Lower real estate prices have triggered some big-ticket sales in recent months in the commercial segment
Some six months after they fled the real estate sector, investors are gradually making their way back. This time around, high networth individuals (HNIs) and domestic funds are putting money mainly into office and retail spaces.
As the economic meltdown unfolded in late 2008, commercial realty became the worst hit segment in the sector and lease rental and property rates fell by 30-40% in the metros and the bigger cities. The lower prices, in turn, have triggered some big ticket sales in recent months.
In May, Unitech Ltd, India's second biggest listed developer, sold a 200,000 sq. ft office property in Saket, New Delhi, to an investor for Rs450 crore, nearly Rs200 crore cheaper than in 2007-08. Unitech didn't disclose the identity of the buyer.
Big catch: The DLF tower in Gurgaon. The cash-strapped realty firm sold its 66% stake in a private mill property in central Mumbai to an undisclosed Chennai-based investor for Rs310 crore in May
The same month, a cash-strapped DLF Ltd, the country's top realty firm, sold its 66% stake in a private mill property in central Mumbai to an undisclosed Chennai-based investor for Rs310 crore. DLF had bought the property for Rs350 crore in 2007, at the peak of a realty boom in India.
In April, three investors from Kolkata bought 50,000 sq. ft of an office property near Bangalore's Outer Ring Road for Rs35 crore, about 20% lower than the asking price till mid-2008, said a property consultant who brokered the deal. He didn't want to name anyone involved in the deal. The developer had earlier leased the property to companies.
"Many HNIs and funds are now returning, looking at only commercial properties...to take advantage of the falling rates. The returns for such properties are as high as 12-13% compared to 3-4% in residential projects," said Farook Mahmood, chairman of Bangalore-based advisory Silverline Group Inc.
For example, a Hyderabad investor with Rs300 crore is scouting for commercial properties in Bangalore, said Mahmood, without elaborating.
There is huge demand from HNIs for buying office properties, said a Unitech spokesman. "We are in contact with a group of HNIs with a portfolio of Rs1,000 crore each, who are looking at lucrative deals," he said.
Unitech, also cash-starved, has been selling office properties and hotels the past two quarters in and around New Delhi and Mumbai. Domestic property-focused funds, which earlier targeted residential projects, too, are looking at commercial properties now. Red Fort Capital Advisors Pvt. Ltd, for example, has invested Rs400 crore in three commercial properties in New Delhi and Mumbai and is looking for more.
After many of its schemes failed, the Yamuna Expressway Authority has now come up with a new multiple scheme today.
The lands under the scheme are located at 41 km from Greater Noida near Javer town. It will be beneficial to industries like IT, biotech, sports, entertainment and service. The scheme includes plot sizes ranging from 25 to 250 acres. Keeping in mind the global recession, the terms and conditions have been kept very flexible. Conditions with regard to the applicants, payment plan, tax and interest have been relaxed this time.
According to sources, sites have been selected for setting up Yamuna- I race track and residential areas by the side of Yamuna Expressway. The additional CEO of the Yamuna Authority Y.K. Behl said decision about the size and number of plots would be taken soon. The rate of the plots has been fixed at Rs 1,650 per sq mt.
The Yamuma Expressway Authority had earlier floated schemes like mini- SDZ, micro-SDZ and SDZ, but they had to be rolled back as they failed to evoke resonable response.
`The report says the area is safe and construction can be undertaken, leaving around 20 metres of land from the hill We have 80 metres of extra land'
With 80 metres of land towards the Shivalik and Nada hills side in Panchkula now available to the Haryana Urban Development Authority (HUDA), the authorities will re-plan Sectors 23 and 32, which fall in the area.
"The decision to use this land was taken after recommendation from Geological Survey of India (GSI)," a senior HUDA official said.
"In 2002, when deep cracks had appeared in the area near the Shivalik and Nada hills, it was decided that Sectors 23 and 32 would be planned leaving 100 metres of land from the hills. This was done for safety."
This, the official said, was a precautionary measure; to check if the crack grows bigger with time.
Also, the authorities had asked the Geological Survey of India to examine the area and give a report.
"The report which came now says the area is safe and construction can be done leaving around 20 metres of land from the hill. So we have 80 metres of extra land," the official added.
While the existing plots in Sector 23 would not be altered, the additional land would be accommodated. In Sector 32, this land would be used to construct facilities like community centers.
If you want to start a business in India, which city would you choose?
The just-released World Bank report, Doing Business in India 2009, has an answer: Ludhiana. Hyderabad and Bhubaneshwar were ranked second and third respectively by the report.
Delhi has been ranked sixth among the 17 cities that have been included in the report, while Kolkata is at the bottom of the table.
Dealing with construction permits, registering property, paying taxes, enforcing contracts, trading across borders and the ease of closing a business were the parametres on the basis of which the report was prepared.
The report added that the cities most conducive to business, where a unit can be started in the shortest possible time (in 30 days), are Mumbai and Noida. In terms of cost, it is least expensive to begin in Patna.
Ahmedabad, Jaipur, Chennai, Indore, Ranchi, Guwahati, Kolkata and Kochi are some other places where setting up shop is easy.
Speaking at the release of the report, Industry Secretary Ajay Shankar said: "The timing of the report is just right because India is ready to take on any super power."
The report also states that compared to economies worldwide, cities in India lag when it comes to closing a business and paying taxes.
STATE Bank of India has launched two special home loan schemes that assure low interest rates in the first three years, upping the ante for its rivals in the mortgage market, which has turned bullish following a pickup in home sales in May.
HDFC has said it will take a view after the Budget, which is only days away. ICICI Bank said it has reduced interest rates in line with the movement of systemic rates and deposit costs since December `08. "We believe that the home loan segment has robust potential and we would continue to focus on this segment," said an ICICI Bank spokesperson. LIC Housing Finance--the second-largest mortgage finance company--has also reduced home loans for existing borrowers by 50 basis points.
The intensity of the competition between SBI and HDFC is evident from claims and counter-claims from both sides on the superiority of their product. "Even if the borrower gets a better deal for the first three years, his payment over the remaining tenure of the loan will be lower under an HDFC loan," said HDFC joint MD Renu Karnad. The institution's chairman, Deepak Parekh, had recently announced a possibility of lending rates coming down if there is a decline in cost of funds.
According to Ms Karnad, there has been a remarkable pickup in home sales. "We are seeing this because of a real reduction in property prices. Builders like Unitech and Lodha have brought down rates in Delhi and Mumbai and are seeing growth in sales." She added that the pickup in sales was so sturdy that prices have started picking up again--a perception echoed by SBI. "There is a definite pickup in home purchases partly driven by a fall in cost of loans and real fall in property prices. There are pockets where the resurgence is so good that property prices have started picking up; it has come a full circle quickly," said an SBI official who did not wish to be named.
Startups weighing options to make it big in Bangalore should gear up for more challenges with a survey pinpointing the city to be one of the most difficult places for any any new venture. The report is based on various parameters on setting up industrial and commercial activity such as permits, notifications and inspections in 17 cities across the country, and it puts Bangalore in the 13th position.
International Finance Corporation (IFC), an arm of the World Bank conducted a research in Indian cities and had put Kolkata last in terms of business friendliness. Whereas report puts Delhi, Mumbai and Chennai on 6th, 10th and 15th positions respectively.
According to the report titled 'Doing Business in India 2009', India's ranking has been dropped six places to 122 among 181 countries. India is still not very favourable for doing business and starting new ventures in the country is a 'time consuming affair'. The country faces several bottlenecks, including bureaucratic hurdles, in making its environment attractive for businesses.
Penelope Brook, The acting vice-president of the financial and private sector development, World Bank Group said, "Red tapism and multiplicity of authorities are few bottlenecks that need to be addressed to do business in Indian cities more effectively." To start a business in shortest time in Mumbai and U.P.'s Noida, in just 30 days, wheras Bangalore takes 40 days to start business by obtaining all kinds of permissions.
Despite the drop in ranking, the study says the ease of starting and operating a green-field project in India has improved owing to significant reforms.
The Budget may bring some good news for home loan borrowers who are yet to get possession of their houses. Finance minister Pranab Mukherjee is considering providing tax rebate on home loan repayment even before the borrower gets possession of his property. The catch, however, is that the buyer must take possession of his property within a year.
This move will provide a boost to the real estate industry that has been reeling under impact of severe economic slowdown. Projects facing delays or staggered out completion schedules may also get a fresh lease of life. This is because renewed interest among buyers to claim full exemption on both principal and interest paid during the year may lead to early completion of projects. Mukherjee is likely to make an announcement in this regard in his budget proposals on July 6.
At present, tax benefits are available to home loan borrowers only when construction of the property is completed and the house is handed over to the buyer before the end of the financial year. Though the principal amount repaid to the bank before the possession of the property is not eligible for tax benefit in the particular year or any subsequent year, interest payable for the period gets tax exemption in the five subsequent years in equal installments.
Under the proposed tax structure, both the principal amount as well as the interest paid on the loan before possession will be eligible for tax rebate, according to a finance ministry official. The entire interest amount paid before the possession will be granted tax rebate in one go, compared with five installments at present.
A spreadsheet with the rental rates for various real estate properties in Gurgaon is given below. You can edit this spreadsheet if
you have a google account (Click here for editing.)
If you need a user name and password to access this sheet, without having or creating a google account, please write to Qubrex@gmail.com and we will email this spreadsheet in Excel's xls format to you.
For details please call Qubrex Properties www.qubrex.com at 98 716 70006, 98 105 76028, 98 119 87371.
A spreadsheet with the calculations of the total price for various real estate properties in Gurgaon is given below. You can edit this spreadsheet if
you have a google account (Click here for editing.)
If you need a user name and password to access this sheet, without having or creating a google account, please write to Qubrex@gmail.com and we will email this spreadsheet in Excel's xls format to you.
Karnataka's largest special economic zone (SEZ) Nandagudi SEZ promoted by Mumbai-based SKIL Infrastructure Ltd, faces termination of contract.
Reason: The company is yet to start land acquisition despite getting in-principle approval two years ago.
The SEZ Act and Rules suggest that approved SEZs should start the land acquisition process within two years from the date of approval. Nandagudi SEZ near Hoskote, approved by the Kumaraswamy government, got in-principle approval by the Centre's Board of Approval (BoA) in August 2007. But the company, which promised to establish a multi-product SEZ by investing over Rs 15,000 crore on 12,350 acres land, has so far not started acquiring land.
A commerce and industries department official said, "SKIL so far has not started acquiring land. Though it is consent acquisition, companies normally bring the development to the department's notice. According to SEZ rules, they should start acquiring land within two years from the date of approval, failing which the agreement is automatically terminated.''
Nandagudi SEZ
To have covered over 36 villages near Hoskote
30 km away from Bengaluru International Airport
55 km from city
SKIL Infrastructure's target industries: agro and food processing; IT/ITES; automobiles, micro-electronics; diamond processing; bio-technology; knowledge process outsourcing; textiles; healthcare; electronics and logistics
Residential property builders have something to cheer if the result of a poll of property brokers conducted by Edelweiss Capital is any indication. The pan-India poll shows that property brokers expect prices of residential property, especially in Mumbai and the NCR region, to increase around the budget.
"Throughout India, property brokers have turned positive on the Indian residential realty market in the past three months," the poll said.
There has already been an increase in the number of transactions in the past one month against nil in the preceding five months, it said. The poll was conducted among 100 odd property brokers in the first-half of June in the four cities of Mumbai, NCR, Bangalore and Chennai and 20 other micro-markets.
A significant change in the sentiment after the elections and preceded by strong stimulus measures have contributed to a strong recovery in volumes and prices, the release said. According to the poll, nearly 87 per cent of the brokers surveyed endorsed that transactions had indeed increased in the past one month. Around 53 per cent of the brokers surveyed expect the price trend to be positive over the next 12 months.
Among other key findings of the poll, 96 per cent brokers believe prices have fallen over the past one year, while 70 per cent of total respondents expect prices to stabilise over the next three months.
Edelweiss periodically tracks residential property market closely and the previous survey was conducted in the first week of April among potential buyers at a property exhibition in Mumbai.
"One of the key findings then was that while 52 per cent of the buyers thought prices were attractive, a whopping 79 per cent had said they would wait for further correction," the release added.
In a bid to address the acute housing shortage in the national capital, its development authority will build 65,000 houses in the next four years, Urban Development Minister Jaipal Reddy announced here Monday.
'Of these 65,000 houses, 40,000 will be for the urban poor and low income group, and 10,000 will be for the middle income group,' Reddy told reporters while releasing the 100-day agenda of his ministry. The houses would be built by the Delhi Development Authority (DDA), he said.
'Our target is to add 10,000 houses for the low income group every year,' the minister said. 'Apart from that, 15,000 houses will be available between 2009 to 2011.'
The government will also provide another 47,500 dwelling units under the slum rehabilitation programme by March 2013.
Referring to the slump in the realty sector, Reddy said: 'We cannot help companies but we can give incentives to buyers. Market forces will decide the rest.'
He said the finance ministry has been asked to cut interest rates on home loans to 7.5 percent for housing units costing up to Rs.30 lakh.
'We also expect a Real Estate Regulatory bill in 2009,' he added.
The Dubai developer behind the world's tallest building plans to merge with three rivals owned by the sheikdom's ruler, in a consolidation aimed at better coping with a global meltdown fueled weakness in the onetime Arab boomtown's real estate sector.
In a statement posted on Sunday on the Dubai Financial Market's website, Emaar Properties said its proposed merger with Dubai Holding subsidiaries Dubai Properties, Samar Dubai and Tatweer would create a company with an asset base of 194 billion dirhams ($52.8 billion) and a debt of 13.4 billion dirhams, or roughly 7% of the total assets.
"The proposed consolidation would create a robust and strategic asset base while joining the strengths" of the various companies, Emaar said.
The deal, first outlined Saturday in a release by Emaar, marks a push to shore up a Dubai property market that has seen values plunge by as much as 40% in the first quarter of 2009 as the global economic meltdown hit the sheikdom hard.
Layoffs in Dubai's largely expatriate work force compounded the oversupply of units in the semiautonomous city-state, squeezing prices. The tougher financing climate also led to project delays and cancellations, and the fallout from the overall economic weakness further tarnished the image of an emirate whose famed man-made islands, soaring skyscrapers and rampant consumerism helped cast it as a rising global business powerhouse.
There are many costs in buying or selling homes that aren't factored in. The result: higher-than-anticipated expenses
When it comes to real estate investments or simple purchase of a residential house, most people do not factor in all the costs. In reality, there are several which total up to a huge number. But they are often ignored or accepted as a common practice.
Typically, while buying a house, one suddenly realises that the budget has gone haywire completely because additional costs have to be incurred. Let's look at these different costs in a real estate transaction?
There are indeed many and most of the major ones have been outlined below. A special one needs specific mention, which is the conversion from Carpet Area to a Super Built Up Area. Carpet Area is the actual sellable area that you should measure with your tape, whereas super built up area includes all common areas such as lifts, parks and things that most people will never know of.
This conversion from Carpet to Super Built Up is called loading and this often varies from 30-50 per cent, depending on the project and type of property. Let's take an example. A premier builder is selling his flats in Goregaon with a super built up area of 1,200 sq.ft. Quoted price is Rs. 12,000 per sq ft and thus the cost without including any of the costs given below would be Rs 1.44 crore. However the actual carpet area is just 875 sq ft (loading of 37.5 per cent) and hence the actual carpet area cost comes to Rs 1.44 crores/875 = Rs 16,457 per sq ft. This is outrageous and yet every real estate seller, be it developers or individuals, get away with it as it has become an accepted norm in a real estate transaction.
BASIC COSTS
Stamp Duty: 5 per cent - varies across states.
Registration Charges
Brokerage: 2 per cent
Parking Charges Rs.3-10 Lakh
Water Connection and Electricity Deposit l Maintenance: Rs. 5-15 per sq. ft. and upwards depending on the type of property
Wear and Tear.
Legal Fees and Litigation Costs
Home Insurance l Interest Cost: If you have taken a home loan
In the above example the stamp duty would work to be Rs 1.44 Crore X 5 per cent = Rs 7.2 lakh
Registration Charges: Rs 0.3 lakh
Brokerage: 2 per cent will be Rs 2.88 lakh
Parking Charges = Rs 5 lakh
Other Charges: Rs 1.2 lakh
Total of basic costs(one time): Rs.16.58 lakh. Now the cost to you has just gone up from Rs 1.44 crore to Rs 1.60 crore
Long Term Capital Gains: 22.66 per cent if sold after 3 years
Short Term Capital Gains (STCG): 33.99 per cent if sold before three years
Affordable housing has given residential segment a leg up but commercial property developers are still not out of the woods.
The demand for affordable residential units may have witnessed an uptrend in the recent past, but commercial real estate refuses to show signs of revival.
"The demand in the residential sector may have picked up in the recent months but the same cannot be said of the commercial and office spaces," says Anuj Puri, chairman, Jones Lang LaSalle Meghraj.
Demand for office space relies largely on the IT sector, which is severely hit by recession in the US and Europe, he adds. The sector's business flow will depend on how quickly the global economy recovers. "Around 80 per cent of demand for office space comes from the IT sector."
Consider this: IT SEZs formed a majority of the notified tax-free enclaves. But, the economic slowdown and the concomitant credit crunch has forced many developers to seek de-notification of their SEZs, a majority of them meant for the IT sector.
In fact, the Board of Approvals (BoA) in the ministry of commerce is considering de-notification proposals of SEZs by DLF, Unitech, Ansals API, and Parsvnath, among others.
It's not SEZs alone. Even big commercial projects have proved to be damp squib. Country's largest developer DLF bagged the rights to develop the 34.6 acre-Dwarka convention centre, in Delhi, with a winning bid of Rs 901 crore. However, the project has not seen the light of the day as the developer does not want to divert funds towards its development, ostensibly because it has a long gestation period.
Similarly, Faridabad-based developer BPTP surrendered the much-hyped Rs 5,000 crore 95-acre plot in Noida to the Uttar Pradesh government, as it could not garner enough funds to pay for the plot.
Says Ramesh Menon, founder director, Certes Realty, a Gurgaon-based real estate consultancy firm, "Projects that have a long-gestation period and require huge investments will not be favoured by the developers at the moment." Menon argues that liquidity situation has been so grave for the developers that they want to start only those projects that have the potential to get returns immediately. "It's due to this reason that the low and mid-income residential projects are being launched."
A senior executive of Unitech, on conditions of anonymity, told FC Estate that though the company is raising around $325 million (Rs 1,560 crore) through QIP, yet the liquidity situation would improve only if end-users invest in the recently launched projects of the company. Unitech had to tweak its ultra-luxury project Grande, in Noida to attract mass buyers. The developer is now willing to sell plots in the 340 acre project, which was earlier, envisaged to have only luxury penthouses.
Even as almost all the ongoing projects of Chandigarh Housing Board (CHB), including the general housing and slum rehabilitation schemes, are running behind schedule, the Board is currently planning three more general housing schemes.
Though those allotted houses in the ongoing projects continue to suffer due to the delay in the completion of projects by several years, CHB seems to be in no mood to speed up the process.
The three general housing schemes, each in Sector 51-A, Dhanas and Maloya have already materialised. These schemes, coming up on an area of around 8 acres each, would be launched within this financial year.
The Board is in the process of acquiring land approvals and allotments from the Administration.
"These schemes would come up along with the ongoing slum rehabilitation projects in Dhanas and Maloya. Another site in Sector 51-A measuring around 8.5 acres has been identified as the general housing scheme for one, two and three-bedroom dwelling units. Once the approvals come, these projects would be announced. This would be followed by the process of inviting applications for the draw or auction, which would be decided accordingly," a senior Board official said.
Even though property prices have ceased to increase in Gurgaon in the 12 months, the state government has implemented a routine hike of 10-12 per cent in collector rates (also known as circle rates) for land registration.
The new collector rates for the `hyper-potential zone', as Gurgaon is tagged in revenue records, would be effective from June 29.
In DLF City (Phase I-IV), where the market rate of land ranges between Rs 50,000 and Rs 70,000 per sq yard, the collector rates has been increased from Rs 19,000-21,000 to Rs 21000-Rs 23,000.
In Sushant Lok (Phase I-III) the collector rates now stand revised at Rs 20,000-21,000 as against Rs 18,500-19,000 per
sq yard.
According to government officials, the hike in collector rates is a routine exercise and has nothing to do with the realty market situation.
"The revenue department has its own targets to accomplish on a yearly basis and revision of collector rates is part of the routine exercise. It was during 2007-08 only when we had hiked collector rates by 25-30 percent as there was a major jump in the realty market at that time in Gurgaon," he added.
New collector rates have also witnessed a jump of 10 per cent in HUDA sectors. But collector rates in commercial sectors have been revised to a maximum of Rs 55,000 per sq yard from last year's Rs 35,000 per sq yard.
In villages, maximum hike has been implemented in Dhundahera village, abutting industrial sector Udyog Vihar where the collector rates have been increased to Rs 1.5 crore per acre from last year's Rs 1 crore.
Largest public sector construction company to come up with residential buildings in Capital While Delhi's population has increased from 1.38 crore in 2001 to 1.62 crore in 2006, the DDA managed to add only 13,000 houses in the intervening period.
some good news for Delhi residents who want to buy their dream home.
The National Building Construction Corporation Limited (NBCC), the largest public sector construction company, will launch its first housing scheme in the Capital early next year.
Up for grabs would be 2,500 flats,priced between Rs 25 lakh and Rs 60 lakh.
The NBCC has built several infrastructure projects across the country. One such project in the Capital is the Pitampura TV Tower.
It entered the real estate sector recently. The first residential housing project that it started was in Rajarhat, Kolkata, known as VIGYOR Towers.
In the Capital, the flats will come up on 30 acres of land adjoining the Ghitorni metro station on the MehrauliGurgaon road. They will be ready by 2012.
Speaking to HT, Arup Roy Choudhury, chairman and managing director of NBCC said, "We have a land in Ghitorni, which we are planning to develop for residential housing. Details are being worked out for the housing project which will be launched early next year." This would be the PSU's first housing project in Delhi.
"There is a huge shortage of housing in urban areas. We ventured into the sector to fill the huge demand-supply gap in the housing sector by providing affordable housing," said Choudhury.
Earlier this year, the construction company had launched two housing schemes -- in the mid and low-end category at Gurgaon in Haryana and Loni in Uttar Pradesh.
It is coming up with 4,000 flats in Gurgaon for employees of the Central government and public sector units.
The flats are priced between Rs 22 lakh and Rs 45 lakh.
Similarly, in Loni 2,000 flats are being developed in the mid segment category.
Fifty per cent of the flats will be reserved for government employees. The rest will be open to the public. These flats are priced between Rs 7 lakh and Rs 15 lakh.
Presently, there is a huge shortage of affordable housing in the Capital with the Delhi Development Authority -- the sole development body in the city -- failing to meet the housing requirement.
The Punjab Government's announcement to set up a Rs 400 crore expressway on the Southern bypass alongside Sidhwan Canal in Ludhiana has provided a fresh breather to the real estate business on the canal banks.
The project - under which a 26 km stretch of single road running along Sidhwan Canal would be converted into a four-lane one -- has caught the fancy of many investors, who have begun bombarding real estate agents and colonisers with enquiries about available pieces of land.
Interest has been renewed soon after the state government prepared the project and invited tenders for the same. With Ludhiana bursting at its seams and residents on the constant look out for more residential areas, especially on outskirts, the new colonies mushrooming on this road have generated a great deal of interest.
Colonies that had come up in the past did not have many takers. Colonisers had tried all possible means to attract buyers. Recession had proved to be a second blow to the business here. But no more. Real estate watchers say the area would go the South City, Rajgarh and Janpath Estate way, which are now inhabited by the masses. These areas are also located along the Sidhwan Canal on the other side of Ferozepore Road.
The colonies located on the other side are within seven km from Ferozepore Road and the new colonies mushrooming are also within 7-8 km from Gill Road. Hence, the interest.
The circle rates in Gautam Budh Nagar district are expected to go up by 11 to 20 per cent, which will in turn push up the cost of constructing houses in Noida and Greater Noida. Besides, the location of the land will also have a bearing on the proposed increase in the circle rates.
The process in this regard has already been set in motion, sources say.
According to S.N. Rai, assistant commissioner (stamps), a meeting at the administration level has already been held to determine the quantum of increase in circle rates. Besides, data is being collected and collated for tehsil-wise increase in circle rates.
This time the location of the land will have a bearing on the extent of increase in the circle rates.
The prime location land will command a higher circle rate than the land located in the interiors.
Similarly, difference in the circle rates of posh sectors and normal sectors will also be maintained this time, the sources said.
While in Sadar and Dadri tehsils areas, circle rates are expected to be hiked significantly, but in Javer tehsil also some increase will be affected.
A committee under the chairmanship of additional DM (finance) Shiv Kant Diwedi has been set up for determining the quantum of increase in circle rates.
The AIG (stamps) and SDMs of all the three tehsils will also be members of the committee.
Observing that property transactions under the General Power of Attorney (GPA) is adversely affecting the economy and leading to growth of real estate mafia, the Supreme Court has directed the government to suggest measures to check the trend.
"If GPA transactions were allowed to go on, it would lead to criminalisation of real estate transactions, besides allowing people to stash away their undisclosed income and assets," a bench headed by Justice R.V. Raveendran said.
The apex court requested Solicitor General Gopal Subramanium to appear before it on the next date (in August) to give suggestions on behalf of the Centre.
The direction came on a petition filed by Suraj Lamp and Industries (P) Ltd that was allegedly cheated by some persons of a two-acre land in Haryana's Gurgaon district. One of those allegedly involved in the case was a former state minister and his father.
In a GPA transaction, a person surrenders all his rights to another person (under the General Power of Attorney) who, in turn, executes sale of the property without paying any stamp duty/registration fees to the government.
Such transactions are only by way of mutual agreements without getting the sale deeds registered as required under the law, often to avoid payment of registration fees to the government. Many of these transactions end up in litigation as those claiming GPA rights cheat purchasers.
But the SC said: "Whatever be the intention, the consequences are disturbing and far-reaching, adversely affecting the economy, civil society and law and order."
Almost every real estate company has begun restructuring its loans, thanks to a bit of flexibility shown by the Reserve Bank of India in lending norms for this beleaguered sector
Real estate prices have declined sharply. Banks, notwithstanding the directives from the government, have been proceeding very carefully in disbursing loans to this sector. True, credit to the real estate sector has eased, but the prices at which properties are being acquired are now being scrutinized much more carefully than before, and the margin money requirements more cautiously calibrated.
DLF Ltd appears to have witnessed the biggest drop in prices.
Almost every big property has witnessed price drops by 30-50% (see table), and there are fears that there could be a further drop of 10-20%. Almost every real estate company has begun restructuring its loans, thanks to a bit of flexibility shown by the Reserve Bank of India in lending norms for this beleaguered sector. It is also the one in which many political bigwigs have significant interests.
DLF Ltd appears to have witnessed the biggest drop in prices. That could explain why this group is trying to focus on infrastructure development as its USP (unique selling proposition) to bring back some more value to its properties. This could explain the tremendous interest it has shown in the proposed 5km private metro in Gurgaon. The project was envisaged by DLF (now by the Haryana government) to promote its housing colonies, particularly Cyber City, which has a huge inflow of employees from Delhi and other areas.
At the time of going to press, the DLF-Infrastructure Leasing and Financial Services Ltd (IL&FS) consortium remains the only bidder for this project. The consortium includes two IL&FS group companies (ILFS Transportation Network Ltd and ITNL ENSO Rail Systems) and DLF. The bid now goes before the state's cabinet for approval. The bid value is not known, but should be interesting for infrastructure watchers because all the other Metro rail projects with which IL&FS has been associated have been priced significantly higher than those at which the Delhi Metro was built. Considering that steel prices, financial costs, and the cost at which equipment can be purchased have dropped since then, there are good reasons for the costs dropping, not increasing.
Finally, decks have been cleared for the construction of mini secretariat part-II in Sector 1, here. In a recent meeting with Haryana government officials in Ambala, the state government gave the green signal for land acquisition for the construction of new building. The government has decided Rs 20 lakh per acre as compensation for landowners.
With this approval, all Panchkula administration officials will come under one roof. At present, the mini secretariat building houses DC, SP, SDM's and other important offices. But due to space constraints, social welfare department runs from its reception counter.
With the coming up of mini secretariat part-II, important departments like Red Cross, child welfare, transport, sarv siksha, district education and primary education, among others which are running from rented premises in different sectors of Panchkula will have a common address.
The administration has finalised around two acre land near mini secretariat for the additional block. Officials said land acquisition process would be completed in two to three months, after which the public works department would make estimate for the project. Sources said tenders would be floated after the finalisation of estimate.
State Bank of India (SBI), the country's largest lender, has announced a 50 basis point cut in its benchmark prime lending rate (BPLR) to 11.75 per cent.
The cut would be effective from Monday, the bank said. With this, SBI has lowered its BPLR by 200 basis points since November 2008, when the Reserve Bank of India signalled a soft interest rate regime.
The move comes within a fortnight of finance minister Pranab Mukherjee's advisory to public sector banks to lower their lending rates. Union Bank of India and United Bank of India have also announced rate cuts. United Bank today said it would cut its BPLR by 25 basis points to 12 per cent from July 1.
By staggering the rate cuts till the end of the first quarter, banks would be able to show a healthy net interest margin (NIM) for April-June, said an executive with a private bank.
While SBI had lowered deposit rates four times in the first quarter of the current financial year, it had not cut its BPLR, fearing an impact on NIM. It had last lowered its BPLR in January. However, since then, it has lowered lending rates for home and auto loans and for small and medium enterprises.
The bank is seeing rigidity in cost of funds as it had mopped up retail deposits by offering 10.5 per cent a year for 1,000 days. While it is unable to reset interest rates on these deposits up to October 2011, its earnings from advances will drop immediately after the rate cut. As a result, SBI's NIM fell by 14 basis points to 2.93 per cent at the end of March 2009, as against 3.07 per cent a year ago. In the fourth quarter, its NIM fell 22 basis points as it raised around Rs 1,000 crore a day through retail deposits in the third quarter and the early part of the fourth quarter.
But SBI executives said the BPLR cut would hit the bank's NIM by just five-six basis points.
Sobha Developers' failure to push its qualified institutional placement (QIP) through may have muddied the waters for others looking to raise money through that route for some time to come.
A host of real estate players are in the queue to raise money from the equity markets, including Delhi-based Parsvnath, Omaxe and Ansal API, Mumbai's HDIL and Peninsula Land and Bangalore's Puravankara Group.
Together, these players intend to raise a whopping Rs 8,000 crore. Bangalore-based Sobha, which had opened its QIP on June 18, finally called it off late on June 22.
Poor investor response was to blame. "Sobha received very small commitment from buyers, which was not even close to 50%, so they called it off," a source said.
The company was looking to raise Rs 600 crore through the QIP route despite having shareholder approval to raise Rs 1,500 crore. The company has net debt of Rs 1,900 crore.
"Net debt should remain unchanged at Rs 1,900 crore over March 2009 to March 2012," Anand Agarwal, research analyst with Credit Suisse, said in a June 23 report. "Even if it can raise half this amount, it would substantially lower the company's gearing and reduce the interest expense in future years."
Unbelievable, but true. A Pune-based builder offers apartments at half the existing rate; Mumbai builders say it's not possible here
A leading builder from Pune has done the unthinkable. Krome builders is offering 1BHK and 2BHK flats on the outskirts of Pune at half the existing rate in the area.
Krome is planning to construct a 425 apartment complex spread over 400 acres in Vishrantwadi, which is a 20-minute drive from Koregaon Park a posh Pune locality.
While the rates in Vishrantwadi are between Rs 2,800-3,500 per sq ft, Krome is offering flats at Rs 1,500-2,000 per sq ft.
This means a flat measuring 300 to 750 sq ft will cost you anywhere between Rs 5 to 15 lakh. The project will be launched in August and bookings start in the same month.
Quality conscious
Nainesh Nandu, managing director, Krome, said, "With the slashed rates, the profit margin will be a little less. But we will buy construction equipment in bulk and optimise our resources.
We plan to use vitrified tiles, aluminum windows and sanitary ware of the best quality. If people think we will compromise on quality, they are mistaken. They can have a look at our other projects."
Giving relief to the allottees of residential plots, Haryana Urban Development Authority (HUDA) has decided to adopt uniform pattern of projections in HUDA plots and necessary instructions for suitably amending the zoning plans have been issued to the Zonal Administrators.
Disclosing this here on Wednesday, Haryana Chief Minister Bhupinder Singh Hooda who is also the Chairman of HUDA, said that henceforth, rear projectons at roof level would be allowed to the extent maximum 1.8 meters width subject to the condition that a minimum 3.0 meters clear open space always remained available by considering clubbed set backs of back to back plots.
The projections in front set back could be allowed up to 1.8 meter width provided at least one-third of front set back area remained open to sky.
However, the above provisions would not be applicable to the plots governed by Architectural frame controls, he added.
In case of buildings where projections had already been constructed, but now fell within above norms, the same might be compounded by considering as sanctionable construction raised in variation of approved plans, said Mr. Hooda, adding that very clear cut instructions to field offices had been given to avoid any delay and back references that the amended provisons/ relaxations would apply to all the cases whether past, present or future.
The Haryana government will construct 37,513 houses in phases for the people belonging to weaker sections of the society in the State, Chief Minister Bhupinder Singh Hooda said here on Tuesday.
These houses will be constructed by Haryana Urban Development Authority (HUDA) and 15,311 of them will be raised during the current financial year at the cost of Rs 460 crore, he added.
Mr. Hooda said the tender for the same has already been issued.
He said 7,352 such houses are already under construction at Ambala, Faridabad, Gurgaon and Panchkula.
German retail giant Metro Cash & Carry is floating a real estate joint venture with local developers for its store network across
the country. Under this proposal, Metro will transfer its land bank into the JVs and sell a majority stake to realty firms depending on the development potential at each location.
"This is an alternate to help us monetise the surplus floor space index (FSI) in a market with significant real estate costs," a Metro spokesperson said. Globally, it will be Metro's first such initiative to tap real estate potential associated with its core business. The world's fourth largest retailer entered India through 100% wholesale trading arm in 2003.
Metro operates six big box distribution centres in the country, and has entered into an MoU with Punjab for starting six stores. Metro also plans to expand in existing markets such as Karnataka, Maharashtra, Andhra Pradesh and West Bengal though the company has not officially commented on this.
Metro AG's Indian unit holds between 7-8 acres of land at each of the locations where it proposes to set up a store. Based on FSI calculations, this has thrown up opportunities for raising some money through stake sales after the store development . Floor Space Index or (FSI) denotes the amount of construction that can be done on a particular piece of land.
Firms have modified development plans and project formats, but analysts say there is still some way to go
India's two largest real estate developers by market value are finding their way out of the woods, say analysts.
DLF Ltd and Unitech Ltd are showing the first signs of surviving their worst crisis ever.
The popping of the Indian real estate bubble and a severe funds crunch had left these firms gasping for cash between October and March even as sales halved despite declining property prices. But they have since revamped their business strategy and raised funds. However, worries continue about whether the two developers can sustain themselves if sales don't pick up and cash flow is affected, if home interest rates inch upwards and revenues from asset sales do not meet expectations.
The firms modified their development plans and project formats, sold non-core assets, ventured into affordable housing, stalled capital intensive projects such as shopping malls, and exited large townships. The process culminated in May, when Unitech raised Rs1,620 crore through a qualified institutional placement (QIP), and DLF's promoters sold a 9.9% stake to investors to raise Rs3,860 crore for buying hedge fund DE Shaw and Co. Lp's stake in its unit, DLF Assets Ltd.
In a QIP, equity stake is sold directly to institutional buyers such as banks to raise money.
The May stake sale helped DLF repay only Rs2,200 crore out of its Rs16,358 crore debt, and it has restructured about Rs2,000 crore of short- and long-term loans.
For Unitech, QIP has solved only a part of its total debt overhang. The firm currently has Rs7,800 crore of debt.
Share prices of DLF and Unitech have surged since 1 April on account of the funds raised. DLF's shares, which were trading at Rs177.1 on 1 April, closed at Rs316.40 on Tuesday, climbing 78.5%. In the same period, Unitech's share price has jumped 120% to end at Rs77.05 on Tuesday.
State-run housing finance firm Housing and Urban Development Corporation (HUDCO) is likely to cut its lending rates by up to 1.25 per cent.
It has been decided to cut lending rate by up to 125 basis points, sources said.
Earlier, HUDCO had reduced its lending rate by 50 to 125 basis points with effect from January 1, 2009.
The company had reduced its rate of interest on project loan by 50 basis points and individual home loan (Hudco Niwas) between 100 and 125 basis points for loans up to Rs 20 lakh for floating rate of interest.
For home loans up to five years, the interest rate was lowered to 10.25 per cent from 11.50 per cent, a cut of 125 basis points.
For home loans with payback period beyond five years, the interest rate was cut by 100 basis points to 10.75 per cent from 11.75 per cent.
The real estate price graph has moved upward once again with developers in Mumbai having started to jack up their rates, capitalising on the recent stock market recovery.
Amid the economic downturn in the last ten months, investors had exited the market while buyers could not afford the prevailing rates. This had forced developers to reduce prices month after month, sending rates 30 per cent below peak levels.
The revival comes amid the stock market rally and the return of some investors in the sector. Cashing in on the speculation, many developers have increased their rates by Rs 100 to Rs 1,000 per square foot (psf) over the last one month.
Lodha Developers, which had priced its Casa Bella Project at Dombivli at Rs 1,998 psf in March this year, has now increased it to Rs 2,088 psf. The rate for its under-construction Thane Casa Univis Project has also gone up, while Rustomjee Builders has increased the rates for its Urbania Project at Thane. Other developers to raise their prices include Akruti for its Thane project, Raheja and Gundecha at Andheri, Lokhandwala, Ekta at Kandivli, and Nirmal Lifestyle at Mulund.
Realty experts have termed this a bad move by developers at a time when many believe that rates need to go down by another 15 per cent to bring them within the reach of home buyers.
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Unbelievable, but true. A Pune-based builder offers apartments at half the existing rate; Mumbai builders say it's not possible here
