Friday, March 09, 2007

Chennai: Bidder snaps up 11 acres at Guindy for Rs. 297 crore

Hindu reports
Deal sets new record for property sale in Chennai

CHENNAI : HTL has sold over 11 acres of land at Guindy for a record price of Rs 297 crore.

According to sources in the industry, the HTL property on GST road, which was put on the block through e-auction, was bagged by a real estate developer for Rs 27 crore an acre. International real estate consultancy firm, Jones Lang LaSalle, the exclusive marketer for the property, was the sale manager. The name of the buyer was not disclosed.

According to sources in the real estate business, the size of the deal sets a new record for a property sale in Chennai. The price works out to about Rs 6,198 a sq ft. For HTL, this is a 50 per cent increase over the price it got in 2005-06 when the National Highways Authority acquired 1.64 acres for Rs 29.06 crore - Rs 4,067 a sq ft.

Guindy, till recently an industrial centre, has in recent year emerged a centre for IT companies and commercial space.

Guindy Industrial Estate, adjacent to the property, a home to small-scale enterprises, is now know more for the IT space and commercial built-up space.

Location advantage

The advantage the location offers is that it is at the junction of Mount Road and Mount-Poonamallee Road. A real estate developer with a million square feet of developed space commands Rs 60 a sq ft as lease in the vicinity.


HTL (formerly Hindustan Teleprinters Ltd), a subsidiary of Himachal Futuristic Communications Ltd, a telecommunications equipment manufacturer, is under the purview of the BIFR. Himachal Futuristic took a 74 per cent stake in 2001 when Government of India disinvested its holding.

Thursday, March 08, 2007

Mumbai : Supari on builder for Rs 500 cr Parel plot


Mumbai: Property redeveloper Rajendra Chaturvedi, who constructed India’s tallest residential building—the 45-storeyed Shreepati Arcade at Nana Chowk—finds himself in the thick of controversy after police arrested four hitmen who were paid Rs 50 lakh to eliminate another builder, Rashmikant Shah.
Chaturvedi was grilled by the Juhu police on Wednesday night in this connection. According to the police, the dispute involves a redevelopment project at Abhyuday Nagar, Kalachowkie in Parel. The plot is worth Rs 500 crore.
The four accused arrested on February 25 include Nisar Shaikh, Aslam Khan, Qasim Qureishi and Vijay Warkar. The police is now looking for the prime accused, Baba Udaynath Maharaj, and his accomplice, Bismillah Khan. The police say Warkar is affiliated to don Chhota Rajan’s gang.
On February 25, the police got a tip-off that the four hitmen would be coming to a spot near Hotel Holiday Inn to eliminate Rashmikant Shah, owner of the Vijay Group. Shah had a meeting in the hotel late in the evening. One of the four accused, Nisar, allegedly opened fire on the police team and tried to escape but was arrested.
According to the police, Shah was involved in redeveloping Abhyuday Nagar for the last five years, but the work had not been completed within the given time-frame.
Rajendra Chaturvedi, the builder under investigation, and Rashmikant Shah, the ‘targeted’ developer, had been at loggerheads over a redevelopment project at Kalachowkie in Parel
After Shah had failed to make headway on the project for five years, the residents approached Baba Udaynath Maharaj, a spiritual leader, who entrusted the project to Chaturvedi in 2006
Shah refused to give in and his men abducted Maharaj and took him to gangster Ashwin Naik inside Kalyan jail. Naik told Maharaj to lay off
On Feb 25, four hitmen, allegedly affiliated to the Chhota Rajan gang, were arrested by the police. They confessed that they had been hired by Maharaj to bump off Shah Group says entire episode cooked up
Fed up with the slow pace, the residents approached Maharaj, a spiritual leader, after they saw him addressing a huge gathering at Kalachowkie, and requested him to hand over the project to any of his followers who could afford to redevelop it. Maharaj then contacted Chaturvedi to take on the project in 2006. Chaturvedi later agreed to redevelop it.
Police sources said that Maharaj then planned to eliminate Shah, who was not ready to give up the project. The accused told the police that Maharaj was abducted by Shah’s men and taken to Kalyan jail and produced before gangster Ashwin Naik who asked Maharaj not to meddle in the matter. The accused also said that this enraged Maharaj, who later called Warkar and gave him the supari to bump off Shah. Warkar then contacted Qureishi and asked him to hire two shooters. “Warkar told us that he (Maharaj) gave him a supari of Rs 50 lakh and promised him a hotel at Mahabaleshwar. Maharaj also made a part payment of Rs 12 lakh. We have recovered the entire amount, two revolvers, two choppers, an Indica car (MH-04 BN 1253) and four mobile phones from the accused,’’ said senior inspector Pradip Shinde.
The accused also narrated how the project, which was being redeveloped by Shah, was later offered to Chaturvedi. “We have called Chaturvedi twice and questioned him after his name cropped up during the investigation. We haven’t got any evidence of his involvement in this case, but will arrest him as soon as we get evidence,’’ Shinde said.
A press release issued by the Shreepati Group on Thursday claimed that the entire episode had been “cooked up’’. “The developer who claims to have been threatened does not have any office or residential premises in the vicinity of the Juhu police, where the matter is being investigated. The developer has
not completed any projects in the island city,’’ it said.
According to the group, the case seems to be a ploy aimed at sidelining it from the proposed redevelopment of Abhyudaya Nagar, even though a majority of the tenants are behind it. “We would like to state that we have no business relations with Shri Udaynath Maharaj ji...Mr Chaturvedi has extended full cooperation to the investigating agency and we shall continue to extend full cooperation to them,’’ the release noted.

Residential prices climb fast in Chennai

CHENNAI: The real estate market in Chennai is passing through a phase that it has never witnessed in the past. The residential properties are getting much costlier than office properties in the city.

The sale price of residential apartments, both in the primary as well as secondary markets, has almost doubled over the past 12-15 months in the city. On the other hand , the sale price of office space has increased just 20% - 30% on an average, during the same period.

The flare-up in residential prices is mostly attributed to the demand outsmarting the supply, besides the increasing cost of land acquisition. The increased demand is mostly driven by the growth in the IT/ITES sector in the city, which has also been attracting large investments in the manufacturing sector.

According to industry sources, the current capital value for office space ranges between Rs 4,500 per sq ft and Rs 7,000 per sq ft in the CBD (central business district), Rs 3,500 - Rs 5,000 per sq ft on OMR (IT Corridor) and Guindy, and between Rs 2,500 - Rs 3,000 per sq ft in suburban Ambattur.

On the other, the capital value of residential apartments ranges between Rs 4,500 per sq ft at the low-end areas and goes up to Rs 12,000 per sq ft.

It even goes more in places like Poes Garden, where the prices had never crossed Rs 5,000-mark.

“While acquisition of commercial space is driven by average rate of return (ARR) on investments, the buying of residential units is mostly driven by aspiration. If someone is keen on buying a residential apartment in a certain area, he buys. In such cases, the logic takes a back seat,” says Sanjay Chugh, vice president – Transaction Management Services.

In the case of the emerging OMR, the prices range between Rs 2,800 and Rs 4,000 per sq ft for newly-launched residential units. The price ranges between Rs 2,500 - Rs 4,000 per sq ft in suburban areas like Perambur and Ambattur.

“Today, the affordability of home buyers has gone up. Also the supply coming into the market is much less than the demand. Hence, builders are getting premium price and are also able to afford premium quality buildings," V Jagannathan, managing director, Ramaniyam Real Estate, a leading property developer said.
T Chitty Babu, MD, Akshaya Homes, termed this as a cyclical phenomenon.

"An emerging market will first witness demand for 'work space', and the higher earning

executives then drive the demand for residential units, which in turn will catalyse the demand for retail, food and entertainment spaces," he said. "Chennai is now in the residential segment of the cycle. And I am sure, 6-9 months down the road, there will be increased demand for commercial space catering to the requirement of retail, entertainment and food categories," Mr Chitty Babu added.

RBI spying on home loan borrowers


MUMBAI: CONCERNED over a possible shakeout in the home loan market, Reserve Bank of India (RBI) has asked several leading banks to furnish data on the number of borrowers who have bought second or third home, how many them belong to the salaried class and the default levels in home loans.

On Tuesday, the RBI met leading banks on a short notice and asked them to provide the loan details. Officials who attended the meeting said bankers told RBI that the home loan market has slowed down following the rise in interest rates and property prices. RBI has also asked bank to provide details on loans disbursed at different interest rates. “Banks have to provide information such as Rs x crore loan disbursed as 7% and Rs y crore at 7.25% and so on. The information sought relates to floating as well as fixed rate loans,” said a banker. The fear is that once the property bubble bursts, borrowers who have invested in second or third homes to earn a fat rent could default, as tenants relocate to properties where the rent is lower. At that point the properties that have been pledged with the banks may not be adequate to cover loan exposure.

Besides, banks are required to provide loan break-up for the salaried borrowers, self employed, loans to builders and property developers. They were also asked to provide information on the various frauds that have surfaced in the home loan segment and measures that banks are taking to protect themselves against such delinquencies.

“RBI also made inquires on the role of home loans as a component of asset price bubble,” said a banker. In other words, RBI is keen to find out to what extend home loans have contributed to the perceived asset price bubble, said a banker. Over the last two years at several occasions RBI has cautioned banks on financing home loan customers. In 2004, when more and more banks were offering home loans at cheaper rates, the central bank raised the risk weightage on home loans from 50 basis points to 75 bps and subsequently in July 2006 to 100 bps.

Further, in order to discourage banks from funding property developers following a steep rise in the property price, RBI raised the risk weightage on loans to commercial real estate in various stages from 100 bps in July 2005 to 200 bps in the January 2007. At present, home loans account for nearly 15-20% of loan books public sector banks while for ICICI Bank, which has the largest share of home loan in the banking sector, it is about 30%. Loan disbursement in the banking sector rose 44% in March ‘06 over the previous fiscal year, from Rs 1,28,728 crore to Rs 1,86,429 crore.

Wednesday, March 07, 2007

Liquidity squeeze hits realty scrips

Real estate stocks are seeing a downswing as they have lost up to 50 per cent market value from their recent peaks.

Leading the bear hug is Parsvnath Developers, which has lost 51 per cent from its recent peak of Rs 468 to Rs 229 on Wednesday. Unitech has shed 30 per cent from the recent peak of Rs 500 to Rs 347.

Sobha Developers shed 42 per cent from Rs 1,104 to Rs 630, Akruti Nirman lost 35 per cent from Rs 564 to Rs 363 and Ansal Properties and Infrastructure shed nearly 50 per cent from Rs 974 to Rs 479.

Industry watchers hint at various reasons for the downfall, from the squeeze on liquidity to commercial real estate, rise in interest rates and subseqent fall in demand and the not-so-favourable Budget proposals.

The move to impose service tax on lease rentals, selective hike in the excise duty on cement prices and non-extension of section 80IA, which gave tax concession to realty firms, also had negative impact on realty stocks.

“In the pre-Budget period, the interest rate hike and the anticipation of lesser demand from property buyers pulled down these stocks. It was expected that the number of buyers who avail of loans and buy properties will come down. The move to impose service tax on lease rentals and the expectant hike in the commercial rentals also impacted realty stocks negatively,” says Suman Memani, senior analyst, Emkay Securities.

Another reason cited for the crash was expectations of major correction in the property prices in smaller cities where most of the listed realty firms have their operations.

“In the short term, the sentiment that there could be correction in the property market in tier-II and tier-III cities led to the downfall in these stocks. Whenever the interest rates have gone up, presuming the slide in demand the market has factored it immediately,” says Ashutosh Narkar, senior analyst, India Infoline.

Rajen Shah, chief investment officer, Angel Broking, believes that the stocks, which were quoting at very high levels, have now come down to saner levels.

Mumbai : Kalina joins the real-estate frenzy

DNA reports

MUMBAI: The season of big-ticket real estate purchases continues. On Wednesday, the Orbit Group bid for and won a two-acre (93,000 sq ft) plot owned by Gujarat Ambuja Cement at Kalina for an astounding Rs333 crore.

Orbit’s offer beat the Rs331 crore pitch by Wadhwa Builders and the Rs304 crore proposition by Kalpatru Developers. The price per sq ft (psf) works out to about Rs20,000, which is higher than the rate for the last sale at the Bandra Kurla Complex. Mukesh Ambani’s Reliance Industries had quoted Rs18,000 psf last year for 65,000 sq ft.

Explaining the high bid, Pujit Aggarwal, Orbit Group managing director, said, “The office rental market is booming. In the past few years, we have received offers from finance companies which are willing to pay between Rs250 and Rs400 psf.”

Besides, office space at the BKC is being quoted at between Rs28,000 and Rs30,000 psf. “Considering the plot’s proximity to the BKC and the shortage of good quality commercial buildings, we are confident of commanding a good price even if we decide to sell space outright,” he said. Orbit can develop up to 4 lakh sq ft of space on the land.

The deal comes as good news to the Mumbai Metropolitan Region Development Authority, which auctions plots at the BKC. The MMRDA is scheduled to call for bids for a similar-sized plot on March 21 and has set Rs18,000 psf as the reserve price. With a Kalina plot fetching almost Rs20,000, all eyes will now be on this

Tuesday, March 06, 2007

Realty firms cash in on land near upcoming SEZs

Real estate companies are rushing in on the opportunities galore around the two SEZs promoted by Reliance Industries - Maha Mumbai SEZ and Navi Mumbai SEZ, which it has started in JV with CIDCO.

Both SEZs are located in Raigarh district and will cover a land area of 14,000 hectares.

According to industry sources, many individuals have also bought land in the Mandwa and Alibag region on the hopes of escalating prices due to proposed SEZs and Rewas-Aware seaport.

To start with, city-based construction firm Samira Habitats is planning to set up a services SEZ in Poynad, Poynad is 6 km from the MMSEZ. It has already appointed Meghraj SP Corporate Finance to scout for private equity partners for the venture.

Real estate major Hiranandani Constructions has also bought 200 acres of land in Nagaon near Alibaug, which is nearly 24 km from MMSEZ. The company is in the initial stages of development plans, a company official said.

Out of the 200-acre land bank the company has with it, it would use 25-40 acres for the SEZ and the rest for the health farms, medical facilities, a international educational institution, a three-star hotel around the SEZ. It has envisaged a investment of more than Rs 100 crore for the venture.

Sameer A Nerurkar claims that the services SEZ would compliment the MMSEZ and NMSEZ. "We want to explore the opportunities spilled out from these SEZs. We are not in competition with the existing SEZs, but to compliment them with auxillary services".

"In the next four to five years, Alibag will not remain as a gateaway destination but will become a suburb to the SEZs. With the world-class infrastructure, well-paying jobs and hi-if lifestyles, the surrounding areas will get great demand.With the upcoming SEZs, a lot of rich and famous are buying land in the areas surrounding SEZs." says Nerurkar.

Apart from the SEZ plan, the company is also planning to foray into medical tourism with a US-based company to set up a JV.

Nerurkar says that his firm was aiming to tap the large chunk of European and US tourists availing medical services in the South East Asian countries and to build upon the union government's target to achieve a business of $1 billion by 2010 by promoting medical tourism in the country.

Samira has a land bank of 600 acres in Alibag and surrounding areas and Panvel. It buys land near the upcoming SEZ, port and potential areas of development.

In Alibag, it is building 'gated community projects', which are cantonment-like projects and building super-luxury villas with an investment of Rs 300 crore, in which it plans construct 50 villas in the first phase and 100 villas in the second phase.

On the North end of the SEZs, the firm has 150 acre of land in Nerual, where it plans to build a mixture of mass housing and villas.

"We are buying land to lock both end of SEZs - villas in Alibag area and mass housing in Panvel," Nerurkar adds.

Monday, March 05, 2007

Govt Revises Guidance Value in Bangalore

Land becomes dear
Govt Revises Guidance Value, 100-400% Rise In Upmarket Areas
Kudli Gururaja TNN

Bangalore: Here is a shocker for those who are dreaming of buying a site or constructing a house in Bangalore. The government has revised the guidance value of prime areas in Bangalore by one to four times.
The notification was issued on February 28 and March 14 is the last date for filing objections. The objections can be filed before secretary, central guidelines committee, BWSSB, Cauvery Bhavan, through post or handed over personally.
With the guidance value having gone up, Bangaloreans will have to pay higher registration fee while buying land and buildings. Land prices already being sky-high, the decision is bound to pinch the middle class further.
The guidance values of land that come under the 12 registrar offices in Bangalore have been revised. The new values will be applicable in Basavanagudi, Gandhinagar, K R Puram, Jayanagar, Rajajinagar, Shivajinagar, Srirampura, Bangalore North, Bangalore South, Yelahanka and Anekal registrar offices. There is a bonanza for those who own farmland in Anekal: the land priced at Rs 4.2 lakh per acre has shot up to to Rs 10 lakh per acre after the revision.
In Tata Silk Farm area, it is quite steep: the revised value has shot up to Rs 4,000 from Rs 1,000 per sq ft. Bellary Road (up to Mehkri Circle) has also seen a steep revision: from Rs 3,000 to Rs 7,000. The revision is over double in Jayanagar 9th block: from Rs 2,000 to 5,000 per sq ft. So also Bannerghatta Road from Rs 2,000 to Rs 4,000.
In Annepura, Azadnagar areas, the guidance value for one sq ft has gone up from Rs 500 to Rs 1,000; in Banashankari I stage, it has been increased from Rs 1,500 to Rs 2,000 per sq foot, while in Srinagar Layout from Rs 800 to Rs 1,300 per sq ft, Ashoknagar Rs 1,200 to Rs 1,900 sq ft, Chennammana tank from Rs 1,000 to Rs 1,650 sq ft, and Hosakerehalli BDA Layout from Rs 1,000 to Rs 2,000 sq ft.

The new rates

Bangalore: The government has revised the guidance value for the following areas. The revised rates are: In Gandhi Bazaar, the value has nearly doubled from Rs 2,500 to Rs 4,500 per sq ft, Kanakapura Road from Rs 2,200 to Rs 4,500, South End Road from Rs 2,200 to Rs 5,000.
In Hanumanthanagar cross road area, the value has gone up from Rs 1,400 to Rs 1,950 per sq ft, Lalbagh Road from Rs 2,500 to Rs 4,500, Kathriguppe Rs 1,000 to Rs 1,600.
Land in RT Nagar too has become quite expensive: in first and second blocks the revision is from Rs 2,000 to Rs 3,000 per sq ft. In the upmarket Sadashivanagar, it has gone up from Rs 3,000 to Rs 4,500. In Madivala BDA and BMRDA layouts for every sq ft which was Rs 105, it is now Rs 450. In Sarjapur, value of agricultural land is revised to Rs 34 lakh per acre. TNN

Yen carry trade and the housing bubble

Was the Yen-Carry trade the mother of all bubbles including India's housing boom ? The DNA article makes some interesting points on the amount of liquidity the Japanese banks provided which has fueled booms in unbalanced markets like India's property bazaar

All liquidity starts in Japan, the world’s largest creditor country. When rates go up here, rates go up everywhere. — Jesper Koll, chief economist for Japan, Merrill Lynch

MUMBAI: These nineteen words form the microcosm of the current global stockmarket mayhem.

Jesper Koll was referring to the universal bogey called the yen carry trade.

It’s a business where “trillions” of dollars are involved. “Trillions”, because nobody on earth has any idea how big a Frankenstein has been been spawned by this vast and prolonged leverage.

Which brings us to the question, what are yen carry trades?

Since March 2001, Japanese interest rates have ruled at 0%. Leveraging the yen thus offered gains of about 300 basis points (“3%” in layman terms) on a platter to anybody wanting to earn.

Just borrow in yen, convert the money into dollars, buy US treasuries that yield about 4.5%, pocket the difference -- after deducting expenses including about 100 basis points in hedging cost.

A caveat is due here: to earn from US treasury bills, the yen/$ rate has to remain steady. But investing in high-yielding emerging market equities like India is far more lucrative.

Why have yen carry trades unravelled now?

The answer lies in the unexpected surge in growth in Asia’s largest - and the world’s second-largest — economy to 4.8%% in the fourth quarter of 2006. This figure may be raised to 5.1%, Koll told Bloomberg,, because corporate investments surged 16.8%, the fastest increase since 2002, data released on Monday show. This growth forces the Bank of Japan to increase rates.

Look at it another way: for years, Bank of Japan has bankrolled the yen-carry trade across the globe and you know what Koll means.

The alarms started going off in the leveraged world when Japan first raised its interest rates to 0.25% on July 14, 2006. This was further raised by 25 basis points on February 21, 2007. The problem is, returns on carry trades move inversely to the appreciation in yen.

So, as a carry-trader, if you have borrowed in yen, you have two worrries: you need to pay more by way of interest (when you borrowed, it was at 0% interest, now you have to cough up 0.5%), and your principal has suddenly bloated too (you borrowed in yen, converted the money into dollars and invested. With the dollar weakening against the yen, to pay back the principal, you need more dollars to get as many yens now).

On a mark to market basis, thus, a borrower ends up being worse off every minute he holds on to the trade. There are two exit routes available now - close out positions, take the loss, or hedge using swaps.

Another related development is that one-month deposit rates in Japan has risen 13 basis points to a six-year high of 74 basis points, according to Bloomberg data. Singapore-based Callum Henderson, head of currency strategy at Standard Chartered Bank, told Bloomberg this means Japanese money is definitely going home. “The spike in short-term Japanese rates will exacerbate the rally in the yen,” he said. The appreciation, thus, can feed on itself as the economy surges ahead.

Which brings us to the most important point, what would India’s exposure to yen carry trades?

It may be more than what analysts estimate, as the form of carry-trade varies. In October 2005, BusinessWeek estimated that more than half the money coming into Indian stocks from abroad is of Japanese origin.

An RBI spokesperson could not provide DNA Money disaggregated data on yen inflows on Monday. There is no data with Bank of Japan or the Bank of International Settlements on global yen carry trades, either.

Data in public domain show Deutsche Asset Management has raised nearly a billion dollars from Japan, for investment in India, beginning from December 2004, while Fidelity Investments has a $1.4 billion fund. In all, about half-a-dozen such megafunds exist in Japan.

Merrill Lynch Investment Managers and JP Morgan Fleming Asset Management have also raised monies.

The sums, thus, are difficult to quantify, but the form itself may give the extent to which India is exposed to the yen. Some of the forms are:

* Japanese investors in India. Funds that borrowed in yen and invested in Indian assets in many forms — equities, real estate, stock futures arbitrage, interest rates and credit spreads.
* NRIs exposed to yen borrowing and deploying the money in Indian deposits to take advantage of higher carry and weaker yen.
* Banks and corporates which borrowed in yen and hedged the principal but not interest payments.

This plus many other forms that we do not know of are leading to yen strength translating into weakness in Indian asset classes.

Has the world seen a yen carry trade unwinding earlier? Only once, in October 1998, which led to the spectacular collapse of Long Term Capital Management in the US. The Federal Reserve had to bail out US banks and brokerages then.