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Delhi Urban Development Minister Arvinder Singh Lovely said basic services like drainage, water supply and power distribution network will have to be strengthened if vertical expansion in the city is allowed.

“We absolutely have no problem with vertical expansion of Delhi. But when approval is given to high-rises, then we will have to strengthen existing infrastructure like sewage network, water distribution system and power transmission. The Centre will have to provide Delhi government funds for enhancing the infrastructure,” Lovely said.

Vertical growth will also address the problem of shortage of housing in the city and insisted that sincere efforts must be made to ensure optimum use of land resource, he said.

Nath has been strongly pitching for allowing high-rise buildings in Delhi to accommodate the growing population.

Chief Minister Sheila Dikshit was understood to have reservations about the proposal. She had said that availability of power and water should be factored in before allowing high-rises in the city.

The Urban Development Ministry is currently in the process of reviewing the Master Plan of Delhi 2021 and is expected to finalise a number of amendments soon like allowing high-rises and increasing the existing floor area ratio (FAR).

FAR is the ratio of the total floor area of a building to the plot area. “We must ensure optimum use of scarce land resources. I think vertical growth will address the problem of housing shortage also,” said Lovely.

Senior officials in the Delhi government said the Urban Development Ministry as well as Delhi Development Authority have given enough indication of increasing the FAR.

The Delhi Development Authority in March had approved the long-awaited land pooling policy. It allows developers or land owners to pool in land for constructing residential blocks.

The Delhi government’s decisions yesterday to extend Lal Dora to 360 more villages and easing restriction on use of agriculture land for construction are also aimed at encouraging private developers to construct residential units.

The government yesterday decided to ease restrictions under the Section 81 of the Land Reforms Act which will mean agricultural land will be allowed for construction of houses and other purposes.

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“The buyer should establish the existence of a proper Society. The original sales deed and the Society share certificate are most important, since the transaction cannot proceed without them. Also, the buyer should bear in mind that in the case of a resale property, proper transfer and re-registration is necessary,” says Ahuja.

The check list of documents required for registration of residential flats, apart from the sale deed, include a letter from the Society that reflects details such as the number of floors in the building, the construction year, the apartment’s built-up area and the number of lifts in the building.

The buyer must demand for an assessment bill to the Society from the municipality in question, a NOC from the Collector if the building exists on Collector’s land, a copy of the property card, and a receipt for the payment of registration fees. In addition, the buyer of a resale flat should ask for a clear ownership history if the residential property has changed hands before.

The local registrar will establish the authenticity of these documents. If one is buying the property via a home loan, the bank will also run a routine due diligence.

Om Ahuja has a word of caution when he says there are certain challenges that a buyer of a resale flat may face. This could include lack of proper chain of documentation, especially in cases where the property has changed hands more than a couple of times in the past. If the property is over 18-20 years old, it is possible that it was never formally registered in the first place. Registering it at the current point in time would put the onus of paying the stamp duty in arrears on the buyer.

“There may also be additional expenses for repairs to masonry, plumbing, electrical wiring and fittings. Obtaining a home loan for a property which is anywhere close to 50 years of age can also be a challenge. Finally, one should bear in mind that the Indian residential property market is in a constant state of evolution. One is unlikely to find the facilities and amenities that are available in the newer projects on the market in an older building,” says Ahuja.

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Also there has to be a demand for luxury apartments in that location.  After identifying and analysing the criteria, a developer then decides as to what kind of a project one will execute.

“Redevelopment of projects has gained a lot of momentum in India in the last decade or so. Many leading developers have joined the redevelopment bandwagon. These large players certainly have the expertise and capabilities in redevelopment. Others are progressing fast. India in no way is anywhere behind in terms of technology or material used in construction today. Based on the climatic conditions and other environmental requirement, we have global expertise. Developers are fast becoming efficient in redeveloping projects,” says Bhagtani.

Redevelopment of a project is a lengthy process. It can be a very tricky and risky business. Developers generally find it difficult to undertake redevelopment of one or two buildings alone. Instead, they prefer societies having more areas as these suit them.

It is more a convenience factor than mere profitability. Also, there are many hassles involved in a redevelopment project. Some members of a society may not agree to redevelopment. In such a case, developer has to wait till most members of the society give the go-ahead for redevelopment. So, there have been instances where developers have opted out of redevelopment projects due to the lengthy time and innumerable hassles with members.

Experience suggests how the world has sold density is to couple it with better design standards. People in developed cities found density much more acceptable if new development was designed compatibly with existing neighbourhoods. A further benefit was that the city obtained new design standards.

Anshuman Magazine, however, is candid to put the blame for societies’ resistance on the lengthy approval process where clearances for redevelopment project take longer time than the normal projects. And since relocation of the existing habitation is a huge challenge, hence resistance by the residents and that is a spoiler for the average investor to get into such a project.

Public acceptance of redevelopment is often like a sine curve. In metropolitan urban areas there is great acceptance, but as one gets out to the first-ring suburbs, there is a real fear of density. Way out where populations are sparce it is not an issue.

It is an issue from a planning standpoint. Not all Indian city planners can claim neighbourhood opposition to infill development as a major obstacle to accommodating growth. However, failure to replicate Indian cities to Las Vegas often lies in holistic planning and will power.

]]> http://www.track2realty.com/can-indian-cities-replicate-las-vegas-iii/feed/ 0 http://www.track2realty.com/connaught-place-main-street-rentals-increase-by-12-noidsas-mall-rise-10-cushman-wakefield/ http://www.track2realty.com/connaught-place-main-street-rentals-increase-by-12-noidsas-mall-rise-10-cushman-wakefield/#comments Tue, 21 May 2013 10:26:33 +0000 Track2Realty http://www.track2realty.com/?p=8602 Track2Realty: NCR retail real estate market remained largely stable as per the latest retail report from real estate consultancy Cushman & Wakefield. A few locations in both main street as well as malls saw some appreciation in rental values. Connaught Place (Inner Circle) recorded an increase of 12% while prime malls across Delhi NCR saw a positively rising curve following robust demand for the same.

Prominent main streets of Delhi NCR like Connaught Place and Greater Kailash I, M Block markets witnessed expansion and entry of prominent international brands leading to a stable to upward rental trend in the rental values.

Due to healthy demand in Connaught Place, a sharp rise of 12% was witnessed over the previous quarter. The values in other markets remained stable with an upward bias owing to limited main street space availability.

Steady demand and expected churn is likely to push up the mall rentals in South Delhi and Gurgaon and main street rentals in Connaught Place (Inner Circle), South Extension I & II.

Driven by the interest from luxury retailers there were some significant few transactions in malls. Select quality malls in South Delhi and Noida witnessed rental appreciation.

Dearth of quality mall space and high demand caused a 10% q-o-q appreciation in Noida’s mall. South Delhi Mall space also registered a growth of approximately 2% in the same period owing to lease expirations and consequent churn in mall destinations.

Overall vacancy levels in malls dipped to 15.8% on account sustained leasing action in both main streets and malls. However, NCR was the only city to witness a marginal rise in mall vacancy level of about 1% over the quarter owing to increased in availability primarily in malls located in the peripheral locations. There was a deferment of approximately 500,000 sf of mall space in Delhi NCR now expected to be seen entering the market in the next few months.

Jaideep Wahi, Director, Retail Agency, Cushman & Wakefield India said, “Foray of international brands into premium malls and main streets is a trend that is here to stay in the Delhi NCR region. Superior quality retail options with ample visibility and considerable frontage in malls and main streets alike will see strong transaction activity. This will be responsible for escalating rentals in both main streets and malls. Transaction activity in niche segments like luxury and jewellery will gather further momentum. Food & Beverages segment is another segment to watch out for; organic growth is likely to happen not only in prime, but also upcoming locations.”

Nationally, there was only one mall of 1 million sq. ft. that got operational in Chennai while nationwide vacancy in mall spaces improved marginally by 1% over the last quarter. Activities were mostly concentrated on mall spaces rather than main streets due to non availability of quality space in the main streets.

This quarter witnessed the deferment of 5 malls amounting up to nearly 1.73 million sq. ft. with Chennai witnessing the deferment of 2 malls amounting to 530,000 sf.  While Pune witnessed the deferment of 1 mall of 700,000 sf mall space, NCR and Bengaluru witnessed the deferment of 1 mall each of 500,000 sf.

                                                                                          Source: Cushman & Wakefield

RETAIL RENTAL MOVEMENT IN DELHI NCR Q1 2013 (QUARTER ENDING MARCH 2013)

                                                                                          Source: Cushman & Wakefield

]]> http://www.track2realty.com/connaught-place-main-street-rentals-increase-by-12-noidsas-mall-rise-10-cushman-wakefield/feed/ 0 http://www.track2realty.com/omaxe-limited-promoters-to-dilute-stake-on-may-21-at-rs-148-per-share/ http://www.track2realty.com/omaxe-limited-promoters-to-dilute-stake-on-may-21-at-rs-148-per-share/#comments Tue, 21 May 2013 10:18:04 +0000 Track2Realty http://www.track2realty.com/?p=8600 Track2Realty: Constellation Capital Ltd and S.A. Finvest Ltd, the promoters of realty firm Omaxe Limited, have fixed the floor price for its offer-for-sale (OFS) at Rs. 148 a share.

The OFS, to take place on May 21, 2013, will see promoter companies Constellation Capital Ltd and S.A. Finvest Ltd; offload 25 lakh equity shares each of Rs 10 each, aggregating to 50,00,000 equity shares (representing around 2.88 per cent of the paid-up equity of Omaxe Ltd). It will take place at the separate window of the BSE and shall commence at 9.15 am and shall close the same day at 3.30 pm.

The OFS is being launched to meet market regulator SEBI’s norm on minimum 25 per cent public shareholding by June 30for private sector listed companies

As on March 31, promoters had 89.14 per cent stake in the company. Thus promoter companies will sell a total of 50 lakh shares, worth Rs 74 crore, on May 21, through the offer for sale route (OFS). After the sale of 50 lakh shares, promoters’ stake would come down by about three per cent to about 86 percent.

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They have launched a scheme which promise huge benefits to the home buyers. As per the ‘25:75 House of Happiness’ scheme, buyers need to pay just 25% of the total cost on booking and rest on offer of possession.

This scheme claims to be different from other subvention plans which are available in the market, the scheme announced will not attract any EMIs as there is no bank loan involved.

The scheme will be applicable on 20 projects of Parsvnath Group which include four commercial and sixteen residential projects across India including cities like New Delhi, Greater Noida, Ghaziabad, Sonepat, Dharuhera, Moradabad, Ujjain, Saharanpur, Bhiwadi, Panchkula and Rajpura.

Parsvnath Group has also unveiled a new visual expression to symbolize the modernity, continuity, adaptability and above all commitment of the company’s businesses as well as the simplicity of its integrated approach.

The logic behind the new brand is also encapsulated in the phrase ‘committed to build a better world’, not intended to be an advertising strap-line, the phrase is simply meant to explain the spirit in which Parsvnath works.

‘Building a better world’ captures both the scale of the company’s activities and the commitment to provide solutions for all. It also defines both the company’s history of delivering on its promises but also hints at a wider social benefit.

Commenting on this Pradeep Jain, Chairman, Parsvnath Group, said, “After studying the buying trends and profile of the customers, we were thinking of bringing a solution that not only suits the end user but also help investors. The scheme is targeted to help the first time buyers to think of having a house of their own.  ’25:75 House of Happiness’ scheme is certainly going to transform the way houses were sold. This is a result of our new approach where we emphasized on problems faced by the buyers at large and thus, designed this scheme. This is purely a ‘risk-free’ way of buying a house as it does not involve any bank loan and EMIs. I am sure in the current market situation; buyers will feel a great relief though this scheme.”

Speaking about the confidence of the PE investors and financial institutions in company’s business model, Jain further said, “At present, we have three PE fund investments of Rs 1015.5 Cr in different projects. While SUN Apollo had invested Rs 90 Cr and Rs 50 Cr in Exotica Ghaziabad and Gurgaon respectively, we have already paid back Rs 34.5 Cr against their investment in Gurgaon. Similarly, JP Morgan had invested Rs 255 Cr in La Tropicana in Delhi out of which we have paid back Rs 58 Cr. Our third partner is Red Fort who has invested Rs 558 Cr and Rs 155 Cr in our two projects i.e. RLDA Sarai Rohila and Parsvnath Red Fort Tower at Bhai Veer Singh Marg respectively.”

The company is in final stages of handing over 0.22 mn sq ft of space to its customers at Bhai Veer Singh Marg project, a high-end ultra-modern commercial complex in the heart of the national capital. The company has given the mandate of construction to L&T which is developing this next generation world class structure. The project is due for the completion certificate.

Giving importance to accelerated construction and faster deliveries, company has been giving third party contracts to construction companies like L&T, IL&FS Engineering & Construction Co. Ltd., Jaycon Infrastructure, Chawla Techno, SYConE EPMC and Ascent Constructions.

Parsvnath is currently developing 76.3 Mn sq ft of area in 27 cities across India out of which it has already sold 36.3 Mn sq ft of space. With the new scheme in place, Parsvnath expects to double its sales in current quarter.

Track2Realty: Omkar Realtors & Developers, one of the leading players in making the slum redevelopment a success story in Mumbai believes slum projects are generally feasible in Metro Cities and more particularly in Mumbai. Shifting focus on Slum Rehabilitation for ECB will really help the sector.

Manoj Paliwal, CFO of Omkar Realtors & Developers says that since land parcels with large number of tenants are available in Mumbai, requirement of capital is also more.

“We are taking up the matter with concerned authorities. Slum redevelopment projects are state level issues, guidelines are meant for the entire country. Therefore, some delays are logical. But ECB in SRA would be a game changer for Mumbai redevelopment as a new window for financing will be available to the developers at reasonable rates,” says Paliwal.

The moot point is why is the move to slum ECB stuck up in policy logjam? Requesting anonymity a Housing Ministry official says Reserve Bank of India has already come out with the guidelines. You have to understand that Government of India and NHB are also working towards issuance of their part of the policy guidelines. I expect that soon these guidelines should be made available.”

Diipesh Bhagtani, Executive Director, Jaycee Homes says the Government has to be proactive with regards to ECB in SRA projects. The lack of a clearly defined policy is the main reason for this logjam. The eligibility levels and related fundamentals need to be established clearly for this policy to take off.

“ECB in SRA would eventually be a boon for the real estate market in Mumbai. The cost of funding through ECB would be cheaper than private funding through normal schemes. Additionally, ECB in SRA will help the poorer sections of the society to benefit as loans will be far more accessible and cheaper. ECB for SRA has the potential to lift the slum dwelling population from slums to live in respectable and affordable houses. Thus, ECB in SRA has the potential to make ‘housing for all’ a reality in a congested city like Mumbai and other metro cities. So, yes, it will definitely be a game changer for Mumbai redevelopment,” says Bhagtani.

It is true that ECB in affordable or low cost housing has not taken off in metropolitan cities of India. The high cost of land, raw materials, labour and inordinate delays in granting approvals act as a deterrent to affordable housing in cities like Mumbai and Delhi. Due to high cost factor, affordable housing as defined by the government is not possible in metro cities.

So, as an alternative, it is better to have developers to access funds from external sources and channel it towards slum rehabilitation projects. But there is a need for a clearly defined policy with regards to slum rehabilitation projects also. Though the Housing Ministry is preparing guidelines for slum rehabilitation projects that can raise funds via the ECB route, but the delay may defeat the purpose for which the proposed guidelines are being framed.

By: Ravi Sinha

Track2Realty: It has been a marginal rate cut that may not have any significant affect on the fortunes of the economy in general and real estate in particular. However, the sector believes it still goes a long way in improving the sentiments of the market by and large. On Friday, May 3, the Reserve Bank of India (RBI) cut its policy interest rate by 25 basis points, for the third time since January as growth slows and inflation ebbs. RBI says there is little room to ease monetary policy further.

The RBI cuts the repo rate to 7.25 percent, its lowest since May 2011, and kept the cash reserve ratio (CRR) for banks unchanged at 4 percent, also in line with expectations. However, it warned that the risk of inflationary pressure persists despite a recent sharp decline in wholesale price index (WPI) inflation, and said a high current account deficit poses the biggest risk ‘by far’ to the Indian economy.

“The balance of risks stemming from the Reserve Bank’s assessment of the growth-inflation dynamic yields little space for further monetary easing,” RBI Governor Duvvuri Subbarao says in the policy statement.

Realty body CREDAI welcomes what it calls consistency in rate reduction along with caveat of more rate cuts and pleas for special RBI policy on national housing. CREDAI Chairman Lalit Kumar Jain stressed the need for the RBI formulating a special policy for the housing industry with focus on affordable housing and quick and equally affordable financing of such projects.

“We sincerely hope that the RBI will keep up the trend of repo rate cut and facilitate a fall in interest rates so that the EMI burden on common house buyer gets reduced considerably,” says Jain.

Rating agency CRISIL says this move was warranted, given the easing inflationary risks and weaker-than-anticipated demand pressures. It categorically says lower repo rates would help lift consumption demand only if lending rates come down. In 2012-13 despite a 1.0 percent cut in repo rate, lending rates came down by a much lower magnitude. Moreover, lower interest rates can revive investments only if other issues such as delays in land acquisition, forest & environmental clearances, and insufficient supply of raw materials, are resolved. In the absence of these supportive measures, the ability of lower interest rates to revive the economy is limited.

MCHI-CREDAI has also welcomed the RBI’s decision to slash Repo Rate by 25 basis points. However, it is disappointed with the central bank’s move to keep CRR unchanged. Paras Gundecha, President, MCHI-CREDAI says they expect banks to pass on the repo rate cut to end users at the earliest.

“Reduction in repo rate will help boost home buyer sentiment and ultimately revive the sagging real estate market in the country. However, the RBI’s decision to keep CRR unchanged will negatively affect the developers. It was the need of the hour to infuse liquidity in the cash-starved real estate industry. Reduction in CRR would also have helped in the revival of the economy of the country,” says Gundecha.

Pankaj Bansal, Director, M3M India says given the overall domestic and global economic scenario, the 0.25 % reduction in the repo rate announced by the RBI is a cautious but welcome balancing act.

“This should result in lowering the cost of borrowing across all sectors of the industry. Should this result in a drop in housing loan interest rates, it will help revive demand for the real estate industry. We look forward to more demand stimulating measures that will address the complex issues of supply side constraints and thus help in keeping inflation under check,” says Bansal.

Manju Yagnik, Vice Chairperson, Nahar Group says RBI’s decision to cut repo rate by 25 basis points to 7.25 per cent from 7.50 per cent today is good news for real estate sector. According to her, the rate cut announced by the central bank ahead of the most auspicious Akshay Tritiya festival is likely to cheer the home buyers.

“There has been huge demand for homes in Mumbai Metropolitan Region (MMR). We have seen an encouraging response for the recently concluded MCHI CREDAI property 2013, India’s largest property exhibition held in Mumbai. We are sure that home buyers will speed up their decision of buying their dream home in this most positive spell after the rate cut,” says Yagnik.

Samir Jasuja, Founder & CEO, PropEquity also welcomes the repo rate cut but says the real estate sector requires larger cuts in the repo rate and hopes RBI continues monetary easing in the coming months.

The current rate cut has for the time being definitely cheered the realty and the market, even though any significant change does not seem to be on the cards.

Track2Realty: When the Reserve Bank of India made the announcement of allowing External Commercial Borrowing (ECB) in affordable housing, including slum redevelopment, there was an optimism and euphoria that cheaper money coming into the much-needed segment of real estate would redefine the property market in general and in the process help the country meet the housing shortage.

Much water has flown since then and the affordable housing could not get the benefits due to the defined parameter of below Rs. 25 lakhs as such projects are not feasible in the metro cities like Mumbai.

However, the Mumbai developers who were looking up to get the benefits of raising cheaper money for the slum redevelopment projects sooner realised that the intentions of the government were not beyond the populist rhetoric. Even after months of waiting for the clearance by the RBI, the Union Housing Ministry is yet to draft the guidelines for the same.

The RBI had set a limit of US$1 billion for FY2012-13, but the housing ministry is yet to issue guidelines for the Slum Rehabilitation Projects that can raise funds via the ECB mode.

Earlier the RBI had said that slum rehabilitation projects will also come under the low-cost affordable housing scheme. The eligibility of these projects for raising ECB will be based on the parameters to be set by the Central Sanctioning and Monitoring Committee of the Affordable Housing in Partnership Scheme (AHP) constituted under the chairmanship of Secretary, Housing & Urban Poverty Alleviation (HUPA), which administers the slum rehabilitation projects.

Slum redevelopment in Mumbai is a much-needed segment of construction but it is not clear why the policy makers have turned cold feet on drafting the guidelines. Pranay Vakil, Chairman, Praron Consultancy wonders what the policy was meant for if it could not move ahead of discussion stage after such a long time. According to him, slum redevelopment is something that is a win-win for all the stake holders as the developer gets the free land to develop and the inhabitants get a free house.

“In making slum redevelopment policy work from Mark to Market, a lot of will power is needed. If policies are not clear, it only deters the prospective investors. We have seen this in Dharavi where the delay for the last 7-8 years led to many financers back out of the proposed redevelopment. Frankly speaking, I don’t have an idea as to why ECB guidelines have not been framed,” says a candid Vakil.

…..to be continued

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If a buyer begins to suffer beyond 20%, then they are willing to buy back at the price they bought it. It is a very effective way of raising money because a particular developer in Mumbai who had employed this method was able to sell 45 flats within 3 weeks at a time when the markets were particularly bad.

Pranay Vakil, Chairman, Praron Consultancy admits the sector has a real problem of funding the developers and a real problem of funding the buyer. The buyer because he may want to buy something which is yet to get approvals; because he has an interest rate which is ever changing. From the developer’s perspective, not every developer has this luxury of tying up with a JV partner because a JV partner, the land owner is looking for a brand.

“Time wise, we may be at the worst time trying to raise money as a real estate company. As far as influencing the RBI, this is something which we can look towards for the right kind of developers, for people who want to use and not misuse the funds. I am sure you cannot paint everyone with the same brush. Raising money from banks for land buying is almost impossible unless it is an SEZ or something where the development has to be completed in a very finite time period. Some of that funding is possible but not for the agricultural land even if it is going to get automatically converted under the town planning acts,” says Vakil.

If the IPO is difficult, banking is difficult, venture capital turns into vulture capital, there are not many options left. The options are to go to a real estate fund or a PE fund, discounting of receivables is an option but these are short term fixes. For a medium to long term fix, sector will have to bring pressure on the government to permit REIT, to let the pension funds in, by legitimate developers doing legitimate developments and then only the need of the industry will be met.

Real estate needs some very stable funding from venture capital and mix of maybe equity and debt and obviously vulture funds have to be kept out. The sector needs pension funds coming into India which have long horizons, which are not hungry to get out early and come with very stable rates and are very strong.

Realtors need to give them comfort and they are there to give them money. Unfortunately, real estate has thus far not been able to give comfort to these funds to come into India.

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