Recovery in Realty.

While there are visible signs of a recovery in the real estate market, price hikes by developers and any increase in interest rates could halt this momentum, writes Ram Prasad Sahu.

The realty sector, which was the worst affected by the downturn last year, seems to be exhibiting early signs of a recovery.

Price cuts on projects over the last six months and healthy pre-sales during the festive season seems to suggest that demand, which had all but disappeared in the third and fourth quarter of 2008-09, seems to be trickling back.

Developers are tweaking their business model by launching smaller apartment sizes and playing the volume game to keep prices low and create buyer interest.

What has helped matters, believes Ramnath S, director, Research, IDFC-SSKI, are factors such as job security and affordability, which are gradually improving, and a lot of companies likely to revise salaries upwards as against a freeze last year.

The benign interest rate environment has also helped. Ramnath believes that pay commission hikes will also increase disposable income of government employees.

Higher sales. . .

While demand as of now seems to be buoyant in the residential space and is likely to gather momentum, is it significant? Says Sanjay Dutt [ Images ], CEO, Business, Jones Lang LaSalle Meghraj, a realty consulting firm, "The slowdown hit the market shortly after the Navratri-Diwali season in 2008 after registering the usual 30-35 per cent upsurge in sales typical of the period.

Sales increased 25-30 per cent this time around and is significant as this is the first upsurge in demand after a prolonged downturn." Driving home the point, Ramnath cites the sales of DLF and Unitech, India's largest listed realty companies, during the current financial year.

"Unitech has launched about 17 million square feet (mnsqft) worth of properties across the country selling over 40 per cent of that. Incrementally, Unitech has launched about 6 mnsqft of affordable housing properties selling about 1 mnsqft of properties till date. DLF too has sold a total of about 4 mnsqft of properties till date. These events indicate an uptick in volumes in the sector."

. . .leading to higher prices

The uptick has however led realty players to increase prices. Ramnath believes that new properties launched in Mumbai [Images ], for example, were offered at 10-15 per cent higher prices as against their lows in March 2009 quarter.

Moreover, developers are now offering properties without any discount and freebies (such as waiver of stamp duty and registration charges). Says Dutt, "Developers in key cities have been hiking prices to test the flexibility of the market. At first, this trend was evident only in the luxury and semi-luxury segments, but it has now percolated down to the mid-income housing segment as well."

A good example is DLF's Capital Greens project in Delhi [ Images ]. DLF increased its prices at Phase II of this project to Rs 6,750 per square feet in September 2009, which is at a 30 per cent premium to those in Phase I launched in April 2009.

Market's liking it too

The improving fundamentals of developers on the back of price hikes, increased liquidity through QIPs, asset sales and pre-sales observed over the last few months is not lost on the market. The BSE Realty index, the worst performer of 2008 is up 248 per cent since its March 2009 lows.

This indicates that current valuations are not cheap. In a bid to cash in on the recovery, leading realty companies are planning to raise money from the primary markets to the tune of over Rs 14,000 crore (Rs 140 billion). This could also suck out liquidity and may cap appreciation of prices of listed scrips, say analysts.

Profitability impact

Ramnath believes that improvement in profitability will depend on future projects. "Profitability will improve only after subsequent new projects are launched at higher prices as compared to previous projects which we believe is unlikely in the current scenario.

Developers are likely to hold on to current (increased) price levels until demand increases significantly from current levels." The worrying factor for realty players continues to be the commercial and retail space, which suffer from oversupply and will take at least another two quarters to recover.

In a recent report on the sector, a J P Morgan report says that rentals for office space have already corrected by 30-40 per cent from their peak levels on the back of slow demand and leasing activity and vacancy rates remain high at over 10-15 per cent across key markets.

The research firm believes that while demand from domestic corporates has started to firm up, IT/ITES demand is likely to remain subdued. We review the operations of the largest players by market capitalisation in the sector.

DLF: Attractive price points and a revival in the fortunes of the sector have helped India's largest realty player lure buyers for its residential properties.

The company is likely to maintain its mid-income housing focus which has yielded good results in Delhi where it was able to sell 1,400 units (2 mnsqft) and 1,250 units (1.8 mnsqft) at the Delhi Capital Greens project (phase I and II, respectively) and 0.5 mnsqft in Bangalore over the last six months.

Including the above, the company has launched about a third of the proposed 15-16 mnsqft residential projects for the fiscal. The story is not as rosy on the commercial and leasing segments.

While the company sold over a 1 mnsqft of commercial and office space in the first quarter and demand seems to be improving, the fortunes of this space is likely to see a significant upswing only next year. Its leasing business, too, is going through a similar business cycle.

While things are looking up, the slow and gradual pick up in volumes will continue to be a drag on its revenues. Analysts estimate that its September quarter revenues will be down by half y-o-y.

Ebidta margins are likely to shrink 900-1,000 bps to about 50 per cent as the company realigns its focus towards affordable housing segment (below Rs 30 lakh or Rs 3 million per unit).

The company plans to exit non-core business (wind power, SEZs) and land bank to raise Rs 5,500 crore (Rs 55 billion) in 2009-10.

This will help it to improve its cash position, manage debt repayments of Rs 1,165 crore (Rs 11.65 billion) and increase pace of execution. Though the stock trades at a discount to its NAV, a fall of 10-15 per cent in its share price would make it attractive from a long term perspective.

HDIL: Increasing prices of transfer of development rights (TDR), which had bottomed in the March quarter of 2008-09, augurs well for HDIL. TDR prices have spiked 80 per cent from levels of Rs 1,100 per sqft in March 2009 quarter and will benefit HDIL which is executing the first phase of the airport slum rehabilitation project where it has TDRs of nearly 45 mnsqft.

Almost all the revenues in the current fiscal are likely to come from the sale of about 3 million sqft of TDRs. The company launched three residential projects totalling 1.9 mnsqft in Andheri and Kurla, in Mumbai. Considering the high demand (it has managed to sell 80 per cent of the 1,814 units at these sites), the company raised prices between 5-14 per cent.

In addition to these, HDIL plans to launch 2 mnsqft of residential projects in Mumbai in the current fiscal. A key concern for HDIL was the debt levels, which have come down significantly post the Rs 1,688 crore or Rs 16.88 billion QIP in July 2009.

The company has used over 80 per cent of this to repay debt and bring down its net debt-equity ratio to manageable levels of 0.44.

While the residential project launched in different parts of Mumbai will yield revenues in 2010-11 and 2011-12 (the company follows the completion method of accounting) and the increasing prices of TDRs are a plus, the current quarter revenues and operating profit are expected to come down by 64 per cent and 79 per cent to Rs 200 crore (Rs 2 billion) and Rs 97 crore (Rs 970 million), respectively. At the current levels, the stock is expensive.

Indiabulls Real Estate [ Get Quote ]: Indiabulls [ Get Quote ] Real Estate has been able to lease out 0.7 mnsqft of space at the One Indiabulls Centre (Mumbai) at Rs 175 sqft per month.

Considering that this is higher than the earlier rates of Rs 150 per square feet, both at the Jupiter and Elphinstone Mills, and future negotiations are likely to be at the new rate, it should boost cash flow of its Singapore-listed subsidiary Indiabulls Properties Investment Trust, which undertakes the leasing operations.

A rights issue by IPIT to the tune of Rs 600 crore (Rs 6 billion) should also help reduce a part of its Rs 636 crore (Rs 6.36 billion) debt. On the residential sales front, IBREL sold all the units (0.53 mnsqft) of the first phase of its Sky project in Mumbai and has also launched three residential projects next to its One Centre.

While the company launched about 9 mnsqft in 2008-09, it is planning to launch about 10 mnsqft in 2009-10, of which 5 mnsqft has already been launched. The company has also been the highest bidder at Rs 1,376 crore (Rs 13.76 billion) for the Mantralaya development project in Mumbai, which could add 1.5 mnsqft to its land bank and about Rs 29 to its NAV.

The Rs 1,500 crore (Rs 15-billion) IPO of IBREL's subsidiary, Indiabulls Power, should help it to fund the capital requirements of power projects in Maharashtra.

While the cash flow from the proposed rights issue of IPIT, IPO of its power subsidiary and the QIP (Rs 2,650 crore or Rs 26.5 billion) of IBREL should help matters, growth in its various businesses will depend on the pace of execution. In realty, while thus far the construction work at its NCR and Chennai work is going on, other properties are facing delays according to an ICICI [ Get Quote ] Securities report.

While cash is not an issue for IBREL (it has Rs 3,000 crore or Rs 30 billion worth Rs 75 per share), any delay in execution of it's residential, SEZs (not yet notified) or power projects could be costly. Analysts peg the sum of parts valuations (power and real estate) between Rs 335-355 indicating that returns of about 21 per cent from the current prices.

Unitech: Unitech has had positive newsflow recently with the government approving Telenor's (a partner in telecom venture) proposal to hike the stake in Unitech Wireless to 74 per cent. The company has had a good first seven months (March to September) going by the response to its launches aggregating to 21.30 mnsqft of residential and commercial property.

The company has managed to book sales Rs 4,000 crore (Rs 40 billion) from the sale of 10.11 mnsqft.

It plans to launch about 30 mnsqft and achieve about 20 mnsqft of pre-sales in this fiscal, says an analyst. Of the past projects which total an area of 22.31 mnsqft, the company has delivered about a fifth and expects to complete delivery of the rest by March 2011.

Improved cash flow from the sale of hotels and plots (Rs 940 crore or Rs 9.4 billion), two QIPs (Rs 4,400 crore or Rs 44 billion) and Rs 386 crore (Rs 3.86 billion) from Unitech Wireless have helped bring down debt levels to about 0.6 times from 1.7 times last year.

Like DLF, the company is eyeing the affordable housing segment and has launched projects under the Unihomes brand catering to budgets between Rs 10-30 lakh (Rs 1-3 million) range. After the sale of about 900 units at its Unihomes project in Noida, the company is planning to launch more apartments under this brand.

Analysts estimate that the company is likely to have a strong second quarter on the back of higher project and asset sales.

Considering the recent spurt in sales at its new launches and balance sheet deleveraging is already factored into the current price and it is trading at a premium to its NAV, expect little upside to flow through in the current fiscal.

Ram Prasad Sahu

Source:

Its Boom Time Again...

It took just two hours for DLF, the country's largest property developer, to sell all the 1,250 apartments in the second phase of its Capital Greens project near the Moti Nagar area of Shivaji Marg (Najafgarh Road) in West Delhi [ Images ].

The project was launched on September 23 and the prices were around 25 per cent lower than the prevailing market rates.

In Mumbai [ Images ], Rustomjee, a prominent private property developer, got bookings for 44 apartments in its Global City project in Virar, a distant suburb of Mumbai, in the first two days of a property exhibition organised by the Maharashtra Chamber of Housing Industry from October 1-4.

The developer has already received bookings for 600 apartments in the Global City and another 200 apartments in Rustomjee Urbania project in Thane, on Mumbai's outskirts, in the last three months, all in the Rs 10 lakh (Rs 1 million) to Rs 50 lakh (Rs 5 million) category.

Another realty firm Nahar Group says it has sold 800 apartments in its Amrit Shakti project in Powai in the last five months. Nahar expects booking for another 15 apartments after MCHI exhibition.

After witnessing a revival of sorts in home sales in the first and second quarters, developers are hoping to cash in on the demand for affordable homes in the third quarter too, due to a large pent-up demand and the general feeling that prices may not go down further.

"Buyers have realised that prices may not go down further and there is no point in waiting now," says a senior State Bank of India [ Get Quote ] executive. SBI's stall at the property exhibition got over 500 enquiries every day during the four-day exhibition and the bank expects a good conversion.

All bankers are also expecting the good run rate on home loan disbursals to continue. ICICI Bank [ Get Quote ] managing director Chanda Kochhar [ Images ] expects a surge in home loan disbursals in the third quarter. "The confidence is coming back due to increased job security and the feeling that real estate prices have corrected enough," she says. There is also a general consensus that interest rates have bottomed out, she says.

JS Augustine, director of marketing at Everest Developers, says there was a huge pent-up demand which is coming into the market now. Buyers who were holding back are now buying. Developers who had pulled back a lot of projects earlier are also launching new projects given the improvement in the market,'' Augustine says.

The period from October 2008-March 2009 was the toughest period for developers when property sales touched lowest levels since 2004. Property prices had fallen over 40 per cent from their peak in 2007-08 as buyers stayed away due to salary cuts and fears of job losses.

But successive interest rate cuts, stimulus packages from the government and overall improvement in economic conditions changed the scenario since April this year with the country's biggest developers, DLF and Unitech, selling over 6,500 units in the first quarter of FY 2010.

"We expect better sales in Q3 and Q4 as well. We have got very good response in Delhi which gives a good value for developers like us,'' says Rajeev Talwar, group executive director of DLF. Even a Unitech spokesperson said the company expects to continue its growth momentum in the coming quarters.

Home loan lenders are naturally bullish. SBI is targeting a growth of 30 per cent in the current quarter against 21 per cent in 2008-09. HDFC [ Get Quote ], the country's largest home loan provider, saw disbursals rise 22 per cent in first quarter and expects the trend to continue.

Normally, there is a lag of three to six months from the time of purchase and disbursal of loans by a bank or a housing finance firm.

Developers, which have increased prices by 10-15 per cent in the last six months, say this is the best prices buyers can get.

"Prices have bottomed out. We do not see any reason to cut prices further. Though prices will not go up sharply, they will certainly go up slowly in the coming months,'' says Parag Shah, general manager, sales, Nahar Group, which sells apartments in Rs 60 lakh-Rs 75 lakh (Rs 6 million to Rs 7.5 million) in its Powai project.

Apart from launching premium housing projects in the last few months, developers have also withdrawn freebies such as free parking, waiver on stamp duty, free holidays and so on after the spurt in sales.

"Last year there was a recession and sales were sluggish. That is why developers needed to doll out freebies. Now products sell without this," says Nahar's Shah.

But that's precisely why some analysts are concerned. Pankaj Kapoor, chief executive of Liases Foras, a realty research firm, says "there is high demand only in the lower price bracket of Rs 10-20 lakh (Rs 1 million to Rs 2 million).

August and September sales have fallen by 20 to 25 per cent as developers have increased prices again. There is still lukewarm response for premium properties," he says.

Prospective buyers like Govind Chitre, a retired government employee, agrees: "The moment developers see increase in the Sensex, they jack up the prices. They charge on the super built-up area, which is really absurd. I feel there should be a strong regulatory authority to control builders."

It's raining orders for India Inc

The trickle has turned into a deluge. India Inc's order book has more than doubled to an all-time high of Rs 73,320 crore in the second quarter of the current financial year, compared to the first quarter. On a year-on-year basis, the increase is 21 per cent.

An analysis of order book announcements by 63 companies shows that capital goods, engineering and infrastructure have led the way, cornering 86 per cent (Rs 63,439 crore) of the total orders. The remaining Rs 9,881 crore went to gems & jewellery, pharmaceuticals and telecom. Larsen & Toubro (L&T) topped the list with new orders worth Rs 14,253 crore.

The order backlog is equally impressive and suggests strong revenue streams for the next few years. Electrical equipment giant Bharat Heavy Electricals Ltd [ Get Quote ] has an order backlog of over Rs 117,000 crore, which could see the company through for the next four years. Engineering major L&T has a total order book of Rs 70,000 crore, which is almost 1.75 times its annual turnover.

It's not the big boys alone who are comfortably placed. For example, BGR Energy, which has won contracts worth Rs 1,633 crore each for two power projects, has an overall order position of Rs 12,500 crore, providing a revenue stream for more than three years.

The bulk of orders has come from public sector undertakings and central and state governments. Foreign companies accounted for a quarter and the private sector for the rest.

India Inc's bosses are predictably upbeat. Pervez Umrigar, managing director of Gammon [ Get Quote ] Infrastructure Projects, said the infrastructure sector has a huge long-term potential.

"The financial position was grim last year, but now it is recovering. I hope complete recovery will take place by this year-end."

Bankers said the order book would continue to be impressive. The banking sector's exposure to the infrastructure sector went up 35 per cent year-on-year and is expected to improve further.

ICICI Bank's [ Get Quote ] Managing Director & CEO Chanda Kochhar [ Images ] said she expected the next level of credit growth to come from project finance apart from home and auto loans. For example, the government's $20 billion roads programme is well on track and a lot of orders are expected to flow into the books of Indian companies.

Source: Rediff

Sentiment turns positive in Hyderabad

The real estate scene in Hyderabad and areas around the twin cities is showing a distinct trend with the affordable segment gaining momentum and more developers looking to address this space as buyers abound.

Sentiment improves

However, an interaction with a cross-section of developers, at a recent meeting hosted by information services provider Dun & Bradstreet, reveals that this segment is also witnessing more enquires.

“The overall situation has changed for the better in the last two-three months with each month getting better. The general gloomy sentiment is behind us,” according to Mr S. Pochender, Chief Executive Officer, Lanco Hills, of the Lanco Group.

The festival season is when there is an increase in the number of enquiries. However, the business is still centered around the affordable home segment. In fact, some of the luxury apartment developers are restructuring their projects to address this segment.

In addition, buyer interest has risen with price correction touching nearly 30 per cent. This, coupled with banks lowering interest rates and gradually stepping up loan disbursals, the sentiment is much more upbeat compared to a couple of quarters back, Mr Pochender explained.

The Managing Director of Koncept Ambience, Mr M. P. Agrawall, said that the market had stagnated for nearly a year. After witnessing a fall and prices coming to realistic levels, things have begun to look up in the last couple of months.

“The prices of land have corrected up to 30 per cent, and those of finished products have come to realistic levels. We believe there is not much scope for further reduction. Even buyers realise this and have begun to enter into deals,” he explained.

Supply scene

Referring to the supply situation, Mr Agrawall said that while there is glut in the Rs 50 lakh to Rs 1crore apartment and villa segments, the supply in the affordable segment is inadequate. In the Rs 1 crore and above category too the number of builders and projects are very few, he added.

Mr Agrawall pointed out that the affordable segment needs to be studied closely. It won’t be easy for every developer to address this space. For those having large land banks, they could consider this segment along with developers who are already in this space.

However, if some of the developers who are currently catering to the above Rs 50 lakh segment want to turn to the affordable segment, it would be very tough. Eventually, many players may hastily get into this space, create an oversupply situation and be at the losing end.

Referring to the Rs 1 crore and above segment, Mr Agrawall said that the price correction has been significant in this area too and buyers realise that the correction phase is over. They are getting into buy mode again.

Millennium Homes, hosted by Dun & Bradstreet last week, attracted quite a few developers in the Rs 50 lakh and above category.

A database of about 25,000 people was drawn up and mailers sent to potential buyers to introduce them to some of the new projects that developers are launching.

Among those who participated in the event include L&T, SMR Vinay, Ramky and Dax Properties.

Dax Properties, promoted by a group of non-resident Indians, in partnership with developers in Hyderabad, is setting up a Rs 500 crore Golf Retreat which will have a 18-hole Golf Course, luxury apartments and plots for construction of villas, according to Mr Masood, Managing Director of Dax Properties.

The Mumbai-based Lodha Builders, which is setting up luxury apartments near the IT hub of Hyderabad, claims that of the 120 apartments planned in the first phase, it has managed to get bookings for 108 which are priced at Rs 2.5-3 crore.

Mr Ravi Sharma, Deputy General Manager, Lodha Builders, said that the company brought about some correction in prices for its luxury apartment venture of each unit of Rs 4,700 sq.ft, with one apartment on one floor.

Source: Business Line

DLF sells 1,250 flats in 2 hours

DLF, the country's largest property developer, sold all the 1,250 apartments on offer in the second phase of its Capital Greens project near the Moti Nagar area of Shivaji Marg (Najafgarh Road) in West Delhi, within two hours of launching the booking on Tuesday evening.

While the prices were lower than the market, the lowest effective price was 39 per cent higher than the lowest price it had charged during the first phase of the project this April.

At the time, DLF had sold all 1,356 apartments on offer under the first phase in a single day; a prime factor was that their lowest effective price was 32 per cent lower than the market price.

This time, claimed a company spokesman, it was more than 25 per cent lower than the market one.

Apartment prices are upwards of Rs 6,000 a sq ft in the area. In the second phase, the company charged Rs 6,750, Rs 7,500 and Rs 8,000 a sq ft, respectively, for the apartments, which ranged from 1,210 to 2,720 sq ft each.

There was a discount of Rs 500 a sq ft for timely payment and an 8.5 per cent discount on down payment. Hence, the effective selling price, which includes both discounts, is about Rs 5,677, Rs 6,363 and Rs 6,820 a sq ft, respectively.

The company additionally charged for parking and for those wanting a preferred location.

A spokesman said the increased charges were due to the better location of the second phase, with a 90 per cent view of greenery and inclusion of four-bedroom apartments, which did not exist in the first phase.

"If buyers lap up the properties with increased prices so quickly, it shows there is a still an appetite in them to absorb that franchise,'' said Anuj Puri, chairman of property consultancy Jones Lang LaSalle Meghraj.

However, Puri said if speculators had participated in the project, then it is bad for the property market, as they could go in for arbitrage later. However, the company spokesman said it had imposed a restriction of one apartment per PAN card holder and a lock-in period of one year within which the buyers cannot sell the apartments.

"We are committed to give value for money for our buyers and rates are still 25 to 30 per cent lower than the prevailing market prices,'' the spokesman said.

In a first of sorts in the Mumbai property market, Unitech, the country's second largest developer, is planning to launch a new residential project in the Worli area of south-central Mumbai, which is expected to be 35 per cent lesser than prevailing prices in the area, sources in the company said.

But the catch is that the buyer of the apartments should pay 75 per cent of the apartment cost in one go, as against the construction-linked payment plans prevailing in the real estate market, wherein the buyer pays some money as booking amount and the rest in instalments linked to each stage of completion.

''But the project is in its very initial stages and is expected to be launched in a year's time,'' sources said. The company is also expected to return buyers the entire amount with 12 per cent interest if it is unable to finish within a year from the launch.

Ashok Kumar, managing director of Cresa Partners, a realty consultancy, said: "It will certainly put pressure in the south-central Mumbai market, where a number of new projects are coming up, resulting in oversupply.''

After a lull of almost six months, real estate developers are once again launching residential projects aggressively to cash on the Navratri festival, considered auspicious for property buying.

The festival of Navratri comes after the Shraadh period, considered inauspicious in the Hindu religious calendar, when property buyers do not book houses.

The interest from developers was so much that over a dozen residential projects by companies such as Parsvnath, BPTP and Emaar MGF were launched in the National Capital Region in the past week.

Emaar MGF, a Delhi-based developer, launched Emerald Floors Premier on Monday after it sold off Emerald Floors and Emerald Estate in the Emerald Hills integrated gated community project in Gurgaon. The same company launched plots and villa floors at Jaipur Greens on September 19, where it has sold 120 plots so far, while Parsvnath Developers also launched Parsvnath City at Saharanpur in UP last Sunday.

According to property consultants, this year the new launches were double the number of last year's Navratri launches, when the property market was in a bad shape. Home sales had fallen by over 50 per cent from the beginning of the year, and developers were offering freebies and discounts to sell their existing projects.

Though on a lower scale, Mumbai also witnessed a couple of launches of luxury projects in South Central Mumbai by companies such as Indiabulls Real Estate and Orbit Corporation last week.

"Every day, we are seeing one or two launches and every developer is launching projects. Last year, most of them were selling old products due to the downturn. This year, we have a seen a slew of new projects during Navratri," said Raminder Grover, chief executive of Homebay Residential, a unit of property consultancy Jones Lang LaSalle Meghraj.

Consultants say the increased activity in home sales is giving confidence to developers to launch new projects. Residential prices have gone up by 15 to 20 per cent in the past six months or so, as developers sold projects which were aggressively priced and marketed.

"The last few months were indeed good for the residential market. There is an increased activity due to good launches and better pricing by developers,'' says Anshuman Magazine, chairman and managing director of CB Richard Ellis, South Asia.

Grover says that unlike last Navratri, developers are not giving any freebies and discounts, as they were confident of selling their products without any added attraction. Magazine adds that developers are selling homes with better amenities and designs to prospective buyers.

"Though developers are marketing their products aggressively, buyers have a high level of awareness on the available projects. It is certainly a buyers' market now,'' said Magazine.

Source: Rediff.com

Super-luxury is back in the realty lexicon

Super-luxury is back in the realty lexicon Raghavendra Kamath & B Krishna Mohan / Mumbai/hyderabad September 22, 2009, 0:11 IST The sales brochure offers you the opportunity to own Mumbai’s first managed private residences with a “lifestyle elevated up to the sky”. At Rs 28,000 per square foot plus other charges, Indiabulls Sky is also promising a 65-storey “marvel with opulent apartments, timeless luxury and impeccable butler service”. Indiabulls Real Estate, which has sold one-third of the apartments since the Lower Parel project was launched in the last one month, now says it will be selective in selling the remaining apartments to create a “classy neighbourhood”. Apartments boasting the tags luxury and super-luxury — the two words forgotten in the real estate world in the last two years — are back with a bang over the last three months. What has brought back buyers this time is the fact that prices are much more reasonable than in 2006-07, when the same kind of apartment would have had an asking price at least 30 per cent higher. Orbit Terraces, a luxury housing project by realty developer Orbit Corporation, also in Lower Parel, saw around 300 buyers making enquiries for 75 to 80 apartments when it was launched last week. The apartments in the project, which include duplexes with attached terraces, cost Rs 3.3 crore to Rs 6.6 crore for apartments ranging from 1,500 sq ft to 3,000 sq ft. A host of other developers are also cashing in on what they call the new-found confidence among buyers. Take Mumbai-based Lodha Developers. The company, which used to sell two or three luxury apartments a month in south Mumbai till December last year, now sells 15 to 20 units a month, a top company official says. It has several projects such as Lodha Bellisimo, Lodha Primero, Chateau Paradise, among others, in South Mumbai. And despite raising prices at the Lodha Primero project in Mumbai’s Mahalaxmi area 30 per cent, the developer has been able to sell 90 per cent of the apartments in the last one month. "The luxury market was hit hard during the downturn. But sales have definitely picked up since March as the economy is on an upswing,'' says R Karthik, senior vice-president of marketing at Lodha Developers. The rush for super-luxury isn’t restricted to the country’s commercial capital. In Hyderabad, for example, at least eight builders are developing multiple projects, under which each villa or a bungalow is priced around Rs 4 crore. Sunish Tom, head of Dun and Bradstreet (D&B) Information Services India events and promotions, says there is a huge demand for exclusive, custom-built luxury houses. D&B recently conducted Millionaire Homes 2009 in Hyderabad, a platform to introduce prospective buyers to property developers. At least 2,000 people have expressed an interest in evaluating luxury properties. Similar events have already been held at Chennai and Bangalore. Ravi Sharma, deputy general manager (sales) of Lodha Group, which sold its luxury properties by invitation, says the company has identified 5,000 high net worth individuals in Hyderabad. “We do customer profiling before extending an invitation,'' he said. The group sold 108 units of the 120 built in Phase I, due delivery in July 2011. Each unit was priced between Rs 2.5 crore and Rs 3 crore. The group plans to begin its second phase in four months. “There is demand for luxury homes. Most buyers want to stay in them and not see them as mere investment channels,'' Sharma said. What defines luxury is changing rapidly. “Golf is the USP for us. There is a huge appetite for this kind of project,”' said Masood, managing director, Dax Properties, a subsidiary of Country Side. Dax is coming up with a golf-centric villa project at Shadnagar (on the Bangalore highway), about 50 km from Hyderabad, covering 300 acres. It will have villas and villa plots ranging from 5,000 sq ft to 15,000 sq ft. In all, it plans to construct 1,000 villas in three phases including 250 villas in the first phase. “The project is approved and the construction will start shortly,'' says Masood, adding that the project cost will be around Rs 500 crore. Vipul Bansal, joint managing director of Indiabulls Real Estate, says the luxury segment was largely insulated from the economic slowdown. “The main reason for buyers staying away was that there was hardly any stock of high-end products in places such as south Mumbai,'' he says. But analysts say the segment is seeing traction once again only because of aggressive pricing by developers. "Basically, it’s a question of keeping something on the table for buyers who need the comfort that they are buying a property that has scope for a 30 to 40 per cent increase after two or three years,'' says Raminder Grover, chief executive of Homebay Residential, a unit of Jones Lang LaSalle Meghraj, an international property consultant. Some developers agree. "Though sentiment and pricing have improved, if you increase prices by 10 to 15 per cent, products cannot be sold as easily as you sell them today,'' says Ramashraya Yadav, head of finance at Orbit Corp. According to Aditi Vijayakar, director of residential services at Cushman & Wakefield, a real estate consultancy firm, self employed people and businessman form the major chunk of new home buyers. That may not be surprising, since increments for salaried people are still subdued in Indian companies. Buoyed by the new-found demand, many developers are planning new luxury launches. Orbit is planning one in Lower Parel during Diwali and another one in Andheri after Diwali, while Lodha is planning two more luxury projects in Mumbai shortly. Source: http://www.business-standard.com/india/news/super-luxury-is-back-inrealty-lexicon/370858/

Builders start raising home prices again

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DLF, the country's largest property developer, will soon conduct a poll among property brokers to decide the pricing and number of apartments to be offered in the second phase of its Capital Greens project in West Delhi.

It's a novel experiment, but property brokers in Delhi say the company is trying to test the waters in view of the vastly changed situation in the real estate market.

Though DLF's spokesman said the company is yet to fix a final price, feedback from brokers suggests the company is exploring the option of charging around Rs 7,000 a square foot (sq ft).

At this level, the price is 56 per cent more than Rs 4,500 a sq ft it charged in the first phase of Capital Greens, when DLF had sold 1,356 apartments in a single day in April this year.

Developers such as DLF, Unitech, Omaxe, Parsvnath and HDIL were among those that cut property prices or forayed into mid-income housing, which were 25 to 30 per cent lower than prevailing prices, in the last quarters of 2008-09, as the economic slowdown and fears of job losses impacted home sales.

Property sales fell 50 per cent from their peak in 2007-08 (when prices had more than doubled froom 2004-05) as buyers stayed away.

Those days are rapidly becoming a distant memory, with many developers increasing prices 15 to 30 per cent the moment they became sure of demand returning.

Take Mumbai-based Lodha Developers. The developer has increased prices 30 per cent in its premium housing project, Lodha Primero in South Mumbai, since its launch about four months ago. It has already sold 90 per cent of the apartments. For its mid-income projects, Lodha has increased prices 12 to 14 per cent.

Neptune Group, another Mumbai-based property developer, has increased prices in its Neptune Flying Kite project in Bhandup 26 per cent, from Rs 4,691 a sq ft a couple of months ago to Rs 5,900 a sq ft.

The national capital region (NCR) is not far behind with housing prices in Gurgaon having moved up to Rs 3,200 a sq ft from Rs 2,800 a sq ft six months back, brokers in the locality say.

Unitech, the country's second largest developer, which is mostly focusing on mid-income housing projects under the Unihomes brand, is also considering a minor price rise in its home prices, a company official says.

"Markets are looking up and this is prompting developers to come up with increased prices for their Navratra launches. Prices are up by 15 to 20 per cent in the secondary market," says Anil Singhal, a property consultant based in Connaught Place, Delhi.

Navratra, a Hindu festival, is considered auspicious for property buys and developers generally launch new projects in the 10-day period

Developers say the move to increase prices is in tune with rising demand from home buyers.

"We are not hoarding our property. When the market was down, we were quoting low prices. Since it has moved up, we have increased prices. We sell according to the forces of demand and supply," says Nayan Bheda, chairman and managing director of Neptune Group.

Adds R Karthik, senior vice president of marketing at Lodha Developers: "It is a standard way of operating projects. It is a strategic as well as tactical move so as to offer value for those who have bought properties.

However, the move to raise housing prices has had its fair share of criticism. Analysts warn that property sales may fall again if developers increase prices sharply since the economic recovery is hardly complete.

"Demand is coming back with much difficulty. It does not make sense to increase prices now. They have to hold prices steady till demand comes back fully," says Anuj Puri, chairman of Jones Lang LaSalle Meghraj (JLLM), an international property consultant.

According to a recent CII study, the Indian real estate market is expected to recover only in 2010-11.

However, the government growing fiscal deficit is expected to impact the sector negatively with increases in the cost of funding and falling return on investments through exchange rate variations.

Some have been once-bitten-twice-shy and have avoided raising prices. Parsvnath Developers Chairman Pradeep Jain says he doesn't see any scope to increase prices for the next couple of months.

"We have to concentrate on selling properties and generating internal accruals first. We are planning to sell properties with attractive discounts in the festive season," says Jain who is also president of NCR chapter of the Confederation of Real Estate Developer's Associations of India (Credai).

Going by the trend in property prices in recent weeks, few of his counterparts in other real estate companies agree with Jain.