Mumbai - Good Recovery, but Rentals Slower

Spate of new launches in the last 2-3 months, well spread over the city landscape.

Based on the market feedback, we understand that the volume off take was quick at the lower end of these price bands and slow at the upper end. Primary sale prices have risen rapidly (10-20%) over the last 2-3 months, around 15% shy of end 2007 peak levels.

Story will be different this time around, and unlike the previous bull market (prices went up 3-5x) prices will rise gradually. Residential rentals, though up from the bottom, are still at 25-30% below the end 2007 peak level (due to new supply), we believe. Further, Real Estate across the World suggests that rentals are a better reflection of the underlying demand, which will ramp slowly in view of significant supply.

On all India basis, we continue to believe that F10 will be the year of volume recovery, leading to 10% price increase in F11.

Mumbai + Delhi Hottest Investment Destinations

According to a survey just published by Colliers Investment, Mumbai and Delhi are the hottest destinations. Here is a complete result of the survey
[City - Preference of Respondents, Upcoming Supply, %of Supply as Affordable homes, Price Trend]

• Mumbai - 75%, 56K Units, 8% affordable, Mild Upswing
• Delhi - 53%, 3.3K units, 2% affordable, Still near the trough
• Bangalore - 52%, 45K units, 2% affordable, prices at trough
• Pune - 42%, 22.5K, 45% affordable, prices at trough
• Chennai - 40%, 44K units, 33% affordable and prices at trough
• Hyderabad - 30%, 28K units, 7% affordable, prices at trough
• Kolkata least favored state due to political parties which have hampered growth - 17%, 8.8 units, 45% affordable, prices just off the trough

3 out of 4 respondents believed that residential prices would increase from 0% to 10% in the next six months.

Model Act + Regulations - Potential Problems

We studied the proposed Model Real Estate Act and here are some potential problems.

Prohibits development of land into a colony or construction of apartments for marketing without registration.

This will prove tough on small developers given its inflationary impact on project cost. The key concern here is whether licencing would occur at the Centre or State level licencing at the Centre level could prove detrimental.

Mandatory registration by a regulatory authority prior to each project launch; 36-month licence period; bank guarantee from developers

These steps would safeguard the consumer from false developer claims regarding carpet area, built-up area and flat development plan, as developers would be required to proffer these details to the registration authority prior to launch. Prices, however, may increase due to the bank guarantee clause.

Disallows the issue of advertisements or prospectuses inviting advances or deposits

This could have a negative impact on end consumers since the absence of advertisements would leave buyers in the dark about upcoming projects.

No deposit or advances to be taken by promoters without first entering into an agreement of sale

This will prevent any discrepancies in the sale agreement, thereby protecting the interests of end users. It will also discourage investor-buyers from entering into the market and fuelling price speculation.

The Big Question - How efficient this Regulator will be ? All Developers are Politicians or First / il-legal Blood of Politicians and hence the regulator won't be in a spot to pass orders like SEBI or RBI does.

Inventory of Residential Apartments

PropEquity has done an excellent job of taking stock of the residential apartment inventory across various cities in India [Mumbai, Gurgaon, Noida, Thane, Bangalore, Kolkata, Hyderabad and Pune] for projects priced around INR 3 mn. Here is the latest availability chart. [Expandable]

Volume recovery in the residential segment has primarily been driven by improved affordability on the back of aggressive price cuts and reduction in mortgage rate.

Affordable housing - Gripped by Fear of Excess

PropEquity research data highlights that developers who had hurried into this segment, to improve their cash flows at a time when high-end residential segment was suffering, are sitting with >40% unsold stock. Of ~0.1mn units that were launched between Nov08-Oct09, only 57% found buyers.

Already seems to be a crowded space; we believe this segment will always remain price sensitive and any steep price hikes will kill absorption, especially as competition is stepping up.

As many as 11 realty companies have filed their DRHPs with SEBI (of which three have filed in the last week) looking to garner ~Rs 190bn (US$4.1bn) from the primary markets.

The real problem is Market has not improved fully and Developers have to tone down their expectations.

Mumbai Apartment Registration Rise

Mumbai's apartment registrations data reveals that demand remains strong despite 5-30% rise in prices in the past five months. Thus, while prices in many pockets in the city are new highs, registrations in October 2009 were the highest in almost two years. he data suggests that the increase in prices has failed to make a dent in residential demand in the city.

Also, the Reserve Bank of India (RBI) increased risk weightage on commercial real estate lending by 100bps, which is likely to result in a 50-100bps increase in borrowing costs. Mortgage rates could also come under pressure owing to inflation-related concerns. Headwinds of higher prices and mortgage rates are likely to weigh on real estate demand in medium term.

Corruption + Bubble - Allowing FDI Without Lock-In

The government may do away with the lock-in period for foreign direct investment (FDI) in the real estate sector that was imposed earlier in wake of worldwide realty rally and concerns of asset price bubble formation. The Department of Industrial Policy and Promotion (DIPP) has proposed the scrapping of the three-year lock-in for FDI in realty. The DIPP has already drafted a cabinet note on the matter which has been circulated to the Cabinet Committee on Economic Affairs (CCEA).

The lock-in period was a cautionary move as real estate, as a space, is generally more prone to speculative trading. The government, therefore, introduced a lock-in for foreign investment after it liberalized FDI in realty in 2005. The restrictions were also supposed to act as an inbuilt buffer in case of a global real estate crash as it would prevent sudden flight of capital. Well we want Foreign Money for Long Term Investments says Finance Minister, then why are you now removing the Lock-in ?

The move, however, would be counter to the intuition of the Reserve Bank of India which had in the latest quarterly review of its monetary policy raised the provisioning on loans meant for the commercial real estate sector to 1% from 0.40% citing potential of an asset price bubble formation. We wish Dr. Reddy was still the Governor of RBI, however, his strict and principled approach likely irked the then FM and was unfortunately shown the door.

I really hate to see this withdrawal happen under Dr. Manmohan Singh, but it is happening. Looting the Hardworking Indian Middle Class and transferring money to Foreign Investors.

DLF - Slowdown in execution & sales

DLF expects a slowdown in the launch of luxury homes in the next 2-3 quarters. Though the mid-income housing business showed sales of c.2.74 msf, higher than 1Q FY09 (c.2.09 msf), they are not robust in comparison to the last quarter of FY08 (c.7.72 msf). A decline in sales coupled with execution delays show signs of a worsening situation. The company indicated significant slowdown in hospitality launches mainly due to funding issues.

DLF plans to focus on the ongoing projects and capital conservation rather than taking on additional risk. The company indicated that it is not driven on buying additional land and would respond to any deals with great caution.

Ground Reality - Moderate Sales + New Launch Absorption Down

All India monthly residential sales volumes has moderated from an aggregate 19,700 units/month sold in March-May to 16,100 units in June-August across the markets we track. Residential new launch absorption has fallen from between 40%-60% in April-June to about 20%-25% in Jul-Aug.

The inventory of unsold homes in the Rs0.5-Rs3.0 mn/unit range has been increasing through CY2009. Cumulative absorption is encouraging in pockets of NCR but below 40% in some markets like Chennai and Bangalore.

Take-up across the six major markets of Mumbai, Gurgaon, Bangalore, Hyderabad, Chennai and Kolkata in August 2009 was about 70% lower vs. August 2008. However, the trajectory in Mumbai and Bangalore has improved a bit since March.

Property investors have been quite active over the past six months in Chennai and NCR with regard to take-up of new launches, however their is no significant pick-up in volume.

Noida - Residential Project Prices

Noida has witnessed fair amount of new project launches in 2009 from Jaypee, Unitech, Divine India Infrastructure, 3C Group, Amrapali Group etc. Here is the latest update our Analyst from Delhi NCR is filing on the SELLING price of these projects. [Click on IMAGE to Enlarge]
Do let us know your DEALING experience in the above projects as this will help otehr prospective BUYERS.

Gurgaon - New project Launch Prices

Our analyst has done an excellent job touching base with most property developers like - Falcon Builders, M2K, Rahejas, Emmar MGF, Pareena Infrastructure, Pal Infrastructure, Unitech, Vatika, Millenium Spire, Pioneer Urban land, etc in Gurgaon and here is how new Residential projects have been launched in the past 6 months and their SELLING prices / sft for the convenience of all the readers is tabulated as below. [Click to Enlarge]Kindly share your experience in BUYING or DEALING with any of the above property developers so that it will help other readers.

Historical Mumbai Property Prices 1993 to 2009

Residential demand is a function of affordability, direction of selling prices and consumer confidence. As prices and interest rates dropped, we saw affordability improving. If prices remain at current levels, affordability will rise only with an increase in household income as further interest rate reduction is unlikely. But on the contrary, if interest rates start moving up then affordability will start emerging as a big concern again.

The following Chart Shows Historical Property Prices in Mumbai between 1993-2009 at Bhandup Mulund Ghatkopar Goregaon Chembur Powai Andheri (W) Bandra (W) Worli and South Bombay.

Government Bill on model real estate

The Union housing and urban poverty alleviation ministry is expected to come out with a bill aimed at taming the demand supply mismatch in housing consumption in big cities. The ministry has invited expert and public opinion for the proposed legislation.

The ministry has already held preliminary discussions with various stakeholders. The government has initiated the process of shaping a model Real Estate (Regulation of Development) Act in this wake. The ministry has targeted to promote planned and healthy real estate development of colonies and apartments, keeping protection of consumer interest in view. The proposed bill is expected to facilitate smooth and speedy urban construction.

More efforts would be taken to encourage institutionalised financing and formal channels of credit. Developing countries are facing increasing effects of climate change, resource depletion, food insecurity, population growth and economic instability.

Prices in Mumbai Western + Central Suburbs Rise

We attended a property exhibition organised by MCHI, with participation by 75 developers and a number of housing finance companies.

Most developers have raised prices in the past four months, and prices are back to their lifetime highs. Many visitors, however, indicated that prices had shot up beyond their affordability.

Developers too displayed a sense of uncertainty, primarily showcasing their existing projects and going slow on new launches.

Western Suburbs Residential Realty Prices:
All prices have risen and the percentage rise is provided.
Oberoi Oberoi Springs Andheri 20,765 19,000 9% [20,765 is the current price]
Oberoi Oberoi Splendor Andheri 11,860 10,200 16%
Mantri Mantri Park Goregaon 5,999 5,590 7%
Rustomjee Elanza Malad 9,500 9,000 6%
Ackruti Gardenia Mira Road 3,350 2,950 14%

prices in Central suburbs are up 5-25%

Lodha Imperia Bhandup 6,500 6,300 3% [6500 is current price]
Kalpataru Aura Ghatkopar 7,000 6,700 4%
Runwal Pride Mulund 8,000 7,000 14%
Runwal Anthrium Mulund 6,600 6,100 8%
Gundecha Zenith Mulund 5,991 5,300 13%
Hiranandani Estates Thane 5,350 5,032 6%
Hiranandani Meadows Thane 5,450 5,200 5%
Runwal Pearl Thane 4,500 3,700 22%

Unitech Homes - No Constrcution Activity

BNP Paribas analysts visited the sites of newly launched Unitech Homes projects and were shocked to find that the company has not launched any Construction Activity. Here is an excerpt from the report of various projects of Unitech Ltd.

Uniworld Gardens II Residential - Apartments Gurgaon Fully Sold Mar-09 No construction activity
The Villas Individual Bunglows Gurgaon na Aug - Sep 09 No construction activity
The Residences Residential - Apartments Gurgaon Fully Sold May-09 No construction activity
Sunbreeze Residential - Apartments Gurgaon Fully Sold Aug - sep 09 No construction activity
Unitech Vistas Residential - Apartments Kolkata 20-25% sold Jul-09 Preliminary construction activity
Gateway Phase 2 Residential - Apartments Kolkata 5 - 10% sold Aug-09 No construction activity
Unihomes Residential - Apartments Kolkata 0-5% sold Aug-09 No construction activity
Unihomes Residential - Apartments Noida 80% sold Jul-09 No construction activity
Uniworld Gardens Residential - Apartments Noida more than 70% sold Jul-09 No construction activity
Willows @ Grande Residential - plots Noida 40% sold Jul-09 Preliminary construction activity
Unihomes Plots Residential - plots Greater Noida Fully Sold Jul - Aug 09 No construction activity
Unihomes Residential - Apartments Greatern Noida ~ 5% sold Sep-09 No construction activity
Unihomes Residential - Apartments Chennai 300 units sold Aug-09 No construction activity
Ananda Residential - Apartments Chennai Fully Sold May-09 No construction activity
Brahma Residential - Apartments Chennai Fully Sold May-09 No construction activity

With Real Estate Regulator coming into force, Unitech will have a tough time if it continues such practices.

Ahmedabad + Indore + Bhopal - Reviews

The following projects meet our guidelines for recommendation and are also affordable :-)

Ahmedabad:
Bakeri Sanatan Residency Vejalpur 1,900
Bakeri Sulay Deluxe Row Houses Vejalpur 2,450

Indore:
DLF Garden city near bypass 1,850
Emaar Indore Greens (Plots) near Airport 800
Ansal Ansal Town near Agra Mumbai Rd 1,500

Bhopal:
Unitech Unihomes Kolar Road 1,360

Bhubaneshwar:
Vipul Vipul Gardens Kalinga Nagar 2,250

Bangalore + Chennai - Housing Reviews

Here are the latest Housing Projects that are available in Bangalore and Chennai for Home buyers. All prices are in INR / sft as quoted by the Developer directly.

DLF New Town Bangalore, BTM Ext. 2,100
Puravankara Purva Venezia Bangalore, Yehalanka 2,800
Puravankara Provident Welworth City Bangalore, Yehalanka 1,800

DLF Garden City Chennai, OMR 2,550
Puravankara Purva Swan Lake Chennai, OMR 2,590
Puravankara Provident Cosmo City Chennai, Near Siruseri IT Park 1,940
Sobha Sunscape Bangalore, Off Kanakpura Rd 1,978 - 2,128
Sobha Sunbeam I & II Bangalore, Off Kanakpura Rd 2,254
Unitech Ananda - North Town Chennai, Perambur 3,100
Unitech Brahma - North Town Chennai, Perambur 3,100
Unitech Unihomes Chennai, Nallambakkam, OMR 1,845

Kindly negotiate and try to get a Deal. Reviews on Indian Real Estate can be logged on here.

Kochi Housing Review

Kochi Housing Market has gained lot of visibility from all the leading developers of India. In our research, we have gathered the prices for various projects quoted directly by the Developer to us. Kindly negotiate for your Deal.

DLF New Town Heights Kakkanad INR 2,500
Puravanakara Moonreach Kakkanad INR 3,090
Puravanakara Eternity Kakkanad INR 2,290
Puravanakara Grandbay Marine Drive INR 4,590

Hot Housing Projects in Pune

Well they are sort of a affordable housing projects, though we wouldn't classify them as Purely Affordable which enjoy incentives from the Govrnment of India on various Loan products.

All prices in INR / sft, unless otherwise specifically mentioned

Kumar Builders 45 Nirvana Hills Paud Phata, Karve Road INR 4,900 for a bare shell unit is 4,500 psf
Kumar Builders Kubera Sankul Hadapsar INR 2,750
Kumar Builders Sublime Kondwa INR 3,225
K Raheja Vistas Kondwa INR 3,000
Sobha Sobha Carnation Kondwa INR 3,555
Mahindra Lifespace Royale Pimpri INR 2950-3050
Magarpatta Trillium Magarpatta City INR 3,250
Magarpatta Sylvania Magarpatta City INR 3,250
Magarpatta Laburnum Park Magarpatta City INR 4,000
Sobha Sobha Carnation Pune, Kondwa INR 3,555

Key projcts in Chandigarh - Mohali

Larger players are gradually expanding to new city markets (Tier II/III) to strengthen their pan-India positioning. Here are the key projects in Chandigarh - Mohali region worth looking at.

All prices in INR / sft

Unitech Unihomes Sector 107 INR 2000-2400
Unitech Executive Floors Sector 97 INR 2500-3000
Emaar Terraces Sector 108 INR 2400-3000
Emaar Bungalows Sector 108-109 6.6 mln for For G+2 units with GF built-up area of 1700sf and roof right for 1st and 2nd floors
Ansal Club Class Floors Sector 114 INR 2000-2300

Do let us know your views as this will help other readers make their choice for their dream home.

12 Months - Fall and Rise

Here is what happened in the past 12 months in the Indian Real Estate Space.

Bad to Worse Market Conditions 20-Oct-08
First Official Price Cut in the Sector 23-Nov-08
Price Softening Becomes More Widespread 7-Dec-08
Price Cuts Accelerating, Land Bank Contraction Begins 19-Feb-09
Price Cut Party Getting Bigger; New Launch Pickup 6-Mar-09
Lo-Behold, Oversupply Coming In Mumbai, Gurgaon 8-Apr-09
Price Correction Sets In Central Mumbai, Volumes Modest 10-May-09
Vol Trends In New Launch Surge 15-Jun-09
Commercial/Retail Demand Remains Subdued 2-Jul-09
Mumbai And NCR Update Plus Contours of Recovery 5-Aug-09
Price Cuts Barely Lifting Volumes in Metros (BCHK) 27-Aug-09
Tier II/III Cities: New Launch Pickup but Modest Volumes 16-Sep-09

The study takes into account real estate market in 7-8 key Tier II/III cities including Pune, Chandigarh, Kochi, Indore, and Bhubaneshwar.

Omaxe into a MoU with Bulandshahar Development Authority

Omaxe’s subsidiary Rivaj Infratech – a private limited company – has entered into a Memorandum of Understanding with Bulandshahar Development Authority for the development of a Hi-Tech Township in Bulandshahar, Uttar Pradesh.

The Hi-Tech Township will be built on land area of 3601.19 acres.

The proposed Hi-Tech Township is well connected to Delhi, located in the NCR Region adjoining Greater Noida adjacent to proposed Eastern Peripheral Expressway and North-East Railway Freight Corridor.

The revenue out of this project is estimated over Rs 7,500 crore and will be executed in phases over a period of five to seven years.

Land registration + approvals - Reforms

Real estate developers in India spend on average 1.5-2 years in obtaining all necessary approvals. In contrast, developers in Thailand and Malaysia receive all their approvals in 6 and 9 months respectively. Thus, by the time a developer in Thailand obtains all the relevant permits/approvals, its Indian counterpart would still be awaiting its building plan approval. An Indian developer interacts with more than 30 agencies to receive the required (50-70) approvals.

A developer in India needs 12-18 months from the time it commences work on a new launch to open the project for bookings. If the approval process is rationalized, many more projects could get approved within that time frame, increasing supply manifold, leading to a drop in real estate prices. The labyrinthine approval process ensures that supply lags demand during up-cycles, keeping prices elevated.

A developer needs to finance land cost for 18-24 months before it can launch the project. This financing cost is passed on to the consumer. Developers take longer to bring in enough supply in the up-cycle and cannot cut back supply quickly in a down-cycle. This leads to sharp run-ups in prices during up-cycles, followed by sharp falls during down-cycles. Forecasting quarterly revenues is also tricky, as revenue recognition from pre-sold projects could get delayed for want of approvals.

Parsvnath Developers - Rohtak Township receives LoI

Realty major Parsvnath Developers has received the Letter of Intent (LoI) for grant of licence from director, Town and Country Planning, Chandigarh in Haryana for developing approximately 118 acres of integrated township in Sector 33 A, Rohtak, Haryana.

The project, with a realization value of around Rs 700 crore, will have approximately 4 million square feet (sq ft) of saleable area and would comprise plots, affordable homes, row houses, independent villas shopping, commercial along with school, dispensary, etc, as mentioned in its filing with the BSE.

The company has already acquired 118 acres land and intends to start the development, construction and marketing activities soon after receiving all the approvals and completing all necessary formalities of obtaining the licence.

This will be the first residential offering by the realty major in Rohtak.

Malls in Gurgaon + Location Map

Gurgaon has witnessed India's first successful retail and mall revolution combined with hospitality and entertainment. Realtors like DLF, MGF, Omaxe etc have had a big hand in this success story. Here is list of Malls and Rtail / Recreational destinations in Gurgaon [some of them which will go live for business in a year of two].



1. Ambi Mall
2. DLF Mall of India 2012
3. DLF Star Mall
4. Galaxy
5. MGF Metropolitan
6. DLF City Centre
7. MGF Metropolis 2010
8. JMD Corporate Suites
9. DLF South Point
10. DLF Mega Mall
11. Metro World
12. Omaxe Gurgaon Mall
13. JMD Galleria
14. House to Home
15. Raheja Mall
16. Orris Commercial-1 2011
17. Orris Commercial-2 2012
18. Exact Promoters
19. Amrapali Corporate Hub
20. Savoys Mall
21. Uppal Element-9
22. Eros Corporate Park 2012

Affordable Housing Projects in Hyderabad

Compared to Bangalore, Hyderabad is offering real good affordable homes and good public infrastructure which may take away IT / BPO investments from the crowded and polluted Bangalore city.

Sr.No Project Name Developer Location May '09 Rate (Rs./sq.ft.) Unit Size Range (sq.ft.)
1 Nile Valley Janapriya Engineers Syndicate Madinaguda 1,600 940-1,350
2 Metropolis Janapriya Engineers Syndicate Moti nagar 2,650 625-1,250
3 Arcadia Janapriya Engineers Syndicate Kaukur 1,895 585-1,500
4 Utopia Janapriya Engineers Syndicate Attapur 2,300 700-1,490
5 Celestia Mantri Gachibowli 2,640 1,000-1,198
6 Rainbow Vistas Ashoka & Cybercity developers Near Hitech city 2,679 1,045-1,515
7 Gulmohar Park II Modi Properties & Investment Pvt Ltd Mallapur 2,000 1,197-1,453
8 May Flower Heights Modi Properties & Investment Pvt Ltd Nacharam 2,300 1,260-1,695
9 Indu Aranya Indu Group LB Nagar 1,850 1,602-1,900
10 Commune Golden gate Kollur 1,800 1,060-1,750
11 Manjeera Smart Homes Manjeera group Qutbullapur 2,100 1,100-1,665
12 Greenwood Residency Modi Properties & Investment Pvt Ltd Kaukur 1,799 1,081-1,462
13 Ushodayam Green Homes Satyavani Group Annojiguda 2,200* 1,100-1,691

Affordable Housing Projects in Pune

Pune seem really affordable compared to Mumbai. Lekin Mumbai mein Jaga Milta Kidar Hey Baap :-)

Sr.No Project Name Developer Location May '09 Rate Unit Size Range
(Rs./sq.ft.) (sq.ft.)
1 Sanskruti - Phase I & II Gini Const. Co. Hadapsar - Handewadi Road 2,750 1,045-1,400
2 Seagul - Phase I & II Runwal Housing Hadapsar - Handewadi Road 2,400-2,500 700-1,362
3 Ashok Nagar Phase I Harshad Const. Hadapsar - Handewadi Road 2,200 885- 1,255
4 Elegance Phase I & II Dreams Group Hadapsar - Handewadi Road 2,250-2,500 800 - 953
5 Green City Phase I Arihant Venkateshwara Hadapsar - Handewadi Road 1,900 552-2,300
Housing
6 Rose Wood Kolte Patil Developers Ltd. Undri 2,500 1,115 -1,890
7 Skyheights Phase I Lushlife & Undri - Pisoli Road 2,250 568 -1,025
Trimurti Developers
8 Sankalp and Lotus Ranjeet Developers Undri 2,000 572-1,500
9 Sunshine Hills Phase I Tricon Builders Undri - Pisoli Road, Pisoli 2,200 600-830
10 Ganga Sparsh and Goel Ganga Group Undri 2,500 530-1,325
Ganga Elika
11 Raheja Vistas K Raheja Corp. Mohammadwadi 2,750 1,095-1,515
12 Hill View Anand Shelters Kondhwa Khurd 2,700 804-930
13 Akruti Countrywoods Phase I Akruti Jay Developers Kondhwa Budruk 2,250 565-885
14 Bellagio Mirchandani Group Undri 2,575 1,250-1,650

Rajiv Gandhi Salai - Affordable Homes colony in Chennai

Rajiv Gandhi Salai has become the colony of affordable housing. If you have bought an apartment there, then touch base with Sonia Gandhi and you may get real good public infrastructure.

Sr.No Project Name Developer Location May '09 Rate (Rs./sq.ft.) Unit Size Range (sq.ft.)
1 Mantri Synergy II Mantri Developers Rajiv Gandhi Salai 2,800 870-1,140
2 Cosmo City Provident Housing Rajiv Gandhi Salai 1,780 983-1,062
3 Pushpadhruma Marg Construcions Rajiv Gandhi Salai 2,099 847-1,077
4 India Bulls Greens India Bulls Properties Rajiv Gandhi Salai 3,000 650-1,700
5 Bollineri Hillside View BSCPL Rajiv Gandhi Salai 2,500 800-1,000
6 Gold City Duggar Housing Rajiv Gandhi Salai 1,790 444-1,069

Affordable Housing Projects in Mumbai

Sr.No Project Name Developer Location May '09 Rate* (Rs./sq.ft.) Unit Size Range (sq.ft.)
1 Garden View Apartments Royal Palms Goregaon (E) 4,800 483-1,259
2 Acme Amrut Acme Group Dahisar (E) 3,000 657-795
3 Orchid Ozone DB Realty Dahisar (W) 3,168 574-882
4 Lodha Aqua Lodha Group Dahisar (E) 3,800 616-2,232
5 Viceroy Park Tower B Vijay Associates Dahisar (W) 4,950 778-958
(Wadhwa) Developers
6 NG Shelter RNA Builders (NG) Mira Road 2,750 629-996
7 Gardenia Akruti City Mira Road 3,000 585 -1,010*
8 Mittal Enclave Mittal Builders Naigaon (E) 2,000 370-770
9 Sigrun Splendour Sigrun Vasai (E) 2,200 543-1,044
10 Virar Gardens Mayfair Housing Virar (W) 2,100* 370-510
11 Rustomjee Estate Rustomjee Virar (W) 1,660-2,054 523-604
12 Gokul Sapphire Agarwal Group Virar (W) 2,300 660-1,000
13 Viva Vrindavan Agarwal Group Virar (W) 2,050 885-1,100
14 Galaxy Apartment HDIL Kurla (E) 4,551 650-920
15 Rustomjee Rustomjee Thane (W) 3,960 780
Township-Atelier A Wing
16 Rustomjee Rustomjee Thane (W) 3,960-4,050 910
Township-Acura A & B Wing
17 Rustomjee Rustomjee Thane (W) 3,929 422-430
Township-Atelier E Wing
18 Dosti Vihar Dosti Group Thane (W) 4,241 837-1,212
19 Cosmos Lounge- Orchid Cosmos Builders Thane (W) 3,500 1,005-1,025
& Promoters Ltd.
20 Akruti Greenwoods Akruti Nirman Ltd. Thane (W) 3,900 565-990
21 Everest Countryside Everest Developers Thane (W) 2,780-3,140 587-831
22 Mittal Park Mittal Builders Thane (W) 3,500 880-2,100
23 Bhoomi Acres Bhoomi Group Thane (W) 3,500 625-925
24 Niharika Kanakia Builders Thane (W) 3,500 1,030-1,190

Delhi NCR Residential Rates - June-09

Here are the rates INR / SFT in Delhi NCR region for Grade - I or Grade II residential properties.

Greater Kailash I&II/ New Friends Colony 11,000 to 15,000
Janakpuri 4150 to 7000
Dwarka 4000 to 6000
Rohini/Pitampura 4000 to 6000
Gurgaon-Sushant Lok 1 - 3500 to 6000
Gurgaon-Sushant Lok II & III - 2400 to 4000
Gurgaon-Golf Course Road Sectors 52/ 56/58 and 61 3500 to 7200
Gurgaon-Extended Golf Course Road/Sohna Road - 2100 to 3800
Gurgoan-DLF Phase 1-4 4000 to 7000
Gurgaon-Near NH-8 2100 to 3500
Old Ghaziabad-Mohan Nagar/ Raj Nagar/Kavi nagar 2800 to 4500
Indirapuram-Ghaziabad 2200 to 3000
Vaishali/Vasundhara-Ghaziabad 2000 to 3000
NH-24 Ghaziabad 1900 to 2400
Old Faridabad 15, 16, 17,21 4000 to 6000
Faridabad-Suraj kund 3400 to 4400
Faridabad (Sectors 70-88) 1800 to 2400
NH-2 Faridabad 3500 to 4200
Noida-Sectors 93 A & B, 119, 137, 151 2100 to 4200
Noida-Sectors - 50, 61, 62, 63, - 3800 to 6000
Greater Noida 1700 to 2600

Affordable Housing Projects in NCR

Project Name Developer Location May '09 Rate (Rs /SFT) Unit Size (SFT)
1 Omaxe Height Omaxe Ltd Sec 86,Faridabad 1,900 1,165-1,475
2 Omaxe New Height Omaxe Ltd Sec 78,Faridabad 1,720 850-1,350
3 Era Divine Court Era Group Sec 76,Faridabad 1,792 890-1,225
4 Redwood Residency Era Group Sec 78,Faridabad 1,900 1,150-1,470
5 Princess Park BPTP Ltd Sec 86,Faridabad 2,250 1,289-1,835
6 Park Floors II BPTP Ltd Sec 78, Faridabad 2,050 1,170-1,414
7 Imperial Estate SPR Buildtech Sec 82, Faridabad 1,950 1,881
8 ILD Spire Green ILD Group Sec 37C, Gurgaon 2,222 1,208-2,510
9 Park Serene BPTP Ltd Sec 37D, Gurgaon 2,250 1,488-2,450
10 Era Divine Era Group Sec-68, Gurgaon 2,550 1,290-1,700
11 Tulip Orange Tulip Group Sec-69/70, Gurgaon 2,200 1,137
12 Purvanchal Heights Purvanchal Construction Zeta – 1, Greater Noida 2,350 1,830-2,770
13 Jaypee Aman Jaypee Group Sec 151, Noida 2,100 850-1,320
14 Mahagun Mascot Mahagun Pvt.Ltd NH 24, Ghaziabad 2,070 1,100-1,890
15 River Heights Landcraft Developers Nh 58, Raj Nagar Ext, Ghaziabad 1,794 965-1,750
16 Mahagunpuram Mahagun Group NH 24, Ghaziabad 1,725 900-1,300
17 GulmoharTower SVP Group Sec-6, Ghaziabad 1,990 1,260-1,560
18 Grand Savana KDP Group Nh 58, Raj Nagar Ext, Ghaziabad 1,900 825-1,550
19 Camellia Garden M-Tech Developers On NH-8, Alwar Road 1,890 1,200-1,900
20 Ashiana Aangan Ashiana group On NH-8, Alwar road 2,100 1,200-1,520

DLF Vs Unitech for 35 acre Gurgaon land

Haryana State Industrial and Infrastructure Development Corporation (HSIIDC) which had invited bids for a 350-acere plot in Gurgaon, has shortlisted top realty majors DLF and Unitech. This is the second time the state government agency has invited bids for the land.

The land is meant for setting up recreation and leisure project, comprising commercial, residential and sports complexes and has a reserve price of Rs 1,700 crore.

Earlier in April, HSIIDC had closed the bids for the same project, in which DLF was the sole bidder.

Omaxe Sangam City - Allahabad

Omaxe, India's leading real estate developer, has launched its integrated township project -- Omaxe Sangam City -- in the holy city of Allahabad. The value of the project is around Rs 100 crore and it is going to be developed over an area of 96 acres.

Omaxe Sangam City will have plots in area ranging from 86 sq yards to 671 sq yards at a price Rs 5200 per sq yd and limited villas set amidst green environment and a host of recreational and entertainment facilities.

Last month, Pancham Realcon, a subsidiary of the company, had entered into a memorandum of understanding (MoU) with Allahabad Development Authority (ADA) for the development of Omaxe Waterfront, a hi-tech township, to be built over an area of approximately 1,535 acres with a total investment of around Rs 1,800 crore.

This project is strategically located on the bank of the holy Ganga and it offers magnificent view of Sangam Triveni of the three holy rivers -- Ganga, Yamuna and Saraswati.

The villas will be aesthetically designed & furnished with imported modular kitchen, ultra modern chimney & hub, etc.

Apart from this, healthcare support, prominent educational institute, office spaces and retail opportunities are also built into the project design for the benefit of the residents.

Projects Eligible Under Tax Holiday Incentive

The Government has offered tax holiday for Real Estate Developers. We checked with the management of these companies and the following projects are likely to qualify under the same.

Company, Project, City and Number of Apartments
DLF Garden City Chennai ~3000
DLF New Town Heights Kolkata ~780
DLF Riverside Kochi ~176
DLF New Town Heights Gurgaon ~3000
Unitech Gateway Kolkata na
Unitech Harmony Kolkata na
Unitech Uniworld City Mohali na
Unitech Uniworld City Gr Noida na
Parsvnath PrideAsia Chandigarh ~359
Parsvnath Parsvnath City Dharuhera ~1000
Parsvnath Parsvnath Royale Panchkula 440
Parsvnath Parsvnath Palacia Gr Noida 382
Parsvnath Parsvnath Castle Rajpura 196
Parsvnath Parsvnath Exotica Ghaziabad 858
Parsvnath Parsvnath City Indore na
Parsvnath Parsvnath Preston Sonepat ~1200
Omaxe The Forest Spa Noida ~176
Omaxe Royal Residency Ludhiana na
Puravankara Swanlake Chennai ~700
Puravankara Elita Garden Vista Kolkata 1278
Puravankara Hallmark Bangalore na
Puravankara Oceania Kochi na
Puravankara Jade Chennai na
Puravankara Moonreach Kochi na

New Incentives from the Govt - Complete Analysis

The Indian government has announced new incentives for the property sector, which should, at the margin, be beneficial for the developers (2-4% EPS upside for F10-12, plus better demand) and the home buyers (5-7% savings for certain affordable housing). More importantly, the incentives highlight the government's pro-consumer and pro-developer policy stance. Two key announcements are detailed below.

Section 80IB (10) has been amended to extend (income) the tax holiday by one year to those housing projects approved in F08 (Apr 07-Mar 08) and get completed before Mar’12. Under this section, only housing units measuring up to 1000sf in Mumbai and Delhi and up to 1500sf elsewhere qualify. Developers can not avail this benefit for larger housing units.

In general, most property developers should directly benefit from this, depending on the extent of projects qualifying for the above. Even though not all the information is available, we estimate that DLF could benefit for its projects totaling 6-7 msf (Kolkata, Kochi, Chennai and New Gurgaon) and UT for 2-3 msf (Kolkata and Greater Noida). Assuming Rs400 psf tax benefit (to be realized over 3 years), we estimate this incentive could lift our earnings estimates by 2-4% for F10-12.

Interest subvention of 1% on all housing loans up to Rs1 mln to individuals, provided the cost of the house does not exceed Rs2 mln. This interest subsidy will be routed through the scheduled commercial banks and would be available for one year. The government has provided Rs10 bln for this incentive.

This incentive should, at the margin, facilitate demand for affordable housing (ASP Rs2000-2400 psf, 1000-800sf unit size). We estimate 5-7% lower outgo for the customer on the total mortgage outlay for 1% interest cost subvention. We believe developers that focus on affordable housing including UT, DLF, should benefit from this.

Chronology of Events - No Recovery Yet

Excerpts from Morgan Stanley Indian Realty Research list the chronology of events in the Indian Real Estate space.

• Bad to Worse Market Conditions 20-Oct-08
• Sobha Blinks - First Official Price Cut in the Sector 23-Nov-08
• Price Softening Becomes More Widespread 7-Dec-08
• Price Cuts Accelerating, Land Bank Contraction Begins 19-Feb-09
• Price Cut Party Getting Bigger; New Launch Pickup 6-Mar-09
• Behold, Oversupply Coming In Mumbai, Gurgaon 8-Apr-09
• Price Correction Sets In Central Mumbai, Volumes Modest 10-May-09
• Vol Trends In New Launch look up 15-Jun-09
• Commercial/Retail Demand Remains Subdued 2-Jul-09
  

Importantly, several old pre-leases have been negotiated down 15-20% - and mgmt teams are guiding to 20-30% lower rental expectation (Lower Parel Rs225 psf, Kurla Rs80-85, Bangalore / Pune /Chennai/Hyderabad - Rs50-70 psf) for the un-leased portion (versus Jan'09). In addition, retailers want mall developers to share the business risks, and, therefore, revenue sharing (4-20%) is getting increasingly common.

Tags: India Real Esate, Commercial Realty, Retail Mall, Office Spaces

Expectations for upcoming budget from Industry

Here is the wish list of Indian Real Estate Developers from the Finance Minister, Mr. Pranab Mukherjee for the forthcoming budget.

1.Reintroduce tax holiday for mass housing under Sec 80 (IB)
2. Tax holiday available to hotels under section 80ID to be extended 10 years from existing 5 yrs. Gestation period in hotel industry, itself, stretches from 4 to 5 yrs.
3. Re-introduce 'tax pass through' status for domestic venture capital funds that invest in the Indian real estate sector
4. Clarity on regulations/taxation on real estate mutual funds (REMFs)
5. Extend the external commercial borrowing scheme to the entire Indian real estate sector
6. Encourage states to reduce stamp duty to 5% and to provide a system of credit for each stage of sale i.e. levy on value addition.
7. Increase the tax break on home loan interest under section 24(b) to Rs 300,000 from the existing limit of Rs 150,000 for self occupied houses.
8. Service tax on renting immovable property should be abolished
9. Reduction/ rationalization of customs duty (exemption from special additional duty) and excise duty (8% to 4%)
10. Extension of STPI clause. Current deadline expires by Mar-10.
11. Introduction of a real estate regulator

Residential + Apartment Prices to Fall by 10%

Crisil in a report released yesterday has said that Residential real estate: Capital values to fall further by 8-10 per cent in 2009 before stabilising in 2010.

End users also have had to put their purchasing plans on hold due to fall in affordability levels and job-related uncertainties. Average residential capital values declined by 18-20 per cent in March 2009 from the highs witnessed during the first half of 2008.

The following Bar Chart shows the Real Estate absorption between - Real End Users and Investors /Speculators in the Indian Residential / Apartment sector.
It is evident from Graph that Realty speculators are active in Kochi and Chandigarh / Tricity [50% + Consumption]. Pune and Delhi NCR offer the second opportunity [30-35%] for Investors while Bangalore Kolkata and Hyderabad offer the third [20%].

Between now and 2011, Developers will add 700 mn sft of saleable area while absorption is expected to be around 500mn sft. The highest and lowest fall in Realty is as expected as shown in the table below.

Historical Prices of New Launches

We have obtained data from Crisil about historical new launch prices in the hot pockets of Bangalore, Delhi NCR and Kolkata between 2005 and 2009 YTD.
Bangalore:

Kolkata:
Delhi / NCR:

Producers + Consumers - Spectrum

The following Triangle shows how Consumers of Indian Real Estate are stacked. It also shows how Realtors are producing the inventory and where the demand is.
Courtesy: Crisil

Opto Circuits to set up SEZ at Hassan

The manufacturer of medical diagnostics and interventional products, Opto Circuits India (OCIL), is looking to develop a single-product special economic zone (SEZ) at Hassan in Karnataka while shelling out around Rs 150 crore. The company has already acquired 250 acres of land from Karnataka Industrial Area Development Board (KIADB) for Rs 40 crore.

The greenfield manufacturing facility to be developed at the industrial growth centre in Hassan will require investment of Rs 100 crore for building up the new plant and machinery.

The Bangalore-based company is now waiting for clear indications on the SEZ guidelines from the government as the incentives provided for the export oriented units (EoU) are expiring in March 2010 and the proposal for extending the same is currently under consideration.

The company will start working on the proposed SEZ without more ado if the EoU incentives are not extended by the government and will shift its entire new product manufacturing work to this SEZ.

OCIL has lined up for around 4-5 products for exports market which will be unveiled once they get requisite approvals from the respective regulators, apart from this the company is also expected to launch its five new products in invasive and non-invasive products range under the regulated markets in next 8-12 weeks time.

It will be launching some of its new product in domestic market as well in the last quarter of this year for which the approval is due from the Drugs Controller General of India (DCGI).

The company has already planned for an qualified institutional placement (QIP) of up to Rs 400 crore and the funds raised in the process will be utilized for setting up of the SEZ and executing other expansion plans along with reducing its debt burden which currently stands at Rs 300 crore.

Government's Anti-Consumer Policies Favor Developers

The Government of India under Dr. Manmohan Singh is not bent upon making the Real Estate market lucrative to Indian consumers but has vested interest in pampering the developers. In short, the Government lacks the will to curb Foreign money in Real Estate which our Developers are raising and once have comfortable cash position, begins their wave of arrogance towards the Indian consumer without any reduction in prices.

We had demanded the Government to ban or have a 10 year lock in for Foreign investment in Residential Real Estate, but they don't oblige. Here are some recent updates that proves our claim.

In January and February, FDI into India increased by 127% to Rs 27.5bn as against Rs 12.1bn in the same period last year. FDI in housing and real estate also increased to 6% of total FDI for these two months as against the average of 5.7% in FY09 (excluding March data).
One need not worry as even this major[attracting foreign money] will fail and Realty Developers will have to reduce the prices further by 10-15% from current levels.Why do we say so ? Realty Developers completely ignored locals and were pampering the NRIs between 2004 and 2007. In 2008, the NRI buyers crashed out. Now for short term, QIPs and Foreign Investors will come, however, this won't sustain for long as they need to SELL the properties they build and the only possiblity is to reduce further and SELL.

Unitech Sales Collapsed in FY-09

Here is the bar chart that we have plotted after obtaining accurate data from Unitech Ltd on its sales between FY07 and FY10[Q1].

It is evident from the above chat that sales were almost Nil for the past four quarters. The same was the fate of other Developers.

Retail rentals declined 12-14% QoQ in 1Q09

Recent data indicate mall rentals across key cities on average declined 14% qoq in 1Q09, while main street rentals declined 12% qoq. Hyderabad and Noida witnessed the sharpest decline in mall rentals of 27% and 17%, respectively, while the fall in main street rentals was the highest in Mumbai (19%) and Delhi (15%).

With developers delaying mall projects, Mumbai, Bangalore, Chennai and Hyderabad did not have any new mall completions in 1Q09. Further delays in planned supply of retail space are likely.

Given high vacancy levels (15% in Mumbai and 20% in NCR) and subdued demand, rentals are likely to remain weak in the near-term. Developers are increasingly shifting to a
minimum guarantee + revenue sharing arrangement to attract/retain tenants.

SEZs procedures to be simplified: Comm Ministry

Jittered over the fate of sagging exports and dismal state of exporters, the commerce ministry has speeded up efforts to reduce procedural time taken for developing Special Economic Zones (SEZs) and to simplify procedures to get the tax-free industrial enclaves after the new government is formally sworn in.

In order to boost the tax-free industrial enclaves on a fast track basis for increasing overseas sales of Indian goods and services, the ministry will enable developers to get their land classified as an SEZ at the initial stage of approval by only submitting legal documents that prove land ownership, instead of a numerous processes earlier including a non-encumbrance certificate.

The move by the commerce ministry would ensure increased and speedy investment flows in the SEZs apart from increasing employment in the region.

Price Correction In Central Mumbai

After sharp 30-40% price cuts in several new launches in suburban Mumbai (Thane, Chembur, Andheri, Kurla etc) over the last 2-3 months, we note price cuts in prestigious South-Central Mumbai (20 mins from CBD, Nariman Point) projects. Lodha Developers launched Primero (at Apollo Mills, NM Joshi Marg) at Rs15,000 psf BSP (Rs100 psf floor rise & car park extra), implying 20% discount to neighborhood. This is a 52-storey tower with roughly 200 apartments.

Several ongoing and partially (60-80%) sold projects in Central-South Mumbai, too, have officially reduced selling prices (10-30%). For instance – Bellisemo (now at Rs 21,000 psf for 32nd storey onwards apts, NM Joshi Marg), Ashok Garden (Rs15,000 psf, Sewri), Orbit Eternia (Rs17000-18000 psf, Lower Parel) and Orbit Arya (Rs40,000-50,000 psf, Napean Sea Road).

Overall, contrary to the market's view, our channel checks suggest lukewarm customer response to several projects.

Bangalore Developers vs DLF - Cold War

The Bruhat Bangalore Mahangar Palike - BBMP [Government authority to approve buildings in Bangalore] - has issued a full page advertisement against DLF Homes which is developing WestEnd Heights at Banerghatta Road Bangalore.

DLF has claimed that it has received approval from BBMP for construction upto 4 floors. BBMP has clarified that DLF has not obtained any approval or sanction. The scanned copy of the Paper Advertisement from BBMP is attached below.
This practice is nothing new as Realty Developers raise booking amount from customers prior to all paper work formalities. We suspect rival builders in the vicinity[Banerghatta Road] who are holding on to inflated prices to loot customers having a hand in this BBMP advertisement as until now BBMP has never issued any such paper advertisements though such practices are so common. Rival Builders want to keep DLF out of Bangalore and hence the cold war :-)

Mumbai - Registrations + Pricing Data

New property registrations for March 2009 in Mumbai rose 30% MoM (down 33% YoY), possibly the first real MoM increase since October 2008. In FY09, total registrations were 45,580, 30% less than in FY08.
The sales pick-up has come in earlier than our forecast of Q3/Q409 though we did expect the stocks to re-rate earlier. We still think existing inventory will be cleared only by Q3/Q409 if price cuts continue.

Property prices in Mumbai between 2003 and 2009 is as follows,

Gurgaon - Registration + Pricing

In Gurgaon, 1,879 properties were registered in March 2009, up 19% MoM. For FY09, registration of properties declined 5%YoY to 29,012 as the base area was higher under the new Gurgaon Master Plan. Here is how Properties were registered in Gurgaon in FY07 to FY09.
Historical Property Prices in Gurgaon and Noida between 2003 and March-09.

We believe the large vacancy levels will result in significant price cuts as developers churn portfolio to meet cash flow demands. Also, the quarterly sales account for less than 10% of the vacant apartments during the quarter. In our view, there will be further price cuts to increase the absorption levels and flush out the inventory.

Residential demand yet to recover meaningfully

RBI data suggests outstanding home loan portfolio of banks grew a modest 8% YoY in 4QFY09, down substantially from 16% seen in 4QFY08. Also growth has slowed during the year from 14% in 2QFY09 to 10% in 3QFY09 and 8% in 4QFY09.

Demand for homes has been muted in FY09 on account of low affordability caused by high interest rates and property prices. It is only since Oct 2008 that RBI took the initiative to lower the repo rate by 425bps from 9% to 4.75% currently. Additionally, in Dec 2008 the government capped interest rates on home loans by PSU banks at 8.5%, for loans up to Rs0.5m, and 9.25% for loans up to Rs2m. House prices have also declined substantially in 2HCY08.

With the decline in interest rates and property prices, affordability has improved. However, this has not yet translated into higher loan growth given that the weak macroeconomic environment and resulting job insecurity, and low income visibility, have adversely impacted buyer sentiment.

Moreover, there is a section of buyers who are waiting on the sidelines expecting further reduction in property prices and interest rates.

IndiaBulls Sells prime land in Mumbai

British Council (BCI) has bought a Lower Parel propoerty encompassing 15,730 sq ft of area of a commercial complex under construction from Indiabulls Real Estate. The deal is valued at Rs 30 crore, or Rs 19,000 per sq ft.

The company has received a under valuation and has also signed a leasing agreement with corporates like Reliance Capital, IDFC, Indusind Bank, Aditya Birla Group for the compensation of around Rs 175 per sq ft.

This funds raised will help the company to finish its incompleted projects.

The real estate sector is facing the heat because of current economic turmoil and lack of sufficient fund. The real estate prices have tanked by almost 50% in the past one year.

Buy Bangalore - Metro Rail Completion in Sight

The BJP Government after 11 months in Power in Karnataka has done only one Good Job which I can vouch for - Awarding part of Namma Metro or Bangalore Metro Tender to World class construction company - Punj Lloyd. Namma Metro is most likely to be completed within the next 18 months.

One thing I like about Punj is, they don't compromise on the work and is known for state of the art execution across the world. Buy Property in Bangalore which is located at the convenience of Metro as they will Zoom now.

Now if you are a regular reader of this blog, you will have noticed me trashing the local government for poor and pathetic infrastructure. However, Punj along with others will solve our biggest Hurdle, conveyance reducing half of our tension in daily life within the next 18 months.

Latest Prices in Mumbai

The latest property prices in various projects of Mumbai is as follows. prices as quoted in the Property Exhibition. Planet Godrej @ Byculla has seen the steepest fall of 34% followed by Nirmal Lifestyle at Mulund 31.5%. Click on the Image to Enlarge.

DLF Capital Greens - Shivaji Marg 85% Sold Out

We did a case study on DLF Capital Greens located at Shivaji Marg, 8 Kms from Connaught Place. Here is the excerpt of the study.

DLF bought this land in 2H07 at Rs16 bln. Late 2008, DLF launched a part (1,400 apts, 1.8 msf) of its Delhi (W) residential project. It appears to have received good customer response, and 85% is likely sold. This is one of the high profile projects in DLF’s land bank, we believe.

Overall project size is roughly 5msf, of which 1msf of commercial/retail space was sold last year; the balance is planned to be used for residential purposes.

Aggregate pricing was Rs6,000 psf (Rs5,000 excluding car parking), 25% discount to neighborhood, and appears to be at the lower end of our expectation. The company used innovative strategy to attract customers by showing low base selling price, and made up some ground by higher Car parks.

We estimate Rs4,300-4,400 psf cost of the project, implying 25-30% EBITDA margins, which according to some builders is on the lower side considering the quality of the land bank. Since the heydays are behind us, DLF is doing a good job leading the Realtors to significantly mark down the prices and unload them.

Correction and Recovery of Property Market - Jones Lang LaSalle Meghraj

We present to you the views of India's leading Realty Consultant - Jones Lang LaSalle Meghraj [JLLM] on the ongoing correction and Recovery of property market. JLLM study includes the cities of Delhi NCR, Mumbai, Bangalore, Pune, Hyderabad, Chennai and Kolkata. JLLM has divided the city into different areas depending on various factors and they are cateogrised as follows,

• Resistant - Despite low supply and lower historical rental appreciation, a sentiment-led correction of 10-20% is expected in these micro-markets. Recovery is expected in mid 2010 and expansion in mid 2011
  
• Fast Movers - Although micro-markets in this category are not looking at a huge supply
  pipeline, their rentals have reached unaffordable levels due to high historical appreciation. High price volatilities and negative sentiments are expected to push the rental envelope inwards. 20-25% Expected Correction. Recovery is expected in mid 2010 and expansion in mid 2011
• Followers - The followers are expected to witness a correction of 30-35% due to the huge supply that is under construction in these micro-markets. These are mostly the suburban
  micro-markets. Recovery is expected in mid 2011 and expansion in mid 2012.
• Aggresors - The aggressors are characterised by high supply as well as significant historical appreciation in rentals. Good infrastructure and proximity to the city led developers and occupiers to believe in the growth potential of these areas. 30-40% correction is expected. Recovery is expected in early 2011 and expansion in late 2011

Now we will see the areas that will fall under the above mentioned categories.

• Resistant - The suburban micro-markets of Bangalore - Whitefield and Electronic City. CV Raman Nagar, Bannerghatta Road, Inner Ring Road, Koramangala, Airport Road,
  Banashankari, Audgodi. CBD of Bangalore, Hyderabad [Begumpet, SP Road, Punjagutta, Raj Bhavan Road, Somajiguda] and Chennai.
• Fast Movers - Banjara Hills, Jubilee Hills, Ameerpet in Hyderabad. Nariman Point, Cuff Parade, Fort, Ballard Estate, Bandra Kurla Complex, Kurla, Kalina in Mumbai. Connaught Place and surrounding roads in Delhi. Park Street and surrounding roads in Kolkata
• Aggressors - Pune Cantt, Bund Garden Road, Shivaji Nagar, Deccan, Koregaon Park, Senapathi Bapat Road. Ghatkopar, Vikhroli, Kanjurmarg, Powai, Worli, Parel, Prabhadevi, Lower Parel, Dadar in Mumbai. Nehru Place, Jasola in Delhi. NH-8, MG Road, Golf Course Road, Sohna Road in Gurgaon.
• Followers - Old Mahabalipuram Road (OMR), GST Road in Chennai. Madhapur, Kondapur, Hitec City in Hyderabad. Salt lake and Rajarhat in Kolkata. Noida City, Noida – Gr Noida Expressway. Hinjewadi, Pimpri, Chichwad, Balewadi, Wakad, Pashan, Fursungi, NIBM in Pune and finally Navi Mumbai and Thane.

This is one of the best source os information based on intensive reasearch by JLLM on the Indian property market for its clients who are not just corporates but investors as well.

Mumbai Oversupply + Gurgaon Problem of Plenty in Next 18 Months

On our last count, we estimated ~32 new towers to be delivered in the mid Mumbai micro market over the next few months. These include Beau Mont (3 towers, Prabhadevi), Planet Godrej (5, Mahalaxmi), Ashoka Towers (4, Parel), Bellisimo (2, NM Joshi), RNA/Raheja/Atlantis/Harmony (all Worli) (details inside). These could total up to ~6-7msf of supply, as compared to negligible deliveries over the last couple of years.

Deliveries have commenced for a few of these projects. We have already seen roughly 50% rental correction in Planet Godrej (from Rs 2 lk/month for a 3BHK in 3Q08 to Rs1.1 lk/month now), where only two out of five towers have been handed over. In the suburbs, Raheja Acropolis rentals have corrected from Rs60k/month to Rs40/month currently over the past year.

Residential supply in the next 18 months in Mumbai:
Project and No of Towers
Beau Mont 3
Planet Godrej 5
Ashoka Towers 4
Bellisimo 2
Casa Grande 2
Imperial Towers 2
Vivarea 3
Ashoka Garden 4
Sumer Builders 2
Vision Crest 1
RNA 1
Raheja 1
Raheja Atlantis 1
Lokhandwala Harmony 1

Residential supply in the next 18 months in Gurgaon:
Project and Area in million sft
Unitech Fresco 1.6
Unitech Harmony 1.1
Unitech Escape 0.7
Unitech World Spa 1.7
Unitech Close 3.0
Unitech Espace 1.1
DLF Magnolias 2.5
DLF Belaire 1.3
DLF Park Place 2.2
Emaar Meadows NA
Parsvnath Exotica 2.5

Property Brokers Poll - Expect Further Correction Across the Board

Edelweiss Research has been doing an excellent job conducting Property Brokers Poll across all the major Realty markets. Here is an excerpt of the findings.

• 99% brokers believe prices have fallen over the past three months
• 87% brokers have seen a drop in transactions over the past one month
• 76% brokers expect price trend to be negative over the next three months
• 53% brokers expect price trend to be negative over the next one year
• Bangalore is the least pessimistic market with 32% brokers having negative outlook
  over the next one year
• Chennai remains the most pessimistic with 73% brokers having negative outlook over
  the next one year
• Brokers in Bangalore and Chennai have turned negative from their steady outlook for
  property prices in the next three months
• Mumbai and NCR brokers' outlook on property prices in the next one year has turned negative from positive earlier
  

This gives you a fair idea on where the market is heading. If its your Dream Home, you should be on the lookout. Negotiate and bragain until the developer comes to your price.

Hyderabad Blues for SEZ Developers - CLSA

CLSA in a report said that their view is incrementally negative on the Information-technology special economic zone (IT-SEZs) leases, which have witnessed net cancellations over the past six months. New enquiries are weak and IT-SEZ vacancy rates are set to jump to 40%-plus in six months.

From the peak of Rs45/sf/month in 2007, IT-SEZ rentals have come off 18% to Rs37/sf/month, and our sources suggest that it will further go down to about Rs33/sf/month in another 3-6 months. This is because IT-SEZ vacancy, now at 32%, is like to cross 40% in another six months.

Institutional brokers suggest that SEZ developers in Hyderabad are in a panic situation, with nearly 7-8m square feet (sf) of IT-SEZ space in the market for leasing, which, at the absorption rate of 2008, will take 6-7 years to clear. The three SEZs we visited - Raheja Mindspace, DLF Gachbowli and Tishman Speyer Gachibowli - have an unleased space of 3.7m sf, with deliveries due over 3-12 months. Raheja has got the land virtually free and can potentially undercut competition by driving the rates further down.

Home Buyers Survey

CLSA Research recently conducted a survey of Home Buyers across Cosmopolitan cities of India and published the findings today. Here is the brief excerpt from the same.

• 80% of the people are looking to purchase a property in the next 1-2 years.
• 44% of those interviewed said that they have actually postponed their buying decision in the past year.
• 69% of prospective buyers intend to stay in the Home they BUY while 31% want it for an investment
• 75% of the respondents aware of price cuts by Developers. Some people even spelt out names -DLF, Unitech, Brigade etc
  
• Respondents believed that prices have dropped by just 15%.
• 90% of the respondents believed that the current price is not lucrative enough to buy a house
• People expect an average of 20% price reduction from current levels, making for a peak to trough decline expectation of 35% in property prices
  

Foreign Investors face 3 years lock-in

Foreign investors in Indian real estate cannot sell their stakes to another foreign investor before three years the FIPB (Foreign Investment Promotion Board) has said. With this, FIPB has overruled a provision in FDI policy that exempts foreign players from the rule in cases where fund transfer is from one non-resident to another. Till now, this three-year lock-in was applicable only on foreign investment in real estate and not on investors.

The FIPB view is contrary to the stand taken by DIPP (Department of Industrial Policy and Promotion), the nodal agency that formulates FDI rules in the country. DIPP's view is that a foreign investor can repatriate funds if it offloads its stake to another foreign investor as the actual investment in a project would remain intact and only its ownership would change.

It was necessary that Foreign Investment Direct or Indirect in Real Estate should have been locked for 10 years. This would have curbed the speculative investment and would have helped the genuine Indian buyer. But do you think our government cares about our own people ? If so, why would be India Bleeding ?

NRIs Exit DLF's Garden City, Chennai Project

NRIs got a taste of speculating in the Indian property market that too in the hands of shady Realtor, DLF [Why Shady - Se their DLF Assets Deal involving Rs 7,000 cr and you will know]. According to today's ET, B'lore edition, 70 NRI Buyers have already submitted their exit letter to DLF who had bought properties in garden City project in Chennai. Since they have not received any response, they are now seeking intervention of ministry of overseas Indian affairs. prics in this project are oficially down by 20%. However, a realtor said that the prices in the vicinity have crashed upto 40% and hence the massive push for refund.

100 Local Indian families who have bookd their apartment in the same project also thronged the company's office. DLF Southern Homes CEO KK Raman said,

We have begun the process of refunds. We recognize the current circumstances when people may have lost increments or jobs.

The refund is directly linked to fresh booking any maye take upto 4 months. Successive Governments have lacked the vision to establish a regulator on the lins of SEBI for the Black Money Real Estate Market in India.

RBI Examines Accounts of DLF + Unitech and Others

In order to avoid a crisis like situation in the US and a Fake Accounting Scam like of Satyam, RBI has woken up, finally and is examining the books of accounts of 10 Real Estate Firms. The examination also includes actual verification of books of accounts, deposits etc and cross checking the same with the respective banks.

Realtors in RBI's Hall of Accounting Shame include - Anantraj Industries, Akruti Citi Ltd, Ansal Properties, DLF, HDIL, Indiabulls Real Estate, Phoenix Mills, Peninsular Land and Unitech.

The goal is to correct the debt-equity ratio, solvency, state of liquidity to avert defaults, cash flows and profit margin in the current operations.

The report further says,

Sources said these real estate companies had raised long-term loans from banks and had placed commercial paper amounting to thousand of crores to raise short-term financing from the mutual funds.

The mutual funds, in turn, got a major part of the subscription to their schemes from the banks who held public deposits. This means a default on even a single commercial paper will impact the mutual funds, the banks and ultimately public deposits.

Hopefully, RBI gets tough on these shady realtors.

New Projects at Lowered Prices

Residential realty market continues to deteriorate: We continue to see sharp price cuts of 20-25% from a greater number of property developers in more cities - now Tier II in addition to Metros earlier.

Gurgaon: UT launched Uniworld Garden II (sector 47) at Rs3000 psf (25% below neighborhood), and IBREL launched Centrum (sector 103) at Rs2100 psf

Indore (main city): IBREL launched Central Park at Rs2000 psf.
Lucknow: Parsvnath Developers Ltd launched Royal Floors at Rs1600 psf.
Mumbai: HDIL launched Premier Residency at Kurla at Rs 5300 psf, 30%-plus discount to neighbourhood, we estimate.

NCR faces Office rental Pressure

Citigroup had a conf. call with Anant Raj and indicated poor office space demand is pushing down rentals in NCR. Pre-leasing has slowed considerably and several tenants are renegotiating for lower rentals or opting out of lease agreements by forgoing the deposit amount. Rentals at the company's Manesar IT Park are down 20-30% to Rs35-40/sq ft and the project is only 40% leased. Also, launch of IT Parks in Gr. Noida and Jaipur has been delayed by 1-1.5yrs because of low demand.

Mumbai mill land fails to get Reserve Price:
In an auction, Dynamix Balwas Group's highest bid of Rs4.5bn for the 10.5 acre land parcel was rejected since it was below the reserve price. You can recall there were no buyers in Finlay Mills' 2nd auction even though the reserve price was down to ~Rs7bn from Rs10.66bn in Dec'08.

IT Slowdown to Directly Affect Realty Market

Last 5 year data suggests that there a direct co-relation between the growth of Indian IT sector and the Real Estate Market. Data on strong housing loan growth of 32% CAGR during FY03-FY07, at a time when the Top 3 Indian IT majors' (a good indicator of the sector) employee base grew at 44% CAGR. The following chart by RBI and Citi shows the direct co-relation.

With most global/domestic IT companies going slow on hiring plans, we see this adversely impacting housing demand. In addition to job losses, we see increasing risks of pay cuts and low visibility on pay hikes weighing on near-term demand for homes.

35% Correction + RESIDEX

As said earlier, here is the second part of the coverage on the impending correction of Indian Real Estate prices.
Edelweiss Report further adds,

Property prices in India increased sharply over the past 6-7 years -rising 3.4x in nominal terms 320 and 2.5x in real terms over 2001 price. We expect a price correction of 48% in nominal terms and 58% in real terms from the peak.

We believe, nominal prices have corrected by ~19% since then. However real prices have corrected by ~24%. We expect prices to correct another ~30% in the nominal terms in the next 3 years.

The factors that will contribute to subdued Real Estate Market is - Slow GDP Growth and deteriorating employment market. Adding to short sighted Realtors woes is the successive downgrades of their ratings and increase in outstanding.

What Should Prospective Buyers do ?
We recommend that you go and straight away sit across the table of projects completed or nearing completion and based on this Analysis ask for further 25% discount. For instance, if you are planning to BUY in Brigade Gateway Bangalore, they are quoting somewhere around Rs 3,900 / sft. Straight away ask them for Rs 4,000 / sft or Less which should also include Car Parking + Registration. [This Project is still under mid stage of construction]

35% Correction from Current Levels - Edelweiss

Edelweiss Research in an exclusive Real Estate Report on the Indian market expects the correction to go further deeper at 35% from current levels. The Indian Realty prices went on escalating without any supporting infrastructure and it is time for the same to face the reality :-) Here is an excerpt from Edelweiss Research,

• Volumes are closely linked with real returns on property and GDP growth
• What is the significance of this report ? Analysts have global property cycles across 15 countries before writing this report. Volumes are closely related to GDP (lag of ~1-2 years) and real returns on properties but share a weak relation with interest rates
• Down cycles in real estate cycles tend to give up their entire gains (in real terms) of the
  preceding up move - Implications for Indian real estate – an additional correction of 35%
• Significant reduction of growth in IT sector, job generation across sectors, and funds flow in the real estate sector
• While volumes have reduced sharply, banks' outstanding to real estate has increased even
  as real estate debt has been successively downgraded [Our Comment - We strongly disagree with RBI's soft corner to Real Estate by extending their Loan Restructuring till June-09 which is putting a lot of stress on the balance sheets of Public Sector Indian Banks where we have deposited our hard earned money.]
• Negative real returns on property are likely to drive property investors to exit holdings,
  keeping prices under pressure, keeping large project launches by developers at bay. volumes and sales are likely to remain highly subdued over an extended period of time.

Sta tuned for the next post which will explain in detail how and why 35% correction as reported by Edelweiss.

Unitech in distress - sells off 200-room hotel

Unitech, which is facing an acute financial crunch, has sold off its 200-room budget hotel in Gurgaon to a high net individual.

The deal for the Gurgaon-based Courtyard by Marriot was estimated at Rs 230 crore. Roop Madan, the buyer of the hotel, has interests in imports, in premium liquor and cigarette trade with investments in many real estate projects, the report added.

Unitech, which has a debt of around Rs 8,200 crore, is contemplating raising around Rs 1,500 crore from sale of projects, the report stated.

Meanwhile, India's second largest realty major has withdrawn its proposal to mop up Rs 5,000 crore from the overseas market.

Jeez!!! These guys will never improve, had they been a little reasonable in their business a year ago they wouldn't be in such a situation. Going by the current market scenario, they have invited larger trouble on their doorstep.

Special audit of DLF books - Government

Minister of State for Finance has informed in the Parliament that the government had ordered to conduct a special audit of the real estate giant DLF's books and would take necessary action after scrutiny suitable as such.

He said that a special audit under section 142(2A) of the I-T Act was ordered in the case of Delhi Lease and Financing (DLF) for the assessment year 2006-07.

The Income-Tax department can initiate special audit of books of accounts under section 142 (2A) of the Income Tax Act in the interest of revenue protection.

Popular Estate to invest Rs 8028 cr in Ahmedabad

Popular Estate Management has entered into a Memorandum of Understanding (MoU) with the Ahmedabad Urban Development Authority (AUDA) for setting up three integrated townships in Ahmedabad district and affordable housing for MIG at Ahmedabad City.

The proposed investment for the said projects is Rs 8028 crore. The projects are scheduled for completion by 2012.

Popular Estates was earlier known as Pioneer Technoparks - promoted by Ramanbhai and ChagganBhai Patels. It looks like these guys change the name of their company to suit according to the frenzy on Dalal Street. After 2000, IT Boom it was Real Estate and hence Patels followed :-) However, they've gotta be really influenctial to bag a project of this scale.

DLF Drops Bannerghatta Road Project Prices by 25%

In a bold move to win the hearts of Bangaloreans, DLF seeking an entry in Bangalore has gottten aggressive and announced priced cuts of 25% on its upcoming project on Bannerghatta Road, Bangalore.

In October 2008, the DLF Westend Heights new town project was launched for Rs 2,775 / sft. If reports from today's Business Standard are to be believed then the pricing is down to Rs 2,100 / sft ET says the rates are down to Rs 1,850 for a larger apartment [1,900 sft size].

Nitesh, Prestige and Sobha have projects in the vicinity and had priced at a whopping Rs 3,200 / sft to Rs 3,500 / sft just few weeks ago. With DLF dropping the bomb shell on pricing, other developers have no choice but to follow them :-)

Similarly for The Summit Project in Hyderabad, DLF dropped prices

The per sq. ft prices that were to open at Rs4,000 have been slashed to Rs1,850 for a 1,760 sq. ft flat and to Rs2,000 for a 1,185 sq. ft flat in the project. Construction hasn’t yet begun and the project is expected to finish in three years

Congratulations to DLF for kicking off the pricing war :-) Welcome to the Reality.

Parsvnath + Omaxe + Sobha - non-investment grade Fitch

Fitch has downgraded Parsvnath Developers (PDL) to BB- from A-. Fitch notes that developers' reluctance to reduce prices and customers' opting to postpone their purchases, in anticipation of a fall in prices, has led to new home sales coming to a standstill which will severly affect the prospects of the company.

Fitch has downgraded Omaxe to BB- from A-. The downgrade reflects Fitch's expectation that Omaxe's profitability and operational cash flow generation will be significantly impacted by the challenging industry environment. The rating action also relates to heightened concerns over Omaxe's short-term liquidity position, which has shown signs of weakening over recent months and has therefore created a degree of short-term refinancing risk.

Fitch has downgraded Sobha Developers to BB- from BBB+. The downgrade reflects significant erosion in the real estate sector and its expected impact on Sobha's operating performance.

10 Year Returns in Indian - Equity Vs Real Estate

There is a common myth amongst Indians - Property investment is a safe heaven compared to Equity. Maybe if you are willing to invest Big Amount in Prime Land, dealing with shady people with lost of Black Money transactions, etc

Now lets take for instance professionals like you and me passionate about our job straight away paying 30% tax to the Government and form the backbone of India [Be Proud]. We don't have huge money to invest in Land so the best of you might have thought of investing is an Apartment. Dream home is a must, but second home, third home speculation is totally uncalled for. The idea of this article is to show how smart professionals with Discipline and Patience have Punched a blow in the face of Speculative Property investors [No offence, just feeling extremely nice that RoI is far better than Realty Investors] For the sake of comparison, professional invested in Mutual Funds as they seldom gets time to Trade or Track a stock individually.

Real Estate Investment Returns in India from 1997-2008:
According to Kotak Report released in Jan-2009, the best residential realty investment RoI has been in Indiranagar, Bangalore - 13.7%, followed by Kothrud, Pune -13% and Gurgain, Delhi -12% [CAGR].

The following Chart Shows YoY Return in Real Estate in India between 1997 and 2008 + CAGR between 1997-2008in Delhi / NCR, Mumbai, Bangalore and Pune. [Expandable Chart]
Equity Returns in Indian Market between 1997 - 2008:
Now as assumed, investment has been in Mutual Fund - A diversified equity fund like HDFC Top 200 has delivered a whopping 21.94% in the same period as on Dec-2008. Other Equity Mutual Funds have also beaten Realty RoI.

So Equity has beaten Real Estate and is an opportunity for everybody Big or Small [as small as Rs 1,000 a month]. Bottom line, be productive, invest in the nation's manufacturing and industrial activity to create wealth. Of course, Patience is a must and see the returns you will enjoy after a decade :-)

BPTP to opt out of India's biggest land deal

BPTP - the over hyped real estate company with its promoters under the esctasy of Land havinally tasted the reality of Realty. We had called BPTP deal the sub-prime of India and they indeed are :-)

BPTP has applied for surrender of a 95-acre commercial plot at Sector 94 in Noida which it had bought for Rs50bn, making it India's largest land deal. The company has already paid Rs13bn, but is unable to pay the balance amount and, under a new policy of the Uttar Pradesh government, has applied for retaining ~25% of the land it has paid for. The new policy allows developers to either get payment of their land dues rescheduled or surrender the plot after paying a penalty of 10% of the amount deposited and get land elsewhere for the remaining amount. Developers have been allowed time up to June 2009 to submit their proposal to surrender their land.

Dirty Real Estate Developers who ignored Indian consumers and targeted NRIs have started converting 3 BHK lifestyle Apt projects into 2 BHK affordable Housing. But the price /sft has remained the same. Without any doubt the Realty sector is headed for another 15-20% correction and ENAM Securities in its report has said that India is headed for a hung Parliament [Means no will to liberalize the economy further, no big FDIs etc] So wait and watch, but if you get a DEAL, squeeze the Developer and BUY it.