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India's largest real estate developer by market value, DLF Ltd, has slashed the pre-launch booking price of apartments at its debut residential project in southern Bangalore as the current slowdown dampens demand for realty.

DLF is now offering apartments at its proposed 80-acre gated community in Bangalore's BTM Extension for Rs2,775 per sq. ft, against Rs3,500 per sq. ft earlier. This means that a 1,310 sq. ft two-bedroom-hall-kitchen (BHK) flat in the project would now cost Rs36.35 lakh, or about Rs9.5 lakh cheaper than its initial price. The current market rate of property in the area is between Rs3,000 and Rs3,500 per sq. ft.

The project, however, is yet to receive mandatory approval from the Bangalore Development Authority.
"We have opened pre-launch bookings and are expecting to get the BDA approval in the next two-three months after which we begin construction," said an official at DLF Homes requesting anonymity as he is not authorized to speak with media. "The first phase (of the project), which will have about 700 units, will be complete in 24 months."

DLF did not respond to phone calls or an email sent by this reporter on Monday afternoon.

"This is an experimental price and they (DLF) are likely to slash it further for quick sales," said a property analyst from a leading international real estate advisory, which works closely with DLF. The analyst asked not to be named. "The company had a soft launch of the project on 15 November where they invited close contacts...(the) final booking price will be determined based on the response they get in the next couple of months," he said.

As analysts forecast a correction in property prices in the coming days, developers are coming out in the open to admit slower sales and lower demand.

Bangalore-headquartered Sobha Developers Ltd recently announced an 8% reduction in prices across all its projects. Another city developer, Golden Gate Properties Ltd, is offering possession of condominiums at its Golden Grand project at 75% of the property value with the option to pay the balance amount in five years.

Editor's Note: After we received this story, we talked to Raheja Developers Pvt. Ltd's Mr. Harinder Dhillon (GM - Marketing, 9971091903) has given us the following response.

-- Start of Rahejas Response ---

We are a customer oriented company & focus not only on the quality aspect but also track the time overrun. Excavation work at the Atharva site in Sector 109, Gurgaon is already complete in all respects. We are the only developers in the new Gurgaon master-plan who have commenced construction activity in the new master-plan sectors. As construction at the site is a great concern for our esteemed customers who have invested their hard earned money to us, we do value their eagerness & do assure that during the project execution, they are most welcome to see the quality and efforts as keen developers we put in our projects. We would request all our customers to keep faith in our organization and also in our projects, which will blossom into major landmarks in the city in the times to come. Our esteemed customers are most welcome to visit the project site now as well as in the times to come to see the progress for themselves.

Also, bank disbursements for Vedaanta commenced six months back by Bank of Baroda, PNB, Axis Bank, HDFC, LIC Housing Finance & PNB Housing Finance. For Navodaya, bank disbursements have already commenced three months back from Bank of Baroda as well as Union Bank of India. For Atharva, Federal Bank is disbursing down payment cases as well as installment payment cases.

The installment payment plans for all our projects are very much construction linked in nature. The application forms as well as agreement to sell installment payment plan section are testimony to the same.

We have already received the in-principal approval on the Atharva building plans & the copy of the minutes of the meeting of Building Plan Approval Committee held under the chairmanship of Sh. Dhare Singh, CTP, Haryana has been scanned for anyone’s reference.

The first page of the minutes is given below.

Click on the image to ENLARGE

The page of the minutes relevant to Atharva is given below

Click on the above image to ENLARGE.

The paragraph relevant to Raheja Atharva is

And the final line says that "the committee decided to approve the building plans subject to corrections and submission from NOC from the Airport Authority of India" ...

-- END of Rahejas Response ----

The submission that our website received is reproduced below.

Hello,

We have invested in Raheja Developers residential project Raheja Atharva in Sector 109, and the following is our story. We would appreciate it if you could help us resolve some of the issues mentioned below.

A legal notice has been served to Mr. Navin Raheja, Managing Director of Raheja Developers Pvt Ltd and is attached below.

Page 1 of legal notice to Mr. Navin Raheja of Raheja Developers Pvt Ltd. Click on image to ENLARGE

Page 2 of legal notice to Mr. Navin Raheja of Raheja Developers Pvt Ltd. Click on image to ENLARGE

In essence the story is as follows:

We received letter from Rahejas in Aug/Sept 2008 that stated "there have been favorable developments at Atharva. The Building plans have been approved after licence by the Director, Town & Country Planning, Haryana. The bhoomi Pujan was solemnized on 29th July 2008." This was false and the building plans have NOT yet been approved by the DTCP. The scan of the letter is below:

The full scan of the letter can be seen below:

Click on image to ENLARGE

Even though the plans had not been been approved, Rahejas as written in the 2nd page of the same Bhoomi Pujan letter, they went ahead and created the Flat-Buyers Agreement - which are already in possession of some of the buyers. How can a buyer agreement be made when the plans have not yet even been approved? Here is the page 2 of the letter telling about the Bhoomi Pujan

Click on image to ENLARGE

Now we are being pressured by Rahejas to make payments on this project. Coercion via sms, calls, demand notes etc is being made to buyers even though the company had agreed that it would not demand further payments till banks had approved and started disbursing loans. As plans have not yet been approved, and requisite papers have not been submitted to banks, no bank - except a minor one - are disbursing any loans. Despite this the company is threatening to impose interest on "late payments" if payments are not immediately made. And as a way out Rahejas is forcing people with longstanding relations with other banks to take their loans from the only bank - Kerala based Federal Bank - that is disbursing loans.

This only bank that is disbursing loans on Raheja Atharva even without the approval of the Building Plans of the Atharva project is Federal bank. And there is news in the market that the money collected in early payments was diverted to pay costs towards the land for Atharva - as the legal notice presented earlier state, it is almost sure that Rs 20,33,78,493 of the money that we paid was later used to pay for the land on which Atharva is to be built.

Accusations are flying, and now buyers in Projects like Raheja Vedaanta & Raheja Navodaya are also protesting that money is being demanded from them while there is no discernible progress on ground.

Please help us clarify what the actual situation is as we are getting very worried about the safety of our investments, and also the fact that we are being almost daily pressured by Rahejas to make more payments to them.

The payment plan has 3 columns - time linked schedule, a construction linked schedule, and the payment due. Even though the project as sold on basis that it is construction linked (column 2), it is now being claimed that it is actually time-linked (i.e column 1). This has caused major confusion amongst the owners who are gathering in force to dispute these claims.

We are not able to get satisfactory answers from the builder Raheja Developers ( telephone 011 406 11111) and would appreciate if other visitors on this forum can pool together their knowledge and experience to help us cope with this situation where our lifetime earnings are at risk.

Please share your experience on this forum via comments, or email to Shri Surinder Kumar Bangia bangia_sk AT hotmail.com who has filed the legal notice, or email to qubrex AT gmail.com who help run this website.

A row has broken out over a proposed location-based classification of homes in Bangalore, which residents say is too similar to a scheme previously held back due to unpopularity.

A number of activists are opposed to the change, saying it is too similar to the Capital Value System (CVS) which would have imposed a duty on homes based on their values.

The Citizens Action Forum (CAF) says the new criteria would see an increase of 20 per cent on property tax in the area.

The Times of India said critics claim the new plans are "old CV' wine poured into a revised SAS (Self Assessment Scheme) bottle".

Real estate market players and end users are calling for a public hearing and consultation on the issue, proposed by the Bruhath Bangalore Mahanagara Palike (BBMP), which organises property tax in the area.

The proposed legislation reads:
"The property tax shall be levied by the by resolution

passed as specified in section 106 at such percentage not being less than 20 percent and not more than 25 percent of the taxable annual value of a building, vacant land or both."

The law would come into force from "such date as the State Government may, by notification, appoint".

CVS rules for property tax have been applied in some regions but were held back from Bangalore after stiff opposition earlier this year.

"In addition to the delay, the current global financial crisis is also likely to change the supply scenario in the coming years as most of the planned projects are yet to take off," said Rajneesh Mahajan, director, retail services, Cushman & Wakefield India.

"The city's main streets, meanwhile, remained active though with a relatively slower demand over the last quarter. Rentals remained stable with a downward trend expected in the near-future. A few retailers who had committed to take up space are expected to re-negotiate their lease terms in the light of the present slowdown," Mahajan added.

Confirming the development, Shivram Malakala, executive director, Habitat Ventures, said, "Developers were deeply impacted by construction delays due to a sudden rise in raw material (cement, sand and steel) prices in the first-half of this year. This delay has affected many retailers who had planned to enter the market by September. Retailers normally eye the country's biggest spending period which commences in September and goes up to January."

During Q3, the city witnessed a few high-end retail space deals. The luxury mall `The Collection', on Vittal Mallya Road, Manzoni, a premium menswear store, Levi's store and a men's lifestyle store from Madura Garments have taken space.

"The increased interest from premium retailers in this micromarket is expected to take high-end retail activity spilling over to the adjoining Lavelle Road," said Mahajan.

"We are looking at divesting up to 100 per cent stake in all six properties, comprising 1,000 rooms. We are also talking to a few private equity funds for this, but a deal hasn't been clinched yet," said a top executive at Unitech. The executive also said the company had scaled down its target for hotel business. Instead of 15 hotels with 2,500 rooms as planned earlier, Unitech has decided not to go beyond the 1,000-room capacity.

"We are proceeding with our hotel business as planned earlier. Six of our hotels are under construction. The first will open in January 2009. Unitech is in the business of developing properties and looking at monetising its real estate assets. We are evaluating a divestment of equity at both individual assets as well as a group of assets. Depending on the price, we will be looking at minority or majority or outright sale in these assets," said Sanjay Chandra, MD, Unitech.

Unitech's first hotel project will be the 199-room mid-market property, which will be managed by Marriott and sport the `Courtyard' brand. A person briefed on the matter said that Unitech was seeking a valuation of Rs 250-300 crore for the property, but had been offered a lower Rs 200 crore by a private equity investor. He said the two parties may close the deal soon at the lower end of the band.

Other two hotels of Unitech, for which the company has management tie-ups with Marriott and Carlson hospital chains, will be ready in around two years.

Chandra said that Unitech planned to build 35 hotels, including 15 in the first phase. The company expected to raise $350 million through private equity in the current fiscal for its hotel business. The global financial turmoil, however, has made fund-raising difficult for real estate firms.

Jay Kinra, executive director, INC Developers said, "Manhattan home owners enjoy enormous floor plans of 6,500 sq ft with all the amenities and technology. Owners will also get a true feeling of exclusivity because there are only eighteen total homes, giving residents exceptional privacy and security."

Manhattan consists of two nine storeyed towers connected by a central core, with one residence on each floor. Each of the apartments, with an area of 6,500 sq ft on a single floor and an in-house swimming pool, has been designed to have three zones entertainment, living and service.

"Our portfolio is spread over 80 completed projects and over 6 million sq ft catering to residential, commercial, hospitality, IT/ITES, industrial and BTS clients. Meanwhile, answering to the growing demand for ultra high-end condominiums in today's market, Manhattan is our foray into super luxurious homes," said Hrishikesh Manjrekar, director, Amar Builders.

The building will use the latest integrated building management systems, and the features include a spa, a gymnasium, concierge services, a business centre, a conference room and wi-fi connectivity.

"I can only offer as much as I am comfortable with," said Sunil Mantri, chairman, Sunil Mantri Realty, while adding that if all goes well, he would not have to buy what he built and sold.

Manish Grover, VP (marketing), Sunil Mantri Realty, said the scheme was designed more to test the sentiments of buyers and the response had been overwhelming. Mantri Realty has about 1,000 units across the four projects with units in Sholapur priced at Rs 2,300 a sq ft at the lower end and Mantri Park in Mumbai at Rs 6,300 a sq ft. The apartment sizes vary between 728 sq ft and 970 sq ft.

Apart from the Mumbai project slated for completion in December, the delivery schedule for the other three projects is 18 months.

Sunil Mantri Realty's projects are in 15 cities such as Mumbai, Hyderabad, Bangalore, Pune, Nagpur, Solapur and Gwalior. The company has a land bank of 1,400 acres.

Of the total supply of 18.41 million sq ft in Mumbai, Delhi, Pune, Hyderabad, Bangalore, Chennai, Kolkata and Ahmedabad, barely 9.21 million sq ft has been absorbed in this period, says the report by commercial real estate services firm Cushman and Wakefield. The report also says that there has been no increase in office space rental. In fact, the report points out that rentals in prime commercial locations such as Nariman Point, Worli, Lower Parel, Andheri and Powai are likely to weaken. It goes on to add that corporate office locations such as Lower Parel and Bandra-Kurla Complex have had higher than average vacancy levels at 6% and 7% respectively.

Kaustuv Roy, Director, Tenant Strategies & Solutions, for Cushman and Wakefield says that there has been a steady decline in commercial rentals. While the best of buildings in Nariman Point have seen a decrease in rentals from Rs 500-550 per sq ft to Rs 400-450 per sq ft, in Bandra-Kurla Complex the most expensive transactions have been at around Rs 350 per sq ft as against earlier rentals of Rs 400 per sq ft and above.

Mumbai has witnessed an additional supply of 1.88 million sq ft of commercial space during the third quarter of 2008 while vacancy levels have been recorded at 26%. Much of this absorption is from earlier commitments and few new ones have been registered. Blaming the wait-and-watch policy adopted by corporates as the reason for low transactions, Roy said that this trend was expected to continue until early 2009.

"Already in recent months there have been no big transactions happening. Only smaller transactions of 5,000 sq ft and below are the ones that are going through. Transactions are generally taking a longer time. With the market going down, even tenants who have entered into a deal are asking for renegotiations,'' said Roy.

Peripheral locations which have higher concentration of IT parks, have recorded higher than average vacancy due to restrained activities from the sector across the country, he said. For instance, peripheral locations in Chennai have a very high vacancy of 40%, Bangalore recorded a higher than average vacancy level of 14% while IT/ ITeS space in Noida witnessed as much as 16-17% of vacancy.

Shail Patwardhan had been looking for an apartment to purchase for self use since 2006. But while many developers had launched premium projects that would suit her lifestyle in Gurgaon, where she is part of the senior management of a leading IT company, most were promising delivery about two to three years down the line.

"In a booming market, I could see projects being launched but not much activity on the ground. I wanted a house to live in not to invest in, so I held back." While in 2006 it would have cost her Rs 3,200 per sq ft, she has now paid Rs 4,900 per sq ft. But she does not regret her decision.

"I wanted a house I could occupy immediately on purchase. If I had bought it in 2006 I would have had the pressure of paying the EMIs on the property which was due two years down the line and had to take care of the rental outflow as well. I also feel more comfortable that the house I am buying today is ready and there are no variables on when it will be delivered to me. Therefore, my purchase at this time is a good option."

Patwardhan is not alone in making such decisions. According to Ravi of True Value Homes of Chennai, there is a huge demand for completed property.

Of the 450 apartments in the Central part of the city launched two and a half years ago at Rs 2950 per sq ft xxxx have now been sold at Rs 4750 per sq ft. In the last four months alone he has sold 150 apartments at over Rs 1 crore each. This is despite the slowdown in the market. The buyer, in this case, was the end user, largely businessmen, professionals, corporate executives and even local bureaucrats. However, in his Sriperambudur project he has gone for affordable housing in the Rs 15-25 lakh category.

"Despite the so-called recession we moved 400 apartments by taking token advances of 5-10%. Since, Sriperumbudur is a thickly populated area the number of end users is very high. The property was priced at Rs 2,200 per sq ft and possession is within 18 months."

Suresh Jain of Vijay Shanthi Developers of Chennai, agrees that the end user is active when the property is ready built.

"Everyone was waiting for prices to come down in Chennai but since that has not really happened, end users, who had been watching from the 70-80% completion stage, are concluding deals by the time the property is 85% complete. In the suburbs, they know, the wait is longer for infrastructure to develop and the off-take has been a little slower. But where the properties are in the more affordable ranges, it comes under the end users' scanner once the columns are done. The customer knows that he would get occupancy within 12-15 months. The floor slabs take 4-5 months to complete and the top floor slab is laid within 6 months. The individual client then gets the flat ready for fit-outs. This stage is when the end user is very active."

"In the present market, fixed deposit is one of the most attractive and safest investment options for the customers. ICICI HFC offers its customers fixed deposits with triple benefits of safety, trust and returns. These deposits come with AAA and MAAA ratings from leading credit agencies CARE and ICRA respectively. These are the highest credit quality ratings and hence offer highest safety to its customers," the company officials said.

They said the company has annual, cumulative, quarterly and monthly income plans available for customer to choose from, as per their convenience. "It has a wide range of term, ranging from 1 to 7 years. The fixed deposits are available in more than 75 locations across India," they said.

To mention the ICICI Home Finance is a 100 per cent subsidiary of ICICI Bank. ICICI HFC is one of India's leading Home Loan providers. It provides end to end home solutions to make the entire home buying process easy, convenient and pleasurable for the customer.

"ICICI HFC provides gamut of services to individuals and companies in the real estate sector. It has a variety of options to choose from. Loans are offered for purchase of new homes, resale homes, land and home improvement. Besides this, the company also offers loan for purchasing commercial property and loan against existing property. The company also has a group of experts that guide you through retail and commercial property search," they said.

So what's in store for the prospective buyer? Will this move in any way impact buyer behaviour? And to what extent will demand go up in the real estate sector? Developers say although such a rate cut lowers the interest burden on a mid-income family, more dramatic cuts are needed to make housing affordable. "A 75 bps rate cut is not enough to fuel demand. It is too small a step to reverse the negative sentiment.

Construction of housing for the masses will only gain momentum which can be a catalyst for overall growth. Capital/credit should be made available at 7.5-8.5% per annum to credible developers and end-users," says Mohinder Puri, CEO and MD of Delhi-based Puri Constructions.

Agrees B P Dhaka, COO of Parsvnath Developers. He says housing demand will get a real boost when the interest rate on home loans falls to 9%. "This is a welcome step. But the real effect will come through only if interest rates come down to 9%. The present cut will only have a marginal impact."

Vijay Jindal, CMD of SVP Builders, feels it is expected that home-buyers will take advantage of this drop in interest rate but to a limited extent. "Last few months have been bogged down by the high home loan rates and the end-user was waiting for it to come down. However, a cut down of 75 bps is not going to turn the future of real estate. If the banks bring down these rates to a greater extent then probably we will see a rise in the number of people coming forward to buy."

At present, many PSU banks, including State Bank of India (SBI), Oriental Bank of Commerce (OBC), Central Bank of India (CBI) and Allahabad Bank, have reduced prime lending rates (PLR). Global real estate consultancy Jones Lang LaSalle Meghraj (JLLM) explains what end-users can expect after this cut and how the EMI component will get smaller. Depending on the actual home loan amount, one would be able to compute the difference now.

For example, if the EMI on a home loan of Rs 1 lakh taken on a 20-year tenure was Rs 1,200 earlier, it will now be Rs 1,000. This will either reduce repayment amount per month, or the repayment period. Typically, low-to-mid end families will opt for reduced EMIs per month since this will increase the money at their disposal. For the High Income Group (HIG) borrowers, monthly savings is not a very important consideration, so they will opt for shortened repayment durations instead.

Indian real estate developers have been reeling under the pressure of formidable forces -- steep borrowing costs now further worsened by a funds crunch and slackening demand for property. While real estate sector has traditionally been subject to market cycles, the deteriorating funding scenario appears to have caught the players off-guard this time round.

The pain appears to have reached such an advanced stage that the National Real Estate Development Council (Naredco) and the Confederation of Real Estate Developers' Association of India (CREDAI) have petitioned the Government to ease FDI investment and External Commercial Borrowing (ECB) norms and also formulate a policy for rescheduling of loans to facilitate the rollover of players' existing debt.

While most industries have been hurt by higher borrowing cost, the problem of availability of funds faced by the realty sector is a fairly recent development.

"Barring the last 45 days when the banking system faced liquidity issues, banks have always been funding the sector," says Ram Yadav, Head Finance and Strategy of Mumbai-based real estate redevelopment player Orbit Corporation.

Sushil Mantri, Chairman, Mantri Developers, also suggests that it could only be natural for banks to turn cautious under the current financial market circumstances not only in case of real estate but across various fields of businesses.

While larger players or players with sufficient private equity backing (early on) have managed to get money to fund their projects, albeit some at higher costs, the CREDAI's appeal is clearly suggestive of troubles in raising loans by the small- and medium-sized players.

Root of the problems
While it is quite usual nowadays to attribute every problem in every sector to the "global credit crisis", the genesis of the problems for the Indian realty sector can actually be traced a little way back, to 2007.

Anurag Mathur, Joint Managing Director, India, Cushman & Wakefield, summarises the issues thus: "Debt has always been a restricted commodity to the sector; the Government's move to tighten the screws in the sector to control inflation increased the cost of funds. At the same time, the crisis that began in the West resulted in drying of funds from sources such as private equity and other foreign funds; IPO market for the real estate too was the first to take a beating on the back of global market events".

A rare occurrence
If external debt funding had been the only issue, then property developers could nevertheless have generated some internal cash flows from completed projects to plough into the business? Property prices could also have been slashed to generate faster cash flows.

Vinayak Chatterjee, Chairman of infrastructure consulting company Feedback Ventures, traces the current crisis to a series of events, whose probability of occurrence, all at once, is rare and was therefore unexpected.

According to him the pull back of consumer demand as a result of higher interest cost, reduced the demand for ongoing projects; this was the earliest sign of trouble. He opines that this phenomenon was also observed in the dip in consumer loans -- be it vehicles, durables or homes.

• The near-term solution
  
• Hoarding land bank

While it has also to do with area available for high-rise group housing and commercial projects under the new Gurgoan-Manesar master plan nearing their earmarked limits, the spell of hectic construction activity in Gurgaon is likely to continue in the years to come. In fact, the number of licenses granted for group housing, plotted colonies, information technology parks and commercial projects in the Gurgoan-Manesar belt this year itself is a whopping 134 even as some out of a total of 237 licenses issued ever since the realty highpoint of 2005 have still to come on ground.

The slowdown
However, the demand slowdown and liquidity crisis has resulted in developers not being in a hurry to get layout and building plans approved and being content at holding on to their land banks.

"Developers are adopting a wait-and-watch approach. The projects may take off once the liquidity and demand scenario seems favourable," says S S Dhillon, director, Haryana Town and Country Planning Department. dhillon adds that the real impact of the slowdown will only manifest itself once there is no progress in projects which have been granted licenses.

Also, against the norm earlier, when there were a large number of smaller players in fray, it is now only the bigger ones with some resilience.

Rajeev Talwar, group executive director of DLF, marks this as the worst financial crisis to hit India which is "affecting every sector in the country, not just real estate".

"This situation is a wake-up call and the government needs to do a lot more than what it has done so far. Mere cuts in SLR and repo rates are not going to lessen the threat of massive closures and huge layoffs." He proposes two ways of alleviating the current downturn in real estate. "Empower the home loan buyer by lowering interest rates and give real estate level a level playing field. All projects should at least be judged on the basis of merit," he said.

Faridabad
In the case of Faridabad, Haryana's next realty hotspot, the boom has finally gone bust. Against 180 applications for group housing in 2007, the figure this year is just 43 while in the case of commercial projects, the number has plunged from 75 in 2007 to nil in 2008. Even in case of plotted colonies, the applications received are a mere 40 against 468 last year. Even the fate of many out of the 62 projects (group housing, plotted colonies, IT parks and commercial projects) granted licenses in Faridabad since 2005, including 13 projects this year, now seems uncertain.

Chandigarh
While land prices in Chandigarh have been recording a new high with every government auction the huge number of private luxury housing projects that have come up in and around the city in the last three years, are finding few takers.

The most hyped luxury project, Pride Asia, a joint venture luxury project of Parsvnath Developers and the Chandigarh Housing Board, is also in trouble with no jump in its sales figure in the last few months and just over 10 per cent of its total dwelling units have been sold so far.

Aimed to cash in on the information technology industry (it is in the IT Habitat area of Chandigarh) and rich Punjabi diaspora, its luxury Rs 6-crore villas and Rs 4-crore penthouses have failed to attract buyers while its one/ two/ three/ four and five-bedroom apartments in the price band of Rs 52 lakh to Rs 3.8 crore are the only ones to be sold off.

Uppal's high-end Rs 1.6 crore to 1.75 crore luxury flats in Chandigarh have also got a lukewarm response, while big names such as Emaar MGF, TDI, Unitech, Pearls Infrastructure, Ansals and Westend Group which have rolled out high-end projects in Mohali are all been hit by slowdown in demand.

The worst hit, however, are small developers with projects in the periphery areas of Chandigarh such as Zirakpur, Dera Bassi and Kharar. From distress sale of flats to defaults forcing banks to recover property, the crisis has hit both builders and buyers alike in these areas. Many projects are running behind schedule and deadlines for handing over of flats are being extended.

In Ludhiana, where land prices crossed Rs 1.5 lakh a square yard for commercial property and Rs 60,000 a square yard in residential areas, there are no takers. Consequently, sellers are adopting a wait and watch policy.

"After the share market, worst-hit is real estate. We are virtually out of work and have not struck a single deal in the past month. It's becoming difficult to keep the kitchen fire burning," said a real estate agent, requesting anonymity.

Arindam Chokroborty, director of IMRS said, "We are looking at coming up with boutique hotels with 40 rooms in the eastern region with similar facilities that match the four star hotels. We have already started acquiring land in Rajarhat."

The projects have been lined up for West Bengal, Jharkhand and Orissa and the approximate investment incurred will be around Rs 20- 25 crore each, and is expected to be operational by the second quarter of 2009-10. Meanwhile, the planned MoU is expected to provide technological assistance and will be an investor for the projects.

With prices coming down in the real estate sector, the company is also mulling at establishing another boutique hotel in Bangalore, in the offing.

The company is looking at a turnover of Rs 240 crore, up from Rs 200 crore now, with the hospitality business contributing Rs 30 crore.

Speaking to Realty Pulse, Sudarshan KS, CEO, Ozonegroup said, "The project near the new airport, Urbana, will have retail, hospitality, education, IT and R&D campuses, and residential units. Total built up area would be 20-30 million sq ft. The project will be self-sufficient with unique water management capabilities, which will reduce the dependence for drinking water from the utility or municipal supply."

Elaborating on its expansion agenda, Sudarshan added, "The estimated cost of projects in hand and those being planned is about Rs 6,000-7,000 crore. Ozonegroup has ongoing projects in Bangalore and Chennai. Our next target is west India excluding Gujarat as we don't understand the market. Our focus will be Maharashtra where we see great potential."

The company has two projects, Tech Park an office space project and Residenza, high-end residential project, in Bangalore. Tech Park spread over half a million sq ft on Hosur main road is functional and enjoys the company of big name tenants like Siemens, Continental group and Blue star.

Sudhanshu Purohit, CEO, ABIL said, "As part of our corporate social responsibility, the ABIL Group will launch mass housing schemes for the lower income groups. This project is the brain child of ABIL chairman Avinash Bhosale, who will personally supervise the entire project. The mass housing project will be built on a no-profit-no-loss basis."

These apartments will have 1 and 2BHKs and will cost between Rs 4.5 lakh and Rs 5 lakh. The project, which would commence in six months, would be completed in about four years in phases. "Since it is aimed at workers engaged in various industries, the company would reduce this price if we manage to get the land at cheap rate or government incentives," Purohit said.

The construction plan includes affordability principle and therefore, the four-floor cluster of buildings would not have elevators. Ten clusters with each cluster spread over five acres of land would have 1,000 flats. Each cluster will have 10-12 buildings.

In October 2007, Sobha had announced entry into north India through a consortium with QVC Realty, the realty arm of IL&FS, and Chintels India, a north-based local developer. While Sobha was to be the lead developer, the 192 acres in Gurgaon on which the project was to come up, is owned by Chintels. A senior official of the consortium, who did not wish to be named, confirmed the delay.

"It might now start in June 2010 because getting funding and licences is becoming difficult," the official said. "Sobha is likely to sell a minority stake to a private equity player to bring in money for the project," the official added.

But Sumit Keshan, chief financial officer, Sobha, said since the project has not been launched yet, "there is no way you can say it has been delayed". Keshan said Sobha is conducting a feasibility study and gauging demand for the project. "Once we assess that, we will put in the money," he said. Keshan also denied seeking private equity funding "right now".

The consortium was to develop an integrated township in Sectors 106 and 109 in Gurgaon. Chintels and Sobha were to develop a group housing project on 72 acres in Sectors 108 and 109, where the developable area is 5.7 million square feet.

Sobha paid token money to Chintels for land acquisition, the unnamed official belonging to the consortium said. Though the consortium has received letter of intent from Haryana, it had not yet received the licences to develop the township. Sobha had told analysts last year that the Gurgaon project would be launched in the first quarter of the current fiscal.

Later, it pushed the date to the third quarter, but if sources in the know are to be believed, the project has long way to go before it sees light of the day. "Sobha's cash flow position is very strained for it to be able to bring in private equity contribution right now. Their Chennai project launch, which was scheduled for last quarter, has also been delayed. Sobha has revised the launch of the Gurgaon project to the first quarter of next fiscal, but it is very unlikely they will be able to do it. Nobody is ready to fund in these times," said an analyst with a local brokerage.

Groups like the National Real Estate Development Council (Naredco) are petitioning for new measures to make it easier for foreign property investment firms to buy in India.

Hindu Business Line also reports politicians are being asked to intervene to ease a shortage of credit for developers looking to complete building projects.

Attention has swung to the Indian government after China announced a $586 billion package for infrastructure and other domestic projects in a bid to help its own economy.

Quoted by Hindu Business Line, Nardeco director general R.R. Singh said:

    "The monetary policies of the Reserve Bank of India for real estate projects and home loans by Indian banks, closure of ECBs and rises in interest rates together with the stock market crash have lead to a situation where credit has dried up and buyers are hesitant to invest despite a strong demand."

Last month the Reserve Bank of India (RBI) cut rates by 100 basis points to eight per cent following a meltdown in financial markets.

RBI said it would continue to monitor the situation and would take more action "as appropriate".

Foreign investment in Indian property remains a contentious issue in some areas, with the government recently warning against illegal sales to outside buyers, particularly in the Goa region.

Chandra, who was enamoured of the premium accommodation segment, has realised the value of pragmatism and is altering his plans. "At the Unitech Nirvana, for instance, instead of our earlier plan of offering 100 independent villas, we will be offering three separate apartments per villa--a total of 300 units," says Chandra. (The plot size remains the same.)

With an interest payout of Rs 900 crore this year, Chandra admits that margins are under stress. His solution: no discounts to customers. "Input costs--of steel and cement--have come down, so rather than giving discounts to consumers, we could look at boosting our margins," he says. Unitech is, of course, somewhat cushioned by the Rs 6,120 crore it got from the sale of its 60 per cent stake in telecom venture Unitech Wireless to Telenor.

India's largest real estate company, DLF, too, has not been spared the blushes as it saw its top line decline marginally in the second quarter of 2008-09 to Rs 3,840.2 crore from Rs 3,846.3 crore in the first quarter of the same year. EBITDA margins have also shown a decline of two percentage points in this quarter vis-à-vis the preceding quarter.

"The entire economy is in a crisis mode, so it will have an impact on the real estate sector," admits Rajeev Talwar, Executive Director, DLF. The company, which claims its pre-booking should keep it comfortably liquid till end-2009, is willing to sacrifice growth over the next six to 12 months to shun risk and could push back the hotel venture's launch by 12-18 months.

It's an indication of the magnitude of the change in market dynamics since January this year. "Over the past three years, the plans of the realty companies were certainly ambitious, led largely by economic growth. In fact, the extent of expansion on the land-bank front by many of these developers was quite unnerving," points out Sanjay Verma, Executive Managing Director, South Asia, Australia and New Zealand, Cushman & Wakefield.

While a general price rationalisation was on the cards as the end of the boom cycle neared, the financial meltdown across economies has left real estate companies gasping. "This credit crunch was unprecedented and it created a panic situation, leading to a lot of uncertainty in the market," observes Verma.

A source, who was present in the meeting, said the government accepted that real estate is an engine of growth. At a time when the economy is facing a threat of slowdown, the sector could be used to revive it. Chidambaram, it is learnt, told the delegation that the government will not only help infusing liquidity in the system, but will also work to bring down the interest rates.

In the last couple of years, realty has been affected adversely because of rise in interest rates, which went up from 8% to around 12%. The interest rate was increased because of the sharp rise in prices of real estate assets, which RBI thought could create a bubble. To discourage the price rise, RBI tightened the provisioning norms, making loans to the sector costlier. At the same time, in the last nine months, when the inflation shot up to cross 6%, level RBI started tightening liquidity to keep price rise under check.

A company Press release here quoted the directors as saying that though the concept is still at a nascent stage, it is dynamic and fast catching up. The benefit of green concept is reduced environmental impact through energy efficiency.

"This is basically because of the large number of ready-to- move-in units available for the huge working population in the country, which is prone to location shifts and transfers. Their bargaining power has gone up considerably because of the slump," said Bangalore-based real estate consultant A Koya.

The biggest increase has been for mid-end properties in some areas of Pune including Koregaon Park, Bundh Garden Road, Kharadi, Kalyani Nagar, which witnessed a 25 per cent increase in rental values, from August, now commanding Rs 30,000-45,000 per month.

"This is largely due to demand-supply mismatch and release of some good quality stock in that area," said Aditi Vijayakar, director of residential services at Cushman and Wakefield.

Priyank Tayal, director, Big Apple Real Estate said, "Of the five projects, Lucknow, Bareily and Agra are under various stages of development, with Lucknow mall to start operations by the third quarter of 2009."

Elaborating on the nature of projects, Tayal said: "Each project is based on a format that will generate better business for brands and retailers. Phoenix United malls will only lease out retail spaces, thereby retaining the onus of mall management and operations on itself."

The Lucknow mall will come up on Kanpur Road. With 5.75 lakh square feet built-up area, the mall will have the city's one of the largest entertainment and recreation centre, including Lucknow's first six-screen multiplex.

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The country's banking industry is set to witness a big rise in non-performing assets (NPA) - which means loans on which payments go missing because India Inc's 30 per cent decline in net profits in the July-September quarter signals an imminent rise in default rates, say industry insiders.

Bankers told Hindustan Times that they began to see default rates inching up from September.

"We are yet to see the worst. Corporates have shown signs of non-repayment and though a clear picture is yet to emerge, the going may become tougher for banks in the next few months," said a senior official at a private sector bank.

The total number of loss-making firms has also increased by about 30 per cent in the second quarter of the current fiscal as compared to the previous fiscal.

At present, the NPA level is about net 1-1.5 per cent - which means less than one in 50 loans or equivalent in loan amount fail to be repaid beyond a defined acceptable level of defaults. An account is classified as NPA if the repayment process of the outstanding amount does not start within 90 days.

In the last couple of years, banks public and private - have been able to reduce their level of bad assets due to robust recoveries. "Howevel: recoveries will be dismal with corporates registering their worst performance in a long time," another banker said.

A large number of small exporters have already started defaulting after they suffered a loss of over Rs 2,000 crore on account of the collapse of the forex derivative market. Banks have been directed by the Reserve Bank of India to transfer the bad assets into a separate account and carry on with lending.

Banks have indicated that they will not stop lending.

INDIA'S BANKS are accumulating bad and doubtful loans at a faster pace as the economy slows, and the trend may accelerate next year as small and medium enterprises, or SMEs, and households struggle to pay debts, bankers and economists say.

A Mint analysis shows that in the quarter ended September 30, the combined gross non-performing assets (NPAs) at the top 10 banks by market capital rose 7 per cent from the preceding quarter to Rs 35,290 crore. The pace quickened from a quarter-onquarter rise of 1.25% to Rs 32,982 crore in the preceding three months.

Year-on-year, the gross NPAs at State Bank of India, ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, Bank of Baroda, Bank of India, Canara Bank, Punjab National Bank and Union Bank of India shot up 14.5 per cent.

As the world's financial power moves towards the East, it hasn't taken long for Asian countries to adopt Western-style rivalries. The Chinese won praise for the Beijing Olympic Village - the "best ever", according to International Olympic Committee president Jacques Rogge.

Now, in time for 2010, India is preparing the Commonwealth Games Village Complex on the banks of the Yamuna river in New Delhi. And when the Games are over, the Village is expected to be one of the most prestigious addresses in India's booming property market.

It's a case of the Patels keeping up with the Wangs. The Olympic apartments in Beijing ranged from £320,000 to £640,000. In New Delhi, prices start lower - a two-bedroom flat at £224,000 - rising to £650,000 for a five-bedroom apartment.

The properties will be available for possession six months after the Games, giving the developers time to convert them from student accommodation to a luxury residential community for Indian expats (though not, sadly, for British buyers, as most foreigners cannot buy property in India).

The athletes are unlikely to benefit from the promised five-star hotel finishes, marble and wooden flooring, air-conditioning and wi-fi facilities. But what they will enjoy are the views across 27 acres of landscaped greenery on the b