1.India realty likely to see up to $5 billion PE exits in 2012

MUMBAI: Private equity (PE) funds are expected to exit between $3 billion and $5 billion worth of Indian real estate investments in 2012, international brokerage Jones Lang LaSalle said on Tuesday.

Most of these investments were made in the country in 2005/06 and are now coming to the end of their 5-7 year cycle, triggering the exit, the brokerage house said in a report.

Over the last four years, PE investors have already exited $3 billion worth of real estate investments, accounting for 23 percent of their total investments since 2005.

Indian developers are already struggling with a lack of financing options as property sales in India's major cities are flat with higher interest rates deterring potential homebuyers, cutting off cash to developers, many of whom have racked up high debt levels.

2.Unitech cuts debt by 40%, to reduce it more: Sanjay Chandra

Realty major Unitech has lowered debt by 40 per cent in last two and half years and would further reduce the borrowing in coming quarters from operational cashflows.
“We have reduced our gross debt significantly from over Rs 9,000 crore in March, 2009 to about Rs 5,500 crore now. The trend will continue in the next two-three quarters after that we may not need to reduce further,” Unitech managing director Sanjay Chandra said in his first interaction after getting bail in 2G telecom scam.
Besides gradual reduction in debt, he said the company would infuse more funds on construction of ongoing projects for fast execution of about 80 projects across the country. It invested Rs 1,300 crore on construction last fiscal.

“We do not have any concern on the debt front. Operational performance is leading to continuous reduction in debt and not asset sales,” Chandra said.
He noted that the company’s debt-equity ratio was in a comfortable position at 0.46 per cent and is very low compared to peer groups.
Unitech, the country’s third largest realty firm, has cut debt by nearly Rs 400 crore in the first half of this fiscal.
In 2009-10 fiscal, the company had raised about Rs 4,500 crore from qualified institutional placement of equity shares, out of which about Rs 2,200 crore was utilised to cut debt. After that reduction has been through operational cash flows.

On sales performance, Chandra said: “We are not pricing our products too expensive that sales are affected. We should achieve sales booking of Rs 1,000 crore per quarter despite macro-economic deteriorating”.
During the first half of this fiscal, Unitech has sold 3.71 million sq ft of area, mostly residential, worth Rs 2,088 crore. The company has launched projects comprising 6 million sq ft of saleable area and more projects are in pipeline.
Chandra said the company would not shelve its plan to develop 13 shopping malls because of the government’s decision to put on hold its plans to open FDI in multi-brand retail.

“We have nine malls under construction and we have land for another four malls. We will develop these malls,” he said, adding that the the company would invest up to Rs 3,000 crore in the next five years for this.
Unitech’s share price fell by nearly eight percent on Friday to close at Rs 19.55 on the BSE. The scrip has plunged from Rs 68.05 on January 4 this year. The market cap of company stood at Rs 5,111.24 crore.

Source:http://www.realtyplusmag.com/rpnewsletter/Fullstory_Newsletter.asp

3.Enter the new age broker

The real estate brokers are the cornerstone of the real estate industry in India. They are the front end of the business, the first point of contact for the customer. It is they who hold the pulse of the market.

Their importance notwithstanding, the general perception of the real estate broker is one of mistrust. “He is the last guy you can trust,” used to be the common refrain. That was probably true in the 80’s. Times have changed and indeed for the better. Today, the real estate broker has undergone a transformation.

CHANGING GAME

This transformation in the real estate brokerage scene in India has been driven by many factors. First, the opening up of the economy and influx of international companies into India has brought about a major demand turnaround in real estate services. That has in turn translated into demand for real estate brokerage services that have best practices benchmarked with the best in global standards.

Second, the growth of information technology has brought about a revolution in the way business is conducted. Internal business processes could be completely automated to suit ease of working.

Third, the volumes of transactions and consumer preference and choice demanded that systems be developed so that the customer can search, view and select from the comfort of his home. Inputs for decision making had to be made more comprehensive and at the same time, simple.

Fourth, the relaxations and incentives for investments by the NRI and PIO market led to the emergence of a new demand where it was not practically possible for international clients to physically travel and see the properties before making the decision to purchase. This was where IT-enabled solutions came to their rescue.

One additional factor has been that there were quite a few international property consultants who made inroads into the highly disorganised brokerage industry in the country and started providing high quality services, backed by mandates. This made the local broker look up and start to address the growing competition from corporate brokers.

All these factors have led to domestic brokers waking up to the need to get their act together, if they wanted to remain in business.

They started out on a series of measures. Some were simple, such as sprucing up their offices. Websites started mushrooming. Listing properties on the internet became a common practice. They increasingly started resorting to e-marketing. Brokers started streamlining their internal processes.

They have next paid attention to the softer side of the game. The attire and the technique of communication started changing. Brokers started attending classes and signed up for a range of courses from personality development to principles and practice of global real estate business. Increasingly, the brokerage industry has witnessed the entry of highly qualified professionals. From the image of the broker we encountered at the beginning of this article, the broker today may well be an engineer, MBA, advocate, retired personnel, chartered accountants among others. Well-educated women too, are choosing this as a career option.

These factors are slowly, but surely transforming the real estate brokerage industry. The makeover is for real. The new-age broker has arrived.

Most corporate clients can avail the services of international property consultants for whom clients are not really a problem as they came from international referrals. Individual customers, however, had no option but the local untrained broker to deal with. This demand for quality is now being filled by the new-age local brokers, who are home-grown, but equipped and skilled to provide the best in quality standards and customer satisfaction.

The new age broker is there for the discerning customer; he is there to hand-hold, guide, advise and take the customer through the entire process of making a property purchase decision in a transparent, thorough and clean manner. The customer does not really mind paying a fee for good quality service and assurance. The property transaction experience thus becomes an enjoyable one.

ORGANISING THE PRACTICE

To enable the growth of the brokerage industry, it is necessary to institutionalise best practices. In pursuit of this goal, the National Association of Realtors — India (NAR-India) has been formed as the apex national level association for realtors in India.

The association has a member-coverage in 25 cities in the country and aims to nurture, incubate and groom new-age brokers who can provide

quality service and customer satisfaction. The objectives are to empower and enable brokers to acquire skills and

emulate best practices.

NAR-India has a strategy of ensuring that all the member-brokers acquire basic real estate education so that the interest of the customer is not jeopardised. The association through its programmes grooms and prepares the local broker for the international market on the one hand, and brings international standards and business practices to the local real estate market on the other.

The association has been striving towards standardisation of business practices. Members are bound by a Code of Ethics and follow modern standardised business practices. The orientation of the whole exercise is that the customer comes first. It is also pursuing the objective of bringing about a multiple listing service (MLS), something common to most evolved markets, in order to enhance business efficiency. Simply put, the MLS is a bouquet of services that accumulates and disseminates listing information among broker participants.

Members follow standard globally accepted practices of servicing so as to ensure transparency in the transaction process. NAR-India is also working on advocating Exclusive Mandates and ‘One side representation’ for the benefit of the customers. One side representation is where the broker declares whom he is representing: the seller or the buyer.

The association has also taken steps to educate brokers and facilitate the upgradation of their skills. NAR-India's three-pronged strategy comprises: a) a basic real estate member entry test or REMET, b) a higher level real estate programme and c) an advanced course on principles and practice of real estate.

Members are being encouraged to take up education and skill upgradation programmes on a continuing basis.

It is high time the government recognises the significance of the real estate brokerage industry in India. It has to ensure their greater involvement in decision making on key issues and make policy more meaningful and inclusive.

— The author is Professor, SPA, New Delhi

4.Housing demand estimated to be over two million units in five years: Report

5.Take Advantage of Home Loan Discounts on Offer

The interest rates for home loans has been going through the roof for the last couple of quarters. At the same time, CPI inflation is stubbornly at double digits. As a result, people have postponed their decision to buy a home or invest in real estate. In such a scenario, banks are looking for ways to become innovative with their loan offerings with all the more reason to do so, as we are in the thick of the festive season!

In this article, we will discuss the discount schemes that are on offer.

Dual rate scheme

Dual rate scheme fixes the interest rate for first few years and then changes it to the prevailing interest rate. The prime example of this type of loan offered by banks is ICICI Bank. The bank is giving home loans with interest rate fixed for first year and second year.

After the second year, the interest rate charged will follow the prevailing interest rate. The prevailing interest rate will be the base rate plus the premium, which can be anywhere between 0.5 per cent and 1.5 per cent depending on the size of the loan.

Discount on processing fee

This is one of the ways to provide discount on total cost of loan. Punjab National Bank has done away with processing fee completely. This will certainly lower down the cost of home loan by few points.

Concessions on loan

State Bank of India, Dena Bank, and Corporation Bank are giving discount of few basis points for home loan till the end of this year. SBI and Dena Bank have offered discount of 25 bps while corporation bank has offered up to 100 bps discount. Corporation Bank has also waived off 60 per cent of the processing fee.

Progressive monthly instalment scheme

Few banks are providing loans on progressive monthly instalment scheme where the borrower’s liability or EMI is based on increase in salary. Hence the EMI will be lower in first few years and will be regular after the period. Corporation Bank offers this scheme. This scheme is especially good for young people who expect their salaries to rise in future.

Fixed rate for LIMITED PERIOD

This is another addition to the schemes offered by banks to home loan borrowers. HDFC is offering two variants of the scheme. Home loan borrowers can choose either 3 years fixed or 5 years fixed home loan scheme.

Fixed rate scheme

Fixed rate home loan scheme is offered by Axis Bank. This fixed rate will remain fixed for the complete tenure of the loan. This scheme is known as “Nischint”. There is no change in EMI and no surprises. The EMI will be set once and for all. The interest rate is 11.75 per cent.

Due to the rising interest rate scenario, product innovations abound in the market, however borrowers should take care to weigh the pros and cons of the scheme. Finally, borrowers should compare the rates and overall charges from different banks to arrive at the effective cost of the loan and then make their decision.

The general perception in the market is that interest rates are near its peak; it might go up once or twice and then begin a downward trend.

Keeping this aspect it mind, explore the home loan options available with an open mind, especially if you have bagged a good home deal, which could become a lost opportunity, if you failed to latch on to it.

On the other hand, borrowers should do their due diligence and research loan schemes where the interest rate or EMI in the initial years is low.

Borrowers should arrive at a rough estimate of the possible interest rates after the initial years. They should check the base rate, premium over base rate, and historic data on past loan schemes to arrive at this possible interest rate as part of their decision making process.

— The author is CEO, Bankbazaar.com

6.IDBI Bank has cut interest rate on Home Loan by 25 to 50 bps

IDBI Bank has cut interest rate on floating rate home loan scheme by 25 to 50 basis points for all existing customers. The bank has also introduced a fixed-cum-floating rate home loan product for new customers. Further, the bank has also decided to offer concession of 100 basis points (1 per cent change is equal to 100 basis points) in rate of interest for all segments of auto loans, the bank said in a statement. The bank said it reviewed its home loan rates in view of the market scenario, competition offerings and provide benefits to customers during the festival season.

All new borrowers would be given an option of either fully floating rate or a combination of fixed and floating rates. The bank has waived the processing fee for loan amounts upto Rs 25 lakh. Under the composite fixed-cum-floating home loan scheme, the bank will charge fixed interest rate for one to two years. Thereafter, the interest rate would be linked to the bank’s base rate, which is currently at 10.75 per cent. Depending on the loan amount, the interest rate on the composite fixed-cum-floating home loan scheme, which has fixed interest rate for one year, ranges from 10.75 per cent to 11.75 per cent. In the case of a loan on which interest rate is fixed for two years, the interest rate ranges from 11 to 12 per cent. The bank has decided to waive the processing fee for auto loans. All the offers are applicable to the new loans sanctioned between October 15 and December 31, 2011

7.Aricent Group Sells 17.63 acres of Prime Gurgaon Plot to Ambience Developers for Rs 206 crores

Aricent group, a telecommunications research and development firm, has sold a prime plot of land in Gurgaon to local real estate firm, Ambience Developers, for Rs 206 crore. Ambience pipped DLF, Shapoorji Pallonji and AlphaG Corp to buy the 17.63 acre land on the Old Gurgaon Highway, immediately adjacent to the prominent residential project Gurgaon One, promoted by AphaG Corp.

Consultant Jones Lang LaSalle, who brokered the deal, said this is the largest corporate land disposition in Gurgaon yet. Private equity firms Kohlberg Kravis Roberts & Co, Sequoia Capital, The Family Office, Delta Partners, and The Canadian Pension Plan Investment Board are investors in Aricent, which was created in 2006 when the former Hughes Software Systems/Flextronics Software Division was combined with frog design.

JLL said in a press release that the Aricent team was led by Ragesh Datt, senior vice-president and global chief information officer for the Aricent Group. Amit Kaicker, head for land transactions (north India) at JLL states, “What stands out in this innovative deal was meeting timelines exactly as per the plan set by the team, which has been a first in a land transaction of this nature.”

8.10% area of Gurgaon Still under Wastelands

Despite hectic real estate and industrial development, at least 10% area of Gurgaon district is still under wastelands while its adjoining district, Mewat, has the maximum share in that regard with 11% of the states geographical area.

A recent survey found that three other districts Faridabad, Mahendergarh and Panchkula also have more than 10% of their area under wastelands. According to the atlas, the maximum area of wastelands 257.96 sq km has been observed in Mewat.

However, Haryana has recorded a marked reduction in its area of wastelands between 2002-03 and 2010-11 shrinking by more than 2% from 7.38% of the total geographical area to 5.3%.

9.High rates and input costs add to real estate woes

MUMBAI: The decision by the Reserve Bank of India (RBI) on Thursday to raise key policy rates by 25 basis points can dent sales of homes in the country. Over the last 15 months, RBI has raised rates on 10 occasions, which in turn has raised home loan rates by about 25%, forcing several home buyers to go out of the market.

"The latest increase is likely to cause more pain to home loan clients," said Vipul Patel, director, Home Loan Advisors, an independent mortgage advisory firm. "The increase in rate is likely to compel clients to postpone or reconsider their proposition of investing in new homes," Patel added.

Over the last six months, builders have been witnessing a decline in registrations for homes and the latest round of hike is seen adding to their worries. Builders are, however, in a catch 22 situation. While they are not seeing any pick up in demand, but the higher rates are leading to increased costs for them through higher input costs. "The rate hike will increase the cost of properties as it increases cost of funds. We are already reeling under the high input costs and coupled with high sanction costs, we have to pass on the same to end user," said Pradeep Jain, chairman, Parsvnath Developers, and also the chief of Confederation of Real Estate Developers' Association of India.

10.Rising interest rates coupled with economic slowdown will affect real estate sector

11.Overpriced Indian Real Estate Market Heading Towards Significant Correction

At long last, India’s overpriced real estate market could come back to earth with a thud. Developers trying to sell costly property cannot find buyers, who in turn find themselves squeezed out of the market by rising mortgage costs and inflated property prices. Inventory, jargon for built-up homes that haven’t been sold, is piling up. Fittingly, a full 25% of total units remain unsold in Mumbai , where real estate rates are the least realistic; Chennai and Pune follow with 19% units unsold, 16% of units can’t be sold in Delhi and its surroundings, followed by Bangalore and Kolkata.

Developers who find themselves unable to sell built units cannot pay back loans and find it hard to raise capital for new projects. Sensible economics suggests that if they can’t sell at high prices, they should cut rates and find buyers. But most builders would rather hold on, hoping for gullible buyers to buy dream homes at prices dreamt up by the sellers. Anecdotal evidence suggests that many builders are selling land holdings to finance loans, rather than cut prices. This too is good, because it will bring more land back into the market, creating further pressure for property prices to fall. For many years, India has not seen a property crash, so many people still believe in the phrase ’safe as houses.’ But globally, property has been prone to long cycles of price appreciation and decline.

12.Govt. Granted Reliance Haryana SEZ only 1-year extension

The government has granted Reliance Haryana SEZ one year extension in validity of in-principle approval for the Jhajjar Special Economic Zone as against four years sought by the promoters.

The extension was given by an inter-ministerial Board of Approval headed by Commerce Secretary Rahul Khullar at its last meeting on March 25, an official said.

“Though the developer had sought extension of the original letter of approval to March 2015, the board decided to extend the validity (of LOA) up to March 31, 2012,” he said.

The official said while Reliance Haryana SEZ, promoted by Mukesh Ambani-owned Reliance Industries, possesses more than 1,000 acres of land in the Jhajjar district in Haryana, it is not contiguous.

The project envisages setting up of the multi-product SEZ over an area of 5,000 hectares of land.

The delay in the project is on account of difficulties in acquisition of land from farmers.This was the third extension in principle validity given to the project. Meanwhile, the board also gave one year extension to several other projects, including those promoted by the Unitech Group, Anant Raj Industries, Uppal IT projects and IFFCO.

13.Rules that Simplify Property Buying for NRIs in India

It makes sense for non-resident Indians (NRIs) and persons of Indian origin (PIOs) to invest in property in India. A NRI is a person who is not resident in India. According to the Foreign Exchange Management Act (FEMA), ‘person resident in India’ includes a person residing in India for more than 182 days during the course of the preceding financial year. It does not include a person who has gone out of India on employment, business or vocation, or for any other purpose for an uncertain period.

Also, a person who has come to stay in India other than on employment, business or vocation, or for any other purpose for an uncertain period. All other persons are NRIs. NRIs are permitted to buy and sell property in India. The acquisition and transfer of property by NRIs should be in accordance with the FEMA. The property should be purchased through a registered conveyance deed. It may also be purchased on a power of attorney. In the latter case, an agreement to sell and a power of attorney are executed by the seller in favour of the buyer.

NRIs do not require permission of the Reserve Bank of India (RBI) to acquire residential or commercial property in India. The RBI has granted general permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase property in India for their bona fide residential purposes. The payment has to be made either out of inward remittances in foreign exchange through normal banking channels or out of funds in a NRE or FCNR account maintained with a bank in India.