NHB for separate body to handle mortgage loans

NHB for separate body to handle mortgage loans
Business Standard, April 6, 2009, Page 8

BS Reporter / Chennai
National Housing Bank (NHB), which regulates and lends to housing finance institutions, said it was in talks with Indian Banks’ Association (IBA), an association of banks and financial institutions, to set up a joint body that would handle technical issues regarding mortgage loans.
The proposed body would also develop a uniform standard for the valuation of housing loans, said S Sridhar, CMD of NHB, at a conference here.
The new body would also appoint independent mortgage counsellors, who will “educate and help” prospective home buyers, Sridhar said during his address at the conference on housing finance organised by NHB, IBA and the Consumer Association of India. NHB, a regulator for 43 housing finance companies in the country, would train the mortgage counsellors, who can be chartered accountants, bank managers, insurance advisors or “anyone who has financial background”, he said. The counsellors will be paid by home buyers for their services, said Sridhar.

He added that NHB was also planning to float a mortgage depository system. He said the National Mortgage Depository System would help arrest “double financing on the same property”. “This will also make the industry more transparent,” he said. Initially, all banks would be linked to the system. Later, all state governments would be connected to it in a phased manner, Sridhar added.

Lower rates in realty

Lower rates in realty
The Hindu Business Line, April 5, 2009, Page 15
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Price reduction is likely to be more pronounced in new projects than in those under construction.
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Moumita Bakshi Chatterjee

Hit by slowdown blues and a massive credit crunch, real estate players are biting the bullet and lowering prices on new and existing residential projects.

Recently, DLF Ltd reduced rates by 20 per cent on two ongoing projects — OMR Chennai and New Town Heights, Gurgaon. Market watchers believe that the move could prompt others to follow suit.

For instance, Omaxe says it has dropped prices by nearly 15 per cent, but only for new projects (Vrindavan, in Allahabad and Indore, is a case in point).

While the company insists it has not “reduced” rates on existing projects, it admits to offering a 5-10 per cent discount to customers who pay instalments on time.

Price correction

Overall, the real estate prices have corrected by 25-40 per cent over the last six months. With funds drying-up from investors, speculators, PE and banks, realtors realise that the funds are only available with end-users, who, in turn, are looking at value for money, says Mr Anuj Puri, Managing Director, Jones Lang LaSalle Meghraj.

DLF came under media glare recently when it slashed prices for its Chennai and Gurgaon projects. Besides this, the company has also launched two more projects at “lower prices” in Bangalore and Hyderabad — against the initially intended price of nearly Rs 3,000 per sq.ft, it has now announced a rate of Rs 2,200-2,300 per sq.ft, says a DLF official.

“In the case of existing projects, there was consumer demand for bringing the rates down. However, in the case of the upcoming projects, there had been an apprehension that the sales could get hit on account of two factors — consumer worry over future cash flows, and their expectation that prices will fall in future. By reducing the rates, we have been able to infuse demand and address these two concerns,” the official adds.

According to DTZ, the last 3-6 month period has seen a 10-15 per cent price correction across the Delhi NCR micro-markets. “The correction has been more pronounced in the peripheral locations of Delhi NCR. There is a correction of 10-15 per cent on the quoted values,” a DTZ representative said.

New projects cheaper

Analysts feel that the price reduction is likely to be more pronounced in the case of new projects than those under construction and nearing completion. This is because on existing projects the end-user is sure on delivery timelines. For new projects, customers are discounting the risk of delivery, analysts opine.

So have the residential prices finally bottomed out? No one really can tell for sure. Naturally, most players claim that the prices are unlikely to tank further. According to Mr Rohtas Goel, CMD, Omaxe, “So far the lack of demand in the market has forced the real estate companies to announce price drops, but I do not think that there is any further scope. Builders cannot afford to cut rates, going forward.”

Agrees Mr Puri of Jones Lang LaSalle Meghraj. “In many cases, I feel that the prices have touched the bottom. For instance, in Gurgaon where rates were initially pegged at Rs 6,500-7,000 per sq.ft, they have now come down to Rs 3,250 per sq.ft. I believe that where the prices have hit the year 2005-range, there is no scope for any more reduction now,” he points out.

In fact, there are cases where builders are going all out to win customer confidence by offering ‘price guarantee’ of sorts. This essentially means that if a builder decides to cut rates on a particular project for the unsold inventory, he would cough-up the differential to its old customers who may have shelled-out more for the same project initially.

This guarantee is being offered only in cases where the builder is reasonable sure that the prices won’t come down in a hurry.

Assured value

Lodha Group, for instance, is offering “best value guarantee” scheme to its luxury housing project customers in South and Central Mumbai. “This is aimed at building customer confidence in the project,” says Mr Abhishek Lodha, the company’s director.

Mr Lodha admits that the new pricing in overall real estate sector is reflecting the market reality. “In our eight new projects, the prices have been pegged 15-20 per cent lower than what they would have been, say, a year ago,” he adds.

Past prices perfect for now

Past prices perfect for now
The Hindu Business Line, April 5, 2009, Page 15

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Overwhelming response to HDIL offer for Mumbai projects.
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— Paul Noronha

The pricing looks very attractive for home-seekers in Mumbai.

S. Shanker


Could residential demand pick up if prices are rolled back to levels prevalent a few years back?

Yes, seems to be the answer going by the experience of one of the largest developers in Mumbai — Housing Development and Infrastructure Ltd (HDIL).

Property buyers in Mumbai appear to be looking for 2004 prices in the current economic scenario, going by the responses that HDIL got last fortnight.

One of the large-scale real estate developers in Mumbai, HDIL has executed 32 projects spanning over 28 million sq.ft of saleable area, besides four million sq.ft under slum rehabilitation schemes in the city since 1996.

Primarily into residential housing, HDIL priced its March launches, comprising one- and two-BHK (bedroom-hall-kitchen) apartments at Kurla, a central suburb in the city, at Rs 5,251 a sq.ft — a level of pricing that prevailed there in 2004. The response has been overwhelming and the company, which opened bookings on March 6, has sold over 85 per cent of the 756 apartments till date.

Even in the present market conditions, where builders have lowered rates across the city, the Kurla project appears to be at least 30 per cent lower than the prevailing rates in the locality.

The second project of 413 apartments at Andheri, an upmarket locality close to the airport, too garnered good response so much so that the company has raised the price from Rs 7,651 a sq.ft to Rs 7,951 a sq.ft.

“We were looking for first-time buyers, who were pushed to the sidelines over the last three-four years and who form a sizable population of the working class in Mumbai,” says Mr Hariprakash Pandey, Deputy General Manager - Finance, HDIL.

Referring to the Kurla project, Mr Pandey says the offering of one and two BHK in the range of Rs 50 lakh fitted the bill of the middle and upper-middle classes who are willing to pay that much more for a central location with good road and rail connectivity, besides other infrastructure. “Many of our buyers told us that they had gone in for no more than a Rs 30 lakh loan by bringing in the balance as margin money,” he said.

The Andheri property too has its advantages, though the company managed to leverage on the prevailing rentals at the locale to arrive at the price point. With two BHK rentals at Rs 50,000-60,000 and buyers known to correlate rentals to the equated monthly instalments of bank loans, the pricing was seemingly attractive. “More importantly, there is no fresh supply coming in at the moment in the locality and the price is close to 40 per cent lower than the 2007 prices,” says Mr Pandey.

HDIL has lined up two more such launches in the coming months, where the price band would look overtly competitive to home-seekers.

Opts out of Dharavi

HDIL has pulled out of the Rs 15,000-crore Dharavi Redevelopment Project and may instead look for contracts from the bid winners.

Mr Pandey said the contract had become unviable and there was a great deal of uncertainty over the biding process. Further, there was no clarity in execution — how much space would have to be provided to the slum dwellers — 269 sq.ft or 400 sq.ft, besides the issue of premium the government sought for the slum resettlement project.

In 2007, the company was awarded the Mumbai international airport slum rehabilitation project as part of the Mumbai airport expansion project, which involves resettling 85,000 slum families by 2012.

Under phase I, HDIL plans to resettle 20,000 slum families on 38 acres at a cost of Rs 3,200 crore by December.

Realty prices to decline: Edelweiss

Realty prices to decline: Edelweiss
Business Standard, April 6, 2009, Page 2

Realtors seek to barter houses against bills, find no takers

Realtors seek to barter houses against bills, find no takers
The Economic Times, April 3, 2009, Page 9

Sanjeev Choudhary, ET Bureau

NEW DELHI: Caught between a credit squeeze and demand crunch, realty players want to barter houses to settle pending supplier bills, but contractors say they can’t forego hard cash and settle for flats in a falling property market.

At least three major realty brands operating in the national capital region have offered apartments in their ongoing projects to contractors and suppliers of building material, industry insiders told ET. “There are several real estate companies that are falling behind on payments and asking contractors to settle for apartments instead,” says PR Swarup, director general of Construction Industry Development Council. Swarup refuses to name any company, but ET has learnt the firms taking this route include even listed players.

A Delhi-based realty firm, a prominent name in the sector, is developing a major residential project in the city and has offered apartments to its contractors. “We have made an offer but the contractor is asking for a discount. If we reduce apartment prices, we will also expect the contractor to bring down the bill value for the work he has done on our project,” says a company executive corroborating this.

Another Delhi-based listed mid-size developer and a highly-leveraged Gurgaonbased listed real estate company too have offered to sell their apartments to their contractors and building material suppliers to settle dues.

This enthusiasm doesn’t have many takers at the other end. “Even if we were to take apartments, they will have to be sold someday to generate revenue. If developers can’t sell these homes, how can we do it?” asks Arun Sahai, CEO of Ahluwalia Contracts, which has been offered houses in a major project in Delhi. Ahluwalia Contracts, a Rs 1200-crore Delhi-based listed construction company, is currently engaged in the execution of several residential projects, including the prestigious Commonwealth Games Village. “Barter will not help. We are focused on construction and without a regular cashflow, our work will get stalled,” says Mr Sahai.

Shailendra Chouksey, director, JK Lakshmi Cement, says his company has become more choosy in supplying cement and ready-mix concrete to builders these days, given the delay in payments. “Builders are under pressure. Most of them have been delaying payments,” he says.

Real estate sector has been under pressure for almost a year because of dramatic decline in sales, credit crunch and unavailability of private equity. Extraordinarily high prices together with high financing cost have made houses unaffordable for home buyers. An economic downturn has further weakened sentiments in the housing market with several existing and potential home buyers suffering or facing the threat of job and salary cuts.

Realty stocks surprise gainer

Realty stocks surprise gainer
The Times of India, April 3, 2009, Page 19

TIMES NEWS NETWORK

Chennai: Major construction-related stocks led by realty giant DLF, Jaiprakash Associates, HDIL, IVRCL Infra and Indiabulls Real Estate helped increase investor wealth by $1.5 billion as around 50 shares representing the sector rose by an average 4.7% on Thursday as the benchmark index rescaled 10,000 peak.

This surprised marketmen as they see no new reason for construction-related stocks, especially real estate, to go up as challenges confronting these companies remain. However, the investors and traders at the markets were bullish on real estate as the BSE Realty index, (which is down 21% for the year), gained 150 points or 9.13%. Except Unitech (unchanged) and Akruti (5% down), all the other 12 constituents were up between 3-16%, BSE data shows. The BSE Realty index captures price movements of only 14 stocks. But a bigger action was witnessed in the construction-related counters with companies involved in contracting, civil construction, housing and real estate finding favour with investors.

While Delhi-based DLF topped the investor wealth added list with Rs 4,537 crore (15% up), Jaiprakash Associates (engaged more in the civil construction side) added Rs 1,338 crore to its investor kitty as its stock rose 13%. The stock of Mumbai-based HDIL gained 13% adding Rs 323 crore to its investor wealth, IVRCL Infra gained Rs 250 crore by virtue of its 14.7% stock rise, Indiabulls Real Estate added Rs 238 crore with its 9.2% stock jump.

Sensex up 447 pts on global cues

Sensex up 447 pts on global cues
The Times of India, April 3, 2009, Page 19

MUMBAI: Positive global cues gave markets the push that set the two major indices BSE sensex and NSE nifty--for a further rise of 15-20% from the current levels. The sensex, after opening nearly 200 points higher, rallied through the session to close at 10,349, up 447 points on the day. Nifty ended 151 points higher at 3,211. These indices ended near their five-month closing highs.

With the US market showing strength on Wednesday despite talks of bankruptcy for auto giant General Motors, Asian markets picked up the cues on Thursday. The rally in other parts of the region forced Dalal Street investors to jump in and realty, metals and oil & gas led the gainers. FMCG was the only laggard with BSE's FMCG index closing a marginal 0.3% lower. At the end of the session, investors were richer by Rs 1.37 lakh crore with BSE's market capitalisation now at Rs 32.4 lakh crore.

The news that G20, the group of 20 most influential countries in the world, pledged $1 trillion for reviving the global economy, could further boost market sentiment when Dalal Street opens on Monday. Markets are closed on Friday for Ram Navmi.

US stocks added to gains on Thursday after the board that sets US accounting standards agreed to give banks more flexibility in applying mark-to-market accounting to their toxic assets.

Optimism was also boosted as leaders of the G20 nations agreed to put an additional trillion dollars into the ailing global economy through extra funding for groups like the IMF. The Dow Jones industrial average climbed 275 points, or 3.54%, to 8,037 in early trading.

Although not much has changed at the fundamental level in the domestic market over the last few weeks, technical charts are throwing up interesting prospects for nifty as well as sensex, chartists said. "Though there is some resistance at around the 10,700 level for sensex, we are looking at a 11,800-12,500 range for the index in about four weeks,'' said Anant Rao, deputy-head, derivatives, SBI Caps Securities.

On nifty, the range is 3,450-3,650, said Sudhanshu Pandey, technical analyst, LKP Shares. "For long, nifty was unable to break the 2,500-3,150 range. On Thursday, the index closed above 3,150 and now we expect some sharp upmove in the next 4-6 weeks,'' Pandey said.

Chartists said the best case scenario for nifty is 3,900-4,000 level, a spurt of about 30% from the current level. For sensex that translates to above the 13,000 mark.

However, a technical analyst with a local brokerage had a word of caution: "The short term peak for sensex and nifty could coincide with the election results and that could follow some sharp corrections.''

Over the next few weeks, market's direction will also be impacted by results for the January-March quarter, market players said. Among frontline stocks, Infosys will start the results season on April 15. At the end of the month, RBI will announce its annual policy statement which could also affect sentiments.

In Thursday's market, DLF, Jaiprakash Associates, Tata Motors, Reliance Communication and ONGC led the sensex gainers. Among the 30 sensex stocks, only Hindalco ended in the red. In the broader market, gainers outnumbered laggards by a ratio of nearly 4:1 with 2,014 advances to 535 declines.

Turnover on the bourses also showed a sharp rise. On BSE, the turnover at Rs 4,926 crore was substantially higher than last month's average daily turnover of about Rs 3,500 crore.

Hurdle to Emaar bailout, DDA seeks bank guarantee

Hurdle to Emaar bailout, DDA seeks bank guarantee
Business Standard, April 3, 2009, Page 5

Neeraj Thakur / New Delhi

The cash to be issued as an interim bailout from the government to Emaar MGF for next year’s Commonwealth Games is ready for issue, but awaits a bank guarantee.

The Union urban development ministry has sanctioned issue of a first instalment of Rs 100 crore agreed on to the cash-strapped firm, but Delhi Development Authority (DDA) first wants the guarantee.

Emaar MGF is the developer of the Commonwealth Games village. It was to finance the construction by taking deposits for sales of two-thirds of the 1,168 apartments to be built to house the athletes -- those who booked are to get the flats after the Games. The remaining flats were to go to DDA, which would sell these separately.

However, Amaar has run into money problems and the flats are not ready. Residential prices in major cities across the country have dropped, as demand has seen a sharp slump. Emaar wanted Rs 12,750 per sq ft from flat buyers; it got few takers.

In December, it wrote to DDA, saying it needed another Rs 1,000 crore to complete the project. It had, it said, already spent Rs 1,400 crore.

The government is yet to take a final decision on the request. It has agreed only to a first instalment of Rs 100 crore, pending a decision on how many flats DDA will buy from Emaar’s two-thirds share. A decision on how many will be taken after a four-member valuation panel gives its proposal. The cost of each flat is yet to be agreed on, as they aren’t ready; barely 40 per cent of the work on site was completed as of March 31. Which is why DDA wants the gurantee.

Unitech to clear Rs. 1,000 cr debt burden by June

Unitech to clear Rs. 1,000 cr debt burden by June
Business Standard, April 4, 2009, Page 4

Raghavendra Kamath & Neeraj Thakur / Mumbai/new Delhi

Delhi-based property developer Unitech is planning to slash its total debt by at least Rs 1,000 crore by June through sale of assets, issuing convertible instruments and pre-sale of apartments, company executives said.

The company had nearly Rs 10,465 crore of debt on March 31, 2008, and after repaying some of that and rolling over debt with the nationalised banks and mutual funds in the past fiscal, its debt is still over Rs 8,000 crore. It was planning to reduce this to Rs 7,000 crore in the next two to three months, the sources said.

They added that options are being explored to also raise as much as Rs 500 crore through convertible instruments, with buy-back options three years later. A Unitech spokesperson declined to comment on the fund-raising plans.

The company was also expecting cash flow of Rs 1,700 crore in the current financial year from sale of existing properties, pre-sales of residential apartments and customer receivables, sources said. The company expected to get nearly Rs 500 crore from that last category of Rs 1,350 crore, the sources said.

However, analysts tracking the company say it will be tough to raise funds through asset sales in the current environment. “While parts of Unitech’s efforts have been successful, particularly in the telecom stake sale and sale of the hotel in Gurgaon, we believe further asset sales in the current environment will be difficult,”’ Citigroup analysts said in a recent report.

They are also concerned about the projected cash inflows. “The company relies mostly on its projects in Kolkata and Gurgaon for operational cash flow. The current situation of the market is not conducive for the company to generate more than Rs 800 crore worth of cash in a fiscal,” said Rupesh Sankhe, equity analyst, Centrum Broking.

However, Sankhe is optimistic on the company’s ability to raise money through its debtors. “The company will not have problem in getting this money,” Sankhe added.

Unitech has been selling assets to raise funds and repay its debt. The company got Rs 380 crore from the stake sale in its telecom arm — Unitech Wireless — to Norway’s Telenor. A company executive said it might use this amount to repay Rs 500 crore due to mutual funds by April 19 and roll over the rest.

The company has also sold its Gurgaon hotel to an investor in Delhi for around Rs 235 crore, of which it has got 45 per cent of the proceeds. The company was also in talks with buyers to sell its office complex at Saket in South Delhi, from which it was expected to make around Rs 500 crore, and some amount from the sale of hospital/school plots and hotel assets this year, sources said.

The company had to repay a debt of Rs 2,500 crore to banks and mutual funds by March 31, 2009. The company has rolled over Rs 1,000 crore it has taken from banks and around Rs 500 crore that it owed to mutual funds. The company has repaid Rs 400 crore from mutual funds and restructured another Rs 600 crore.

“We may use part of the Rs 380 crore received from Telenor to repay mutual funds and roll over the rest,” a company official said.

Real Estate Intelligence Report, Thursday, April 2, 2009