusing on affordable housing - a space that is posting strong demand despite the relatively subdued market conditions.

A latest report on affordable housing by Knight Frank has projected a market size of over Rs 3,00,000 crore by 2011. The scope of this sector is expected to arise from housing requirement of over 2 million units by 2011. The report also revealed that over 32 per cent of the potential buyers surveyed are looking at making a purchase in the next 6-12 months.

However, while affordable housing offers low-risk from demand perspective, there could be challenges on project execution side, cautions a PE expert. "On the positive side, there is a large demand which is not met by the current supply. But there can be execution issues pertaining to time and cost overruns on such projects - all these aspects have to be considered by potential investors," said the expert.

LICHF slashes home loan rates by 0.5%

LICHF slashes home loan rates by 0.5%
The Financial Express, August 15, 2009, Page 11

By ugesh sarkar, Section Real Estate

LIC Housing Finance on Friday cut interest rates for new loans by 0.5% effective from August 1, even as LICHFL director and chief executive RR Nair said in Chennai on Friday that the firm would mobilise funds through non-convertible debentures (NCDs) and term loans to disburse loans worth around Rs 15,000 crore this year.

With the cut, for customers opting for floating rate loans between Rs 30 lakh and Rs 75 lakh, the new rates would be 8.75% as against 9.25%. For three-year fixed or floating scheme loans between Rs 30 lakh up to Rs 75 lakh, the new rate will be 8.90% against 9.5% earlier, a company press release said. "The decision has been taken in view of the prevailing market conditions," an LICHF official said.

Country's premier home loans lender, HDFC, has also cut interest rates on loans between Rs 30 lakh-Rs 50 lakh by 0.50% from August 12. The new rate accordingly stands at 9% from the earlier 9.5%, an HDFC source said. For loans up to Rs 15 lakh, the rate remains unchanged at 8.75% and for loans between Rs 15-30-lakh, the rate remains at 9%, sources said.

Speaking in Chennai, Nari said, "The liquidity is good and this year we want to raise Rs 15,000 crore. Already, Rs 6,000 crore has been raised," adding that the company would not opt for external commercial borrowings (ECBs) as there was adequate liquidity. The company had disbursed Rs 8,000 crore loans last year. "I believe reaching the target will not be a difficult task," he said after inaugurating a property fair.

Nair said the real estate sector has started to look up after being in lull owing to slowdown in the economy. Pointing out that there has been a great demand for dwellings across the country, he called on the real estate developers to seize the emerging opportunities. The supply-demand mismatch is alarmingly high and LICHL are gearing up to help out the end-users in order to narrow the gap. Nair said LICHFL would not be entering into reverse mortgage portfolio unless products are suitably redesigned. "Reverse mortgage system, at times, leads to senior citizens getting evacuated from their home at the fag end of their life," he said.

Premium home prices to upswing 15-25%: experts

Premium home prices to upswing 15-25%: experts
The Financial Express, August 17, 2009, Page 4

By Mona Mehta

With end-users and investors returning to the real estate market and demand for apartments in the metros picking up bit by bit, experts believe the price of premium residential apartments will rise by 15% to 25% during Diwali this year. They say premium apartments in Mumbai, including South Mumbai, Bandra and Worli, and those in Delhi, including Connaught Place and East of Kailash, which were available at Rs 70,000 to Rs 80,000 per sq ft during January to March this year (Q4 of 2008-09) will be sold at Rs 1 lakh to Rs 1.20 lakh sq ft during Diwali .

Sanjay Dutt, chief executive officer - business, Jones Lang LaSalle Meghraj (JLLM) told FE, "In Q2 of 2009-10, real estate market has started witnessing emergence of buyers, unlike Q4 of 2008-09 when the sector witnessed slowdown and builders were forced to lower realty prices by 40%. But now, builders are planning to bridge the pricing gap by hiking prices of premium properties by 30% in prominent premium apartments in Bandra, Worli and South Mumbai, apart from Delhi's Connaught Place and East of Kailash, by Diwali 2009."

During Q4 of 2008-09, at Altamount Road in South Mumbai, builders negotiated and sold flats at Rs 30,000 per sq ft. Orbit Corporation sold flats in Orbit Arya on Napean Sea Road at Rs 57,000 per sq ft during Q2 2008-09 when the realty market was at its peak, but had to cut down prices of flats in Orbit Haven to Rs 45,000 to Rs 55,000 during Q4 due to the slowdown. During the period, Oberoi Constructions too had stopped sale in Oberoi Skyz, a 65-storey building at Prabhadevi.

But during Q2 of 2009-10, Shapoorji Pallonji's twin towers in Tardeo commands price of between Rs 45,000 to Rs 55,000 per sq ft. Besides this, certain other under construction properties in Mahalaxmi and Tardeo will command prices of between Rs 20,000 to Rs 30,000 per sq ft. Currently, a penthouse spread across two levels in South Mumbai commands prices of between Rs 60,000 to Rs 70,000 per sq ft.

Niranjan Hiranandani, managing director, Hiranandani Constructions said, "The supply of premium housing is expected to increase by 15% due to the emerging demand. Hence, prices for premium housing will increase. We will be launching projects in Powai, Panvel and Chennai at existing market rates in a phased manner in the near future."

There are certain industry experts who believe that the number of real estate transactions will be better by Diwali 2009. According to Pranay Vakil, chairman, Knight Frank India, "By Diwali 2009, we expect number of transactions to be better than what they were six months back. Properties with a sea view will command better values."

Jitendra Jain, managing director and chief executive officer, Neev Group of Companies says, "We are planning to launch premium residential housing in South Mumbai in the next nine months and the joint ventures we will be entering into will be based on the market rates existing during that period."

TDI Infra to invest Rs 350 cr in Haryana

TDI Infra to invest Rs 350 cr in Haryana
Business Line, August 17, 2009, Page 13

9% growth biggest challenge, says PM

9% growth biggest challenge, says PM
The Financial Express, August 16, Page 1

fe Bureaus, New Delhi

Against the spectre of looming drought, Prime Minister Manmohan Singh on Saturday said restoring the GDP growth rate to 9% was the biggest challenge before the country even as he spelt out sops for the agriculture sector and promised to make all efforts to control rising prices “so that not even a single citizen of India should ever go hungry”.

“Our economy grew at a rate of about 9% from the year 2004-05 to the year 2007-08. This growth rate came down to 6.7% in 2008-09 due to the global economic crisis. It is only a result of our policies that the global crisis has affected us to a lesser extent than many other countries. Restoring our growth rate to 9% is the greatest challenge we face,” he said in his address to the nation on Independence Day.

Cautioning that drought could have an adverse impact on the economy, he promised that his government would “make every necessary effort to meet this challenge - whether it is for increasing capital flows into the country, or for encouraging exports or for increasing public investment and expenditure”.

“We expect that there will be an improvement in the situation by the end of this year, but till that time we will all have to bear with the fallout of the global economic slowdown,” he said.

Sending a positive message to the farming community, Singh said his government would extend full support to farmers, including postponing of their loans and deferring interest rates because of the impending drought situation. “We will provide all possible assistance to our farmers to deal with the drought. In view of the deficiency in the monsoons, we have postponed the date for repayment of bank loans of our farmers. We are also giving additional support to farmers for payment of interest on short-term crop loans,” the Prime Minister said from the ramparts of the Red Fort.

Contending that the country needed another green revolution, he said the UPA government was now aiming for 4% annual growth in the agriculture sector, which he was confident of achieving in the next five years. “We will have to adopt modern means to be successful in agriculture. We will have to make more efficient use of our scarce land and water resources. Our scientists must devise new techniques to increase the productivity of our small and marginal farmers. More attention will have to be paid to the needs of those farmers who do not have means for irrigation,” he said.

He also appealed to the business community to fulfill their social obligations by joining the government’s efforts to ensure inclusive growth.

Singh also sent a strong signal on curbing high prices by urging state governments to exercise their statutory powers to prevent hoarding and black marketing of essential commodities. To ensure that no one goes hungry, he said the government is working to bring a food security Bill that provides for supply of 25 kg of rice or wheat at Rs 3 a kg to families living below poverty line. Touching upon issues related to health, Singh referred to the H1N1 virus and said the public should not panic. “I want to assure you that the situation does not warrant a disruption of our daily lives because of fear and anxiety,” he said.

The Prime Minister’s speech also referred to the aam admi and made several promises to further improvement in the National Rural Employment Guarantees Scheme (NREGS), and extension of the Integrated Community Development Scheme (ICDS) to every child below six years by March 2012.

He also hailed the Right to Education Act, saying money should be no issue in expanding education. To this end, he announced a new scheme to help poor students by way of reduced interest rates on their education loans. This will benefit about 5 lakh students in getting technical and professional education, he said.

Discounting reports that the Jawaharalal Nehru National Urban Renewal Mission (JNNURM) for the urban areas was not working, the Prime Minister e said the programme would be accelerated. He announced that the Rajiv Awas Yojana will provide better housing to slum dwellers.

FinMin readies interest subsidy scheme for low-cost homes

FinMin readies interest subsidy scheme for low-cost homes
Business Standard, August 17, 2009, Page 7

Jyoti Mukul / New Delhi

Loan sanction limit of a year from Oct.

The Union ministry of finance has finalised the interest subvention scheme for low cost housing which had been promised in the Union budget. It will be open for loans up to Rs 10 lakh sanctioned after October 1.

Senior officials told Business Standard the ministry would soon be seeking Cabinet approval for the scheme. “Loans have to be sanctioned between October 1, 2009, and September 30, 2010, though we are also looking at the possibility of keeping the scheme open for only six months till March 31, 2010,” said an official.

The concession interest rate scheme that the Indian Banks Association worked out earlier this year is open for five years. Under the scheme, a one per cent interest subsidy would be available on the first 12 equated monthly installments of the loan; the total cost of the home cannot exceed Rs 20 lakh.

The interest subvention would be routed through scheduled commercial banks and housing finance companies (HFCs) registered with the National Housing Bank. The measure would cost the exchequer Rs 1,000 crore.

An official said they did not expect the entire money to be used up. With an average loan size of Rs 8 lakh in this category, at least 12.5 lakh loans need to be sanctioned during one year for using up Rs 1,000 crore.

The government would compensate banks and HFCs for the subsidy by parking the money with the Reserve Bank of India (RBI) for release on a quarterly or half-yearly basis. The balance sheet of banks and HFCs would be subsequently audited for the amount.

The scheme has been criticised on the grounds that the maximum benefit an individual can get under the scheme was Rs 10,000. “Besides, a builder can always show the housing cost as sub-Rs 20 lakh but increase the price subsequently on various grounds,” said an official.

In his reply to the Budget debate, the finance minister had also allowed developers of housing projects to avail of a tax holiday under section 80 IB(10) of the Income Tax Act on profit from projects approved between April 1, 2007 and March 31, 2008, if the projects are completed on or before March 31, 2012. The minister asked the developers to pass on the benefit to their consumers.

The two announcements were expected to provide a stimulus to the housing sector and were a continuation of the policy that, last December, saw an announcement of a concessional interest rate scheme. The Indian Banks Association had accordingly worked out an interest rate of 8.5 per cent for fresh home loans below Rs 5 lakh and 9.25 per cent for loans between Rs 5 lakh to 20 lakh.

Black money falling flat

Black money falling flat
The Economic Times, August 17, Page 14

With most house buyers from salaried class, sellers are either accepting white money or running the risk of losing customers

Good news for property buyers. The obnoxious black money, or the unaccounted cash component, for buying a flat is slowly fading out with
buyers calling the shots in a market still being rebuilt after crumbling in last year’s financial storm.

Across Indian metros, more and more properties can now be purchased through the accounted money or white, thanks to the changed profile of the buyers and the government’s base price policy.

“The range of properties that could be bought through only cheque (white component) has increased as most of the buyers are salaried people,” says Yashwant Dalal, president of All India Estate Agent Association, the country’s largest association of property agents with over 10,000 members.

Today as much as 80% of the buyers in top cities such as Mumbai, New Delhi NCR, Bangalore, Chennai and Ahmedabad are salaried, whereas businessmen and speculative investors dominated the market just a year ago when the real estate boom was at its pinnacle, say industry experts.

This has forced sellers to either accept white money or lose the buyer in a market where demand still trails supply.
While almost all newly developed residential properties can be bought through 100% white money, now many resale properties too are available without the black component.

According to a prominent Mumbaibased developer, the black portion in payment has tremendously gone down in all properties that are below Rs 1 crore. “But for properties over Rs 1-1.5 crore buyers themselves demand that we take payments in black, as they cannot declare the total price of the whole transaction otherwise they could get in to trouble,” said the developer requesting anonymity.

Over the last one year, property prices dipped 30-45% and there were few buyers. Those coming into the market are salaried people who can support a loan but can’t afford black money.

According to industry experts, some sellers in Delhi and Mumbai still demand black component, especially where the selling price is steep compared to the price of the plot and development costs. But now buyers are snubbing them.

“Recently a seller of a resale apartment was asking for around 30% of the payment in cash (black) for a Rs 55 lakh apartment, but I told him straight away that it was not possible, I can pay little more but arranging for black is a big problem,” said Shravan Desai, a professional working in a multinational in Mumbai. In several places in Mumbai including the western suburbs, New Mumbai and Thane the percentage of the black component has come down from 40% a year back to 15% or even nil in many cases.

“If the buyer wants, he can bargain even for full white payment,” says Praful Joshi, a real estate broker based at Borivali . Also, many sellers now accept payment in cheque and are willing to absorb the capital gain tax. The increase in the white component is also a result of some income tax laws that brought more transparency into the property market, say analysts.

“According to Section 50 (C) of the Income Tax Act, one had to pay tax according to ready reckoner prices. If anyone pays below the current market price, he still has to pay tax as per the market rate,” says Vinod Sampat, a tax lawyer and consultant. An individual reinvesting the net proceeds from the sale of a house in another residential house is exempted from capital gains tax. This has given a big relief to many sellers who reinvest in real estate.