Real Estate in India: Loans, Builders, Development and More

Weekly news updates on trends in the Indian real estate market

Indian real estate continues to attract global developers. Consolidation seems to be happening with big developers negotiating with small realtors for their land banks. Tier I and II cities in India are capitalizing on the trickle down effect of the IT and ITES boom.

- Chillibreeze Business Research Team

NACL working on plans to leverage Rs 5,000-cr realty

National Aviation Company (NACL), the newly-formed entity after the merger of Air India and Indian Airlines, is chalking out a plan to leverage its real estate and office space assets within the country and overseas.

The assets are valued at Rs 5000 crore.

The plan involves sharing of office space by the two airlines, reduction in rental payouts and leasing out office space.

Over a two-three year period the merged airline is looking at effecting savings to the tune Rs 450 crore, while at the same time augmenting its revenues by a similar amount.
Sept 4, 2007
Source: Economic times

As home prices fall, developers eye India masses

Home prices in India have dropped as much as 20 percent since January.

Several developers are looking at the mass market.

Gross margins for the mass market are around 20 percent, rather than the 30 percent for high-end housing. But developers can forge healthy businesses by building huge townships on non-prime land that is more easily acquired.
Sept 4 2007
Source: Reuters via Yahoo

Plaza Centers to Invest 50 Billion Rupees in India

Plaza Centers NV plans to invest 50 billion rupees ($1.2 billion) in India to build entertainment and commercial centers.

The company will develop 50 properties in five to seven years. Plaza has bought 50% stake in a company developing malls in Pune. It has plans to build malls in Bangalore also.
Sept 3, 2007
Source: Bloomberg

Fiat evaluating bids for Kurla property

Automaker Fiat India is evaluating bids for its 54-acre property in suburban Mumbai’s Kurla area.
Sept 3 2007
Source: Business Standard

Small realty feeds big cos for consolidation

Small real estate firms are selling their land banks to big developers.

In 75% cases, land assemblers are small time developers, whose plans to become a full-fledged developer could not fructify. The remaining 25% includes local landlords, politicians, big-ticket farmers and village headmen.

The real estate industry is in consolidation phase and 10-12 national players will survive in the business.
Sept 3, 2007
Source: Economic Times

Demand for home loans slowing down

The demand for home loans has slowed down over the past few months due to rising property prices and high interest rates.

Interest rates have increased by 250-350 basis points in the last 18 months. Also, the property prices have increased by as much as 40-50 per cent in the same period.
Sept 2 2007
Source: Hindu Business Line

Realty feels IT-ITeS ripple effect

Factors like rising manpower and real estate costs and need for risk mitigation are causing IT-ITES companies to move to newer Tier-II and Tier-III destinations which have lower real estate and manpower costs.

As per the Nasscom-McKinsey estimates, the IT-ITES industry will require nearly 100 million sq ft of additional office space by 2010.

According to estimates, the salary differential between a Tier-I location and a Tier-II location at the entry level is 19-22 %. The salary differential between a Tier-I and a Tier-III location could be as high as 42-57 %.

However, tier II and III cities may not have quality office space and quality of life at par with the tier I cities.
Sept 1, 2007
Source: Economic Times

Dice loaded in favour of big builders

The Punjab government’s new policy for the establishment of residential colonies will favour larger national players rather than small local realtors. The state has been divided into three zones based on the growth potential of the area. The Greater Mohali area has been placed in the hyper zone while Amritsar, Jalandhar and Ludhiana have been placed in the high potential zones in the state.

According to the new policy

• the minimum area required for the coloniser in a high or medium potential zone will have to be 10 acres independent and five acres as part of a plotted colony.
• a residential colony (plotted) will be of minimum 100 acres in the high potential zone, 50 acres in the medium potential and 25 acres in the low potential zone.
• Sharp increase in external development and land use charges

The state government feels this will remove non serious players but the colonizers feel this would encourage illegal colonies.
Sept 1, 2007
Source: The Tribune

$800 million raised for property development in India

HDFC, India's second-largest mortgage company, said it raised $800 million from overseas investors for a real estate fund to tap the nation's growing demand for homes and offices. HDFC is seeking a 20 percent to 25 percent return for the nine-year fund.

The fund will invest in the residential, commercial, hospitality, education and health care sectors, as well as in developers.
Aug 30, 2007
Source: International herald Tribune

CB Richard Ellis Group acquires India affiliate

CB Richard Ellis Group, Inc. announced the acquisition of a majority interest in CB Richard Ellis South Asia Pte Ltd (CBRE India) - a CB Richard Ellis affiliate company that is a full service provider operating in 30 cities across the Indian market.
Aug 30, 2007
Source: Economic Times

US realty firm Hines to invest $300 m here

Hines has drawn up plans to invest up to $300 million in India over the next two-three years to develop real estate projects worth over $1 billion. The company has presence in 16 countries, with offices in 96 cities with total assets valued at around $16 billion.

The realty major has identified FDI-compliant projects in high-end office and residential spaces, mixed-use townships, IT SEZs and large format mixed-use retail, commercial and hospitality projects. The first project is being launched with DLF at Gurgaon.
Aug 29 2007
Source: Economic Times