Real Estate Prices To Remain Stable: DLF

Real estate prices are likely to remain stable at current levels, a top official of real estate major DLF Limited said Tuesday.

"I don't see any price bubble in real estate and expect prices to remain steady at current levels," DLF vice-chairman Rajiv Singh told reporters on the sidelines of a press conference here.

However, there could be some upward or downward movement depending upon land location, he said.

Company officials pointed to the "strength" in the market and maintained that "there is no lull in demand."

DLF's business is heavily dependent on the performance of the real estate sector, particularly in the regions in which it operates.

However, given that prices in the NCR region and the metros where its main land bank exists are holding stable, company officials said "there is no cause for worry."

Source://Zeenews

The new property millionaires

The first time that Sudhanshu Mishra invested in property was when he was 29 years old. He bought a home in Lucknow, which is now occupied by his parents. Subsequently, after relocating to Bangalore, he invested in property by buying two three-bedroom apartments, one of which is in the process of being sold. Bought for Rs 33 lakh, the market rate of the apartment in question today is Rs 65 lakh, giving Mishra a profit of Rs 30 lakh.

The same goes for interior designer, Lavina Khanna. She bought her first property when she was 30 years old in Dwarka, which was just beginning to make a mark on the property scene in Delhi. She bought the three-bedroom apartment for Rs 15 lakh and sold it Rs 30 lakh after four years. “Appreciation was not as fast then as it is today. Now, it does not make sense to hold on to property for more than two-three years,” says Khanna, who has bought two apartments in Gurgaon and one in Greater Noida at Rs 2,200, Rs 2,100 and Rs 1,800 per sq. ft respectively. Earlier, she has sold one apartment for Rs 3,000 per sq. ft., which she bought at Rs 2,100 per sq. ft, two years ago.


The lure of big bucks is too great to resist and if you can perfect the art of garnering them periodically, then why not! Investing in real estate is the new mantra for a lot of people in India today, considering the boom that the sector is witnessing of late. But, the investment bug has bitten the young more and with them they bring in new ideas and values.

The most prominent trend that is being witnessed today is the decreasing period of ownership in property. Most youngsters today— in the age group of 25-35—are buying property and holding it only for two-three years. The reason—they prefer short gains rather than sitting on property for life, and the best way to do this is by buying through pre-launches.

Take the case of Vikas Khokha, a senior executive with Bharti Airtel, who prefers to invest in pre-launches, as it gives him the opportunity to make quick profits as and when the property is launched and the prices appreciate. He bought a three-bedroom apartment on Sohna Road in Gurgaon when the area was just coming up. Bought for Rs 32 lakh, 34-year-old Khokha sold the apartment for Rs 40 lakh after two years. The market rate of the same apartment today is Rs 70-80 lakh.

“In a pre-launch, not only are the rates less, but I also don’t have to pay the entire amount. Payment for pre-launches is usually done in regular installments. As it is banks and financial institutions do not provide loans for pre-launch offers,” he says.

Khokha is a part of a growing tribe of youngsters who are looking for short-term gains, instead of sitting on a property and passing it on to the next generation.

Generation Y wants to partake of the fruits of investment in this life itself, even though it means getting a profit of only a few lakhs. “Whatever profit I get, I again invest a part of it in property,” says Khokha, who has subsequently invested in plots in Faridabad and Agra as well as an apartment in Noida.

In fact, with interest rates rising, a number of youngsters today prefer not to go in for home loans and buy property by putting in their own savings. An example to boot is that of 35 year old media professional Vivek Makkar, for whom investing in property today has become a ‘way of life’. After selling his plush bungalow in West Delhi, Makkar had the cash to spare, which he wisely used in investing in property by buying space in a mall in North Delhi and buying apartments in Gurgaon, Faridabad and Noida. As soon as the property appreciates, he sells it off and makes a cool Rs 15-20 lakh per property, a part of which goes into more investments in real estate.

In fact, a number of investors today are investing in malls. They buy space in a mall under construction (for Rs 200-300 per sq. ft., depending upon the location) and then rent it out to big brands for Rs 450-550 per sq. ft.) and reap the benefits for all times to come.

Another trend that is doing the rounds is that of many mid-level professionals joining hands and buying property together. Even though the property is in an individual’s name, the money put in is that of four-five people. They prefer to invest in Tier II and Tier III cities, which are accessible to the metropolitan areas that they live in. Like advertising executive Atul Arora, 32, has invested in Meerut, Jaipur, Zirakpur and Panipat with four of his friends. “We divide the profit that we get after selling and depending on everyone’s requirements again invest it into property. We choose Tier II cities because being mid-level professionals we cannot afford the high rates that the Delhi NCR is recording these days. Tier II cities fall into our budget and give good returns as well,” he says.

However, if you look at prevailing rates in metros, then investing in property there always fetches you the best possible profit. The present rise in rates is making old time investors laugh all the way to the bank. As is the case with Mumbai-based KK Rajaram, vice president (Finance), Shri Chakra Udyog who bought two flats in Vikhroli in 1993 at the rate of Rs 1,400 per sq. ft, whereas now the value currently stands at Rs 6,500 per sq. ft With plans to sell the properties, Rajaram plans to utilise the profit he receives in buying new property.

But, what is making young professionals invest in property today instead of in shares, apart from good returns? “Liquidity is more in real estate as compared to investing in the stock market. Shares do sell outright as compared to property, but then unlike real estate they also witness a downward graph as well. Even though there is a slight correction happening in the high-end segment, property price never goes down,” says Khokha.

Like Khanna says, the “boom will never go bust.”

Is There a Slowdown in The Property Market?

It might be a brick-by-brick process but the slowdown in the property market is evident. Industry watchers firmly believe that with the dollar inflow into realty slowing down, land prices will also sober down.

Private equity firms are playing the wait-and-watch game. Experts say the volume of private equity joint ventures has fallen. And this is because private equity players expect land prices to fall further.

Nalin Kumar, Executive Director & Head - Real Estate, JM Morgan Stanley, said, “I think the real impact will be at the raw material end, or the land prices end. And that will eventually be felt through the entire value chain. In my opinion, the land prices had started to go to levels, which were difficult to sustain, particularly in Class-III towns. The class-II town areas, which were significantly outside the metro limits will get impacted significantly."

But it is not just the tier-II and tier-III cities that will see a correction. Experts believe that certain pockets in tier-I cities, such as Real Estate Gurgaon and Mumbai, might as well see a dip.

Gaurav Pathak, Analyst, ICICI Securities, “As of now, supply is coming up in Central Mumbai, as well as suburban areas of Thane and Navi Mumbai. There could be some amount of correction here in Mumbai. But I do not see a significant downside in prices.”

Private equity is one of the last sources of funding that is open to developers. But with even these deals slowing down, developers could be faced with tough times ahead.

Source://Moneycontrol

Back-door entry for foreign money in RE

Smart investors are often a step ahead of rule-makers. Bankers, lawyers and financial engineers may have already found a way to overcome the recent clamp-down on the rush of foreign money into the Indian property market. The new route may be more expensive and not as easy as before. But, it can work.

Regulators fear that some of the Indian firms are taking advantage of the liberal norms for setting up overseas subsidiaries to float companies in tax havens with a capital of just a few dollars. This wholly-owned overseas subsidiary then emerges as the new vehicle to bring money into the property sector.

One of the real estate groups has done this, almost immediately after the government banned preference shares as foreign direct investment in the real estate sector. Till now, a local company owned by an Indian developer was issuing preference shares, or hybrid securities like convertible shares to the foreign investor. The money that came in was equity masquerading as debt. A few weeks ago, the government stopped it.

“What more and more developers will now do is get the investment at the overseas level, instead of receiving the money in India. The foreign subsidiary will issue preference and convertible shares to overseas investors, and then invest it in a real estate project in Gurgaon or Pune,” said a real estate fund manager familiar with such transactions. The money from the foreign subsidiary that will enter India will be shown as plain equity, flowing in through the automatic FDI route. Since a foreign entity (even though owned by a local group) will issue the preference shares, there is very little that Indian authorities can do.

For the overseas investor, the risk is more, since it would be investing in a company in Cyprus or Dubai, and not directly in the Indian project. “However, there are structures which can be put in place to take care of the risks....through their ownership in the overseas vehicle, the foreign investors would actually end up controlling the Indian firm which owns the property,” said a banker.

“There could be certain agreements to protect the interest of the foreign investors. Many international property funds and foreign banks are willing to bet big on the Indian property sector, where they feel the returns will still be higher than in some of the other emerging markets,” he said. Some of the foreign banks have set up dedicated desks to structure investments for the Indian property market. After the restrictions, these groups are now working overtime to find an alternative.

Sources said that many Indian developers, caught off guard by the curbs on foreign investment, are willing to pay a price to get it done. With domestic banks shutting their doors to realtors, the property players are expected to walk the extra mile.

Source: Economictimes

DLF roadshow ahead of offer to begin in the last week of May

DLF Ltd, one of India’s largest real-estate developers, will begin its much anticipated pre-initial public offering (IPO) roadshow during the last week of May.
The IPO of DLF’s shares is slated for the second week of June, said investment bankers involved in the offer. The company plans to sell 175 million shares.

The roadshow will also provide a more recent snapshot of DLF’s financial performance, through March 2007. The company’s most recent filing with the Securities and Exchange Board of India was submitted in March and covered results through January.DLF will submit a copy of the latest prospectus to the Registrar of Companies before the roadshow begins, said the bankers, who did not wish to be identified.

DLF plans to hold roadshows in Delhi, Mumbai, Ahmedabad and Chennai, as well as overseas markets such as Singapore and Hong Kong, part of a 16-city list targeted for the share issue.
Mumbai and Ahmedabad are expected to be key stops on the roadshow.

“Gujarat and Maharastra have the maximum retail investors. We will have the roadshow in two cities in Gujarat —Ahmedabad and another city,” said one banker associated with the issue.
Roadshows are used by companies to gauge how much investors are willing to pay for its shares. The response to the roadshow will then help DLF and the banks underwriting the company’s issue to fix a price band for the public offering.Kotak Mahindra Capital Co. and DSP Merrill Lynch Ltd are global coordinators and lead managers for the issue.DLF declined to comment, citing regulatory guidelines that prohibit it from talking about the IPO.

The company first filed to sell shares to the public a year ago but had to call off the attempt after minority shareholders protested over the allocation of shares in a rights issue, a bonus plan and a subsequent stock split.

This was for shares they held in DLF, which was previously listed until 2003 and was forced to delist after promoters violated stock market regulations by upping their holdings to more than 90%.

In January, DLF filed for the new offer after appeasing some of these shareholders.
DLF, owned by billionaire Kush Pal Singh and his family, built its real-estate empire by developing large tracts of Gurgaon, one of the Capital’s satellite towns, where land values have risen from Rs650 per sq. ft to as much as Rs6,500 per sq. ft over the last five years.
Close to New Delhi’s domestic and international airports, Gurgaon now houses row after row of large shopping malls that cater to densely packed apartment complexes and office buildings.

Source://Livemint

Gurgaon Based MDLR Group Build Four Hotels For Rs 1,000 cr

The severe hotel room shortage is attracting new players to set up hotels. The latest to join bandwagon is Rs 2,000-crore Gurgaon-based MDLR Group which will be opening four luxury hotels with a proposed investment of Rs 1,000 crore (excluding land price) in next three years.

MDLR, with business interests in real estate and multiplexes will be opening four hotels in Manesar, Gurgaon (near Delhi), Shimla and Jaipur. “The land for two hotel sites in Gurgaon and Manesar was acquired last year from Haryana State Industrial Development Corporation (HSIDC),” Gopal Goyal, chairman, MDLR group told ET.

The 11 acre land on which the Gurgaon hotel will be built today has marketable value of Rs 350 crore almost double of the value that it was bought at, thanks to the escalating land prices. While the Shimla property will start operations in the next three months, for NCR properties they are targeting the 2010 Commonwealth games. Delhi and NCR region are short of 30,000 rooms for Commonwealth games. It is this shortage which most of the hotel developers are trying to cash in on.

"By the end of next year we will be acquiring 10-12 more aircraft,” said Mr Goyal. The airline will be later expanding operations to Mumbai, Surat, Jaipur and Bhavnagar. “We are also in talks with ATR and Bombardier to acquire 10 aircraft and 10 more will be kept as an option,” said Harsh Vardhan, director, MDLR Airlines.

The airline has been positioned as a regional carrier for premium category competing with Paramount Airways. Its fares will be higher than low cost carriers but 10% lower than that of full service carriers. It will be opting for eight levels of fares with the cheapest being Rs 1,000.

Source://EconomicTimes

DLF Goes For Brand Makeover

As DLF gets ready to hit the capital markets with the largest ever IPO, expect the real estate giant to go on an advertising overdrive over the next couple of weeks.For starters the company is planning to increase its advertising budget from a mere Rs 10 crore last year to a whopping Rs 100 crore this year.

Not just that another Rs 100 crore will be added to the advertising kitty every year for the next five years taking the total budget to Rs 500 crore.A large part of the money will go towards an image makeover and re-branding exercise. 'Yes, DLF' will be the new catchline that the company is planning to roll out as part of the ad campaign.Brand recognition"We have stayed out of the market for a long time.

Last year we did make a splash to get some brand recognition and this year we need to reinforce the brand to come into public memory," said Rajeev Talwar, Group Executive Director, DLF."We have to do a concentrated spend and we will have to get into a marketing posture that will allow investors and buyers to recognise key strengths of the brand," he added.For Delhiites DLF may have become quite a household name over the past 60 years.

It has built satellite townships like new Gurgaon and posh colonies like Greater Kailash.However, building capital may not be as easy as building homes as the company decides to go public. It will first have to build a brand that will have enough recall among investors across the country. "The company will never be the same again as we are planning a pan-India rollout," Talwar further said.So at least for now DLF will be the advertisers darling but will that help it become a darling of the investors? That is something we will have to wait and see.

Source://NDTVprofit

Oversupply to bring down commercial rentals 15%

After the correction in rates in the residential segment, it is the turn of commercial real estate (especially Grade A office space) to register a drop in rates to the tune of 15%. The primary reason being oversupply. Pune leads the race in commercial realty with oversupply of 208% by the end of 2007, followed closely by Chennai at 200%.

While Kolkata is expected to be 66% surplus, Bangalore will have 38% more supply than demand, and Hyderabad, 33%. In Delhi NCR, it is expected to be at 20%, among the lowest. Mumbai is the only exception with the demand projected to exceed supply by 8%, according to global property advisers DTZ.

Grade A leasehold office space across most cities is seeing the beginning of an oversupply situation that will continue in the short to medium-term, even though demand continues to be strong. Property experts opine that the first casualty would be rentals which could drop as much as 15% in the next few months.

"Our city-level demand supply analysis, seen in conjunction with the macro-economic fundamentals, clearly indicates that office space rentals are likely to hit a plateau in the next six to twelve months. Barring a few exceptions (primarily the central business districts), the oversupply situation will lead to a correction in office rental values. Or, very simply, this correction in Grade A office space rental values will not be driven by a lack of demand but due to an oversupply build-up,” says Ankur Srivastava, managing director, DTZ India.

For instance, the estimated supply of office space in 2007 in Delhi NCR is expected to be around 15.9 million sq ft (as against 10.6 million sq ft in 2006) with the estimated absorption being pegged at 13.2 million sq ft, resulting in a 20% excess supply. Bangalore is estimated to have 18.3 million sq ft of commercial space in 2007 (as against 12 million sq ft in 2006) with the absorption estimated at 13.3 million sq ft. This works out to 38% of excess supply in the city this year.

Chennai is expected to have the largest supply of commercial space this year at 19.5 million sq ft (which was only 5.3 million sq ft in 2006) with the estimated absorption pegged at only 6.5 million sq ft, resulting in an excess supply of a whopping 200%. Same is the case with Pune, which is estimated to have a supply to the tune of 17.9 million sq ft while demand could be just 5.8 million sq ft.
Room to let

• Pune leads the race in commercial realty with oversupply of 208% by the end of 2007, followed closely by Chennai at 200%

• Mumbai is the only exception with the demand projected toexceed supply by 8%Kolkata with an estimated supply of 8.3 million sq ft (3.9 million sq ft in 2006) and an absorption of 5 million sq ft will have an excess of 66%. Hyderabad, on the other hand, is estimated to have a supply of 6.1 million sq ft (3.8 million sq ft in 2006) and an absorption of 4.6 million sq ft, resulting in an excess of 33%.

Mumbai is the only city, which is expected to be in the negative as far as oversupply is concerned. With its estimated supply pegged at 6.9 million sq ft (6.4 million sq ft in 2006), the absorption is estimated at 7.5 million sq ft.

Says Srivastava, “As demand continues at the current pace and fresh supply tapers off, it is expected that the oversupply position will reduce over the longer term. In the short to medium-term, however, as an oversupply position emerges across most metros, stakeholders like occupiers, investors, developers and intermediaries need to understand the implications and formulate their strategies accordingly.”

Demands of White Paper on Land Deals Issues

THE Indian Lok Dal has demanded that the Haryana government should issue white paper on the land deals to benefit industrial houses. The demand was made by the INLD District spokesman Ravinderjit Singh Daizy while interacting with media persons at the PWD Rest House in Ambala Cantonment, here today.

Daizy alleged that the Hooda government was acquiring land from the farmers at cheaper prices to furtherhand over these to industrial houses in the name of SEZs. He said that such lands were being acquired at Gurgaon, Hissar and now in Ambala district, where a real estate DLF, had been offered land for developing residential estate at Haryana-Punjab border on Chandigarh-Ambala highway. He said that the farmers were being divested of their fertile land by acquiring these forcibly to benefit the industrialists.

He alleged that the Chief Minister and his cabinet ministers were partners in such dubious deals. The INLD spokesman demanded that the Hissar MP Jai Parkash and his MLA brother Randhir Singh should resign on moral grounds since their two brothers- Dharam Vir and Raj Pal were booked in a fraud case by the Delhi Police. While Dharam Vir was arrested, the other is still absconding. Both had borrowed Rs 25 lakh for setting up a soft drink factory but didn’t make the repayment.

He also demanded the resignation of Haryana Education Minister Phool Chand Mullana holding him responsible for indiscipline in schools where teachers were caught indulging in criminal acts of raping the schools girls. He said that the standard of education had not been maintained and there were schools with zero per cent result in the matriculation examination.

District Unit president Surjit Sondha, District Mahila Wing president Shashi Kesri, Ambala Cantt Unit president Raj Kumar Sharma, Dr K D Sharma and other leaders were also present on the occasion.

Source://http://cities.expressindia.com/

Sarovar Hotels eyes serviced apartment mkt

Mumbai-based multi-brand hospitality chain Sarovar Hotels is looking at entering the serviced apartments market through the management contract route.

The company is in talks with real estate players for operating serviced apartments in Bangalore, Chennai and Gurgaon. “Currently, the plans are in the evaluation stage but we are definitely entering the serviced apartments segment as soon as we get a good deal,” Ajay Bakaya, ED of Sarovar Hotels, told ET

Mr Bakaya added, “We could operate these serviced apartments under any of our four brands, excluding Hometel. And the room rents would be a on par with a three star hotel accommodation.” Apart from its budget hotel brand Hometel, Sarovar manages properties under Premier, Portico, Park Inn and Park Plaza brands.

In the south, Bangalore, Hyderabad and Chennai are major markets for serviced apartments. Similarly, many serviced apartments are coming up in Gurgaon and Noida due to increasing demand from MNCs. Though there is no data available to estimate the growth of serviced apartments market in India, the action is in this space is heating up with entry of international hospitality majors like Hilton International and Ascott.

Currently, hospitality majors like the Taj and Grand Hyatt operate upscale serviced apartments in Mumbai. Bangalore-based Royal Orchid, which operates a serviced apartment in the city, plans to launch another one in Pune. Real estate groups like Raheja and Brigade also have a presence in this segment.

Meanwhile Sarovar Hotels plans to set up seven Hometels’ across Chennai, Hyderabad, Mumbai, Baddi (Himachal Pradesh) and Chandigarh with an investment of over Rs 300 crore.

Source://Economictimes

Protest Against SEZ Becomes Huge in Gurgaon

The confrontations against development of Special Economic Zone (SEZ) along the KMP Expressway to come up at the place of village land for industrial zones are getting fiercer day by day. Farmers have decided to block all roads leading to Gurgaon on May 13 to make their concerns heard.

A large number of families will out protest rally against the state government and private companies’ decision to acquire village land. All farmers would spread out to different entry points of Gurgaon and will not allow traffic to enter from neighboring districts.
The farmers will also submit a memorandum to the Gurgaon District Magistrate on May 13, announces Braham Parkash, the president of Kisan Majdoor Krishi Bhumi Bachao Sangharsh Samiti.

About 1,000 people from 24 villages attended a meeting arranged in Garoli Village and raised slogans criticizing the Haryana State Industrial and Infrastructure Development Corporation (HSIIDC) regarding their shift to acquire land for institutional and industrial zones.

HSIIDC had issued notices to farmers on seven villages on either side of the proposed 135-km KMP Expressway for acquisition of 3,700 acres. “Now, the state government wants to pursue its own plans of taking up the development of a Global Corridor on our lands. We have been ploughing the land for generations. Why we should give it to them against our wish, says a farmer.”