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Wednesday, March 18, 2009
Sign of Hope: US housing rebounds in Feb
Sign of Hope: US housing rebounds in Feb
The Times of India, March 18, 2009, Page 21
REUTERS
WASHINGTON: New US housing starts and permits unexpectedly rebounded in February, according to data on Tuesday that provided a rare dose of good news for the recession-hit economy and fractured housing market.
The commerce department said housing starts jumped 22.2% to a seasonally adjusted annual rate of 583,000 units from 477,000 units in January. That was the biggest percentage rise since January 1990 and also marked the first increase since last April.
"That is an encouraging sign for the US economy. It is good signal of what is to come. With the rally in equities we hopefully have seen a bottom for the economy here,'' said Matt Esteve, forex trader at Tempus Consulting in Washington.
US stocks have been on the rise over the last several days and the major indexes opened flat on Tuesday. US government bond prices trimmed gains after the data and the US dollar fell against the euro as risk aversion eased.
The data came as the Federal Reserve's policy-setting committee was due to start a scheduled two-day meeting on Tuesday, It is expected to leave the target for its benchmark overnight funds rates unchanged at zero-0.25%.
But the statement at the end of the meeting on Wednesday will be scrutinised for clues on the central bank's readiness to start buying Treasuries to boost its efforts to jump-start an economy in recession since December 2007.
New building permits, which give a sense of future home construction, rose 3% to 547,000 units, from 531,000 units in January. That also marked the first advance in permits since April last year.
Compared to the same period in 2008, housing starts were down 47.3% in February and permits declined 44.2%. Completions rose 2.3% to a rate of 785,000 from January's 767,000.
The housing market is at the center of the financial and economic meltdown and bringing some measure of stability to the sector is crucial to rescuing the economy.
Collapsing house and stock market values are a drag on consumer spending, which accounts for over a third of economic activity.
A separate report from the labour department showed US producer prices rose by less than expected in February after the pace of energy price increases slowed, but core producer prices came in a bit above forecast.
The seasonally adjusted producer price index increased by 0.1% last month versus a 0.8% gain in January.
"These two reports will be a relief for everybody and bring some optimism. But the Fed will remain cautious because one month doesn't make a trend,'' said Kurt Karl, chief US economist at Swiss Re in New York.
The Times of India, March 18, 2009, Page 21
REUTERS
WASHINGTON: New US housing starts and permits unexpectedly rebounded in February, according to data on Tuesday that provided a rare dose of good news for the recession-hit economy and fractured housing market.
The commerce department said housing starts jumped 22.2% to a seasonally adjusted annual rate of 583,000 units from 477,000 units in January. That was the biggest percentage rise since January 1990 and also marked the first increase since last April.
"That is an encouraging sign for the US economy. It is good signal of what is to come. With the rally in equities we hopefully have seen a bottom for the economy here,'' said Matt Esteve, forex trader at Tempus Consulting in Washington.
US stocks have been on the rise over the last several days and the major indexes opened flat on Tuesday. US government bond prices trimmed gains after the data and the US dollar fell against the euro as risk aversion eased.
The data came as the Federal Reserve's policy-setting committee was due to start a scheduled two-day meeting on Tuesday, It is expected to leave the target for its benchmark overnight funds rates unchanged at zero-0.25%.
But the statement at the end of the meeting on Wednesday will be scrutinised for clues on the central bank's readiness to start buying Treasuries to boost its efforts to jump-start an economy in recession since December 2007.
New building permits, which give a sense of future home construction, rose 3% to 547,000 units, from 531,000 units in January. That also marked the first advance in permits since April last year.
Compared to the same period in 2008, housing starts were down 47.3% in February and permits declined 44.2%. Completions rose 2.3% to a rate of 785,000 from January's 767,000.
The housing market is at the center of the financial and economic meltdown and bringing some measure of stability to the sector is crucial to rescuing the economy.
Collapsing house and stock market values are a drag on consumer spending, which accounts for over a third of economic activity.
A separate report from the labour department showed US producer prices rose by less than expected in February after the pace of energy price increases slowed, but core producer prices came in a bit above forecast.
The seasonally adjusted producer price index increased by 0.1% last month versus a 0.8% gain in January.
"These two reports will be a relief for everybody and bring some optimism. But the Fed will remain cautious because one month doesn't make a trend,'' said Kurt Karl, chief US economist at Swiss Re in New York.
US housing posts surprise surge
US housing posts surprise surge
The Economic Times, March 18, 2009, Page 7
Wholesale Inflation Up 0.1%; Fed Likely To Continue To Keep Key Interest Rate At Near 0%
AP WASHINGTON
HOUSING construction posted a surprisingly large increase in February, bolstered by strength in all parts of the country except the West, which has been hardest hit by the current housing slump. The commerce department reported on Tuesday that construction of new homes and apartments jumped 22.2% in February compared with January, pushing total activity to a seasonally adjusted annual rate of 583,000 units.
Meanwhile, the labour department reported that wholesale prices edged up a slight 0.1% in February as a big drop in food costs offset a second monthly increase in energy prices.
While the surge in housing construction was far better than the continued decline economists had expected, the rebound is likely to be viewed as a temporary gain given all the problems the housing industry still faces.
Even with the big increase, construction activity remains 47.3% below where it was a year ago. The strength in February was led by a big increase in apartment construction, which can be highly volatile from month to month.
The 0.1% increase in wholesale inflation was much lower than the 0.8% surge in January and smaller than the 0.4% increase economists had expected. Compared with a year ago, wholesale prices are actually down 1.3%. Core inflation, which excludes energy and food, edged up 0.2% in February, only slightly higher than the 0.1% gain economists had expected. Core prices had risen 0.4% in January.
Only last summer, officials at the Federal Reserve had started to worry that a surge in energy costs could spread to other areas of the economy and boost inflation to unacceptable levels. But after the financial crisis struck in the fall, the Fed switched signals and is now aggressively fighting a deepening recession with no real threat of inflation.
The Economic Times, March 18, 2009, Page 7
Wholesale Inflation Up 0.1%; Fed Likely To Continue To Keep Key Interest Rate At Near 0%
AP WASHINGTON
HOUSING construction posted a surprisingly large increase in February, bolstered by strength in all parts of the country except the West, which has been hardest hit by the current housing slump. The commerce department reported on Tuesday that construction of new homes and apartments jumped 22.2% in February compared with January, pushing total activity to a seasonally adjusted annual rate of 583,000 units.
Meanwhile, the labour department reported that wholesale prices edged up a slight 0.1% in February as a big drop in food costs offset a second monthly increase in energy prices.
While the surge in housing construction was far better than the continued decline economists had expected, the rebound is likely to be viewed as a temporary gain given all the problems the housing industry still faces.
Even with the big increase, construction activity remains 47.3% below where it was a year ago. The strength in February was led by a big increase in apartment construction, which can be highly volatile from month to month.
The 0.1% increase in wholesale inflation was much lower than the 0.8% surge in January and smaller than the 0.4% increase economists had expected. Compared with a year ago, wholesale prices are actually down 1.3%. Core inflation, which excludes energy and food, edged up 0.2% in February, only slightly higher than the 0.1% gain economists had expected. Core prices had risen 0.4% in January.
Only last summer, officials at the Federal Reserve had started to worry that a surge in energy costs could spread to other areas of the economy and boost inflation to unacceptable levels. But after the financial crisis struck in the fall, the Fed switched signals and is now aggressively fighting a deepening recession with no real threat of inflation.
Unusual build-up in Akruti City stock leaves market guessing
Unusual build-up in Akruti City stock leaves market guessing
The Economic Times, March 18, 2009, Page 17
Mumbai-Based Realty Co Hits 52-Week High; Overtakes Unitech, Indiabulls Real Estate
Rajesh Unnikrishnan & Supriya Verma Mishra, MUMBAI
MUMBAI-BASED real estate firm Akruti City on Tuesday overtook Unitech and Indiabulls Real Estate to become the second-most valuable property firm in terms of market capitalisation. But the spectacular rise in Akruti’s share price over the past few months has raised quite a few eyebrows. The stock has been consistently outperforming the real estate sector as well as major equity indices during a period marked by sliding real estate prices and a slowing economy.
On Tuesday, the stock surged 12.3% to close at Rs 1,577.80, after touching a 52-week high of Rs 1,610 intra-day. The stock has risen 56% over the past one month alone, compared with a less than 2% rise on the BSE Real estate index, and a 2% fall in the BSE Sensex. Brokers are unsure if the run-up in Akruti’s stock price has to do with the company’s fundamentals, or the low non-promoter holding.
On Tuesday, nearly 70-lakh shares were traded on both exchanges combined, which is slightly more than the non-promoter holding in the stock. And despite such heavy volumes, less than 4% of the trades resulted in delivery. Of the company’s equity base of 6.67 crore shares, promoters own 90%, around 6% is held by corporate bodies, and the rest by the public.
As far as earnings go, the company has reported an earnings per share of Rs 58 for the first nine months of the current financial year, surpassing the EPS of Rs 44.87 for the whole of last year. But the company’s net profit for the third quarter (October-December) fell sharply, weighed down by heavy interest costs. Construction activity has seen a significant slowdown over the past 6-8 months, and many projects have stalled due to lack of funds. Most of Akruti’s projects are in Mumbai, where the fall in prices has been gradual compared to other parts of the country. Yet, it seems unlikely that Akruti would have been immune to the problems in the sector. Industry watchers say the sector in general is likely to fare poorly in the current quarter too, after a dismal performance in the preceding quarter.
“Many companies had booked revenues in their residential properties in advance, expecting timely completion of the projects and good demand,” says an industry person. “A lot of those revenues could be unwound in this quarter,” he adds. Also, brokers point out that the stock is not exactly cheap. On a trailing basis, Akruti is trading at a price to book value(P/BV) of over 13 times. In comparison, market leader DLF is trading at a P/BV of little over 2 times, while Indiabulls Real estate is quoting at a P/BV of less than 1. IL&FS Reality Fund has picked up 15% stake in Infrastructure Ventures India, an SPV floated by Akruti City, for Rs 200 crore. Akruti’s land bank for residential projects (6 million sq ft) in Mumbai has been primarily acquired through the slum rehabilitation route
On Wednesday, Fed officials are expected to signal that they will continue to keep a key interest rate at a record low near 0% for as long as necessary and use other unorthodox means to jump-start the economy.
The Fed has the leeway to focus on the weak economy because inflation pressures are expected to remain low in the face of widespread layoffs that are depressing wage demands.
The Economic Times, March 18, 2009, Page 17
Mumbai-Based Realty Co Hits 52-Week High; Overtakes Unitech, Indiabulls Real Estate
Rajesh Unnikrishnan & Supriya Verma Mishra, MUMBAI
MUMBAI-BASED real estate firm Akruti City on Tuesday overtook Unitech and Indiabulls Real Estate to become the second-most valuable property firm in terms of market capitalisation. But the spectacular rise in Akruti’s share price over the past few months has raised quite a few eyebrows. The stock has been consistently outperforming the real estate sector as well as major equity indices during a period marked by sliding real estate prices and a slowing economy.
On Tuesday, the stock surged 12.3% to close at Rs 1,577.80, after touching a 52-week high of Rs 1,610 intra-day. The stock has risen 56% over the past one month alone, compared with a less than 2% rise on the BSE Real estate index, and a 2% fall in the BSE Sensex. Brokers are unsure if the run-up in Akruti’s stock price has to do with the company’s fundamentals, or the low non-promoter holding.
On Tuesday, nearly 70-lakh shares were traded on both exchanges combined, which is slightly more than the non-promoter holding in the stock. And despite such heavy volumes, less than 4% of the trades resulted in delivery. Of the company’s equity base of 6.67 crore shares, promoters own 90%, around 6% is held by corporate bodies, and the rest by the public.
As far as earnings go, the company has reported an earnings per share of Rs 58 for the first nine months of the current financial year, surpassing the EPS of Rs 44.87 for the whole of last year. But the company’s net profit for the third quarter (October-December) fell sharply, weighed down by heavy interest costs. Construction activity has seen a significant slowdown over the past 6-8 months, and many projects have stalled due to lack of funds. Most of Akruti’s projects are in Mumbai, where the fall in prices has been gradual compared to other parts of the country. Yet, it seems unlikely that Akruti would have been immune to the problems in the sector. Industry watchers say the sector in general is likely to fare poorly in the current quarter too, after a dismal performance in the preceding quarter.
“Many companies had booked revenues in their residential properties in advance, expecting timely completion of the projects and good demand,” says an industry person. “A lot of those revenues could be unwound in this quarter,” he adds. Also, brokers point out that the stock is not exactly cheap. On a trailing basis, Akruti is trading at a price to book value(P/BV) of over 13 times. In comparison, market leader DLF is trading at a P/BV of little over 2 times, while Indiabulls Real estate is quoting at a P/BV of less than 1. IL&FS Reality Fund has picked up 15% stake in Infrastructure Ventures India, an SPV floated by Akruti City, for Rs 200 crore. Akruti’s land bank for residential projects (6 million sq ft) in Mumbai has been primarily acquired through the slum rehabilitation route
On Wednesday, Fed officials are expected to signal that they will continue to keep a key interest rate at a record low near 0% for as long as necessary and use other unorthodox means to jump-start the economy.
The Fed has the leeway to focus on the weak economy because inflation pressures are expected to remain low in the face of widespread layoffs that are depressing wage demands.
Recession could end in 2009: Bernanke
Recession could end in 2009: Bernanke
The Economic Times, March 17, 2009, Page 6
AP WASHINGTON
AMERICA'S recession "probably" will end this year if the government succeeds in bolstering the banking system, Federal Reserve chairman Ben Bernanke said on Sunday in a rare television interview. In carefully hedged remarks in a taped interview with CBS' "60 Minutes," Bernanke seemed to express a bit more optimism that this could be done.
Still, Bernanke stressed — as he did to Congress last month — that the prospects for the recession ending this year and a recovery taking root next year hinge on a difficult task: getting banks to lend more freely again and getting the financial markets to work more normally.
"We've seen some progress in the financial markets, absolutely," Bernanke said. "But until we get that stabilised and working normally, we're not going to see recovery. But we do have a plan. We're working on it. And, I do think that we will get it stabilised, and we'll see the recession coming to an end probably this year."
Even if the recession, which began in December 2007, ends this year, the unemployment rate will keep climbing past the current quarter-century high of 8.1%, Bernanke said. A growing number of economists think the jobless rate will hit 10% by the end of this year. Asked about the biggest potential dangers now, Bernanke suggested a lack of "political will" to solve the financial crisis. He said, though, that the US has averted the risk of plunging into a depression. "I think we've gotten past that," he said.
It's rare for a sitting Fed chief to grant an interview, whether for broadcast or print. Bernanke said he chose to do so because it's an "extraordinary time" for the country, and it gave him a chance to speak directly to the American public.
Bernanke spoke at a time of rising public anger over financial bailouts using taxpayer money. Battling the worst financial crisis since the 1930s, the government has put hundreds of billions of those dollars at risk to prop up troubled institutions and stabilise the banking system.
Democrats and Republicans on Capitol Hill have questioned the effectiveness of the rescue efforts and have demanded more information about how taxpayers' money is being used.
Bernanke's TV interview seemed to be part of a government public relations offensive. Treasury secretary Timothy Geithner appeared on PBS' "The Charlie Rose Show" last week, discussing the financial crisis and the Obama's administration's relief efforts.
Looking back, Bernanke said the world came close to a financial meltdown. Asked how close, Bernanke responded: "It was very close." Bernanke admitted that the Fed could have done a better job of overseeing banks. Critics say lax regulatory oversight contributed to the crisis. Bernanke said he believes all the big banks the Fed regulates are solvent. Big banks won't fail under his watch, Bernanke said — though, if necessary, the government should try to "wind it down in a safe way".
The Economic Times, March 17, 2009, Page 6
AP WASHINGTON
AMERICA'S recession "probably" will end this year if the government succeeds in bolstering the banking system, Federal Reserve chairman Ben Bernanke said on Sunday in a rare television interview. In carefully hedged remarks in a taped interview with CBS' "60 Minutes," Bernanke seemed to express a bit more optimism that this could be done.
Still, Bernanke stressed — as he did to Congress last month — that the prospects for the recession ending this year and a recovery taking root next year hinge on a difficult task: getting banks to lend more freely again and getting the financial markets to work more normally.
"We've seen some progress in the financial markets, absolutely," Bernanke said. "But until we get that stabilised and working normally, we're not going to see recovery. But we do have a plan. We're working on it. And, I do think that we will get it stabilised, and we'll see the recession coming to an end probably this year."
Even if the recession, which began in December 2007, ends this year, the unemployment rate will keep climbing past the current quarter-century high of 8.1%, Bernanke said. A growing number of economists think the jobless rate will hit 10% by the end of this year. Asked about the biggest potential dangers now, Bernanke suggested a lack of "political will" to solve the financial crisis. He said, though, that the US has averted the risk of plunging into a depression. "I think we've gotten past that," he said.
It's rare for a sitting Fed chief to grant an interview, whether for broadcast or print. Bernanke said he chose to do so because it's an "extraordinary time" for the country, and it gave him a chance to speak directly to the American public.
Bernanke spoke at a time of rising public anger over financial bailouts using taxpayer money. Battling the worst financial crisis since the 1930s, the government has put hundreds of billions of those dollars at risk to prop up troubled institutions and stabilise the banking system.
Democrats and Republicans on Capitol Hill have questioned the effectiveness of the rescue efforts and have demanded more information about how taxpayers' money is being used.
Bernanke's TV interview seemed to be part of a government public relations offensive. Treasury secretary Timothy Geithner appeared on PBS' "The Charlie Rose Show" last week, discussing the financial crisis and the Obama's administration's relief efforts.
Looking back, Bernanke said the world came close to a financial meltdown. Asked how close, Bernanke responded: "It was very close." Bernanke admitted that the Fed could have done a better job of overseeing banks. Critics say lax regulatory oversight contributed to the crisis. Bernanke said he believes all the big banks the Fed regulates are solvent. Big banks won't fail under his watch, Bernanke said — though, if necessary, the government should try to "wind it down in a safe way".
Realtors open discount window
Realtors open discount window
The Economic Times, March 17, 2009, Page 5
Unitech, DLF, HDIL, BPTP Offer 30-40% Price Cut On New Residential Projects To Stimulate Demand
Ravi Teja Sharma NEW DELHI
REAL estate developers have found a new way of activating the market. Developers such as Unitech, DLF, HDIL, BPTP and others have launched residential projects in the last couple of months at 30-40% discount to ongoing projects. Analysts believe this will stimulate demand and add muchneeded liquidity to the industry grappling with the problem of not being able to sell off projects launched a year back. “The market might not be bouncing back as yet but because of these launches, the movement has started surely. This is giving confidence to buyers,” says real estate consulting firm CB Richard Ellis CMD Anshuman Magazine.
DLF has launched two projects, in Hyderabad and Bangalore, in the last 3 months totalling close to 4,000 units. Executive director Rajeev Talwar informed that of these, about 500 units have already been sold in the price range of Rs 1,850-1,890 per sq ft. “These prices are lower than prices in 1998,” says Mr Talwar. DLF is expecting sales to improve in the near future. Developers are launching completely new projects. “They have realised that they cannot sit on idle land and need to launch at current market prices,” says Mr Magazine. “The good news is that the response has been fairly good considering the current market conditions,” he adds. Unitech too has launched a few projects in the last 2 months—at Gurgaon and at Dadar in Mumbai. Unitech’s Uniworld Garden II in Sector 47, Gurgaon has been launched at Rs 3,250 per sq ft. “What this launch has done is that it has brought down the ticket size 40-50% in this area,” says Unitech head (corporate planning) R Nagaraju. Mr Nagaraju claims that all the 150 units launched in the first phase in Gurgaon were sold out in 12 days. Indiabulls has launched Centrum Park at Sector 103, Gurgaon recently at a price of Rs 1,950 per sq ft. This is almost 40% lower than prices in the area last year. Sobha Developers, which was planning a project in the same area at a price range of Rs 3,500-4,000 per sq ft, has deferred its plans.
Edelweiss Capital real estate analyst Aashiesh Agarwaal feels it is important for developers to maintain a presence in the market they chose to operate in. “It will help them monetise their land assets which are lying idle at the moment,” he says.
What is reassuring is that a lot of people are back window shopping, says Cushman and Wakefield India executive director (residential) Aditi Vijayakar. But transactions are still slow and people are taking a lot longer to decide. Buyers are uncertain about the delivery capabilities of developers, as the market has seen a number of projects getting delayed recently. Mr Agarwaal though sees this has a release of pentup demand at the price points being offered by developers today. “Marginal buyers have converted at this price point but we don’t see it sustaining. This is a temporary rise in demand,” he says. A robust employment outlook and positive debt repayment capacity will dictate demand outlook going forward, he says. But this is probably the best time to go shopping. “Developers are looking for genuine customers and not punters. There are more projects available and developers are willing to listen to you and hopefully negotiate too,” says Miss Vijaykar.
The Economic Times, March 17, 2009, Page 5
Unitech, DLF, HDIL, BPTP Offer 30-40% Price Cut On New Residential Projects To Stimulate Demand
Ravi Teja Sharma NEW DELHI
REAL estate developers have found a new way of activating the market. Developers such as Unitech, DLF, HDIL, BPTP and others have launched residential projects in the last couple of months at 30-40% discount to ongoing projects. Analysts believe this will stimulate demand and add muchneeded liquidity to the industry grappling with the problem of not being able to sell off projects launched a year back. “The market might not be bouncing back as yet but because of these launches, the movement has started surely. This is giving confidence to buyers,” says real estate consulting firm CB Richard Ellis CMD Anshuman Magazine.
DLF has launched two projects, in Hyderabad and Bangalore, in the last 3 months totalling close to 4,000 units. Executive director Rajeev Talwar informed that of these, about 500 units have already been sold in the price range of Rs 1,850-1,890 per sq ft. “These prices are lower than prices in 1998,” says Mr Talwar. DLF is expecting sales to improve in the near future. Developers are launching completely new projects. “They have realised that they cannot sit on idle land and need to launch at current market prices,” says Mr Magazine. “The good news is that the response has been fairly good considering the current market conditions,” he adds. Unitech too has launched a few projects in the last 2 months—at Gurgaon and at Dadar in Mumbai. Unitech’s Uniworld Garden II in Sector 47, Gurgaon has been launched at Rs 3,250 per sq ft. “What this launch has done is that it has brought down the ticket size 40-50% in this area,” says Unitech head (corporate planning) R Nagaraju. Mr Nagaraju claims that all the 150 units launched in the first phase in Gurgaon were sold out in 12 days. Indiabulls has launched Centrum Park at Sector 103, Gurgaon recently at a price of Rs 1,950 per sq ft. This is almost 40% lower than prices in the area last year. Sobha Developers, which was planning a project in the same area at a price range of Rs 3,500-4,000 per sq ft, has deferred its plans.
Edelweiss Capital real estate analyst Aashiesh Agarwaal feels it is important for developers to maintain a presence in the market they chose to operate in. “It will help them monetise their land assets which are lying idle at the moment,” he says.
What is reassuring is that a lot of people are back window shopping, says Cushman and Wakefield India executive director (residential) Aditi Vijayakar. But transactions are still slow and people are taking a lot longer to decide. Buyers are uncertain about the delivery capabilities of developers, as the market has seen a number of projects getting delayed recently. Mr Agarwaal though sees this has a release of pentup demand at the price points being offered by developers today. “Marginal buyers have converted at this price point but we don’t see it sustaining. This is a temporary rise in demand,” he says. A robust employment outlook and positive debt repayment capacity will dictate demand outlook going forward, he says. But this is probably the best time to go shopping. “Developers are looking for genuine customers and not punters. There are more projects available and developers are willing to listen to you and hopefully negotiate too,” says Miss Vijaykar.
India likely to see fall in office rentals: Report
India likely to see fall in office rentals: Report
The Economic Times, March 17, 2009, Page 6
NEW DELHI: India is facing a situation of major real estate oversupply and is likely to witness “significant falls” in rentals this year, a report has said. According to Jones Lang LaSalle’s (JLLS) March Global Market Perspective, stock of commercial property in major cities, such as Delhi and Mumbai, are forecast to expand by 50% in 2009. “Tier I cities in emerging markets of China and India are facing a situation of major oversupply and also are likely to witness significant falls in rentals this year as vacancy levels climb,” the report said. However, sentiments for the hotel sector are improving for Asian market as a whole, it said. As for markets like Singapore, Tokyo and Hong Kong, which were heavily exposed to international financial services, landlords are drastically reducing rentals in an attempt to maintain occupancy levels.
The Economic Times, March 17, 2009, Page 6
NEW DELHI: India is facing a situation of major real estate oversupply and is likely to witness “significant falls” in rentals this year, a report has said. According to Jones Lang LaSalle’s (JLLS) March Global Market Perspective, stock of commercial property in major cities, such as Delhi and Mumbai, are forecast to expand by 50% in 2009. “Tier I cities in emerging markets of China and India are facing a situation of major oversupply and also are likely to witness significant falls in rentals this year as vacancy levels climb,” the report said. However, sentiments for the hotel sector are improving for Asian market as a whole, it said. As for markets like Singapore, Tokyo and Hong Kong, which were heavily exposed to international financial services, landlords are drastically reducing rentals in an attempt to maintain occupancy levels.
Retail rentals to dip further, correction of 25% likely
Retail rentals to dip further, correction of 25% likely
The Financial Express, March 17, 2009, Page 3
Kakoly Chatterjee
New DelhiOffice and retail rentals are likely to see a further dip in the coming months. Of the two, retail is going to be worse hit. Even after a 10%-15% correction till December, the latest retail launches are set to experience a further correction of 25%.
In order to cope with the current crisis many of the retailers are innovating their business model. Some are getting into a revenue sharing model with the mall owners. Here retailers share a percentage of their profits with mall owners depending on the agreement they have with each other and have to pay lesser rentals as a result.
Some retailers are also going for the shop-in-shop format where the retailers are lending out some of their space to other retailers. Delhi-based retailer, Vishal Megamart has lent out part of its space to laundry retail chain White Tiger and retailer Shopper’s Stop has given out space to Crossword stores even though the last two belong to the same entity-namely the Raheja group.
Most big developers are going for revenue sharing model. But for retailers they are not going for a universal agreement with the mall owners. It is mostly on one to one basis and depending on the location. While this model was prevalent in 20% cases before, this trend is increasingly gaining more popularity in the current scenario.
According to a Religare report the lease rental to gross profit for the period 2007-2008 for Pantaloons was 21%, Vishal Megamart 15%, Provogue 11% and Shopper’s Stop 25%. Analysts believe that these numbers are very high because of unusually high property rates. The international standard for lease rental to gross profit is around 6%. Experts believe, with the price correction across all segments of real estate this ratio is likely to come down to around 10% this year.
Some retailers who had open contracts are renegotiating their deal. Vishal Megamart has been able to get a discount of 15% for most of its rented spaces.
Commercial rentals have also dropped across all sectors. Sanjay Dutt, CEO (business) Jones Lang LaSalle Meghraj said, “A huge future supply and softening demand will push vacancy up across cities in 2009. Pan-India grade A office vacancies will rise from 5% in 2007 to 17% in 2009”. Residential catchments dependent on office worker-based occupancy will see a corresponding dip.
With considerable commercial supply coming in over the next 12 months it is likely to increase competition. Residential will see a corresponding reduction in demand from office-based residential occupants. There will be a slowdown in additional demand for IT/ITES spaces, so previously projected growth will be compromised.
As a result commercial rentals will continue to decline for another 15-18 months, after which they will reach equilibrium point and begin to pick up from there.
The Financial Express, March 17, 2009, Page 3
Kakoly Chatterjee
New DelhiOffice and retail rentals are likely to see a further dip in the coming months. Of the two, retail is going to be worse hit. Even after a 10%-15% correction till December, the latest retail launches are set to experience a further correction of 25%.
In order to cope with the current crisis many of the retailers are innovating their business model. Some are getting into a revenue sharing model with the mall owners. Here retailers share a percentage of their profits with mall owners depending on the agreement they have with each other and have to pay lesser rentals as a result.
Some retailers are also going for the shop-in-shop format where the retailers are lending out some of their space to other retailers. Delhi-based retailer, Vishal Megamart has lent out part of its space to laundry retail chain White Tiger and retailer Shopper’s Stop has given out space to Crossword stores even though the last two belong to the same entity-namely the Raheja group.
Most big developers are going for revenue sharing model. But for retailers they are not going for a universal agreement with the mall owners. It is mostly on one to one basis and depending on the location. While this model was prevalent in 20% cases before, this trend is increasingly gaining more popularity in the current scenario.
According to a Religare report the lease rental to gross profit for the period 2007-2008 for Pantaloons was 21%, Vishal Megamart 15%, Provogue 11% and Shopper’s Stop 25%. Analysts believe that these numbers are very high because of unusually high property rates. The international standard for lease rental to gross profit is around 6%. Experts believe, with the price correction across all segments of real estate this ratio is likely to come down to around 10% this year.
Some retailers who had open contracts are renegotiating their deal. Vishal Megamart has been able to get a discount of 15% for most of its rented spaces.
Commercial rentals have also dropped across all sectors. Sanjay Dutt, CEO (business) Jones Lang LaSalle Meghraj said, “A huge future supply and softening demand will push vacancy up across cities in 2009. Pan-India grade A office vacancies will rise from 5% in 2007 to 17% in 2009”. Residential catchments dependent on office worker-based occupancy will see a corresponding dip.
With considerable commercial supply coming in over the next 12 months it is likely to increase competition. Residential will see a corresponding reduction in demand from office-based residential occupants. There will be a slowdown in additional demand for IT/ITES spaces, so previously projected growth will be compromised.
As a result commercial rentals will continue to decline for another 15-18 months, after which they will reach equilibrium point and begin to pick up from there.
Builders chant ‘timely completion’ mantra to woo buyers
Builders chant ‘timely completion’ mantra to woo buyers
The Hindu Business Line, March 17, 2009, Page 1
Moumita Bakshi Chatterjee
New Delhi, March 16 When it comes to selling residential projects in a downturn, the promise of ‘timely completion of project’ has become as good a bait, as any other — affordability, complementary club membership or swimming pools.
With the slowdown in sales and cash crunch delaying real estate projects, some builders have started pitching ‘on time completion’ as their Unique Selling Proposition — a commitment that until recently was taken for granted.
According to Mr Sanjay Verma, Executive Managing Director (South Asia), Cushman & Wakefield, this new positioning is a response to restore consumer confidence. “The biggest fear of a real estate buyer today is protection of his capital invested into a project, and its completion,” he says.
A case in point is the recent marketing campaign unleashed by Crossings Republik which declares that despite the “tough times” and “slump in global economy”, its project has been running on schedule. Another ad campaign, by Purvanchal Construction Works, talks of a commitment to “completion and possession on time”.
Industry experts feel that when the market was ‘euphoric’, completing projects on time was a given. Now with funds drying up and projects getting stalled, real estate buyers are already feeling the heat — for some possession has been delayed by over one year. Builders are now hoping to differentiate themselves from the rest, by meeting project deadlines.
“In the case of Crossings Republik, we felt that some people had raised doubts on whether the project timelines could be maintained in the current market scenario. We wanted to reassure them that the first phase of 2,000 apartments is on track and would be delivered this year,” explains Mr Sanjeev Srivastva, Managing Director of ASSOTECH, a real estate company which has a project in the mega township of Crossings Republik.
Mr Pankaj Bajaj, Managing Director of Eldeco Group, says, “The past bull run in the property market had seen entry of many non-serious players, but the market has now realised that fly-by-night operators are unlikely to deliver. At the same time, the serious players are making a conscious attempt to differentiate themselves from others. They are reiterating their commitment to adhere to time lines.”
The Hindu Business Line, March 17, 2009, Page 1
Moumita Bakshi Chatterjee
New Delhi, March 16 When it comes to selling residential projects in a downturn, the promise of ‘timely completion of project’ has become as good a bait, as any other — affordability, complementary club membership or swimming pools.
With the slowdown in sales and cash crunch delaying real estate projects, some builders have started pitching ‘on time completion’ as their Unique Selling Proposition — a commitment that until recently was taken for granted.
According to Mr Sanjay Verma, Executive Managing Director (South Asia), Cushman & Wakefield, this new positioning is a response to restore consumer confidence. “The biggest fear of a real estate buyer today is protection of his capital invested into a project, and its completion,” he says.
A case in point is the recent marketing campaign unleashed by Crossings Republik which declares that despite the “tough times” and “slump in global economy”, its project has been running on schedule. Another ad campaign, by Purvanchal Construction Works, talks of a commitment to “completion and possession on time”.
Industry experts feel that when the market was ‘euphoric’, completing projects on time was a given. Now with funds drying up and projects getting stalled, real estate buyers are already feeling the heat — for some possession has been delayed by over one year. Builders are now hoping to differentiate themselves from the rest, by meeting project deadlines.
“In the case of Crossings Republik, we felt that some people had raised doubts on whether the project timelines could be maintained in the current market scenario. We wanted to reassure them that the first phase of 2,000 apartments is on track and would be delivered this year,” explains Mr Sanjeev Srivastva, Managing Director of ASSOTECH, a real estate company which has a project in the mega township of Crossings Republik.
Mr Pankaj Bajaj, Managing Director of Eldeco Group, says, “The past bull run in the property market had seen entry of many non-serious players, but the market has now realised that fly-by-night operators are unlikely to deliver. At the same time, the serious players are making a conscious attempt to differentiate themselves from others. They are reiterating their commitment to adhere to time lines.”
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