Growth of Integrated commercial complexes in India

The real estate scenario in India is witnessing a change. According to commercial real estate India information integrated commercial complexes are becoming a reality just like integrated residential complexes. Inside sources of real estate developers India inform that the process for developing integrated commercial space has already begun in India. Leading real estate developers opine that this trend is an emerging one and is going to sell well. Such integrated commercial spaces will have office space, five-star hotels and retail space along with other facilities within the complex.

One such project has already been executed in Bangalore by the Brigade Group. Following on its footsteps many such projects are being planned all over the country.
Real estate developers agree that the profit margin in such projects would be definitely higher in comparison to other real estate projects. In Capital City of Noida and at Mulund in suburban Mumbai such projects have been launched by BPTP Ltd in the name of Nirmal Lifestyle and Nirmal Galaxy respectively.

This trend which is picking up in India is not the first in the world as such projects have been in vogue in different parts of the world. Integrated commercial complexes are turning out to be a balance between development and demand.

Growth of Commercial Real Estate Market

According to the report of Real Estate Intelligence Services Division of Jones Lang LaSalle Megraj, the commercial real estate market of India is shinning with the economic recovery of India. The report titled “Seven Stars of India-India’s best performing micro market for occupiers” declared that India is the most encouraging office micro market. The report figured that 2011 will be beneficial for the landlords where as 2010 will stay advantageous for tenants. In 2011 the office rents will increase and the landlords should think about locking striking lease procedures.

Mr. Abhishek Kiran Gupta, the associate director of the Real Estate Intelligence services Division of Jones Lang LaSalle Megraj stated that the up tick in the level of lease contracts has been reported in most of the Indian big cities. More than a million square feet of land is given out on lease in Mumbai, Delhi, and Hyderabad.

The report suggested the landlords to change the approach for commercial occupiers if they want to maximize their profit ratio. Office micro market is high real estate development and this development would outpace the net absorption, which in turn would lead to a rise in the vacancy level.

Sahara-SEBI clash adjourned on may 17

The clash between the Sahara group and securities and exchange board of India (SEBI) would likely draw to a close. The lucknow bench of the Allahabad High Court had after hearing from both the sides over the past three days have now adjourned the matter till may 17. According to the advocate of the Sahara group, Mr. Prakash Chandra the concluding arguments from both the sides will be made on may 17. According to other lawyers the arguments from both the sides were complete in nature. As a matter of fact on November 14, SEBI had announced Sahara group a violator of its norms and therefore banned it from raising money from public.

Sahara India real tatese and Sahara housing investment had allegedly raised around Rs 4843 crore by investors. SEBI has prescribed guidelines on public issues for accessing public money, grading by credit rating agencies and other guidelines exists which according to SEBI has been violated by the sahara group in the debentures issue. As a reply the sahara group challenged the order made by SEBI arguing that it wasn’t a listed entity and SEBI didn’t had the jurisdiction as an authority to regulate it. Further SEBI in return argued that issuing of equity or any debt instrument to more than 49 investors clearly comes within the jurisdiction of SEBI. In the month of January the apex court of land directed the lower courts to hear the matter on a day-to-day basis.

11% hike observed in Mumbai rentals

Mumbai might have witnessed a sharp decline in real estate property sales but this has not affected its rental value. Rental value of properties have not only increased in Mumbai but also in other metropolitan cities. In the past year rental value in Mumbai and its outskirts have grown by 11%. This was disclosed by private real estate portal, 99acres.com which had conducted the study. Whereas in Bangalore, Pune and Delhi he rental value has increased by 13%, 11% and 9% respectively.

However properties in South Mumbai localities which is one of the most preferred locations, have witnessed a slump in rental value. For example the Worli residential market witnessed a 21.31% slump and areas like Prabhadevi, Parel and Bandra which falls in west Mumbai saw a dip in rental value by 18%, 12% and 11.57% respectively. All these figures were for last year. A real estate expert while talking to reporters from DNA said that the rental value in South Mumbai localities has indeed skyrocketed. For most people this area is still unaffordable. He said that as a result a lot of people are opting for properties located in the suburbs and outskirts. He further added that it is because of the prevailing exorbitant property rates in Mumbai that the rental value has shot up.

Phadnis Infrastructure plans to invest Rs. 1700/- in India

ALIBAUD: Infrastructure Development Company Phadnis Infrastructure plans to invest Rs. 1700 /- crore in the next five years to reach new milestones. According to company’s chairman and managing director th company has huge growth plans for India and in its objective they have planned to invest over Rs. 1700/- crore in the next five years. He said that these funds will be utilized by the company in the real estate, hospitality and ITeS sector as it aims at full fledge growth and expansion in these sectors.

The company plans to invest about Rs. 1000 crore in the real estate sector and Rs. 600/- crore in hospitality and it also aims at investing a significant amount in the ITeS sector too. Also he added that the real estate sector is where the focus of the company lies but they also want to invest in hospitality sector as it is having huge growth potential. They want to set up 25 budget hotels pan- india in the next few years. They are expecting revenue of Rs. 600/- crore from each hospitality and real estate sectors. The company which is also in building roads, bridges and other infrastructural projects expects to double its revenue from current Rs. 800/- crore to Rs. 1600/0 crore by March 2012, he said. He adds that the company will be bidding for various government and private projects.

The increase in the repo and reverse repo rate to affect the real estate developer and the buyers too:

The Reserve Bank of India has increased the repo rate and the reverse repo rate by half a percentage points each as a result to which the new rates are 7.25% and 6.25% respectively. The banks and other financial institutions are also expected to increase their lending rates soon. Also the projected growth rate is around 8% in contrast to 9%, what the government has projected in the union budget this year.

The growth in the interest rates coupled with slowdown in the economy will directly or indirectly affect the activities of the real estate sector as well. The lowering of economic growth is a consequence of the growing inflation rate which is hovering around 9%. The latest rise in the repo rates by RBI means that the cost of construction has gone up for the real estate developers and this increase certainly hasn’t come up at the best of times. According to some reports the banks have already taken cautious approach at real estate lending and reduced the burden on them. As a result most of the real estate developers are raising costs from the private sector now. The construction costs have significantly risen as the returns on the borrowings have risen to a great extent. It can easily be assumed that the burden of the increased costs will shift on the buyers to maintain the same profit margins.

Zinc hospitality plans a strategic investment in real estate sector in India

Zinc hospitality which holds equity shares in India and New York is planning to introduce its own brands in India. The company also owns Glow Studios and Zinc City, partnered with a Bangkok based Invision for the mid-market segments. It now plans to invest around $40 million in various cities across India for four properties to be developed by 2013. According to the CEO of the company, initially it aims at having equity stakes in their projects and later to build their own brands and later on to invest in the property level as a strategic investor.

The tariff of the two hotels Zinc city and Glow Studios will be around $100 per room. The hospitality company wants to expand in other cities like Coimbatore, Guwahati, Amritsar, Faridabad and Ghaziabad. According to Rahul Chaudhary, executive director, Indian sub- continent, Zinc Invision Hospitality the luxury market in India is getting vry saturated, they will look onto that segment at a later stage. The company also aims at opening at least 30 new hotels in Asia and West Asia by 2013 with upscale brands like Zinc living, Zinc edge, a luxury hotel Soma and Zinc Journey. The CEO also adds that they don’t want to open a huge number of hotels but have a focused growth and quality projects.

Israeli company to invest in real estate India

According to the Wall Street Journal, Israeli Conglomerate Elbit Imaging and its subsidiary Plaza Centers NV is set to make fresh investments, worth at least USD 500 million aimed to develop real estate projects in India. They want to build a diversified real estate project in India having residential, office and retail projects within it. The newspaper said that the Elbit India Plaza Management Services is on the verge of signing its first residential, joint development project in Thiruvananthapuram, the capital city of Kerala on an 11 acre piece of land. A Pune based company named Panchshil Realty and a local builder will assist the Israeli firm.

According to many property analysts, after the economic meltdown experienced in 2008-09, the real estate developers are again showing interest in highly developing countries such as India, China and Brazil. During the meltdown period almost all the real estate developers had altered their plans of building projects in these countries. The Israeli firm Elbit had entered the Indian market in 2006 and since then had invested a good amount of sum in the central and southern Indian states. According to the report the firm is developing two new projects in Pune including a shopping mall and some office space and retail center with its partner Panchshil Realty and the approximate investment in the projects in around USD 200 million.

2. The new real estate bill focuses on giving more power to the consumer:

A draft bill is into the making since the past two years formulating the real estate deals but now the bill is modified in a way to fit it into a central legislation governing the deals within thttp://www.blogger.com/img/blank.gifhe whole country. In the newly formulated draft bill the consumer has been given more protection by laying more emphasis on his rights and by protecting him in case of fraudulent real estate deals. The provisions of the draft bill are made in such a manner that the developer will not be able to easily fool any buyer; he’ll have to make public disclosures about the project and also the final project completion date beyond which he’ll be liable for over dues. All the disclosures pertaining to the project must be made before launching the project so that the consumers are not taken for a ride later on. The developers will now need to register themselves with the regulatory authority which regularizes the real estate deals in the country. According to the housing ministry officials the draft bill will be introduced in the Parliament in the latter half of the year.

To make this draft bill a central legislation certain clauses have been removed from the earlier bill which includes state centric issues such as building bye-laws and municipality concerned issues. The newly formulated bill focuses on consumer protection, timely completion of projects and fulfillment of contractual obligations by the builder/ developer.

1. The real estate sector is facing problems as regard to funding:

The real estate sector in India has been experiencing a boom in the recent years. It has been made possible with large scale infrastructural development and capital flow in the country. Especially in the residential sector it has been on a roller coaster ride in the last two or three years. The sector experienced huge rise in late 2007, followed by a correction in 2008 and then recovery in 2010. The comeback ohttp://www.blogger.com/img/blank.giff growth in this sector is due to certain specific reasons, one of them being the demographics and other favorable economic conditions of the country. Whereas according to some sources the sale of projects of some real estate developers have plunged in the past few months mainly because of rise in prices which became unaffordable to majority of genuine buyers.

However this situation has occurred earlier also. During the economic meltdown period, upon RBI guidelines banks had advanced few generous debts to real estate sector redevelopment. But this was obviously on a premise that sales will surely be on track post meltdown period and developers would have enough assets to repay in 12 to 14 months period. But if the reports are believed to be true then there won’t be much surprise that the real estate developers would be requesting for delays. But this time negotiation of debts wouldn’t be that simple at all.

Real estate companies finding it difficult to repay bank loans

Funds shortage and dip in property sales seems to have hit the country’s real estate firms hard. As this has affected cash flows the firms now feel that theirhttp://www.blogger.com/img/blank.gif ability to repay bank loans will be hampered. According to industry estimates at least six real estate companies are feeling the pinch and so they are finding it difficult to pay back bank loans as per commitment. This was revealed by two senior bankers and some real estate industry officials. After restructuring of loans by banks following the 2008-09 slump about Rs 20000 crore as bank loan repayments were due till 31st March from real estate companies. However, at least six companies could not meet this deadline.

According to the chairman of a large public sector bank who did not wish to be named said that these companies are on the verge to default. He further revealed that already some of these firms have overdue interest repayments. As of now there is no decision for immediate categorization of these loans as non-performing assets (NPAs). If interest on a loan is not paid for 90 days it becomes an NPA. Since no interest is earned by the banks on such loans therefore banks as per RBI guidelines are required to set aside money for NPAs. On the other hand a loan defaulter finds it difficult to secure fresh debt.

Kolkata based developer ‘Eden Group’ plans 7-8 new projects at an investment of Rs 250 crore

A leading Kolkata-based real estate developer named Eden Group is all set to develop 7-8 new projects on an area of about 1 million square feet. According to the company these projects willhttp://www.blogger.com/img/blank.gif be launched within the next one year. As per company sources the total investment will come to about Rs 250 crore and these projects will be located in and around Kolkata. The total investment also includes the cost of the land. Company sources also disclosed that the funds for these projects will be collected through internal accruals. The projects will include residential as well as retail space. It is expected that every quarter at least two projects would be launched. The first project is expected to be launched in June. In next one year the company hopes to develop 1,000 units.

Mr. Krishna Modi, director (marketing & legal) of Eden Group while talking about the growth plans of the group said that the group plans to launch 7-8 projects in and around Kolkata within a span of one year. He said that almost 95 per cent of the development will be focused on residential properties and the rest on retail space. Mr. Modi said that since the group happens to be completely debt-free company therefore only internal accruals will be utilized to meet the estimated cost of investment which will be about Rs 250 crore.

Piramal Realty Ltd plans 5 residential projects in Mumbai

Piramal Realty Ltd which is the brand new venture of Ajay Piramal, the chairman of Piramal Group is all set to develop five residential projects in Mumbai. The total investment for these projects have been estimated at about Rs 1500 crore. Mr. Khushru Jijina, the MD of the company said that about 30 million sq. ft of area will be developed by the company through land acquisitions. The funds he said will be sourced from the company’s own sources and therefore there will be no borrowing. Regarding the segments that would be covered by these projects Mr. Jijina said that various segments like premium residences, premium office spaces, second homes, low-cost housing and redevelopment of existing space are being considered.

A total of 20 projects are being evaluated which are located in Mumbai, Pune and Nashik. However Mr. Jijina said that land procurement for five large residential projects in Mumbai has reached an advanced stage and the projects are likely to be launched in 2012. According to property consultants the financial strength behind these projects is the biggest asset and that will give a strong start-up. Last year when Ajay Piramal was giving an interview he had said that about Rs. 17,000 crore was realized from the sale of Piramal Healthcare Ltd’s branded generics business to Abbott Laboratories. He said that this amount would be used to create new businesses and that includes real estate development.

Loans not repaid by many top real estate developers

According to a report as many as around six including two senior bankers and other real estate industry officials havhttp://www.blogger.com/img/blank.gife failed to meet the deadline for the repayment of loans advanced by various banks to them. The major cause attributed to such act is the reduction in sales and the slump faced in 2008-09. The deadline which was 31st march has been over passed already and the loan which lies around Rs. 20,000 crore is still unpaid.

If a chairman of a public sector bank is to be believed the accused will not be able to repay the loans. The chairman didn’t want to reveal his identity but said that a few among the defaulters have approached for a fresh loan. “They have approached various banks for fresh loans, possibly to repay the old debt,” he said.
The companies which have sought a fresh loan are Lodha Developers Ltd., Unitech Ltd., DB Realty Ltd. and Emaar MGF Land Ltd according to the senior banker. Among them Lodha Developers didn’t respond to an e-mail sent last week. A Unitech spokesperson said that the company wont reveal any financial figures until the results are announced. The group director at DB Realty declined to reveal whether the firm has any payment over dues or if it has sought a fresh loan to repay an earlier one. The Emaar MGF said that it has refinanced some of its debts and has also repaid an amount of Rs. 1,400 crore in last year and a half.

Real estate developers failed to repay loans:

As many as six top real estate developers failed to repay loans they obtained from the market as a consequence shortage of funds and reduction in property rathttp://www.blogger.com/img/blank.gifes. Indian real estate firms are hit by losses due to lessening of property prices and drops in sales which had directly affected their capability to repay the loan they had obtained from various sources. According to a conservative estimate at least half a dozen real estate companies are finding it difficult to repay their loans among who two are senior bankers and other are real estate industry officials. From a source it has been revealed that around Rs. 20,000 crore was due for repayment by the real estate companies by 31st march after the slump in 2008-09.

According to a chairman of a renowned public sector bank all of these real estate officials are most likely to default. He also said that among them some are already facing overdue interest repayments. However as a fact the loan cannot become non performing assets (NPA’s) before the duration of 90 days. Banks do not earn money for such loans and they are required to set aside a sum of money for NPA. But for a defaulter obviously securing another fresh debt becomes very difficult.

ED to attach properties of Unitech and Swan: Companies allegedly involved in 2G scam

The Supreme Court has been intimidated by the Enforcement Directorate (ED) about its decision to attach the properties of Unitech Wireless and Swan Telecom whihttp://www.blogger.com/img/blank.gifch are allegedly involved in the 2G scam. ED officials informed the apex court this attachment will be done within 2 months. Following this development, shares of Unitech plunged down by 4.45% and that of DB Realty by 4.07% on the Bombay Stock Exchange. Senior counsel KK Venugopal speaking on behalf of ED told to a bench comprising Justice GS Singhvi and Justice AK Ganguly that both the telecom companies have properties worth Rs 2000 crore and these will be attached. Enforcement Directorate is government body that investigates money laundering and probes violation of rules governing foreign exchange.

ED has already submitted a fresh status report to the Supreme Court which contains the latest update on its investigation. Though Mr. Venugopal did not name the two companies in front of the court but he was clearly referring to Unitech and Swan which have been accused of procuring mobile services licenses at a very cheap rate in connivance with former telecom minister A Raja. ED refers attachment as a process of identifying properties which it considers to have been bought from the proceeds of a crime and attaches the same so that the accused is unable to sell them off.

SEBI bars Emaar MGF from raising Rs 1600 crore via IPO

A third attempt by Emaar MGF Land which is a New-Delhi based real estate firm, to raise Rs 1,600 crore through an initial share sale offer came to a naught due regulatory issueshttp://www.blogger.com/img/blank.gif. Seven months has passed since Emaar MGF had applied to the Securities and Exchange Board of India (SEBI) seeking its approval for its initial public offering but till now the regulatory body has not given its nod. According to reliable sources the role of Emaar MGF in the alleged irregularities in developing the Commonwealth Games village might have put the New Delhi-based firm under the scanner. On September 30, 2010 that Emaar MGF, which is a joint venture between Indian lender MGF and Dubai’s Emaar Properties, had filed its draft red herring prospectus (DRHP) with SEBI.

The Prime Minster had appointed the V K Shunglu committee to look into issues relating to organizing and conduct of Commonwealth Games that was held in Delhi last year and this committee has indicted the role of Emaar MGF Construction Pvt Ltd which is a unit of Emaar MGF Land. The committee which released its second report last month has clearly stated in the report that Emaar MGF failed to meet its contractual obligations, received undue financial gains and also alleged to have made unauthorized payments. There were other charges too.

Needs realized in the real estate sector at the CREDAI 11th national convention

A meeting of the Confederation of Real Estate Developers Association of India (CREDAI) was held which was presided by many eminent members of CREDAI such as the chairman Mr. Pradeep Jain, Presidenhttp://www.blogger.com/img/blank.gift Lalit Kumar Jain, other main key speakers in the event included CREDAI secretary T. Chitty Babu and the Vice President Mr. C. Shekhar Reddy. The secretary observed that the proposed shall have a wide scope in as much as to include all the stakeholders of the real estate sector.

The conference of CREDAI discussed on many issues speed and efficiency of the real estate projects, innovation and technology to be used on a wide scale as a part of this sector to impart modern outlook and changing trends trends of Indian realty. Attention was also given to the recent construction at the Indira Gandhi International Airport in Delhi and other iconic buildings in the world as a case study to support the point.

Awards was presented by Mr. Kamal Nath, the Union Urban Development Minister of India to various real estate developers of CREDAI under various categories. The secretary Mr. T. Chitty Babu also received two awards himself on the behalf on his projects in Chennai under the name of Akshaya Pvt. Ltd, of which he is the chairman and the Chief Executive Officer.

CREDAI conference in Singapore:

According to some industry leaders the law is proposed to regulate the development of the real estate sector of India and it must address the interests and responsibilities of all stakeholders. A consensus on this was established ihttp://www.blogger.com/img/blank.gifn a meeting of the Confederation of Real Estate Developers Association of India (CREDAI) at its 11th national convention on this Friday. The meeting which was of 2 days was inaugurated by the Union Urban Development Minister, Mr. Kamal Nath on Thursday and presided by the Confederation of Real Estate Developers Association of India (CREDAI) chairman Mr. Pradeep Jain and President Lalit Kumar Jain.

Other main key speakers in the event included CREDAI secretary T. Chitty Babu and the Vice President Mr. C. Shekhar Reddy. The secretary observed that the draft bill initiated by the centre primarily focuses on the responsibility of the real estate developers. He also emphasized that the new law should be comprehensive in scope to include all the stakeholders. The stakeholders in the real estate sector apart from the government and the local authorities, who possess the power to grant approval for the construction and legalization of the project, included the real estate developers, the buyers of homes and offices and agencies carrying out the business of funding such projects. According to him all these stakeholders must be held accountable under any legislation for the proper administration of the real estate sector.