Sunday, March 21, 2010

Big ticket land deals end 18-month

18 acres 570crores = ~31 crores per acre in Ghatkopar, with an FSI of 1:1 one can build 90,000 sq ft leading to a price of 3400 per sq ft. With an FSI of 1:2 that is down to 1700 per sq ft. Now with a construction cost of 1000 rs per sq ft, the cost basis is 2700 rs per sq/ft. These properties will be loaded up 35-40% , so a 1000 sq ft apt will actually have 600-650 sq ft living space . An apt with a cost price of 2700 x 600 = 16L will be sold for 10,000 Rs per sq/ft leading to a price of 1 Crore(1000 x 10000) , thereby generating a return of 600% to the builder. Great job guys in looting the Mumbaikar of every available living space.


Livemint.com reports


Raghavendra Kamath / Mumbai March 22, 2010, 0:23 IST

High-value land deals are back in the country’s commercial capital after an 18-month break. The first two-and-a half months of this year have already seen developers, with more cash at their disposal from rising home sales, close half-a-dozen deals worth Rs 4,000 crore.


Three large property deals have already been finalised this year in Mumbai. The largest among these is the bid to develop a 250-acre plot in Kharghar (Navi Mumbai) for Rs 1,530 crore. The deal was won by a consortium of Bhushan Steel and Subhash Chandra’s Essel Group from the City and Industrial Development Corporation of Maharashtra (Cidco).

This is the biggest land deal in Mumbai for the past 18 months.

Soon after came a Rs 571 crore deal by the Wadhwa group to buy 18.18 acres in the Ghatkopar suburbs from Hindustan Composite, and Sheth Developers bought Golden Tobacco Company’s property in Vile Parle for Rs 591 crore.


More mega-deals are expected. For instance, sources said Jet Airways, which bought land in the Bandra Kurla Complex, for Rs 826 crore around two years ago, is close to signing a deal to sell the land in a joint development project.

Despite facing setbacks in land auctions in 2009, government agencies like the Railway Land Authority (RLDA), National Textile Corporation (NTC) and Mumbai Metropolitan Region Development Authority (MMRDA) are planning to auction their land this year again.

Leading the pack is RLDA, which managed to sell only one plot last year due to the property slowdown. In the next financial year starting April, the authority is planning to raise around Rs 4,500 crore from selling 25 sites covering 172 acres.

“Overall participation from developers has also improved,'' confirmed P D Sharma, member, planning and infrastructure, RLDA, the nodal agency for developing surplus land of Indian Railways.

He said RLDA received 20 requests for qualification (RFQ) from well-known developers for its Sarai Rohilla plot and 14 expressions of interest (EoI) for the Bandra land. RLDA is having to re-auction the Sarai Rohilla plot because the previous winner could not pay the bid money.

Though NTC's last attempt to sell its Finlay Mill in Mumbai to the Lodha group is yet to materialise, it is planning to sell two or three more defunct Mumbai mills to developers.

Bolstering the upsurge in demand for commercial land is the rise in home sales. After a 25 to 30 per cent drop from their peak, home prices have gone up 15 to 20 per cent in the last nine months as demand returned to the residential market.

“Finished product (home) sales have gone up. As a result, developers are willing to pay higher prices and buy land now. They would not have paid such prices a year ago when home sales were low,'' said Anuj Puri, chairman of global property consultant Jones Lang LaSalle Meghraj.

“Developers’ liquidity positions are certainly better now than a year-and-a-half ago. We are seeing a lot of non-banking finance companies and mutual funds lending money to developers now,'' added Parry Singh, managing director of Red Fort Capital, an India-focused realty fund.

Most land buyers in Mumbai are planning to build premium residential apartments to make the most of their expensive investments.

“Today an average product does not sell. Only good products by good developers sell. A lot of developers are stuck with title issues, poor sales and so on,'' said Vijay Wadhwa, promoter of Wadhwa group.

Wadhwa has already pre-sold 0.5 million square feet out of 1.6 million sq ft of built-up space in the Ghatkopar residential project and Sheth Developers is planning premium residential apartments on its newly acquired land.

DLF, the country's largest developer, recently changed its plans to build an office-cum-retail complex into a high-end residential complex in Lower Parel because commercial rents have fallen sharply. DLF bought the 17-acre Mumbai Textile Mill land from NTC for Rs 702 crore in 2005.

Puri says developers’ interest and ability to pay have also improved because the floor space index (FSI), the amount of construction permitted on a given plot of land, is increasing in Mumbai. Though the base FSI is 1.33 in the Mumbai suburbs, re-development projects on defunct mill lands, slums and so on get a higher FSI.

This time, however, the revival in land deals is marked by caution. This was evident at the MMRDA's recent land auction when none of the developers turned up because the agency's quoted price of Rs 3 lakh a square metre was considered too high.

“Though markets have revived, deals are being closed only at reasonable levels. There is money to be made but developers have realised that they need to be cautious,'' said Red Fort's Singh.

Developers such as Wadhwa group who bought expensive land parcels, say they are focusing on executing their current projects than buying new land.

Private equity funds are also equally cautious. “Though we are looking at property deals actively, we are focusing on those in which risks have been taken out and proper approvals are in place,'' Red Fort's Singh added.

5 comments:

Anonymous said...

Downfall has started. See the Sensex go down by 400 points today. Moreover, the US healthcare bill just passed. Dow is screweed too.

Anonymous said...

DOuble dip in US has started now. Indian investors and people investing in India would see a big drop in thier investments, be is stocks or RE.

Time to sell off both stocks and RE.

Anonymous said...

"A lot of developers are stuck with title issues, poor sales and so on", said Vijay Wadhwa.

"developers have realised that they need to be cautious", said Red Fort's Singh

RE downfall has started.

RE and stock markets will be screwed.

The economies world over are on artificial ventilator support.
And there is no actual recovery.

Only an illusion & artificial jobless recovery all over the world which is quite misleading.

shailesh said...

Foreign funds sneak into property business

MUMBAI: Foreign debt, banned in real estate, is finding its way into property firms, as bankers and lawyers help builders cobble together new deals to raise money.

Even though foreign loans, better known as external commercial borrowings (ECBs), are not permitted in construction, property firms have spotted a mechanism where the debt can be provided by foreign institutional investors (FIIs) registered with Sebi.

The two transactions are parts of a back-to-back deal struck among the NCD-issuing firm, the local NBFC and an FII. At least four developers, three from Mumbai and one from Bangalore, have raised over Rs 1,000 crore in the past few months through this route.

“It does not directly violate the Press Note on foreign investment in property, and such FII investment is within the overall corporate bond ceiling applicable to foreign funds....but it’s against the spirit of the regulation,” admits a senior banker who has advised one such NCD issuance.

Indeed, a few foreign banks have made presentations to property firms on the convenience of such fund raising that has become more attractive since the government plugged a loophole in the foreign direct investment (FDI) norms in real estate.

Anonymous said...

World stocks hit by Greek debt, India rate hike.

19-MAR-2010 : 7 Banks closed in one day in US.

On an average 12 banks are getting closed per month.

Siemens lays off 4200 IT employees.

Religare Cap lays off 17 execs from sales, research teams.

Job insecurity increasing.

RE players, speculators, investors. Still feeling bullish ? Still, in the state of denial ?