Better now than ever

Better now than ever
The Hindu Business Line, May 10, 2009, Page 15

--------------------------------------------------------------------------------
The overall sentiments are changing again. Real estate is looking good and property prices have pretty much bottomed out. - KABUL CHAWLA, MD, BPTP LTD.

--------------------------------------------------------------------------------

Moumita Bakshi Chatterjee

In March 2008, BPTP Ltd took the industry by surprise when it outbid its larger rivals to clinch the biggest land deal in India. The company snapped-up 95 acres of prime commercial land at Noida, near Delhi, for Rs 5,006 crore. But the realty market crash in the months that followed saw BPTP approach the Noida Authority seeking permission to surrender the land. BPTP’s Managing Director, Mr Kabul Chawla, says that the market crash was sudden and the company soon realised that a smaller 22-acre project at the site may make more business sense.

Mr Chawla shares with Business Line the company’s plans for this year.

Excerpts from the interview:

Looking back, would you say that in bidding aggressively for the Noida land last year you grossly misjudged the real estate market?

At that point when we bid, it seemed that it had been taken for a song. Exhausting the 10 million sq.ft looked easy, and the time span to consume this was envisaged at 7-8 years. The sudden fall in the market was not anticipated. But it was important that we realised in time that we will not be able to use the entire land bank in 7-8 years. So we opted for a smaller project and retained only 22acres .

Of course, we had to pay a penalty of Rs 123 crore. But at least we are still going ahead and executing the project. Also, our cash flows are not locked-up for the future.

Is the demand in the residential market somewhat reviving? Have consumer sentiments improved in the last few weeks?

In April 2008 when the markets were turning, BPTP went out and sold about 2,500 apartments until March. Of course we re-priced the product, as we had to ensure that customers saw value add. I think real estate is a product-specific market.

The sentiments at that time were low, and people were not sure whether developers will deliver on their promises. These were the biggest challenges that we all faced.

Fortunately, we convinced our customers that we will be able to deliver.

But now the overall sentiments are changing again, and it is reflecting on the stock markets as well. I think real estate is looking good.

I believe that there is a demand-supply gap, today. A lot of supply everyone talked about earlier was not achievable.

Besides, many of the property products were not even relevant. If you build a project and there is no accessibility or social infrastructure to support it, then it is not a meaningful project. Only those projects that meet these specifications will attract demand.

Would you say that the property prices have finally bottomed out?

Yes, pretty much. Everyone has come down to margins of less than 20 per cent and people are focusing more on creating value for customers. If your customer does not make money (see appreciation in property value) he will not re-invest with you. It was a tough time for developers when property markets took a beating.

But if you need a house, now is the time to buy it.

Does BPTP plan to raise funds through private placement or an IPO?

The balance in the real-estate portfolio has ensured that we are not an overly-leveraged company today. And we are not under stress.

If we raise funds, it will be primarily for construction of Noida project where we have retained 22 acres of land, and are building a five-star hotel and an office complex. And here too, the construction cost will be less than 40 per cent of the overall product cost.

So a part of it will be funded from borrowings and part from internal accruals. We are not looking at fund-raising right now.

We are not planning an IPO this year.

In fact, I am not sure that the Indian and foreign investors still understand how real estate works in India. I do not think that maturity has come yet. Real estate is a tricky play.

Only those developers who understand the business well, have credibility with institutions, and are focused on their projects, are going to survive.

Real Estate

Tata Housing eyes Rs 700 cr from low-cost projects

Tata Housing eyes Rs 700 cr from low-cost projects
Business Standard, May 10, 2009, Page 4

Raghavendra Kamath / Mumbai

Tata Housing Development Company, a unit of Tata Sons, expects to earn Rs 700 crore in revenue from low-cost housing in the next four years, a top company official has said.

Tata Housing is launching over 1,000 low-cost houses under the brand “Shubh Griha” priced between Rs 3.9 lakh and Rs 6.7 lakh in Bhoisar, on the outskirts of Mumbai, and plans to launch around 4,000 such houses across other cities in the next four years, mainly targeting industrial workers and other low-wage earners.

The company is targeting Rs 15,000 crore revenue by FY13 from its projects, covering an area of 20 million square feet. It plans to build 10,000-13,000 homes by then. The company aims to earn 5 per cent of its revenue from low-cost houses.

“Low-cost projects have more velocity and can be completed in two years. We see huge opportunity in this space, especially in industrial belts,” said Brotin Banerjee, managing director and chief executive of Tata Housing.

The company is launching two-three such projects in Bangalore and the national capital region in this fiscal and plans joint development with land owners, wherein it will share a percentage of revenues with the owners of the land, and outright of purchase of land in other cases, according to Banerjee.

A host of companies such as Omaxe and Ansal API have launched low-cost apartments to target the low-wage earners and generate cash in the downturn. While New Delhi-based Omaxe has launched 5,000 apartments in Rs 5.99-8.99 lakh range at Mayakhedi in Indore, Ansal API has launched 4,000 low-cost apartments in Jaipur, Jodhpur, Agra and Meerut.

“Our revenues are doubling every year and we hope to continue by being present in different categories and launching innovative products,” said Banerjee. Currently, the company has more than 10 million square feet under development.

Banerjee says more land is now available for developers and land prices have come down to realistic levels. “Earlier, land prices used to escalate within a month. Prices have hit their bottom and I expect them to remain sluggish for the next eight-nine months,” he said.

Real Estate

Faltering at the final step

Faltering at the final step
The Financial Express, May 10, 2009, Page 4

Preeti Parashar

Ashok Bansal was waiting anxiously to be a proud owner of a villa worth five crore rupees in a prestigious luxury housing project coming up in the vicinity of Chandigarh. But looking at the present realty market scenario, he is searching for prospective buyers to sell his dream home. “I took a housing loan worth one crore rupees from a bank to buy this villa. But today I am skeptical of the investment made in this property. The developer has stalled the work and the future of the project is uncertain. So there’s no other option but to sell the property,” rues Bansal.

Like Bansal many more investors who had booked luxury apartments, villas and condominiums worth anywhere between Rs 50 lakh to Rs six crore in various projects in north India and other parts of the country, are now turning to distress selling. But there are no buyers! With the fear of losing his hard earned money, a customer is ready to sell the three-bedroom apartment he booked for one crore rupees at a much lower price. “I booked this apartment for Rs one crore in Amritsar. But looking at the slow pace of development I am ready to sell it. There are other options to invest into rather than blocking such a huge sum of money,” he says.

Realty players going slow

Real estate giants like Parsvnath, Emaar MGF, Ansals and ATS Infrastructure had announced huge investment in housing as well commercial projects in Punjab, Haryana and Chandigarh region. But now these much-hyped projects seem unlikely to take off with some developers ready to withdraw investment. Zoom Developers had announced to invest upto Rs 600 crore in major cities of Punjab for constructing housing complexes, hotels and shopping malls in 2007. But so far the company has invested only Rs 30 crore.

Emaar MGF had announced an investment of Rs 16,000 crore in Mohali in Punjab, which would constitute a major portion of the company’s investment portfolio in India. But with the investors sentiments running low the development work is getting delayed in its largest integrated township — Mohali Hills to be spread across 3,000 acre in Mohali. It is learnt that the company is exploring the semi-urban and rural areas of Punjab for fresh investment in affordable as well as luxury housing projects. The step is being undertaken for incremental sales to happen via people who still are ready to invest.

Cross country effect

In Mumbai, three million square feet of commercial space has been held up while housing projects are in go-slow mode, according to Jones Lang LaSalle Meghraj. Major commercial projects like DLF Towers and Ruby Mills have also been delayed. “Work on DLF Towers, to come up over 17.5 acre in Lower Parel with an investment of over Rs 700 crore, seems to be going slow. Also Ruby Mills to be spread over 10 lakh sq ft of space in Lower Parel worth Rs 500 crore was slated to be launched in 2010, but will be extended to 2011,” says an official.

Major projects in Hyderabad hit by the economic downturn include Maytas Hill County and Lanco Hills Phase II. Lanco Infratech’s Lanco Hills phase II, with over Rs 3,500 crore investment, is awaiting its launch which has been delayed due to the present market conditions.

Chennai is also facing the heat of the downturn with various projects put on hold. As per JLLM, both residential as well commercial projects are going slow in Chennai and its suburbs. DLF’s residential project in Sholinganallur is likely to be delayed along with Mansarovar properties, which was to launch its residential project in the first quarter of this year.

Corrective measures

ATS Infrastructure has offered various options to its investors to make up for the delay of their project — Golf Meadows Prelude in Dera Bassi (Punjab), which will be delayed by six to eight months. The company has given two options to the buyers — to receive an interest of 6.5% (of the apartment cost) per annum at the time of possession or accept additional facilities. “We took this initiative to retain the credibility of the company among the investors,” says RS Bhullar, VP, ATS Infrastructure. Bhullar adds, “We will be incurring extra costs of Rs two lakh per apartment for additional fittings etc and we expect that the overall cost of Rs 100 crore will escalate by 7-10% due to the delay.”

However DLF seems to have adopted a wait and watch mode in launching its projects in Mohali, Mullanpur village near Chandigarh and Panchkula (Haryana). As per company officials, the projects will be announced in the next few months as the company is awaiting approvals for them.

On the brink of withdrawal

Parsvnath’s luxury housing project — Prideasia has been hit due to the lackadaisical attitude of the Chandigarh administration. The project’s fate is hanging in balance with an investment of over Rs 700 crore at stake. Parsvnath had bagged the project at a price of Rs 821 crore in an open auction about two years ago but has failed to pay the balance bid-amount of Rs 304 crore.

Barely 140 units out of the total 1,314 units were sold out and now around 60 investors have already opted for withdrawal of their deposits. Advisor to Parsvnath, PK Jain says, “We are not only losing out our investment but also the customer’s goodwill. Either the administration should approve our drawings or give us the desired land to continue with the project.”

With investors delaying payment of installments and developers going slow, the real estate projects in the northern region are likely to miss their deadline of completion, adding on to the woes of the downtrodden industry.

Real Estate

Steel manufacturers shift focus to domestic mkt

Steel manufacturers shift focus to domestic mkt
The Financial Express, May 11, 2009, Page 4

Smita Joshi Saha, Mumbai

With correction of about 60% in the global steel prices due to the economic slowdown, Indian steel players have cut down on their exports and are now completely focusing on growing domestic sales, say industry players.

Steel manufacturers like JSW Steel, Essar Steel and Ispat Industries have confirmed of their focus on the domestic market as exports take a back seat.

Sajjan Jindal, vice-chairman and MD of JSW Steel, while announcing the company’s fourth quarter results said, “The company will reduce its exports to 13% in FY10 from 18% in FY09 and 40% in FY08.” Jindal also sees JSW’s saleable steel going up by 78% to 6.1 million tonne in FY10 and output going up by 72% at 6.4 million tonne in FY10.

Similarly, Ispat Industries’ exports have also remained just minimal from about 13% two year back, agrees Anil Surekha, director—finance, Ispat Industries Ltd.

Declining to give specifics, an Essar steel spokesperson confirmed that the company’s exports have gone down considerably. Globally steel demand is expected to dip by 15%. However, steel demand in India is expected to grow, with World Steel Association predicting that only India will be in a positive growth zone in 2009 at 2%.

According to World Steel Association data, steel demand in China, is seen falling 5% as the ongoing global economic crisis hits the country’s exports. Demand for the metal, used in the construction and automotive industries, is seen falling 36.6 % in the US and 28.8 % in the European Union.

Meanwhile, as the domestic demand in India is growing with improvements in construction and slight improvement in automotive segment, domestic steel players fear dumping of the commodity in India by overseas companies, which would impact the domestic industry.

Steel makers are of the view that there would be avalanche of imports in the coming months as there is generally a time lag of 2-3 months between the import bookings and arrivals.

Hence, domestic steel majors have asked the government to impose safeguard duty on cheap imports of a key steel products, which has started affecting the sector.

Real Estate

Indiabulls Real Estate to raise $150 million from QIP issue

Indiabulls Real Estate to raise $150 million from QIP issue
Business Standard, May 9, 2009, page 5

BS Reporters / Mumbai

Property developer Indiabulls Real Estate (IBREL) is talking to investors to raise at least $150 million (Rs 750 crore) from sale of shares to select investors as part of its qualified institutional placement (QIP) plan.

The Mumbai-based real estate developer has begun its road show and has hired Morgan Stanley as adviser. A spokesperson confirmed the hiring of the investment banker.

Indiabulls Real Estate had announced last month that it planned to raise $600 million (Rs 3,000 crore) from sale of shares from a QIP issue.

The money from the QIP is expected to be used to fund its power projects, mainly the 1,320 megawatt project planned to be built in Amaravati, Maharashtra.

The company plans to seek shareholders’ approval at a meeting on May 18.

The QIP was expected to be a precursor to the initial public issue being planned by the company, sources said.

Sources involved with the development say the company plans to complete the issue soon after a clear picture emerges on who will form the next government at the Centre.

Indiabulls Real Estate shares have risen 11 per cent this month and 8.9 per cent this year, compared with 23.11 per cent gain that the benchmark sensitive index has recorded this year.

Indiabulls Real Estate had, earlier this week, said it failed to raise Rs 2,322 crore from promoters and key officials as they did not convert the warrants issued to them into equity. The promoters did not convert as the company’s shares were trading about 74 per cent below the conversion price of Rs 540 per warrant.

IBREL had issued 43 million warrants in November 2007 to promoters and joint managing directors on a preferential basis. The last date for conversion was May 4 2009.

Real Estate

Less is more: Low-cost housing projects on the rise in Ahmedabad

Less is more: Low-cost housing projects on the rise in Ahmedabad
The Hindu Business Line, May 9, 2009, Page 17

Virendra Pandit, Ahmedabad

Two days after Tata Housing Development Company announced their low-cost housing project in the price band of Rs 3.90-6.70 lakh, a leading property developer of Ahmedabad on Thursday offered a project of more than 1,000 flats, priced between Rs 3.50 lakh and Rs 5.25 lakh at the basic level, to be completed in the next 18 months.

The Omshantinagar-2 scheme, for low and middleincome groups, will be launched here on Sunday (May 10). In what is Gujarat's first low-cost housing project during the global economic recession, Santosh Associates is constructing these flats in the Vejalpur area, within the limits of Ahmedabad Municipal Corporation (AMC). The Tata Housing project, meanwhile, is some 100 km from Mumbai.

In fact, Santosh Associates has already sold around 1,600 flats, 90 per cent of them low-cost, in different projects developed in the city ever since its inception in 1996, Mr Taral Bakeri, Partner, told Business Line, on the sidelines of a press conference.

WORKING SPACE

The company has nearly one lakh square yards of land bank in Ahmedabad, mostly in labour-dominated areas, where it would be taking up more such projects. He said, although Santosh Associates had signed an MoU with the Gujarat Government during the Vibrant Gujarat Global Investors' Summit in January this year, proposing investment of Rs 70 crore for construction of 2,000 lowcost houses, the company would be actually investing around Rs 100 crore in the next couple of years. After the existing project at hand, Santosh would soon be taking up another 1,000-plus flats scheme, in the next few months, he said.

Ahmedabad, with a fivemillion population, can absorb around 25,000 low-cost houses a year; there is huge demand but inadequate supply, Mr Bakeri said.

The low-cost flats at Omshantinagar- 2 would comprise two rooms with a kitchen (58 square yards) and three rooms with kitchen (75 sq yards) in storeyedapartments.

The company has signed up with leading banks for housing loans. The project would have all the basic facilities such as roads, streetlights, local bus availability, markets, temples and hospitals within the developed area. It would also have safety features such as earthquake- resistant structures, underground water storage tanks and overhead tower, as also common plots for recreational activities for children.

Million-dollar home dreams vanish as realty dawns

Million-dollar home dreams vanish as realty dawns
The Economic Times, May 10, 2009, Page 1

Neha Dewan & John Sarkar, ET Bureau, NEW DELHI

When the rich get less rich, lavish lifestyles turn into a bad dream. Wide-ranging influences, from shock at sudden economic strains to the rise of simpler living, have shrunk blue-ribbon realty consumption. Million-dollar realty transactions, which used to be routine in big cities such as Mumbai and Delhi, have all but disappeared.

Property brokerage firms point out that the once-tony suburbs of the Capital have been hit the hardest. “Million dollar transactions or deals worth Rs 5 crore are seeing a dip of around 50% in Noida and Gurgaon due to very limited supply,” says Pankaj Jain, executive director of Realistic Realtors, a North Indian real estate consulting firm. But according to property brokers, swish locations such as Vasant Vihar, Shanti Niketan and Anand Niketan are still holding up due to the pent-up demand for independent floors. “Over the last two quarters million dollar transactions in these locations have seen a spurt of around 20%,” adds Jain.

He also points out that cash rich cities such as Chandigarh are seeing only a few such transactions in prime areas like Panchkula and Mohali. “The dynamics of the Chandigarh market are very different. The holding capacity of these areas is quite good. However, owing to the tight supply, only a few transactions are being witnessed in this value,” he mentions.

Even Mumbai, which boasts some of the most costly addresses in the country, is not faring any better. Other than a slim demand in areas such as Cuffe Parade, Lower Parel, Bandra and Worli, million-dollar real estate transactions in the City of Dreams are now far and few. “The supply is always limited, with only a few choosing to go for this segment,” says Rajeev Talwar, executive director of DLF.

Agrees Niranjan Hiranandani, MD of Hiranandani Developers, who feels that the mid and lower rung segments are in the limelight now. “There are not too many such big ticket transactions happening in Mumbai as of now,” he reiterates. “It’s a high price zone and the market for that is limited in the current scenario.”

And down South, demand for $1m houses is also rather low. Says Anshuman Magazine, CMD, CB Richard Ellis, South Asia: “Jubilee Hills and Banjara Hills in Hyderabad are seeing an overall decline in such transactions. Similar is the case with Chennai in areas such as Boat Club and Poes Garden.” According to Mr Magazine, it’s also the nervous sentiment that is persuading buyers to postpone their purchase. “Since a lot of the demand in Hyderabad comes from senior IT executives, they are holding back due to uncertainty in the job market,” he adds.

Also, in Chennai, for instance, many independent houses that would roughly cost Rs 5 cr and above are owned by people who have inherited either the land or the entire property. In Bangalore, demand for such luxury apartments is also low owing to the erosion of demand from the market. However, according to Cushman & Wakefield, Bangalore is more important than Chennai and Hyderabad in the South for investment or purchase of property tagged at million dollars due to stronger economic fundamentals.

The trend in Kolkata too is no different. Brokers say the million transactions in the City of Joy are to the tune of 1-2% in areas like Ballygunge and Alipore with a buyer profile mainly consisting of businessmen. “Kolkata is no Delhi or Mumbai. The fastest selling price bracket in the city is in the range of Rs 25-40 lakh. Areas such as Alipore and Ballygunge are saturated now. Fresh development in these areas is impossible,” says Venugopal Sampath, Eastern India head of allCheckDeals.com, a realty brokerage firm.

So what all can a million dollars do for you? While it will offer an independent residence for you in posh locations in Chennai, Hyderabad and Bangalore, metros such as Mumbai and Delhi will mean living in upper class suburban locations if you don’t prefer build-up floors. As per C&W, while locations like Lower Parel, Mahalaxmi, Prabha Devi and even further north in areas such as Juhu and Bandra have the potential to offer residential units costing roughly $1mn. In NCR many ‘gated community’ projects in the peripheral locations of Gurgaon and Noida are available in this bracket.

However in Chennai, residential units with a price tag of $1mn will help you snap up luxury residences such as free hold bungalows and high-end condominiums in sizes varying from 4,500 sq ft to 6,500 sq ft in locations such as R A Puram, East Coast Road and Poes Garden among others. In Bangalore, some new high-end residential projects would be available at this cost in areas such as Richmond Road, Lavalle Road and Sankey Road. These apartments would range from 3,700 sqft-6,000 sq ft, with 3-4 bedroom units. So now you know where to make the most out of your million dollars.

Real Estate

Real Estate Intelligence Report, Friday, May 08, 2009

Tatas do a 'nano' in housing

Tatas do a 'nano' in housing
Business Standard, May 7, 2009, Page 4

BS Reporter / Mumbai

Launch houses priced between Rs 3.9 lakh and Rs 6.7 lakh.

The Tata group, which recently launched the low-cost car, Nano, today entered the low-cost housing segment to target industrial workers and other low-wage earners.

Tata Housing Development Company, a unit of Tata Sons, will open from Saturday the sale of application forms for over 1,000 houses under the brand “Shubh Griha”, priced between Rs 3.9 lakh and Rs 6.7 lakh, in Bhoisar, a distant suburb of Mumbai. It would launch around 4,000 such houses in other cities in four years, said Tata Housing Managing Director and Chief Executive Officer Brotin Banerjee.

The Mumbai project is expected to be completed in the next two years and buyers will be barred from selling the house for six to nine months after the purchase.

The company would also launch two to three such projects in Bangalore and the National Capital Region (NCR) in the current fiscal, Banerjee said.

“We believe there is a huge opportunity in this segment as our study has shown that around 48 per cent people in the lower segment are currently staying in a rented accommodation and there is a lot of migrant population in industrial belts in cities,” he added.

The Mumbai apartments will be available in three categories — 283 sq ft, 360 sq ft and 465 sq ft. The company has brought in State Bank of India for sale of applications. The buyers need to book the flats within 20 days of the launch. The initial booking amount is Rs 10,000. Based on a lottery, as done in the Nano’s case, the company will declare a first list and a waiting list within 15 days of the final booking.

Tata Housing is expecting a revenue of Rs 100 crore from the Bhoisar project. It will do a joint development with the land owner, with the latter getting a certain percentage of revenues. It will also follow the joint development model and outright purchase in other planned projects and is talking with state governments across the country in this regard, according to Banerjee.

The Tata move closely follows those of other developers such as Unitech, Omaxe, Raheja and Ansal, who are also planning low-cost projects in suburbs of satellite towns or smaller cities to target the bottom segment and generate more cash.

Unitech plans to launch residential projects in the Rs 5-10 lakh range in metros like Chennai and Kolkata and suburban cities like Gurgaon over the next few months. Omaxe has already launched a sub-Rs 4-10 lakh project at Peetampur and the Dewas industrial area near Indore to target industrial workers. It had sold half the project, a company spokesperson said.

According to a research report released by the Tata housing arm, the country faces shortage of 24.7 million dwelling units, of which more than 70 per cent fall in middle and low income groups.

Tata Housing Development launches 'Shubh Griha'

Tata Housing Development launches 'Shubh Griha'
The Financial Express, May 7, 2009, Corporates & Markets, PVIII.

By Corporate Bureau

Tata Housing Development Company, a fully owned subsidiary of Tata Sons has forayed into a low cost housing project across 67 acres land in Boisar in Mumbai called 'Shubh Griha', thus launching its first value homes concept.

Addressing a media conference, Brotin Banerjee, managing director and CEO, Tata Housing Development Company said, "Through the value homes concept we will sell about 1,200 apartments in Phase I which will be priced between Rs 3.9 lakh to Rs 6.7 lakh. The area size of flats will be a mix of approximately 465 sq ft, 380 sq ft and 280 sq ft respectively".

Banerjee said the value homes will be sold to home buyers based on the basis of a lottery system wherein flats will be provided only to those home buyers whose names will be chosen through this system by the company. The lottery forms will be available to the homebuyers at select SBI (SBIN.NS : 1312.7 -56.8) banks from May 9, 2009 onwards.

As for the booking process, Banerjee explained that applicants can purchase the application form booklet for Rs 200 from SBI branches. After purchase of the application form booklet, bookings can be made in the next 20 days alongwith the initial booking deposit of Rs 10,000 through bank pay order at select SBI bank branches across Mumbai. He said, "The first list and the waiting list will be declared after 15 days of the final booking after a thorough scrutiny of the submitted application form booklets. The allotted customers would be sent allotment letters from Tata Housing alongwith the payment schedule."

Banerjee added, "Home buyers will be provided possessions of flats only after two years. While we expect revenues to the tune of Rs 100 crore through Shubh Griha, the total project cost of Shubh Griha is less than Rs 100 crore." The value homes by Tata Housing will have a pan India presence with similar projects across Tier I and II cities including Delhi, Bangalore and Kolkata.

As for the rationale behind foraying the value homes concept, Banerjee said, "We observed that since most of the people in the low income bracket live away from their families to earn a livelihood in the big cities, there is a large percentage of migrant population with these people living either in rented or company provided accommodation. Specifically, our study shows that around 48% of people in the lower segment are currently staying in rented accommodation. Shubh Griha initiative is in line with the group's philosophy of commitment to providing quality, innovative products for the common man".