Blame builders, homes will cost you more

TIMES NEWS NETWORK[ THURSDAY, FEBRUARY 01, 2007 02:07:41 AM]

Buying a new home may turn out to be more expensive. This is not because of any hike in home loan rates. It is just the fact that builders, who face the prospect of being charged a higher interest rate on their loans, may well pass on the burden to home buyers.

With the Reserve Bank of India (RBI) forcing banks to set aside more capital for lending to property developers, loans to such developers and builders will be priced higher. Loans also may be hard to come by for some of these builders, with several banks already going slow on sanctioning funds to the realty segment.

While RBI’s move is aimed at discouraging banks to lend less to the real estate in the backdrop of inflationary concerns, in practice, the higher borrowing costs for the developer is bound to translate into higher rates for home buyers, said bankers.

India’s realty sector has attracted a huge amount of interest from both local and global investors fuelling a rise in property prices in even Tier II towns. Monetary policy authorities have consistently voiced their concern over spiralling property prices and the growing exposure of banks to the realty segment. Since 2005, RBI had forced banks to provide more capital while lending to the real estate sector, in an effort to discourage excess flows.

On Wednesday, RBI raised the standard provision for loans to property developers from 1% to 2%. This will mean that for each loan of Rs 100 crore that a bank disburses to a property developer, Rs 2 crore needs to be set aside from its profits as a provision.

To offset this impact of setting aside more capital in their own books for such a lending, banks will charge higher interest rates on loans to property developers, who in turn, may pass on the higher rates to customers. “By raising the provisions requirement to these segments, RBI is signalling that banks should slow down in giving loans to them, but focus on productive sector where the provisions remain unchanged,” KC Chakrabarty, chairman and managing director of Indian Bank said.

“Real estate developers are already feeling the pinch of the policy after RBI hiked the risk weightage to 150 basis points. Most banks have already slowed down on giving loans to them,” said TS Bhattacharya, managing director of State Bank of India.
Although RBI has not raised the risk weightage or standard provisioning for home loans, bankers feel that if their cost of funds rises in the near term, they may be forced to hike the overall lending rates, including home loan rates. Banks now charge about 9.25-10% for loans based on floating rates and close to 11% for home loans disbursed on a fixed rate terms.

The recent efforts by RBI to rein in credit to the realty segment do not seem to have quite worked. The RBI data shows that loans to commercial real estate continues to grow.

It rose by 84% on a year-on-year basis and accounted for 2.5% of non-food credit. The RBI data showed that as of October 2006, banks’ exposure to real estate was Rs 37,838 crore. A provisioning of 2% would mean banks would need to set aside Rs 756.76 crore.

Indian rates near four-year high

BBC reports

India has raised its short-term interest rate to its highest level since March 2003.

The central bank raised the cost of borrowing by a quarter of a point to 7.5%, but left other rates unchanged.

Policymakers said they had raised rates in a bid to curb inflation, which is significantly above targets at 6.1%.

The bank added it hoped the move would not hit growth, as it raised forecasts for economic expansion in the current financial year for a second time.

The central bank now expects growth for 2006/2007 of between 8.5% and 9% - compared with previous forecasts of 8%.

The economy grew 9.1% in the first half of the year to September driven by surging output from the agricultural sector, the Central Statistics Organisation said.

Warning

"Demand pressures appear to have intensified, reflected in rising inflation, high money and credit growth, and elevated asset prices," the central bank said.

It also warned about rising house prices and the surge in credit growth, which it wants to see reined in.

As a result, the central bank's move was a warning shot to the financial sector that it must "must moderate credit growth", finance minister Palaniappan Chidambaram said.

"Monetary policy takes some time to work...it would have a favourable impact on bringing down inflation," Mr Chidambaram added.

The government has also taken measures to try to combat inflation by cutting import duty on edible oils, steel and cement.

Navi Mumbai international airport project drives up land prices

Mumbai, January 30, 2007 - The proposed international airport project in Navi Mumbai is driving up land prices in areas such as New Panvel, Kalamboli and Kharghar. The City and Industrial Development Corporation of Maharashtra (CIDCO) has recently sold plots in the area for significantly higher amounts than recent market prices.

The Navi Mumbai International Airport would be one of the world's few ''greenfield'' international state-of-art airports offering world-class facilities for passengers, cargo, aircrafts and airlines. The airport will support the rapidly growing air travel needs of the Mumbai Metropolitan Region. It is expected to absorb annually 4.5 million passengers in its first operational year, doubling to 8.2 million by 2010 to 13.7 million by 2020 and 30 million by 2030 according to developer CIDCO.

The site of the airport in Panvel, to be developed through a public-partnership model, is located in an area of 950 hectares. CIDCO plans to sell 470 hectares in the periphery of the airport for development of hotels, malls, multiplexes and other aviation related facilities.

This real estate bonanza is sure to attract large developers to the area and drive up property prices. CIDCO recently sold 12 plots in the area for residential and commercial use at a significant premium to prevailing prices. For example, a 1535 sq.m plot was auctioned in New Panvel at Rs.47,200 per sq.m almost double recent prices. In Kharghar CIDCO has realised Rs.3,715 per sq.ft from a land sale.

Indiabulls raises Rs 1,200 cr

from Economic times
MUMBAI: Dev Property Development, an overseas arm of Indiabulls Real Estate, raised Rs 1,200 crore through an offer of its shares to qualified institutional investors at the London Stock Exchange on the alternative investment market (AIM) segment.

The company's shares will start trading on the exchange from Monday. Sources said LN Mittal, Fidelity, Capital Research and the government of Singapore have picked up large stakes in the IPO.

Dev Property Development will acquire minority stake in the projects of Indiabulls through a secondary sale of shares by the latter and by investing fresh equity capital in Indiabulls' projects for a total consideration of Rs 1,055 crore.

A fortnight ago, Morgan Stanley had invested big amount in city-based real estate company Oberoi Construction. The rush for Indian real estate projects is a reflection of the higher returns from properties vis-a-vis the stock market.

The stock market offers a return of 20%, while returns from real estate projects are as high as 25%. With higher disposable incomes, Indians are buying homes, splurging on entertainment and buying from retail chains.

Hence, there is a rush to build homes, entertainment and retail malls. Indiabulls had received Rs 437 crore by partial sale of its stake in Jupiter Mills and Elphinstone Mills development projects.

Dev Property has also invested Rs 618 crore in subsidiary companies of Indiabulls undertaking real estate projects. It would also have the right to co-invest along with Indiabulls in its future real estate projects.

Earlier, Knight Frank had valued Indiabulls' real estate projects at Rs 21,569 crore and Indiabulls' stake in its projects at Rs 15,125 crore.

Indiabulls' real estate business has been demerged to Indiabulls Real Estate and its shares are expected to start trading in February.

All shareholders of Indiabulls Financial Services received one share of Indiabulls Real Estate for every share they held in Indiabulls Financial Services.

In December, Indiabulls Infrastructure, a subsidiary of Indiabulls Real Estate, had sold 13.3% stake to LN Mittal and Farallon for a consideration of Rs 447 crore.

The Dev Property IPO was managed by Deutsche Bank, Citigroup and UBS. The lead marketing agent of the issue was CLSA and KPMG is the statutory auditor of Dev Property Development.

RBI may push up housing loan rates

from Rediff.com

The housing sector is likely to face rise in interest rate and other restrictions as the Reserve Bank of India announces the quarterly review of its credit policy on January 31.

The bankers say that with the clear directions of the government to bring down inflation through monetary measures, the RBI has limited options apart from raising repo and reverse repo rates.

ABN Amro Bank's chief economist Abeek Barua said, "We are expecting increase in repo and reverse repo rate by 25 basis points, besides increase in capital requirement and risk provisions especially for the housing sector."

He said although the interest rates for the housing sector have gone up by as much 2.5 per cent in recent past, but it may further go up by 0.5 per cent over the next quarter as the banking regulator is likely to raise risk measures for housing sector.

"We feel the property market has overheated in select cities, where we have become stringent in sanctioning loans," K V Kamath, CEO and managing director, ICICI Bank told PTI.

He said heating of the property market has made the bank cautious in mortgage lending, forcing it to adopt stringent sanctioning norms. The floating interest rate for the housing sector is hovering around 10 per cent while fixed interest rate is around 11 per cent.

Finance Minister P Chidambaram has also hinted that RBI will take effective monetary measures to bring down inflation, while ensuring that productive sectors do not face any credit crunch.

Bankers said that heating of the property market especially in the metros like Delhi and Mumbai, where realty prices have more than doubled over the past two years mostly due to easy lending by the banks, can force the central bank to put sectoral restrictions on housing and other sensitive sectors.

Chidambaram had cautioned that growth in non-food credit by over 30 per cent as against around 20 per cent growth in bank deposits is not sustainable. Expecting hike in housing interest rates, builders in the nation capital are asking the clients to book flats immediately.

Ansal API vice president Kunal Banerjee said, "If interest rate on housing loans rises further, it will adversely affect the middle class and thereby hamper the demand for real estate."

Bankers said though the restrictions put on the housing sector by the RBI during its last credit review has slowed down the housing loan market, but it could still take additional steps to safeguard the banks from the overheating sector.

Commenting on the expectations from the credit policy, Oriental Bank's CMD K N Prithviraj said RBI could consider increasing risk weightages for sensitive sectors.

Barua added that the RBI could also announce cut in statutory liquid ratio by 50 basis point or a time frame for that cut coupled with increase in repo and reverse repo rates to meet its objectives.

Bangalore's Boomtown Blues

from the BBC story on globalization.

Nitesh Shetty may be Bangalore's youngest property billionaire.

Aged 30, he has 4,000 apartments under construction in the city, with plans to expand his operations into Calcutta, Mumbai and New Delhi.

And he has just sealed a $100m deal with Citigroup to build Bangalore's latest luxury hotel, the Ritz Carlton.

Having dropped out of university pursue a career as a tennis pro he started supplementing his earnings by selling billboard space in Bangalore after getting a 10,000 rupee ($226, £115) loan from his mother.

At 23, he borrowed 500,000 rupees to turn a house in central Bangalore into an office block.

The home was owned by an old widow, and he gave her a 50% stake in the venture.

He then persuaded the bank to rent the ground floor - which covered his interest payments - and he never looked back.

Mr Shetty told the BBC there was no shortage of foreign investors eager to take a stake in India's real estate boom.

He has named all his luxury apartment complexes after famous US locations, such as Times Square, Key Biscayne, and Forest Hills (the US Wimbledon), and has hired the Australian cricketing legend Shane Warne to promote his properties.

But in true Indian fashion, Mr Shetty, a bachelor, still lives with his mum.

In the 1990s, when the Indian government decided to liberalise the economy and encourage the IT services industry, Bangalore established special zones such as Electronic City - a hub of hi-tech firms.

But its highly educated, literate workforce prompted the government to locate its defence and space research here in the 1960s.

Today the Bangalore boom is based on its attractiveness as the centre of India's IT industry, which is enjoying unprecedented growth as foreign multinationals rush to outsource their back-office functions to India.

The city's population has grown from 1.6m in 1970 to 2.8m in 1990 and 6.5m today, making it India's fastest growing city, and planners expect it to reach 10m by 2015.

India's IT sector employs 1.3 million people directly, and 3 million indirectly - and 40% of the IT sector is concentrated in Bangalore.

Bangalore also has the highest average income in India, and the jobs are plentiful, with Infosys expected to hire thousands this year.

Out on the town

There are six new shopping malls, and luxury car showrooms like BMW are springing up everywhere.

The young, well-paid worker likes to go out on the town, and restaurants and bars are doing a roaring trade, with 500 new bars in the city alone and dozens of cafes.

With a new bar opening every week, owners cannot get enough staff.

That's good news for the head barman at the newly opened Le Rock pub, who has been hired at double his previous salary.

And there has been a boom for taxi firms as the IT companies all pay them to transport their workers to and from their offices, given the hopeless inadequacy of the public transport system.

growth of Bangalore's population

Not that the new-found wealth always filters through.

Raj Singh came from Tamil Nadu 15 years ago to work as a taxi driver.

He still sends half his salary to his mother back home, and visits her two weekends a month, travelling for 15 hours on three buses.

But if his wages are higher, so is his rent. He cannot afford to live in Bangalore, and it costs half his salary even to rent a room in a village 30 miles away.

And many of the thousands of construction workers who have to build the new apartments and offices live in squalor in makeshift roadside tents that sit uneasily among the city's glamour.

Weekend breaks

The hi-tech industry has also introduced a new phenomenon in Indian life for those who are on-the-up - the weekend break.

Previously, everyone spent six days a week in the office, but the high-paid IT workers only do five.

With their high-stress jobs, they are increasingly interested in getting away from it all.

And into the breach has stepped Santosh, a trekking guide.

His web-based travel agency, Getoffurass.com, specialises in finding weekend hideaways in the jungle, and is doing a roaring trade.

Santosh told the BBC that the biggest change was that now he was leading Indians, not Westerners, in treks across the Himalayas.

Infrastructure woes

Bangalore's public infrastructure has lagged woefully behind the pace of private sector investment.

Every Bangalore IT company has to have a private generator and uninterruptible power supply to cope with the daily power failures of the grid.

Despite 15 years of lobbying, the 5km stretch of road linking Electronic City to the city centre is still crammed with bullock carts, trucks, cars and two-wheelers despite a private-public partnership to fund a new expressway.

And its international airport has an antiquated terminal far too small for the hordes of international businessmen flooding into the city - and the frenzied search for luggage as people gather five-deep around the single luggage carousel sometimes prompts emotional - and occasionally physical - outbursts.

Bangalore's city commissioner, K Jairaj, told the BBC that untrammelled growth could not go on indefinitely, with five million vehicles already clogging the roads and property prices going through the roof.

The government's policy is to decentralise development - building new towns on green field sites surrounding the city.

K. Jairaj, commissioner, city of Bangalore
The boss of Bangalore is critical of many of his workforce

Mr Jairaj also said that, in order to generate more jobs, the government wanted to encourage more labour-intensive sectors like car manufacturing to locate in Bangalore, and would not resist plans to disperse IT jobs to more cities in India.

But he said his greatest problem was the weakness of his own civil servants, who were not good at managing big projects "on time and on budget."

Cultural dislocation

For those Bangalore natives who do not have jobs in the IT industry, there are signs of increasing unease about the direction the city is going.

Some object on religious grounds to the wild nightlife, which was recently highlighted when the police started enforcing a curfew law that forbids disco dancing in bars after 11pm.

Others want the IT firms to give them a share of the good jobs.

They are calling for a reservation system, similar to that in the Indian civil service, which allocates a percentage of all jobs to the so-called "backward castes".

And many are disturbed by the fact that Kannada, the native language of Karnataka, has become a minority tongue in Bangalore, with English, Hindi, and Tamil all more widely spoken.

The state government has now insisted that Kannada, not Hindi, should be the language of instruction at school.

It plans to change Bangalore's name to Bengalooru in an effort to appease locals disturbed by the tremendous influx of outsiders into the city in the past few years.

The change still has to approved by the Federal government.

Tensions reached boiling point in April last year when crowds rioted outside Microsoft's global research centre in Bangalore after hi-tech companies failed to observe an unofficial day of mourning following the death of Karnataka's most famous film star, Rajkumar, the "John Wayne of India."

So despite its prosperity, the cultural dislocation brought about by Bangalore's rampant success in the global economy has, at least for now, increased rather than decreased political tensions.

Indian market ‘correction’ looms - Deepak Parekh

India’s real estate and stock markets are heading for a correction, with a liquidity crunch in the banking sector likely to accelerate the trend, according to one of the country’s most influential bankers.

Indian stock valuations are inflated and property prices in many areas are beginning to exceed what people can afford to pay, said Deepak Parekh, chairman of Housing Development Finance Corporation, which controls India’s second largest private-sector bank.

“I’m concerned about overheating real estate prices, I’m concerned about overheating of stock markets, that some of the valuations are not justifiable,” Mr Parekh said in an interview. “The kind of returns people got in the last two to three years, they would be foolish to expect this year. The Indian story is fully priced.”

Foreign investors eager to tap into India’s rapid economic growth of above 8 per cent have been pouring funds into stocks and specialist private equity funds investing in property and other sectors.

India commanded nearly half of foreign fund flows into emerging markets tracked by Morgan Stanley last year, with the average market capitalisation last year nearly 50 per cent higher than a year earlier.

In cities such as Mumbai, housing prices have risen threefold since 2004, with residents reporting increases in rent of up to 2.5 times in two years.

“Real estate has to do with affordability. There is no point building houses of a crore [Rs10m, $227,000] and two crores when people don’t have the resources to pay for them,” said Mr Parekh, whose bank specialises in loans for first homebuyers. Banks such as HDFC and its rival, ICICI, the country’s largest private sector bank, have been reporting credit growth of more than 30 per cent as Indians borrow to buy homes, cars and appliances.

But Mr Parekh warned that across the banking sector there was an emerging credit crunch with loan growth outpacing deposit growth by about 10 percentage points.

“This is a cause of concern because this creates higher interest rates and this creates a slowdown of the economy,” he said.

“The government keeps talking of a benign interest rate policy but with demand for funds in excess of the liquidity available, something has to break somewhere.”

He said he expected a correction rather than a crash, with the stock market likely to settle 10-20 per cent below its current levels and real estate price rises to stall rather than collapse.

Chetan Ahya, economist at Morgan Stanley in Mumbai, said indicators such as inflation and property prices showed the current economic growth rate was unsustainable in the short term.

“In our view, it’s not a risk, it’s pretty much very largely prevalent. The economy is overheating,” Mr Ahya said.

Credit Suisse, Sun-Apollo realtly funds enter India

Economic Times reports Credit Suisse's $1b to tap Indian realty

NEW DELHI: Zurich-headquartered Credit Suisse, a leading financial house of the world, is giving final touches to a dedicated $1-billion fund for investing in the booming real estate sector in India. The India fund is expected to be announced early in the next fiscal.

US-based Financial services giants Goldman Sachs and Morgan Stanley have managed a strong foothold in the real estate market in India. While Morgan Stanley Real Estate fund has struck a few large transactions in the space, Goldman Sachs is planning to make an investment of $1 billion.

According to sources, Credit Suisse’s $1-billion investment in real estate will be brought in in a phased manner by 2010 and will focus on commercial space. “The financial plans to build a real estate portfolio with an asset value of around $1 billion over the next 3-5 years.

High on its priority list are large-format retail malls, two-star and three-star business hotels, healthcare and multi-use office-cum-residential complexes,” a source told ET.

When contacted, a spokesperson at Credit Suisse’s Zurich office said: “We do not comment on rumours. If we would set up an India real estate fund, it would be announced by a press release.”

Sources said the fund will primarily pick equity in ongoing big-ticket projects or those looking for second round of funding to complete their partially operational projects.

The fund is unlikely to park money in start-up projects, the sources added. The fund is also keen on acquiring management stake in some projects post completion. Typically, after the financing of the project, financiers exit the project by selling the entire stake.

Credit Suisse is a 150-year-old company providing a gamut of financial services, including private banking, investment banking and asset management.

Financial Express reports SUN-Apollo Ventures Ltd has announced the closure of its $630-million SUN-Apollo India Real Estate Fund, which will pursue real estate development and investment opportunities in India. SUN-Apollo Ventures is a joint venture between the SUN Group, an Indian business and investment group principally owned by the Khemka family with operations predominantly focused on India and the countries of the former Soviet Union, and Apollo Real Estate Advisors, one of the most active global real estate investors and fund managers.

The fund was launched in April 2006 and had its first closing in August. Investors include , US, European and Middle Eastern institutional investors, multilateral agencies and high net worth individuals.Chetan Dave, MD, SUN-Apollo , said, “The dramatic growth in India's economy is generating significant demand for all forms of real estate, ranging from offices to shopping centres.”

Here come the moneybags

Outlook article

Space. That's the need of the hour for Indian industry, looking to grow in every direction. Companies are looking to occupy every inch of land they can lay their hands on to keep on their unprecedented expansion spree.

Inevitably, property speculation has emerged perhaps the hottest topic across boardrooms. Not just in India. The big guns of global realty are watching Indian real estate prices ever so closely as the country looks for ways to meet a demand for around 1,000 million square feet property over five years across seven major cities.

Those in the queue include top real estate funds managed by the likes of Blackstone, Broadstreet, Carlyle, Deutsche, Hines and Morgan Stanley.

And once they are in, these big funds -- with corpuses of more than $10 billion each -- may just re-landscape the Indian realty space. Like their equity counterparts, they are known to pump in big money and move in fast once they have figured out the local dynamics. Before you realise what, they may be sitting on huge chunks of land.

Explains a senior executive of a leading real estate fund in the US: "Each of our global fund managers run through about 700 actionable mails (where they have to take a decision on the spot) a day. The pace is very fast and we don't mind if we make a few mistakes along the way. The stakes are too high for us to slow down."

Not surprisingly, global funds are seen as aggressive risk-takers and conservative Indians might do well to start preparing for their big-ticket entry that's looking imminent.

And going by the great land rush across India, it seems India Inc is preparing for the deep pockets. Players from Reliance to Tatas to Infosys to Indiabulls are engaged in a never-before race to amassing land wherever it is available. We don't associate these names with real estate.

But then, that proves the immense potential of the sector. "Land is finite, money is infinite," quips a developer, hinting that the property boom is far from over. Instead, it has just begun.

The Foreign Interest

With rental yields in the US and Europe dipping to about 4-5%, squeezed by inter-fund trading given the lack of significant new realty development, funds are increasingly eyeing opportunities in emerging economies.

In Asia particularly, with Japan -- the biggest investment destination for such funds -- providing limited scope for growth given the land constraint of the island nation, a significant part of the region's allocation is seen flowing into China and India, two markets that provide scale for long-term investments.

"Foreign capital is looking for markets, where they can get returns. India is one such market where they can expect a return of 20% a year," says Shahzaad Dalal, vice chairman & managing director, IL&FS Investment Managers, the managers of IL&FS Realty Fund that has CalPERS, the US pension fund, as an investor.

Says Sanjay Verma, joint managing director, Cushman & Wakefield, "The drivers of investments for foreign investors outside the developed world are: need for diversification, to cash in on distress sale opportunities, high short-term price upsides and long-term growth potential. India and China fall in the last category and most investors will be looking at these realty markets with a 10-15 year perspective."

Agrees Elizabeth Dewitt, vice president, Trammell Crow Company, US, "Foreign investors were checking India out for the last five years. Now they are taking a long-term view on India."

So, what's the kind of money they are likely to bring in? Ankur Srivastava, managing director (India) of DTZ Debenham Tie Leung, a leading real estate advisor, sees at least 50 overseas investors coming in with $6.7 billion in equity, which leveraged could spell fresh investments to the tune of $15 billion.

And like in the equity market, foreign funds don't mind being the "loss leaders," meaning they don't mind losing some money in the early years to gain an entry and better understand the local dynamics. They'll wait to rake in the big bucks in the long-term.

Does this mean realty is set for a foreign fund-fuelled bull run, like the equity markets? Not quite. Real estate investments are not as easy to get into and get out of, thus the pace of investments is slower.

So while we are likely to see an up-tick in prices in the longer-term for sure, it might lack the fireworks of the equity market. Also, says Prakash Gurbaxani, CEO, TSI Ventures, "Entry of foreign investors does not affect prices on a stand-alone basis, price is more a function of demand and supply." TSI Ventures is a joint venture between ICICI Ventures and Tishman Speyer, one of the world's largest developers.

Now, despite India opening up the real estate industry to foreign direct investment (FDI is under automatic approval route for projects of at least 25 acres or a minimum built-up area of 50,000 square metre), it remains an over-regulated sector with archaic regulations.

So, foreign investors are looking to enter through joint ventures with local players who understand the regulations and other dynamics of the market. Morgan Stanley Real Estate Fund, for instance, has come in by taking a stake in Bangalore-based Mantri Developers. Emaar Properties of Dubai, which has brought in the largest FDI in the sector of $500 million so far, has entered into a joint venture with MGF Developments for residential, commercial and hospitality projects in India.

Says Shravan Gupta, managing director, Emaar MGF, "We plan to develop integrated townships of international standards that will raise the bar by bringing in best practices in technology, design, construction scale and most importantly, the consumer's expectation of his living and working space."

The India Story

To these global investors, India offers an opportunity that can absorb billions of dollars unlike many other markets. "On a macro level India is a good destination. Real estate is a subset of overall growth story," says Gurbaxani.

The prime driver for all these investors is the India economic and demographic story -- by 2010 India is slated to be the world's third largest economy with a 300 million strong middle class that's larger than the US's.

The IT sector alone would require about 66 million square feet of space by 2008, as per a Ficci survey. Industry expects a demand for 25 million sq ft for 200 malls coming up across the country, besides a significant surge in the hospitality sector.

Says Ashwin Ramesh, director, Prime Real Estate Advisors (an affiliate of Quantum Asset Management): "India has a mere 85,000 hotel rooms, compared to 135,000 in Las Vegas alone." On the residential side, Milind Korde, MD, Godrej Properties, puts the shortage of dwelling units at 20 million. This should see the real estate opportunity grow to $50 billion by 2010 from $12 billion today, say sources.

Cushman & Wakefield has estimated cumulative demand across Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, NCR and Pune at 840-1055 million square feet for 2006-2010.

This is the kind of projection that has made companies with no interest in real estate whatsoever till a few years ago enter the field. Reliance has bought a 14 acre plot in Mumbai's Bandra Kurla Complex for Rs 1,104 crore (Rs 11.04 billion); Indiabulls has put up Rs 441 crore (Rs 4.41 billion) for the Elphinstone Mills land in the city; Bata India is developing 260 acres of land it owned in Kolkata; SSI, an erstwhile software company, is building a township in Perambur in Chennai. . .

And then, there's a bigger realty game -- the special economic zones (SEZs). Everybody is rushing to join the SEZ bandwagon.

Reliance has already earmarked Rs 40,000 crore (Rs 400 billion) for a 25,000-acre project in Haryana. DLF Commercial Developers is investing Rs 800 crore (Rs 8 billion) in a 1,100 acre SEZ in Amritsar; Unitech has obtained clearance for a Rs 10,000 crore (Rs 100 billion), 20,000-acre SEZ in Haryana; Ansals have tied up with housing finance major HDFC for developing a Rs 1,000-crore (Rs 10 billion) IT SEZ in Noida (NCR).

And there are many more who have already clinched the deal or are in the queue. Says Pradeep Jain, chairman, Parsvnath Developers, which plans to set up 14 SEZs in the country at a cost of Rs 40,000 crore: " We have already tied up 6,000 acres of land and will start delivering developed property in the next two to three years."

Critics say the whole SEZ programme is a major land scam whereby corporates are amassing huge chunks of land at subsidised rates. And there's widespread criticism that the SEZs are not all about exports.

A comment by Anand Jain, director, Reliance Venture (the SPV floated for the project), lends weight to this school: "The multi-product SEZ should attract the top Fortune 500 companies and would have a theme park in a possible tie-up with Disney, Time Warner or Universal." Of course, there's a fun factor in the SEZs. The question is, will it be at the expense of the taxpayers?

SEZ, of course, is a controversy. And foreign players are keen to keep out of controversies. They are much more interested in realty projects in the hospitality (hotels) and IT/ITES sectors as the properties are normally of high quality and offer good returns.

Land Mafia

So, does the entry of big money mean the property prices are going to scale new highs? Nope. "Entry of foreign investors does not affect prices on a stand-alone basis, price is more a function of demand and supply," says Gurbaxani.

And in India, the supply side (land) holds the key. Land being a state subject, the laws and regulations vary from state to state. Besides, old laws like the Urban Land Ceiling & Regulation Act (ULCRA) are still to be repealed across many states.

Deepak Parekh, chairman, HDFC, points to estimates that expect real estate business to grow at 14% by 2011-12 if the Act is repealed to make a case for this. He also expects that this would curtail property prices by 40% in the next 5-6 years.

Says Manisha Grover, national director (research and strategic consulting), Jones Lang Lasalle, an international property adviser: "The key challenge in the development business in India lies in the procurement of land ready for commercial exploitation. This because of the high fragmented land holdings, title issues and infrastructure constraints that artificially restrict land supply." And the situation is unlikely to change in the near future.

What this means is that if you have control over a large land bank, you can rake in big money. Land being the raw material for development a large inventory ensures higher production and revenues. It is with a view that the laws are unlikely to change in the near future that developers are going all out to acquire as much land as they can and as soon as possible.

The land hoarding game has just begun and it could get uglier with more and more players joining the fray. Foreign investors also do not want to get involved in the land acquisition game -- they prefer coming in when land for projects has already been acquired, even if the returns are lower.

While developers look at returns of up to 50%, foreign investors are comfortable with even half that. They wish to play it clean and do not wish to get involved in unethical deals or legal battles.

"Foreign investors are extremely compliant," states Alok Vajpeyi, vice chairman and managing director, Dawnay Day AV Financial Services, an institutional realty investor. Implying, this means tremendous bargaining power for developers with large land banks.

In fact, there have been cases of proposals for tie-ups by foreign realty players with large developers not going through due to the valuation.

In this context, land being allotted at subsidised rates for development, as in the case of SEZs, by states offers an opportunity few would let go. However, here too any failure to complete the acquisition of the minimum required land area could put paid to any plans for development.

Besides, an SEZ coming up in the vicinity of a commercial and retail district could hurt other developers -- as their land costs are much higher. So the stakes are high.

But the real estate players are not unduly worried about the extra competition. "If you deliver quality stuff and on time, then there are no dearth of takers. And there is enough space in this sector for a few more players," says Pranav Ansal, director, Ansal API, one of the major developers in the country with nearly 6,000 acres as land bank.

The Price Prop

What's also helping keep prices firm for now, in what some believe to be an overpriced market, are supply factors -- little land supply and lots of money supply. Developers earlier were mostly buying and developing land with their own reserves and borrowings. Hence they would sell off the real estate at various stages of the project to fund new projects.

However, with foreign funds pumping in money their holding capacity has increased -- helping them to keep supply tighter. And the fund supply is only going to swell. According to industry insiders, $4 billion of realty fund investment is waiting to enter, with $1 billion already having received all regulatory clearances.

Some, however, believe the money may not flow in right away. "Investors want to enter but are waiting for a correction of about 20%," claims an official with KL Raheja Universal. Adds Akshaya Kumar, CEO, Colliers Jardine, a real estate advisory firm, "Over a longer time frame of two years, a lot of supply is expected to hit the market, and at that time there could be a correction."

But while areas like Whitefield in Bangalore have already seen a decline of up to 20% in capital values, Mumbai is a different case altogether. Says Korde of Godrej Properties: "In south and central Mumbai it is difficult to find a single plot of more than one acre. This is why recent deals of 10 plus acres have attracted a high premium."

In addition, claims Naresh Nadkarni, CIO of HDFC Venture Capital, "Developers from other cities have been most aggressive in their purchases." This he claims is to get a foothold in new markets. Thus, while there might be a multiplicity of factors driving prices today and varied opinions on how significant a correction we might see, the verdict for the long-term outlook remains almost unanimously upbeat.

Also, recently Securities and Exchange Board of India (Sebi) has waved the green flag for real estate mutual funds to make an entry into the country. And while this will offer another exit option to foreign funds -- besides the IPO route for equity or dissolution of joint ventures on completion and sale of projects -- in the future, experts expect that it might take a little time for them to hit the market.

This as certain issues need to be sorted out, like daily NAV disclosure. This can be possible if the illiquid part of the portfolio (up to 65%) is revalued every quarter and the liquid part marked-to-market on a daily basis. Again, while completed realty projects can be valued based on rental yield, there will be an issue with regard to valuing projects under construction.

These issues will need to be sorted out by the regulator before realty funds can become an investment option for investors at large.

Where It Hurts

Meanwhile, the rising property rates have already started hurting companies. Of course, those with real estate assets are having a nice time.

Glaxo, for example, did rake in Rs 221 crore (Rs billion) through the sale of its land at Mulund in Mumbai to Oberoi Constructions. And Mukand raised an almost similar sum by selling its 25-acre Kurla plot in Mumbai to a consortium of real estate developers. However, most others in Corporate India -- barring large information technology (IT) companies who have managed to get land allotted to them at attractive prices by states -- are feeling the pinch.

"The increase in rental values definitely impacts the operating costs of a business, occupancy costs account for about 10% of the operating expenses," says Manisha Grover of Jones Lang Lasalle.

This is what is prompting users of large commercial space to move to the peripheral locations in cities, she adds. The costs can come down by 50-80% by moving to the suburbs industry sources point out. For those in the retailing business, realty is a major overhead. It is no wonder then that retailers and developers have been working with alternatives to pure lease deals.

Deals based on a share of revenues subject to a fixed minimum guaranteed payment and hybrid part-lease-part-revenue share formats are gaining currency. Pantaloon and CapitaLAND have formed a retail management joint venture mall that will manage a portfolio of over 50 quality retail malls located in metros, mini-metros and tier-II towns within the next two to three years.

Crossroads, which was acquired by Pantaloon in Mumbai, will be one among them. To start with, the company will follow one such model for the Crossroads mall in Mumbai.

The entertainment segment too is feeling the heat. Says Manoj Bhatia, CEO, INOX Cinemas: "We will consider a property only if the acquisition rate is profitable at the ticket price we can charge." INOX has a mix of leased as well as owned properties for the multiplexes it runs.

For INOX, though, one positive is that the India story will also lead to greater affordability even as a realty boom unfolds. In fact, given that the realty bets placed by developers and foreign investors are based on the India story, the single biggest risk they face is an economic slowdown. For a developer and investor, the answer to one question holds the key: Do you buy the India story?

"Prices are headed up in India"

Karen Ellzey, managing director, Strategic Services, TrammellCrow Company, a top real estate fund in the US, was recently in India on her first visit. She spent time in Bangalore, Delhi and Mumbai with industry people. Prashant Mahesh caught up with her for an interview in Mumbai. Excerpts:

What brings foreign investors to the Indian realty market?

I think the whole thing driving interest in real estate investment is demographics. Anybody who looks to invest in real estate looks at population trends. In India there is a huge population, a population that is arguably not well served by real estate as per its growing needs. So that translates into opportunities for investors. There will be skilled labour, which will need place to work and live, and will want to spend money on new products and services. This all translates into a huge opportunity.

What do you read from the recent rush among companies and developers in India to acquire huge tracts of land?

It is conventional wisdom to control the dirt (that's what we say for owning land) which makes everything else possible. You want to be the first to get it, before everyone else rushes in at the lowest possible cost. That gives you the best position to respond to any kind of development.

So I would say it's an issue of strategic positioning, for whatever future opportunities that may come up. If somebody else owns it, you have a vision to build and you don't own that piece of dirt it is probably too late to realise your dream and vision.

Real estate prices have shot up in certain pockets of the country. Do you think it's rational?

Real estate price is a product of supply and demand. When demand is high and supply is low, market responds and prices goes up. In India, I don't see enough supply to match demand. As more and more land develops, prices will move up. Now is a good time to get into the market because as more and more real estate is developed it will increase in value.

Does the entry of foreign money push up prices?

Real estate follows a particular cycle in response to the economic cycle. Investors expect a top and bottom, with each economic cycle. There is a lot of growth opportunity and all I can say is that we are headed up, though it is difficult to predict the extent of rise.

More and more jobs are being created here, and disposable income is rising, which will lead to tremendous growth. However, sometime in the future, and I would not like to project when, real estate too will enter into a cyclical mode just as it did in the US.

What impact would high real estate have on business?

Certainly corporations look at cost. They also look at labour cost and speed at which the place can be ready for work or use. A lot of US corporates are conscious about branding and cost, how attractive the space is and so on.

Stop treating urbanisation as an evil

From the Hindu
What is it that has actually made Bangalore develop a robust clime for the real estate boom? Anurag Mathur of Cushman & Wakefield, India, spells out the USP of the Garden City to RANJANI GOVIND

Bursting at its seams, the Garden City is all poised to spread itself the horizontal way, even as the skyline is witnessing a veritable burgeoning of tall buildings both in residential and commercial sectors. The exponential growth steered by IT and ITES is gripping the city with terrifying traffic and infrastructure snags. Cloudy as it may seem now, sunshine is expected with developments like Greater Bangalore taking shape to envelop the contours and lighten the nucleus of the city, Metro Rail to ease road chaos, peripheral ring road expansions to bring in better connectivity and mechanised garbage collection for a more organised and cleaner lifestyle.

Amidst plans, developments and government proposals for the city's improvement, PropertyPlus caught up with Anurag Mathur, Deputy Managing Director of the global real estate consultants, Cushman & Wakefield, to get a grip of the `real' situation and ascertain the effects of resultant spread out.

Buildings are mushrooming at an alarming rate... getting urban is an uphill task.

As with any other major city in India, there has been a feverish activity with respect to land development within Bangalore. The Indian economy is booming, mainly with the backing of services and manufacturing industry; both of which require developed urban infrastructure. Unfortunately, the country has lagged in creating new urban centres unlike countries like China and Malaysia; this has resulted in a huge (and continuing) pressure on developed urban centres like Mumbai, Bangalore and the National Capital Region. The time has come for us to stop treating urbanisation as an evil and focus on creating planned urbanisation that allows a balance between built space and open areas, resulting in quality life for its inhabitants.

The actual city expansion over the last few years...

Bangalore is relatively a circular city and over the years has grown in concentric circles. In the last five years Bangalore has added nearly 10 to 15 km in all directions. As per the Comprehensive Development Plan, the existing urbanised area in the city amounts to 512 sq. km. with 300 sq. km. of proposed area to be urbanised. The increasing growth in North Bangalore is due to the new International Airport. East Bangalore has grown beyond Whitefield and South Bangalore has crossed the Electronics City. While this growth was basically with office space, it is trailed closely by residential, retail, hospitality and logistics/warehousing.

The upcoming peripheral ring road, with a circumference of more than 110 km, translates into a diameter of around 35 km. Development has moved way past the outer ring road, to beyond the peripheral ring road in a period of less than five years and this is indicative of the growing borders of the city.

What is the ratio of built land area when compared to other IT cities?

While it is very difficult to present statistics in this regard, presently, the Bangalore market constitutes the largest organised market for commercial development in south India. From 4.30 million sq. ft. in 2003, Bangalore received a supply of 17.25 million sq. ft. of built space in 2006, which is a 230 per cent increase from last year. Other emerging IT hubs like Hyderabad and Pune witnessed a supply of 2.94 million and 4 million sq. ft. respectively in 2006.

How much of the construction activity is hampering traffic?

No matter how large the construction "yard" is or the location of ongoing construction, most construction activity would create pressure on the immediate surrounding traffic. That being said, by using modern construction techniques, this can be reduced significantly as has been demonstrated so well by the Delhi Metro Rail Corporation over the last six years when they went about constructing the Metro Rail network in some of the denser parts of Delhi, with remarkably low nuisance to surrounding areas.

Bangalore in the next two years, when the Metro Rail zooms through...

The pace of growth would lead to expansion of Bangalore's geographical boundaries to a great extent, as has been already proposed in the CDP 2015.

However, it is expected that the proposed peripheral ring road once operational, coupled with the five townships proposed along this ring road, will help to decongest the city.

The Metro Rail, expected to get operational by October 2008, is proposed to have two tracks, from Mysore Road to Byappanahalli (west-east) and from Yeshwantpur to R.V. Road (north-south), both via the Kempegowda bus terminus. This would help significantly in decongesting the city as there will be less reluctance to live in the suburbs. Airport City has been planned for non-aviation activities, which will include fully equipped business centres, restaurants, hotel rooms and other facilities expected to be on a par with international standards.

Other developments like conversion of the Bangalore-Hosur stretch of the national highway into a six-lane road and road-widening along the 141-km stretch of state highway connecting Bangalore and Mysore further reiterate the geographical expansion in the next 5 to 10 years.

Growth post-2012 would largely depend on projects and infrastructure initiatives announced in the next 4-5 years.

What is the boom primarily due to, only IT?

The boom started due to IT and was further fuelled by the ITES sector, the same is evident from the absorption figures which have increased from approximately 1.08 million sq. ft in 1999 to approximately 11.43 million sq. ft of office space in 2006. However, it is interesting to note that as of Q1 2004, Bangalore housed 92 of India's 180 biotech companies, with total actual investments of over Rs.1,000 crore.

India, being on the `threshold of biotech revolution', currently has 280 biotech and 180 bio-suppliers contributing to the total biotech market worth $100 billion, of which a major percentage is located in Bangalore.

With regard to property rates, what do you predict?

Marginal price increase is expected in the months to come in the Central Business District, off CBD locations as well as Koramangala and Indiranagar which are no longer considered as suburban areas; rental and capital values in the peripheral locations of Whitefield and Electronics City are currently stable and are expected to remain stagnant in the near future owing to the oversupply situation. North Bangalore (Yelahanka, Devanahalli) as well as areas around the NICE corridor (West) are the favoured investment destinations.

With regard to the residential market, prices may not escalate at a rapid pace, but the trend over a 5-10 year horizon continues to be robust. Investment in peripheral locations may be a good option with a medium to long-term view, since connectivity to these areas is expected to improve significantly.

Rs 100-crore apartments are hot!

Rediff.com.

At a time when prices are merely notional if the address is right, it's hardly surprising that the cost of residential properties in New Delhi and Mumbai are going, quite literally, through the roof. Hold out long enough for the right buyer and even the most generous estimates by real estate agents or consultants could go awry.

And as Indians gain the confidence to spend as well as aspire to A-lists everywhere, a few more crores are hardly likely to matter when the price of even an apartment matches that of a decent, mid-sized company!

Only a week ago, the Oswals bought a bungalow on an acre of land on New Delhi's Tilak Marg (in prestigious Lutyens Delhi) for Rs 100 crore (Rs 1 billion). Other industrialists who own houses in the neighbourhood are steel tycoon Lakshmi Mittal, Bharti Enterprises managing director Sunil Bharti Mittal and DLF chairman K P Singh.

The most a property in this central part of Delhi has fetched is a whopping Rs 137 crore for a bungalow on Amrita Shergill Marg, becoming the most expensive residential real estate to change hands in India. The one-acre plot was purchased by Sanjay Singal of Bhushan Power & Steel.

Lakshmi Mittal, who bought a 12-bedroom mansion in London's Kensington Palace Gardens in 2004 for $125 million (Rs 550 crore), also got a slice of Delhi's residential pie for a more modest Rs 40 crore (Rs 400 million) on Prithviraj Road. Today it is valued at Rs 80-100 crore (Rs 800 million- Rs 1 billion).

According to real estate anaysts, Treveni Infrastructures picked up a 2.8 acre property on Sikandra Road for Rs 115 crore (Rs 1.15 billion). In another recent transaction, the Jindals bought a 3.2 acre property on Mansingh Road for Rs 125 crore (Rs 1.25 billion).

If Lutyens Delhi is the city's power address, in its Tony Khan Market or Jorbagh areas you should expect to pay Rs 3 lakh per sq yard. On S P Marg, where liquor baron Vijay Mallya owns a house, the going rate is around Rs 5 lakh per sq yard.

There is news now about highrise apartments being developed in central Delhi's Connaught Place. These 4,000 sq ft apartments could cost as much as Rs 16,000 per sq ft or Rs 6.4 crore (Rs 64 million) overall.

DLF is building a nine-storey apartment complex on 2.5 acres in W-block of Greater Kailash II, in south Delhi. These 6,000 sq ft apartments are being sold for over Rs 21 crore (Rs 19,000-25,000 per sq ft), by invitation only. Sources tell us about a possible development of apartments and individual bungalows by DLF in GK-II's E-block.

DLF also has a plan for very high-end villas in posh Chanakyapuri. These 6,000-7,000 sq ft villas could cost between Rs 12-14 crore (Rs 20,000 per sq ft).

Gurgaon too has some big ones. The top-end penthouse at Ansal's The Ivy could cost between Rs 5-8 crore (Rs 50-80 million). A 2,500-4,500 sq ft apartment at DLF's new Park Place and Park Tower ranges between Rs 1.75-3.15 crore (Rs 17.5-31.5 million). Omaxe's The Forest Noida offers apartments ranging from 4,000-6,500 sq ft for Rs 2.25-4.5 crore (Rs 22.5-45 million).

Delhi may have raised the bar where expensive residential rates are concerned, but Mumbai is still leagues ahead on average.

"Every second building in Mumbai commands a huge price, anything above Rs 25,000 per sq ft to sometimes even upto a whopping Rs 75,000 per sq ft," says architect Hafeez Contractor.

The NCPA Apartments at Nariman point are among the most expensive in Mumbai with an uninterrupted view of the sea. Rs 60,000 per sq ft is the current rate there. The vice-chairman of Reliance Capital, Amitabh Jhunjhunwala, recently bought a 2,880 sq ft apartment at NCPA for Rs 18 crore (at Rs 63,000 per sq ft).

Other expensive areas in Mumbai are Cuffe Parade, Napeansea Road, Carmichael Road, Altamount Road and now Worli and Bandra as well.

Shah Rukh Khan's bungalow Mannat, on Bandra Bandstand, is currently valued between Rs 70-100 crore (Rs 700 million-Rs 1 billion). The approximate rate here is Rs 30,000-plus per sq ft, as opposed to Rs 15,000-20,000 per sq ft at Juhu, where Amitabh Bachchan owns a bungalow.

Indiabulls promoter Saurabh Mittal recently bought a 5,500 sq ft apartment in Maker Building on Cuffe Parade for Rs 40 crore (Rs 400 million). The rate here is a whopping Rs 72,000 per sq ft.

A recent transaction in Sunita Building on Malabar Hill for a 3,450 sq ft apartment, where the rate is even higher, fetched Rs 1.03 lakh per sq ft. Leading stockbroker Rakesh Jhunjhunwala bought a 4,400 sq ft apartment at El Palazzo on Malabar Hill for Rs 25 crore (at Rs 57,000 per sq ft).

Among the most impressive buildings under construction in Mumbai is Shapoorji Pallonji's Imperial Towers on Kambala Hill. Two 65-storey towers, with the first 12 storeys reserved for car parking, have two 25,000 sq ft penthouses on top. At a conservative Rs 50,000 a sq ft, each of these penthouses could cost Rs 125 crore.

Standing tall at 36 storeys, the building on the old Chattan Bungalow site at Altamount Road, being developed by K Raheja Universal, will blow your mind. The first 12 stories offer just amenities.

The remaining 24 storeys have 12 duplex apartments stacked on top of each other. Each apartment has its own huge terrace and an elevator to take the car right up to the living room. The whole building itself is on a hill, enhancing the view.

The view might be better from the top, but luxury living seems to be a goal in itself.

Prices may not fall in many pockets

Business Standard interview
Niranjan Hiranandani
Rajesh Bhayani / Mumbai January 21, 2007
Niranjan Hiranandani, managing director, Hiranandani Constructions, spoke to Rajesh Bhayani on an array of topics related to the realty sector, including expected returns. Excerpts:

What kind of returns one can expect from the real estate sector now, when it is almost at its peak?

I think the real estate sector will give 30 per cent returns in 2007. Even next three years will be good for the sector in general, and next five years will be good for the housing (residential) sector in particular. In India, we have immense scope for housing.

The consistent high growth rate of the economy has opened the doors for huge development of commercial properties. I don’t agree with the view that in places such as Mumbai 60-70 per cent buying is by investors. It is around 30 per cent. The rest is buying by individuals.

How will realty prices behave in the coming days? There is a buzz of the market peaking out in Mumbai?

Prices will not fall in Mumbai. Demand as well as liquidity is good. And if the stock market corrects, more investments will flow into the sector. Prices in many pockets in the city will not fall; rather they will rise.

In some peripheral areas, prices may correct provided supply increases owing to TDR use, abolition of ULC (urban land ceiling) and so on.

Should Mumbai be seen as the benchmark for realty prices? Which other centres are going to drive the growth in the sector?

Yes, Mumbai is the benchmark for real estate prices. It is the financial hub of the country. It has a tremendous financial purchasing power in the country which no other city can match. In Mumbai, to earn your bread is very easy.

The Mumbai-Nasik-Nagpur belt and Mumbai-Pune belt have great growth potential. At the national level, Chennai, Jaipur, Hyderabad and Bangalore are growing and will continue to grow.

How to benchmark the prices in Mumbai?

Real estate valuations are more a perception than anything else. I don’t blame somebody buying a place at Marine Drive by paying Rs 73,000 a sqft. That’s only one deal. But how can you justify somebody being able to sell (costly) 100 housing units in Thane, Vashi and other places.

You have to look at the areas sold by builders. That’s why I am of the view that the weighted average prices should be calculated to find out the benchmark prices in Mumbai. It will give a trend, which will be generally applicable in the country.

What is your wishlist for the forthcoming Budget?

I would say the government should treat real estate on par with information technology. If it wants the IT sector to grow, the realty sector should feature first on its agenda. It is the government which has set the ambitious target of affordable housing. And for that it will have to encourage housing.

What is your estimate of private equity money flowing into the sector?

One estimate shows $10 billion of private equity is coming into real estate. I have no idea, but I would say that whatever amount comes in – even if it is $50 billion – it is not enough to make housing affordable.

Chennai : Pacifica launched first IT project in India

RAMNATH SUBBARAMAN TIMES NEWS NETWORK
CHENNAI: US based real estate company Pacifica has launched its first IT project in India at Chennai. Pacifica's 1.1 million sqft Tech Park is expected to be ready for occupation by April this year, making up nearly 12% of estimated IT space to come up in the city this year.

Mr Vikram Agnihotri, Regional Head - South, Pacifica told reporters in Chennai on Friday that the company has invested about Rs 150 crore to Rs 175 crore in the tech park, and expects the project to break-even in three years. The IT park is located on Old Mahabalipuram Road on a 7.29 acre land in Navalur.

So far, Pacifica has signed up with four players, who would be taking up a total of two lakh sqft in the park. Two of them already have presence in the city, and are expanding their operations here. The other two are from Bangalore, he said, without disclosing their names. The company expects the IT park to be fully occupied in three to five months time, he added.

Real estate consultants Cushman & Wakefield's Ravi Ahuja said the total demand for IT space in Chennai this year is expected to be about five million sqft, against an estimated supply of eight to nine million sqft. "This (8-9 million sqft) is under construction. We would not know how much of this would fructify," he added.

Mr Agnihotri said the company expected a rental of Rs 35/sqft, which was the going rate for that location last year as well. Mr Ahuja said, in Chennai, rentals for IT space was over Rs 50/sqft near Tidel Park, the city's first IT park located right at the begining of OMR. "The rentals drop as you go down the road", he said.

Pacifica also plans to get into residential housing in Chennai. "We will be focusing on middle and upper middle segments," Mr Agnihotri said. The $2billion San Diego, California based company, which started its Indian operations in 2005-06, has two residential projects spread over five acres each in Ahmedabad, besides hotel and mixed-use projects in Hyderabad, Pune and Bangalore. It's investing about US$200 million in the country, the company said.

Greater Bangalore is now a reality

Times Of India
What is the good news for the denizens who have been embraced into Greater Bangalore? That there is no increase in any taxes in the near future.
At least that’s the first indication government officials are sending out. Major issues that the citizenry are worried about — betterment charges, levying new cesses — have still not been spelt out. “Give us a few more weeks, everything will be spelt out,” say officials. The administrative challenges still remain — how many offices, staff strength, uniform taxation system and merger. The status quo — existing offices will continue at the CMCs, TMC and village panchayats. Until notified further, these citizens have to continue paying taxes, cesses and get their khata from the existing offices.
Here’s what is being promised as well — that from every residence, there will be an office within 3-4 km, where basic administration work for the citizens can be handled. To start with, the existing 3 zones will escalate to 8 zones and each zone will have 4 offices.
Officials say that it’s only from the next financial year that all the citizens coming under the jurisdiction of 741 sq km of Greater Bangalore, will be treated under a new banner, with a uniform adminsitration for the entire jurisdiction.

Boundary for Greater Bangalore

In the north, the boundary starts from the junction of Govindapura and Vaderapura. The boundary is co-terminus with the northern boundary of Vaderapura running in eastern direction. The boundary again touches the junction of Kattigenahalli, Kogilu and Bellahalli. The boundary further covers the northern and eastern limits of Belahalli running towards south, along the eastern limits of villages.
The boundary runs southwards encompassing Medahalli (of K R Puram CMC). The boundary traverses westwards along the southern boundary of villages Basapura, Begur, Yelenahalli, Kambathenahalli encompassing the village Basavanapura, Gottigere. From the junction of Nagadevanahalli (of Kengeri CMC) and Sonnenahalli, the boundary moves towards the north along the boundary and encompasses villages — Sonnenahalli, Ullalu, Herohalli, Siddelehalli.
From the junction of Lakshmipura, Singapura (of Byatarayanapura CMC) Chikkabettahalli, the boundary runs towards the north, covers villages Chikkabettahalli, Doddabettahalli, Atturu (of Yelahanka CMC), Ananthapura and Harohalli villages.

Registration of properties

The final notification on Greater Bangalore has come at a time when the registration of properties is in a limbo. While the CMC/TMC (which is now dissolved) and 111 villages of various grama panchayats, which have now come under the aegis of Bruhat Bangalore Mahanagara Palike (BBMP), will have to wait as the state has not issued any clear guidelines on the status of properties that are now part of Bangalore agglomerate. According to official sources, it will take a while for the BMP to update property records in erstwhile CMC/TMC areas and issue khata under the BBMP banner. Until then, property registrations in these areas will continue to be in a mess.
Currently, only properties in BMP jurisdiction with the Palike issued khata, those allotted by BDA and layouts approved by BDA, properties allotted by Karnataka Housing Board, KIADB and KSSIDC are being registered.
“Once the urban local bodies come under the BBMP, khatas issued by the CMC/TMC/gram panchayat will have to be updated by the BBMP officials within one year. Only then the properties can be registered,” officials of the stamps and registration department explained to The Times of India.
Properties in CMC/TMC areas, which have khatas will be valid till the next financial year. However, revenue properties will be banned from registration as they are agricultural non-converted lands.
Meanwhile, the property value in the city outskirts has seen a 10 to 15 per cent increase ever since the preliminary notification of Greater Bangalore. Property developers too are holding back their assets till the government comes up with a clear policy on the issue. “We have identified land in CMC areas and finalised the deal. But we do not want to register as there will be administrative wrangles later. We have paid the owner and will do the transaction when Greater Bangalore takes shape,” said a few developers.

CM plans out elections

With Greater Bangalore being notified, the state is looking at the next step: setting up an elected body to govern it. CM H D Kumaraswamy on Wednesday said: “As soon as reservation and delimitation of constituencies are done, we will take up the elections.”

Kumaraswamy firm on Bidadi township

The Hindu

Says farmers will get a fair compensation

# 9,000 acres of land to be acquired
# 32 bidders offer to develop the township

BANGALORE: The State Government will hold discussion with farmers and provide a good compensation package for those who stand to lose land for the proposed satellite township in Bidadi, 35 km from Bangalore, Chief Minister H.D. Kumaraswamy has said.

The Government had decided to acquire over 9,000-acre land in several villages to establish the township at Bidadi in Ramanagaram Assembly Constituency, which is represented by Chief Minister himself.

Tier-2 Karnataka cities get funds

Times Of India
Bangalore: If the IT boom has to reach tier-II cities, isn’t it best to follow the Bangalore example? This is what chief minister H D Kumaraswamy is aiming to do.
Identifying the International Technology Park Bangalore (ITPB), set up through a tie-up with Singapore in 1994 as the root of Bangalore’s success, Kumaraswamy has sought to set up similar parks in tier-II cities. “I have spoken to a Singapore government representative for tie-ups and public-private partnerships for technology parks and infrastructure in tier-II cities like Belgaum, Mysore and Mangalore. I have also asked for the setting up of a Singapore consulate in Bangalore,’’ the CM said on Wednesday.

Discussions with the Singapore representative is part of the CM’s one-onone meetings with foreign dignitaries under the CII Partnership Summit. Other than Singapore, Kumaraswamy met representatives of Kuwait and South Korea to discuss bilateral trade and investment.
The CM said he has requested Kuwaiti assistance and investment in oil exploration and processing along the state’s coastal areas. “The Kuwaiti representative was very forthcoming and even told me there were more South Indians in Kuwait than Kuwaitis!’’ he added.

The South Koreans are looking at mutual trade and investment in the fertiliser and steel sector. Kumaraswamy said there’s a proposal for a steel mill to be set up off Seoul in South Korea.
Bidadi township soon
The first of the CM’s dream satellite townships appears set to take off: 32 major players have put in bids to develop the Bidadi township. The bids are for construction of residences, development of industries, shopping malls, etc. The aim is to decongest Bangalore.

“We are processing the bids. Some companies have also expressed interest in another township at Nandagudi in Hoskote,’’ the CM said.
There is, however, opposition from farmers who fear the compensation paid to them will not be adequate. Kumaraswamy said he will try to resolve these doubts: “We are setting up the township 30 km out of Bangalore keeping the land rates in mind. But farmers in Bidadi are those who voted for me, I will protect their interests more than that of capitalist investors.’

High realty rates edge out average Mumbaikar

Times Of India

Mumbai: The overheated property market has virtually edged out the average Mumbaikar from his own city. And when a leading housing industry expert like Deepak Parekh of HDFC admits there is no scope for the common man to buy a flat in Mumbai, it reinforces the sentiment that skyscrapers, redeveloped societies and newly-constructed complexes, even in the suburbs, are beyond the reach of most salaried people. “It is unfortunate that the common man has to go out of the city in search of accommodation. There is little hope for him to purchase a house in Mumbai,’’ says Parekh whose father pioneered the concept of housing finance.

The question then is, who are these people buying homes across Mumbai today? What is their background, their profile?
According to the HDFC head honcho, they are mainly businessmen, professionals or successful Indian managers who may have made money on stints abroad and are now coming back on fat salaries. “Then there are NRIs and retired corporate heads buying apartments in south Mumbai,’’ says Parekh. The average salaried man, according to him, can only think of places like Borivli and beyond.

Vice-president (private banking department) ABN Amro bank, Deepak Rattan, fits the profile of an average flat-purchaser these days. He has finally settled for a three-bedroom pad in a Worli highrise for Rs 2.1 crore. The backside of his flat faces a slum, but Rattan says he hardly has a choice. “Gone are the days when a Rs 2-crore budget was considered huge in the heart of the city. Today, brokers tell you to try your luck in the suburbs,’’ he laughs.

Rattan’s comment echoes the experts who criticise the state government for its failure to provide decent low-cost, public housing and for promoting what US-based urban planner Edward Soja recently described as ‘Gated Communities’ where the well-heeled live behind iron gates.

Ketan Vadalia, a property developer in the eastern suburbs, says 70% of the buyers in locations like Ghatkopar and Mulund are traders from the metals and textiles market. The other 30% are salaried people, mainly from IT companies, drawing a minimum salary of Rs 1.5 lakh.
“The minimum budget for an apartment in Ghatkopar starts at Rs 50 lakh for a twobedroom pad. It can go up to Rs 1.25 crore for a larger flat,’’ says Vadalia.

“These buyers are people who have been in a family business for a long time and over the years they have had enough resources to buy a flat worth Rs 50 lakh in areas like Ghatkopar,’’ adds Vadalia. Interestingly, the communities with the strongest purchasing power are Gujaratis and Marwaris, who prefer areas like Santa Cruz, Vile Parle, Malad, Kandivli and Borivli in the western suburbs and Ghatkopar and Mulund on the eastern side.

Builder Nayan Bheda of the Neptune Group, which is setting up residential projects in Bhandup, points out that 90% of his almost 600 flat buyers are from the service sector, mainly from MNCs and corporate houses. The rest are Gujarati traders.

“Our customers fall under the higher middle income group. Flats in our project are pegged between Rs 50 lakh to Rs 80 lakh each, depending on the size. In the second phase, each will cost over Rs one crore,’’ says Bheda. Barely two years ago, Bhandup was one of the most affordable destinations to stay in. Prices in 2005 were below Rs 2,500 a sq ft; today, they have almost doubled.

It’s the same story in the western suburbs. Managing director and CEO of Mahindra Gesco, Pranav Datta, says his clients include doctors, architects, businessmen and senior professionals, who buy flats upwards of Rs 1.25 crore in places like Goregaon. “The salaried-class who can afford such flats earn Rs 30-Rs 40 lakh a year,’’ adds Datta.

As for central Mumbai, where glitzy residential towers are replacing defunct textile mills, the aspirational Mumbaikar’s dreams of purchasing a flat at the rate of Rs 4,000 per sq ft disappeared more than two years ago. Prices here have shot up by 300% since then.

Jaidev Mody of Piramals, which is setting up the Ashok Garden project at Parel comprising four towers, says 70% of the buyers are professionals from financial services companies, banks and large corporations, general managers, presidents and MDs.

Even rates in a congested and downmarket area like Khetwadi (where many redevelopment projects are coming up) are in the range of Rs 9,000 to 12,000 per sq ft. In nearby Girgaum, a two-bedroom flat would cost Rs one crore and double the amount for a three-bedroom flat.
Haresh Mehta, one of south Mumbai’s largest property redevelopers of dilapidated chawls and buildings, says that 80% of his clients are diamond merchants and traders from the metal market. “They have a lot of purchasing power,’’ he adds. Market sources reveal that customers buying flats in redeveloped cessed properties in south Mumbai have to pay as much as 40% of the amount in hard cash.

Morgan fund invests $152m in Oberoi realty firm

Source - Hindustan Times
In one of the largest FDI deals in Indian realty, Morgan Stanley’s Special Situation Real Estate Fund has invested $152 million in Mumbai-based developer Oberoi Constructions.

While officially there was no statement on the equity size picked up by the Morgan Stanley Fund save that it was a ‘minority stake’, it is reliably learnt that it is a 10.75% stake.

Anand Madduri, the Hong Kong-based executive director of Morgan Stanley’s Asia-Pacific Property portfolio, claimed the Oberoi deal was the single largest foreign direct investment (FDI) in India’s real estate sector so far. Oberoi Constructions is a fast-growing firm in the financial capital, and has no connection with the hotel group of the same name.

"The closest is Farallon Capital’s investments in Indiabulls at around $143 million. However, these were in several tranches spread over 24 to 30 months," Madduri added.

US-based hedge fund Farallon Capital has taken a 60% stake in Indiabulls Property which has in turn picked up two NTC textile mills in Mumbai in separate public auctions.

The Morgan Stanley realty investment of $152mn for a 10.75% stake implies that Oberoi Constructions has derived a valuation of a little over $1.4 billion.

Since Oberoi Constructions has a turnover of a little over Rs 600 crore per year, the high valuation by international investors is largely a derivative of the high asset value given to the land banks built up by the company.

Four major property projects are being developed by the company - 8 million square feet in Goregaon in a mall and a residential project on what used to be Novartis land, two million sq feet each at Jogeshwari’s Fantasy Land and Mulund’s Glaxo SmithKline (GSK) land and an additional 8 lakh sq ft at Andheri’s Excel Industries land.

"All these projects are FDI-compliant, and we have taken care to buy property titles that are FDI compliant," Vikas Oberoi, the company’s chief promoter, told HT.

He clarified that the joint venture with ICICI Venture at Worli on what used to be Glaxo’s land, is not FDI compliant, and was part of a separate SPV (special purpose vehicle).

Madduri said there were no plans to ramp up Morgan Stanley’s investments in Oberoi Constructions in the future. "The company will continue to acquire land, and these can be leveraged for future funding," he added.

Bachchan family plot thickens

Mid-day reports that 674 sq meter plot in Juhu was gifted for around 3.3crs with around 6L paid towards stamp duty. The rate works out to be around 5000 rupees per sq/ft in Juhu which is the rate in Kandivili. I guess for Mr Bachchan and others in Mumbai "Black" is green. The biggest surprise to every at the Registrars office was the absence of Amar Singh. Rumour has it that he is going to gift a plot measuring 6000 meters to Mr Bachchan. Ofcourse the plot will be in UP.

This has been a good week for superstar Amitabh Bachchan.

On Sunday, his son Abhishek got engaged to actress Aishwarya Rai and now his younger brother Ajitabh has gifted him a 674 square metre plot in Juhu worth around Rs 3,30,21,000.

Yesterday, the brothers signed the gift deed of plot number 15 of Vitthal Nagar Co-operative Housing Society at the office of the joint sub-registrar at Bandra Kurla Complex.

The brothers arrived at the office around 5.30 pm and started the procedure of assessment and paying the stamp duty. Within no time, they left the premises — smiling and shaking hands with the registrar office employees.
“We found all the documents okay as required and a stamp duty of Rs 6,60,450 was paid by Amitji according to the market valuation,” confirmed Udayraj Chavan, the joint sub-registrar of Andheri 2 (class II). The stamp duty was paid under Chavan’s guidance.

MiD DAY has acquired the details of the gift deed that was executed on Sunday.

According to the gift deed, on November 29, 1975, the previous holder of the said property, Naranbhai Motibhai Patel, had assigned and transferred all his rights, title of the property to Ajitabh for an amount of Rs 1,36,760.

The deed copy further mentions that the donee is older natural brother of the donor. It also says the donor is desirous of gifting all his rights, title and interest in respect of the said property.

According to a source, “Ajitabh decided to confirm the gift deed on Makar Sankranti when his nephew got engaged to Aishwarya.”

Sources added that a production facility house and an office for Abhishek and Aishwarya are likely to be constructed there after the marriage. It could also serve as the new corporate address of ABC Production Limited, which the Bachchans are planning to revive.

Rumour has it that Abhishek has acquired a property at Carter Road, Bandra, where he and Aishwarya may live after marriage. They have been regularly visiting the four-storeyed bungalow Naivedya (plot no 85).

This bungalow, owned by builder Shobit Rajan and designed by architect Pornitnath, has eight rooms, a terrace lawn, 1,000 sq ft washroom and a small swimming pool at the roof top. According to an estate consultant, “This property is worth Rs 1,14,400 per sq ft. The bungalow would cost them at least Rs 9 crore.”

Citi Property to invest $500mn in Indian realty

Business Standard
According to David Schaefer, managing director and head-Asia pacific, CPI, the company is looking at investing in the hospitality and residential sectors in addition to creating office space in tech-parks. "The funds being brought to India are being utilised for creating a quality land bank in major cities and also to invest in specific projects undertaken by builders," he added.

Since the country is facing a shortage of quality hotel rooms in major cities, the company is planning to bring in funds to build quality assets which thereby bring in global hotel brands.

"Of the committed $500 million to India this year, nearly 40% is being reserved towards the hospitality sector to build hotels and service apartments in tier II information technology cities," he said.

The company since May 2005 has invested $250 million in building real estate assets in residential and hospitality sectors in Chennai, Bangalore, Pune, Delhi and Hyderabad.

Nitesh Estates partners Citigroup for luxury hotel

Bangalore-based Nitesh Estates is partnering New York-based Citigroup Property Investors to develop a luxury hotel for $100 million. For the hotel management, the company is in talks with three of the top global hotel chains.

Making an announcment today, Nitesh Shetty, managing director, Nitesh Estates said: "Citigroup Property Investors has partnered us to build the hotel, a 250-room luxury hotel set to come up on Residency Road in Bangalore."

"The project is an integrated one having high-end retail stores on the ground floor and a health spa on top of the building. We will finalise the management chain in 3-4 weeks," he added.

The hotel is being designed by an architects firm based in California and is to be operational in 30 months.

David Schaefer, managing director Asia Pacific, Citigroup Property Investors said, "We believe the real estate sector in Bangalore has a tremendous growth potential. We have identified Nitish Estates as one of the fastest growing property developers in India."

Mahindra plans 2,500-cr heavy vehicle plant near Pune

TIMES NEWS NETWORK[ WEDNESDAY, JANUARY 17, 2007

MUMBAI: Mahindra & Mahindra has committed to an investment of Rs 2,500 crore near Pune to set up a greenfield facility. The new facility, M&M’s fourth in the state, will manufacture commercial trucks through its joint venture with US-based International Truck and Engine corp (ITEC).

The plant will manufacture 50,000 medium and heavy commercial vehicles for the Mahindra-International JV and the remaining capacity will be utilised to manufacture new generation of M&M vehicles, mainly those used for commercial purposes. Spread over 700 acres, the facility will begin production in two years and will have an initial capacity of 2,50,000 vehicles which can be increased in future.

The company refused to comment on what other M&M vehicles will be manufactured in the new facility but Anand Mahindra, vice-chairman and managing director of M&M said, “With the economy growing at 9% we have no worries about what to do with unutilised capacities.“

Pawan Goenka, president-automotive sector, M&M added, “Between this project and our new facility with Renault, we are making sure we have enough capacity for the next 10-15 years for all our future product lines.” M&M signed a 51: 49 joint venture agreement with ITEC in 2006 and has been scouting around for a suitable location for its facility.

The new plant will come under a new company in which M&M will hold a majority stake. Of the Rs 2,500 crore investment which will be made over the next 5-6 years, Mahindra-International will put in Rs 400 crore and the rest will be financed by M&M through internal accruals and debt.

The joint venture will produce medium and heavy commercial buses and trucks which will be designed and developed by the two companies based on ITEC’s existing product line. The vehicles will be distributed through M&M’s distribution network and will also be exported through its own as well as ITEC’s and M&M’s overseas networks.

While the JV also includes M&M’s existing range of light commercial vehicles, which are currently being manufactured in Zaheerabad and marketed under the Mahindra International brand name. As per the terms of their arrangement joint venture company will manufacture commercial vehicles with over 3.5 tonne capacity which leaves M&M free to manufacture smaller vehicles including those in the very lucrative 1-tonne segment.

With M&M’s latest investment announcements the Maharashtra state has crossed the Rs 10,000-crore mark in auto investments with companies like Tata Motors-Fiat, General Motors, Mico, Volkswagen and Daimler Chrysler choosing the state for future expansions.

Middle class moves out of metros

Press Trust of India

Metros New Delhi, January 16: Italian marble floors, bar, modular kitchen, a state-of-the-art bathroom and a swimming pool in the backyard: luxury has just got redefined, and that too for the middle class as far as housing is concerned.

With real estate prices in the NCR region soaring, developers are looking at greener pastures in tier II and tier III cities: in fact, the boom has just begun in Kundli, Sonepat, Panipat in Haryana and Rudrapur in Uttaranchal, where luxury apartments, affordable even by the middle class, are fast coming up.

All roads today lead to tier II and tier III cities that are around two to three hours drive from Delhi where these luxury apartments are coming up," says Kashif N Usmani of Taneja Developers and Infrastructure Ltd (TDI).

"The last decade saw the transition of sleepy towns like Gurgaon, Noida and Faridabad into enviable addresses. But today, these tier I towns, as they are called, are all saturated and far beyond the means of the middle class," he says.

"The focus is now on other closer-to-Delhi cities of Haryana as the development policies there are very conducive for real estate development. For around Rs 20 lakh, a middle class person can get a luxury apartment," says Sunil Anand of Anand Properties & Infrastructure Ltd.

The catch is that these apartments come with a luxury tag.

A 2-3-bedroom apartment comes with attached state of the art baths, modular kitchens and wooden flooring in the master bedroom. "If this is not enough to lure the buyer, there is also a fountain at the entrance," says Anand.

ASSOCHAM against land grabbing, says new chief

-Zeenews
New Delhi, Jan 16: Newly-elected president of industry body Assocham and Videocon Chief Venugopal Dhoot on Tuesday said he was against "land grabbing" in the name of SEZs and the chamber would take farmers on board while pursuing industrialisation.

"Assocham is against land grabbing. We are for farmers and when we undertake industrialisation we would like to convince them that it is for their benefit," Dhoot told a news agency in his first interview before assuming office.

With controversies surrounding land acquisition for SEZs and other industrial projects in many parts of the country, Dhoot reiterated there was "no sense in making SEZs by compromising the interest of farmers".

His comments come in the backdrop of protests against Indonesia's Salim Group's Special Economic Zone at Nandigram in West Bengal, Tata Motors' car project at Singur and against SEZs in Haryana, Uttar Pradesh and Maharashtra among others.

On the issue of rehabilitation policy proposed by the Prime Minister, he said the chamber would support it.

Asked if Assocham was ready to speak to politicians who were agitating against acquisition of farm land for industrial purpose, Dhoot said: "As a chamber we do not believe in talking to individuals. If any issue has to be taken up then we will speak to governments, including chief ministers."

Dhoot, whose group has been active in global takeovers, said government should provide support and incentives to parent Indian companies that are investing overseas.

Reliance Retail splurges Rs 1,000 crore on real estate acquisition

HinduBusinessLine

NEW DELHI: Putting its mega retail plans on full throttle, Mukesh Ambani-promoted Reliance Retail has spent close to Rs 1,000 crore in two days acquiring commercial properties in the national capital.

According to sources, Reliance Retail on Tuesday acquired a property at Vikaspuri in West Delhi valued at around Rs 280 crore.

Yesterday, it had acquired seven properties valued at around Rs 700 crore. Of these, six were at Dwarka near the Indira Gandhi International Airport and one at Rohini in West Delhi.

"The overall space size of the acquisition is over five lakh square feet," the sources said, adding the company would be taking part in another bid tomorrow for two properties at Vasant Kunj in South Delhi.

These two properties at Vasant Kunj are together expected to be valued around Rs 25 crore, the sources added.

When contacted, company officials declined to comment.

The properties acquired by Reliance Retail were a part of auctions by the Delhi Development Authority, through which it had collected about Rs 900 crore against a reserve price of about Rs 400 crore.

Yesterday, the DDA had auctioned 16 commercial plots totalling around 40,000 square metres. Mr Mukesh Ambani had last year unveiled mega plans for expansion in the retail space entailing an investment of Rs 25,000 crore in the next few years. - PTI

Landmark to kick off Kolkata entry with 3 big store

TIMES NEWS NETWORK[ TUESDAY, JANUARY 16, 2007]
MumbaiEdition
KOLKATA: Within days of snapping its ties with the Emami group, book-and-gift retail chain Landmark is busy chalking out plans for its Kolkata foray, whereby it proposes to open at least three large size retail outlets and a slew of smaller format stores across the city.

Talking to ET, Landmark's chief operating officer Himanshu Chakrawarti said: "We are looking to launch three stores, each spread over some 25,000 - 30,000 square feet. Total investment for these three stores is estimated to be about Rs 15 crore."

The Chennai-based retail chain is eyeing prime properties in and around Camac Street - Theatre Road area, Salt Lake as well as in south Kolkata. "To begin with, we plan to hit high-street areas with large format stores.

Subsequently, we will focus on opening stores in malls," Mr Chakrawarti added. He, however, refused to identify the properties citing confidentiality reasons. Realty sources said the company has identified prime properties on Camac Street, Lansdowne Road as well as on Hazra Road, but a final decision is yet to be taken. The properties will be taken on lease.

Till recently, Landmark used to operate in Kolkata through a joint venture with FMCG major Emami. With Trent acquiring a controlling 76% stake in Landmark as well as its subsidiaries from its founder Hemu Ramaiah last year, ties with the Emami group was severed last month.

Mumbai/Pune : RIL deals directly with farmers for SEZ land in state

TIMES NEWS NETWORK[ MONDAY, JANUARY 15, 2007 04:37:54 AM]

PUNE/MUMBAI: In a major shift in strategy on special economic zones (SEZs) in Maharashtra, the Mukesh Ambani-led Reliance group has decided to buy land outright from farmers, instead of involving any government agency to acquire it.

Reasons for the move are many. The delay in the passage of the Maharashtra State SEZ and Designated Areas Act, concerns raised by Congress president Sonia Gandhi on land acquisition and — most importantly — widespread agitation at Singur and Nandigram over forced acquisition of agricultural land by the West Bengal government have resulted in the state government going slow on the plans.

“We have now decided to purchase land directly from farmers,” confirmed the RIL spokesperson for Maharashtra SEZs. He, however, refused to discuss the price being offered but said, “It’s much more than the prevailing market rates. Farmers are now happy and queuing up to offer their land,” he claimed.

Sources in the state government indicated that the company changed its tack sometime in December. “So far, they have bought close to 700 hectares,” a senior official told ET.

According to a revenue department official, nearly 80 purchase deeds have been registered in the last few days in Raigad district. The company has paid a stamp duty of around Rs 60 lakh on these registrations. This is an additional cost for the company, which is understood to have paid farmers three times the government-listed rates on direct purchase of land.

As per the earlier plan, the Maharashtra government was to acquire land spread in 45 villages for Reliance SEZs at government rates, which comes to a couple of lakhs per hectare, against the market rate ranging Rs 40-Rs 75 lakh per hectare, depending on the location. The government’s role as a land acquirer for Reliance had come in for sharp criticism.

However, it’s not yet clear whether the company wants to follow the direct buying route or would involve the government at a later stage.

The group is planning two mega SEZs in Mumbai —Navi Mumbai SEZ and Maha Mumbai SEZ. It has already taken over 450 hectares on first lease from Cidco for its Navi Mumbai project. The lease deed was registered prior to March 31, 2006, and a stamp duty waiver was given to the company.

However, last year, the company had decided to drop the acquisition route — where a state agency acquires land and then transfers it on first lease to the developer. It has, instead, started buying land directly from farmers.

Reliance was, in fact, looking at starting the formalities of leasing over 10,000 hectares once the Maharashtra State SEZ and Designated Areas Act was passed. The legislation would enable developers to get a stamp duty waiver if they directly acquire or lease land. A stamp duty waiver was available between October 2005 and March 2006.

The state government, however, did not extend the stamp duty waiver beyond March 2006. It was reckoned that the waiver would be automatic, once the SEZ legislation is passed by the Assembly and notified by the state government. This also slowed down the SEZ development.

Now, passage of the state SEZ legislation could be delayed till the Centre formulates a rehabilitation package for displaced farmers. Last year, Congress president Sonia Gandhi made it clear that agriculture land ought not be used for these zones and the dominant view inside the party is that the policy should not be construed as anti-farmer.

Around 72 SEZ proposals have so far been approved in Maharashtra, but their fate is unknown due to lack of clarity on land acquisition norms.

Some of the big-ticket SEZ projects lined up for Maharashtra include Bajaj Auto in Aurangabad, Bharat Forge (Pune), Videocon (Pune and Aurangabad), Shapoorji Pallonji (Nagpur), Indiabulls (Raigad), Wipro (Pune), Syntel International (Pune), K Raheja Universal (Navi Mumbai), Hiranandani Builders (Powai) and City Parks (Pune). At present, developers which register their deeds will have to pay stamp duty. With Reliance setting a precedent, the cost of land acquisition would go up for others.