15 realty firms waiting in wings to enter market

15 realty firms waiting in wings to enter market
Mumbai
The Economic Times

After NHPC and Oil India POs, 15 real estate companies are waiting in the wings to tap the capital market to raise up to USD 6 billion with the housing sector showing signs of recovery.

"Fifteen real estate firms including Lodha Developers, Oberoi Constructions, Emmar MGF and Godrej Properties among others are planning to raise around USD six billion from the domestic market in the next six to eight months," Anuj Puri, Chairman and Country Head, Jones Lang LaSalle Meghraj, said here.

These are basically firms which wanted to come out with the IPO earlier, but held them back due to bearish market, he said. "However, I believe that the market has appetite for USD 1.5-2 billion during the period and thus it will be difficult for second or third-runk companies to raise funds if they do not price the IPO properly," Puri said.

The success of a real estate IPO would depend upon corporate governance, background of the companies and the right pricing among others, he said, adding that start-ups and relatively unknown firms would face difficulty to raise funds from the market.

Puri said almost USD six billion private equity fund was also likely to come in the six to eight months time to the domestic real estate market. "Private equity funds which have raised the money from the Indian market and the management are Indian and also those which might have raised fund outside are now investing in the Indian market," Puri said.

However, he said private equity funds raised overseas and managed by non-Indians are still not coming into the Indian real estate market.

Puri, meanwhile, cautioned that the price of the residential properties should not go up drastically as the industry was still on the thin ice. "A minor 5-10 percent hike is fine, but anything beyond that will take away the confidence from the consumers," Puri said.

Finally, Some Regulation

Finally, Some Regulation
Krishna Kumar Mangalam
The Times of India (Delhi edition)

The central government is working on a model real estate regulation bill to provide guidelines to facilitate growth and promotion of healthy and transparent, efficient and competitive real estate sector in the country, said the housing and urban poverty alleviation minister Kumari Selja. This is a welcome move and will help the sector in becoming efficient and competitive. However, developers feel the government should form a separate regulator on the lines of Securities and Exchange Board of India (SEBI) to regulate the sector.

Addressing a conference on real estate, the minister said Indian real estate market is unorganized and fragmented and that most of property transactions are based on certain perceptions and not necessarily on sound business principles. In this, customer satisfaction is low and the procedure for redressal is long and cumbersome.

This has created problems for both buyers and developers. As end users are not sure of delivery of a house by builders on time, they don’t want to risk a purchase by taking a loan from the bank. Particularly, in times of a slowdown when developers are facing a financial crunch, the likelihood of developers not completing projects on time is high. In fact, in the last couple of years, many reputed builders have not been able to deliver their projects on time. Some of the projects, in fact, were delayed by more than two years.

Apart from this, many buyers are not even sure of the specifications, which developers promise while selling them the houses/flats. Worse still, when developers do not deliver on time or stick to the promised specifications while selling, buyers do not know where to for redressal. Going to a court is not only time consuming but also expensive.

This has forced buyers to either defer their purchase or to go for completed projects. But, this apprehension of end users has affected genuine developers as well, which have a plan and required finances to complete a project. However, in the last couple of months, end users have started showing interest in buying new projects. But, they want to buy in the projects of reputed developers alone. This has created problem for the new but good developers.

To increase the stock for affordable housing the focus has to be on augmenting land supplies. Kumari Selja said the issue is a critical one and requires a number of measures such as alternative methods of land assembly, development and disposal to be pursued, check on prices of urban land, encouraging public-private partnership, promoting intense use of land-higher densities, revision in Floor Area Ratio or Floor Space Index and change of norms to suit local situations, discouraging speculation in land development, and allotment or disposal process to check rising prices of land.

PE invite into housing sector in the works

PE invite into housing sector in the works
The Economic Times, New Delhi

The government is preparing guidelines for the participation of private equity (PE) funds in housing sector under the Rajiv Gandhi Awaas Yojana, minister of state for urban development Saugata Roy said. The scheme aims to make a slum-free India in five years with construction of over 10 lakh houses.

“The ministry, in consultation with the Planning Commission, is currently processing guidelines to ensure PE’s participation in the Yojana,” he said at a national conclave on private equity in infrastructure organized by Assocham.

The government wants to harness private funds to provide affordable housing to millions of households under the scheme, he added.

“PE funds are keen to park their investments in the Yojana .... Besides, the government cannot generate resources for this on its own,” he said.

As per IDFC Projects Equity managing director Sachin Johri, a large number of PE’s are willing to take stake in such projects to an extent of 40-50 percent. Enumerating benefit of participation of private equities in the scheme, Roy said PE funds will also provide expertise in valuing infrastructure projects, advise in fine-tuning business models, assist in toning up operational efficiencies and strengthening corporate governance.

The urban development ministry is also in talks with the World Bank for a $5 billion loan under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) for improving urban infrastructure, the minister said. The WB loan requested under the JNNURM is expected to be finalized “shortly” after authorities have vetted the attached conditionality, he said.

Home Buying In A Sweet Spot For Deals

Home Buying In A Sweet Spot For Deals
Sandeep Singh, New Delhi
Hindustan Times (Delhi edition)

The annual festive season is here amid a stable economic environment, a relatively secure atmosphere on jobs, low interest rates and stable residential property prices after an 18-month-long correction period.

So, is this the time to buy that dream home?

Experts say yes, and their views are backed by the current macroeconomic environment, and the state of real estate sector.

Property prices to remain stable
Property prices dipped between 15 and 30 percent in the slowdown period. However, with a quick revival in markets, home buying sentiments are also up.

"Market has bottomed out and any further correction looks unlikely.

However, I think they are not going to go up in a hurry," said Anuj Puri, chairman and country head, Jones Lang Lasalle Meghraj.

Prices are expected to remain more or less stable. "There is a possibility of price rise in some areas but there won't be a significant change as there is good supply and the global economy is still slow," said Anshuman Magazine, chairman and managing director, South Asia, at property consultancy firm CB Richard Ellis.

Stable prices are expected to help end-users, not speculators.

"It is not the time for investors who are looking to make money in the short term," said Puri.

But certain areas in cities like Mumbai and Delhi where supply remains a constraint has seen some up tick in prices. "I see prices going up because there is demand in the Mumbai market," said Niranjan Hiranandani, managing director, Hiranandani Constructions.

As builders launched affordable home projects over the last three months, they generated some buying interest. But then, speculators were zooming in as well.

Bengal Govt To Try Mix-'N'-Match Land Option

Bengal Govt To Try Mix-'N'-Match Land Option
Kolkata
The Times of India

Taking over land for industry is now the state government's greatest worry. With different models land acquisition or direct purchase reaching a dead end, as evident in Singur and Vedic Village, the state government is trying out a new model this time: a mix of acquisition and direct purchase. This is being applied in the case of a 3,000-acre plot in Panagarh in Burdwan for a proposed industrial park.

After Singur, this is one instance where the government is going to take over such a huge area of land through the direct purchase route, keeping the acquisition option ready as a fall-back option. A portion 400 acres has already been acquired by WBIDC. Interestingly, it is being applied on commerce and industries minister Nirupam Sen's political turf, Burdwan.

Land and land reforms department officials said that in case this model turns out to be successful, WBIDC is keen to apply it elsewhere as well. The top brass of the land and land reforms department, including minister Abdur Rezzak Mollah, met officials of West Bengal Industrial Development Corporation (WBIDC), including managing director Subrata Gupta, to work out this new model for the industrial park.

While Gupta was not available for comment, Mollah said that WBIDC wants imposition of Section IV(I) of the Land Acquisition Act for the area and also wants to purchase land directly. This has hitherto not been tried out in the state.

Officials in Writers' clarified that there is no bar on buying and selling of land under the Act even if Section IV(I) has been imposed. "Since anyone is free to sell their land, WBIDC itself can purchase directly where it is possible to do so easily. If it is not possible to purchase, land can be acquired," said a land department official.

Pollution-Free Land To Cost More

Pollution-Free Land To Cost More
Bangalore
The Times of India

Being eco-friendly is not just about a Green Earth or your health. It's also about wealth. Builders and developers are ready to pay more for land certified as contamination-free under the Environment Site Assessment (ESA).

According to the programme developed in India by Enzen Global Solutions, a seller can voluntarily check for contamination level in soil, water and air in the area before the person puts it up for sale. Mostly done in industrial areas being converted into residential or business complexes, such an assessment will minimize risk to buyers. A positive appraisal will enhance land value and it's advantageous for sellers too.

"Most of us look at cost or accessibility when we chose a place to build a house or office. Awareness about safety in terms of pollution is slowly increasing among Bangaloreans," said Uma Rajarathnam, head of environment practice department, Enzen Global Solutions.

Prospective buyers too are aware of this trend. "When I bought my house in Brookefields, I didn't check these things. Now, I find the groundwater so polluted that we are forced to use reverse osmosis. Even after that, we find white patches on the granite slabs when water is left on it. Standards on pollution are always welcome," said Mythili G Nirvan, who works with a public relations agency.

Rupam Dutta, general manager of hotel Radha Regent, said he looks only at land with ESA certification. "The most important thing I need in my business is clean water. I need authorization from the government every month on water quality. We have to address satisfaction of customers who include corporates and foreigners," he said.

Such demand for clean facilities drives the need for the ESA mark. "ESA will have an effect on the price of industrial site. The seller will definitely demand a better price if the site is free of contamination. Otherwise, the buyer can negotiate a lower price," said R Balaji, CEO of Propmart, property solutions provider.

Real Estate Intelligence Service, Friday, September 11, 2009

Recession is receding: US

Recession is receding: US
Hindustan Times, HT Business, September 11, 2009, Page 21

The recession is ending and the US economy is finally growing again.

That’s the message implicit in the Federal Reserve’s latest survey of businesses around the country, which found economic activity stabilising or improving in most regions. Economists warn the expansion is fragile and will have staying power only if consumers start spending more money. Rising unemployment that keeps Americans cautious could make for a plodding recovery in the months ahead.

The Labour Department will report on Thursday the number of new jobless claims filed last week, which could indicate whether the incipient recovery is slowing the pace of layoffs. Wall Street economists expect that first-time claims for unemployment insurance benefits fell to a seasonally adjusted 560,000 from 570,000 the previous week, according to a survey by Thomson Reuters.

Economists closely watch initial claims, which are considered a gauge of layoffs and an indication of companies’ willingness to hire new workers.

While the figures are volatile, first-time claims have trended downward in recent months. Initial claims topped 600,000 for most of this year, until falling below that level in early July. The total number of people receiving benefits, meanwhile, is expected to drop by about 30,000 to 6.2 million. The figures on so-called continuing claims lag initial claims by a week. All but one of the Fed’s 12 regions, meanwhile, indicated economic activity either was “stable,” showed “signs of stabilisation” or had “firmed,” according to the Fed’s survey.

Businesses in most Fed regions said they were "cautiously positive" about the economic road ahead. The survey, known as the Beige Book, does not include precise figures.

The survey’s findings will figure into discussions when Fed Chairman Ben Bernanke and his colleagues meet September 22-23. The Fed is expected to keep interest rates at record lows, probably for some time, to help nurture the recovery.

We’ve pulled economy back

US President Barack Obama said the “bold and decisive” steps taken by his administration has pulled US economy back from the brink.

“This nation was facing the worst economic crisis since the Great Depression. We were losing an average of 700,000 jobs per month. Credit was frozen. And our financial system was on the verge of collapse,” Obama told the US Congress wherein he called for health care reforms.

Admitting that a full and vibrant recovery was still many months away, the President vowed to continue with the steps to strengthen the economy.

Expansionary policy must end soon on price concerns: RBI

Expansionary policy must end soon on price concerns: RBI
The Financial Express, September 11, 2009, Page 1

fe Bureaus, Mumbai

Reserve Bank of India (RBI) governor Duvvuri Subbarao on Thursday said India would have to exit its expansionary policy sooner than other countries, setting off expectations of a rise in interest rates before the end of calendar 2009. However, he did not offer a timeline for such a change in stance.

“India may have to make a judgement on exit sooner than other countries as inflationary pressures are showing up,” said Subbarao at the Ficci-IBA annual conference on ‘Global Banking: Paradigm Shift’ on Thursday, adding that the timing and sequence of such actions were crucial. “It is not as if I know when we are going to do it and I am not telling the market,” he said.

Subbarao’s comments again threw into stark relief differences between the central bank and the finance ministry on the subject. Just a day earlier, finance secretary Ashok Chawla said withdrawal from the accommodative monetary position would have to wait.

“The consensus from all around the table from the G-20 countries (is) that this is something which has to wait… that the recovery, which is taking place, is still very tentative,” he told a television channel. Chawla said there was need for more clarity that the situation is back to normal “before we can start really seriously considering the exit options”.

Subbarao also made clear his differences with the Percy Mistry and Raghuram Rajan committees’ recommendations on bringing all trading of financial products, including the government debt market and foreign exchange market, under Sebi. He said this is an arrangement that has stood to the test of time and protected India’s financial stability even in the face of severe onslaughts. “This is an arrangement that we should not jettison lightly in the quest for a unified market regulator.”

The RBI governor also acknowledged that any exit strategy by India would have to be coordinated with other central banks. According to him, the government’s high fiscal deficit made it much more difficult for RBI to maintain price stability.

“While the current crisis has shown that price stability is not sufficient to ensure financial stability, price stability is decidedly a necessary condition for financial stability. Higher inflation could also push the yield curve upwards. This could result in significant mark-to-market losses for fixed-income instruments with potentially adverse implications for banks’ profitability. This again could impair financial stability,” he said.

He said preserving and strengthening financial stability is a complex challenge. “We need to take measured and timely action, and make a balanced judgement--not to be too benign, but also not go overboard with excessive or premature tightening. There is a concern in some quarters that the crisis may have dented our enthusiasm for financial sector reforms. I believe that concern is misplaced. We will not slow down on reforms, but will surely rework the road map to reflect the lessons of the crisis.”

RBI is conscious of the need to pay increasing attention to financial stability and to improve its skills in this area. “As a beginning in this direction, we have set up a multi-disciplinary financial stability unit in RBI and are planning to put out a regular financial stability report. The first report is planned in the next few months. These reports will present an overall unified assessment of the health of the financial system with a focus on identification and analysis of potential risks to systemic stability,” he said.

RBI to exit expansionary stance before others

RBI to exit expansionary stance before others
Business Standard, September 11, 2009, Section II, Page 3

BS REPORTER Mumbai

The easy monetary stance, which has been adopted by the Reserve Bank of India (RBI) since October last year, might be reversed before other economies due to inflationary pressures, Reserve Bank Governor D Subbarao indicated today.

“We may have to take the call (to exit) sooner than most other countries. Because as we know inflationary pressures are showing up and we need to be sensitive to them,” Subbarao said at a banking seminar organised by the Federation of Indian Chambers of Commerce and Industry (Ficci) and Indian Banks’ Association.

He, however, was candid in admitting that RBI had no clear idea on when to exit the current accommodative policy stance.

“The current state of expansionary monetary and fiscal policy is not a steady state. We got to do it at the appropriate time, in the right sequence. It is not that I know when I am going to do it and Iam not telling the market. We have no clear idea,” the governor said.

RBI is not getting clear signals as the economy is yet to shift into higher growth mode following the financial crisis, but at the same time, inflationary pressure is building up due to a rise in global commodity prices and weaker monsoon in India.

Since the global financial crisis broke out in September last year, RBI lowered cash reserve ratio by 400 basis points (bps), while repo and reverse repo rates were cut by 425 and 275 bps, respectively, to infuse liquidity. The government has also announced three stimulus packages in the last one year to boost demand.

Though RBI may unwind before other central banks, the governor highlighted the importance of coordination in withdrawing the accommodative policy among nations.

“Coordination is important but it does not mean synchronisation. It does not mean everybody does it in the same time. It means that everybody has broad understanding that when others are going to play the game,” he said.

Subbarao said the RBI has set up a multi-disciplinary financial stability unit which would put out regular financial stability report. The first report will come out in the next few months.

“This report will present an overall unified assessment of the health of the financial system with a focus on identification and analysis of potential risks to systemic stability,” he said.

Commenting that tension between fiscal and monetary policies could potentially militate against financial stability, he said, India too was confronting the dilemma of managing the tension.

“The government has asked the Finance Commission to indicate a road map for returning the path of fiscal consolidation. It is imperative that both the centre and states return to apath of fiscal responsibility, for a number of reasons, including the need to preserve financial stability.

He also assured the global financial crisis has not dented the enthusiasm for financial sector reforms.

“We will not slow down on reforms, but will surely rework the road map to reflect the lessons of the crisis,” Subbarao said.

Restoration of trust key to pace of economic recovery

Financial stability cannot be taken for granted

Financial stability has to be explicit variable in policy.

Capital account liberalisation is a process not an event

To issue regular financial stability report

To issue 1st financial stability report in few months

High inflation can push yields up

High inflation could impair financial stability

Banks will incur high MTM loss if gilt yields rise

Hard to maintain price stability if fiscal deficit high

Need to review if foreign banks can enter as arms or branches