Sunday, June 15, 2008

Religious tourism: Spirituality propels Haridwar realty boom

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Religious tourism: Spirituality propels Haridwar realty boom

HARIDWAR: Instant karma has emerged as the driving force behind the state's multimillion-dollar realty industry, with religious tourism turning the twin towns of Haridwar-Rishikesh into hot spots for developers, industry trackers say.

With the two holy cities being located some 200 kilometres from the national capital, Haridwar and Rishikesh are fast becoming a favourite with residents of Delhi and its adjoining areas looking for a bit of quick spiritualism.

Subsequently, these places have become almost an extension of Delhi-Gurgaon for spending the weekend.

"Most of our flats are purchased by the residents of Noida-Gurgaon who visit a couple of times in a year to get a taste of spirituality," says the manager of Gayatrilok Apartments on the Haridwar-Roorkee highway.

Today, it is not only the local developers who are reaping benefits but also big players such as Super Tech, DLF and Sahara, who have now forayed into construction of shopping malls. For instance, the Deep Ganga group of Delhi has already tapped 75 percent of projects.

Real estate major Vardhman group and velvet exporter Rishabh Veleveleen are investing Rs.4 billion to develop a new township Vardhmanpuram, which will have customised villas and interior decorations of the buyers' choice.

"Hardwar, being an important religious place on the world map, has good growth prospects. Statistical figures show that religious towns of India at large are witnessing more than 45 percent annual rise in property prices against the average 25 to 30 percent in tier-II cities," says Vardhman chairman U.C. Jain.

The township proposes to “blend” spiritual living with modern features like open-air theatres, swimming pools, spas, healthcare centres, and shopping plazas with large expanses of greens thrown in.

People at the top corporate management levels, who relocate themselves from big cities, are adding to the shortage, which is being tapped to the hilt by residents of developed neighbourhoods like Shivalik Nagar.

Says Shivalik resident K. Ghai, a retired BHEL executive: "My one-room set here fetches me more monthly rental than the one near Chandigarh, which has more covered area and is located in a newly-built township."

Development is concentrated in Haridwar and Rishikesh, as 90 percent of the state is part of the Ganges and the Grand Himalayas, and the only available land for housing and infrastructure developments is available here.

"There is a huge demand for good housing from foreigners and NRIs who wish to invest here as post-retirement options," says Manoj Gupta, a local real estate developer.

Adding to the demand are forthcoming events like the residential yoga camps and festivals by religious organisations and the Uttaranchal Tourism Board, as well as the Kumbh Mela in 2010.

Growing industrialisation, driven first by hydel projects at Tehri, Maneri and Joshimath, is now doing its bit.

The industrial development area in Haridwar has been declared an “excise free zone”, and companies like Hero Honda, Hindustan Lever, Mahindras, and ITC apart from a clutch of pharma and cosmetic companies are setting up facilities in Haridwar.

The upshot: there's going to be more shortage in Haridwar and Rishikesh. As builders say, these are “the next destination” spots.

Real estate sector facing severe cash crunch

The recent bloodbath in the real estate sector has started taking a toll. Almost all large developers are now facing a severe cash crunch and finding it difficult to complete their ongoing projects. In fact, the situation is so bad that most of them have reported a 50-70% cash shortfall. Industry sources told SundayET that the liquidity crunch has forced many developers to pick up cash from the unorganised market at interest rates as high as 35% to 50% annually. The lending rate of banks is between 18% and 20%.

The grade A developers which are facing crash crunch include DLF, MGF Emaar, Shobha Developers, Unitech, Omaxe, Parsvnath Developers, Hiranandani Group, Ansal API, BPTP Developers and TDI Group.

As a result of the crash crunch many developers have started going slow or even stopped construction of projects which are either in their initial stages of development or which would not affect their bottomline in the near future. While most developers that SundayET spoke to, agreed with the problem at hand, none of them were ready to be quoted on how it had affected them.

“There are visible signs that the global liquidity crunch has started to impact real estate companies in India. It is becoming extremely difficult for both small and large realty companies to organise financing, given the global liquidity crisis. The recent slowdown in demand, high interest rates, rising input costs and meltdown of realty stocks have only added to their problems. The real estate companies are in dire need for credit and other sources of capital to complete projects at hand and also to sustain their expansion plans. Some companies are able to access capital, albeit at very high costs, which in the long run may not be a sustainable solution, especially given the size of the market and consequent need for large chunks of capital,” says Cushman & Wakefield executive MD (South Asia) Sanjay Verma.

Many in the industry feel that notwithstanding the final verdict on the extent of global economic slowdown and recovery of financial institutions, real estate players in India may continue to face liquidity problems in the near future due to global credit crunch and unfavourable stock market conditions for raising capital.

What’s more, bankers say they may now get more cautious towards lending to real estate developers. “Real estate companies have many projects at hand and the sales have been constantly dwindling. Analysing these sentiments, any financial institution will be cautious. Remember, during monsoons, housing sales come down and banks may have to consider increasing interest rates further in future,” says HDFC Bank chairman Deepak Parekh. State Bank of India (SBI) is no different. It is also contemplating similar measures. “We are not sure for how long the current volatility will exist in the realty market. Also, banks need to maintain their reach among their clients. However, it is possible that all banks may sanction loans to only those developers with whom they have had a long relationship,” says a top SBI official.

Industry experts feel the only avenue available for raising capital in the current situation is at the project SPV level and by way of private equity or similar sources, which is generally the most expensive method of raising capital and has limitations on the over all extent of financing that is required. “Concerns about liquidity will continue to plague the market since debt will not be easily available. Real estate players had traditionally raised money from debt funds via corporate deposits and commercial paper. However, debt funds are currently not eager for more exposure in real estate and are continuously rolling over the debt advanced to these players. The primary source for institutional funding will, therefore, now be private equity,” says JLLM chairman & country head Anuj Puri.

Chennai's realtors skid on fuel price hike, inflation

CHENNAI: Promoters of ongoing real estate projects, worth over Rs 4000 crore, are reworking their pricing strategies as rising inflation and the fuel price hike have pushed up input costs.

Steel prices, already northbound, has shot up by over 30 per cent since fuel costs went up, Builders Association of India office-bearer MK Sundaram told reporters.

Transportation has become more expensive with petrol costing Rs 5 more per litre, and diesel Rs 3 more. Other items like sand are dearer by nearly 40 per cent, he said.

The situation has been trickier for promoters by the 8.24 per cent inflation that many had not factored into their contracts.

Subsequently, cost overruns have become common, and several projects have become unviable. With contractors beginning to lose money, Sundaram said some projects have had to be deferred and labour laid off.

"Who will buy a flat pegged at Rs 2,500 a sq ft at double the price when the cost of funds also go up while salaries don't?" Sundaram asked. "The price hikes have hit the industry hard."

Construction major HIRCO, which has a huge project under way in Chennai's southern suburbs, is likely to rework prices for sales of completed projects by at least 20 per cent, company officials said on condition of anonymity.

"We will have to assess the sentiments of buyers, especially in the light of rising cost of funds and several other fiscal parameters," a HIRCO official said.

While the HIRCO project, spread over 500 acres is expected to have a total outlay of at least Rs 800 crore, Puravankara, another construction major, has at stake a project worth Rs 3 crore at current prices, according to independent estimates.

Other construction projects - Chennai's version of London's Tube and flyovers - may also suffer due to huge cost overruns, industry sources said.

Chennai Metro Rail Limited - a public sector company owned by the state government - has worked its cost at a little under Rs 1000 crore at current prices. This could go up by at least 50 percent when work begins in 2009.

And, by the time it's completed in 2014, the cost may have escalated 300 percent, sources at Larsen and Toubro, another construction major said.

The reasons are not difficult to fathom.

The Tamil Nadu government's takeover of sand quarrying, citing profiteering by private contractors, resulted in a temporary shortage, sending prices higher by almost 45% within a span of two months.

The fuel price hike has only worsened matters.

Present indications of a further fuel price hike may render several projects financially unviable, said non-resident Indian financial expert R Rao, currently on a visit to India from the US.

"We seem to be planning for day before yesterday. Lack of infrastructure and short-sighted planning render whatever is created financially unviable," Rao told IANS. "Consumers do not get their money's worth."