Real Estate Intelligence Service, Thursday, September 03, 2009

Centre weighs fund-raising options to meet viability gap for road projects

Centre weighs fund-raising options to meet viability gap for road projects
The Financial Express, September 3, 2009, Page 12

Ashutosh Kumar, New Delhi

With an ambitious plan to award road projects worth Rs 2,00,000 crore in the next two years on public-private partnership (PPP) basis, the government is looking at various options to raise funds and set up a line of credit to meet the viability gap funding (VGF) and annuity payment requirements, among others.

Furthermore, the government may allot a part of the Rs 10,000 crore tax-free bonds raised by the India Infrastructure Finance Company Ltd (IIFCL) directly to the National Highways Authority of India (NHAI) for refinancing of the road projects.

“Since the fund mobilised from the first tranche of tax-free bonds is lying idle with IIFCL, a part of it could be provided directly to NHAI for refinancing its projects,” said an official close to the development. Without revealing details on the quantum of funds that will be provided and time of its implementation, the official said, “The issue may be taken up as an option for meeting NHAI requirement. As of now no final decision has been taken on this front.”

However, a top road transport and highways ministry official said that the move is being considered and NHAI may get the money directly from IIFCL as and when need arises. NHAI, which will require a buffer of around Rs 80,000 crore for outgo on VGF and other requirements, is also weighing the option of raising deep-discount bonds. These bonds will be sold at discount from their par value. “The bonds are issued for a period of 20 years. They come with the options of yearly interest and maturity. Banks and financial institutions that have long-term repayment liability can avail these bonds,” said an NHAI official.

“The bond proceeds will be used for meeting VGF needs, ongoing engineering procurement contract, pre-construction related expenditures, payment of annuity bills, and servicing future borrowings,” said the National Highways Authority of India official.

Incidentally, NHAI could till date raise only Rs 220 crore from the Rs 4,000-crore 54 EC bond which it issued in May this year. Officials, however, are optimistic of garnering more funds by the end of current fiscal year.

The authority also plans to approach Life Insurance Corporation to seek loan.

“We are likely to initiate negotiation with the LIC after December. By that time, we will have a clear idea regarding requirement of additional funds. In case of need, we will seek loan from LIC,” said the official.

Unique offers now a reality in realty hardsell

Unique offers now a reality in realty hardsell
The Financial Express, September 3, 2009, Page 4

Mona Mehta, Mumbai

Sensing a revival of consumer interest, realty developers in Mumbai are coming up with unique add-ons in their residential and commercial ventures to lure buyers. Builders claim that enquiries for commercial projects and residential transactions have grown by 50% during the second quarter of this fiscal.

Be it green building technology for schools and hospitals, unique interiors and decor or luxury lounges for commercial projects, each builder is hard selling his project. For instance, Kohinoor Developers' upcoming Kohinoor City project at Kurla in Mumbai is a green technology project. It includes four commercial buildings, residential apartments, retail establishments, a school and hospital. Kohinoor Developers MD Atul Modak tells FE, “We are developing commercial buildings with green technology. We recently sold one building to the National Stock Exchange (NSE) and are in talks to sell other two commercial buildings. However, we have not hiked the property prices.” The outright price for commercial properties is Rs 15,000 per sq ft, Rs 8,000 for residential and Rs 150 per sq ft on lease.

Man Infrastructure is developing decor inspired by both ancient Roman architecture and modern art at its ongoing commercial project at Vile Parle in Mumbai. Meanwhile, Kanakia Spaces has launched a cafeteria that resembles a five-star lounge at its commercial project, 215 Atrium. Anshuman Magazine, country head of CB Richard Ellis says, “Property sales are happening in areas where prices have corrected and interest rate on home loans have come down. Moreover, in Mumbai and Bangalore, certain developers are reducing ticket size of apartments and offering unique decor. This is expected to happen in other metros as well.”

Jones Lang LaSalle Meghraj MD (West India) Pawan Swamy opines, “The trends in commercial spaces in cities like Mumbai focus on larger floor-plates, single-floor occupation, self-sufficiency in parking facilities and better efficiency via design. The demand is clearly for affordable housing. It always existed and would do so in metros.”

Realty tries to put downturn to bed with 10-15% hike in prices

Realty tries to put downturn to bed with 10-15% hike in prices
The Economic Times, September 3, 2009, Page 1

Developers Jack Up Prices In Mumbai & NCR; Move Likely To Dampen Demand

Sachin Dave MUMBAI

WITH residential property buyers gradually returning to the market, especially in key regions like New Delhi-NCR (National Capital Region) and Mumbai, realty prices in these areas have moved up 10-15%. While some developers have increased prices across projects, others are doing it on a project-specific basis.

Industry trackers say the hike in prices could result in demand moving southwards. Realty fund Kotak Investment Advisors’ director, Vikas Chimakurthy, said, “There was a substantial demand, especially in the mature markets, after prices dropped a few months ago. Today, potential customers are not willing to buy properties at these (higher) prices.”Developers, meanwhile, confirmed the decision to hike prices. “We have increased prices across all our properties by 10%. It is not much and is the result of the improved market conditions,” said Abhishek Lodha, director, Lodha Developers, a Mumbai-based company that has projects in and around the city.

Delhi, like Mumbai, is witnessing a hike in prices of realty projects. DLF, the country’s largest real estate company by market capitalisation, is one of those whose properties will be dearer. “Yes, there has been a price increase though it is still limited to some projects nearing completion,” said DLF executive director Rajeev Talwar.

How long these prices will hold out is hard to determine. “Mumbai and some parts of New Delhi have been witnessing some rise in price and it will be interesting to see if these prices are sustainable. In other markets like Bangalore, supply still exceeds demand,” said real estate consultant Saffron Asset Advisors managing director Ajoy Veer Kapoor.

As realty gets pricier, there has been concern among buyers about whether this is purely on account of the economic scene improving or due to builders reaching an understanding among themselves. Though prices have not reached the 2007 levels, the hike has been enough to make buyers think twice. “We are still a while away from the 2007 levels, which could take two more years. In our case, we have increased prices by around 5% for our projects and are hopeful of a recovery by the end of this year,” said Hiranandani Constructions managing director Niranjan Hiranandani.

RICS & CII hold conference on valuation

RICS & CII hold conference on valuation
HT Estates, August 29, 2009, Page 03

The Royal Institution of Chartered Surveyors (RICS) had organised a joint National Conference on “Valuations: The Emerging Road Map for India” with Confederation of Indian Industry (CII) on August 27, 2009. The conference highlighted the need to develop effective Valuation Standards and build a world class valuation profession in India.

Anshuman Magazine, Past Chairman, CII National Committee on Real Estate & Housing and CMD, CB Richard Ellis South Asia Pvt Ltd said: “In a globalized economy, valuations form the backbone that helps determine where to put in money and make investments. It is necessary to make valuation practices more robust to instil investor confidence in the system which will drive capital investments to India.

Professional valuations are vital to a healthy property market and a stable economy, forming the basis of performance analysis, financing decisions, transactional or development advice, dispute resolution, taxation and various statutory applications. And, the recent turbulence in global financial and property markets has turned the spotlight on valuers, valuation standards and methodology. This warrants efforts to be made to encourage the harmonization of standards and valuation qualifications across India.

Jitesh Khosla, OSD, Indian Institute of Corporate Affairs and formerly joint secretary, Ministry of Corporate Affairs Government of India said, “A distinct valuation discipline is emerging in India that needs to be taught properly with a structured knowledge input and develop its own professional code of conduct and standards to achieve a certain level of proficiency. Therefore, it is necessary to have standards pertaining to the International Valuation Standards (IVS) and International Financial Reporting Systems (IFRS) to measure quality.”

In an increasingly demanding market it is essential that valuations are presented to clients in a clear and unambiguous manner, thereby instilling trust and confidence. Robust practice standards form the basis of accurate and consistent valuations. While the need for a uniform valuation standard has been increasing felt by key stakeholders, up until now, there has been none available for adoption by the industry.

Sachin Sandhir, MD & county head, RICS India said: “Even as the developed countries indulge in a more sophisticated and complicated debate surrounding market value and fair value, India has a its unique issues to focus on while being aware of the happenings in the international arena.”

HIRANANDANI UPSCALE TIES UP PE FUNDING FOR THREE PROJECTS

HIRANANDANI UPSCALE TIES UP PE FUNDING FOR THREE PROJECTS
Vivek Seal, New Delhi
DNA

Hiranandani Upscale, a fully owned company of Mumbai-based developer Hiranandani Group, said it has achieved financial closure for three of its new projects from private equity players for acquisition of land plots. However, the company did not provide financial details on the developments.

"Currently, we have two townships projects off the ground ... in the next year we are looking at adding three more and one smaller development project. Our focus is tier-1, so we have projects in Chennai, Hyderabad and Bangalore," Neha Hiranandani, director at privately held Hiranandani Upscale, said.

She added that with new and existing projects, they are looking at total developable space of 50 million square feet of long gestation township projects. "For the new projects, we are in various stages of negotiations and due-diligence. The land has been already acquired for the project, but I cannot provide any investment figures. The funding would be through various methods, primarily through a private equity placement for which we have achieved a financial closure for three of the new projects, but I can not disclose more," Hiranandani added.

The company has sold only minority stake to investors, mostly in the acquisition of the land plots, and not for the longer-term development, so as to maintain a controlling stake in the projects.

Sources familiar with the development said the developer has acquired 135 acres in three cities for about Rs 800 crore. The land comprises of 35 acres in Chennai, 80 acres in Bangalore and 20 acres in Hyderabad.

REALTY DEAL SPURS TURNAROUND HOPE

REALTY DEAL SPURS TURNAROUND HOPE
Kolkata
The Telegraph

A chunk of prime land in New Alipore has changed hands in a big-ticket deal at a time such deals are under the scanner across the state.

A 229-cottah plot next to BP Poddar Hospital, which once housed the factory of edible oils group Rasoi, has been sold to city-based real estate firm Ideal Group for Rs 85 crore, which works out to around Rs 37 lakh per cottah. The factory premises were lying idle since June 2002, when the company shifted operations to Banganagar, near Diamond Harbour.

“We will develop a high-end residential property there, in the shape of two high-rise towers designed by Hafeez Contractor,” said S.K. Himatsingka, the chairman of the Ideal Group. The realty firm is looking at around 200 apartments and hopes to break ground in January 2010.

The deal doesn’t scale a new city peak as there have been instances of land parcels being sold at a higher price but the realty lobby holds it as a pointer to a possible turnaround in the economy that has been going through a slump.

Emaar-MGF Land Pvt Ltd had made real estate history in Calcutta by quoting Rs 213 crore for a 6.24-acre plot (around Rs 34 crore an acre) on the Bypass. Later, LIC had surpassed that, quoting around Rs 55 crore per acre for a land parcel near Science City.

“Still, the Rasoi deal, at this juncture, could be one more hint that the market is bouncing back,” said a city-based property agent.

GODREJ PROPERTIES ACQUIRES LAND FOR TOWNSHIP IN AHMEDABAD

GODREJ PROPERTIES ACQUIRES LAND FOR TOWNSHIP IN AHMEDABAD
Maulik Pathak & Vinay Umarji, Mumbai/ Ahmedabad
Business Standard

In what could be the first major land deal in Ahmedabad after Tata Motors parked their Nano project at Sanand a year ago, Godrej Properties - the realty vertical of Godrej Group has completed acquisition of over 100 acres near Ahmedabad for its 'Godrej Garden City' project.

The township, to be spread on about 250 acres, will offer affordable homes in the range of Rs 20-25 lakh. The company had proposed an investment of Rs 5,000 crore for the project to the state government earlier in January this year.

The project was recently selected among 16 founding projects across the world for the Climate Positive Development Programme, launched by former US President Bill Clinton.

Industry experts believe that when the project materialises, it will be the largest ever of its kind in the city. The housing project will be spread across 30 million sq. ft of area and it will house residential as well as commercial properties, said sources close to the development.

Godrej Properties aims to create an integrated township within the city limits of Ahmedabad by providing a mix of residential, commercial and public spaces.

The company aims to hit the capital market in the next couple of months, if the current uptrend in the market continues. The company has already got clearance from Sebi for the IPO, which will involve fresh capital issue of 13.5 percent stake.

Besides Ahmedabad, the company is coming up with affordable housing projects in Bangalore, suburbs of Mumbai, Pune, Kolkata and Chandigarh.

LOW-COST HOMES MADE BY BUILDER, PRICED BY MHADA

LOW-COST HOMES MADE BY BUILDER, PRICED BY MHADA
Rajshri Mehta, Mumbai
DNA

The Maharashtra Housing and Area Development Authority (Mhada) has recently approved the first project under a new scheme which aims to raise the stock of public housing by partnering with private firms under the JNNURM. The Neptune Group will build 9,000 ground plus 4-storey structures, which will house flats of 300 sq ft and 500 sq ft for the economically weaker sections (EWS) and low-income group (LIG) respectively, on 57 acres land it owns at Ambivali, 6 km from Kalyan. There will also be 900 sq ft homes for the middle-income group (MIG), which will be sold in the open market.

According to the scheme, the developer, in lieu of giving his land free of cost for affordable housing, will get Rs 60,000-Rs1 lakh from the Centre for every tenement constructed for the EWS and the LIG. At least 25% of the total flats will have to be in the EWS and the LIG categories. The Mhada, as the implementing agency of the project, will finalise the rates for the sale of these houses.

The remaining 75% flats can be built for the middle and high-income groups and sold by the developer at market rates. The prospective buyers, apart from getting homes at affordable prices, can also avail a subsidy of 5% per annum on the interest charged in home loan. This subsidy can be availed only by those buying homes meant for the EWS (average monthly income up to Rs 3,300) and the LIG (between Rs 3,301 and Rs 7,300). The Neptune Group, on the other hand, will be rewarded with an infrastructure subsidy of roughly Rs 50 crore.

Mhada CEO Gautam Chatterjee said (before the election code of conduct came into effect), "We want to create a win-win situation for both the developers, who chip in with their land, and the buyers."

Rahul Chitale, director of Neptune Group, said that the company was preparing a detailed proposal. A second proposal, by the Shreepati Developers, who aims to develop around 18,000 flats on 120 acres at Khalapur near Karjat, is awaiting Mhada approval. In this project, 7,678 flats will be built for the EWS and the LIG.

Cement despatches grow on back of weak monsoon

Cement despatches grow on back of weak monsoon
The Financial Express, September 3, 2009, Page 12

fe Bureaus, Mumbai

Weak monsoons and new capacities seem to have benefited the cement industry at least in terms of increased despatches. Major players like Aditya Birla group, ACC Ltd and Ambuja Cement have reported an increase in their despatch figures for the month of August 2009.

Indian cement industry witnessed a despatch growth of about 9.9% in July 2009, and industry watchers expect the total despatch growth to be more than 15% in August this year. With prices correcting and demand expected to grow by just 8%, the oversupply of the commodity is clear with increased despatch numbers reported by the cement manufacturers. Aditya Birla Group’s cement despatches in August 2009 grew 32.15% to 3.21 million tonne (mt) against the same period last year, whereas its production for the month grew by 38.30%. Ambuja Cements despatches during August grew 15.33% to 1.42 mt and ACC Ltd’s despatches grew 7.14% to 1.65 mt. Similarly, Shree Cement reported a 30% growth in its August cement shipment, whereas, Dalmia Cement and JK Lakshmi’s Cement’s despatches grew 15.7% and 15% over August 2008.

J Radhakrishnan, an analyst with India Infoline, in a recent report had said, “Cement Manufacturers Association (CMA) has reported 15 mtpa capacity addition so far in the current year. Based on interaction with companies and factoring in further delays, we expect 32 mtpa capacity additions through the rest of FY10. This could go as high as 40 mtpa if Jaypee’s Himachal Pradesh units, all grinding units of Grasim’s Kotputli expansion and ACC’s Wadi expansion come on stream as guided by the companies.”

According to a cement dealer, “The new capacities that have come on stream are getting stabilised. Demand is still there and there is only a slight correction in prices,” he said on condition of anonymity.

Cement prices in Mumbai are about Rs 250 per 50 kg bag, whereas in North and East the prices are Rs 240 and Rs 270 per bag respectively. In South, where the prices have fallen 2-15% in the past three months is at about Rs 250 per 50 Kg bag.

Meanwhile, commodities such as coal are under severe pressure due to the slow down in the global economy. Sharekhan in its recent report on the cement sector said, “The recent cost inflation in terms of the expected increase in the price of raw materials (due to increase in the limestone royalty payment) and the expected increase in the price of domestic coal could put pressure on the margins in the coming quarters.”

Cement sales fall in Aug as demand slows

Cement sales fall in Aug as demand slows
The Hindu Business Line, September 3, 2009, Page 3

Our Bureau, Mumbai

Cement demand seems to have tapered off in August with the onset of the monsoon and slowing down of activity in the real estate sector.

ACC sales were down 10 per cent in August at 1.65 million tonnes (mt) against 1.81 mt in July.

Output was down at 1.63 mt against 1.83 mt in July. Ambuja Cement sales were marginally up at 1.43 mt (1.44 mt in July) while production rose to 1.42 mt (1.44 mt).

Aditya Birla Group companies, UltraTech Cement and Grasim Industries, reported a seven per cent rise in sales at 2.90 mt against 2.70 mt in July.

Production in August was up to 2.93 mt (2.75 mt).

Dalmia Cement, a prominent player in the south, reported that its August sales were down at 350,000 tonnes against 380,000 tonnes in July. Output dipped to 351,000 tonnes (376,000 tonnes in July).

Shree Cement, one of the largest cement manufacturers in the northern region, has reported a 17 per cent drop in sales at 689,000 tonnes in August against 830,000 tonnes in July. JK Lakshmi Cement despatches were 333,000 tonnes in August (320,000 tonnes).

The poor monsoon has resulted in a sharp fall in demand in the rural and semi-urban regions. “Demand may come down further in the coming months once the impact of the weak monsoon sets in. Besides, the soaring commodity prices will also curtail spending by the common man,” said an analyst.

Cement companies have reduced prices by Rs 10-15 per 50 kg bag across regions to stem the sharp fall in demand.

ACC and Shree Cement shares were down 0.06 per cent and 0.95 per cent to Rs 779 and Rs 1,509 respectively. JK Lakshmi Cement fell one per cent at Rs 135 while Ambuja Cement and Dalmia Cement were up 1.32 per cent and six per cent each at Rs 100 and Rs 203.