Events

This is the Pravasi Bharatiya Divas (PBD), to be held Oct 9-12, a premier international conference organised by the Singapore Indian Chamber of Commerce & Industry (SICCI), the Ministry of Overseas Indian Affairs (MOIA) and the Confederation of Indian Industry (CII), with the support of the governments of Singapore and India.

This business-focused conference in Singapore reaches out to the Indian diaspora in the Asia-Pacific region and beyond.

Here is a `regional' PBD, according to sources in MOIA. Regional PBDs are held in response to many requests to host the main PBD outside India. Since the main event is held in India, the ministry agreed to hold regional PBD events in other parts of the world.

Many countries have requested MOIA to host such events in the future and these may be held in Europe, Africa or the Caribbean. The first regional PBD was organised in New York last year and now the second one is in Singapore next month at the request of the Singapore government that is supporting it and also partly financing it.

Considering the progress of the Indian economy, Singapore wants to appear as the gateway to India from the East and the gateway for Indian companies to reach out to the Asia Pacific region.

The event is in the interest of both India and Singapore to increase their business, economic, political and cultural relations. Special focus is investment both into India and Singapore. The leading speakers from Singapore include President S.R. Nathan (an NRI); Lee Hsien Loong, the prime minister; Goh Chok Tong, senior minister; Lee Kuan Yew, the former prime minister and minister mentor; S. Jayakumar, deputy prime minister; and captains of business and industry.

The line-up from India is also impressive: Vayalar Ravi, minister for overseas Indian affairs; Kamal Nath, minister for commerce and industry; Kapil Sibal, minister of science & technology; Sam Pitroda, chairman, National Knowledge Commission; Rajendra Kumar Pachauri, chairman of the Nobel-winning Intergovernmental Panel on Climate Change; and top industry and business leaders, including K.V. Kamath, managing director, ICICI Bank, and the president, Confederation of Indian Industry.

ITC Welcomgroup manages more than 80 hotels under different brands in India through the brands ITC Luxury Collection, Sheraton, WelcomHotel, Fortune Hotels and WelcomHeritage.

Parsvnath will own and develop the hotels, while Fortune Park will manage them. The hotels will run under the brand names Fortune Select, Fortune Park, Fortune Inn and Fortune Faith.

Building Blocks

•  The tie-up entails setting up 20 five-star, 20 four-star and 10 three-star and budget hotels at an investment of Rs 2,500 crore.
  
•  Parsvnath will own and develop the hotels, while Fortune Park will manage them. The hotels will run under the brand names Fortune Select, Fortune Park, Fortuno Inn and Fortune Faith.

India has been witnessing a spurt in hotel projects over the last few years. The hotel industry is expected to grow rapidly, reaching Rs 82,676 crore by 2010. It is estimated that about 70,000-80,000 rooms will be added over the next two years. In addition, over 200,000 rooms will be added over the next five years throughout the country.

A number of real estate developers have tied-up with domestic as well as international hospitality chains to cash in on the boom. DLF has joined hands with Hilton Hotels and Four Seasons and Emaar-MGF has a joint venture with Accor.

Parsvnath is coming up with 17 hotel projects in the first phase, of which Fortune Hotels will manage seven projects in Ranchi, Lucknow, Indore, Jodhpur, Ujjain, Chandigarh and Dehradun. These hotels will be operational by 2010. The company is also developing hotels at Shirdi, Mohali, Hyderabad, Ahmedabad, Goa, Gurgaon and Kochi. The company has plans to develop 75-100 hotels in the country in the next 10 years.

Emaar will raise Rs6,457.5crore at the top end of its new price range.

It revised the pricing in the wake of the volatility in the stock market.

As per information on the website of the National Stock Exchange (at 5pm), the issue, which is looking to sell 102.57 million shares, received bids for 16.48 million shares.

Institutional investors offered to buy 16.40 million of the 61.54 million shares reserved for them, while retail investors sought to buy 86,640 shares of the 30.77 million reserved for them.

"The issue so far has been mostly subscribed at the lower end of the price band," said an analyst with an international financial services group who didn't want to be named.

The performance of an initial public offering (IPO) on Day 1 does not have a bearing on the number of shares the company making the issue will be able to sell by the time the IPO closes, but it is usually a good indication of the market's appetite.

The Reliance Power Ltd IPO, for instance, was sold out in a few minutes. The Emaar MGF issue closes on 6 ­February.

There is a message in the findings because Washington-headquartered AFIRE always gets it straight from the horse's mouth - nearly 200 of its members collectively hold $700 billion in cross-border real estate.

*  Quarterly results of corporates: Check out

Survey respondents said they planned to increase spending on global real estate by 20 per cent in 2008, compared to 16 per cent in US acquisitions. India first figured in AFIRE's survey in 2005 and rocketed to second place last year.

AFIRE chief James Fetgatter said China beat India to third spot this year in the rankings of countries that offer the best opportunity for capital appreciation in real estate.

Uttara Choudhury

 "It is not possible to have a uniform Central Act for all states. Therefore, this Act will be applicable only to Delhi and it will be a model for the other states to follow," said Maken, who was the chief guest at the meet. He, however, clarified that the watchdog would not regulate pricing. The regulatory authority would be a facilitator for developers in terms of permissions and other procedures.

As for buyers, it will ensure that they are not given a bad deal. "For instance, if they are promised a 1,500 sq ft flat, they should not end up getting only 1,200 sq ft. The body would act as an appellate authority," said Maken. According to Niranjan Hiranandani, head of Hiranandani constructions, real estate is already grossly regulated in India. "To construct one building, we require 52 permissions. Any further regulation will only reduce supply and increase costs. Unless supply is increased by increasing FSI, reforming land policies and creating more infrastructure, regulation won't help," he opined.

Anuj Puri, country head and chairman of Jones Lang LaSalle Meghraj said, "Ïn the real estate market, the real risk factor is the land fact as 80 per cent of the cost is the land cost and 20 per cent of the cost includes cost of construction and other transaction costs. Hence, land acquisition is the biggest risk factor in the real estate sector."

According to Hiranandani, home loan mortgages in India are worth barely 4 per cent of GDP, whereas in Singapore they are 70 per cent of GDP. "Looking at the scenario, it becomes important to be at par with international standards in terms of providing similar kinds of homes to all categories of people so that no middle class people are left without a home," he said.

Maken said that developing a regulatory body itself would bring in more surplus land as developers will form more joint ventures for property development. Further, he added that since demand for the real estate sector is growing in urban areas, builders should focus on developing real estate projects in urban markets and for the purpose, more investment is required.

Pranay Vakil, chairman of Knight Frank India, pointed out, "There is enough surplus land such as salt land which is creating a value in itself."

Home and commercial property buyers face the prospect of having to fork out value added tax (VAT) on their apartments for construction materials, over and above the money they have agreed to pay the builder to acquire the property.

The minimum VAT on construction material is at 4 per cent, though the rate may vary slightly from state to state.

Maharashtra has already implemented the judgement in a circular it issued on February 7, 2007.

The state will begin levying VAT on construction materials and the value of construction in all pre-launches - that is, on contracts that precede construction - with retrospective effect from June 20, 2006. Realty companies fear that this might start a chain reaction in other states, in a bid to increase revenue collection.

The circular follows a Supreme Court bench upholding its judgement in litigation between the K Raheja Development Corporation versus Government of Karnataka.

The Rahejas had an agreement with owners of land in Karnataka for the construction of residential and commercial developments. The issue before the Supreme Court was whether Raheja was liable to pay work contracts tax, which translates into paying VAT, according to a senior partner in Ernst & Young.

The Maharashtra circular is based on its interpretation of the Supreme Court judgement that pre-launches are included under works contract.

Quoting the judgement, the circular stated that works contract includes "any agreement for carrying out, either for cash or for deferred payment or for any other valuable consideration, the building and construction of any moveable or immovable property."

In layman terms this means that in cases where buyers purchase houses before completion of construction, builders would be levied works contract tax on the building material.

Buyers will have to begin shelling out more as they have to bear the tax burden. Customarily, there is an understanding between the buyer and the real estate developer that until the buyer takes possession of the development, any impact of changes in taxation would be borne by the developer.

"So far, builders were paying VAT on the actual cost of the construction by the contractor. Now they have to pay tax on the material as on the last sale price to the buyer. A part of the builder's profit will be added back to the value of the material. It necessarily means more tax to be paid. Authorities are now likely to attribute more to the cost of construction," said Satya Poddar, partner, Ernst &Young.

In 2004, the total m-cap of these companies was Rs 1,210 crore which went up to a whopping Rs 60,660 crore by November 2006.

According to a report by Edelweiss, Anant Raj Industries recorded the biggest growth--more than 168 times--from Rs 40 crore to Rs 6,716 crore in three years. It is closely followed by one of the largest real estate companies, Unitech, whose m-cap has grown by 122 times from Rs 324 crore to Rs 39,400 crore. Unitech also constitutes the lion's share of total sectoral m-cap at 65%.

Prajay, a Hyderabad-based company, has seen 58 times growth in its m-cap from Rs 20 crore to Rs 1,146 crore. Recent initial public offerings (IPOs) by companies such as Bangalore-based Shobha Developers and Delhi-based Parsvnath Developers are not included in this list as they were not listed earlier.

The report says while Ansal API clocked an m-cap of Rs 4,931 crore from Rs 100 crore in 2004, Mahindra Gesco's m-cap rose to Rs 4,058 crore from Rs 220 crore. Peninsula Land's m-cap was Rs 365 crore in 2004 and has gone up to Rs 2,626 crore.

Ansal Housing, which had an m-cap of Rs 21 crore in 2004, has now gone up to Rs 519 crore. Arihant Group has seen its m-cap rise by 40 times--from Rs 8.4 crore to Rs 336 crore now. DS Kulkarni Developers, a Pune-based housing construction company, saw its m-cap climb from Rs 107 crore in 2004 to Rs 925 crore by November 2006, according to Edelweiss.

Says Tanaji Chakrabarti, president, knowledge centre, Trammell Crow Meghraj: "After a prolonged period, the real estate sector has been recognised in the capital market, reflective of the performance that has been posted on the ground over the last few years.

The market cap of leading listed real estate companies as well as new companies listing has grown substantially and is in line with the growing spread and depth of such companies in rapidly growing real estate and urban infrastructure volumes that are being undertaken by such companies."

After tracking capital values in three metros like Delhi, Mumbai and Bangalore the end result was that either there has been a fall in the prices of the residential values or they have not increased in last three months. Prime areas in Delhi like Friends Colony, Maharani Bagh, GK I &II, Prithviraj Road and Hauz Khas have witnessed a 5 to 10% fall in the prices of residential values.

In Mumbai, prices at Colaba, Cuffe Parade, Central Worli, Bandra and Juhu have remained stable in the last three months. The story is the same in Bangalore where the market has not witnessed an increase in the last one quarter (October-December) while there was 10 to 15% increase in the last quarter (July-September).

Says Santhosh Kumar CEO, Trammell Crow Meghraj Property Consultants: "In the current real estate scene, what is being observed is a stabilisation of select markets. A consistent upswing is not possible in any market, particularly when a large level of supply is in the offering.

Real estate markets have observed high levels of growth in the recent past. However, in certain markets, market stabilisation has been observed. This indicates that there are not many buyers for the prices quoted for various real estate typologies at this point of time."

In fact, SundayET spoke to number of developers who refused to comment of the prices correction but at the same time agreed that there has been a slow down in last three months. Many developers, however, feel that the biggest risk to growth in this sector is sales to speculators.

Of course, how this inventory build-up will affect prices going forward remains to be seen. Further, the developers tendency to divert money from one project to another - rather than to keep a financial cushion - can lead to a chain reaction.

Says Sanjay Verma executive MD, Cushman & Wakefield: "The last quarter has seen a stabilising of prices in certain micro-markets since the supply has kept pace with the active demand in these places.

The demand in most of the markets is through informed and healthy transactions led primarily by investors who are seeking long term positions or end users.

Certain locations have been witnessing extensive residential construction activity and taking into consideration the projected supply in 2007, purchasers are adopting a wait-and-watch attitude in the hope that prices will rationalise or even correct to a marginal extent."

Another aspect of the drop in prices is that it is largely located in major tier I cities, while tier II and tier III cities are observing a slow but steady build up of prices. Even in the tier I cities, the downward trend seems to be a manifestation of offloading of housing stuck with investors and end-users that may be governed by external factors not related to real estate.

While this may trigger a temporal build upon effect, this is not likely to continue for long particularly owing to the holding power of the buyers, whether they are investors or end-users.