REAL ESTATE TAMILNADU AND KERALA

True Value Homes (TVH), a leading engineering, construction and project management firm, plans to launch affordable housing projects in Kochi, Coimbatore, Tiruchi, Tirupati, Madurai and in multiple locations in Chennai in the next three months.

According to a press release from the company, the demand for affordable housing in India is still far outstripping the supply. The shortage in the low-income housing segment is estimated to be around 2.1 crore households. This presents a Rs13-lakh crore opportunity for developers. The affordability of a house for an average middle-class household has been defined to be in the Rs 3-10 lakh range. At this price, there could be a potential of 21 million buyers.

Mr N. Ravichandran, Chairman, True Value Homes India Pvt Ltd, said in the press release, “Addressing the growing demand of the affordable homes segment, TVH Svaya is poised to provide world class housing, which is now within the reach of the middle class.”

In Chennai the company has launched TVH Svaya, a $60-million residential project spread over 13 acres with 840 apartments of 555-1,085 sq.ft and priced between Rs14 lakh and Rs 23 lakh. TVH Svaya is situated in Sriperumbudur, a suburb to the west of Chennai on Kundrathur High Road. It targets the middle class family earning a cumulative income of Rs 5 lakh per annum. The apartments would be ready for occupation within six months of booking. TVH is a professionally managed company based in Chennai which has completed more than 4 million sq.ft of built-up space, with about 6 million sq.ft under construction and 28 million sq.ft in the pipeline covering residential and commercial property across Tamil Nadu.

‘Infrastructure thrust vital'

India's economic growth has to be supported by adequate and sustainable infrastructure development, according to a report “Infrastructure Development in India: An Assessment of Status and Strategies” by NCAER. The report provides a review of the progress of infrastructure development for seven sectors.

As the economy has accelerated growth, the utilisation rates of infrastructure have gone up whereas infrastructure building is itself lagging. There is a need to improve implementation performance. The report suggests full exploitation of the current potential of the infrastructure sectors; slack capacity in one sector also implies less than full utilisation of capacity elsewhere.

The report covers seven sub-sectors of infrastructure — power, telecommunication, roads, railways, airports, ports and irrigation.

The release, quoting Mr Suman Bery, Director General, NCAER, said “The Eleventh Five year plan (2007 to 2011) projected investments in infrastructure development to the tune of $500 billion. The current economic slowdown has cast some doubts on the scale of investments that may be possible in a short period of time, but there is a wide recognition that infrastructure development would be essential for sustaining high rate of economic growth over a longer term which in turn is necessary to achieve developmental goals.

“This study points to areas which require attention to improve performance in infrastructure development. It is hoped that this report will act as a useful source of reference to policy makers, academics, corporate sector and the public-at large on Infrastructure development in India.”

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REAL ESTATE BANGALORE

Flip through any newspaper that gets printed from Bangalore, and it is not uncommon to find real estate companies putting out full page advertisements of their projects.

Similarly, hoardings are back in action in the city showcasing real-estate developments, and radio ads are also being resorted to. Companies are now thinking out of the box and, in fact, 2009 witnessed a few prominent players showcase their ongoing projects in a bid to find buyers for their unsold stock.

With aggressive promotional campaigns on the one side, and favourable home loan rates and a big push from banks and the government on the other, developers were successful in stimulating buyer-interest during the second half of 2009.

Signs of good times?

Does this signal the return of good times for the Bangalore real-estate sector? Some reports do suggest that sales volumes in the residential market have gained momentum over the past few months, and transactions are said to have grown by about 40 per cent on a year-on-year basis. Companies have come out with new launches and sales continue to be better than last year signalling that the worst is, indeed, over.

According to a top official of the Bangalore-based Sobha Developers, the real-estate sector in the city is on a revival. In fact, the company was one of the first to reach out to buyers through innovative campaigns. “Since June 2009, there has been a pick up in demand. The economy is showing strong signs of growth and the interest rates for home loans have come down,” he adds.

With the economy getting over the slowdown blues, and the IT and ITeS sectors beating expectations in the past few quarters, the Bangalore market is witnessing a pent-up demand from these sectors, which augurs well for the real-estate market, said Mr Sunil Mantri, Chairman, Sunil Mantri Group.

“The IT/ITeS employees had stayed away from the market during 2008-09 due to job insecurity,” he said recently, while announcing the launch of two residential projects in the city. “But now we are targeting IT employees for these two projects, and there has been a good response. With the return of salary hikes and bonuses, IT employees' confidence has come back too,” he added.

Mr Anand Narayanan, National Director – Residential Agency, Knight Frank India, says that there is definitely an increase in buyer interest over the last six months. “The developers are also increasingly using top-of-the-line advertising and real-estate advisors to package and sell their products,” he adds.

Innovative channels

In fact, at Sobha Developers, the official says that besides advertising, the company has opened many other innovative sales channels such as an employee referral programme, lady consultants, brokers' channel, and online communications. “We have also opened new marketing offices in Dubai and Mumbai.”

These all-round efforts have resulted in a significant increase in enquiries and sales, he adds.

“Well-designed advertisements are the ones which will stand out and assist developers in generating product-level interest,” says Mr Narayanan of Knight Frank. Though developers are not willing to come out with actual ad-spends, it is believed that ad-spends in the rejuvenated market conditions could be significant. Though Sobha Developers declined to give the exact numbers, the official says that the ad-spend is “in line with the budget”.

Integrated marketing

For 2010-11, the company would focus on an integrated marketing communications approach, “to further enhance our brand equity, generate leads and sales enquiries, and reassure the consumer that we are a high-quality player with significant focus on delivery”, he adds. The planned spend for the next financial year would be based on “target sales and would be distributed appropriately across channels to optimise our cost of sale,” says the official.

If numbers are anything to go by, Provident Housing, the wholly-owned subsidiary of the Puravankara Group focusing on the affordable segment, spent about Rs 2 crore on its promotional campaigns in 2009-10 for its affordable projects in Chennai and Bangalore.

The company had print and broadcast campaigns for the Provident Wellworth project in Bangalore that had apartments in the Rs 14-19 lakh price bracket.

“Ads or no ads, the going has been excellent for us,” says Mr Jeyakar Jerome of Provident Housing. The company saw about 70 bookings a month.

REAL ESTATE MANGALORE

With realty in Mangalore city witnessing rapid growth over the past few years, pressure on the roads is mounting. The city planners have now realised the need for upgrading the existing road infrastructure and establishing new ones wherever necessary.

While the Mangalore City Corporation (MCC) has been implementing road infrastructure development projects within the city limits with the Rs 100-crore grant given by the Karnataka Government, the revised Master Plan of Mangalore Urban Development Authority proposes the construction of a ring road and expanding the roads within the city.

The widening and concreting of the roads, which began in 2008, are going on in full swing in most parts of the city.

As the project focuses on road infrastructure development within the city, most properties in the residential and commercial segments will benefit from this.

RING ROAD

Highlighting the need for better roads for the growth of the city, Mr P. M. A. Razak, President of the Kanara Builders' Association, told Business Line that commercial property will witness more growth due to the widening and concreting of roads.

He said the revised Master Plan of Mangalore has marked the roads as per their hierarchy and each of them will be widened accordingly.

The Master Plan has suggested the construction of a 36-km-long ring road from Kotekar in the south of Mangalore to Surathkal in the north. According to the Master Plan, the 45-metre-wide road will pass through the villages of Deralakatte, Belma, Amblamogaru, Adyar, Neermarga, Tiruvail, Moodshedde, Padushedde, Marakada, Kenjar, Thokur, Bala and Idya.

It is to be noted that some of the major residential and commercial projects are planned in some of these villages.

Deralakatte, for instance, is emerging as the education hub with a host of professional colleges having their presence there. Also, some prominent developers of Mangalore have already started residential projects there.

A ring road would give a boost to the establishment of integrated townships in these villages. This apart, a road project — Mangala Chorniche — running parallel to the Nethravathi and Gurupur rivers has been proposed in the Master Plan.

Mr Razak said that the concept of TDR (transferable developmental rights), which has been proposed in the Master Plan, will facilitate faster road widening as it would be an incentive for the landowners to surrender the required land for road widening.

Transferable rights

However, the willingness of the landowners to part with the land will depend on the compensation in terms of adequate TDR and guarantee to repurchase the TDR by the City Corporation, he said.

The TDR allotted now is inadequate to compensate landowners for the loss of land. Currently the TDR is 1.5 times of the land surrendered for the roads. This needs to be increased to at least three times immediately, he said.

Though the revised Master Plan has several provisions for infrastructure development such as road widening, ring roads, etc., the critical factor will be availability of funds and execution of works by the local bodies.

Mr Razak said that the local authorities have to strike a balance in generation of funds from taxation revenues, development fees, and loans/ grants.

The execution of infrastructure project is the key for the success of the revised Master Plan, he added.

REAL ESTATE GUJARAT

The township policy announced by the government of Gujarat recently has left many realtors of the city disappointed as it is very different from the drafts that were being discussed, they claim.
Following this, the realty sector of the city is abuzz with rumours of some of the realtors pulling out of the township policy. “We were contemplating a township project as it seemed profitable at the time, but when we took a look at the policy, we decided it was better for us to do a smaller project now and come back to the township project at a later date,” a realtor, who did not wish to be named, told Business Line.
The realtors have voiced concern that it would be costlier to build a township under this policy than to build a smaller affordable housing project under General Development Control Regulations. According to the new policy, real-estate developers can get a free floor space index (FSI) of 1, and to get an extra 0.5 they would have to pay 40-50 per cent of jantri rate. This pushes up the total cost of the project which would eventually be passed on to the end-consumers, said the realtor.
“The FSI to be provided is not appropriate as we would end up paying a higher price if we undertake a project under the township policy rather than one under the urban development bodies such as AUDA, GUDA and VUDA and other corporations,” he said.
Under the policy, a developer wanting to set up a residential township will need to buy a minimum of 200 acres of land in the urban development authority areas and 100 acres in urban authorities operating in municipalities.
The developer will need to set aside 60 per cent of land for residential purposes and use the rest for building common infrastructure such as roads, drainage, water supply and electricity.
Affordable housing
Townships or no townships, the affordable housing sector for the city is looking up with a slew of projects in the pipeline. Takshashila Realties Ltd is one such realtor bullish on the profitability of the sector. “There is excellent opportunity in the Rs 10- 25 lakh category right now,” says Mr Pratik Banker of Takshashila Realties, which is coming up with a housing complex in Naroda.
Priced at Rs 8-12 lakh, the housing society is not cheap accommodation with poor amenities but affordable accommodation targeted at the salaried class who take home an average of Rs 10,000-15,000 a month. Mr Banker says that 70 per cent of the market comprises this income group who cannot buy a house that is above Rs 20 lakh and yet require all comforts of life.
Keeping this in mind, each tower in the one, two and three BHK apartment complex will house a small library for children and guesthouses, the facilities of which can be enjoyed at a nominal fee. Parking space, lawn and other amenities would be free of cost, he added.
While he would like to see more participation in the space, he admits that low-cost housing has not captured as many developers as it should.
“While I would like to see low-cost housing to become a trend, the truth is that if land prices escalate, then the builders cannot do anything about it. The government can help by giving more FSI to bring down the cost of the scheme though,” he added.
Projects taking off
But going forward, the demand for low-cost housing is going to increase in comparison with that for high-end housing as it is a question of need versus choice, he said.
The township project of the Bakeri Group in the city is on track and 90 per cent of the flats have already been sold, said Mr Taral Bakeri, Partner, Santosh Associates. The houses are priced at Rs 6.5-8 lakh and a lot of people are coming in, he said.
Along with Godrej, other builders such as Safal Infrastructure Pvt Ltd and Ganesh Housing Corporation Ltd have also announced plans of townships in the city. As the policy states that 5 per cent of the area would have to be set aside for socially and economically weaker sections, the supply of affordable residential housing will grow.
Bharat Parekh a leading real estate consultant has seen a lot of buying pressure in new projects such as Nirvaan Group , Ambience Group , Bhavya Group in Ahmadabad in 2009 and hopes to see the same buying spirits in the new year 2010. He claims that mainly the buying is by NRI's who are moving out of the Dubai space and see great growth potentials in Ahmadabad.

REAL ESTATE BANGALORE

The year 2009 has been a mixed one for the Bangalore real-estate market. The one segment that saw considerable buzz was the residential segment, where there was a clear shift in demand towards the affordable segment, from the Rs 50-70 lakh mid-market segment.
However, the year was relatively dull for the commercial and retail real-estate segments. Given the significant demand for sub Rs 30-lakh properties in the city, property developers should try to “synchronise their project specifications and actual demand to create a sustainable business,” says Mr Irfan Razack, Managing Director, Prestige Group, in a press release.
Demand-supply gap
A well-planned and executed, mass housing project makes good business sense, considering the growing demand for such houses, the big push from the government and attractive interest rates announced by banks, developers say.
“Though there is massive demand shortage for high-end and luxury apartments, the demand-supply gap in the affordable housing sector is quite high. Banks have reduced their interest rates on quick loans and the prices for steel and cement have gone down considerably for developers to launch affordable housing projects,” says Mr Razack.
The developers now vying for their share in this ‘affordable' pie include some of the well-known names in the city such as Brigade Group, Puravankara Projects through a wholly-owned subsidiary Provident Housing, Prestige Group, Shriram Properties, Nitesh Estates and Ozone group, among others. Mr M. Murali, Managing Director, Shriram Properties, feels that for developers the affordable housing segment is purely cash-flow management. “We are able to take advantage of cost reduction available in the market on commodity prices and pass on the benefits to customers. The strategy is to achieve volume and consequently desired profitability goals. Quick turnaround and deployment of money in these projects will give developers the desired result,” he says.
Nitesh Estates plans to have a bulk of its future projects in the Rs 20-30 lakh price range, as “this is where the demand is. We would like to position ourselves in this category, and it is in this segment that 80 per cent of our residential projects will be focussed in the future,” says Mr L.S. Vaidyanathan, Executive Director, Nitesh Estates.
On property prices in the city, Mr Anurag Mathur, Managing Director of global real-estate consultants Cushman & Wakefield, says that over the last quarter of the year, the city continued to witness minor corrections of 1-3 per cent in capital values across select micro-markets such as high-end properties in off-central (Frazer town, Benson Town, Richards Town, Dollars Colony) and east (Whitefield) as well as mid-end properties in south-east locations (Sarjapur Road, Outer Ring Road, HSR Layout), north-west (Malleshwaram, Rajajinagar) and south (Koramangala, Jakkasandra) markets. However, over the last one year, property prices in the city have dropped by 5-19 per cent.
The next few months, he says, would see further corrections in certain corridors such as the east, south east, north-west as well as south-west. “The rental markets, on the other hand, are expected to remain stable over the short term,” adds Mr Mathur.
According to the annual year-end report by Cushman & Wakefield, though Bangalore maintained its top position as the market with the highest commercial real-estate absorption with 5.7 million sq.ft, the city also recorded the highest decline (53 per cent) in office space supply in the country at approximately 5.3 million sq.ft during 2009 as compared with the previous year. However, the city's total office space absorption was almost 45 per cent less compared with 2008.
However, Mr Mathur says that with gradual revival in the economy, mostly towards the second half of 2010, demand for office space is likely to increase and as a result construction activity is also likely to gain pace in the mid-term. “In the coming months, rentals stabilisation across all micro markets is likely,” he adds.
Retail segment
The highest mall supply deferment was witnessed in Bangalore, which saw almost 80 per cent less than the expected mall supply, ensuring the city maintained vacancy levels at 3 per cent, same as 2008, says Mr Mathur. This slowdown in mall construction need not be viewed as a negative growth indicator for the retail real-estate segment. The slowdown in supply could be attributed to the slowdown in construction activity that 2009 witnessed due to reduced retailer demand and funding woes.
“The slow pace of development helped maintain a healthier supply-to-demand equation, keeping mall vacancy levels in check. Mall and Main Street rentals are likely to remain stable over the next few months,” says Mr Mathur.
Another leading real estate consultant D.Srinivas says that areas like the Electronic City which saw a lot of buying in the last 5 years has come down by about 35% due to the global slowdown. Also the IT industry being hit by the recession has not bought enough land in this area.
"We hope to see a new high in this area due to problems in Andhra Pradesh and will bring people back to Bangalore which is the IT hub of India" quips Srinivas

Water crisis dampens Mumbai realty

For Mumbai's city managers it is a virtual scramble for water with reservoir levels fast dipping and monsoon well over six months away. And, till such time, the Municipal Corporation of Greater Mumbai (MCGM) has the stupendous task of rationing water to the island city. The cumulative storage of the reservoirs is 23 per cent lower at 7.38 lakh million litres against last year's 9.62 lakh million litres.
Curtailing supply
As a first measure at conservation, the corporation has curtailed water for existing buildings and denied connections to new ones.
For real-estate developers who were just about seeing demand coming back, it is a definite setback to a hassle-free path to recovery.
The Maharashtra Chief Minister, Mr Ashok Chavan, told the winter session of the Assembly in Nagpur that no water connections would be given to townships and new towers of seven storeys and more till the completion of the Middle Vaitarna project.
The water supply scheme is slated for completion in 2012. The Rs 1,330-crore Vaitarna project will deliver 455 million litres a day (mld) to the city. Against the requirement of 3400 mld, the current supply is around 2900 mld.
In the meanwhile, the corporation has been made it clear that new constructions would have to wait over 30 months for water connections or depend on alternative sources such as tanker supply or bore-wells.
Last week, the Municipal Commissioner, Mr Swadheen Kshatriya, said water supply for Slum Rehabilitation Authority schemes and project-affected persons would be provided. Similarly, buildings constructed by the Maharashtra Housing and Area Development Authority that qualify under the low- and middle-income group housing would be eligible for 45 litres per capita.
However, for new buildings that do not come under bulk consumers the corporation proposes to halve the per capita supply of 90 litres to 45 litres. Bulk consumers are those whose requirements are more than 2 lakh litres a day.
In addition, the MCGM has asked large bulk consumers such as malls, multiplexes, five star hotels, the Mumbai Port Trust and the Railways to go in for bore-wells to take care of their non-potable water consumption, which as such are facing a 30 per cent cut in supply.
The MCGM plans to acquire nearly 1,000 private wells in the city and also request for more water from the Bhatsa Lake. As such water drawn from the Bhatsa is about 1,715 mld. The present water supply is from Vihar Lake, Tulsi Lake, Tansa Lake, Lower and Upper Vaitarna and Bhatsa.
The corporation is also working out a schedule for imposing 100 per cent water cut one day a week across the city and the timetable for this is expected to be announced on January 7.
Private sector help
The General Secretary of the Builders Association of India, Mr Anand Gupta, says that most buildings in any case were being constructed with tanker supply and in the case of new buildings that go in for the preliminary approvals, completion would take over two years. However, the management and distribution of water by the civic body was an issue and it could well look up to the private sector in areas where it was found wanting.
Now, it remains to be seen whether the Maharashtra Government will accede to the frantic request of the civic agency and divert the water meant for irrigation to quench the thirst of the millions in an ever-expanding city.
Says, Kishore Bhatia a leading real estate agent based in Mumbai that all projects in Bandra an uptown suburb has come to a standstill. The BMC has delayed supplying municipal water to new constructions leading to hardship to new flat owners. The builders on the other hand blame the whole situation on the BMC which in turn blames the deficient rains this year.At the current scenario says Bhatia , property prices in upmarket areas will take a hit of upto 25%. The same view is echoed by Vibhoo Mehra another leading real estate consultant in upscale Juhu area which has seen large scale development in the last one and half year. "New building are not been suplied with BMC water inspite of paying high taxes. Even the water being supplied in Posh areas of Juhu is contaminated . The BMC turns a blind eye twoards this" quips Mehra.

REAL ESTATE PRICE SURGE IN VIJAYAWADA SLUMP IN HYDERABAD

Property prices in Vijayawada have increased nearly 20 % since the
agitation for a separate Telengana began, while Hyderabad has seen a fall in demand for realties.Many builders are showing a keen interest on "construction activity" in Vijayawada, expecting that it would become the capital of Andhra Pradesh if Telengana is carved out, said Giridhara Prasad Gupta, a real estate businessman. And this has led to prices of apartments and plots zooming upward in ayawada.Ramavarapadu and Gannavaram in the city are now the most sought after areas as the L&T IT Park construction is going on there. In comparison,
in Hyderabad, the property registration activity has come down by 10 per cent, according to a senior official.C. Sekhar Reddy, president, Andhra Pradesh Builders Forum, said real estate transactions in Hyderabad have come down recently. However, he said, this could not be attributed totally to the Telangana issue. "There has been a slump in the sector for the past one
year," Reddy said. He said on an average as many as 15,000 apartments were sold in Hyderabad from 2004 to 2007. The figure has come down to 10,000 in 2008.Reddy said the builders were hopeful of recovering from the signs of global recession and see good growth this year. "Hyderabad has become global destination for investments. Telangana will not be an issue for investments. This is only a temporary issue," The builders Forum president said.

REAL ESTATE IN TURMOIL IN ANDHRA PRADESH

With weeks of agitation continuing across Andhra Pradesh over the issue of statehood for Telangana, transactions in the real-estate sector have nearly come to a standstill in Hyderabad and other major towns, with buyers opting to wait and watch.

After a gloomy recession-hit beginning to 2009 and major price correction, the sector had begun to gradually show signs of recovery in the last few months. However, the continued uncertainty over the statehood issue has set the clock back, according to representatives from the realty sector.

The President of AP Builders Forum, Mr C. Shekhar Reddy, said the sector has taken twin blows in the form of economic recession and also drop in prices due to slackening demand. “The prices of residential properties have dropped by about 30 per cent in the last 12 months. The flexibility to go down any further has gone,” Mr Reddy said.

The Managing Director of Koncept Ambience, Mr M.P. Agrawall, said: “While realtors are concerned about the ongoing agitation as transactions have come to a halt, genuine buyers are keen They expect some more downslide before buying.”

The notion that there is more supply than demand is incorrect, he said. The economic downturn and lack of buyer interest in the first half has deterred many developers from venturing into new projects.

The available supply will take care of the demand over the next six months, and “suddenly we will realise that there is need for more projects particularly in the affordable segment, which is in short supply,” Mr Reddy said.

The Chairman of Confederation of Indian Industry, AP region, Mr Y. Harish Chandra Prasad, said: “The agitation is bad for the infrastructure sector and real estate players. It sends wrong signals to investors. We hope the issue settles down soon and the uncertainty is put behind, helping resume normal business. The offtake of commercial property too could be hit as companies and establishments adopt a cautious wait-and-watch approach.”

Speculative buying

The Chief Executive Officer of Lanco Hills, part of the Lanco Group, Mr S. Pochendar, said that speculative buying was missing in the market in the last six months. This augured well for the sector as the slowdown, coupled with demand-driven pricing, has helped stabilise prices.

“Before the build-up to the current agitation, market was already subdued and bottomed out at every nook and corner of the twin cities. The number of takers too had come down. The speculative investment was totally out. The prices too had reached their lowest levels in the last four years. I don't see any more surprises in the sector,” Mr Agrawall said.

Since the recent agitation, genuine buyers hope to see some more downslide, which is unlikely. There is also no likelihood of flight of investors, as some speculate. Investors invest wherever there is opportunity, not just in Hyderabad, but other States and in some overseas markets, Mr Agrawall said.

However, some players said prices will go up in Vijayawada and Visakhapatnam as some of the speculative investors could prefer these growing cities to Hyderabad in the near term.

Mr Shekhar Reddy, however, believes this is not true. From the interaction he has had with some of the project developers, they see this as a passing phase of their business cycle and are okay waiting for this phase out. “Even assuming that a separate state is formed, how will this change their existing business plans?” he asked.

“Due to slowdown, with scores of real-estate developers delaying taking up new projects and concentrating on completing the ongoing ones, in the next six to 12 months we will suddenly face a situation where we will have increased demand and shortage of supply. This could potentially push up prices faster than we anticipate,” Mr Agrawall argued.

Mr Prasad said the ongoing impasse could also affect the prospects of some of the major infrastructure projects such as the Hyderabad metro rail and foreign direct investment. Banks and financial institutions base their project estimation on the business prospects and valuation of real-estate. And if this comes down, they could be wary of funding new projects.

Impact on infra projects
Asked if some of the projects are in trouble due to liquidity crunch, Mr Shekhar Reddy said the situation is no different from the one about 12 months ago. In fact, several private equity players have set up their teams to look at potential buyout candidates or investment opportunities.

“The agitation has had a negative impact on the sector. However, we are looking at the next year with much optimism and hope that the current stalemate is resolved. Once that happens, all those who are keen to own a property will be back hunting for properties,” Mr Pochendar said.

For the real estate developers, reality has sunk in. From a stage a couple of years ago, where on the day of Bhoomi Puja most apartments would see buyer interest, realtors are now faced with the challenge of convincing potential buyers who prefer to wait and watch. This happens when it is a buyer's market, Mr Reddy said.

REAL ESTATE PUNE

There is a mixed bag of news for those who have interests in commercial and office space — that segment of real-estate hardest hit by the economic downturn. The good news first: there is a general consensus that are signs of life in what had gone into a quasi-comatose state. The not-so-good news is that both rentals and demand are still years away from the boom times’ best.

For almost a year, beginning with the third quarter of 2008, there was a huge lull in demand for commercial space of any kind, says Parag Borawake, General Manager, Marketing, for Pune-based developer Darode Jog Properties. “Frankly speaking, we also were offering any of our properties for lease as clients laid so many conditions,” he says.

Not sellers market, yet


According to him, evidence of a revival of interest began appearing a couple of months ago. It is still not a sellers market, but it has at least levelled. “We have signed letters of intent to lease out offices and retail space, and will close six to seven deals in the next month or so,” Borawake says, adding that there are also enquiries for built-to-suit spaces.

Pune has a vast oversupply of commercial space in all segments, be it IT, office or retail, avers Ravi Varma, a real-estate broker and President, National Realtors Association. While concurring that customers are returning to the arena, he cautions, however, that it will be a while before the space created over the last few years finds takers.

In the last ten months, nearly 1.3 million sq.ft was leased out to the IT sector, indicating that there are signs of revival. But there is still around 3 million sq.ft in various stages of development. So it will take two to three years more for the demand-supply mismatch to be equalised, he says. The rentals too are in the region of Rs 35-40 per sq.ft for the cold shell, against Rs 50-70 depending on the location at the height of the boom.

When it comes to retail space, it is the small stores that are beginning to turn the corner, while large commercial spaces, malls in particular, are still slow in the off-take.

Rentals competitive


Leasing of corporate office space and high street retail is definitely picking up, says real-estate consultant Andrew Pinto, adding that rentals are competitive and lock-in period is down from three-five years to one year. The businesses that are beginning to raise their head are banks, food outlets and retail brands.

According to observers, the most preferred area in Pune for commercial space is Jangli Maharaj Road and Deccan Gymkhana, where the prevailing lease rent is Rs 200 per sq.ft. followed by Mahatma Gandhi Road and Koregoan Park with rents here in the Rs 125-150 per sq.ft range.

Typically, proprietors prefer to sign agreements for 60 months with an MoU permitting extension for another four years.

The agreement usually provides for a raise in the monthly rent by 6-8 per cent at the end of every year, and a refundable deposit of 6-10 months rent that has to be paid upfront before the property is occupied. Most agreements are registered and the stamp duty and registration fee shared equally by the two parties.

In the good times, there was space for a little added bargaining, especially when it came to the lock-in period where the renting party usually had to give an assurance of rent for a minimum three-year period.

This clause is a prominent casualty in these still-a little-recession-hit times.

REAL ESTATE Visakhapatnam

Major housing projects in and around Visakhapatnam have got stalled during the past two years due to the economic slowdown and the lull in the realty sector. Companies from Hyderabad and Mumbai that purchased sites in auctions conducted by the Visakhapatnam Urban Development Authority (VUDA) have not started work on the projects.

One major housing project proposed in the boom was the one to be undertaken by the VUDA and Jurong India Infrastructure (India) Ltd at Madhurawada within the Greater Visakha Municipal Corporation limits. There was much hype over the project but it too got delayed due to the unfavourable conditions in the market.

Progress reviewed


At last, however, there has been some action. Earlier this week, Mr V. N. Vishnu, Vice-Chairman of VUDA, reviewed the progress of the project and fixed the guideline and norms to be followed in its implementation.

He said in an interview that, earlier only high income group (HIG) units and middle income group (MIG) units were included in the project, but now low income group (LIG) units too are in. “We have felt that due to the impact of the recession it is necessary to include LIG units also. Jurong will design the project,” he said.

Directions had been given to VUDA officials as well as the representatives of Jurong to complete the procedures by the end of September so that the project can be taken up as soon as possible. The national building code would be complied with in construction and the price of the units would be finalised in accordance with the Andhra Pradesh Standard Schedule of Rates, he said.

Number of units


The project will have 710 units in different categories on 20 acres in the first phase. Of the total, there would be 100 HIG units, 160 MIG-1A, 120 MIG-1B, 210 MIG-2 and 120 LIG.

The price of the units would have to be finalised, he said, and the total cost of the project had also not been calculated yet. “However, affordability is the key factor. The units will be affordable to the middle class as well as the lower class,” he said.

Common facilities such as a community centre, hospital and local shopping malls would be developed and the most advanced reticulated cooking gas supply system put in place. “We are attaching a lot of importance to this major housing project. We hope it will revive activity in the vicinity of Madhurawada again,” he said.

REAL ESTATE DELHI,GURGAON AND NCR REGION

The slowdown in the property market, induced by the global meltdown and negative sentiments, had dealt a body blow to the mega land deals, in the country. But the gloom seems to be finally lifting. Coinciding with the return of buyer interest in select pockets of residential market and the improved liquidity position of builders, land auctions are inching back into the spotlight.

Consider this. DLF Ltd recently made headlines when it walked away with 350.7 acres in Gurgaon, for an estimated Rs 1,750 crore, marking one of the largest land deals in the country. The prime land, on the Gurgaon-Faridabad road, had been put on the block for re-bid after the only bidder in the first round (DLF) had drawn attention to certain difficulties in project implementation.

HSIIDC (Haryana State Industrial & Infrastructure Development Corporation) re-invited bids in July this year with easier terms and conditions, including staggered payment plan spread over seven years. This time, DLF clinched the deal with its winning bid of Rs 12,000 per square metre — two other bidders did not qualify on technical grounds.

The land in the Delhi suburb would be used for development of commercial, residential, sports complexes, and an 18-hole golf course. DLF, however, remains tight-lipped about the project, but sources say that the land deal is “positive” for the company, given its proximity to South Delhi on one side and the existing golf course on the other.

DLF is not the only one going after such transactions. Earlier this year, Anant Raj Industries decided to set aside nearly Rs 400 crore from its cash reserves, to acquire land for upcoming residential projects.

So are the land deals back in reckoning, after a long dry spell? Industry experts believe that land acquisition will gather pace, but will remain largely need-based.

“The market definitely is improving, new projects are being launched and the cash flow, for builders, is getting back in shape on the back of QIP issues and some proposed public offers that are being lined-up,” says Mr Manish Aggarwal, Executive Director, Investment Services, Cushman & Wakefield (C&W) India.

Time to buy


While the conditions are turning positive, the biggest clincher clearly is land valuation. In many cases the land prices have corrected nearly 60-70 per cent, says an industry observer.

Agrees Mr Amit Sarin, Director and CEO, Anant Raj Industries. “It is the best time to buy land — the valuation is a fraction of the 2007-level. Everyone is announcing low cost and affordable housing projects and the main ingredient of low cost in real estate is the land cost, not construction cost,” Mr Sarin points out.

But Anant Raj Industries, itself a zero-debt company, expects land buying to remain selective for a while.

“It is not a trend in the industry. It will happen only in those cases where the land costs are extremely attractive and the builder has a comfortable liquidity position,” he adds.

The company has stayed away from aggressive land buying over the last 2-3 years.

No frenzy likely


Real estate consulting firm CBRE too does not foresee the return of land frenzy seen in 2007-2008. “Companies are not rushing into transactions. They are more cautious and evaluating deals carefully on parameters such as potential for development, location, margins and valuation,” says Mr Anshuman Magazine, Chairman and Managing Director, CB Richard Ellis South Asia Pvt.

PRICE RISE - REAL ESTATE MUMBAI

Call it better home loan rates or just improved consumer confidence and market sentiment, demand in the residential category, particularly in the affordable segment, has picked up.

And, as bookings and enquiries pour in, developers, particularly in Mumbai, have gone back to the customary practice of hiking rates, which have risen 20-30 per cent since May and continue to go up by the day as bookings grow.

Sales improve


Of late, there has been a marked improvement in sales across metros. DLF reported bookings for 1,356 apartments, measuring 2 million sq.ft, for its project Capital Greens, on a single day.

Indiabulls Group, which launched an affordable home project in Gurgaon, has closed over 100 bookings of its launch of 200 in the first phase. The project is a cluster of 800 apartments.

In Mumbai, Kalpataru Group’s project in Thane saw 110 flats sold in 10 days at Rs 3,100 per sq.ft. Another of its project at LBS Marg logged a sale of 50 flats after the rate for a two-and-a-half BHK was reduced from Rs 98 lakh to Rs 82 lakh. At the distant western Mumbai suburb of Virar, a residential township project promoted by Rustomjee and Evershine on 217 acres registered sale of 174 apartments at Rs 1,700 a sq.ft.

“DB Realty project at Dahisar registered 1,400 bookings, even before construction began,” says Mr Suman Memani, Associate Vice-President, Religare Securities, who also points out that prices have since gone up, particularly in the Mumbai suburbs.

Prices go up


According to Mr Memani, HDIL’s Versova project launched at Rs 7,500 a sq.ft had since gone up to Rs 9,500. Similarly, DB Realty had raised prices at Dahisar to Rs 3,300, from Rs 2,700. The most recent instance is of the Harasiddhi Group, which launched its offering in Goregaon, near here, at Rs 10,000 a sq.ft (carpet area), raised the price to 10,300 a sq.ft.

In general, the price hike creeps in after 50-60 per cent of the project gets sold out. In some ways developers are testing the waters and gauging how much the market can absorb. In any case, after the major chunk is sold any developer can afford to wait for a better tiding, he says.

The price increase is only 5-8 per cent since May, says Mr Anand J. Gupta, General Secretary, Builders Association of India.

Justifying the increase, Mr Gupta says it is purely based on demand-supply dynamics. Builders, who were languishing for want of enquiries, now see a silver lining on the horizon, after they had lowered prices to the maximum to stimulate demand.

Mr Gupta points out that historically real estate had either gone up or come down. It had never been stagnant and in places where it had been constant, development was rather stunted such as in Baroda and Ahmedabad. For ages, the only reason for real estate remaining a choice asset class is because it appreciates, he says.

NO JUSTIFICATION


Mr Pawan Swamy, Managing Director - West India, Jones Lang LaSalle Meghraj, sees little justification for escalation in rates at this point in time. The corrections that have taken place in overheated locations of cities such as Mumbai were required, since developers had priced themselves out of the market.

The fact that the slowdown forced them to rationalise their rates has been working to the developers’ advantage, and one would have assumed that the recent market dynamics had delivered a clear and unequivocal message.

However, Mr Swamy feels that there has been a resurgence of demand for residential property in many markets that are not seeing much supply. In such locations, a number of developers who have successfully sold a sizable component of their existing projects are now attempting to see what kind of price escalations the market will be able to accommodate.

This is, to a significant extent, a gamble that can backfire if the developer in question misjudges market dynamics.

However, this is not happening across the board, but rather in high demand-low supply locations and only among developers who have sufficient capital clout. Nevertheless, much depends on the buyer community — if such price escalations are pandered to, we may be looking at price bubbles building up in such locations.

Last month, Mr Deepak Parekh, Chairman, HDFC, cautioned developers against raising prices, stating that such a move would stall recovery of the segment. He was also sceptical about the builder fraternity’s commitment to the affordable housing segment.

Homing in on value

The middle class, is looking for lower prices, if market response is anything to go by. And in a market like Bangalore, where jobs are on a shaky ground, it is the affordable segment which seems to be going strong. With banks also kicking in special interest rates, the revived interest in the housing sector, particularly the sub-Rs 30-lakh category, was apparent at the recent realty expo held by the Confederation of Real Estate Developers’ Association of India (CREDAI), Karnataka.

The two-day exposition brought together 32 leading property developers and housing financial institutions under one roof offering homes at competitive prices. The properties on display were not only from Bangalore, but also from Mysore, Chennai, Hyderabad, Pune, Goa and Kochi. There were 18,000 apartments on offer.

‘Time to buy’


According to Mr Kamal Sagar, Chairman, CREDAI Realty Expo, real estate prices in Bangalore from reputed developers are still lower than equivalent locations in Chennai and Hyderabad.

“This is the best time to pick up a good property in Bangalore. The builders have decided to work on thin margins and even the financial institutions have reduced the home loan interest rates by 0.5 per cent to attract buyers.”

The trend is tilted towards the sub-Rs 30 lakh segment. Bangalore has seen the launch of quite a few projects in this segment with more reputed builders wanting to enter the fray.

Real estate consulting firm Knight Frank’s recent research estimates that the middle-income population in Bangalore needs 3.27 lakh housing units by 2011, at an average unit size of 800 sq ft. “About 80 per cent of the total middle-income housing requirement falls in the Rs 3-5 lakh income segment.” And it is this sizeable pie that the developer community is vying for now.

For instance, Provident Housing, a subsidiary of Puravankara Projects, which is involved in the affordable housing segment, launched Provident Welworth City with 3,360 apartments in Bangalore last month. Prices start at Rs 14.90 lakh for two-bedroom apartments and Rs 18.90 lakh for three-bedroom. “We opened bookings for 1,000 apartments three weeks ago, and 50 per cent have been booked (cheques received so far),” said Mr Jayakar Jerome, IAS, Managing Director, Provident Housing.

Middle income group


At the CREDAI realty expo, Provident Housing saw about 500 walk-ins, and 20 cheques were received.

Similarly, CSC Constructions, launched three projects in the Rs 4-19 lakh range in Bangalore — at Attibele near Electronics City, Devanahalli, and Sarjapur Road — a few months ago. According to Mr Abhinand Patil, General Manager - Sales and Marketing, CSC Group response to the projects has been good.

In the last two months, CSC Group has sold 80 units across projects. “We will be re-launching the Devanahalli project in about 45 days, but with a slight hike in prices,” said Mr Patil.

CSC Group has plans to launch homes in the Rs 1.5 lakh - Rs 3.5 lakh price category, but the unit sizes would be about 200 sq.ft, and the location would be “pretty far away from the city,” said Mr Patil.

In fact, the company plans to come out with such projects in Bangalore, Hyderabad and Mumbai, with each project comprising 1,000-1,200 units. According to Ms Kalpana Murthy, Regional Manager, Residential Services, at real estate services firm Cushman & Wakefield, “Majority of urban households across India, including Bangalore, earn less than Rs 5 lakh per annum and hence, their affordability is for houses below Rs 20 lakh. The inherent demand from this segment has always been there by the sheer virtue of their numbers and this unmet demand would without doubt constitute the largest segment in the city today,”

Banks provide booster


Banks have pitched in with attractive rates just at the right time. Mr Albert Tauro, Chairman and Managing Director, Vijaya Bank, said the affordable home segment has seen a robust growth in the April-June quarter in comparison with the January-March quarter of 2009. “There has been more than 50 per cent growth in the sub-Rs 20 lakh category of home loans in the June period compared to March,” he said. In the higher bracket, Rs 40-50 lakh loans, the growth has not been robust, he added.

According to Mr Sreenivas Rao, Area Manager, LIC Housing Finance, which took part in the CREDAI Realty Expo, “It is at the right time that we have reduced our rates in August. The fixed rate category will be at 8.9 per cent for three years for loans up to Rs 75 lakh, whereas the floating rate is 8.75 per cent up to Rs 35 lakh and 9.5 per cent for loans between Rs 30 lakh and Rs 70 lakh.”

Also, the stamp duty rate for sale transactions of new apartments in Karnataka which has come down from 7.5 per cent to 6 per cent seems to be working well with buyers.

Mr Irfan Razack, Chairman and Managing Director, Prestige Group, which is evaluating houses in the Rs 12-25 lakh range says, “We must get land at reasonable prices. Obviously, the size of the unit will reduce.

“We can’t go high rise — the houses will be spread horizontally and they will be in the outskirts of Bangalore, at least 30 km from the city. But we will provide the same ambience as in other residential projects.”

‘Affordability’ defined


The debate is on as to how one defines affordability and by what yardstick. While low-cost housing is primarily targeted at the lower income group (households having annual income of less than Rs 1.5 lakh), affordable housing is for all income categories.

According to the Knight Frank report, “The affordability of a household in a given location is an interactive outcome of the house price, household income, spending and saving behaviour and other demographic factors such as household size. Definition of affordable housing is a challenge for real estate players.”

HDFC says 5.1 times annual income is the maximum affordability of a household. For instance, for a household with an annual income of Rs 3 lakh, an affordable house would cost Rs 15 lakh.

According to Ernst and Young survey ‘Realty Pulse 2008’, developers believe that considering the city, location and product offering, the price of an affordable house ranges between Rs 10 lakh and Rs 25 lakh.

REAL ESTATE CHENNAI

Would allowing hospitals greater built-up area per unit area of land help bring down congestion and risk of infection? How do you increase security in a hotel or hospital, where visitor comfort and speed of entry is a prime consideration? Where lies the balance between security and personal liberty? When will our roads be safer for commuters?

These were some of the points debated on Saturday at a round-table workshop on ‘Safe Chennai’ where participants looked at various aspects of making the city a better place to live in. The topics covered safety and security aspects in five sectors identified as key to making a city more liveable — transport, hospitality, industries, healthcare and education.

Organised on the Madras Formation Day, by the Confederation of Indian Industry, participants are to give a set of recommendations on making the city a safer place to live in.

Safety drive


Over 11,000 people die in traffic accidents every year, says Mr T.V. Somanathan, Managing Director, Chennai Metro Rail Ltd. The State Government put in place a road safety policy in 2007 and is moving towards enhancing safety on the roads. By year-end, a project would be in place to use computer modelling, satellite systems, including GPS, and detailed data collection to identify the location, causes and context of an accident to put in place appropriate solutions. This could be more traffic lights, signages or other regulations, he says.

A key factor would be increasing the public transport infrastructure and safety and security. Statistics clearly show commuters are safer in public transport than in individual vehicles, he said.

Chennai Metro Rail, which is putting up the metro rail project, is looking to industry bodies such as CII to give their inputs on making it a safe and secure mode of travel. Security comes at a cost not just in terms of expense but also personal liberty. Should security be stepped up to levels that infringe on individual rights? Baggage checks may be the norm for air travel but in surface transport where anybody can access the facility anywhere along the line, would baggage scanning be relevant? It would only add to the cost without significantly helping to add to safety, he pointed out.

Simple steps, big results


Mr N. Prakash, Chairman, CII – Chennai Zone’s Task Force on Arts, Culture & Entertainment, felt that immediate solutions and short-term measures could be put in place to improve the quality of life even as the authorities worked on long-term planning.

Chennai needs a decent taxi service and a commuter-friendly auto-rickshaw service. Could these not be addressed fast, he wondered. These would go a long way in making domestic and international tourists and visitors comfortable. Chennai is a business and tourist hub. Maintaining not just safety and security but also preserving the monuments in a better condition would help. Implementing simple measures such as these are the ‘low hanging’ fruits that could be harvested fast to great benefit, he said.

If residents wish to opt for making an individual home a safe refuge, the constraint would only be cost and not technology.

Mr S. Ramakrishnan, Chief Executive Officer, Real Estate, Marg Ltd, a leading infrastructure and real-estate developer, pointed out that in the last few decades population density in Chenani has increased from about 6,000 a sq.km to about 24,000 and is set to grow to over 32,000 in a few years. Natural calamities, epidemic outbreaks and physical security would all impact a larger number of people.

Physical security could be addressed through increased use of technology that provided for surveillance and monitoring. Laws would be needed to ensure quality in construction — providing earthquake resistant buildings. Health and well-being could be ensured through hygiene and sanitation laws that ensure adequate open space and greenery.

REAL ESTATE SCENARIO - KOLKATA WEST BANGAL

Prospective buyer Arun Mitra had been thinking of buying a second-hand flat since February. Following the downturn, he was sceptical about timely completion of projects under construction. Even the bank he approached for a home loan had then given him the impression that it was keen on lending towards a completed project rather than one under development. Five months down the line, he has changed his mind and booked a flat in a project under construction in Rajarhat.

Homebuyers in Kolkata are slowly but steadily regaining their confidence in green-field and brown-field housing projects, according to developers and industry experts.

“Between January and June this year, nearly 60-70 per cent of the transactions we registered were in the ready-to-move-in properties and resale flats. The trend has now shifted towards projects under construction with nearly 90 per cent of the bookings being done in the segment,” Mr Mayank Saxena, Associate Director, Jones Lang La Selle Meghraj, Kolkata, said.

The initial trend of higher demand for ready-to-move-in flats is natural, he said, as resale of used flats picks up first in any upturn. The first wave of reviving demand comes from end-users looking to move in immediately, he pointed out.

At a mature stage of the recovery, however, upcoming projects exert appeal. “The trend of demand during a recovery moves from resale houses to brown-field projects and then to green-field projects,” he said.

Price increase


Indicative of some sort of recovery in projects under construction in Kolkata, some large developers have increased prices of flats recently. The Tata Housing project in Rajarhat has increased prices from Rs 2,700 a sq.ft to about Rs 3,150 over the last three months. “This is mainly because the developer has assured a steady cash flow in the first phase and can now afford to sell slowly at a higher price band for the remaining units,” a real-estate broker said. The size of the flats in the second phase of the project has also been increased by 100 sq.ft, to around 1,400 sq.ft. Unitech too increased the price of flats recently in its Rajarhat Vista project by about Rs 50 per sq.ft.

The prices in some projects in the city were, however, down by about 30 per cent as against the year-ago period, Mr Saxena said, adding that prospective buyers should look at investing before the prices increased further.

Customers prefer wider choice


Customers’ preference for a project under construction might be attributed to wider choice with regard to the layout and position of flats, he observed. Prior declaration of a penalty by developers for a delay in delivery of upcoming projects also helped boost customers’ confidence, he said. The upcoming projects, he pointed out, were at times more optimally priced as the developers used less expensive fittings. For example, smaller vitrified tiles and ceramic varieties may be used in place of large vitrified tiles.

“There is a larger flexibility in payment of loans for projects under construction as the period of payment is stretched over a longer term,” Mr Kumar Shankar Bagchi, Managing Director, Bengal Peerless, said. “In a downturn, banks are keen on extending loans to completed projects as they feel their liquidity is safer in such cases. Efforts by the Centre in recent times to boost lending, lowering of interest rates and the overall revival of the economy have, however, increased bank lending for flats under construction as well,” he added.

It was also difficult to woo customers into making a full down payment by offering discounts, as the rebates (around 5 per cent in case of Bengal Peerless) were much lower than bank deposit rates, Mr Bagchi, pointed out. Faced by considerable demand for its projects under construction in Rajarhat, the company was planning to launch a green field residential project of 1,600 units on E M Bypass, about 50 km from its existing project Avishikta, he said.

Mr Harsh Vardhan Neotia, Chairman, Ambuja Realty, said bookings were going well in both its green field projects — second phase of Uphar near E.M. Bypass and the Ujaas in Lake Town. Flats in Ujaas are priced at Rs 45 lakh and in Uphar between Rs 45 lakh and Rs 1 crore. Both the projects are expected to be completed by March 2011.

Mr Abhijit Das, Joint Managing Director of Kolkata-based real-estate broking firm Lemon Grass Advisory Pvt Ltd, said, “Demand has picked up in upcoming projects in the price band of below Rs 30 lakh and over Rs 70 lakh.”

“One year from now, builders will return to the earlier pricing, and buyers still waiting may miss the bus,” he added.

Real estate Chennai - Putting Chennai on the global map

Is Chennai doing enough to attract global attention and investments? What does it take to do that?

These were some of the questions debated at a panel discussion on getting Chennai on the realty fast track, organised by the international property consultants Jones Lang LaSalle Meghraj (JLLM).

Mr Alastair Hughes, Chief Executive Officer – Asia Pacific, JLLM, asserts Chennai is not as well known in the international markets where Delhi, Mumbai and Bangalore are familiar names. The city is rated on a par with the emerging tier II destinations such as Hyderabad and Pune. The gap is in the absence of aggressive marketing and policy that position it well, he feels.

Look at what successful cities such as Dubai and Singapore do. They will have certain common attributes, says Mr Hughes. And these would be — a master plan, a long-term vision of where they want to be in a given time frame; Infrastructure to enable the growth that they envision, for example, both Dubai and Singapore have one of the best airports in the world; Attractive tax regime, access to talent, money, clarity in property titles and laws that facilitate entry of foreign investments, would be some other features. These would be backed by sustained promotional programmes that highlight to the international community what they can offer.

For foreign investors, Indian cities are far down on the list of priorities as a choice to invest in property, says Mr Hughes. The investors are more likely to choose Hong Kong, Singapore, Australia, Korea or even China, where the Government actively woos investors. Indian cities were never in this segment and something has to be done to put them there, he says.
Lifestyle issues

The issue plaguing Chennai need to be addressed at a basic level, feels Mr Ajit Chordia, Managing Director, Olympia Group. The concerns are quality of water, power and lifestyle that the city has to offer.

Another major differentiator between Chennai and a city such as Bangalore or Mumbai is the lifestyle. Chennai needs to do a lot more on the quality of lifestyle it has to offer. What has Chennai on offer to attract people to make it a home? There are no recreational facilities of international standards.

The couple of golf courses in the city date back to the pre-independence era. Bangalore, on the other hand, has a dozen golf courses, he points out. Quality residential space is another feature that is in short supply; International schools – there is a huge waiting list in the few that are available, he says.

Mr T. Chitty Babu, Managing Director, Akshaya Homes Pvt Ltd, feels conservatism is Chennai’s trait and strength. The city has an ancient heritage and culture, which it can build on. Its music festival is a high point on the annual calendar. More modern features, such as medical tourism, can also be promoted.

Mr K.K. Raman, Executive Vice-President, DLF Southern Homes, says apart from an organised promotional campaign, more effort is needed from individuals, he says. Chennai should build on relationships.

For example, DLF can claim credit from bringing IBM to Chennai, a location that was not under the consideration of the MNC. But when DLF set up its IT park in Chennai it was able to convince IBM, which had taken up space in DLF IT Park in the north to expand to Chennai. Creating the ambience and the perception is key. The growth of the city will have to be people-driven.
People, resources

Chennai’s strengths are its people and natural resources. It is not commonly known that the highest revenue for companies per unit wage is in Chennai, the huge pool of skilled human resource and educational infrastructure, work ethics which is among the best and the law and order situation, which is ideal. Look at Chennai’s beaches, he says. Anywhere else they would have been the focus of international attention, and the city administration would have leveraged the asset, Mr Raman says.

Mr K. Phanindra Reddy, Managing Director, Tamil Nadu Urban Infrastructure Financial Services Ltd, pointed out that the State may be growing at a sedate pace, but it was growing. Aggressive marketing or high pitched sales was never a style it has adopted. It has a strong social infrastructure, physical infrastructure is being put in place with large increases in power and water capacity expected to be in place in the near future.

REAL ESTATE HYDERABAD Signs of recovery in Hyderabad

Low interest rates — at a near 10-year low, thanks to the Government’s recent announcement lowering rates for houses below Rs 20 lakh — and the pent up demand for affordable housing have seen the real estate market in Hyderabad recover in the last two months.

With value for money being the buzzword, the action is now centered around apartments and independent houses in the Rs 20-30 lakh segment. There is still pressure on sales volumes when it comes to apartments which are over Rs 30 lakh, according to industry experts.
Buyers’ market, still

“It continues to be a buyers’ market. This has forced many developers to re-look their existing projects and for the rest it is clear that affordable housing is the way to go forward,” according to Mr K. Ravinder Reddy, Chairman and Managing Director, Janapriya Engineers Syndicate, and Chairman of Andhra Pradesh Builders Association.

Mr Reddy said that after the elections the real estate market has shown clear signs of revival.

Though it is nowhere near the dizzy heights it had reached couple of years ago, the pent up demand is beginning to be served.

The Centre’s efforts to shore up the economy, coupled with State Government support by way of lower stamp duty and waiver of stamp duty for properties below Rs 20 lakh, have spurred the market. Buyers have realised that the market has more or less bottomed out and it is time to buy , Mr Reddy explained.

What is significant is that this time round speculative buying in anticipation of big returns on investment is conspicuous by its absence, according to Mr C. Sekhar Reddy, Chairman and Managing Director CSR Estates and Member of CREDAI (Confederation of Real Estate Developers Association of India).

Citing recent interactions with major real estate developers and members of the banking community at a meeting in Mumbai, Mr Sekhar Reddy said that the realty market in Hyderabad mirrors the other markets in the country. The enquiry levels and the conversion rates are going up, he added.

“Of the 12 municipalities in the Greater Hyderabad Metropolitan Corporation area, in nine municipalities we have projects that cater to all buyers. Significantly, in these areas there is adequate supply of affordable housing where flats are available for below Rs 20 lakh,” Mr Sekhar Reddy, said.

More developers, which include even the major players such as DLF, Mantri and Asoka Developers, are launching projects that are offering apartments in the Rs 20-30 lakh range.

The lower interest rate regime and concessions offered by the State Government for houses below Rs 20 lakh make this market, which is still hungry for good projects, attractive for developers, Mr Sekhar Reddy said.

The prices have already corrected by about 25 per cent, he added.
Land availability

However, in the core city area , the cost of real estate continues to rule high mainly due to demand-supply mismatch. The availability of land is an issue and this keeps prices high.

In a study of 10 cities by PropEquity , Hyderabad comes lowest in terms of launch of new units at 2,585 units because of high inventory.

REAL ESTATE BANGALORE

Change with the times

The Bangalore-based Mantri Developers has come out with compact apartments about 20-25 per cent smaller than what was commonly sold till last year. A residential unit now is about 1,000 sq.ft for a two-bedroom apartment instead of 1,300 sq.ft earlier.

This has helped Mantri Developers grow 20 per cent in the April-June quarter this fiscal. “We changed the specifications and made apartments more compact for our Mantri Synergy project in Chennai. That resulted in more than 60 per cent sales in the three towers that the changes were made,” according to Mantri Developers’ Chairman and Managing Director, Mr Sushil Mantri.

The project, which was originally conceived with nine towers of 90 units in each. But three towers were reconfigured and now have 120 units in each. About 30 per cent of the other towers are still unsold, “but we do not have much to worry,” Mr Mantri said. The project, located on Old Mahabalipuram Road, has been priced at Rs 2,800 a sq. ft.

“Change in strategy has delivered good results for us, and we have replicated this model for other projects too in Hyderabad, Bangalore and Pune. And we have been quite successful in all these cities,” he said. At Hyderabad, the company has launched a project where 70 per cent of the 1,000 units planned would be compact units, while 30 per cent would be bigger. According to Mr Mantri, over a third of the project, at Rs 2,800-3,300 per sq.ft, has been sold in the two months since its launch.

Defining the changing outlook in the real estate sector, Mr Mantri said there is no change in the customer profile. “Customer profile remains the same. What has changed is people’s mindset. They have become more conservative in terms of budget for that priced home-buy,” he added.

ANJANA CHANDRAMOULI Plea to extend Sec 80IB benefits The Union Budget for 2009-10 should extend tax benefits to developers under Section 80IB and expedite introduction of real estate investment trusts (REIT) and mutual funds (REMF), according to Mr Surendra Hiranandani, Managing Director, Hiranandani Upscale Group of Companies.

In a press release, he said the tax benefits under Section 80 IB will provide an incentive to developers and increase customer confidence in the industry. The real-estate sector hopes the Government will focus on regularising tax and other issues related to REITs and REMFs.

Currently, investors have adopted a wait-and-watch approach as the Government has a tight control on entry and exit of FDI. While entry of FDI has been broadly clarified, there are number of cases where conflict and ambiguities exist between the RBI and the I-T department creating hurdles at the time of repatriation of the profits. Clarifications on these guidelines could introduce a renewed interest in this sector.

There is an anticipation of a possible increase in excise duty on cement. This coupled with service tax and TDS, both of which are currently levied on the developer, provide little incentive for the industry to grow, he said in the release.

The SEZ policy is not particularly beneficial for the IT/ITES/BPO sector. The STPI policy must be extended, which will also give exports a much-needed boost. Section 80 IA for IT parks also needs to be continued for the same reasons. Clarifications on these issues will help boost investment, says Mr Hiranandani. — Our Chennai Bureau
Big growth in Brigade Group’s business

Real estate developer Brigade Group has seen a 200 per cent jump in business in the April-June quarter of this financial year with sales of over 100 residential units. In June we sold about 60 units, hiked prices by 2-3 per cent in May and June and brought down the discounts given earlier, said Mr M. R. Jaishankar, Chairman and Managing Director, Brigade Group.

He said Brigade’s debt stood at Rs 428.6 crore, as on March 31, 2009, with the current debt-equity ratio at 0.42. There is no constraint from debt funds, “in fact, we have an unutilised debt of Rs 300 crore,” said Mr Jaishankar.

He said the company was considering to raise up to Rs 1,000 crore through private equity for hospitality projects. It is open to entity-level dilution for its wholly-owned subsidiary Brigade Hospitality Services and special purpose vehicle (SPV) level sourcing. JP Morgan would help the company identify private equity investors, he said.

The company is also not for qualified institutional placement (QIP) now. “We prefer QIP to happen at a much better valuation than what it is now,” he added.

Mr Jaishankar said that the company plans to dilute 20-22 per cent stake at the SPV level for its 120-acre township project in Devanahalli. Over the next one year 12 projects, totalling about 12 million sq.ft of development, would be completed.

REAL ESTATE - PUNE

In November 2007, the Government of Maharashtra gave the nod for 100-metre buildings in Pune. The official notification issued on November 15 of that year gave vertical growth a robust push. With the bar raised substantially from the prevailing height restriction of 36 m (12-floors) that had came into force a decade earlier, 30-floor buildings (above the ground) are poised to become a reality.

The move has set the ball rolling for a transformation of the Pune skyline, and the city is slowly, but surely, evolving from one dominated by low-rise residential and commercial structures to one where buildings, a dozen ones to begin with, will, literally speaking, soon tower above the landscape. Clearly, penthouses are set to get a new, more evocative meaning.

Flying off the shelves


Part of the evolution process is the gradual ebbing away of the claustrophobia associated with lifts and fear of dizzying heights amongst the buying clientele. Pune-based developer Kumar Builders was the first to announce the launch of its first 100 m high residential tower of 80 apartments about two weeks ago. Kruti Jain, Executive Director, said that houses located on floors 15-23 (currently permission up to 70 m height has been procured, and the rest is under process) are flying off the shelves. “In the first week, we received bookings for 50 per cent of the houses. In fact, there is a wait list for those who want a house on a particular floor,” she says, adding the second tower in the four-tower 45 Nirvana Hills project in Erandwane will open for bookings in a month’s time. The going rate for bare flats (minus fittings and paint) is Rs 4,500 per sq.ft, with Rs 25 per sq.ft for floor raise. One of the notable features in this scheme will be a one-acre garden on the 30th floor.

As of today, there are at least two other developers in the 100 m tall building space. Panchshil Realty’s first residential project in this dimension will be YOO Pune by Phillipe Starck at Hadapsar. It will offer some 240 apartments (5 BHK condominiums) spread in six towers (totalling 1.3 million sq. ft) situated within a landscaped parkland.

Bookings are expected to open a few months on. Panchshil Tech Park at Kalyani Nagar is a commercial project in the same space.

Evaluation committee


According to an official in the Pune Municipal Corporation, sanctions to build up to 70 m have been accorded to 14 independent projects, involving both residential and commercial spaces. Most of these will apply for sanctioning of the added 30 m.

“A four-member high-rise technical committee headed by the Divisional Commissioner has been formed to evaluate these (100 m) proposals. The committee held its previous meeting last month,” he says. Sanction for the city’s first 100 m high-rise may be just a few weeks away. Also on the cards is extension of the 100 m height rule, currently applicable in the old city limits, to 23 villages brought into the PMC area in 1997.