India Real Estate Investment Trusts - Analysis

Here is an analysis of the Draft Guidelines for Indian Real Estate Investment Trusts after studying various documents released by SEBI.

Guideliness will open a hitherto closed market, and provide developers/property market, another pool of money (IPO's, off-shore structures, and P/Es, were a rage in 2007).

• Structure - set-up under local laws; managed by a real estate investment management company
• Funds - close ended, listed on stock exchanges with valuations done by independent principal valuers disclosed annually
• Dividend distribution - not-less than 90% of post tax profits
  
• Issues - No clarity on taxation for REIT's or investors - this is key to the viability of these structures, and needs to be addressed.

The investment guidelines for REITs cover

• Non-income producing/under-development asset: Capped at 20%
  
• single Asset exposure: 15% cap
  
• Developer exposure/concentration: restricted at25% for projects developed/marketed/financed by a developer group
• Leverage: Capped at 20% of total gross assets
  
• Restrictions: Cannot invest in land/participate in development activities.

We see this as early signs of an evolving commercial asset sale market (office, IT Parks/SEZs, Hotels, Malls, Hospitals) in India; which could result in potential yield compression. Key beneficiaries should be developers with higher leverage towards such assets such as DLF and Unitech. Further, this should provide a new channel for financing projects and enhance levels of disclosures and transparency in the sector.

Parsvnath IT Park in Gurgaon

Parsvnath Developers has received LoI from director town and country planning, Haryana to develop an IT park project on main gurgaon sohna road just 3 kms away from Rajiv Chowk in Gurgaon. The approximate realization from the project is expected to be Rs 650 crore within 2 financial years.

IT Park is spread over an area of 6.8 acres and is located in sec - 48 in Gurgaon. The project sprawls over a total build-up area of 8.5 lakh sq ft. and will showcase state of the art IT Park giving boost to IT and ITeS services in the area. The project is expected to begin within three months and will be completed within next 24 months. The company already has one IT Park situated at Chennai.

Will HDIL Compete with Mukesh Ambani ?

We have reliably learnt from insiders on Dalal Street that Wadhawan group promoted Housing Development and Infrastructure (HDIL) has already received an in-principle approval from the state government for the special economic zone (SEZ) project. After Bandra-Kurla complex, the Maharashtra government is planning to develop the Kanjurmarg and Vasai-Virar regions as the next business districts, reports suggest.

This will be the second-largest special economic zone (SEZ) around Mumbai after Mukesh Ambani’s 25,000-acre development, which spreads from Navi Mumbai to Alibaug.

Holiday Inn - Bangalore International Airport

Brigade Enterprises has informed us that Brigade Hospitality Services, a 100% subsidiary of the company a Bangalore-based real estate company focusing on the development of residential, commercial and hospitality properties has signed a management contract with Inter Continental Hotels Group for a new Holiday Inn Hotel called Holiday Inn Bangalore International Airport. Earlier, Brigade Hospitality Services Pvt Ltd entered into a letter of intent on 27 April 2007 with IHG to manage a proposed hotel of approximately 250 keys to be developed near the Devanahalli International Airport at Bangalore.

Holiday Inn Bangalore International Airport will be developed by Brigade Enterprises Ltd and will be managed by IHG. Well connected to the new international airport. Holiday Inn Bangalore International Airport will be laced with around 250 rooms along with restaurants, swimming pool and a gymnasium. The Holiday Inn Bangalore International Airport will be slated to accept bookings by the beginning of year 2010.

DLF Akruti Pune bags BAI Universal Award 2007

DLF Akruti Info Parks (Pune), a joint venture SEZ project between Akruti City and DLF has bagged the prestigious Builders' Association of India [BAI] Universal Award 2007 for best equipped and mechanized site. In the present era, machines and mechanized part of the constructions run upto 35% of the entire project cost.

Since the last decade, the BAI has been instrumental in initiating awards for 'Well Built Structure' under various categories. The key objective of these awards is to create an awareness amongst construction professionals on the importance of quality, time and economy, thus helping industry in upgrading and innovating from current standards.

Akruti Developers Projects in Mumbai

We have an exclusive coverage about the ongoing and forthcoming projects from Akruti Constructions, a Mumbai based realty developer.
The expected realization from the above projects is as tabulated below [Rs / Sft]
Worli-Tardeo 30000-45000
Bandra & BKC 20000-30000
Andheri 12000-20000
Jogeshwari 8000-14000
Sion-Matunga 12000-18000

Other projects in Mumbai is as shown in the Map below.

Omaxe to Develop Kokapet, Hyderabad

North India's realty company Omaxe has won a bid to foray into the southern market starting at Hyderabad. The bid of Eden Buildcon [Omaxr's subsidiary] to develop land at Kokapet area in Hyderabad for residential and commercial purposes has been accepted by the Hyderabad Urban Development Authority (HUDA).

Omaxe said the project is expected to cost between Rs 1,600 crore and Rs 1800 crore. The company received the project for 25 acres of land in Hyderabad through an open auction-cum-sealed tender basis.

Realtor Moves to Jammu - Parsvnath

Parsvnath Developers, India's leading real estate company, is all set to come up with its maiden project in Jammu. The company has announced the launch of residential project, Parsvnath Passion duly approved by Jammu development authority (JDA) in the region with an approximate realization value of over Rs 100 crore in next three years including this financial year.

Parsvnath Passion is the first integrated group housing project being developed in Jammu by a national real estate player, situated over 11 acres of lush greens having a saleable area of over 7 lakh sq.ft, the project has 75 % of the total property area as open space for comfort and ease of its residents.