The ‘affordable’ mantra....

To boost slowing demand in the realty sector and tap the growing market for affordable housing, realty firm Unitech Ltd will build 20,000 homes this year, priced between Rs10 lakh and Rs30 lakh, launching its first such project in Chennai this month.

India’s second largest property developer by market value on Tuesday launched its new initiative branded Uni Homes, which will have apartment sizes starting at 660 sq. ft.

The realty firm said its second such project will be constructed in Manesar in Haryana, on the outskirts of New Delhi. The apartments in Chennai would cost around Rs10 lakh and those at Manesar around Rs15 lakh, it said.

Faced with falling sales on the back of an economic slowdown, India’s realty companies have been launching what they call affordable housing because they say there is robust demand in this segment.

Earlier this year, Unitech had launched a project in Gurgaon, south-east of New Delhi, where apartments are priced between Rs28 lakh and Rs40 lakh. All 750 homes were sold in 45 days, the firm said. Encouraged by the response, it launched another project, also in Gurgaon, with prices at Rs35-45 lakh. It has so far sold 180 of the 200 flats in that project.

In May, Mumbai-based Tata Housing Development Co. Ltd launched a low-cost housing project branded Shubh Griha in Boisar, around 50km north of Mumbai. The apartments of 283 sq. ft, 360 sq. ft and 465 sq. ft would cost between Rs3.9 lakh and Rs6.7 lakh, the company said.

In March, Mumbai-based developer Lodha Group launched Casa Bella, an integrated township project in Dombivalli, a Mumbai suburb, where apartments would cost between Rs11.7 lakh and Rs24.3 lakh.

In August, Bangalore-based realtor Puravankara Projects Ltd launched a unit called Provident Housing and Infrastructure Ltd to construct apartments priced at Rs10-20 lakh in cities such as Bangalore, Chennai, Hyderabad, Coimbatore and Mysore.

In May last year, Omaxe Ltd, another New Delhi-based developer, set up a subsidiary called National Affordable Housing and Infrastructure Ltd to build homes in the Rs3-15 lakh category in smaller cities such as Sonepat in Haryana, and Nimrana and Bhiwadi in Rajasthan.

“There is a demand in the affordable housing segment. Interest rates have come down and that helps because people can take loan at a cheaper cost,” said Anshuman Magazine, managing director of CB Richard Ellis, a real estate consultancy firm. “There is also a renewal of confidence among buyers.”

Unitech expects to start its Uni Homes projects in Hyderabad, Bangalore, Kolkata and Lucknow.

The company said these projects will all be well located. “The project in Chennai will not be very far away from the city.”

Unitech plans to invest Rs1,700 crore this year to build these homes.

“This is just the construction cost,” the spokesperson said. “Land for the projects has already been paid for,” the spokesperson said.

The real estate company says it owns around 8,000 acres of land in various cities, on which it can develop some 500 million sq. ft of residential and commercial space.

Dealings Started-Agents Roaming

With the Congress government successfully managing to hold its power for the second time, chief minister Y S Rajasekhar Reddy and his men are not taking it low. They have already started taking initiatives and projects that will keep them busy for the next five years and that way they are also want to score over the anti-incumbency that might possibly rise among the voters. In this process, the real estate market has been focused very well and slowly but steadily, the market is now said to be breathing some oxygen. Reports have been arriving from our real estate sources that the dealings have begun on a healthy note and even the buyers are said to have come out slowly into the open. To add to the good news, the dealing are said to be happening not in outskirts but within the city in areas such as Kukatpally, Patancheru. It seems that there is some good movement as per agents and they have begun to pull up their socks and are gearing up to get into the market more aggressively. For now, they have started to focus on small ventures but soon they are having plans to come up with some ambitious ones too. Usually, the Kukatpally and Patancheru segments are considered hot cakes among the real estate market and the prices tend to be at a high end in such places. So if the deals and transactions increase there, then it won’t be long before the word will spread into the market and even the other areas also will get the heat. However, many are saying that the brokers and real estate people must not make the blunder of coming up with exorbitant prices and try to hike up the market else it will lead to another collapse which will become very hard to come out of. Source: greatandhra.com

How India can wipe out fiscal deficit

The government may mobilise a whopping Rs 4 lakh crore, an amount which may help in wiping out the country's fiscal deficit, by bringing down its holding to 51 per cent in all the listed public sector firms, a report says.

"If the government plans to sell its stake in the listed PSUs maintaining its stake up to 51 per cent, the total amount that can be raised is about $94.77 billion (over Rs 4.46 lakh crore)," SMC Capitals said in a report.

With fiscal deficit rising to $62.26 billion (Rs 2.96 lakh crore) - over six per cent of GDP - last fiscal, taming the ballooning deficit would be on its priority agenda when the new UPA government presents the Union Budget in the first week of July.

"If the government goes ahead with disinvestment plans, the infrastructure sector will be the main beneficiary as the proceeds would be ploughed back into the company," SMC capitals equity head Jagannadham Thunuguntla said.

"It is unlikely that the government would go for divestment in the PSU lenders. Shipping, logistics firms would turn out to be the front runners as the government can mobile more funds by selling less stake," he added.

Addressing the first 15th Lok Sabha session last week, President Pratibha Patil had said, "My government will develop a roadmap for listing and people-ownership of PSUs while ensuring that the government equity does not fall below 51 per cent.

Source: Rediff

Real Estate Recovery in Coming 3 Months : ASSOCHAM

Anticipating strong policy measures for real estate in forthcoming Budget, embattled realty majors see positive signs of recovery taking place, within next Three months as affordable housing rev up demand and improved cash flows address their liquidity concerns, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

The ASSOCHAM Business Barometer (ABB) Survey on “Flowing Sentiments in the Real Estate Sector” released here today by its President, Mr. Sajjan Jindal says “based on an expert (focus) group of 25 real estate firms, found 88 per cent of respondent CEOs sensing a quick revival in the sectoral activity within next three months as developer’s strategic shift towards affordable housing and a significant price correction in the housing projects has pepped up the sale of residential property”.

As per the Survey (conducted between May 15 – 25, 2009), a whopping 92 per cent of the respondent developers considered affordable housing as the most dominating segment to shore up the demand in real estate sector. The policy actions supplementing the robust demand in the housing sector is likely to hold the key for a speedy recovery phase in the sector.

With developers’ concentrated efforts to target the lower and middle income consumer group during the downturn, 84 per cent of the surveyed CEOs signaled the least impact (in terms of demand contraction) in the affordable housing segment.

According to the Survey, at a time when luxury housing (more than 50 per cent), SEZ (40 – 50 per cent), retail space (30 – 40 per cent) and commercial space (20 – 30 per cent) were witnessing steep contraction in demand, affordable housing was the single most resilient segment with a minimal contraction of zero to ten per cent.

On the policy front, the surveyed CEOs sought single window clearances for all schemes under affordable housing in the line of SEZ clearances to enable fast development of units and achieve the short fall of about 26 million houses at the earliest.

A majority of 76 per cent of the ABB respondents viewed the stimuli given to the sector through fiscal and monetary measures as inadequate to help boost the demand-supply scenario. However, of all the measures taken by the RBI and the commercial banks, 64 per cent of the respondent CEOs were of the view that RBI’s allowance to banks to restructure loans to developers has been the most successful in improving the liquidity for real estate sector.

In the present market scenario, 60 per cent of the surveyed CEOs perceived resurgent stock market as the most prominent source of finance to fund the sector’s cash requirement, followed by 28 per cent viewing bank credit as the best viable option.

Hefty funds raised through QIPs in the stock market (exceeding Rs 8,000 crore) along with debt restructuring would allow the developers to manage their cash flows even more efficiently to address their liquidity concerns.

Almost 92 per cent of the respondent CEOs strongly agreed to the need to unify stamp duty on property across all the Indian States. The surveyed developers also sought reduced stamp duty charges to increase revenue and avoid duty evasion.

Among other policy issues, respondents asked for a central regulation body, recognition of real estate sector as industry, further relaxed norms for ECB and FDI along with a need for speedier and hassle free statutory approvals.

The Survey also found that metropolitan cities has been the worst affected market segment whereas tier II cities have been seen as the most promising one to boost up the sector as commercial activity moving to these cities and their greater yield has given a tremendous impetus to investment in the these market segments.

Among the six metropolitan cities, the financial capital of India, Mumbai, has been ranked first as the most saturated in terms of real estate assets (both commercial and residential) followed by Delhi NCR (second) and Bangalore (third) whereas Chennai, Kolkata and Hyderabad were ranked fourth, fifth and sixth respectively.

Source:http://www.webnewswire.com/node/456272

Realty Sector Looking Up

After witnessing an acute slowdown during the third and fourth quarter of 2008, the real estate sector has shown some recovery in the first quarter of 2009 ending March 31. If trends ofabsorption for the period January-March 2009 are any indication, a report prepared by PropEquity Research suggested there has been a surge in absorption in majority of the cities.

A recent study conducted by PropEquity across Mumbai, Bangalore, Chennai, Hyderabad, and Gurgaon in NCR reveals that absorption has been high among the residential new launches in the first quarter of 2009 in Mumbai, Chennai and Gurgaon. The study attributes the success rate in absorption to the price correction and reduction in unit sizes introduced by developers in these cities. However, Bangalore and Hyderabad, which witnessed fewer new launches during the period, experienced a low absorption.

The real estate sector experienced one of the worst kinds of slowdown in demand because of rise in the interest rates in the January-March 2008, by almost 2 percentage points, to 12%. At the same time, the prevailing prices of residential apartments in most of the cities made them unaffordable for most buyers. The situation further worsened after global financial markets got affected due to the failure of banks and b ro ke r i n g houses in the US and Europe. This also affected Indian real estate market very badly and demand plummeted.

According to the report, While October-December 2008 saw the nadir with absorption of only 1,113 units in Mumbai, the first quarter of 2009 witnessed the launch of over 14,478 residential apartment units and a corresponding absorption of 5,746 units. As against this, during October-December 2008, 3,096 units were launched, the report said. Similarly, in Gurgaon, during January-March 2009, 815 units were sold while 4,490 units were launched. As against this, in October-December 2008 quarter, only 587 units were sold from 3,708 units launched. Hence, both the absorption and launch figure showed sign of recovery.

The report says the main reason for increase in absorption of the new launched products is drop in the per sq ft rate and the reduction in the size of the units, which brought their prices within the affordable range of buyers. The report says most of these units were launched at a price almost 40% lower than the average pricing of apartments that were available in the first quarter of 2008. The average unit size of these apartments was also lower by almost 35%.

According to Samir Jasuja, founder & CEO of PropEquity, "The increase in this high absorption trend can be attributed to price correction and reduction in unit sizes adopted by developers. This encouraging trend is indicative that the markets are poised for a recovery if proactive measures are adopted by the real estate community to offer the right product at the right price to the consumers."

This trend continued in Gurgaon and Chennai where the new launches have witnessed high absorption after the unit sizes were reduced and average prices corrected by almost 15% to 25%. As anticipated, 61% of the total absorption in Gurgaon and 58% of the total absorption in Chennai in the first quarter of 2009 was constituted by the newly launched residential apartment units.

Source: Economic Times

Liquidity starts seeping back into India Inc

Liquidity starts seeping back into India Inc

Business Standard: May 21, 2009

Mumbai/New Delhi: After a near six-month drought, India Inc is finding some takers for debt and equity issues If trends over the past few weeks are anything to go by, banks are slowly shedding their aversion to financing new projects and foreign investors are heading back to India. Though private and the foreign banks are yet to step up lending in a big way, public sector banks have started financing projects. The result: Funding of over Rs 58,000 crore for large projects has been tied up in the last six weeks. The list includes Indian Oil’s Paradip refinery (Rs 14,900 crore), State Bank of India’s loan to NTPC (Rs 8,500 crore), Krishnapattnam Port (Rs 3,000 crore), BGR Energy’s engineering, procurement and construction work (Rs 4,000 crore), SBI’s loans to Vodafone (Rs 10,000 crore) and the Anil Dhirubhai Ambani group’s three projects (Rs 14,500 crore for the Sasan Ultra Mega Power project, Rs 2,000 crore for Delhi Metro Express and around Rs 1,000 crore for transmission projects in the west). “With interest rates falling, lenders are locking in deals at higher yields on the project finance side,” said Ravi Kapoor, Managing Director of Citigroup Global Markets. Infrastructure developers aren’t the only ones finding it easier to raise resources; companies such as Tata Motors are finding takers, too. A banker associated with the Rs 4,200-crore debenture issue, said the auto major had placed its entire debt in a day. Construction major J P Associates is also in the process of raising nearly Rs 4,000 crore from debentures. Companies that failed to raise equity in the aftermath of the September crisis — when several global investment banks crumbled under the sub-prime loan crisis in the West — had to opt for non-convertible debentures to meet their funding requirements. Although this market remained strong, with companies raising funds at up to 12 per cent, participation was limited to state-owned Life Insurance Corporation. Now, other banks are back in the market, said market participants. In April, companies collectively raised NCD issues worth Rs 25,000 crore. There are signs that the equity market is looking up too. Overall, bankers estimated that over Rs 40,000 crore of rights, QIP and debenture issues are in the pipeline. In the last six weeks, Unitech, DLF and Indiabulls — all real estate players — have together raised Rs 8,000 crore through qualified institutional placements (QIPs). “The private placement by the three realty companies is an example of foreign investors willing to invest in a sector that was perceived to be the most risky,” said Enam Securities Vice-president Yogesh Kapoor. He predicted that other sectors considered less risky will attract investment more easily from overseas investors. “The underlying sentiment has changed dramatically. Indian stocks, which were punished severely in comparison to other emerging markets, provide attractive value propositions for investors,” Kapoor added. Also, the election mandate that returned a less fragmented government at the Centre is expected to facilitate the reform process, so some state-owned companies will enter the capital market, which will increase the supply of good quality papers, Kapoor said. Some constraints, however, remain. “On the equity side, companies with good assets and a good track record on returns to shareholders are able to raise funds now. But the gate is not so widely open that anyone can get through,” said Gagan Banga, director, Indiabulls Real Estate, which raised Rs 2,585 through a QIP issue on Tuesday. Also, he said the cost of debt remains high “We have seen sentiments improve for the short-term but we have not found a solution for the medium to long term,” Banga said. Indiabulls Power Services is looking to raise around Rs 5,200 crore of debt to achieve financial closure for its upcoming thermal power plant. It has already raised its equity contribution of Rs 800 crore. Though Banga did not name any projects, funds for Sasan were tied up at 12.5 per cent, while SBI’s five-year loan to Vodafone will cost 13.25 per cent during the first two years. Going forward, however, things are likely to improve. “Investment in infrastructure projects will pick up substantially shortly. It was expected to start early this year but got caught in the election process. The National Highway Authority of India had stopped the award of new projects owing to the election code of conduct, but it is expected to start soon. This time, the response is going to be overwhelming as most of the projects have been redesigned,” said India Infrastructure Finance Company Chairman and Managing Director, S S Kohli. He added that benign interest rates will also make infrastructure projects more economically viable. “With enough liquidity in the system, there will be no paucity of resources,” he predicted. According to government estimates, infrastructure projects worth nearly Rs 46,000 crore will be awarded in the coming months. “The pipeline of projects, from sectors like power and gas, to raise funds is strong. In the current financial year, we expect to arrange around Rs 100,000 crore for infrastructure projects,” said A P Verma, managing director & CEO of SBI Caps, which was associated with the Tata Motors and Sasan fund-raising. Though companies are still under pressure and demand remains subdued, the sentiment, bankers said, has changed because the worst seems to be over, at least in the domestic market. “The mood was really down in the last quarter of 2008. By mid-January, it had started improving and by March there was clear visibility of the mood changing,” ICICI Bank Chairman K V Kamath told Business Standard in a recent interview. Although overseas fund-raising remains tough, given the high credit spreads, domestically banks are flush with funds, which can be gauged from the fact that for nearly six weeks now, they have been consistently parking around Rs 125,000 crore on a daily basis through the Reserve Bank of India’s reverse repo window.

Infrastructure Projects Starts Again....

Just two days after returning to power, Congress government in Andhra Pradesh has started releasing funds to infrastructure companies implementing ticket irrigation projects in the state, valued at over Rs 1.2 trillion. 

Construction companies, such as IVRCL, Nagarjuna Construction Company and Lanco Infratech, are carrying out these projects under the Jalayagnam Scheme. The three firms have orders worth Rs 8,000 crore on the irrigation project. Congress promised to continue the scheme if voted to power. 

The multi-purpose projects that are at different stages of execution were stalled for a while as the state had delayed payments to the companies carrying out the projects. Money for these schemes came largely from sale of land. But the downturn in the realty market hit the resource-raising ability of the state through this route. 
These projects were launched by the government in 2004, and are scheduled to be completed by 2012. 

“IVRCL is executing irrigation projects worth Rs 5,000 crore under the Jalayagnam Scheme. We received sanctions for the projects last week. While some projects may take about a year, few others may take four years to get completed. The delay in fund allocation was mainly on account of the model code coming into force before the elections. It has not impacted us as such,” said IVRCL chairman and managing director E Sudhir Reddy. The company has bagged about seven state-sponsored irrigation projects. 

Lanco Infratech too is implementing three projects, valued at Rs 30 crore. Nagarjuna Construction Company (NCC) is executing 11 irrigation projects under the scheme, valued at Rs 2,751 crore. “While we hold a 50% stake in these projects, the other 50% is held by Maytas Infra. All our running bills have been paid by the government,” said NCC executive vice-president (finance) Y D Murthy. 

Companies feared that these projects would be cancelled if a non-Congress government comes to power.