In 2010,the Indian real estate sector remains Negative

In 2010,the Indian real estate sector remains Negative; however, the sector could exhibit signs of stability by the second half of the year. Fitch notes that the fundamentals of India’s real estate sector are improving, as seen by better liquidity and improved demand in the residential segment.

The agency expects growth in 2010 to be driven by government support, especially for the affordable housing segment, improved access to debt and capital markets, and the recovery of real estate demand. Yet, there are concerns that the government may roll out moderately adverse policies to keep property prices in check when economic conditions become more stabilised. In addition, the government may also find it politically difficult to provide a supportive environment if developers continue to increase real estate prices.

In order for Fitch to take a more favourable view of the sector, sustainable operating performances and continued deleveraging by developers over a longer period will be key positive factors, which the agency expects to see during the second half of the year. Demand for both residential and commercial real estate segments slowed down considerably in H109, with a significant drop in property prices. However, H209 witnessed some revival, particularly in the residential segment.

Enhanced affordability, lower mortgage rates, and better job security have helped revive demand for homes. Conversely, demand in the commercial segment remains weak, primarily impacted by over-supply and the scale-back of expansion plans by corporate India. During the crisis, the Information Technology/Information Technology Enabled Services (IT/ITES) sector, where the bulk of the demand for India’s commercial office spaces come from, adopted a conservative staffing approach. This has led to demand lagging behind supply; however, Fitch expects demand for commercial spaces to improve in H210 consequent to the expected resumption of hiring in key sectors like IT/ITES and financial services. That said, based on the current commercial spaces under construction, oversupply risk persists in the sector, which would keep lease rentals under pressure in 2010.

Future group in Real estate sector

After building a retail empire with revenues of around Rs.10,000 crore, Kishore Biyani is eyeing a piece of India’s booming real estate sector—putting finishing touches to new homes. The Future Group has tied up with developers in various cities including Lavasa Township near Pune, Nirmal Lifestyle Ltd in Mumbai, Aparna Constructions and Estates Pvt. Ltd in Hyderabad and Omaxe Ltd in Delhi to undertake projects such as furnishing apartments to providing fitted kitchens.

Ladham said B&Q used to handle around 40,000 homes annually, helping builders and home owners to design and finish their apartments. He expects Future Group will be handling more than that in India five years from now. “You look at the demand and you look at the home ownership projections over the next five years in India. We are really on the low end of that curve,” Ladham said. “The demand is going to triple if not quadruple in the next five years. Home owners need people to come and finish off their homes.”

Typically, Real estate in India are bare shells when handed over to buyers, who then need to complete the rest of the furnishing on their own or through local contractors, where reliability can be an issue. This is the niche that Future Group wants to enter. Biyani, founder and the chief executive of Future Group, said the home division, could become the second biggest revenue earner for the company in the next five years, propelled by the latest venture—Home Town Design and Build Services. That would put it behind the flagship Big Bazaar supermarket division that has annual sales of around $1 billion (Rs.4,532 crore).

Home Town Design has received orders from various developers for about Rs.700 crore and he expects the business to clock Rs.1,000 crore in revenue by the June fiscal year end. In the next five years, Biyani expects around Rs.5,000-6,000 crore in revenue from the venture. While Biyani declined to disclose the investment being planned in the venture, Ladham said it would be “significant.

Realty Estate company Panchsill has roped in internationally acclaimed design company, Yoo Design Studio

Construction and real estate development company Panchshil Realty has roped in internationally acclaimed design company, Yoo Design Studio, to design ‘Yoopune’, a one-of-its-kind residential project that is coming up in Real estate Pune. For Yoo, a company promoted by Philippe Starck and John Hitchcox, a renowned property entrepreneur, it is the debut project in India.

The Yoopune will offer 228 unique ‘Yoo inspired by Starck’ designed homes spread over six towers overlooking lush, historic rainforest and trees as old as 100 years. The launch of the new project was announced here on Saturday. John Hitchcox, chairman and co-founder, Yoo, said, “I am delighted that we have had the opportunity to design a wonderful development in multi-faceted Pune, a vibrant place and ideal location for a Yoo project. Yoopune is the embodiment of Yoo inspired by Starck, which is about great design that ultimately helps people to live better.”

The site in Hadapsar spans 17 acres and includes exclusive amenities like Six Senses Spa, swimming pools, basketball and tennis courts, a tea lounge, a cigar room and recreation areas for children and families. Sagar Chordia, director, Panchshil Realty, said, “Through this collaboration, the two companies hope to redefine the way India looks at living.

The Real estate company said that Bill Bensley, an award winning international landscape architect, would be responsible for the exotic and natural environment surrounding the homes. Scheduled for completion in 2014, the homes will offer a selection of the best European-designed fixtures and finishes, including Italian marble, and Poggenpohl kitchens with Siemens appliances.

Scam Hit Indian Real Estate Sector in Acute Need of Regulation

The year 2010 will probably go down in India’s history as the year of scams. As always, the authorities swing into action after the event. Regulations and compliances notwithstanding, scamsters continue to devise and leverage the loopholes. Unregulated sectors, such as real estate, which is in acute need of regulation, probably demonstrate best the investors’ predicament. The real estate sector probably has the highest rate and volume of investments and the largest number of investors. Contrasted with the various SEBI regulations which aim to protect the capital market investors, real estate development regulation has been sadly neglected, though there is a draft Bill on the anvil.

Currently, the Indian promoter-developer buys the land from villagers and “obtains” clearances from the competent authorities for the building and layout plans. The predevelopment clearances required range from non-agricultural orders by way of Government permissions for the proper use, as for example conversion of land earmarked for agricultural purposes only. Building and Floor plans are approved by local municipal or state urban development authorities, depending on location. In addition, a no-objection certificates are to be obtained notably from the state pollution boards, water supply and sewerage authorities, properties and respective state and central authorities such as the Archaeological and Airport bodies in order to rule out attendant risks the development may pose to the existing structures and operations.

In practice, these approvals are taken at a much later point of time. Because of the tight demand and supply situation, booking and collection of a large chunk of consideration from prospective buyers are concluded well before these clearances are obtained. The buyers have no choice but to sign on the standard contract formats, without the right to negotiate, leaving customers and investors to the mercy of unscrupulous promoters and subjected to various unfair trade practices, with cavalier disregard for compliances. The contracts which the buyer is induced to execute have clauses which are onerous and one-sided, with loopholes for the developer to get away with delays, random cost escalations, exorbitant penal interest, to name a few. The Developers ensure that they are fully insulated from all future liabilities, which are passed on to the buyers at a later point of time, when they become aware that their rights to ownership, super areas, common areas and facilities are very different from what was represented.

The buyers’ recourse so far has been to the Consumer Courts. The National Commission in 2007 dismissed DLF”s appeal from the complaint filed by one Kamal Sood to hold that the builders’ practice of collecting money from prospective buyers without obtaining the required permissions amounted to an unfair trade practice, and the builder is dutybound to obtain the requisite permissions in the first instance, and thereafter, recover from the buyer. It further held that if there is any express promise that the premises would be delivered within a stipulated time-frame, the builder has to bear the escalation costs. Even then the developer’s deep pockets, and rounds of appeals are often a deterent for mostinvestors.

Godrej Properties to Develop Residential Project at Bangalore

Godrej Properties Limited (GPL), a real estate arm of Godrej Group , on Thursday said it would develop a residential housing project at Mohali in Punjab, which could involve a capital outlay of Rs 450 crore. Besides, the company would also focus on several cities, including NCR , Mumbai , Pune, Chennai and Chandigarh for developing a slew of residential projects in line with its plans to cash in on the growing demand for housing from urban sector.

“We are looking to develop a residential project in Mohali with a minimum land of 20-25 acres…we are in talks with certain land owners here for (entering into a) joint venture in this project,” the company’s MD Milind Korde told reporters here today. Though investment is not a constraint for the company for the upcoming project at Mohali, yet the estimated capital outlay in this project may be around Rs 450 crore, including the land cost, he said.

GPL is already in the process in real estate of developing its first Rs 400 crore commercial project in Chandigarh, which will be spread over 4.04 acres with a development size of 6.80 lakh square feet. “This project is going to complete by September next year,” he said. Company’s focus towards growing real estate sector of northern region could also be gauged that it has set up a 3,500 square feet office here which will take care of its projects in northern region.

Real estate sector in India is witnessing tremendous boom

Real estate sector in India is witnessing tremendous boom. Real estate industry in India is presently worth $12 billion and is growing at the rate of 30 per cent per annum. The importance of real estate sector in India can be gauged from the fact that it is the second largest employer next only to agriculture. The real estate industry has significant linkages with several other sectors of the economy and over 250 associated industries. According to a study One Rupee invested in real estate sector results in 78 paise being added to the GDP of the country.

Eighty percent share of the real estate market is garnered by residential sector and the rest is comprised of offices, shopping malls, hotels and hospitals. The sustained demand from the Information Technology (IT) sector has fuelled the growth of real estate sector. It has been estimated that the demand for IT space would be 66 million square feet over the next five years. Several multinational companies are shifting their operations to India to take advantage of the relatively low costs. With human resources being the key element in this industry, hiring people and housing them assume great importance. The need to create space for people to work and live triggers the development of other related infrastructure.

Traditionally, the government's support to housing had been centralized and directed through the State Housing Boards and development authorities. In 1970, the Government of India set up the Housing and Urban Development Corporation (HUDCO) to finance housing and urban infrastructure activities. In 2002, the government permitted 100 per cent foreign direct investment (FDI) in housing through integrated township development. However, FDI rules at the moment are quite stringent. For FDI in real estate prior approval of the Foreign Investment Promotion Board is required, which, can be rather tedious and there is a lock-in period for repatriation of the original capital invested for a period of three years. On the top of it the rules stipulate a minimum land holding of 100 acres. Getting 100 acres of free land in an urban area is almost impossible. Hence the permission of FDI in real estate hasn't had the desired effect.

The boom in retail industry has also spurred the growth in real estate sector. India at the moment is witnessing a spurt in extremely large retail spaces. Shopping malls with over 1 million sq ft of space have become the order of the day. As the competition in the market intensifies, builders are going out of their way to be different. Specialized malls, designer brands and multi-movie options are the order of the day. With the big players like Reliance, Big Bazaar, and Bharti entering retail market, real estate sector would be the big beneficiary.

Real Estate sector is booming in india

With property boom spreading in all directions, real estate in India is touching new heights. However, the growth also depends on the policies adopted by the government to facilitate investments mainly in the economic and industrial sector. The new stand adopted by Indian government regarding foreign direct investment (FDI) policies has encouraged an increasing number of countries to invest in Indian Properties.

India has displaced US as the second-most favored destination for FDI in the world. As the investment scenario in India changes, India which has attracted more than three times foreign investment at US$ 7.96 billion during the first half of 2005-06 fiscal, as against US$ 2.38 billion during the corresponding period of 2004-05, making India amongst the "dominant host countries" for FDI in Asia and the Pacific (APAC).

The positive outlook of Indian government is the key factor behind the sudden rise of the Indian Real Estate sector - the second largest employer after agriculture in India. This budding sector is today witnessing development in all area such as - residential, retail and commercial in metros of India such as Mumbai, Delhi & NCR, Kolkata and Chennai. Easier access to bank loans and higher earnings are some of the pivotal reasons behind the sudden jump in Indian real estate.

Why Invest In Indian Real Estate?
Flying high on the wings of booming real estate, property in India has become a dream for every potential investor looking forward to dig profits. All are eyeing Indian property market for a wide variety of reasons:

* It’s ever growing economy which is on a continuous rise with 8.1 percent increase witnessed in the last financial year. The boom in economy increases purchasing power of its people and creates demand for real estate sector.

* India is going to produce an estimated 2 million new graduates from various Indian universities during this year, creating demand for 100 million square feet of office and industrial space.

* Presence of a large number of Fortune 500 and other reputed companies will attract more companies to initiate their operational bases in India thus creating more demand for corporate space.

* Real estate investments in India yield huge dividends. 70 percent of foreign investors in India are making profits and another 12 percent are breaking even.

* Apart from IT, ITES and Business Process Outsourcing (BPO) India has shown its expertise in sectors like auto-components, chemicals, apparels, pharmaceuticals and jewellery where it can match the best in the world. These positive attributes of India is definitely going to attract more foreign investors in the near future.

Property prices may crash as loan scam hits funding

Liquidity for the sector may dry up as bankers turn cautious in sanctioning fresh loans, forcing builders to cut prices to improve cash position, helping prospective buyers who have been holding on due to high prices.

Finance minister Pranab Mukherjee’s direction to state-run lenders to prevent a recurrence of the loans-for-bribes scandal, and banks’ decision to go for a critical appraisal of all real estate loans above Rs 50 crore may stall projects and drive developers to private funds.


DB Realty tumbled 10%, Indiabulls Real Estate lost 5.2%, DLF fell 3.8%, and Unitech declined 6% as a fund shortage threatens to derail their project execution, which had just started to show signs of recovery after the 2008 credit crisis.

The arrest of eight finance executives by the Central Bureau of Investigation on Wednesday on charges of taking bribes to sanction loans does not lead to a systemic risk since the amount involved is tiny, bankers and bureaucrats said. It is getting more attention than it deserves, they said.

“ banks and financial institutions should strengthen the NPA (non-performing assets) monitoring and management in their institutions to ensure that advance action is taken to identify incipient sickness and take appropriate action on it,” said Mukherjee.

A Bank of India official said, “All big-tickets loans, particularly to builders, will come under the scanner now. Recall of loans can happen if there is a fear that the quality of loans may suffer. But as of now, there is no such worry and hence it would not prompt us to recall loans.”

Adarsh Builder Scam Gets Murkier...

The mystery surrounding the missing documents relating to the Adarsh scam just got murkier. Even as the theft of crucial papers missing from the Adarsh file in Mantralaya is being investigated, other vital papers relating to the case have gone missing from the records of the Colaba-based Defence Estate Office (DEO). The DEO is the custodian of all land records involving local defence force units.

While four pages related to notations made by babus on various clearance granted to the society have gone missing from Mantralaya files, the DEO has been unable to trace official records regarding the no-objection certificate (NOC) granted by it to the project in March 2000. Also missing are records showing the existence of a defence-built garden (Kukri Park) at the site before the plot was allotted to Adarsh society.



Official sources added that even as the DEO was the first office to be approached by the society for an NOC for the project, the DEO file relating to the case does not contain papers revealing the names of the proposed members. A senior official said that the army top brass has already been informed about the missing papers.

As many as eight officials employed with the DEO at some point had initially applied for membership to the society. The aspirants included M Guruswamy, the defence estate officer who granted the NOC to the project in March 2000.

Ironically, Gurusamy’s name had figured in the list of proposed members in the society before he granted the NOC, which claimed that the ‘‘disputed land was outside defence limits and could be used for the welfare of acting and retired defence personnel’’. Interestingly, the same records have also gone missing from the DEO’s file.

Just as in the case of the urban development (UD) department, which had custody of the missing Mantralaya papers, the DEO began looking for the papers after CBI officials sought the documents. Fortunately, the local army headquarters was in possession of copies of most of the documents that were missing from the DEO file, and the CBI collected these papers from them.

RBI Rules To Impact Real Estate

The realty sector is unlikely to be impacted adversely following the measures announced by the Reserve Bank of India on Tuesday aimed at tightening home loan regulations.

However, rising capital values can play a spoilsport hereafter as the RBI, through these measures, has alerted home buyers, developers and banks, industry experts said.

The RBI on Tuesday, as part of its monetary policy review, raised repo and reverse repo rates by 25 basis points each while keeping the cash reserve ratio and bank rates unchanged. It also announced reduction in loan-to-value ratio to 80%, which most commercial banks were keeping at around 85%.

RBI also increased the risk weights for loan of more than Rs 75 lakh to 125% from 100%, and raised provisioning requirement for teaser rates to 2% from 0.4%. According to Ajay D’souza, head of research at Crisil, increasing risk weights for loan of more than Rs 75 lakh may not impact the demand, as a large part of demand is for loans less than that.

However, borrowers with a loan above Rs 75 lakh may have to face a 150-basis point higher cost as a result of all the measures announced on Tuesday, said an analyst with a foreign brokerage.

Budget 2010 - Impact on Real Estate Sector

The pending housing projects have been granted a one year extension for completion, from the existing four years to five years, for claiming a 100% deduction on their profits under section 80-IB of the Income Tax Act, 1961 (“Act”). This extension is available for housing projects approved by a local authority on or after April 1, 2005.The industry players who have got their 80IB (10) eligible projects delayed can take comfort with the time for completion being extended to 5 year from current 4 years. Moreover interest subvention scheme of 1% on all individual housing loans upto Rs 10 lakh (Rs 1 million) for units costing upto Rs 20 lakh (Rs 2 million) till March 30, 2011 is a positive move to encourage affordable housing units costing upto Rs 20 lakhs.Since real estate sector is more interest sensitive this 1% subvention will reduce the EMI significantly and improves affordability. Further more and more developers will conceive projects in this price segment to tap the potential auguring well for the sector on a whole. However the impact of bringing rental of vacant land into service tax as well as other changes in service tax has to be seen.Since the demand for real estate being a derived one, the growth thrust as well as more money on middle class individual will benefit the industry by way of demand pickup.

In addition, under section 80-IB of the Act the built-up area of shops and other commercial establishments in housing projects has been relaxed to 3% of the aggregate built-up area of the housing project or 5000 square feet, whichever is less, from the existing 5% of the aggregate built-up area or 2000 square feet, whichever was less. A 4 month extension has been provided for setting up and commencing operations of hotels and convention centers in National Capital Territory of Delhi and specified surrounding regions. Such hotels and convention centers would now be eligible to claim specified deductions, where such facilities are set up and commence business by July 31, 2010.

Since real estate sector is more interest sensitive this 1% subvention will reduce the EMI significantly and improves affordability. Further more and more developers will conceive projects in this price segment to tap the potential auguring well for the sector on a whole. However the impact of bringing rental of vacant land intoservice tax as well as other changes in service tax has to be seen.

But inspite of the positives of budget 2010 like incentives to hotel business, housing projects, higher allocation under Indira Awas Yojana and other rural development/infrastructure schemes, is unlikely to meet the expectations of the industry primarily due to some of the service tax proposals.