Masterplan Silent on 650 Acres

The Urban Development Ministry may be trying to make the Delhi Masterplan 2021 more eco-friendly but interestingly the DDA's plan does not include 650 hectares of land in the Vasant Kunj-Mahipalpur area as part of the Ridge.

Despite many Supreme Court committees directing that the area be notified as a reserve forest, the MPD has not included the area. Environmentalists say that having failed to fill up water bodies across the city, the DDA is now eyeing the commercial benefits of the Ridge.

The MPD mentions 7,777 hectares as the notified Ridge. This only includes the Northern, Central, South-Central (Sanjay Van) and Southern (Bhatti mine area) belt. Currently, the controversial Vasant Kunj malls are coming up on 25 hectares of this land, the army has 330 hectares and the DDA 315.

Other modifications in the Master Plan were notified in 1990 and reflected in the MPD 2001, but this area was left out. "The whole of the 6.5 km stretch along the Vasant Kunj, Mahipalpur, Vasant Vihar stretch has been left out. This area has already seen rampant construction and the DDA now wants to keep this open for further development," environmentalist Vikram Soni alleges.

The ridge is an extension of the Aravalli range but is not a continuous stretch, and it is this argument that the DDA has used to refute allegations that have been made against it. The DDA says this area is just "rocky land" and not forest area. In its affidavit before the Supreme Court in July 2004 and again in February 2005, the DDA stated that the land was just "rocky land" and merely a "land classification" which did not indicate the "land use". It adds that the JNU campus was also set up on this area.

Real Estate Growth Continues In Gurgaon, Albeit At A Slower Pace, According to the QGAPI

The growth story of Gurgaon's Real Estate market continues, but the pace in the last six months has slowed to almost half compared to the six months prior to them.

* The QGAPI (Qubrex Gurgaon Apartment Price Index) calculations, as shown in Figure above, now stands at 1876 with it being 1000 in October 2005.
* The growth over the most recent 3 months was 14% compared to 26% growth seen from April 2006 to June 2006. The index has been calculated by weighting all properties in the basket equally.

The index was calculated based on 17 properties in Gurgaon. The properties included in the index

* represent all major builders,
* are both ready-to-move and under-construction,
* are from all areas (Golf Course Road, Sohna Road, Nirvana, NH8 and Old Gurgaon),
* range in sizes from 1586 to 3850 sq.ft, and
* evenly fall across the budget spectrum.

No room, say Bangalore hotels

The Hindu

# There are over 4,700 rooms in about 66 hotels in Bangalore
# Some hotels have increased charges by 30 per cent

Bangalore: On a good day, rooms are tough to get in upmarket hotels in the city. Now with the Aero India 2007 on, there are no rooms to be had for love or money unless you have booked much ahead.

Visitors and tourists from all over the country and abroad are here in connection with the show, and if anyone thought it fit to fly in and look for a room, sorry but another time. "Bookings for the show had commenced almost a year back," said Amar Ravishankar, Sales Executive, Manager, Leela Kempinski. Some 200 rooms in his hotel have been booked by visitors to the Aero India show. "To cope with the demand, we have accommodated those who stay for a minimum four days," Mr. Ravishankar said.

There are over 4,700 rooms in about 66 hotels in Bangalore that are booked right through. And the rooms are pricey. To get a room below $350 a night has become near impossible in upmarket hotels.

A number of hotels have also upped their charges by 30 per cent.

"Not us," said Rakhi Lalvani, of the Taj Group. "Taj Residency has 160 rooms and Taj West End 117 rooms. They are now mostly occupied with Aero India visitors. Our hotels are providing transport facilities to Yelahanka for them."

ITC Windsor Sheraton and Towers is also pulling out all stops to make the guests' stay comfortable, said Rajesh Rohi, Reservation Assistant.

Ditto with The Grand Ashok. "Delegates from different countries as staying with us and we're providing special facilities for them, said Shalini Mahapatra, spokesperson for the hotel.

Nagpur rakes in crorepatis

Hindustan Times

Nagpur is in the hot seat and raking in billions. There is nobody here who doesn't walk down the city's `Crorepati Galli' and aspire to own a bungalow here. A survey by the National Council of Applied Economic Research (NCAER) says Nagpur has seen a phenomenal rise in crorepatis or billionaires from just a handful about ten years ago to 438 billionaires.

Though there are more billionaires in Delhi (5,085) or Mumbai (4,439 crorepatis), Nagpur has the highest growth rate of millionaires. The city is home to the well-known Pendharkars of the Vicco group and Sharmas of Baidyanath.

The study shows that there is more to Nagpur than oranges and Vidarbha. In 2002, there were 10, 417 households with an annual income of over Rs 10 lakh in Nagpur as against 1,199 in 1996. In terms of percentage, that is a 770 per cent growth in six years. Mumbai with a `billionaire growth rate' of 319 per cent and Delhi with 274 per cent were the third and second slowest among the 10 cities that were surveyed.

"Nagpur is a peaceful city unlike others where businessmen face extortion, and are kidnapped and threatened by the mafia," said N. Kumar, a leading city-based builder, film financer and one of the crorepatis. "The infrastructure and quality of life here have attracted several businessmen and industrialists from Orissa, Madhya Pradesh and Chhattisgarh. The international airport, cargo hub and the Boeing unit have changed the way others see the city."

Satish Goel, another crorepati who shifted from Raipur a few years ago, said Nagpur will be India's next big metro. "The city has the advantage of providing skilled and technical personnel," he said.

Realty bites: Home Buyers seek budget relief

Hindustan Times

For DS Kulkarni (24) buying a flat in Mumbai has become a daunting task. The sky rocketing prices have compelled him to focus on Navi Mumbai.

"There is no other alternative," said Kulkarni adding, "For Rs 14 lakh, I can maximum have a flat with a carpet area of less than 300 sq ft in Navi Mumbai. Houses are not cheap even in Thane." "Builders are increasing prices by Rs 100 per sq ft every week and it is unrealistic. But what can I do," he said.

The expectations

Release land into the system by repealing of ULCA and releasing of salt pan land
Stamp duty exemption on resale flats
Enhance the income tax exemption limits to Rs 3 lakh paid towards interest
Segregate first time house buyers from the 2nd and 3rd (investors) as the former is in dire need for a house

This sums up the plight of the salaried class house buyers, constituting about 80 per cent of all the buyers in the Mumbai region, and who pay back the cost with their future income.

But there is more trouble ahead.

Prices of flats in the Mumbai region are likely to go up by 10 to 15 per cent post-budget due to the shortage of land, say real estate developers. Unless the finance minister announces radical measures by unlocking land resources and provides tax sops, the prices will gallop.

Though the finance minister has asked the public sector banks not to increase the interest rates for the time being, it may not help much as the private sector banks, that control 75 per cent of the business, may charge more. "Unless interest rates are attractive, buyers will find it difficult to go for houses. Also, the land availabili ty issue needs to be addressed if prices are to settle," said Mukesh Patel, director, Neelkanth Group.

The finance minister must announce big changes in the budget to curtail prices, he said. Realty developers have asked the FM to make enough land available in every city so that prices will fall automatically. This can be done by repealing the Urban Land Ceiling Act and releasing the salt pan land for development.

The tax exemption limits on interest amount for housing loans must be enhanced to Rs 3 lakh so that the rising payout levels can be balanced. And finally, exempting stamp duty on resale flats. But the housing finance sector does not expect much. "It will be great if the existing sops can be retained. The FM would be more focused on addressing the problem of rising inflation and falling agricultural growth rather than the housing sector.

"We expect real estate and interest rates to stabilise with a higher side of 50 basis points," said Aseem Drhu, Executive Vice President, Head of Business Banking and Mortgages, HDFC Bank.

He said this year house buyers will come under the double pressure of rising interest rates and real estate prices. But since people's income is rising it will have margin effect on the housing finance industry that will still grow at 20 to 25 per cent as compared to 30 per cent now. "This year should see stabilisation of real estate prices," he added.

Structure of SEZ unlikely to be changed

Times Of India

MUMBAI: The Union Government on Thursday said it was unlikely that the basic structure of the SEZ policy would be changed and the Empowered Group of Ministers (EGoM) would meet after the Budget to bring more clarity to the existing policy.

"The EGoM is going to meet again after the Budget. They may bring in some clarification. But, I don't think that the basic structure of the rule is going to be changed," Union Commerce Secretary G K Pillai, who is also the Chairman of the SEZ Board of Approval said.

The UPA government has put a halt on agricultural land acquisition for industrial purposes following protests from different quarters.

Pillai said that so far 235 SEZ applications have got formal approval, while 162 have bagged in-principle nod from the Board of Approvals.

The Union Commerce secretary said that these 235 proposed SEZs, being set up across 17 states and three Union Territories would require "only 34,510 hectares of land" but bring in 8.9 lakh jobs and an investment of Rs 59,000 crore.

So far 63 SEZs have been notified out of which 23 are operational. These 23 have created 15,800 jobs and brought in Rs 11,000 crore investment in one year, Pillai said.

He said that both the Union Finance and Commerce Ministries were working on a report to judge the socio-economic benefits of SEZs.

"We expect these reports will come out in the next three months," Pillai said.

PSU banks freeze home loan rates

If you were worried about mounting interest rates on the home loan you have taken or are planning to take, breathe easy — at least until March. Finance minister P Chidambaram on Monday asked public sector banks to hold in abeyance any decision that hits the monthly budget of the common man.

Public sector bank chiefs, who met the minister on Monday, immediately agreed and decided to freeze interest rates at the current level.

But here’s a caveat. The FM’s request included only public sector banks. Currently, 75% of the home loan market is lies with private sector banks and housing finance institutions which may not necessarily comply. The freeze on interest rates by public sector banks could, however, put pressure on them and force them to fall in line.

Over the past three years, interest rates have gone up on five occasions. From 7% in 2004, the rates had hit 10% by January 2007. Borrowers are now paying nearly 25% higher equated monthly instalments (EMIs).

Last week, the Reserve Bank of India (RBI), in its annual policy review, hiked the repo rate (the rate at which banks borrow funds from RBI) to 7.50%. This hike is expected to put pressure on banks to revise the rate at which they lend. Chidambaram’s remarks came in the backdrop of the concerns this hike raises.

While RBI has expressed concern on credit flow to real estate, Chidambaram said home loan had not been clubbed with the sensitive sectors where the central bank wants credit growth to be moderated. He pointed out that the provisioning requirement — resulting in setting aside of more funds for the sensitive loans — had not been changed.

In other segments like personal loans, credit card, commercial real estate and loans for buying shares and borrowing from non-banking finance companies, the provisioning norms have been increased from 1% to 2%.

Time to pay off your home loan

TIMES NEWS NETWORK

NEW DELHI: ICICI Bank's latest hike in home loan interest rates was probably accompanied by a round of groans from those who now face the prospect of paying even larger EMIs. With other private sector banks set to follow suit, is there any way they can avoid having to shell out ever increasing amounts? And what about those who haven't yet bought a house, but were planning to do so?

If you were one of those planning to buy a house, you might be better off postponing the move. According to a consultant, prices are likely to come down. If interest rates go up further, the fall will even be steeper. At the same time, rents are still low. For example, the rental of a house worth about Rs 60 lakh is just Rs 10,000 per month in Delhi. If you buy the house, your EMI would be Rs 61,920. So it makes sense to pay rent and wait.

What if you already have a house loan?

Try to reduce your liability by repaying a part of the loan from your bank deposits. On a Rs 60 lakh loan, because of the tax incentive, the effective rate of interest comes down from 11% to around 10%. But your fixed deposits with the bank earn only around 9%. If you repay a part of your floating rate loan from your own deposits, banks do not levy prepayment charge.

Should you withdraw money from PF to prepay your house loan?

Not really. Your provident fund still earns an effective post-tax return of over 11%. As we've just established, the tax sops on home loans effectively bring down the rate of interest from 11% to 10%. So you're still better off keeping money in PF. But yes, if the interest rate on home loans is hiked to, say, 12%, then it's better to pay it off even if you have to draw down your PF to do so.

Should you switch from a floating rate to a fixed rate loan?

No, say bankers and consultants. This would invoke a 'switch charge' of around 1.5% to 2% of your outstanding amount. Besides, the fixed rate is always 1 to 1.5 percentage points higher than the prevailing floating rate. While the floating rate is now 11%, the fixed rate is 12.5%. If you switch now, in the first year your effective rate would be 14-14.5%, including the switch charge. After that, it would be around 12.5%. At the same time, if in future interest rates come down, you would be stuck with the higher fixed rate.

Bankers feel a fall in rates in the medium term, say six months, is likely. They argue that if inflation is controlled, rates should fall. Also, if present interest rates continue, the economy is likely to slow down, which in turn would result in a fall in interest rates.

Pune punch

Economic times again on Pune

This is boom town with a vengeance: if more housing is not brought into the Pune market quickly, the city could face a huge shortage. And this is not at some distant date: the Promoters and Builders Association of Poona (PBAP), an industry body comprising the city's top builders and developers, estimates this could happen over the next few months.

"Demand is fast out-stripping supply. Pune is becoming a city of have nots be it roads, housing or any other infrastructure. There is no housing stock in the market," Lalit Kumar Jain, chairman, Kumar Builders and current president, PBAP, said. He added that this is mainly due to non-availability of developable land.

Rohit Gera, executive director, Gera Developments and honorary secretary, PBAP, echoed Mr Jain's view: a galloping demand and a huge shortfall. "Pune is the sixth most important city in the country and IT is getting it huge attention. But the city cannot cope with the growth, it does not have adequate housing or infrastructure," Mr Jain remarked. He added that office premises for IT development are available in both the IT `hotspots' of the city, namely Hinjewadi and Kharadi.

When demand outstrips supply, the inevitable happens prices rise. And in Pune, prices in some locations have risen 100-150% over the past three years, averaging out at 75% for the city as a whole. The localities where appreciation has been at 150% are Kalyani Nagar, Boat Club Road and Koregaon Park. Currently, the minimum price for residential properties across the city is Rs 2,000 per sq ft, going all the way up to Rs. 8,000 per sq ft. Mr Gera pointed to the micro markets of Kharadi and Baner, where gross supply is being consumed in two-three months. And new projects are not being announced at the same rate as demand growth all of which means an upward pressure on prices of what is available.

"If no new projects are launched, then everything that is available in the market will be sold out in the next two-three months. This tight supply situation is causing the upward pressure on prices," he said.

In 2005-06, 65,000 tenements were built, which came down to between 35000 to 40,000 in the current fiscal. Developers, trying to pressure the civic body, claim that if the city's development plan is not sanctioned, there could be a further fall in construction in fiscal 2007-08. Just when the city is getting more investment, hence more jobs being created.

As for the much-touted townships, market sources claim that all the 15 to 16 of them are stuck with the state government's environment department, awaiting clearances. Since each of these project is being developed on a 100 acre area, these sources point to the marginal effect they will have on the city's woefully inadequate supply.

"Townships don't solve the problem since they will each have a maximum of 4,000 tenements if the FSI is 1. If the FSI is not increased to 1, then the maximum tenements each will have is 2,000. Every year, 1 lakh people get added to the city's population where is the housing for them?" they asked.

Developers in the city are up in arms against the civic body not passing the new Development Plan, thereby stalling the process of creating more housing. Their other grouse is the state government dragging its feet over the repeal of the Urban Land Ceiling Act (ULCA), under which large chunks of land are not available.

According to one estimate, if the ULCA is repealed, then an additional 15,000 acres could come into the market in the Pune and Pimpri Chinchwad areas. Apart from land becoming available, it will also have a cooling effect on prices, helping to stabilise the market, developers maintained. Mr Jain pointed out that with an annual influx of 1 lakh people, 60% of who will need housing, which means 65,000 tenements. Added to this is the local demand for 85,000 tenements, and the total goes to a huge 1.45 lakh incremental homes every year. "About 60% of people who come to Pune, who will need housing also includes the lower income group (LIG) component. These people will live in shanties and they do not get counted," he said.

Although this is not a phenomenon specific to Pune alone and is part of the urban Indian nightmare, it is an area which does not receive the requisite action. "The LIG segment is not addressed and it is unacceptable for society or our social structure that they should live in shanties. We, as developers, need support from the central and state governments since there is no funding available for the construction of such housing," Mr Jain said. With close to 40% of the city's population living in slums, this is a significant segment.

Pune is gaining a new global look

Economic times

Pune is undergoing a tremendous change, developing rapidly and offering its residents a whole new international lifestyle. Large malls, international brands and speciality stores have changed its face, bringing new zing to the retail scenario. Young professionals and migrant white-collar workers are increasingly zooming in on these new spaces, and the result is an evolution in organised retailing that one could not have imagined even ten years ago.

Earlier Laxmi Road area, M G Road, Camp Road and areas near Jungli Maharaj Road saw some retail activity. Then Deccan as well as the Camp area saw a sudden spurt with the Central Mall and Big Bazaar. More recently Nucleus and Magnum Mall have also come up. Senapati Bapat Marg, Kalyani Nagar, Nagar Road, Paud and Bibewadi are the new destinations gaining ground in retail. Kalyani Nagar is coming up with Adlabs mall and multiplex and Nagar Road will soon see three to four big commercial developments.

Developers like Vascon Engineers, Kumar Builders, Kolte-Patil and Kakde have come up with a number of malls. Some of the wellknown malls in Pune are the Nucleus Mall near Camp, Pune Central, City Mall, International Convention Centre, Shoppers, Stop and Magnum.

Lalit Kumar Jain, Chairman, Kumar Builders says, "The coming of the IT industry into Pune has given it a lot of exposure. Along with that, the new economic business growth has also helped a great deal in changing the face of the city. The kind of people required to adapt to new trends are present in Pune; thus almost 80% of the population has easily adjusted to the developments."
"The city needs larger malls at newer locations. The outskirts are still to see malls and soon there will be malls soon in those areas too. At the same time malls will see changes in the near future," adds Jain.

Kumar Builders has a seamless, no-partition mall at Bund Garden Road known as Pune Central. The mall is spread over an area of 1,50,000 sq ft. Some of their upcoming malls include a 1.6 million sq ft mall near Karve Road, four multiplex malls at Fatima Nagar, Kalyani Nagar, Station Road and Karve Road respectively.

Govind Shrikhande, CEO, Shopper's Stop, believes Pune is the cultural capital of Maharashtra, with booming software, manufacturing and education sectors. "Property rates have been increasing dramatically for the last five to seven years. For the retail hubs, like Deccan, Camp etc, the rates vary between Rs 40 to Rs 60 per sq. ft per month. Pune offers a good combination of the educated, upwardly mobile and more demanding consumer," he adds.

Shopper's Stop has stores in Pune - one in the Camp area, as part of Nucleus Mall and the other in Shivaji Nagar. Both are more than 45,000 sq. feet. "We have intentions to open at least two more stores. Sadly, the infrastructure continues to be a deterrent," explains Shrikhande.

Along with Shopper's Stop, Pyramid and Crossword are some of the important players in Pune. Interestingly, Pune will lead the mall culture in the country by being the first ever city to get niche malls. Ishanya Mall - The Design Centre, developed by Deepak Fertilisers is being projected as a "one-stop mall for interiors and exteriors". Kumar Builders are also developing a mall near Peshwe Children Park, which will specially cater to children.

Developers in Pune, seem to have realised the need for specialised malls. The Ishanya mall, spread over 5 ½ lakh sq ft on 10 acres of land will, apart from offering specialist shopping, allow for relaxation in a pleasant environment and cultural entertainment.

"Organised retailing is happening faster in Pune than in other cities. In other words, the expected mall space will be more in Pune compared to other cities. There is huge amount of amount of growth taking place in the city," observes I S Narula, President and CEO, Ishanya Specialty Mall. The coming months will see it emerge as number two in terms of organised retail space.

He adds, "The city is moving fast towards development also because of the coming of big industries, the satellite city coming up and automobile industry growing and to complement it all are the IT industries. Pune today is amongst the fastest growing cities in the world. Since there are no space restrictions for Pune as in Mumbai and Bangalore, the city is proudly growing in all five directions."

Bangalore has no space restrictions whatsoever and is growing in all directions

The glitz and glamour that are making their presence felt is only the beginning; as the year progresses, and competition increases with both new and large players in the fray, the Pune retail scene will undergo a metamorphosis.
Watch out for exciting times!

ICICI Bank Raises Interest Rates on Loans, Deposits

Bloomberg reports

By Sumit Sharma

Feb. 6 (Bloomberg) -- ICICI Bank Ltd., India's biggest by market value, raised its benchmark lending rate by one percentage point to 14.75 percent, the second increase since December.

The bank, which has one-third share of lending to individuals for purchase of houses, cars and other durables, said the floating rate on home loans has been raised by one percentage point to 11.75 percent.

ICICI Bank will pay 125 basis points more on its fixed deposits on maturity of five years on an amount of 100,000 rupees ($2,267) or less. One basis point is one-hundredth of a percentage point. The revised rate will be 9.5 percent compared with 8.25 percent, it said. The new rates will be effective Feb. 9, the bank said in a statement faxed from Mumbai.

ICICI Bank raised its lending rate after the Reserve Bank of India, the country's central bank, on Jan. 31 raised the key interest rate at which it lends overnight by a quarter point to a four-year high of 7.5 percent, making it more expensive for banks borrowing from it.

The central bank has raised rates five times over the past year to reduce the availability of money and contain the inflation rate that accelerated to a two-year high of 6.12 percent in the week ended Jan. 6.

ICICI Bank last raised its lending rate by half a percentage point effective Dec. 18. It raised the home loan rate to 10.75 percent from 10.25 percent and its benchmark lending rate to 13.75 from 13.25 percent.

Expanding Loans

About 68 percent of ICICI Bank's loans are to individuals to purchase houses, cars or other durables. The bank's loans rose 42 percent in the three months ended Dec. 31 to an outstanding 1.8 trillion rupees.

Bank loans have been rising rapidly as the economy expands. Loans rose about 30 percent through the year to Jan. 19, outpacing the 23 percent growth in deposits, according to central bank data. Loans expanded at an average 35 percent in each of the past two financial years.

ICICI Bank and HDFC Bank Ltd, India's two biggest non- state-owned banks, give 68 percent and 55 percent of their loans, respectively, to individuals.

India's Finance Minister P. Chidambaram yesterday told chairmen of state-run banks to hold home loan rates at current levels.

``Ninety percent home loans are to middle or lower middle class people,'' O.P. Bhatt, chairman of the State Bank of India, India's largest lender with more than 9,000 branches catering to 100 million customers, said in New Delhi yesterday.

Raising either the monthly installment of payments or extending the maturity of the loan would hurt borrowers, Bhatt said.

Ecnonomic times : Bubble trouble ??

What goes up must come down....The great property spiral may finally have to kowtow to the laws of nature. For real-estate prices are in for a correction at least in North India.

While the decline is relatively sharp (10-20%) in 'B' cities like Chandigarh, Amritsar, Jaipur, Rudrapur and Karnal, it's moderate (5-10%) in the National Capital Region (NCR) of Delhi. And prices in other cities like Mumbai, Bangalore, Pune and Chennai are showing signs of stabilising.

It's happening in Delhi too. Barring posh South Delhi, where residential prices are still rising, there's been a 5-10% fall in the months since Diwali in suburbs like Noida, Greater Noida and Gurgaon, and in areas like Mayur Vihar, Patparganj, Rohini and Dwarka.

The main reasons are fairly obvious: an unprecedented price boom, which has made property unaffordable for a large chunk of the middle class; a flood of new projects, and the complete mismatch between capital value and rental rates.

However, developers and consultants take heart from the high economic growth; the decline, they say, is unlikely to be steep or last very long.
"The correction was inevitable given that prices had become unrealistically high. In that sense, it's good for the sector," says CB Richard Ellis (South Asia) MD Anshuman Magazine. But, he adds, it should not be seen as the beginning of a slowdown as latent demand is still "very strong".

Exit speculators

The trend, which could be limited to stabilisation in prices instead of a decline in certain markets, would force speculators to exit, paving the way for end-users to enter.

So far, a majority of plots or apartments in a project were cornered by speculators and brokers at the pre-launch stage, who, in turn, sold them to the end-users at 25-50% premium.

Now, with end-users increasingly baulking at steep prices, investors are stuck with their investment. With no money flowing in, they are not being able to block apartments in upcoming projects.

This has also made it more difficult for developers to find buyers for their projects. Says Magazine, "Earlier a project would be sold within a few days, now it might take a few months, but it is going to end users.

Therefore, the price discovery is genuine." In the last three months, developers have not been able to increase the selling price of their projects and, thanks to the absence of the speculators, people are being able to buy property directly from builders at rates cheaper by 10-25%.

A senior banker reveals that in a project in Greater Noida, brokers cornered almost all the apartments in a project being developed by a respected developer, thinking they would sell it at a substantial premium.

Finding no takers, they are now selling the apartments at a discount 15-20% less than the official launch-price of the project.

What's more, such discounts could get even better when the large number of projects are completed. As Vivek Dahiya, director of global real-estate consultancy firm Debenham Tie Leung, points out, a number of projects launched in the last two years would be ready for delivery in the next six to 18 months.

"When that happens, speculators would want to exit. This would increase supply and prices could witness a sharp correction."

Growth = Demand

However, the market is hoping that the decline wouldn't go beyond 10-15% from present levels as long as economic growth continues to create new buyers.

Says Unitech executive director Sanjay Chandra: "In a city like Delhi, for instance, there would not be much problem for developers as demand for residential real estate is genuinely on the rise. This stems from large-scale absorption of commercial real-estate space in 2006."

According to one estimate, 6.4 million sq ft of commercial space was leased out in NCR in 2006 as against 3.2 million in 2005. This translates to 75,000 new jobs, since every 1,000 sq ft of office space is supposed to accommodate 12 employees.

Even if only 25% of them go in for a new house, there would be a demand for around 19,000 houses. Against this, the annual supply in the region would not be more than 10,000 houses. "This means a huge mismatch in demand-supply. Though the price points could be an issue, which would see some minor correction," says Chandra.

TO B OR NOT

But the situation could be different in 'B' cities like Amritsar, Chandigarh, Jaipur, Karnal and Rudrapur where commercial activity has not picked up. Besides, a large number of developers have already entered these markets to cash in on cheap land and easy investor money.

But there is no huge demand from end-users. Developers and consultants feel the upcoming townships near these cities might witness a sharp correction in coming months.

However, Assotech CMD Sanjiv Shrivastava points out that prices in 'B' cities are still substantially higher than what they were one year back. He believes the correction would not be very steep in areas where developers had planned projects with an eye on end-users' requirements.
Even in 'B' cities, by the time the projects and townships are completed in the next three to five years, there would be enough demand if the economy continues to grow at the current pace of 8-9%."

Besides, the new townships would also fuel economic activities in these areas. "But there could be problems if investors enter these markets to make a fast buck."

ATS Infrastructure promoter Getambar Anand attributes the correction to the large number of project launches announced by developers without commencing development work. This has affected market sentiment.

Pawa Builders MD Pankaj Pahwa blames unscrupulous elements in the business for playing havoc with market sentiment. "Many developers have sold apartments or plots without even having land. There is a need for a regulator to keep an eye on such irregularities."

Dahiya concludes: "Clearly, a correction is inevitable as more and more projects enter the market, interest rates inch ever upwards, vacancy levels in completed projects increase and end-users question the rationale behind the price rise.

But it is still unclear which reason might act as the proverbial last straw."

Realty funds` rollout soon

Business Standard

Rajesh Abraham / Mumbai February 2, 2007
Retail investors have never had it so good in terms of diverse products from mutual funds.

Schemes that are linked to gold prices (Gold ETFs) to capital protection schemes to products that invest in overseas stock markets are now the flavour of the season.

Yet another product, which until now was beyond the reach of a small investor, will soon become affordable for him. It is the proposed real estate mutual funds (REMFs) which will enable investors to buy and sell real estate properties.

Market regulator Securities and Exchange Board of India (Sebi) has already made its stand known – that it is in favour of REMFs. But there are some issues that need to be addressed before allowing the launch of such schemes in the country.

“Once allowed, REMFs will allow Indian investors to buy a product that is pegging its investments in the booming real estate sector,” said Ashwin Ramesh, promoter and director of Primary Real Estate Advisors, an affiliate of Quantum Mutual Fund, which is eyeing an entry into the sector. While tax issues will likely be addressed in the forthcoming Budget, there are other bottlenecks that also need to be looked at by the authorities concerned. These include unifying the stamp duty and registration fees for property transactions, which now varies from state to state.

Ajoy Veer Kapoor, managing director of Saffron Advisors, said: “If you want to have apples to apples comparison, you need to address these issues. I’m sure that the authorities concerned will address these issues sooner than later.”

REMFs, once allowed in India, would give domestic investors a new and interesting tradable product in a sector that is on an upward trajectory, he added.

REMFs are expected to mobilise funds from the public to invest in real estate projects in areas such as office spaces, residential apartments, shopping malls and IT parks, and will earn their revenues through rentals and even selling the completed projects.

“The ownership model is more popular in mature markets such as the US,” said Ramesh of Primary Real Estate Advisors.

The US is considered the most mature of all markets with a market cap of over $350 billion in realty projects. There are over 200 listed entities in the US investing in real estate projects through Real Estate Investment Trusts of Reits.

Pranay Vakil, chairman of Knight Frank, said the recent clarification by the finance ministry that the Sebi would regulate REMFs has set the ball rolling on the rollout of norms for REMFs.

“This clarification has set the ball rolling and now the issue of taxability needs to be addressed. This is the finance ministry’s call and since the Budget is near, the issue is expected to be addressed in the Budget,” he said.

Several players including ING Vysya and Kotak Mahindra are expected to go the REMFs route, once the market is opened up, said industry officials.

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.