Affordable houses, unaffordable locations

While developers have come to accept it as a fact that affordable housing holds the key to realty revival, there exists a huge gap between the buyers’ preferences and project locations, which grossly lack the required physical infrastructure, according to a report.
However, the much tom-tommed mantra of affordable housing may help realty firms in Kolkata and Pune more than their counterparts in Mumbai, National Capital Region (NCR) and Bangalore. Reason? Kolkata and Pune offer the maximum number of affordable locations than the other three, a research report by property consultancy Knight Frank says.
There is a flip side to it, though. The report indicates a sizeable gap between the preferences of the buyers and the projects under development. Although a number of affordable projects have been announced, the locations do not have adequate infrastructure, which is of utmost importance for the proper development and successful implementation of affordable housing.
Knight Frank’s research report on ‘Affordable Housing’ was based on what they called "requirements of the Indian middle class" with household income of Rs 3 lakh-Rs 10 lakh per annum across 1,400 households in seven cities — Mumbai, NCR, Chennai, Bangalore, Hyderabad, Kolkata and Pune.
The report reveals that good connectivity to workplaces is the most important factor influencing buyer’s decision in selecting the location of their residence. This is followed by infrastructure and potential for future development. Besides, customers are more concerned to know whether the project has uninterrupted water supply and sufficient power back-up and effective security systems than frills such as gymnasium, swimming pool and the like.
The affordable housing segment may be fraught with challenges, but it surely offers developers an opportunity to tap a huge realty market that is estimated to cross over Rs 300,000 crore by 2011. One can gauge how mammoth the scope in this sector is from the fact that more than 2 million housing units would be required by 2011.
Mumbai, with a market size of Rs 647,00 crore, has a housing requirement of 404,673 units, which would need 324 million sq ft. Similarly, NCR requires 547,434 units that would be spread over 438 million sq ft. It market size is expected to grow to Rs 876,00 crore. On the other hand, Bangalore’s 327,694 units would come up over 262 million sq ft and its market size would reach Rs 524,00 crore by 2011.
Experts say that the size and value of units varies from city to city. “In larger cities such as Mumbai, units measuring 1,000-500 square feet can by no yardstick be considered 'affordable',” says Anuj Puri, chairman & country head, Jones Lang LaSalle Meghraj, a property consultancy.
On the outskirts of Kolkata, however, housing units of 450-600 sq ft can be had for Rs 5.5 lakh. Same is the case with Pune, where a small-sized, 2BHK house on the peripherals can come at Rs 6 lakh.
According to the report, while those earning between Rs 3 and 10 lakh would drive demand, the largest contributor to this market size is expected to be the group with an annual income of Rs 3-6 lakh. Inter estingly, buyers in the Rs 8-10 lakh income group quoted a more conservative budget for a house than those in the Rs 3-6 lakh group.
This reflects the extremes on which higher income group consumers operate during boom and recession periods. The report also throws up interesting facts about the expected timelines of deals. Over 32 per cent of these middle-class, potential buyers plan to purchase a residential property in 6-12 months while 7 per cent of them would
like to own a dwelling unit in the next 6 months.
Jayakar Jerome, managing director of Bangalore-based Provident Housing, the affordable housing wing of Puravankara Projects, says, "Our objective is to cater to the middle class buyers who just cannot afford homes that are available in the market today. Primarily, we are looking to tap government employees, young working couples as well as those who are retiring soon.”

Souce: http://www.mydigitalfc.com/real-estate/affordable-houses-unaffordable-locations-956

StanChart to buy 10% stake in Ramky Infra

The private equity (PE) arm of global bank Standard Chartered Plc. will invest Rs200 crore to buy a 10% stake in Hyderabad-based construction and infrastructure firm Ramky Infrastructure Ltd, two senior Standard Chartered officials who did not want to be identified said. The deal values the firm, with Rs1,500 crore of annual revenues, at Rs2,000 crore.

One of the two officials said the PE firm has “agreed to invest some Rs200 crore in the infrastructure firm in tranches, based on certain future profit milestones”.

Standard Chartered PE will become the fourth institutional player to invest in Ramky Infrastructure. International Finance Corp., Infrastructure Leasing and Financial Services and Sabre-Abraaj Capital had invested around Rs140 crore for a 14% stake in the company in December 2006, valuing it at around Rs1,000 crore.

On 4 June, Singapore-based PE fund Standard Chartered IL&FS Asia Infrastructure Growth Fund picked up a 4.45% stake in Ramky Enviro Engineers Ltd, a waste management company of the Rs2,500 crore Ramky Group, investing Rs200 crore and valuing it at around Rs4,400 crore.

Ramky Group chairman A. Ayodhya Rami Reddy admitted that Ramky Infrastructure has entered into an arrangement with a leading global PE firm to raise around Rs200 crore in a structured deal. However, he refused to name the firm, citing a confidentiality clause.

Ramky Infrastructure plans to use the money it has raised for working capital to execute projects on hand, Reddy said. The firm has some Rs8,000 crore of orders on hand in waste water, irrigation, roads and power.

Ramky Infrastructure operates in two principal business segments: construction and development. It expects to end this fiscal with a turnover of Rs2,400 crore and a net profit of some Rs150 crore against revenue of Rs1,500 crore and a net profit of Rs70 crore in the fiscal to March 2009, Reddy said.

“Finding that the mining sector offers huge opportunities, we have decided to enter this segment. We plan to take up an array of mining that includes coal and metals, both ferrous and non-ferrous,” Reddy said. A couple of expansions too are on the anvil.

“Based on the experience gained in offering contract services in the mining sector, we plan to begin owning mining assets, both in the domestic and overseas markets. However, the focus would be more on the overseas market, especially on African countries, where we have already incorporated a company,” said Reddy.

To add value to its construction business, the company is also planning to take up manufacture of building materials such as doors, hinges, aluminium frames and floor finishings, among others, he said. To begin with, the firm plans to invest some Rs100 crore in both ventures and scale up operations.

On funding the new initiatives, Reddy said the firm has adequate internal accruals and would also deploy a portion of the fresh funds of Rs200 crore now being raised from Standard Chartered PE. Reddy also said he would later sell shares in the primary market to raise money and offer an exit route to existing institutional investors.

Source: http://www.livemint.com/2009/08/13214114/StanChart-to-buy-10-stake-in.html?h=B

Hyderabad realty seeing signs of revival: Analysis

After struggling through some tough times and sluggish growth for a while, the Hyderabad real estate market may finally be seeing signs of a revival, especially in the residential segment. CNBC-TV18’s Vishwanath Pilla and Ashwin Mohan reports.

Hyderabad's real estate market has remained flat for the last eight months. But no more, it is showing signs of a recovery. And there are three reasons for this revival.

First: An election result that gave a clear mandate against bifurication of Andhra Pradesh. The congress government is against splitting the state into Andhra and Telangana. And this has prompted investors to resume investing in real estate.

The second: Easing of interest rates

Third: Withdrawal of the 5% stamp duty on property up to 1,200 square feet.

The builders did their part. They reduced prices by 15-25%, and altered the product mix, giving buyers better choice and perceived value for money.

Prajay Engineers Syndicate, for instance, converted a portion of its high-end Villa project into affordable housing - selling two-bedroom flats at just Rs 10 lakh.

Ravinder Reddy, Director, Prajay Engineers Syndicate said, “Villas are moving little slowly currently, that's one of the reason why we have brought in a new product in this project, which was not envisaged earlier. With change in environment in the market, we have brought in a product that is readily available."

Sales in Hyderabad has fallen dramatically compared with the last year. Problem compounded by banks becoming cautious on home loans.

But with a revival in interest, even banks are seeing a rise in home loan enquiries.

Anil Girotra, ED, Andhra Bank said, “We are also informed by our builder clients that they started receiving lot of enquiries from the people. So it looks like the activity is going to grow."

However, experts say this revival is skewed towards residential property. Commercial real estate is yet to see a significant recovery. A report by James Lang Lasalle says mall vacancies have climbed 5-15%, and office rentals have fallen 20-25% compared to 2008. Currently, demand for office space in Hyderabad is just 2 million square feet, a pittance, when compared to the supply of 7 million square feet. And this is a cause for concern.

Source: CNBC-TV18