Unitech to launch a mid-income project

Unitech Ltd plans to launch a mid-income project (1,200sqft houses) in Greater Noida at Rs.2750 - sees potential demand. This will be followed by Residential launches in Chennai and Hyderabad shortly. The company is also accumulating more land parcels in Mumbai through slum rehab, will disclose once formalities completed.

NKID Infrastructure Project: NKID is a large infrastructure project near Kolkata being developed by a consortium including Unitech (40%) and Salim Group (40%) and Universal Success (20%) of Indonesia. The project is spread over ~37,830 acres of which govt has handed over 13,457 acres (35%) for development – includes the recent ~12,500 acres handed for a Chemical SEZ.

Mumbai Builders holding capacity under test

Mumbai Builders holding capacity is under stress test now since they are holding vacant sky scrappers and structures as we do not see any dip in prices in Mumbai. Executives did mention that transactions had gone down substantially. Inspite of this fall in transactions, developers do not seem willing to reduce prices and are banking on their holding capacity. Prices in some of the areas are given below:

Area Base Rates (INR per sqft)
Sewri/Wadala 8,000-13,000
Chembur 8,000-10,000
Ghatkopar/Vikhroli 7,500-8,700
Bhandup/Mulund 6,500-8,000
Thane 4,800-7,500
Kalyan 2,800-3,000
Bandra 18,000-20,000
Santacruz/Khar 15,000-19,000
Vile Parle 12,000-14,000
Andheri 7,500-9,500
Goregaon 5,500-10,000
Kandivali 5,000-7,000
Mira Road/Vasai 2,500-3,000

Also check out the property prices of various projects in suburban areas of Mumbai.

BPTP Defaults on Initial Payment

Early this Month we had reported about India's Most Expensive Real Estate Deal. We have learnt from the Delhi authorities that BPTP has defaulted to pay the first installment of Rs 1,251 crore [$300 mn]. BPTP has sought an extension of 60 days. However, they now have to pay an interest of 14% on the initial amount.

Foreign Investors caught in the sub-prime crisis are looking closely at the Real Estate sector and hence none of them were able to extend their support to BPTP yet. According to RBI regulations they can't go in for an ECB. Unfavorable market conditions rules down the listing on London's Alternate Investment Market.

Mumbai Suburban Proprty Prices

Most of the quotes indicated a cost of Rs6-Rs10 mn for a 2 bedroom, hall and kitchen (2 BHK) apartment. This does not include preferential location charges that can vary from Rs20-Rs70 per floor rise, parking space (about Rs0.3 mn), stamp duty and registration and other infrastructure/maintenance charges.

Most agents indicated that prices have appreciated since their projects were launched. Given the number of apartments coming up in suburbs such as Mulund and Thane, property prices may struggle to appreciate in these areas.

Company, Location, Type of Apt, Area in sft, Price / sft [Rs]
Hiranandani Glen Ridge, Powai 4 BHK 2,650 18,000
Rustomjee La Sonrisa, Matunga (E) 2 BHK 1,170 22,000
Dosti Flamingos, Parel-Sewri 2 BHK 1,250 14,500
Sheth Polaris, Goregaon (W) 2.5 BHK 1,245 11,000
Oberoi Splendor, Andheri (E) 3 BHK 987 12,500
Dosti Acres, New Wadala 2 BHK 950 11,400
Rustomjee Elanza, Malad (W) 2 BHK 1,100 9,000
Sheth Ivy, Malad (E) 2 BHK 1,190 7,900
Sheth Grandeur, Borivali (E) 2 BHK 1,210 7,500
Kalpataru Ghatkopar (W) 2 BHK 1,028 8,200
Nirmal Lifestyle Mulund 2 BHK 981 7,200
Kalpataru Siddhachal, Thane (W) 2 BHK 1,127 5,500
Lodha Luxuria, Thane 2 BHK 1,044 5,859
Kanakia Thane (W) 2 BHK 945 6,265
Rustomjee Thane (W) 2 BHK 1,100 4,770
Dosti Vasai (W) 2 BHK - 1,400-1,800

Also check out our exclusive coverage of HDIL's Property Prices for various projects in Mumbai.

Mumbai Proprty Fair Update

This is an update by Goldman Sachs from MCHI Property 2008 at Bandra Kurla Complex, Mumbai on April 18th.

Property rates being quoted for Mumbai suburbs were high and likely to be beyond the reach of many upper middle income families. Given the upcoming supply, we believe risks are on the downside for property prices. We believe developers will struggle to achieve volume growth if they do not offer lower ticket sizes.

On Goldman's interaction with Investors,

Feedback on the sector based on our interaction with Asia based investors over the past month has generally been bearish.In the absence of a correction in property prices and interest rate cuts, GS believes end user demand will likely continue to languish. Property stocks may struggle to perform in the near future.

We are currently fetching the rates of various projects in Mumbai and shall update them soon.

Mumbai Commercial Districts - Rentals and Demand

The micro markets of Mumbai are expected to add substantial amount of office space in the next two calendar years with Central Mumbai (Worli/Lower Parel) adding 5 mn sqft, Bandra-Kurla Complex 4 mn sqft and Andheri another 5 mn sqft. This works out to adding space equivalent to more than two Nariman Points.

Mumbai’s corporate office space demand is concentrated in four micro markets:

• Nariman Point/Cuffe Parade
• Worli / Lower Parel/Parel
• Bandra-Kurla Complex/Kalina/Sion
• Andheri (East & West)/Andheri-Kurla Road/Sahar Road

Nariman Point/Cuffe Parade: This is the traditional commercial business district of the city located in South Mumbai. The existing stock of office space to be in the range of 6-6.5 mn sqft. spread over 30-33 towers. There is no fresh supply in this market and current monthly rentals are in the range of INR350-500 per sqft per month.

Worli/Lower Parel/Parel/Dadar: This micro-market located in Central Mumbai is fast emerging as a hub for the financial services industry of India. The existing stock of office space to be in the range of 4-4.5 mn sqft. Over the next two years (CY08/09) we expect about 5mn sqft to be added. We expect another 1-2 mn sqft to be added post CY09.

Bandra-Kurla Complex/Kalina/Sion: This area is the secondary business district of Mumbai and is highly popular given its central location and good connectivity. We estimate the existing stock of office space to be in the range of 3.5-4 mn sqft. Over the next two years (CY08/09) we expect 4mn sqft to be added

Andheri: Andheri is the new upcoming destination for corporate India with its proximity to the airport and numerous industrial estates that are being converted into office space. The existing stock of office space to be in the range of 4.5-5.5 mn sqft. Over the next two years (CY08/09) we expect about 5mn sqft to be added. We expect another 1-2 mn sqft to come up post CY09.

Bombay Dyeing developing Worli + Wadala properties

Failure Textile Tycoon, Nusli Wadia is hoping to encash on the landbank which his sick textile mills own in Worli and Wadala regions of Mumbai.

The company has signed orders worth Rs 2,000 crore with Larsen & Toubro's construction division for developments at the textile mills & spring mills complexes at Worli and Wadala regions of Mumbai respectively.

The turnkey construction project involves construction of mixed-use developments of approximately 4.00 million sq.ft at the Textile Mills at Worli and 5.00 million sq.ft at the spring mills development at Wadala to be completed in the next 46 months by the end of December 2011.

HDIL, Mulund + Starlight, BKC,Mumbai Deals

Looks like the Mumbai Real Estate prices will crash the same way as the Mumbai SENSEX crashed on Jan-21st-2008, wiping out half of the traders in Indian stock market.

HDIL bought a 10 acre plot for over Rs 2,000 mm from Bombay Oxygen Corporation Ltd. The property is located on LBS Marg in Mulund, Mumbai. Taking an FAR of 2 as a base case (inclusive of development rights loading), the developer will have to achieve an average monthly rental of Rs 47psf for sustaining a 19% PAT Margin (Project IRR of 23%).

In the MMRDA Auction, Starlight Systems (promoted by Ajay Piramal and Suntech Group) bagged a 7043 sq m residential plot (BUA of 14,100 sq m) in Bandra Kurla Complex for Rs 4960 mm (Rs 32,712 psf). Taking the built up area of 0.2 mm sq ft as per the bidding details, the developer will have to achieve an average selling price of Rs 50,000 psf for sustaining a 19% project IRR. This is at a significant premium to prevailing residential capital values of Rs 20,000-30,000 psf and is likely to be the WORST REal Estate Deal.

Analysis of BPTP, Noida + DLF,Delhi Deals

BPTP Group won India's largest land deal for Rs 50B (US$1.2B) for a 95 acre commercial development at sector 94 along Noida and the Greater Noida Expressway. The company is planning to develop a big mixed use complex for banks in the area.

As per the company's development plans of 8.5 mm sq ft, it will have to achieve an average monthly rental of Rs 115 psf for sustaining project IRR of 17%. This assumption is at a significant premium to prevailing rentals of Rs 50-55 psf in the area (for commercial). Retail rents are high in the micro market -upwards of Rs 150 psf going to above Rs 250psf. (Source C&W, JLL).

DLF bought 38 acres of land at Swatantra Bharat Mills from DCM Shriram Consolidated Ltd. The plot is located at Shivajimarg Road in West Delhi at a distance of just about 4-5 km from the Delhi’s CBD, Connaught Place. The company already owns 27 acres of land in the same location and plans to develop integrated township on the site of about 10 msf.

As per the company's development plans, the developer will have to achieve an average selling price of Rs 9,000 psf for sustaining a project IRR of 20%.

Nitesh Estates Chamiers Road, Boat Club Deal

We present a quick analysis of Nitesh Estates' Chamiers Road, Boat Club in Chennai deal. Nitesh Estate won a bid for a 9 acre church land for Rs 6,300 million (Rs 700 mm an acre). The company plans to develop 1 mm square feet at the site, comprising a five-star hotel, shopping mall, office block and a residential block.

As per the company's development plans of 1 mm sq ft, it will have to achieve an average selling price of ~Rs 14,500 psf or a monthly rental of Rs 120psf per month for sustaining a 22% PAT Margin. This assumption is at a significant premium to prevailing rentals of Rs 60-65 psf in the area (for commercial). The residential prices are high in the micro market ranging between Rs 13,000-16,000 psf. (Source C&W, JLL). Clearly Nitesh Estates bid will be financially viable only if prices/rents increase from current levels in the micro market. Else, Nitesh Shetty will be upset in the Real Estate Grandslam :-)

Triangle India Fund invests Rs 457 crore in Prozone Enterprises

Provogue India has announced that Triangle India Real Estate Fund LLC, has entered into an agreement to invest Rs 457 crore for a 27% stake in a step down subsidiary of Prozone Enterprises. This downstream subsidiary of Prozone Liberty holds stake in four projects being developed in Aurangabad, Indore, Nagpur and Jaipur covering over approximately 1.6 million sq.ft.

Prozone Enterprise is a joint venture between Provogue (India) and Liberty International PLC .

Prozone-Liberty has set up six international and domestic subsidiaries as SPVs for carrying on its business viz. Prozone Liberty International, Prozone International, Prozone Overseas, Alliance Mall Developers, Royal Mall and Standard Mall. The downstream subsidiary of Prozone-Liberty has acquired 5% additional stake in its Aurangabad Project and now holds a majority stake in it.