Thursday, October 18, 2007

No home slowdown in India

This article by WSJ lacks indepth research. The Sigrun project in Mumbai is Virar, the northernmost tip of Mumbai stretching 60 km from Churchgate. Sigrun is building second homes for the uber rich rather then building low and middle income housing. Virar is adjacent to the Arabian sea and a very beautiful place along the coast. Recent developments have trashed the area due to rampant haphazard construction. Neverthless I have fond childhood memories of the place.
Bidadi is another beast which is home to H.D. Kumaraswamy's constituency. All these developers are targetting the upper middle class segment which has easy access to loans due to their high salaries. The real housing need will not be satified by these developments. Ofcourse the rich will get richer as these prices will rise once everyone decides that a second home is a good investment.

Urban migration triggers slew of residential projects; suburbs in chunks
THe Wall Street Journal

T he housing markets in the U.S. and the United Kingdom have been slowing, but in India, largescale residential projects are only getting bigger.

India's massive urban migration-it is estimated that 220 million people there will migrate to cities in the next decade-has triggered a slew of large-scale residential developments. The rural exodus is largely being driven by workers leaving India's agricultural sector to take up more-lucrative employment in the rapidly expanding service and manufacturing industries.

Forecasters estimate that India has a shortage of about 20 million housing units-and counting-intensifying the need for more dwellings.

The government has created a number of initiatives to address the shortage, includ ing the creation of "townships," or satellite towns located close to big cities such as Bangalore, where overcrowding is most severe.

Township projects are taking shape in various parts of India, but one of the biggest undertakings-the first phase of which is expected to provide homes for around 750,000 people when completed-has been drawn up by the Banga lore Metropolitan Region Development Authority, formed by the state government of Karnataka to oversee planning and development in the Bangalore area. The ambitious development will create five integrated townships, which will be developed through a partnership with private developers over a roughly 60,000-acre site.

This month, Indian develop er DLF Group & Limitless, a development subsidiary of Dubai World, the business and investment-holding arm of the Dubai government, were tapped by the authority to develop the first of the five townships, Bidadi.

Together, the two companies will invest $12 billion in the project, a 9,884-acre development located 22 miles southwest of Bangalore.

"Satellite towns are essential as the services and manufacturing sectors grow and more people move from the countryside to cities," says Anurag Mathur, deputy managing director of real-estate advisory firm Cushman & Wakefield Inc. in India. "The infrastructure is under enormous pressure in towns such as Bangalore, so the aim of projects such as Bidadi is to decongest city centers."

Bangalore is on course to follow the example of some other major Indian cities to build entire suburbs in huge chunks to meet the hunger for quality housing and office space for one of the world's fastest-growing middle classes. Thanks to changes in the law that encourages foreign investments in Indian development, many of those townships are joint partnerships between established Indian developers and Western realestate investors, including U.S.-based Tishman Speyer Properties LP, Marathon Asset ManagEment and Walton Street Capital LLC.

In addition to dwellings, Bidadi Township will have a retail, office and recreational component, according to Imad Benharouga, head of corporate strategy at Limitless in Dubai.

Construction is expected to start in the first half of next year and take five years to complete.

Plans for Bidadi also include the largest technology hub in the country and one of the largest in the world, says Karun Varma, head of transaction services in Bangalore at real-estate advisory firm Jones Lang LaSalle Inc. The aim: for workers to both work and live in the vicinity, cutting down on commuting time.

Schools, parks and medical facilities are also going to be developed.

"It is a challenge to build a large township like this in such a short time, which is why I think the government chose a big developer to do it. However, you need aggressive and challenging timelines to make projects like this happen," says Mr. Varma, who isn't advising on the project.

This month, Indian conglomerate Sigrun Group started construction on a 200-acre township on the northern outskirts of Mumbai. Sigrun Kingdom, as it is known, will consist of around 7,000 homes, as well as shops, offices, medical facilities and schools, according to Sheetel Chantel Halai, head of South Asia at real-estate advisory firm Savills in London, who is advising on the project.

Banks reduce loan interest rates

IDBI Bank today reduced its floating rates on housing loans by 50 basis points to 10.50 per cent, following in the footsteps of the State Bank of India (SBI) and ICICI Bank, the two largest lenders in the country.

An IDBI Bank release said the new rates were for loans taken between October 12 and December 31.

The bank has launched a “buy now, pay later” scheme, under which loans for properties under construction can be paid in equated monthly instalments after a moratorium of 18 months.

While the SBI has cut interest rates on home, auto and personal loans by 50-100 basis points, ICICI Bank has reduced its rates by 0.25-0.50 per cent.

Bank of Baroda, Axis Bank and HDFC have also reduced rates.

In September, HDFC had cut its rates on floating home loans by 0.5 per cent.

The cuts are a consequence of a fall in the rate of growth of credit to 24 per cent in the first half of the fiscal from 31 per cent a year ago.

This is the result of the Reserve Bank of India (RBI) adopting a tighter monetary policy, to check liquidity and curb inflation.

Banks have been clamouring for a softer interest regime ahead of the RBI’s half-yearly monetary review on October 30.

Recently, finance minister P. Chidambaram had asked banks to cut interest rates to boost sagging demand in sectors such as auto, paper