Opportunities for realtors in land bank use
The Hindu Business Line, July 4, 2009, Page 2
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Adarsh stations
50 railway stations would be developed as world-class stations with international level facilities
Over 300 ‘Adarsh stations’ would be developed with basic facilities
Construction of multi-functional complexes in station premises thru PPP model proposed
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Our Bureau, New Delhi
Real estate developers see a strong business opportunity emerging from Railways’ plans to develop 50 world class stations, 375 ‘Adarsh stations’ as well as its intention of putting land banks to commercial use.
However, players feel that much would depend on the actual terms of development and the speed of implementation of projects. In the past, by the Railway Minister, Ms Mamata Banerjee’s own admission, plans for commercial usage of rail land did not take-off in a big way.
Large opportunity
Parsvnath Developers – which has the mandate to develop 13 Delhi metro stations – termed the Friday announcements as a “large opportunity” for real estate sector.
“But there are some concerns – how many players can leverage their strength to develop such projects properly, how many of them have the deep pockets to do so considering the liquidity crunch, the actual mechanism for such projects and the support provided to developers,” Parsvnath, Chairman, Mr Pradeep Jain, told Business Line.
Global facilities
As many as 50 railway stations would be developed as world-class stations with international level facilities. These would be developed through an innovative financing and PPP model. In her speech, the Railway Minister also said that over 300 ‘Adarsh stations’ would be developed with basic facilities.
She also proposed construction of multi-functional complexes in station premises and developing “new innovative ideas for land and air space utilisation for commercial purposes through the PPP model.”
Implementation
According to the DLF Group Executive Director, Mr Rajeev Talwar, the utilisation of land by Railways would release a large amount of supply into the market and also have an influence on prices.
“These are good intentions but we have to see how well and fast it is implemented,” he pointed out.
Speaking to newspersons after the Rail Budget was presented in Parliament, Member (Engineering), Indian Railways, Mr Rakesh Chopra, said that Railways had anticipated raising Rs 3,400 crore from commercial utilisation of land like Bandra (Mumbai).
However, it has now been pared down to Rs 100 crore following withdrawal of bidders from the projects on the back of the slowdown in the real estate market.
Another large real estate company, while admitting that Railways had an attractive land bank at prime locations, said that it was too early to comment on the business prospects as a lot depended on the final structure.
“We have heard about some of these ideas and concepts even in the past. What we now need to see is concrete action,” the company official said.
Monday, July 6, 2009
Opportunities for realtors in land bank use
NHB to host e-site for South Asia Housing forum
NHB to host e-site for South Asia Housing forum
The Economic Times, July 5, 2009, Page 6
ET Bureau, NEW DELHI
National Housing Bank (NHB) will host an electronic site for the South Asia Housing Forum, which will facilitate the exchange of
knowledge, experiences, policies, programmes and strategies for housing solutions among the member countries.
This decision was reached at the recently organised South Asia Regional Housing Workshop in Jakarta, Indonesia, by the World Bank.
As per the proposal, NHB will also set up a secretariat for the South Asia Housing Forum (SAHF). The member countries include Afghanistan, Pakistan, India, Bangladesh, Sri Lanka, Indonesia, Mauritius and Maldives.
While the countries of the South Asian region represent nearly one-fourth of the world population, and more than a billion people as candidate of low-income housing, the region is still the lowest in terms of mortgage debt to GDP ratio, a measure of penetration of housing finance in a country's economy.
Most of the housing shortage in the region originates from the low-income segment of the population.
Business SENSE
Business SENSE
Economic Times, July 5, Page 9
One is the political centre, other a biz hub. Delhi & Mumbai command 50% of the top residential mkts in India, offering fast growth. So which are the best places to invest in the two metros? Neha Dewan finds out
The rest of India almost doesn’t matter – at least when it comes to realty. Think property and you think capital Delhi and financial capital Mumbai. These two metros, along with their suburbs, comprise the largest pie of real estate in the country. No surprise that they are undoubtedly the most sought after destinations for an investor looking at attractive residential locations.
And not without reason. These markets are significant from the perspective of sheer administrative strength and as centres of business as well as growth. And numbers bear out this fact as well. According to Rajiv Sahni, partner, real estate practice, Ernst & Young, while in terms of office space absorption, NCR comes second after Bangalore, it commands nearly 35% share of the top 8-10 residential markets in India. Mumbai comes second, with a 15% share of residential market.
So which are the best places to invest in Delhi and Mumbai? Aditi Vijayakar, executive director, residential services India, Cushman & Wakefield, advises that investments should usually be targeted towards destinations that have a stronger prospect of appreciating in the future, offer leasing potential and have the inherent strength to sustain demand. “Locations such as central Mumbai (Parel, Mahalaxmi), Bandra (West & East), Kalina and JVLR in Mumbai and NOIDA-Greater NOIDA expressway, Indirapuram, Golf Course extension road, in Delhi offer such opportunities. They are ideally located from the perspective of accessibility and have growing commercial hubs in the vicinity. These are emerging as strong changing markets.”
Aditi adds that as far as return on investment is concerned, these will vary depending on projects, acquisition cost, leasing potential, supply pressure, promoter’s brand equity and maintenance quality. “Average returns from rental may vary from 4% to 6% and capital values may appreciate at the rate of 8% to 10% per annum. Returns are dependent on the capital and rental value cycle and currently both values have dipped given the economic environment.”
What also makes these cities attractive for owning a residential space is the fact that they are buzzing with economic activity. According to Anshuman Magazine, CMD, CB Richard Ellis, a lot of improvement has taken place in these cities in terms of business opportunities and infrastructure which makes them extremely viable destinations.
Developers also agree that Gurgaon and Indirapuram are attractive markets in Delhi NCR whereas it is Navi Mumbai, Vasai, Virar, and Kandivali in Mumbai which will see increased development. Says Harinder Dhillon, GM, Marketing,
Raheja Developers, “These two markets make up at least 30% of the entire market. Gurgaon is lucrative due to the upcoming developments in accordance with the new Gurgaon masterplan. The Indirapuram area and beyond will remain in demand because of the revised floor area ratio (FAR) and population density norms. In Delhi, the areas under new master plan which will open up under the new R zone such as Chattarpur, Nangloi, Alipur, Najafgarh blocks will see heightened activity. In Mumbai, it is Navi Mumbai, Vasai, Virar, Kandivali which are likely to witness hectic transactions in the near future.”
Agrees Vijay Jindal, CMD, SVP Group who says that some of the best places to invest are in Delhi NCR and the new developments in Mumbai. “If one is looking at the futuristic development of the place, then places in Ghaziabad are NH24 and NH58, and if you move further then Faridabad is also coming up well. Some of these places might look deserted but think of places like Dwarka some 10 years back. It is now in demand primarily because of infrastructural developments. In the financial capital, locations such as Navi Mumbai and Thane are attractive,” he says.
Some are of the view that the genesis of Delhi and Mumbai is different altogether as one is a political centre and the other a business hub. Brijesh Bhanote, senior V-P, sales and marketing of The 3C Company, a Delhi-based real estate firm feels that as the cost of construction and land prices in Delhi are relatively lower than Mumbai, hence return on investment could be better in the capital.
A few things should, however, be kept in mind while seeing the investment potential of a given location. Various aspects such as infrastructural developments, connectivity, power, roads etc should be considered so that one can get maximum returns of the investment. “Neighbourhoods with a strong employment base, proximity to educational, health and shopping centres, ideal external connectivity through mass transportation system, closeness to golf course and natural garden are essential features of a property having appreciation potential. If such a property is backed by a developer having reputation for high quality construction, it is destined to give handsome return on a medium to long term basis,” says Rajeev Rai, vice-president, corporate, Assotech.
With developers coming up with many projects in and around new developments in Delhi NCR and Mumbai, you can expect a lot of supply in these cities in the near future. But do study the pricing basics and micro examine the investment potential of a given location in these two real estate markets. Make a good choice and be sure of a profitable bargain.
Brigade Group to develop 8-10 mn sq ft of new projects
Brigade Group to develop 8-10 mn sq ft of new projects
Economic Times, July 5, Page 9
Bangalore: Bangalore-based real estate firm, Brigade Group said 12 million square feet of residential projects were nearing completion and would enter the market in the coming 12 months and it would take up new projects covering 8-10 mn sqft in 2010. Mr Jaishankar, Chairman and Managing Director, Brigade Group, said that the new projects would include a mix of residential, commercial and hosptiality. The new projects would include affordable housing of 8,000 to 10,000 units in Mysore and Bangalore. The group, which was optimistic of demand picking up momentum, was also looking at some recovery in margins by increasing prices by five percent in the coming months, said Jaishankar.
In realty, the worst is over
In realty, the worst is over
The Hindu Business line, July 5, 2009, Page 15
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Improvement in the secondary housing market is not as obvious as is in the primary market. - MR KUMAR GERA, PRESIDENT, CREDAI.
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Moumita Bakshi Chatterjee
The near lull in the housing sector just months ago has been replaced by a slew of project launches touting affordable price tags, and a fund-raising spree by leading realtors. Developers are keeping their fingers crossed that sustained improvement in consumer sentiments – coupled with Government’s thrust on urban housing, a bigger Jawaharlal Nehru National Urban Renewal Mission (JNNURM) outlay, and the Union Budget for 2009-10 – would speed up the recovery in the sector and drive up demand for property.
Business Line spoke to Mr Kumar Gera, President, Confederation of Real Estate Developers Association of India, and Chairman & Managing Director, Gera Developments, on issues relating to recovery, challenges, and expectation from the Government.
Real estate companies are claiming that housing sales have picked since March-April. In your view, is the worst behind us and have the prices bottomed out?
Yes, I do believe that the worst is behind us and sales will now be inching forward in terms of velocity and price. My reason for saying this is largely due to the change in sentiment that is being witnessed, which seems to be related to the growth of the economy being at a healthy 6-plus per cent.
But is the demand restricted to specific segments of the property market, primarily the affordable housing space? In your opinion, are real estate players catering adequately to this segment ?
Currently revival is seen mainly in the residential sector, albeit at lower price points, and in the less-than-1,500 sq.ft segment. Real estate development often sees a herd mentality among developers.
The current mantra seems to be affordable housing and it is this segment where maximum sales are happening while commercial sales and residential units with price tags in crores of rupees are sluggish, at the moment.
Meanwhile, the improvement in the secondary housing market is not as obvious as is the case in the primary market – this is because the drop in prices in the secondary market has generally been less than the drop witnessed in the primary housing market.
Has the cash crunch, for players, eased over the last quarter. Do you expect the cash flows to improve in the coming months?
The cash crunch has eased to an extent as a result of offloading inventory at low prices, disposal of NPAs, reduction of land banks, arranging finance through private investors, holding back or delaying new launches, and so on. It is expected that the overall liquidity in the markets will see improvement, going forward. But there still are challenges.
These relate to depressed prices and low sales velocity, which though better than March-April levels, are far lower than those witnessed in the year-ago period.
For instance, if the prices dropped by, say, 35 per cent in the period October to December 2008, and increased today by a mere 10 per cent, the actual rise is still a fraction of the previous levels.
The impact is bigger when you see the fall and the relative rise in the context of the slow sales velocity. We still have a long way to go to recover the earlier growth rates.
The Parliamentary Standing Committee on urban housing, in its latest report, has taken note of the benefits of having Special Residential Zones (SRZs) and has asked the Centre to consider such programmes. Do you think the concept of SRZs is even more critical, in the wake of the current affordability push?
Yes, setting up SRZs could be the answer to issues of affordability and kick-starting the economy. The Government can stipulate the minimum size of the land – say, 50 acres and above – and have these SRZs bonded by compound walls just like an SEZ.
In this model, the Government should not get into land acquisitions, and the same can be done directly by the private sector.
SRZs would be areas that are excluded from domestic taxes and levies, with specific rules to promote large-scale affordable housing. For instance, each SRZ could have 3,000-4,000 affordable dwelling units.
Government support to development of these zones through concessions means that these fiscal benefits will bring down the cost of the units that are located within these SRZs. I think creation of SRZs is the need of the hour, more so in the current context.
Could you outline specifically the three most important things that industry wants from the Government?
We would like to see the three categories — affordable housing-projects with over 100 units, below 90 sq.mt of space each; integrated townships -any development that is over 20 acres; and SEZs — being accorded infrastructure status.
Secondly, we are hoping that the Government would raise deduction permissible on interest repayment for housing loan from Rs 1.50 lakh to Rs 3 lakh.
Thirdly, exemptions should be provided for affordable housing projects below 90 sq.mt on the lines of the erstwhile 80Ib (10) scheme.
Lodha group in talks with PEs to raise $180 m
Lodha group in talks with PEs to raise $180 m
The Economic Times, July 6, 2009, Page 5
Sanjeev Choudhary NEW DELHI
MUMBAI-based realty firm Lodha group is in talks with three private equity players to raise $180 million (around Rs 850 crore) for its three projects, a senior company executive said.
“We are in active negotiations with private equity funds for three projects and are looking at an average deal size of $60 million for each project,” Lodha group director Abhisheck Lodha said, adding any of these potential deals may take more than a month to be closed.
The Rs 2,200-crore privately-held group, which already has Deutsche Bank, J P Morgan and ICICI Venture as investors, is scouting for PE investments in an affordable residential project, a high-end office project and a back-office building project. Mr Lodha said all three projects are located in Mumbai or its suburbs, but didn’t name the projects. The Lodha group had received PE investments worth $200 million in 2008 and $450 million in 2007, including $410 million by Deutsche Bank.
Mr Lodha says private equity funds have become selective in investing in the property market and are looking at smallticket deals now, but “money is available.” As real estate went into a slump last year, with sales diminishing and credit becoming tight, private equity funds too vanished from the market. With property prices now falling and developers willing to offer higher returns, interest among PE players seems to be returning. Recently, private equity fund Red Fort Capital invested Rs 90 crore in a Parsvnath Developer’s premium housing project in Delhi.
Lodha group, known for building premium and luxury homes priced between Rs 75 lakh and 35 crore at top locations in Mumbai, too has meanwhile shifted its strategy and is focusing on lower priced homes in order to drive sales. “We expect to take the contribution of our affordable segment from 15% in current revenues to 25% by 2011,” said Mr Lodha, adding that the company has sold around 2,500 affordable apartments in the past six months. For Lodhas, affordable mean houses priced between Rs 10 - 50 lakh. Its Casa Bella project is offering a 550 sqft home for Rs 12.5 lakh. The company is currently constructing 30 projects worth 27 million sqft, 80% of which fall in residential segment.
Mr Lodha said volumes have picked up in the property market and prices have started to firm up. He says property prices have already moved up 5-10% in Mumbai since March.
GROUND REALTY
The Rs 2,200-cr privately-held group is in need of investments for an affordable residential project, a high-end office project & a back-office building project
Lodha group, known for building premium & luxury homes priced between Rs 75 lakh and 35 crore at top locations in Mumbai, is now focusing on low-priced homes to boost sales
Friday, July 3, 2009
Government of India: Economic Survey 2008-2009
Challenges, Policy Response and Medium-Term Prospects
Fiscal Developments and Public Finance
Prices and Monetary Management
Financial Intermediation and Markets
External Sector
Agriculture and Food Management
Industry
Energy, Infrastructure and Communications
Human Development, Poverty and Public Programmes
Statistical Tables
Economic Survey (All Chapters) [English] [Hindi]
Economic Survey (All Tables) [English] [Hindi]
Economy is sound, let's push reforms, says Economic Survey
Economy is sound, let's push reforms, says Economic Survey
Business Standard, July 3, 2009, Page 1
BS Reporter / New Delhi
Painting a picture of a resilient economy, the pre-Budget Economic Survey 2008-09, tabled in Parliament today by Finance Minister Pranab Mukherjee, said India could grow up to 7.75 per cent in 2009-10, up from 6.7 per cent in 2008-09, provided the global economy, particularly the United States, bottomed out by September and the government was able to push the button on significant economic policy reforms.
The World Bank had recently said India would grow 8.1 per cent in 2010, ahead of China (7.5 per cent). The numbers in the survey also suggest India is finally ready to rub shoulders with its northern neighbour.
The economy, according to the survey, can count among its strengths the large services sector which has historically been less affected by cyclical downturns than manufacturing, a strong farm sector, robust savings rate, ambitious infrastructure development programme and upbeat foreign investors. The "shock absorbers of the economy," it said, were the sound banking system, large foreign exchange reserves, a comfortable external debt position and low inflation. It listed as concerns the dip in growth of private consumption and gross capital formation and said the downside risks were the reduced availability of risk capital, lower capital inflows and delayed revival of the OECD economies.
In keeping with the resurgent mood, the survey listed an ambitious reform agenda for the government, a clear signal that it was no longer weighed down by the Communist parties. Surcharges, cesses and new taxes like commodity transaction tax, securities transaction tax, fringe benefit tax and dividend distribution tax had reversed the move towards a simpler tax system, it said. The first three of these taxes were introduced by Mukherjee’s predecessor, P Chidambaram (2004-08). High government-administered interest rates on small savings, it added, had kept lending rates from coming down.
Reflecting the new-found boldness of the Manmohan Singh government, the survey made some radical suggestions like restricting the cooking gas subsidy to six or eight cylinders for a family every year, auction of freely tradable 3G spectrum for next-generation mobile telephone services, raising foreign investment in defence to 49 per cent, opening up multi-brand retail, restricting price control to drugs with just five or six players, relaxing the contract labour laws and permitting retrenchment of workers by companies without prior permission.
It conceded that the return to the path of fiscal correction could occur next year with a fiscal deficit target of three per cent of GDP by 2010-11, mobilisation of at least Rs 25,000 crore through disinvestment, de-control of petrol and diesel prices as well as sugar and fertiliser industries, opening coal mining for the private sector and reform of pension, insurance and retail sectors.
"These reforms should be implemented over the next four to five years, which will take the country back on trend of growth," said Arvind Virmani, chief economic advisor in the ministry of finance. These, however, are just a wish list of the finance ministry and may not be implemented in full by the government.
To balance the interests of farmers and consumers, the survey suggested that there should be a domestic price band for agricultural commodities within which imports and exports are freely allowed. If the international price threatens to exceed the brand, export restrictions and lower import duties would kick in and vice-versa. To rein in the fuel subsidy, it suggested temporarily taxing upstream crude oil producers. (This demand was made last year by the Samajwadi Party at the height of the crude oil crisis.)
The survey suggested that the indirect taxes, that were reduced in the recent part as part of fiscal stimulus package, could be restored once the economy is back on track. “The approach of the government has been to use a mix of fiscal measures including reduction in indirect which could be reversed subsequently,” it said.
In the last financial year, 2008-09, the government had cut peak excise duty rate in two tranches from 14 to 8 per cent and service tax from 12 to 10 per cent.
In spite of the optimistic projections, the survey raised doubts about the global economy, especially the “green shoots” of recent commodity price rises. According to the survey, this could be “a result of position-taking by financial investors, seeking to benefit from global recovery expectations due to the large fiscal and monetary stimulus and/or to hedge against inflation risk in the United States due to the massive quantitative easing.”
WHAT NORTH BLOCK WANTS Some key policy prescriptions
For fiscal stability, simplicity
* Limit LPG subsidy to 6 to 8 cylinders a year per household
* Limit kerosene subsidy by ensuring that every rural household has a solar cooker and lantern
* Convert fertiliser subsidy to user nutrient-related subsidy
* Revitalise disinvestment programme to raise at least Rs 25,000 crore a year
* Rationalise dividend distribution tax
* Phase out surcharges, cesses and transaction taxes such as securities transaction tax, fringe benefit tax
* Auction 3G spectrum and allow it to be freely traded
For financial markets
* All financial market regulation under Sebi
* Allow high net worth individuals to invest directly in the markets
* Set up centralised debt management office
* Align voting rights in banks with equity holdings
* Phased increase in FDI in banks
For energy efficiency
* Decontrol petrol and diesel prices
* De-nationalise coal to allow private entry
* Sell oil fields to private sector
For business
* Raise FDI limit in insurance, defence, allow it n multi-format retailing
* Allow private entry into the provision of passenger train/railway services
* Remove need for prior government permission to retrench workers but raise compensation requirements
* Ease contract labour laws Amend Factories Act to increase workweek to 60 hours from 48 hours
The first statement of intent from new govt
The first statement of intent from new govt
The Financial Express, July 3, 2009, Page 4
Indranil Pan
The annual report card for the economy indicated definite strains to the economy as a result of the global economic crisis. However, it also points out the rosier side. The hope that the Economic Survey raises is that the inherent strengths of India are many and these can ultimately help mitigate the adverse impact of the global downturn. Though the deepest period of the crisis indicated demand as the constraining factor for the Indian industry, the services sector was relatively healthy. Also, the scaling up of rural development programs including the NREGS has enabled the rural consumption demand to stay on the stronger side. Added to this is the fiscal stimulus, mainly in terms of the 6th Pay Commission awards and the lower interest rates by RBI that buffered any fall in consumption demand.
This Economic Survey could be read as the first statement of intent of the new government, the direction to the management of the economy that can be expected from the short-term perspective of the Union Budget announcement on July 6 and also the long-term challenges to restore back the high growth path for the Indian economy over the next 5 year period. Unlike the fire-fighting skill of the last government, the skills of the present government would lie in the management of the economy so as to ensure the sustainability of the “green shoots” in India and maintain investor confidence.
In this sense, the tight rope walk would be to manage the stimulus process in the short term and time the removal of accommodation of monetary and fiscal stimuli suitably so as to ensure a process of medium-term consolidation. The Economic Survey lays out these challenges clearly when it indicates that the Budget Deficit should return to around 3% of GDP at the earliest, roll back interest rate cuts as the economy revives and also drain out the excess cash to curb inflation.
The Survey lays out the reform orientation needed to ensure that the economy returns to a high growth path. Though difficult to implement all in the immediate Budget exercise, the intent seems clear. The plan is to revitalise the disinvestment process to net Rs 25,000 crore each year. Further the government is expected to set-up a road map to reform the subsidies segment to reduce leakages and ensure proper targeting. And lastly, the goal would be to converge various schemes with a thrust on quality of expenditures and outcomes. The Economic Survey also indicates the need to broaden the long-term debt market by liberalising the investment norms of insurance and pension funds, development of credit enhancement institutions and also tax incentives for long-term debt market. The introduction of repos and derivatives in corporate debt is under consideration. This will go a long way to ease the funding problems for India Inc, especially for infrastructure development.
The writer is chief economist, Kotak Mahindra Bank.
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