India Property News

Indian realty not celebrating this festive season

The festive season is a great time for both the buyers and the developers. . However, this year is a testing time for the industry. In the tier II and III cities the situation seems to be challenging for most developers this year. Many developers are not officially reducing the per sq ft price as they may not be able afford it. But even those who can afford it may still not do it as it will send a wrong signal for his reputation and for the state of property market. The stigma attached to the property price reduction in the Indian market coupled with an on going slow-down may result into stagnancy. Considering that the sentiment may worsen further, choking the cash flow, he may opt for discounts to push sales in the current sluggish market. Most developers are now offering the reduced price under the disguise of incentives. Those shying away from accepting the correction are labeling it as ‘Festival-discount’. Those who are not yet open to this idea are giving away the discounts to the customers on the negotiating table.

Despite being an inevitable part of most property purchased, lending statistics have declined as banks are also hit by the slow down. High rate of interest has added to low turn out at the home loan counters. Now, a few banks have also joined the incentive band wagon. Many nationalized banks are charging 1 per cent less interest during the period of festivities and for selected projects only. Many are waiving off the 1 per cent processing fees as well. Some banks such as State Bank of India (SBI) have tied up with some developers to offer ‘Interest Subvention’. This means the buyer will be paying 2 to 2.5 per cent less interest on the loan taken during the first two or three years during which the construction is going on. SBI has already announced interest rate of 11 per cent and further declared 0.25 per cent reduction for selected projects for stipulated period of festivals. Read More>>

Monday, November 03, 2008  India-Realestate

Property prices remain unchanged despite slowdown

The Indian real estate sector has been witnessing a slowdown but the developers are still holding on to the property prices. “Until a few months ago the slump was only being talked about and very few builders actually reduced their prices. The real impact will be seen now. The rupee fell to a six year low on Wednesday. The way the stock markets have reacted recently has created negative sentiments in the real estate market which will take at least two years to stabilize,” said Sandeep Sadh, CEO of the portal Mumbai Property Exchange. Sadh, like most property analysts, predicts continuing poor sales this Diwali, which is usually the time when maximum property transactions are conducted.

As the tug of war between unremitting developers and buyers waiting for a price crash continues, transaction volumes have hit an all-time low. In the month of August this year there have been only 3,814 property sales transactions, 30% lower than August last year which saw 5,385 transactions. “During Diwali, developers will be forced to reduce their prices by 20-25% if they want volumes in sales,” said Gulam Zia, national director, research and advisory services, at the property consultancy Knight Frank. Zia added that the reason developers do not want to admit to any such plans is because once home-buyers hear of a downslide in prices, they will wait for a further reduction which is what is happening right now. Read More>>

Monday, November 03, 2008  India-Realestate

Real estate PE deals may decrease

Private equity deals in real estate may increasingly become scarce in the short term, deepening crisis for cash-starved property firms. PE funds are sitting on a pile of cash but not willing to commit funds as they feel they would get better deals in the near future. “Given the volatility in the market, PE funds in general are not taking any decision on investments. We will be better placed to decide once the dust settles down on the market,” says the head of a domestic PE fund, which expects to invest a few hundred million dollars in real estate. The US subprime wave has now engulfed Indian stock market with realty stocks being the biggest loser. BSE Realty Index has slid 81% off its January peak. It shrunk 45% in a month as of Wednesday.

Listed developers had already abandoned the idea of tapping capital market or even private placement at the parent company level since the meltdown began in January. Almost all the PE deals which were struck this year were at project level. PE investments in real estate fell from Rs 7,100 crore in December quarter of 2007 to Rs 6,830 crore in six months ended June. The decline in the coming months could be steeper. “There is hardly any deal being closed as of now in the real estate space. PE players are just sitting on the sidelines waiting for further correction during Diwali and then in the run up to parliamentary election is when they plan to pick up stake,” says DTZ investment advisory director. Read More>>

Monday, November 03, 2008  India-Realestate

Demand for second homes on the rise

The residential real estate in India is growing. Rising incomes and attractive home loan options have fuelled the demand for second homes. Over the years, the variety of newly built second homes in India has increased quite substantially. Today, one can choose from a host of options, both in terms of geography as well as the format. Urban fringe homes or suburban homes present an option beyond the limited inner-city residence options. Suburbs across the country have emerged as a preferred location for homebuyers for premium residences, given the better land availability in these areas as compared to city centres. New residential projects and communities in tranquil suburban areas offering landscaped living, high-end specifications and top-of-the-line internal amenities provide an alternative way of living close to existing urban centres, yet away from its hustle and bustle.

The ever-growing size of homebuyers in the country is poised to drive the phenomenon well into the future. In fact, there is now an established trend of homebuyers looking at options beyond the ordinary for their second home purchases - both by geography as well as by residence formats. Looking ahead, it is anticipated that the depth and size of the second homes market would improve further owing to the sophistication of buyers as well as the pro-activeness of developers to meet the burgeoning demand for such products across the country. Read More>>

Monday, November 03, 2008  India-Realestate

Kamal Nath to further SEZs cause in EGoM

The commerce ministry will be pushing again for treating bank credit to special economic zones (SEZs) projects on a par with other industrial advances. The RBI had, in September 2006, directed state-owned banks to offer loans to SEZs on the same terms and conditions as offered to real estate projects. Treating SEZs like real estate resulted in higher interest costs since banks have to make extra provisioning and assign higher-risk weightage on such advances. With only a few months to go for the general elections, the Government has once again decided to clear out the air around some of the long-standing issues pertaining to SEZs.

The Empowered Group of Ministers (EGoM) on SEZs, chaired by external affairs minister Pranab Mukherjee, is likely to meet later this month, possibly around October 20, to try and sort out certain problems being faced by SEZ developers and units. Some of the major issues yet to be resolved are those of the interpretation of Section 10AA (7) of the Income Tax Act, imposition of a minimum alternate tax (MAT) of 10 per cent on SEZ units, removal of export duty on supply of steel to SEZs, availability of central value-added tax (Cenvat) credit to domestic manufacturers on inputs used in finished goods supplied to SEZ developers and the contention over the RBI’s definition of SEZs as real estate and not infrastructure projects. Read More>>

Monday, November 03, 2008  India-Realestate

AITUC against SEZs

The AITUC has expressed reservations against the setting up of special economic zones in the country. As far as the Kerala-specific safeguards, which have been incorporated by the LDF Government, are concerned the AITUC will react only after the notifications are issued, according to the AITUC state general secretary Kanam Rajendran. AITUC is not happy with the assurances given to the working class for protecting their interests. Kanam Rajendran said that the CPI was a political party which represented various sections of the society and therefore it would have a different opinion about SEZs but the AITUC represents the workers and it was worker’s interests which were of prime importance. Even in the public sector SEZs like the Cochin Export Processing Zone the labour laws were being flouted.

On the comment of LDF convenor Vaikom Viswan that those who were opposing SEZs were actually not loving the nation. Kanam Rajendran said that nobody need preach about patriotism to the AITUC. The AITUC had agitated against the East India Company in 1920. He said that the AITUC always believed in peaceful methods of agitation and not in violence. Read More>>

Monday, November 03, 2008  India-Realestate

Choice Hotels on expansion spree

Global hospitality chain Choice Hotels will double the number of its hotels by 2010. The group, which has four brands in India, is planning to invest Rs 1,500 crore over the next two years to double the number of its hotels from the existing 25 to a figure of 50 across India. “We have started construction of 21 more hotels and plan to sign agreements for four more. All these new 25 hotels would be ready by end of 2010 calendar year and we would thus double our number of hotels in India to 50,” Choice Hotels India Chief Executive Officer Vilas Pawar said. He added the group would invest Rs 1,500 crore in setting up of new hotels, including cost of the land, along with some other real estate developers with whom Choice Hotels has entered into partnership. “We have tied up with real estate player Amrapali Group for three hotels, Mittal Group for two, Asterix Group for two and Sabri group for developing four hotels,” Pawar said.

The group, which has around 5,500 hotels around the world under ten brands, has 25 in India under the brands ‘Sleep In’ (accommodation based 3-star), Comfort (restaurant-cum-accommodation 3-star), Quality (full service 4-star) and Clarion (entry level 5-star). It has currently an inventory of 2,000 rooms and plans to add 1,800 more in the new hotels, he added. Among the 25 new hotels planned, one would be in the Sleep In brand, four would be Clarion and the rest divided among the Comfort and Quality brands. The new properties are to come up in New Delhi, Amritsar, Hyderabad, Pune, Chandigarh, Manesar, Gurgaon, Goa, Bangalore, Chennai, Ludhiana, Noida and Bathinda. Read More>>

Monday, November 03, 2008  India-Realestate

RBI lowers CRR, home loan rates may fall

The Reserve Bank of India’s move to slash the cash reserve ratio has released Rs 20,000 crore into the market. This may lead to a fall in home loan interest rates. HDFC chairperson, Deepak Parekh, believes the fall in oil prices, moderated inflation and rising liquidity will cap interest rates. “Oil prices are coming down, inflation has moderated. Liquidity was an issue and this move by RBI will infuse liquidity. I am hoping that interest rates have peaked,” says Parekh.

Some analysts say the there could be further good news for borrowers. “I suspect that there could be further cuts in rates before, during or after the credit policy,” say stock analyst Harsh Roongta. Banks aren’t willing to commit themselves on a cut, but say funding will get easier with more money to lend. One needs to watch out for RBI’s credit policy on October 24. Read More>>

Monday, November 03, 2008  India-Realestate

Developers doing away with construction-linked plans

Real estate developers including DLF and Unitech are now introducing ‘time-linked’ payment plans for home buyers, thus replacing the construction linked plans. By doing so, buyers become prone to higher risk of late delivery of homes, besides facing an indirect increase in the cost of owning a home. Under time-linked plan, a developer gets assured money from a home buyer in instalments but is under no obligation to use that money in the same project to deliver homes in time.

It’s been a usual business practice for developers to divert sales proceeds from one project to another. During the real estate boom of the past five years, builders expanded massively by routinely using the proceeds of one project to purchase land elsewhere. Times have changed with the global financial crisis and realty firms are now facing major cash crunch, which is likely to worsen. Therefore, if they were to divert funds from one project to another now, it is likely that some projects may get stuck mid-way. Read More>>

Sunday, November 02, 2008  India-Realestate

Jammu real estate industry growing despite turmoil

The turmoil in J&K couples with the slowdown in the country’s real estate sector has affected the industry in Jammu. There is stagnation in investments and a visible negative growth in industry and developers differ over whether the boom bubble will burst. “Agreed that the withdrawal of certain concessions (excise duty exemption) to the industry led to loss of capital, offering of government accommodation to the migrant Kashmiri pandits living in camps slightly impacted demand and general slump in trade during the agitation over Amarnath land followed by boycott of Jammu goods in Kashmir is hurting, but this is not going to impact the sector so greatly,” said property dealer Dinesh Kumar. “We have around a dozen builders and three of them have already tied up with major builders at the national level and some more are busy negotiating JVs.”

“There were some problems last year but I see the real estate witnessing a growth of around 10% this year,” said Nidheesh Builders’ head Murthi Gupta. “Growth of nuclear families, continuous migrations from the countryside and sustained flow of soldiers retiring from services will continue to maintain the demand for vertical housing, that despite being a new concept is gradually getting acceptability,” he added. Mr Gupta, who in the last 15 years has successfully built and sold many properties, said security, social dependency, facilities at affordable investments were helping the apartment culture to sustain and gain popularity. Many others think that restriction on Floor Space Index (FSI) in Jammu had acted as a deterrent for developing high-rise buildings. Read More>>

Sunday, November 02, 2008  India-Realestate

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