Indian Property News

Singapore may set up SEZ in India

Singapore is keen to set up a special economic zone in India, but also voiced an understanding that the acquisition of large tracts of land was a sensitive issue in the South Asian country, unlike in China. “I had proposed the idea of having a special economic zone with India to Premier Manmohan Singh two years ago and he was very enthusiastic about the idea,” senior Singapore Minister Goh Chok Tong told the Prawasi Bharatiya Diwas, a conclave of more than 800 members of the Indian diaspora from 20 countries. Widely credited to be the man behind the “India fever” in Singapore, Goh said at a special session on “Personal Reflections on India” that he knew there had been problems in acquiring large areas of land required to set up an SEZ.

Comparing the condition with a “different system” in China, the former premier said his project for setting up an “Eco City” in April last year in China was expedited by the authorities and land was soon acquired. “In China because of a different system, things can move much faster,” Goh said, adding, “We are still interested and are still looking for that piece of land in India”. The senior minister also said the city state was open to entering into infrastructure projects in India in partnership with Malaysia. His response came to a query from Samy Vellu, the president of the Malaysia Indian Congress (MIC), who asked if Singapore would be keen to take up infrastructure projects in India along with Malaysia by pooling talents from both neighbouring countries. Read More>>

Monday, November 03, 2008  India-Realestate

MCHI sops fail to attract buyers

The real estate exhibition by the Maharashtra Chamber of Housing Industry in Mumbai got a lukewarm response from the prospective buyers. Superficial discounts like stamp duty waivers, free car parks, no charge for floor rise and special offers on the equated monthly installments that is to be paid on home loans seem to be failing to change the buyers’ sentiments as they expect a crash in prices soon. Even as hundreds of enquiries poured in at the exhibition on Dussehra, it failed to translate into actual bookings.

“Most developers in Thane have been quoting a price range of Rs 5,500-5,750 and the price has remained some what constant in the last six months. Now a majority of them are willing to negotiate further. But I am planning to wait till the prices come down to Rs 4,500-5, 000,” said a buyer. Read More>>

Monday, November 03, 2008  India-Realestate

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

Govt proposal may increase flats by one lakh in Delhi

The Delhi government is considering a proposal that will make it obligatory for group housing societies wishing to make use of the increased floor area ratio (FAR) under Delhi’s new Master Plan-2021, to construct new dwelling units in their society premises instead of finding ways to expand the existing flats. If the Union urban development ministry proposal goes through, around 1 lakh more houses are expected to come up in the city. FAR in group housing societies has been increased from 167 to 200 in MPD-2021, which was notified by the urban development ministry in February last year.

After MPD-2021 came into force, several housing societies had permitted their residents to increase the area of their flats by making extensions to take advantage of the raised FAR. But the government, keen to bridge the huge gap in affordable housing in the capital, hopes that the new proposal will make available more houses. As per urban development ministry, the proposal would force housing societies to utilize the increased FAR to construct new houses. The proposal will provide housing to many who are not in a position to afford costly flats offered by private builders. The availability of around one lakh houses, that too in existing housing societies, would also put a check on sky-rocketing prices of flats. The proposal is also in tune with the master plan’s provision increasing the population density by 40% — from 175 persons per hectare to 250 persons — in residential areas. Clause 4.4.3-B of the master plan, which deals with increase in FAR in societies, does not specify how the increased built-up area is to be utilized. 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

DIAL plan falls short of Rs 1500cr

Delhi International Airport Pvt Ltd’s (DIAL) plan to fund the Rs 8,975-crore airport project (Phase I) by raising funds from real estate projects within the larger airport area ran has now led to a shortfall of nearly Rs 1,500 crore. Top officials closely involved with the project revealed that there was opposition from the Airports Authority of India (26% partner in DIAL) over making good this gap through equity infusion in proportion of stakeholders’ holdings. The ministry then asked the consortia to raise more debt but the lead project banker advised them to seek a development fee as the UDF alone may not have been a cushion enough to do so.

‘‘DIAL has to share 46% of its revenue with AAI and 3% with its European technical partner, Fraport. On the remaining 51%, 30% tax would be charged and so DIAL will get only about Rs 36 from every Rs 100 taken as UDF. This puts a limit on the amount of debt that can be serviced and no bank today will lend more than what can be recovered after the global crisis triggered for this very reason in the US,’’ said a source. 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

Haryana SEZs have a long way to go

Haryana has gained approval for over 50 special economic zones but there is a lot that needs to be done. Even land acquisition is yet to commence for some of the projects. Of all the SEZs, five will be set up by private players in synergy with the Haryana State Industrial and Infrastructure Development Corporation (HSIIDC). These are the Reliance Haryana SEZ at Gurgaon and Jhajjar, DLF SEZ at Gurgaon and Ambala, and Unitech SEZ at Kundli, near Sonepat.

The joint venture agreement between Reliance Ventures Ltd (a 100 per cent subsidiary of Reliance Industries Ltd) and the HSIIDC was signed on June 19, 2006, for setting up a multi-product mega special economic zone over 25,000 acres in Gurgaon-Jhajjar in Haryana (that was later bi-furcated into two SEZs — 12,500 acres at Gurgaon and 12,500 acres at Jhajjar). The HSIIDC got 10 per cent sweat equity in these projects and contributed 1,086 acres from its own land bank. The state government announced the SEZ at Ghari Harsu in 2003 and spent two years (Jan 2004 to Jan 2006) in acquiring the land for the first SEZ of Haryana to be developed by the Haryana State Industrial Development Corporation (HSIDC), which was merged with Reliance SEZ and HSIDC, and was renamed HSIIDC. 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

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