News and views about the Real Estate in Indian cities

Weekly news updates on trends in the Indian real estate market

Investors and developers continue to be optimistic about India’s booming real estate and the opportunities the country has for developers and hospitality players. However, the reality about the creaking physical infrastructure raises questions about the sustainability of the boom. Housing for the urban poor remains a chronic issue with stop gap approach of the government. The industry needs trained manpower and institutions are increasingly forging academia- industry linkages.

- Chillibreeze Business Research Team

House that for the aam aadmi?

Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has committed to providing housing for the urban poor. The total outlay for housing under the Mission is Rs 18,600 crore ( of Rs 50,000 crore).

According to the Ministry of Housing and Poverty Alleviation, 1.2 million new houses for the urban poor would be constructed in the mission and non-mission cities.
Sept 11, 2007
Source: Indian Express via Yahoo

IL&FS launches country’s first yield-driven realty fund

A yield driven investment fund has been registered by SEBI.

The fund is to be launched by IL&FS Investment Managers Ltd and Milestone Capital Advisors Private Ltd. IL&FS-Milestone Fund-1 will target a corpus of Rs 1,000 crore, including a green shoe option of Rs 500 crore

The key features of IL&FS Milestone fund is that it offers a low minimum investment commitment of Rs 10 lakh for individuals (in multiples of Rs 5 lakh thereafter) and Rs 1 crore for corporates. Both the categories of investors will be offered a facility of paying a upfront 30% on application with the balance amount to be paid in third month (30%) and 40% before the end of the 12th month. The fund offers a quarterly yield distribution to investors and property appreciation benefits in the long term. The fund is targeting an annual yield of 11% (pre-tax) and internal rate of return (IRR) of 18-20% (pre-tax) with property appreciation.
Sept 10, 2007
Source: Financial Express

Concrete concerns continue

Builders and real estate analysts are of the opinion that property prices will not go down even though industry experts do feel that a 10-20 percent correction is required.

Rise in construction costs, lack of land availability, Urban Land Ceiling and Regulation Act and stamp duty structure are factors that contribute to high cost of real estate.

JLL’s Puri says property prices have decreased only in the National Capital Region (Gurgaon and Noida mainly), while they are on an increase in Kolkata, Chennai and Bangalore.
Sept 9, 2007
Source: Business Standard

India's demand-driven real estate sector to witness higher foreign fund inflows

Policy changes allowing 100% FDI in real estate sector has led to spurt in activity in the real estate sector.

Recent investments include Plaza Centers NV''s plan to invest 50 bln INR, Nakheel Group''s 10 bln USD investment , Morgan Stanley’s 150 mln USD deal with Oberoi Constructions in Mumbai, California Public Employees'' Retirement System investment in an IL&FS fund. Also, Ascendas India has plans to raise 357 mln to invest in integrated real estate projects. Nicolas Berggruen said he is looking to invest invest 20-100 mln USD in Indian real estate.

Industry experts feel the only road blocks in the real estate boom are the poor state of infrastructure and rising land prices.
Sept 9, 2007
Source: Thomson Financial

Funds on the horizon

Indian companies including Kotak Group, the Piramal Group and Milestone Capital have raised cash to invest in India’s real estate sector, primarily in tier I and II cities.

Real estate funds can be of various types but have a common goal. They all invest in real estate ventures. These may include companies listed on the stock exchange, funds that are listed on the stock exchanges and buying or selling real estate stocks, or directly in developers. They can also invest in Special Purpose Vehicles (SPV) for large infrastructure projects.

A JP Morgan report on states that the $50 billion (Rs 2,02,100 crore)real estate industry is projected to grow at 9 per cent per annum, reaching $90 billion (Rs 3,63,780 crore) by 2011.

However, some mutual fund companies feel that India needs to put the checks and balances for investors and have framework like the real estate investment trusts.
Sept 8, 2007
Source: Hindustan Times

Want big salaries? Try the realty sector

The real estate sector is expected to become more transparent and grow by 30% in the next few years. Realty studies are a popular with college graduates, management, architecture and engineering students.

Specialised courses on real estate are being offered by institutions like SPA, ISB, IIRE and these institutions are tying up with foreign players. Many students have found lucrative placements with real estate consultants and developers.
Sept 7, 2007
Source: Outlook Money via Rediff

Pune's closed factories become a real estate play

Several companies in Pune are converting industrial land at Pimpri-Chinchwad into profitable commercial real estate.

Companies include Raccold Appliances, Greaves Cotton, Elpro International, Garware Nylon and Formica India are converting their factory premises into commercial or residential projects.

Migration and a demand-supply mismatch (50,000-55,000 flats a year against a supply of 30,000-35,000) have driven real estate prices in Pune. The IT sector is expected to add 65,000 jobs in the next two years in Pune. This will ensure the demand for commercial space grows at 30 per cent, fuelling residential growth in areas like Pimpri-Chinchwad.
Sept 7, 2007
Source: Business Standard

Growing each day

The seven large cities - NCR of Delhi, Mumbai, Bangalore, Kolkata, Chennai, Hyderabad and Pune - have the largest share of mall revolution in the country.

According to a Knight Frank report, out of the total 361 expected mall projects in the country, 227 are in the top seven cities while the rest 134 are distributed over various smaller towns like Chandigarh, Jaipur, Lucknow, Indore and other similar cities.

According to Cushman and Wakefield, NCR is expected to have over 100 malls and shopping arcades covering approximately 25 million sq ft built up area by 2009. A majority of the proposed mall developments in the city suburbs are planned as mixed use developments that offer shopping, entertainment, commercial, hotel and amusement parks.

Establishment of malls in Noida, Gurgaon and Gaziabad have led to escalation in residential property prices in the areas.
Sept 7, 2007
Source: Economic Times

Flourishing Faridabad

Faridabad is emerging as the fastest growing satellite town in NCR.

Sector-86 , popularly called the Naharpaar area, is the most popular investment destination with key real estate players planning development in the area.
Sept 7, 2007
Source: Economic Times

Glamourising Ghaziabad

Gaziabad is emerging as a preferred residential destination in NCR.

The once small UP town has world-class residential townships, the world's biggest power project, fastest growing commercial centres, retail destinations and 14 new flyovers.
Sept7, 2007
Source: Economic Times

Yatra to put $1 bn in realty

Saffron Asset Advisors, which manages investments of NYSE Euronext-listed real estate investment firm Yatra Capital, is planning to invest over $ 1 billion in Indian real estate over the next 12 months.

The company is also planning to raise a domestic fund of Rs 300 crore.

Private equity firms have so far committed close to $3 billion investments in Indian real estate sector. Some of the big deals in the real estate sector this year include Avenue Capital's 26% stake in SKIL Infrastructure for $500 million, DE Shaw's $400 million investment in DLF Assets, IL&FS' $100 million in QVC Realty, Morgan Stanley Real Estate's $150 million in Oberoi Constructions, Singapore-based GIC, George Soros and Morgan Stanley joint investment of $166 million in Anant Raj Industries and TPG-Axon Capital's $100 million investment in DivyaSree Developers.

So far, Yatra has invested 21.6 million euros to pick 49 per cent holding in Kolte Patil Developers for projects in Pune. The company will be investing another 22.37 million euros for projects at Nashik and Indore.

The company also has a strategic shareholding in Phoenix Mills and 24 per cent holding in a joint venture to develop a retail mall "Market City", in Pune.
Sept 5, 2007
Source: Hindustan Times

The coming hospitality boom

India’s hospitality sector is on the verge of a boom. The government has allowed 100 per cent FDI in the Indian hospitality sector.

Tourism now contributes as much as 5.9 per cent of India's GDP, and accounts for 1.18 per cent of its overall FDI.

There has been an inflow of foreign players in the business and several developers are entering the hospitality markets. Oberoi Construction which has recently acquired 100 acres in Pune to develop a township is now eyeing cities such as Hyderabad, Bangalore, Chennai and Delhi. JLLM is planning to introduce Jones Lang's hotel division from the US, and service Jumeirah hotels of Dubai and Dusit Hotels from Thailand. Ansal API has floated a special purpose vehicle (SPV) with Ambience Hospitality Management to build 30 hotels at various locations. Ascott group from Singapore, Emaar, Accor of France have got plans for budget hotels. Players like Mariott and Taj have expansion plans and strategic tie ups lined up.
Sept 1- 15, 2007
Source: Indian Express