DLF alters plans, now seeks to build 500-acre township

DLF alters plans, now seeks to build 500-acre township
MINT, The Wall Street Journal, February 2, 2009, page 7

With Tata Motors calling off its Singur project, and DLF’s proposed 4,840-acre township almost written off, real estate prices in Dankuni have crashed in the past few monthsRomita Datta Kolkata: DLF Ltd has proposed building a 500-acre township at Dankuni in the suburbs of Kolkata, abandoning plans to develop a 4,840-acre township in the same area, which was to be its biggest project in eastern India.

In July 2006, the West Bengal government had awarded the contract to build a 4,840-acre township in Dankuni in Hooghly district to DLF, which had offered a record price of Rs56 lakh an acre, or around Rs2,700 crore, and to spend up to Rs40,000 crore on building the township. The government, however, couldn’t acquire the land.

DLF’s new proposal comes as a face saver for the state government, said an official of West Bengal’s urban development department. “On the other hand, the (state) government’s inability to acquire land gave DLF the opportunity to wriggle out of the project… DLF would have certainly not paid Rs2,700 crore now,” added this official, who did not want to be identified because he isn’t authorized to speak to the media.

After the panchayat polls in May, in which the ruling Communist Party of India (Marxist), or CPM, and its allies suffered a major setback, the state’s urban development minister Asok Bhattacharya had formally announced that his government wouldn’t acquire the land forcibly in Dankuni even if it meant abandoning the project.

Confirming DLF’s new proposal, which was sent last week, Bhattacharya said the state government was willing to provide land for the smaller township that the real estate firm now wants to build. “DLF can have its 500-acre township, but we aren’t abandoning plans to build a bigger township there (in Dankuni). The real estate business seems to be in trouble…we will build an industrial township instead,” said Bhattacharya.

A DLF spokesperson said he wasn’t aware of his company’s new proposal to build a 500-acre township, and refused to offer any comment on the stalled Dankuni project.

Bhattacharya also said that DLF, which, in January 2007, had paid Rs270 crore, or 10% of the amount it had bid for the proposed township, has asked the government to return the money. The real estate firm has agreed to make an advance payment, albeit of smaller amount, for the 500 acres that it has now asked for, he said.

The price of land in Dankuni could go up again when DLF’s new proposal is made public. It had earlier shot up to Rs1.2 crore an acre because of DLF’s proposed township and the now abandoned small car factory that Tata Motors Ltd was building in Singur, which is barely a 20-minute drive from Dankuni.

Faced with stiff resistance to the acquisition of farmland in Singur, which, too, is in the Hooghly district, the state government had abandoned plans to forcibly procure land in Dankuni much before it was formally announced by the minister. Bhattacharya had decided to build consensus and buy land from farmers paying the market price, but the spurt in real estate prices in Dankuni put the state government in a spot.

With Tata Motors calling off its Singur project, and DLF’s proposed 4,840-acre township almost written off, real estate prices in Dankuni have crashed in the past few months.

A few months ago, district magistrate Neelam Meena estimated that land prices in Dankuni ranged from Rs11 lakh to Rs38 lakh an acre depending on productivity and the distance from NH2, the highway that connects Kolkata with northern India.

DLF may walk out of Delhi convention complex project

DLF may walk out of Delhi convention complex project
Business Standard, January 31, 2009, page 5

JOE C MATHEW New Delhi, 30 January

DLF, the country’s biggest real estate company, may drop the plan to develop India’s largest convention and exhibition complex in Delhi, sources say.

The move comes 18 months after the cash-strapped developer was allotted 35 acres by the Delhi Development Authority (DDA) to build and maintain an international convention &exhibition centre, hotels and allied commercial facilities. The cost of the project is estimated at Rs 6,000 crore and was expected to be completed in three years.

The realty major has already spent Rs 900 crore on land purchase. The continuing liquidity crunch and delay in sourcing funds internationally have led DLF to review its plans to invest further in the project.

The company has spent over Rs 100 crore in finalising the project plan, identifying its technology partners and beginning the spadework for various projects. It has intimated its inability to complete the project unless the existing contractual obligations were renegotiated, according to DDA sources.

DLF is in talks with DDA to see if changes can be made to the original terms in the lease agreement, sources said. The lease agreement stipulates a time-bound completion of the project and has penalty clauses for every missed deadline. However, the agreement allows DLF and DDA to extend the timeframe for completing the project after mutual negotiation.

“DLF is looking at revising the contractual agreement that can even allow some equity participation from the government side,’’ sources said. The agreement stipulates that the entire financial burden from the conceptual stage to execution is on the developer.

DLF declined to comment on the delay and status of the project though company insiders say the developer is not keen on the project. “The project has been killed,’’ a source said. The lease deed allows DDA to take back the land if the developer fails to executive the project beyond a certain time. The proposed convention centre is one of the most prestigious projects of DDA and was modeled on Suntec Convention Centre in Singapore and aimed at attracting tourists of the MICE (meetings, incentives, conferences and exhibitions) segment.

The conference centre has been designed to accommodate 12,000 delegates. In addition, the complex will house 25 meeting rooms of varying sizes with a total seating capacity of over 2,000 delegates for breakout sessions.

Debt papers downgraded by Crisil

DLF, the country’s biggest real estate developer, had about Rs 1300 crore worth of debt papers, including pass through certificates downgraded by one notch by Crisil on slowing real estate sales which is contraining cash flows and will lead to problems on capital structure.

The company has been forced to increasingly rely on refinancing of its debt, Crisil said in a statement. The rating agency on January 28 downgraded the company’s rating to A+ from AA- on slowing real estate sales and deteriorating external environment.

DLF has to repay an estimated Rs 4300 crore of debts in the next two quarters. The company is planning to raise loans of about Rs 4900 crore against its portfolio of leased assets. The company expects to receive about Rs 4400 crore over the next few months through equity investments in the company.

Small landowners get govt nod to jointly develop special zones

Small landowners get govt nod to jointly develop special zones
The Financial Express, January 31, 2009, page 4

Tough times call for innovative measures. At a time when funds for special economic zones (SEZ) are drying up and big companies are facing opposition while acquiring large tracts of contiguous land for such projects, the Centre has, for the first time, allowed small landholders to jointly develop an SEZ.

The IT SEZ, to come in Noida, has a lead developer (Wellgrow Infotech Pvt Ltd) owning 4 hectares, and three other small joint developers owning only a little over 2 hectares — Vansh Software Developers Pvt Ltd (2.409 hectares), Panacea Townships Pvt Ltd (2.024 hectares) and Abloom Infotech Pvt Ltd (2.024 hectares)—making the total size of the SEZ 10.457 hectares.

The commerce ministry’s board of approval (BoA) has asked all the four developers to build on their respective plots of land as per the norms under the SEZ Act and Rules. The rider, however, is that to get the approval, separate plots of land owned by different parties should be contiguous and the total area must meet the minimum land area requirement of a particular type of SEZ. Each of the small landholders will also have to meet the stipulated minimum net worth requirements.

“The approval for this SEZ project was given in accordance with the provisions of the SEZ Act and rules. We looked at the contiguity of the land and the net worth of the developers. Now each developer will be jointly and severally liable for developing the SEZ,” an official told FE.

The move, leading to a paradigm shift in the manner in which SEZs are being developed, would result in the creation of several mini-SEZs within a big SEZ jointly developed by small landowners with holding of as little as 2 hectares — who were often the main opposition to the land acquisition for such projects. It would also reduce risks involved in a single developer developing and marketing an SEZ.

Earlier, in most cases, the big players would arm twist or coax the small landholders to sell/transfer their land to them to build an SEZ. The big companies would then at the most make the small landholders co-developers by leasing out a portion of the total land to develop infrastructure for the SEZ. However, since co-developers have no free hold over the land, they have lesser status than a developer who can dictate terms to them as per the co-developer agreement.

But after the recent decision of the BoA, small landholders can hold on to the ownership title of their land and be joint developers of the SEZ. This would mean that there would be lesser incidents like that of Raigad and Singur, where the fight was about acquiring large tracts of land from many small landowners for industrial projects.

However, considering the complications involved in monitoring such an SEZ, the BoA decided that the entire SEZ will be a processing zone (where industrial units are located) and that it will now have any non-processing area housing social amenities.

Without this rider, each developer could have asked for a separate processing area and non-processing area for their part of the zone. This would have forced the government to appoint more customs field officers at each entry and exit point, resulting in a monitoring nightmare. But with the rider, there will now be only one exit and entry point.

“It throws open tremendous opportunities for small landholders who can now share the risk of development and marketing of the SEZ with other joint developers, however big or small they are. I see that the BoA is keeping in mind today's economic environment and is progressively evolving the SEZ policy,” said Tapan Sangal, senior manager, PricewaterhouseCoopers said.

Also, since there are more freeholders of the land, the value of each plot will be more than in the case where the plots are leased out, he said. However, the downside of such an approval is that the government authorities would have to now get involved in more paperwork and due diligence of each of the small players who want to be developers, an industry source said.

Real Estate Intelligence Report

India & China to buoy world eco this yr: IMF

India & China to buoy world eco this yr: IMF
The Times of India, January 30, 2009, Page 1

Global Growth to be lowest since WW-II

TIMES INSIGHT GROUP

China and India—the only sizeable economies likely to record growth rates of over 5%—will prevent the world from recording negative growth in 2009, said the International Monetary Fund (IMF) on Wednesday. Even so, at 0.5%, the world economy will register its slowest growth rate since the Second World War.

The IMF’s update to its World Economic Outlook is a sharp downward revision from the 2.2% growth in global output it had projected as recently as November last year. It now estimates the Chinese economy will grow at 6.7% rather than the 8.5% anticipated in November, while the forecast for India has been pared from 6.3% to 5.1%.

The advanced economies are projected to record a 2% decline in output. Ironically, while the US—where the current global crisis originated—will suffer a decline of only 1.6%, the UK will see its economy shrink by 2.8%, Japan by 2.6% and Germany by 2.5%. The Euro area will fare worse with a 2% drop in output in 2009.

For 2010, the Fund foresees an impressive global recovery to 3% growth, with China’s 8% and India’s 6.5% once again leading the way. While the US will bounce back to grow by 1.6%, the Euro area and the UK will grow by 0.2%, and Japan by a somewhat better 0.6%.

Pranab-bank meet may lead to more rate cuts

Pranab-bank meet may lead to more rate cuts
Business Standard, January 30, 2009, Page 1

Banks say cost of funds still high, sectoral cuts possible

NILADRI BHATTACHARYA &SIDHARTHA
Mumbai, 29 January

In a possible precursor to further rate cuts, Finance Minister Pranab Mukherjee’s meeting with public sector bank chiefs Monday will review their benchmark prime lending rates (BPLR) and interest rates on loans for automobiles, homes, small and medium enterprises (SMEs) and non-banking finance companies (NBFCs).

The government has indicated that it would like interest rates to be reduced next month, just before elections are announced. Bankers, however, have said a rate cut is only possible in March, a source said.

“If the government wants, we can look at extending additional or special lines of credit to certain sectors, where all public sector banks can participate,” a senior executive at astate-owned entity said.

Banks contend that the cost of funds is still high, even though it has been falling through successive rate cuts by the central bank in 2008.

Cutting lending rates will also mean cutting deposit rates and bankers fear losing out to small savings schemes such as post office deposits and public provident fund as a result, which could eventually hamper resource mobilisation to feed credit growth. Small savings schemes offer 8 per cent plus tax benefits. In contrast, banks have reduced interest rates on deposits and only those with a maturity of four years or more come with tax breaks. For instance, State Bank of India offers up to 9 per cent.

Since November, public sector banks have reduced lending rates by up to 150 basis points, against 50 basis points by their private sector competitors. Deposit rates have fallen by up to 300 basis points.

Following the latest round of reductions in deposit rates earlier this month, banks have seen resource mop-up drop to Rs 11,300 crore during the fortnight ended January 16 from nearly Rs 70,000 crore in the previous fortnight.

Finance ministry officials have already held discussions with bankers to assess the flow of credit to various sectors.

Mukherjee is also scheduled to discuss the impact of the stimulus package and the utilisation of refinance to National Housing Bank (Rs 5,000 crore) and the small industries lender Sidbi (Rs 9,000 crore).

The government also wants to assess how banks have fared in extending credit to NBFCs and for commercial vehicle finance. Credit flow to housing, real estate, SMEs and infrastructure and the experience with non-performing assets in these segments is also on the agenda. Banks have been asked to report on their progress on restructuring stressed assets, since the process has to start latest by January 31.

In recent months, banks have scaled down credit to certain segments such as housing, NBFCs and small scale industry owing to a fear of defaults and a drop in demand ( see table ).

LATESTRBI data shows that in the fortnight-ended January 16, lending by scheduled commercial banks, including regional rural banks, was estimated at Rs 13,837 crore against Rs 14,469 crore in the previous fortnight.

With banks going slow on lending, there has been a rise in the statutory liquidity ratio (SLR) holdings from 25.8 per cent in mid-October to 28.9 per cent in early January.

But data also revealed that public sector banks seen a 28.6 per cent rise in credit flow for the year up to January 2 this year, against 19.8 per cent in the year up to January 4, 2008. In contrast, the growth in credit flow from private and foreign banks has dropped sharply despite demand shifting from equity and overseas markets to the Indian banking system.

Govt clears infra projects worth Rs 34,000 crore

Govt clears infra projects worth Rs 34,000 crore
Business Standard, January 30, 2009, Page 2

BS REPORTER
New Delhi, 29 January

In a major push to the infrastructure sector, the Cabinet on Wednesday cleared projects worth around Rs 34,000 crore, including the Chennai Metro project.

Apart from that, foreign direct investment (FDI) worth Rs 957 crore in Krishnapatnam Port Company Ltd, which is currently developing the Krishnapatnam port in Andhra Pradesh, was also approved.

The Union Cabinet yesterday gave its approval to Phase Iof the Chennai Metro project, covering a length of around 45 km. The total cost of the first phase has been estimated at Rs 14,600 crore. On the lines of Delhi Metro, this project will be entirely funded by the Centre and Tamil Nadu government on 50:50 basis.

The Cabinet also approved the Delhi Metro Railways (Amendment) Bill, 2009, to amend the Delhi Metro (Operation and Maintenance) Act, 2002, and the Metro Railways (Construction of Works) Act, 1978. “The requirement to move this Bill arose because without a proper legal framework the construction work of the extension to Gurgaon and Noida can be stalled any time or legally challenged. Since these extensions are to be completed before the Commonwealth Games, 2010, there is an urgency to provide an appropriate legal cover for these extensions,” said an official statement.

OTHER DECISIONS
· Additional market borrowing of Rs 30,000 crore for states by March. The states will continue to get incentives associated with prudential norms even if their fiscal deficit is 3.5 per cent as against the mandated 3 per cent
· All Prasar Bharati employees working in All India Radio and Doordarshan and recruited on or before October 5, 2007, to be considered as central government employees on deemed deputation
· Redevelopment plan for Lady Hardinge medical college approved
· India to join International Renewable Energy Agency
· Rs 125 crore financial relief to ITI Ltd
· India-Albania double taxation avoidance agreement
· Continuation of National Vector Borne Disease Control Programme
· Revision of basic guidelines for urban poor under the Integrated Housing and Slum Development Programme
· Approval to National Commission for Heritage Sites Bill, 2009
· Modifications in guidelines of centrally-sponsored Swarna Jayanti Shahri Rozgar Yojana
· Budgetary support of Rs 71.84 crore for nine sick, lossmaking companies under the Department of Heavy Industry

AFFORDABILITY, the new realty mantra

AFFORDABILITY, the new realty mantra
The Economic Times, ET Realty, 30 January 2009, page 29

Gurgaon, which till recently was catering greatly to high-end customers, has now started moving towards a more affordable range of housing, complete with infrastructural development. ET Realty reports

Prabhakar Sinha

With real estate market facing considerable slowdown, a new trend of building affordable houses is emerging in the National Capital Region of Delhi. After Ghaziabad, Indirapuram, Noida, Greater Noida and Faridabad, a number of projects in the range of Rs 20 lakh to Rs 30 lakh for an apartment, have been launched in Gurgaon.

So far, Gurgaon has been known for its luxury apartments. In the last two years, the township witnessed the development of apartments in the price range of Rs 3,500 to Rs 10,000 per sq ft. On top of this, the size of most of the apartments used to be upwards of 1,800 sq ft. Thus, the cheapest apartment available in the area was priced around Rs 60 lakh. This affected demand in the residential real estate sector here. At the same time, as most builders were into the construction of premium apartments, these properties are in oversupply and witnessing correction in prices.

With capital values ranging approximately in the Rs 5,000-8,000/sq ft in residential apartments such as Beverly Park I & II, Heritage City, Garden Estate, etc, the cheapest apartment in this area is available for around Rs 1 crore. Golf Course Road also gained prominence with developers planning large projects catering to the luxury and premium segment customers.

In fact, there has been a deluge of luxury residential projects on the Golf Course Road, and this coupled with wide roads leading to efficient connectivity, large corporations chose to be located in this area. Golf Course Road thus gained the tag of "the address" in Gurgaon, with excusive luxury projects such as Aralias, Magnolias, Exotica, Central Park 1 being located on this stretch. Capital values in these projects range between Rs 6,500 and Rs 10,000 per sq ft. But as the premium segment of apartments are in oversupply, this has witnessed some correction in prices in the last two months. According to a Cushman & Wakefield report, approximately 8-10% correction has been recorded in these areas in the recent past, although downside is limited due to high occupancy levels and a broad end user base. To revive demand and real estate activities in the area, realtors have now changed their strategy, focusing their projects on affordable housing segment in Gurgaon, as well as Manesar. Various projects have been announced on the Rajiv Chowk-Manesar stretch along NH-8, in the this segment owing to lower land costs - some projects cater to the high-end segment as well. As areas like MG Road and Golf Course Road started to saturate with realty development, growth shifted along NH-8 with a slew of projects launched in these new sectors. With the master plan also emphasizing on these new sectors and with infrastructural initiatives in the form of Metro, ISBT, KMP expressway, Northern and Southern Periphery Road, one can be assured of strong connectivity to other parts of Gurgaon and Delhi, says the report. The capital values of projects along this stretch are in the range of Rs 2,000-Rs 3,500 per sq ft. With apartment sizes varying between 1,200 sq ft and 1,800 sq ft, their prices range from Rs 24 lakh to Rs 40 lakh. The report states that prices are not only attractive for end users, but also for long-term investors. As Gurgaon grows and projects on this stretch come up, one can expect capital values to appreciate in the long term. A number of builders like Pal Group, Falcon Realty, ILD Group, Bestech Group and Raheja Developers have launched a number of projects in the affordable range in the Gurgaon-Manesar region. A number of affordable housing projects are coming up in Sector 37 and 71 of Gurgaon.

Falcon group has launched studio apartments at Rs 5.5 lakh in Global Eqi-city on NH-58; one-bedroom apartment with hall and kitchen on 650 sq ft of covered area for Rs 10 lakh and two-bedroom apartment on 950 sq ft for Rs 15 lakh. Similarly ILD group has launched Spire Green in Sector 37, priced Rs 26 lakh onwards. Pal group has launched the Pal City Park in Sector 95 in Gurgaon for Rs 26 lakh. Similarly, Bestech group and Sidharth Buildtech have launched projects in Sector 71 and 95, respectively, for around Rs 30 lakh. Raheja group has already launched a low-cost apartment project in Sector 92 at around Rs 27 lakh. Big builders like DLF and Unitech are also planning to launch affordable houses in Gurgaon.

UP calls projects pre-bid meet today

UP calls projects pre-bid meet today
The Financial Express, January 30, 2009, page 9

Lucknow: To attract the private sector towards infrastructure development in the state, a high-level delegation of the Uttar Pradesh government, led by chief secretary Atul Kumar Gupta, will hold a pre-bid meet in New Delhi on Friday.

The objective is to facilitate a constructive interaction among the top-rung industrialists, their associations, business people and potential investors with senior state government officials.

The four departments that have been identified as thrust areas are tourism, transport, technical education and housing and urban rejuvenation.

The team of high-level government officials who have been dispatched include the industrial and infrastructure development commissioner VK Sharma, principal secretary, finance, Anup Mishra, principal secretary, infrastructure, VN Garg, and principal secretary, chief minister, Ravindra Singh, along with other senior government officials from various departments.