Real estate Sector

Despite government-appointed directors taking over charge of Maytas Infra, its only key project Hyderabad Metro is once again in trouble with the Andhra Pradesh government weighing whether to take the project forward with or without Maytas.According to sources, the state government is more or less convinced that Maytas Infra would not be able to take the Rs 12,000 crore project forward on its own.  Though taken up on a public-private partnership model, the company had agreed for a reverse grant to pay the government a certain amount without opting for viability gap funding. However, after its key promoter and Satyam Computer founder B Ramalinga Raju confessed to financial fraud Maytas Infra too was caught up in the ensuing storm.

The company is being probed for fund diversion from Satyam. Maytas Infra failed to achieve financial closure for the Hyderabad Metro by March 17, the deadline for fixing up funds. Citing difficulties, the company had sought extension of the deadline. Though the government is yet to take a decision on that, sources said the scope for Maytas to raise funds looks limited. "For about Rs 1,700 crore loans that it has, it is seeking a debt restructuring and its potential to raise further debt looks unlikely," an official source said. Given this situation, the Andhra government is learnt to have been examining options to take the project forward without having to depend on Maytas. "The state government sees the metro as a prestigious project. It can't wait for Maytas to come out of troubles... There are options to take it forward," an official said.However, one source said, the government is working on three options.One is to ask the Centre to fund the entire project.

The other option is to ask the Hyderabad Metro consortium, including Maytas, Nav Bharat, Ital Thai and IL&FS, to change the lead partner. "Currently, Maytas is the lead partner. Since its ability to raise funds is under question.. if any of the other partners come forward to take the responsibility, the project can be reworked," a source said. The third option, which is said to be under active consideration, is to cancel the bid awarded to the Maytas consortium and go in for re-tendering. "We are yet to take a decision. But we definitely want to explore the option of looking for central support to fund the project," an official said. Analysts feel Hyderabad metro remains a lifeline for Maytas Infra and would have a significant impact on the company if it is allowed to continue with the project. The existing pipeline of Rs 13,000 crore projects would not match the single metro project considering the by-products the project would offer."It is not just the metro Maytas would be developing. There is a significant real estate value along with the project. Losing this project would be a back-breaker for the ailing company," a source said.

With its investor roadshow complete, India's GMR Infrastructure Ltd has managed to attract just over half the $1 billion (around Rs4,750 crore) it was initially hoping to raise, according to banking sources-an ominous sign for issuers looking to cash in on a stock market rally. While share sales are beginning to flow after a 15 month drought as India's main index has surged 90% from its 2009 low in March, wary investors are concerned the run-up has been too fast. Rapid surge: The BSE building in Mumbai. The Sensex has gained 90% from its 2009 low in March. Ashesh Shah / Mint "Clearly quality is coming into play now," said Jayesh Shroff, who oversees $1.3 billion for SBI Mutual Fund. "There will be some inflection point. Some issues may not sail through at some prices." So far in 2009, 11 Indian firms have raised nearly $2.6 billion, mostly in the last two months. Another three dozen firms, including GVK Power Ltd and JSW Steel Ltd, have announced their intentions to raise $8.5 billion in share sales, Thomson Reuters data showed.

Property and construction firms, reeling from debt-heavy balance sheets, form a majority of this group. Most are opting for the sales of shares to institutional funds, which can be done faster than a standard follow-on offering. Bankers reckon as few as one-third of the planned offers will succeed as investors are faced with multiple choices and stocks are no longer cheap. Shares in top real estate firm DLF Ltd have jumped nearly three-quarters since its founders raised $780 million in mid-May, handing out handsome returns to its investors.But new investors in GMR, which operates two of India's biggest airports in New Delhi and Hyderabad, would be buying into a firm that has already at least doubled in value since February and trades at 93 times its forecast earnings for fiscal 2010. "We are concerned with a run-up (in prices). Investors don't like this," said Ashutosh Agarwala, GMR's chief financial officer for strategic finance. "But having said that, I don't think it will matter. We haven't decided the pricing, but all I can say is the (placement) will be investor friendly," he said. GMR still cannot launch its offer due to restrictions on pricing from the market regulator. Under pricing rules for share sales to institutions, offers must be priced at a minimum of the average price in the past two weeks or six months, whichever is higher, making newer issues dearer following the recent rally. GMR's current market price of Rs158 is well below the regulator's floor price of around Rs185.

Overseas heavyweights including HSBC Holdings Plc., Government of Singapore Investment Corp. Pte Ltd, the UK's Prudential Plc. and T. Rowe Price Group Inc. have been among the most active investors in recent offers in India, bankers said, and are expected to become more cautious after sharp run-up in share prices. Most of the share sales so far have gone towards retiring high-cost debt and would not help in generating fresh cash, eventually diluting earnings on expanded capital, analysts said. Even for firms working on new projects, returns will flow only after a few years, as in the case of GMR, which plans to use the proceeds to finance a slew of new road and power projects. "Indian industry is hungry for capital. If investors are indicating prices are high, companies will have to value it. Pricing power is still with the investors," said Girish Nadkarni, executive director at Avendus Capital, an investment bank. But firms such as Gammon Infrastructure Projects Ltd, which is debt free and plans to invest in new projects, insist offerings that will deliver strong cash flows are attractive enough for investors. "I have a queue of these guys waiting," said Parvez Umrigar, managing director at Gammon, which aims to sell shares worth $105 million.

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Homes sales in India are trickling back in some sections of the  real estate market, but industry watchers say a rebound is months away as buyers in the world's second-most populous country await further price corrections. Builders have begun new projects after a year-long hiatus, and are also swapping older premium project proposals for cheaper ones to restart sales as they try to beat a severe cash crunch. "While the market has turned up, I don't expect it to be back to 2007 or 2008-beginning levels for another 6 months or 8 months," said Rajesh Goenka, Chairman, Axiom Estates, real estate agency, servicing overseas Indians mostly in the earning bracket of $100,000-$300,000 a year. Indian real estate developers have spent months battling a severe cash crunch as high interest rates and an economic slowdown kept buyers away and funding from investors dried up.

But, a spate of interest rate cuts and a sentiment revival has encouraged builders to focus on middle-income buyers by launching new projects or re-market older ones as mid-income properties. Unitech, Parsvnath Developers as well as India's top listed real estate firm DLF redesigned projects and cut costs to appeal to a wider consumer base. Demand is swaying towards affordable housing and buyers of luxury properties are staying on the sidelines, holding out for a further drop in prices. In the quarter to March, half of the homes sold were in 114 new projects of the 2,000 available for sale, according to estimates by realty rating and research agency, Liases Foras. Realty firms are also using the momentum to tap investors for money. Real estate firms alone have raised $1.7 billion this year so far, Thomson Reuters data showed, to beat a cash crunch.

In cue, India's realty index has almost tripled, outperforming the 82 percent rise since March 6 in the benchmark 30-share BSE index when it saw its 2009 low. Despite a cautious revival in demand for homes, the sales taking place now are not spread evenly despite prices falling by 40 percent from their peak for under-construction houses mainly in southern and northern India, analysts say.

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Office markets across the country continued to show a downward trend as most markets recorded negative growth in rental values after supply across eight major cities in India outstripped absorption by 45 per cent.Mumbai, the financial capital of India, witnessed the sharpest decline in rental values in the first quarter of 2009 while the National Capital Region witnessed significant decline in rental values in central business district in the first quarter of 2009, according to Cushman & Wakefield’s latest office market report.

Micro markets of Mumbai including those of Lower Parel and Worli recorded drops of 37 per cent and 29 per cent respectively from a three per cent and 13 per cent drop respectively in the preceding three months. Rentals in central business district of Nariman Point fell by 13 per cent in the first quarter of this year compared to 20 per cent in the previous quarter. Rentals in NCR’s CBD, mainly Connaught Place dropped by 17 per cent, the highest in the last 3 years, the property consultant said in the report. The drop comes after a 14 per cent decline in the previous quarter. Bangalore rentals fell in the manageable range of three to seven per cent in key markets.

“The first quarter of the year can be termed as the weakest so far in terms of commercial office take up across major cities in India as compared to a similar period for the last 2/3 years,’’ said Kaustuv Roy, Executive Director, Cushman & Wakefield. Bangalore witnessed the highest new office space supply of approximately 2.81 million square feet and also the highest demand of 1.29 million square feet. NCR and Mumbai witnessed fresh office space supply of 2.6 million square feet and 2.47 million square feet respectively and absorption of 0.8 square feet and 0.9 square feet respectively. Chennai, which had been reeling under over supply pressures saw moderate supply 0.98 square feet and absorption of 0.9 square feet. Hyderabad and Ahmedabad saw no addition to the current stock.

Vacancy levels had remained largely consistent to last quarter with most IT/ITeS destinations witnessing high vacancy levels. Chennai’s peripheral location (Rajiv Gandhi Salai) recorded the highest vacancy of approximately 42% while the city average was at approximately 18%. The lowest vacancy was recorded in Ahmedabad at five to six percent due to limited leasing activities and no new supply in the market.Mumbai recorded a vacancy of approximately 11-12 per cent while vacancy levels in NCR stayed at a manageable 8 -10 per cent. Bangalore, Pune and Kolkata remained at an average of 16 -18 per cent. Hyderabad saw some slackness in activities and therefore recorded a reasonably high vacancy of 23% of which prime suburban region comprising of Banjara Hills and Jubilee Hills recorded a higher 35% vacancy.

"Re- negotiations and migration to more cost effective locations has been the norm for the cautiously advancing corporate sector. However going forward we are likely to see supply contraction,"said Roy."Acutely affected areas like IT/ITES and certain corporate office destinations will see deferment of projects to bridge the gap between supply and demand. While rental values are expected to be under pressure in short to medium term, going forward lower rentals are likely to have a more positive impact on the absorption numbers," he added.

The recession has taken its toll on Hyderabad Real Estate market where land prices and apartment prices are down by 40 percent. The job losses specially in IT/BPO sector and speculations over more job cuts lead to this down trend. Though this is good times for new buyers, it is really going tough for builders and resellers. Builders are coming forward and willing to negotiate prices with the customers. And some builders are even advertising with ‘buy one and get one’ tag in order to dispose their properties as early as possible.The residential land prices near Manikonda, Gachibowli and Kokapeta which were going for Rs.20,000 - Rs.25,000 per Sq.Yard before are now Rs.12,000 - Rs.15,000 per Sq.Yard.

Most of the apartments which were sold for Rs.3500 per Sq. Ft before are now going for Rs.2000 per Sq. Ft. or even less. A two-bed room flat in Nizampet road, Kukatpally is costing around Rs. 20 lac now. And the prices for independent house/villas also fallen down by more than 35%, an Independent house of 2700 Sq.Ft area in locations close (< 5Km) to Hitech city is costing now around Rs.50 lac. And also builders are more open and flexible now with respect to instalment payments.Reserve Bank of India (RBI) today announced that it is further cutting repo, reverse repo rates by 0.25 percent. A cut in reverse repo will have a direct impact on home loans that will become cheaper and this certainly brings good cheer amongst consumers.

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Southern metros led by Bangalore, Hyderabad and Chennai have become the most favoured destinations for attracting infrastructure investments from corporates ahead of Mumbai , Delhi and Kolkata, an Assocham study said.The report "Indian Metros : pulling infrastructure investment" pointed out that the three southern capitals accounted for 70% of total private investments in infrastructure projects among six metros in India. Kolkata, Mumbai and Delhi accounted for the remaining 30%. As per the Assocham study, the private sector has bet Rs 33,161 crore on the southern metros compared to Rs 14,240 crore in other tier-I cities.

The southern metropolitan cities are less urbanized with a combined urban population of about 16 million compared to Mumbai (18 million), Delhi (18.7 million) and Kolkata (15 million), the Assocham study said. Assocham president Sajjan Jindal said: "Southern cities are attracting private attention towards infrastructure projects primarily due to better state policies, availability of talent due to engineering and business institutes , high literacy rates and rising per capita income ." The study said that even when the real estate sector across the country is facing problems, investments in realty projects have acquired highest share in overall infrastructure investments in the southern tier I cities.

Around 12 projects were announced by the private sector during last six months amounting to Rs 12,990 crore. Bangalore had a maximum of six realty projects while Hyderabad and Chennai had five and one respectively . The second highest investments are lined up for SEZs. As much as Rs 12,150 crore would be spent in developing five SEZs by the corporate sector in southern metropolitan cities.

The special housing loan schemes launched recently by State Bank of India at 8 per cent interest rate have triggered migration of customers of some private banks to SBI.While the exact number of migrated customers/loan applications could not be ascertained, the foreclosures of housing loans at leading  private banks for loan swapping have gone up noticeably, according to sources.

"We actually expected to drive good demand for new home loans from prospective buyers but are pleasantly surprised with increasing  response on the loan swapping front," a senior SBI official from Mumbai told Business Line. However, the new loan applications still remain "dull" in some major  urban locations due to expectations of further dip in the real estate prices and interest rates, he added.Sources in some private banks, including ICICI Bank, confirmed the "noticeable"  foreclosures in home loans. "There is also significant  increase in the number of enquiries on foreclosure penalty and request for list of documents necessary for applying for a loan with another bank for swapping," said a source in ICICI Bank.Existing customers are also hoping for some benefit in view of the reduction in interest rates by SBI and other banks. "When I asked whether any renegotiation of interest rate on my home loan is possible, I was told by the bank staff that I can close the loan to go to another bank," said Mr S. Reddy, a senior IT professional who had taken Rs 20 lakh housing loan from ICICI Bank here. However, the official spokesperson of ICICI Bank in Mumbai said: "There has not been any increase in number of foreclosures of home loans."

A HDFC Bank official said while new customers were weighing their options, the existing customers are enquiring about the penalty and foreclosure of loans. The penalty for pre-closure of loans after payment of EMIs for three years now ranges between 2.25 per cent and 3 per cent of the outstanding in different banks. The benefit for a customer who swaps his loans from a higher rate to a  loan at 8 per cent interest for one year is varied. "This is a calculation which needs to be worked out at the individual level depending on the loan amount outstanding, rate of interest and its nature (flat/floating) and the foreclosure penalty one has to pay," said Mr Dattatreya Sarma, Deputy General Manager, State Bank of Hyderabad (which is also offering home loans at 8 per cent).

ICICI Bank, the country's largest private sector bank, has cut its home loan rates by 25-50 basis points (100 basis points = 1%) for new customers with immediate effect.Unfortunately, existing home loan borrowers from the bank will continue to pay a higher interest rate. ICICI Bank is the first private sector bank to reduce rates in the wake of the Reserve Bank of India's decision to cut its benchmark policy rates-repo and reverse repo rates-by 50 bps on Wednesday. Earlier, State Bank of India and Canara Bank had reduced interest rates on home loans.

public sector Bank of Baroda also cut its benchmark lending rate by 50 bps to 12% with effect from April 1. The cut in the bank's prime lending rate will reduce the interest burden in all its advances which are linked to its benchmark prime lending rate (BPLR, a rate offered by a bank to its best borrowers), including home loans from the bank. UCO Bank too announced on Friday that it was cutting BPLR by 50 basis points to 12.50% from the current level of 13%. According to the new floating rate structure of ICICI Bank, the interest rates would be 9.75% against 10% earlier for home loans of less than Rs 20 lakh. For loans between Rs 20-30 lakh, the new rate would be at 10%, compared with 10.5% earlier, while for loans of Rs 30 lakh and above, the interest rates would be at 11.50% against 12% earlier.

"The rates are still fairly stiff compared to other major players, especially if you look in the Rs 30 lakh and above category. If you look at the other major players, the rate is in the range of 10.50-10.75%,'' said Harsh Roongta, CEO, Apnaloan, an independent loan tracking firm. "LIC Housing Finance offers very attractive rates. Even Canara Bank's new offer was attractive,'' he added. Earlier this week, Canara Bank announced that it would charge 8.25% interest for the first year for loans up to 20 years. Last month, SBI announced a home loan scheme where interest rate for the first year was fixed at 8% and the rate would change from the second year. The move invited criticism from other housing loan providers, which feared that the scheme was a deliberate attempt to wean away their existing customers. Many banks are likely to take cue from ICICI Bank and announce rate cuts soon. visit for all the home loan rates of different banks  http://www.maaproperties.com/Pages/HomeLoans.aspx

It's here. After talking of a rebound, putting up with stagnation and offering freebies and discounts, developers hit by a demand crunch and economic slowdown are biting the real bullet, lowering prices in key apartment zones in or around Delhi, Mumbai, Bangalore and Hyderabad.Real-estate prices across the country have fallen by 10-40 per cent. And while prices vary depending on location, size, quality, amenities and time of possession, there are clear indications that the earlier price surge created by speculation and high growth has petered down. Developers are generally still not cutting prices of existing projects, but they face a market in which re-sales could do much the same thing.The country's second-largest builder, Unitech, is planning new projects in the suburbs of Noida and Greater Noida at Rs 2,000-2,500 per sq foot (psf), according to a spokesperson. This is the same area where market players say prices were roughly twice as much a couple of years ago."It makes perfect sense for industry leaders to rationalise project prices," said Anuj Puri, country head at real-estate consultancy firm Jones Lang LaSalle Meghraj. "That is the need of the hour."

Market players say in the Gurgaon area, well-developed zones have over the past year seen rates slump by 8-12 per cent, but remote areas are seeing a crash of 20-35 per cent.For example, a plot in Sushant Lok Phase II today sells at about Rs 23,000 per sq yard compared to Rs 30,000 only six months ago, a fall of 23 per cent.  However, genuine deals are few because buyers are waiting for a further fall, while sellers are hoping for a rise.In Noida, flats that went at Rs 5,000-6,000 psf a year ago now come for Rs 3,500-4,200, while in Greater Noida, the fall has been from Rs 3,000-3,800 psf to Rs 2,000-2,800 psf.DLF is already selling a project in the New Gurgaon area that covers locations like Manesar at Rs 2,200 psf. A company spokesman said prices had dropped by at least 10 per cent in Chennai and by 25 per cent in Bangalore. Developers are not sure if there would be a similar fall in the North.Buyers in Mumbai and Pune could expect a further 10 per cent reduction in prices, Puri said. In the Mumbai-Pune zone, realty prices for ongoing projects have already crashed by 25 to 40 per cent in the past six to nine months, say local market players. "It's difficult to predict the bottom (of prices)," said Niranjan Hiranandani, managing director, Hiranandani Constructions. "I don't think prices will reduce further."

In Pune, prices have come down to  Rs 2,200-3,000 psf from about Rs 4,000 earlier. "The market has touched more or less 2005-06 price levels and unlike other places the conversion (deal) rate is high in Pune," said Lalit Kumar Jain, chairman, Kumar Builders, a developer from Pune. Prices in Navi Mumbai were zooming till 2007 with escalations in the region of 70-100 per cent in two years. But over the past year, a 20-30 per cent fall is clearly visible. "We have reduced our rates from Rs 7,000 psf, at which we sold six months ago, to Rs 4,700 now," said Om Gehlot, whose project Gehlot Majesty is situated on Navi Mumbai's Palm Beach Road.

As real estate sector goes through one of its worst times, consumers are looking at value-for-money options and developers are looking at cutting overheads while trying not to compromise on quality. A section of property builders say the economic downturn iis beginning to prove a boon to the green realty sector because of established and proven technologies that reduce running costs of buildings.

Homebuyers and companies buying office spaces have also shown their preference for green buildings that will drive the market with greater focus in the year ahead. “We are seeing a growing interest even among existing buildings to retrofit certain technology elements that can save energy in either air-conditioning, or lighting, or the use of water. Many hotels and hospitals, even offices, are beginning to see the advantages of managing waste within their premises, for this eliminates the cost of transporting waste and the mess of waste that is not disposed off,” said Chandrashekar Hariharan, chief executive officer, of Bangalore-based Biodiversity Conservation (India) (BCIL). He added that “Green realty sector will benefit from the market downturn as investors and buyers today are more discerning and weary of parting with money without the assurance of greater benefits and features that can save on energy bills, water bills, and on managing the waste without the risks of health hazards and without reliance on inefficient municipal bodies.

If energy efficiency becomes the norm for buildings, it would be the start of a minor revolution to reduce demand for energy, as well as to bring efficiency in management of precious water resources and more effective waste management in our cities.” “One has to devise a business model that would benefit as well as adhere to the green norms,” said P Surya Prakash, managing partner of Hyderabad-based SatyaVani Green Homes.He said green buildings are not just environment-friendly but alsohelp cut costs such as maintenance costs for the building and cost of power for the customer. To involve his clients completely in green initiatives, SatyaVani Green Homes has decided to incentivise the customer by subsidising power for 25 years by Rs 18,000 per year. “We bring down connected power load. Normal buildings need 12 mw of connected power. We are making this a zero carbon power. We call this green power,” says Surya Prakash. The concept may not be new, but developers who are actively involved in the green initiative say that green builders should strengthen the movement by sharing their experiences and the advantages they have gained.

“The focus should deepen in learning more tools and techniques and design approaches for better management of energy, water, and waste with cost efficiency and ease of execution being the prime factors,” says Hariharan.BCIL is also offering information at no cost on several things that can be done to bring energy efficiency in many things we buy or use or do in our daily workday lives, he adds. In 2008, there were as many as 240 million sq ft of commercial buildings that requested green certification. The residential green rating system was launched in May 2008 and in less than four months the initiative received applications for a staggering 150 million sq ft of residential apartments, which aspired to green, from builders. The approach has been facilitated by technology and management processes for construction that are reasonably user-friendly and can therefore allow for scale and replicability.

The real estate scene may be going through its worse stage in years, but that has not stopped buyers from evincing interest in new Real estate Projects or the offers that go along with them. This was in ample evidence at the Times Property Show that began on a positive note at Taj Krishna lawns on Saturday where 14 builders and developers displayed their new and ongoing projects in the city at 24 well designed stalls of the Times Property Home Affair show.

The fair has properties ranging from Rs 8 lakh to Rs 2.5 crore. Commissioner of I&PR, C Parthasarathi, who inaugurated the show, said that the fair gave both builders an opportunity to fight the slowdown. Putting up a fair is itself a brave move, he said. Developers hoped that being the first property fair in 2009, it would wake up the property market and provoke others to give some impetus to the industry. The crowds thronging the fair in the evening certainly made them smile. A visitor Srilekha Sundar said she was pleasantly surprised to find some really good bargains. "The media has been mentioning that rates are coming down and there is scope for negotiations, but I was skeptical. I can seriously consider buying something soon now." Developers were also encouraged by the response. "We expect to finalise some deals here because we found genuine buyers," said one developer who did not want to be named.

Surprisingly the government-owned Rajiv Swagruha Corporation is also here offering properties within a range of Rs 8-37 lakh alongside big names like the Aparna group, Aliens, Aditya Housing, PBEL, INDU, Janapriya, Modi, Saket and fairly new ones like Silpa Real Estate, Madhu Infra and SAP Constructions. There is clearly a wide range of choices, with something for everyone. This fair gives an opportunity both to builders and buyers to get the best deals and value additions. So if one is looking for a good property buy, Taj Krishna is the right venue where the Home Affair ends today.