Delhi Real Estate

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.

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 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 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.

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.

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 banks of Yamuna.

The development will also be certified as a Green Building, which may salve the consciences of those worried about their carbon footprint (not to mention the expense) as they fly between Britain and India to stay at their apartment.

Marketed by Hamptons International, the Village Complex is being developed by Emaar MGF, a joint venture between Emaar, of Dubai, and MGF, of India. The developers claim they sold half of them in the three weeks from launch.

The Village is being promoted as a "landmark address", as it will be Delhi's only purpose-built, self‑contained premium residential community. The Delhi Development Authority has stipulated that it will be the last gated development to be built by the river.

• Rising demand for affordable homes
  
• What you can buy and where
  
• Gated estates
  
• Avoiding the pitfalls
  
• The portfolio buyer: Robby goes back to his roots
  
• Buying and selling costs

India's largest real estate developer, DLF, has put on hold construction of one of the most high-profile mall projects, `Mall of India', at Gurgaon, as retail rentals fall and cash becomes precious. The proposed venture was set to be the country's largest mall, with around 4.5-million sqft space.

A DLF spokesperson said: "There is no truth in the statement that `Mall of India' has been put off. Construction has not been stalled. Its planning and development is under full swing." A visit to the site, however, gives a different picture. Till a few months ago, several workers could be seen at the project site and excavation work was in progress. Now, there is hardly any activity on the site, clearly indicating that company has slowed down the pace of the project.

While announcing the September quarter results recently, DLF V-C Rajiv Singh had said the company will "in the short-term reduce capital intensity of the business model". He had said the company will shift focus from capital-intensive projects such as malls to mid-income homes and offices, where revenue realisation is faster.

Speaking to Realty Plus, Sushil Baderwal, CMD, Baderwals said, "We are undertaking real estate projects spanning townships, group housing, shopping malls, office spaces, hotels, IT Parks and SEZ's focusing on tier II & III cities. The company has also diversified into infrastructure development with roads, flyovers and airports projects."

According to Sushil Baderwal, Baderwals will launch an integrated township in Udaipur in collaboration with a local builder. The township, complete with a mall and a five star hotel, will come up at a cost of Rs 650-700 crore. The group, which is already undertaking a township project in Panipat on NH1 in a joint venture (JV) with Ansal API and an independent township project in Mohindergarh (Haryana), will do township projects in Bikaner and Kaithal (Haryana) as well.

Baderwal further informed Realty Pulse that his company has planned to develop a high-rise group housing project over 32 acres in Sonepat, besides another group housing project in Bhiwadi. "On the commercial real estate front, we will be coming up with one of the largest mixed use developments comprising shopping mall, multiplex, luxury hotel and an office block in Bhiwadi. In Panipat too, we are developing a mall, multiplex and a hotel," added Baderwal.

A 100 acre multiproduct SEZ and a 25 acre IT Park in Indore and a resort and airport project in Panna (Madhya Pradesh) are the other commercial projects which Baderwals group will be undertaking. 'Starting next year, we will be launching one project a month. All these projects will be funded through internal accruals, foreign funding and bank loans. Being a zero debt company with over 1000 acres of land bank, our real estate development plans are not at all impacted by the current credit crisis and slowdown in demand", Baderwal said.

According to a latest survey by global realty consultant Cushman & Wakefield (C&W), rentals of office spaces in the IT Special Economic Zones in Noida fell by 14 per cent in the quarter and it was likely to decline further - for once thanks to the financial meltdown.

Office rentals in Gurgaon IT SEZ and in south Delhi's micromarkets have also declined by seven per cent each and C&W viewed that both these places would see further fall in rental values.

"Most of the micro markets witnessed correction in rental values over the quarter due to slow leasing activity with companies adopting a cautious approach and anticipating further correction," C&W said.

Other locations that registered depreciations in rentals include commercial locations of Gurgaon and secondary business districts and are likely to weaken in coming months, it added.

India Inc has been feeling the heat of the global downturn with Index of Industrial Production declining to 1.3 in August this year and many corporate houses have tightened their purse strings, but high office rentals have proved to be a major area of concern.

C&W, however, said prime locations of central business districts (CBD) - Connaght Place - saw rentals surging by nine per cent in the third quarter of 2008.

"... rental values in CBD locations firmed up due to limited availability, no scope of further new supply and buoyant demand," it said.

Real estate player Vipul, for instance, is looking at PE funding for some of its projects. The player has already signed a term sheet with UK-based PE fund for a mixed use project in North India. "They will have a 40% stake in one of our Special Purpose Vehicles (SPVs). We are looking at PE funding for some of our other projects as well. During the last three months, banks have been reluctant to lend. Hence, there is no option but to think of other conducive options," says Atul Banshal, senior GM, finance, Vipul.

According to estimates, real estate companies have a total debt of around Rs 25,000 cr, and many developers have been lobbying for a relief from the government in terms of re-scheduling of their outstanding payments.
In a bid to attract cash inflows, real estate major Unitech too recently announced divestment of stake in its telecom operations, and the company has been eying at closing a private equity deal, sources said. Delhi-based Omaxe Group has slowed down its projects that are at a nascent stage of development and is open to PE funding for the future.

Sanjay Verma, executive MD, South Asia, Cushman and Wakefield feels that the process has just begun. "Going forward, some of the players may also have to sell some assets to remain afloat. That isn't necessarily a bad thing as one can decide where to focus. These kind of deals are currently being done more by invitation as the market right now does not offer a logical price mechanism." Private debt, PE deals and strategic divestment of assets are some of the alternate fund-raising options now as against debt from banks or foreign exchanges, he feels.

However, developers such as Parsvnath and Hiranandani still swear by the traditional sources of funding. Says Pradeep Jain, chairman, Parsvnath Developers, "We are comfortable with our cash flows and plan accordingly. We have long-term funds that care of our requirements and financial institutions have supported us. Private debt is out of the question for us."

Ditto for Niranjan Hiranandani, MD, Hiranandani Developers who says that there isn't any innovative financing strategy that they are specially thinking of at present. "We always look at all sources of funding and haven't changed anything specifically in the current scenario."

May slow due to the global financial meltdown and a fall in demand for such projects.An executive at RIL's external public relations agency, however, said that work on the SEZs had not begun.A senior RIL executive said the project was going slow and blamed the current business environment, which he described as "bad in all areas".

"At this moment, we have been told not to spend money. Our capital expenditure on the sites have been stopped. The meeting to decide what to do next will happen next week in Mumbai," said the executive, who didn't want to be named because he is not authorized to speak to the media. "However, no formal directions have been issued."

The SEZ plans are being executed by Reliance Haryana SEZ Ltd, a joint venture between Reliance Ventures Ltd, a subsidiary of RIL, and the Haryana State Industrial and Infrastructure Development Corp. Ltd, or HSIIDC, the state's industrial development agency. While Reliance holds a 90% stake in the SEZ arm, the rest is with HSIIDC.

Also See Difficult Times (PDF)mint had reported in July that Reliance Haryana SEZ's land acquisition plans were facing hurdles, with land owners in the area demanding around three times the amount the company is willing to pay because land prices have increased since late 2006, when it made its offer. The company had acquired 9,500 acres of a targeted 25,000 acres in July.

The two major commercial projects, Crossings Galleria and Crossings City Center would come up in the Crossings Republik, the integrated township being constructed by the firm in Noida, Greater Noida and Ghaziabad, Crossings Infrastructure Director Sanjeev Srivastva said.

"The company will raise 35 per cent of the total investment through internal accruals and rest through debt and advances," he added.

Crossings City Center would be a mall and commercial hub with about 600 showrooms spread over an area of one million square feet. It would also house food courts, multiplexes, office towers, entertainment zones and hyper markets.

The City Center is expected to be completed within next 24 months.

Crossings Galleria, which is also a shopping destination, would be completed within the next one-and-a-half years, it added.

Crossings Republik is a Rs 6,000 crore integrated city project, which would cater to a population of over 1,00,000 residents.

"It is not that demand has declined," said Santhosh Kumar, deputy chief executive officer of Jones Lang LaSalle Meghraj, a global real estate consultant and brokerage firm.

"There is a lot of demand in the middle segment but the prices quoted by developers are very high," Kumar told IANS.

In places like Lucknow and Meerut, he said, realty developers were quoting as much as Rs.4 million/Rs.40 lakhs for mid segment housing which was quite unrealistic.

"Sales are just not picking up. Compared to last year, the figure has gone down by 50 percent, even when they are selling at 20-30 percent below the earlier market prices," said Punit Saxena of the real estate consultants Axiom Estates.

"This is alarming. If the situation doesn't improve, there could be distress sales in six months."

 It has come to the notice of the Central Government that foreign nationals are buying immovable property illegally in some parts of the country, particularly in Goa, which has raised concerns . . . [A]ll, including the authorities concerned in the State Governments, are hereby advised to be extra vigilant in such matters and satisfy themselves about the eligibility under [the Foreign Exchange Management Act] before registering a sale or purchase of immovable property in India. The enquiries [sic] may include both the intending buyers and sellers. The relevant travel documents and the nature of visa may also be verified before registering such sale / purchase.

Reuters has more. The Calcutta Telegraph has local coverage.

Under India's Foreign Exchange Management Act (FEMA) [text], a foreign national is permitted to purchase land only after he or she has resided in India more than 182 days. Additionally, the buyer must file income tax in India and any investments must remain in the country. The Goa government in March amended India's Registration Act of 1908 [text], banning the sale [Indian Realty News report] of all land to foreigners unless the Reserve Bank of India granted clearance.

"Third quarter saw a total supply of 18.41 million sq ft across major cities in India while the total absorption was registered at 9.21 million sq ft.

However, marginal corrections in values were recorded in peripheral locations with high concentration of IT and ITeS office space," global real estate consultant Cushman & Wakefield (C&W) said in its quarterly report on Indian office space.

The rentals, primarily IT spaces, in Noida in National Capital Region (NCR) during Q3 dipped by 14 per cent compared to the previous quarter, it said.

"... a wait- and-watch policy adopted by the corporate sector has brought the quantum of transactions low. We will continue to see this trend well into the last quarter of the year as well as into the early 2009," C&W Director (Tenant Strategies & Solutions) Kaustuv Roy said.

While peripheral locations with higher concentration of IT/ITeS companies would continue to face lower than expected transactions, corporate office spaces (non IT) in high demand markets were likely to remain stable with a strengthening bias, he added.

Some locations in Chennai (suburban - Ambattur), Kolkata (Rajarhat) and Delhi (Gurgaon and south micromarkets) have seen depreciation of office renatals by 13 per cent, 10 per cent and seven per cent respectively.

"This quarter continued to show signs of the cautious approach from developers who focused on completion of existing projects within defined time limits," Roy said.

However, few locations in Kolkata, NCR, Bangalore and Ahmedabad have witnessed increases in rentals.

Faith Thoms, director of public relations and communication-Asia Pacific, Hilton Hotels said, "The Hilton Garden Inn Saket project was delayed on various regulatory grounds. We are looking forward to opening the property next year. Hilton Hotels Corporation continues to be committed to its relationship with DLF in India."

DLF, in its clarification filed with the stock exchanges on Tuesday, too said, "For the benefit of the market in general, it is clarified that DLF's JV with Hilton is on a firm footing and all plans for development of hotels stand as originally envisaged."

Further Thoms said that the relationship (with DLF) has evolved positively, with an unprecedented 17 hotel projects currently under development. The first hotel under the alliance, the Hilton Garden Inn Saket in Delhi, is scheduled to open in 2009, Thoms added.

On further progress of the joint venture, Thoms said, "Other examples of our progress include ongoing development of the Hilton and the Hilton Residences in Kolkata which amount to 550 rooms, and the Hilton, Homewood Suites by Hilton and the Hilton Garden Inn projects in Dwarka which comprise over 800 rooms."

"DLF will exercise prudence in build out phase for the hotel business, which could be pushed back by 12-18 months from planned date owing to existing liquidity constraints," said DLF in its clarification.

Nagarjuna Constructions made the announcement despite recently posting a 26 per cent rise in profits.

The company, which is involved in infrastructure and commercial and residential developments, becomes one of the biggest Indian firms to wind down activity.

Hindustan Construction Co and IRB Infrastructure have both already said they will be slowing down their real estate plans.

Subba Raju, Nagarjuna vice president for finance, said:

"We are not planning any investment in real estate projects. All our real estate projects are fully capitalised.

    "We have put all other projects on hold. We are not launching them because of adverse market conditions."

India's real estate market has been experiencing a slow down as high interest rates have created a major squeeze on lending which has hit both developers and mortgage applicants.

Back in September Nagarjuna announced a 26 per cent rise in profits to 423 million rupees.

Many Indian builders have recently begun slashing prices and offering add-ons to investment property units in a bid to shift unsold stock.

''Spread over an area of 360 acres, Crossings Republik is a new city being added to the Delhi NCR. It will be a self-sufficient, environmentally sustainable and will have its own public transport system as well. It will have more than 30 million sq ft of built-up residential area and two million sq ft of commercial area comprising hotels, multiplexes, malls, service apartments, office complex, community facilities and others,'' Crossings Infrastructure Director Manoj Gaur told a media conference here.

The first phase of possession for 2,000 apartments is slated for December next year and by December 2010, more than 500 families are expected to take possession of their condominiums, he added.

''Golf course facing, Crossings City Centre will be a glitzy mall and the commercial hub of Crossings Republik. It will feature 600 showrooms spread across an area of one million sq ft It will also have seven atriums, two food courts, a four-screen multiplex, two office towers, an entertainment zone and hyper markets. It will be complete within the next 24 months,'' he continued.

Whereas Crossings Galleria is the neighbourhood shopping destination and will comprise 100 shops spread over 35,000 sq ft. It will be completed with the next one and a half years.

Another Director of the company, Mr Sanjeev Srivastva, said:'' We expect to have the best of brands set up shop here and we are confident that our residents will also appreciate the easy accessibility to everything that they might need for their families or homes.''

The existing, yet depleting, testimonies of colonial architecture that have survived the test of time and administrative apathy add to the charm; at once you start calculating the amount in your bank account for converting hard liquid cash into a concrete reality for your family.

Your resolve is strengthened by the fact that there is a general slump in property prices worldwide, and, Shimla is no exception. In fact, any property dealer readily confirms the actuality that the property prices have been stable for past several months due to the slouch.

Demand, too, has gone down, relatively, with ever-increasing prices playing havoc with your purse strings and your savings converted into investments taking a direct hit from the shaky share market.

No wonder if you talk to some of the property dealers, they promise you heaven -- a single-room flat for as less as Rs 5 lakh and a two-room apartment less than double the amount. But as soon as you embark upon the mission to hunt a house in the erstwhile summer capital, you realise it's an uphill task.

In the satellite towns of Vikas Nagar, Kasumpti, and Khalini, one, two and even three-room flats are available at relatively reasonable prices. But the areas where the locks are ready to be opened are by and large inaccessible, if you do not have leg muscles that compliment six-pack abs!

The narrow bylanes meandering through the unending rows of bazars take a deep plunge right into deep depressions between the hills. You drive down, but at constricted sharp turns, you are forced to leave behind your vehicle, or risk the chance of being stranded with no place to turn.

After you have walked as far as your breath takes you, there are rows of flats with open drains carrying soapy water, garbage and stink. One look is enough to tell you some of the flats are standing on concrete pillars "strong" only till the first earthquake tremor. You realise that a quiver can bring the entire structure down, or even incessant rains can wash it away in no time.

Water is a problem, with supply restricted to a few hours in mornings and, perhaps, evenings. The washrooms are outside -- some do not even have a flush system. All along the walls are huge plastic drums lined with algae.

The view of the deodars is simply blocked by the huge flat-roofed structure. Where are the slanting tin roofs with gables so characteristic of the hills? There's no answer. With such environs, you may very well be vacationing in Jalandhar!

In some parts of Sanjauli -- particularly the area near Cemetery Road -- death means grave trouble with little space to carry the body. Localites say at times a body has to be carried from one roof to another due to the cramped structures.

In Shimla, the situation is hardly better. Almost one-and-a-half century ago, the British established Shimla as the summer capital to avoid summer heat and to stay in pristine environs but it's now nothing less than a mini metro.

Walking was a fashion in hills. Now, honking cars with stereos blaring Singh is Kingg numbers is the in-thing. There's no peace and you just cannot hear silence in the chirping of birds.

Standing on the Lower Mall, you realise the paradise is an environmental disaster -- the Queen of Hills has been dethroned and is fighting a lone battle for survival. Okay, it was the mecca of tourists but nowadays, people hesitate to click on Shimla while making reservations through the Internet, all because of poor infrastructure, besides ever-existing shortage of water and electricity.

"Parking too is a problem due to the large floating population. On an average over 50,000 visitors come to the town daily. It's also expensive," says disillusioned Delhi-based businessman Sachin Sagar, in Shimla for exploring investment prospects.

But does all this mean Shimla is a big no for hill lovers? "No," says property consultant Dalip Kumar Kaushal. "Eighty per cent buyers are still investing in Shimla and surroundings in houses for self-use. If you wish to invest, nothing like buying a cottage for yourself. These are available in Mashobra, Naldehra. and so many other places." The tag: Anywhere between Rs 70 lakh to 1 crore.

Another consultant Mukesh Mishra says the demand for vacation homes or cottages has gone up in recent times. But what about legal hassles? Well, a non-Himachali wanting to buy land outside the municipal limits has to satisfy the provisions of Section 118 of the HP Tenancy and Land Reforms Act. So, happy buying!

Where to Buy

DEPENDING on your choice, you can go in for a vacation cottage around Kasauli, Dharampur and Kumarhatti. If you wish to spend relaxing moments near Shimla, you can buy a cottage in the area around Chail. The price depends on size, accessibility, location and the quality of construction. Cottages in relatively inaccessible areas are comparatively cheaper. The ones near the road are sure to cost much more.

The Deal

NON-HIMACHALIS can buy a constructed house or land up to certain size within municipality limits. They do not need government permission for this. But for property outside municipal limits, the process is complicated as Section 118 of HP Tenancy and Land Reforms Act imposes restrictions on non-Himachalis wanting to buy land in the state.

"Office space will be given out on lease to both small and big companies. Depending on the market situation, we will decide the rent rate. This is not only for new players but also an opportunity for existing companies to expand," said M K Sardana, general manager, IT. Tenders have been invited for the project. "It is currently in request for proposal state and the work would begin soon," added Sardana. When asked about the future of the IT and ITeS sector vis-a-vis the current global meltdown, Sardana said: "There has been no direct impact on the sectors but they surely are in a state of panic and have implemented cost-cutting measures."

According to a recent report, the Haryana government has spent Rs 4,107 crore in establishing 1,976 small-, medium- and large-scale industries since April 2005 till September this year. According to the report, about 68,000 people are employed in these sectors and Rs 7,330 crore has been generated in returns.

At present, there are over 400 IT companies functioning in Gurgaon alone which includes companies like GE Capital, Google, TCS, Motorola, Convergys, among others.

Stating this in Chandigarh, an official spokesman said that total exports from district Gurgaon in the Information Technology and ITES industry has touched a mark of Rs 18,000 crore at the end of last financial year. In the year 2006-07, the software export from Gurgaon was Rs 15,000 crore whereas it was Rs. 10,700 crore in 2005-06.

He said that it has been made possible due to industrial friendly climate created by the present Government led by Chief Minister Bhupinder Singh Hooda.

The present State Government had assumed office on March 5, 2005.

Referring to the details of industrial units set up during this period in Gurgaon, he said that out of these units, 1924 small scale units have been set up with an investment of Rs. 1531 crore and these units provided employment avenues to 45,600 unemployed youth.

He said that 52 large and medium scale industrial units were set up with an investment of Rs. 2576 crore and 12,455 youth were provided employment opportunities.

Singh and Chandra recently came together to call on a leading UPA minister and top Congress politician to sound him out about the travails of the real estate sector, that has seen prices fall and credit disappear for builders.

Both DLF and Unitech, firms listed on the Bombay Stock Exchange, have seen their scrip fall over 80-90 per cent since January this year. The duo is expected to meet other authorities too.

Central to this lobby effort is the developers' belief that a housing market crash in India, would spell further bad news.

"The top five real estate developers currently are providing direct and indirect employment to nearly 250,000 people across thousands of sites in the country.

The impact of a depressed market will not be only felt on our share values but on jobs and overall economic growth", said a developer close to the effort to convince the UPA to ease up things for homeowners and developers.

The realtors want the UPA to push for policy amendments which would see banks lower the risk weight attached to investment in the real estate sector.

In 2007, the central bank had increased the amount of money that banks set aside as a proportion of their total lending to the sector.

Separately, it also raised interest rates in order to control inflation, a cycle that was only recently broken in order to ease liquidity in the financial system.

"We are really an industry. Yet, we are not treated as one. We create infrastructure, but the norms are skewed against us.

The government earns so much revenue from us in taxes but continues to look down upon the sector as a bubble that needs to be broken", the developer added.

UPA sources confirmed that Singh and Chandra had come calling to explain their difficulties.
Realising the success that other sectors like civil aviation and telecom have had by lobbying the government, real estate developers are expected to continue their lobby effort.

Already, several mid-size and small developers in the national capital region of Delhi are meeting once a week to evolve a common agenda.

Real estate companies say people have less money to spend on buying a house, leading many to look at lettings instead.

Aditya Verma, business head of Makaan.com is among those who have spotted a shift away from purchasing.

Quoted by the Hindustan Times newspaper, he said:

"In the past quarter, while makaan.com saw queries relating to rent of property rise by 19 per cent, it observed a 16 per cent decline in queries relating to purchase of property."

In an April report on demand in the Indian real estate market, Makaan said 2008 was shaping up as "the year of affordable housing".

More recent data from the company shows demand for property in Hyderabad declined by 11 to 12 per cent between June and August, according to the Business Standard.

The paper also reports the survey shows 62 per cent of those looking for property in the city would buy a residence anywhere in the area provided it met their basic requirements.

However, Hyderabad also appears to be bucking the rental demand trend, with the number of people looking for lets in the city down five to 11 per cent.

Public-private partnerships have become the mantra for governments (Centre or states) for developing infrastructure. Most of them are now structuring road and airport projects by awarding large parcels of land at less than market rates to partly compensate the cost of infrastructure development.

Private companies believe that every news story of their securing a concession would cause a magical jump in their stock price.

Each time the government invites bids for any infrastructure project, there is a mad rush to bid the lowest. Most end up trying to quote a negative grant, where the concessionaire pays a fee to the government for securing the project rights. Several are now bidding ridiculously low amounts without proper project appraisal, in the hope they would be able to influenc