Tulip to invest Rs 100 cr to build housing project in Gurgaon

NEW DELHI: Real estate firm Tulip Infratech will invest Rs 100 crore over the next three years to develop 400 apartments in Gurgaon.


"Seeing the demand for affordable housing project, we are coming up with 400 flats in first phase at Gurgaon-Sohna road. The basic selling price of the three-bedroom apartment has been fixed at Rs 25 lakh," Tulip Infratech Ltd Chairman and Managing Director Praveen Jain said.

Asked about the project cost, Jain said the investment will be about Rs 100 crore, including land.

The company has land and the construction cost would be funded through customers advances and debt, he added.

Jain said the project 'Tulip orange' has been launched and the construction work is expected to start by August. The project will be completed within three years.

At present, Tulip Infratech is developing three housing projects, comprising 1,200 apartments, at a total investment of Rs 500 crore. The two projects are located in Gurgaon and Sonepat.

The company would start delivering the flats in Sonepat, where it has sold 50 per cent of 640 flats, by the end of this year, Jain said.

About Gurgaon projects, he said the mid-income housing project would get completed by the end of next year, but there would be some delay in the premium residential project as only 20 per cent out of 252 apartments has been sold so far due to significant fall in demand for high-end products.

Source: ET

Builders, politicians cheer affordable homes in India

MUMBAI: A recent state government lottery for about 4,000 low-cost apartments in Mumbai drew more than 430,000 applications, underlining the need for affordable housing in a country where housing is also a top election issue.

Political parties of all hues have seized on affordable homes as a vote getter in India's ongoing general election, plugging in to the frustration of millions priced out of a real estate boom fuelled by a robust economy and a six-year bull market.

Developers too, stung by the credit crunch and sagging demand for offices and premium residences, have turned to a middle class segment that may be more immune to the economic slowdown.

"For the government it makes sense from a vote bank perspective," said Anuj Puri, managing director of real estate consultancy Jones Lang LaSalle Meghraj. "For builders, this slump may last two to three years. How do they pay salaries, keep their lenders happy? This is the option."

Parties have been quick to seize the opportunity in a country where home ownership tops every wishlist, and is part of the trio of basic amenities alongside electricity and roads promised by every politician to mostly rural voters.

The Congress party-led government has recently encouraged states to release land for affordable homes, invited private partnerships and stepped up funding of rural housing.

The Congress government in Maharashtra state has declared 2009 as the year of "Housing for the Common Man", with a plan to build 1 million affordable homes, while the Congress government in Delhi held a lottery for 5,000 flats that got 500,000 applications.

The opposition Bharatiya Janata Party has vowed to build 1 million homes every year in its manifesto.

AFFORDABLE HOUSING IMMUNE TO CREDIT CRUNCH

But it is not just politicians taking an interest in votes. Investors stung by a slump in the wealthy real estate sectors are increasingly looking at investment in affordable housing.

This kind of housing is "seriously undersupplied" in India, according to a Goldman Sachs report. More than 30 million units are needed because of growing urbanisation.

Mumbai, long a magnet for migrants from poor states, is home to one of the 10 most pricey residential neighbourhoods in the world, yet more than half its 17 million residents are homeless.

Demand has also stayed robust because these buyers do not depend on bonuses or stock-market gains said Puri, who defines an "affordable" home as costing no more than five times the buyer's cumulative salary, or 2.2-3.5 million rupees ($44,000-$70,000) for an average middle-class family in India.

This segment of buyers appears relatively insulated from the credit crunch, as is evident from robust motorbike sales and the record number of new mobile phone users being added every month.

"Ironically, the sector which was one of the principal causes of the financial market meltdown in the U.S. may just offer downside protection in India -- the fortune at the bottom of the pyramid," said the Goldman Sachs report.

Since India eased rules on property investment in early 2005, foreign investors such as Citigroup and Morgan Stanley have piled in, causing land prices to double in major cities.

But as the credit crisis spread, it put the brakes on several big projects; affordable housing on the other hand, is relatively insulated as there is little foreign funding.

Top developers such as DLF, Unitech, Omaxe and Parsvnath are targeting the segment now, with about two dozen projects in Mumbai's suburbs alone, even as high-ticket commercial and residential projects have stalled.

The Mumbai draw was more keenly awaited than the election.

"I didn't want to regret later that I didn't even make an attempt at getting an apartment 30-40 percent cheaper," said Jitendra Patil, 29, an advertising executive.

Source:http://economictimes.indiatimes.com

Office rentals drop up to 37 pc in Jan-Mar

NEW DELHI: Office rentals declined up to 37 per cent in India during the first three months of the year due to sluggish demand, as business houses held back expansion plans to tide over the economic slowdown.

According to a study of eight Indian cities by global real estate consultant Cushman & Wakefield (C&W), supply in the cities outstripped absorption by 45 per cent in the January-March period of 2009.

Subsequently, drop in rentals in major business districts of the country ranged between three per cent and 37 per cent as compared to the previous three months.

For instance, at Lower Parel in Mumbai, office rentals fell by as much as 37 per cent in the first quarter of the current year, the study said.

Worli and Bandra Kurla Complex areas of the financial capital witnessed decrease of rentals by 29 per cent and 20 per cent respectively, it said.

"The first quarter of the year can be termed as the weakest so far in terms of commercial office take up across major cities in India as compared to a similar period for the last 2-3 years. Renegotiations and migration to more cost effective locations has been the norm for the cautiously advancing corporate sector," C&W Executive Director Kaustuv Roy said.

Though supply levels in the market is expected to fall, C&W predicted rentals to remain under pressure in the coming few months as well.

"Going forward we are likely to see supply contraction. Acutely affected areas like IT/ITeS and certain corporate office destinations will see deferment of projects to bridge the gap between supply and demand.

"While rental values are expected to be under pressure in short to medium term, going forward lower rentals are likely to have a more positive impact on the absorption numbers," Roy said.

Source:http://economictimes.indiatimes.com/Markets/Real-Estate/Office-rentals-drop-up-to-37-pc-in-Jan-Mar/articleshow/4429839.cms

Indiabulls Real sells Mumbai property to BCI for Rs 30 cr

MUMBAI: Real estate firm Indiabulls Real Estate (IBREL) has sold 15,730 sq ft of area in its upcoming commercial complex at Lower Parel in central Mumbai for Rs 19,000 per sq ft to the British Council (BCI). The property firm has also signed leasing agreements with leading corporate houses such as Reliance Capital, Aditya Birla Group, IDFC and Indusind Bank for rents ranging between Rs 175 and Rs 225 per sq ft.

“We have done an outright sale deal with British Council recently at Indiabulls Centre at Lower Parel for around Rs 30 crore. We feel that we received a decent valuation, given the current tight situation in the real estate market,“ Indiabulls Group spokesperson Gagan Banga told ET. He also confirmed signing of the lease rental agreements with a few corporate houses.

IBREL holds a 45% stake in Indiabulls Property Investment Trust (IPIT), a Singapore-listed entity, which owns two prime properties at Lower Parel — Indiabulls Centre and Elphistone Mills.

Industry sources said IBFEL command high prices, vis-à-vis its peers in central Mumbai. “After Bandra-Kurla Complex, Lower Parel has emerged as the next commercial hub as rentals are hovering much lower than Nariman point, the main business district of the city,” a senior official of property consultant Lang LaSalle Meghraj (JLLM) said.

According to a report on India office market by international property consultants CB Richard Ellis, tower I of the Indiabulls Centre (450,000 sq ft) is the only newly-constructed building, which is operational and ready for occupation in the Lower Parel area.

The report said, despite the general lack of demand, extended business districts like Lower Parel and Worli have witnessed a revival of construction activity in many of the projects that were earlier stalled. Industry sources said that IBREL is sitting on a cash reserve of around Rs 3,000 crore and is on the prowl for half-finished projects and other land asset buyouts as property prices have crashed around 50% during the past one year.

“Currently, most of the developers are raising debt. But there is a limit for middle and small developers to raise debt. They will have to go for equity at one point. Another three to six months down the line, we expect more projects will come up for raising funds through equity. We will evaluate them,” Mr Banga said.

Currently, the cash-strapped real estate sector is desperately seeking funds for revival. Various reports indicate that around Rs 4,500 crore to Rs 5,000 crore worth of projects across the country are facing great difficulty in finding takers.

Source:http://economictimes.indiatimes.com/Markets/Real-Estate/Indiabulls-Real-sells-Mumbai-property-to-BCI-for-Rs-30-cr/articleshow/4427590.cms

Residential property rates may fall 35%

Realty brokers in India expect residential property prices to settle down at a 25-35% discount on the current listed prices over the next couple of months, according to a recent survey.

The demand for homes remained muted in the otherwise busy season of January-March, the findings of the nationwide property brokers’ poll, conducted by financial services company Edelweiss, indicate. The only projects selling are those priced at least 25-30% lower as against the ongoing market rates, while real estate companies reluctant to slash prices are struggling to clear inventory.

“Customers are coming back for deals. Prices have begun to consolidate at 30-35% discount to the list prices,” realty company Orbit Corp’s corporate strategy head Ram Yadav says.

Some aggressively priced new projects, including Lodha’s project in Thane, HDIL’s in Andheri and Nirman Lifestyle’s Mulund project, are doing well in Mumbai. “HDIL’s Rs 7,651/sq ft at Andheri is a good price as compared to Rs 6,000/sq ft at which the state housing development authority MHADA is selling its flats in a similar area,” says Santosh Naik, MD and CEO of Disha Direct, a real estate marketing company.

Property dealers, the report says, don’t see a recovery in the domestic realty market any time soon as buyer sentiment is expected to remain subdued due to the weak economic environment.

According to the survey, 76% of the brokers expect prices to decline over the next three months and about 53% of them see the trend continuing over the next one year.

City wise, Bangalore is the least pessimistic with 32% of the brokers surveyed having a negative price outlook over the next one year, while Chennai is the most bearish with 73% expecting a decline in realty value.

Sales during the January-March quarter are expected to be much lower (less than 50%) than what they were in the corresponding quarter last fiscal.

India’s largest real estate companies DLF and Unitech are faced with unsold inventory and increasing interest costs. Things do not seem to be getting better for at least another year for either of these developers

Soruce:http://economictimes.indiatimes.com/Markets/Real-Estate/News-/Residential-property-rates-may-fall-35/articleshow/4387266.cms

DLF, DAL raise Rs 1,100-cr debt from HDFC Bank

NEW DELHI: The country’s largest property firm DLF and its promoter group company DLF Assets (DAL) have together raised around Rs 1,100 crore as debt from HDFC Bank through lease rental discounting (LRD) of their properties. The fresh round of debt raising will ease cash flow at DLF.

A DLF spokesperson declined to comment on fund raising, but two senior company executives confirmed the raising of debt through LRD. LRD allows a property owner to raise funds against the expected rentals from the property in future.

Privately held DAL has raised around Rs 800 crore while DLF has raised the rest. The fresh debt will help DAL pay DLF for the properties it had earlier purchased. As of December 2008, DAL owed Rs 5,400 crore to DLF.

DLF had earlier raised over Rs 3,000 crore in debt from Punjab National Bank (PNB), Life Insurance Corporation (LIC), State Bank of India (SBI) and Bank of India (BoI) between December and February, mainly to repay short-term debt.

DLF’s impressive sales and profit figures in the past several quarters were significantly based on its transactions with DAL, a company floated by DLF’s promoter KP Singh. Property sales to DAL contributed 43.5% to revenues and 35% of DLF’s profit before tax for the December 2008 quarter.

DAL, which has attracted investments from the US hedge fund DE Shaw ($400 million) and UK-based Symphony Capital (estimated $650 million), was originally proposed to be listed on the Singapore Stock Exchange, as a real estate investment trust. The global economic downturn, however, forced DLF to change its plan last year, and the company has since been trying to raise equity in DAL through private placement.

While announcing the December quarter earnings, DLF vice-chairman Rajiv Singh had said that DAL will raise around Rs 2,000 crore through private equity deals. He said that DAL would raise the same amount through lease rental discounting, if equity deals didn’t materialise.

Market analysts see the rising receivables from DAL, as the single-biggest concern for DLF. Meanwhile, DE Shaw is also looking at exiting its investment in DAL and any loss to it on account of a fall in market value of DAL has to be compensated by DLF promoters. As per JP Morgan’s estimates, DAL’s market value has fallen to $1.5 billion from $2.2 billion in 2007.

In view of this, DLF is weighing several options aimed at extinguishing receivables from DAL and help DE Shaw exit DAL.

First is to let DAL raise funds through LRD and pass that on to DLF, which would then use the money to buy DE Shaw’s investment in DAL.

Second option is to convert entire receivables into equity in DAL. This would mean DAL picking a majority stake in DAL. “DLF could look to buy a part stake in DAL at some stage, to provide a one-time resolution of balance sheet debtors. This could be done through converting outstanding debtors on balance sheet to an equivalent stake at an appropriate cap rate,” said JP Morgan in a recent report.

Third option being discussed by DLF management is to merge DAL with itself. This may probably require DLF to raise debt to buy DE Shaw’s investment in DAL, following which DAL will be merged with DLF. The merger may entail DLF issuing convertible bonds to Symphony Capital. DLF can’t issue fresh shares to Symphony, a foreign investor, as the realty company is also executing many non-FDI compliant projects

Source:http://economictimes.indiatimes.com/Markets/Real-Estate/DLF-DAL-raise-Rs-1100-cr-debt-from-HDFC-Bank/articleshow/4382390.cms

No clear sign of recovery in real estate market

MUMBAI: There seems to be no clear sign of recovery in the real estate market. Even the otherwise busy season (January to March) could not prove to be any better than the previous quarters. This is evident from the offtake of inventory at project sites of various developers.

A recent property brokers’ poll conducted by Edelweiss on the residential property market also throws up the same results. The only projects that are selling are the ones that are priced at least 25-30% discount to the ongoing market rates. In fact, some of the new projects (Lodha’s project in Thane, Dombivili, HDIL’s project in Andheri and Kurla) launched in Mumbai and around did see some good response as they were priced very attractively.

Buyer sentiment is expected to remain negative due to weak economic environment. Consequently, property volumes would remain muted and prices would decline further.

As per the survey, 76% brokers expect price trend to be negative over the next three months and 53% brokers expect price trend to be negative over the next one year.

Location wise, Bangalore is the least pessimistic market with 32% brokers having negative outlook over the next one year. On the other hand, Chennai remains the most pessimistic with 73% brokers having negative outlook for the same period.

This would further have a subdued impact on the earnings estimates for the sector. Sales are expected to be down by more than half of what they were in the March’08 quarter. Both DLF and Unitech, the largest players of the sector, are faced with unsold inventory and increasing interest costs.

No utopian situation can lend a helping hand to the declining operating profit of these developers, and things do not seem to be getting better for another year for either of these developers.

By ET Intelligence Group