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| March
2008 | Issue V |
www.axiomestates.com |
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| TRENDS
IN THE INDIAN REALTY MARKET |
| INSIDE |
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New
Launches |
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Mega
Projects |
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City
Watch |
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Axiom
News |
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Realty players hop on to hospitality business
The booming realty market
is blurring the lines between commercial, residential
and hotel developers in Chennai. Close on the
heels of major players such as DLF, Unitech, and
Puravankara, city-based developers are also diversifying
into the hospitality business.
While developers such as Appasamy, Ceebros and
Harrisons have forayed into this category, others
such as Arihant and Visranthi are expected to
follow suit.
Industry
observers attribute the heightened interest in
the hospitality sector to a number of drivers
like availability of capital, the synergy that
real estate developers bring to hotel projects,
IT parks having lost some of their sheen for these
developers due to uncertainty in tax benefits
and a huge demand for hotel rooms that stems from
an increase in the number of business and leisure
travelers plus tourists. |
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| Realtors
Hone in on Luxury Market
Real Estate developers are tapping the luxury home
segment by targeting non-resident Indians and high
net worth individuals in India. This is essentially
because demand in the luxury home segment is growing
sharply. The noveau rich are now extending their possessions
of luxury homes with ultra-sophisticated amenities
such as personal swimming pools, jogging tracks, health
clubs and personal gardens.
Leading developers such as Sobha Developers, DLF,
Kalpataru, Nitesh Estates, Unitech, Omaxe, Royal Palms,
Lodha Developers and Marvell Realtors are developing
projects in cities such as Mumbai, Delhi Pune, Goa,
Bangalore and Kerala, with the price tags of average
luxury homes varying between Rs 3 crore and Rs 50
crore.
While it has been there for some time now, the luxury
home segment in India is estimated at around Rs 2,000
crore with around 30 million potential buyers. Many
real estate firms have started marketing their projects
in the overseas market by organising property exhibitions
and floating sales offices in the countries like the
UK and US and UAE.
A
typical luxury home is spread over about 4,430 square
feet in Mumbai, where the comparable size of a home
for an average family of four is about 800 square
feet. These high-end homes are typically located on
private roads that are fenced off with an exclusive
private gate and state-of-the-art security systems
including cameras. The amenities could also include
a spa, multi purpose court, climate controlled swimming
pool, gymnasium and a business lounge.
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Spirituality
Steers India's Realty Industry
Spirituality has emerged as
a major factor driving India's $15 billion realty
industry that is growing at 35 percent per annum.
Religious towns have good growth prospects. They
are witnessing more than 45 percent annual rise
in property prices against the average 25-35 percent
in Tier II cities.
Religious tourism is pushing the realty industry's
growth in destinations like Vrindavan, Mathura,
Haridwar, Ajmer, Amritsar, Tirupati and Nasik
- cities on the fast track and emerging hot spots
for real estate developers.Most of these religious
tourism-motivated townships also blend spiritual
living with features like golf courses, billiard
rooms, tennis courts, spas, clubs and swimming
pools, with large expanses of greenery thrown
in. Some of these places, notably Haridwar and
Rishikesh, because of the weather and serene surroundings,
have also emerged as major centres for yoga, ayurveda,
spas and inner healing centres.
It is not the local developers alone who are reaping
profits. Even Big players like API, Omaxe, Unitech
and Sahara group are coming up with their projects
in these cities. Ansal-API has forayed into this
market with two townships with their Sushant City
brand - one in Ajmer spread over 125 acres of
land and the other at Kurukshetra over 200 acres.
"Ajmer is a major spiritual and religious
centre given the presence of the Pushkar temple
dedicated to Lord Brahma and the dargah of Ajmer
Sharif. That is why real estate seems to be investing.
That is the reason property prices in cities and
towns like Amritsar and Ajmer have gone up by
five times in the past two years and more such
townships are in the offing. Omaxe has lined up
a 440-acre integrated township with more than
2,000 residential units on the Jaipur-Ajmer Expressway
to tap visitors to the famous Sufi shrine of Khwaja
Moinuddin Chisti. They have plans in Varanasi,
Allahabad, Rishikesh, Haridwar, Vrindavan, Tirupati
and Puri and Triveni Infrastructure is looking
at the temple town of Haridwar, Shirdi, the abode
of Sai Baba, and Tirupati, home to Lord Venkateswara.
Unitech and Sahara also have similar plans for
Varanasi, with the former already announcing a
1,500-acre integrated township there.
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| Real
Estate pitches for more foreign direct investment
The
booming realty sector wants a status equal to telecom
and aviation with amendments in the foreign direct investment
guidelines to boost construction and infrastructure
development in the country. The double-digit growth
in this sector is mainly on account of off shoring of
business including high-end technology consulting, and
improved techniques employed here.
The realty industry wants this crucial sector to be
given the same status as telecom and aviation with amendments
to FDI guidelines for townships, housing, construction
activities and built-up infrastructure.
One of the steps that could go a long way in boosting
the sector was to make the equated monthly installments
(EMI) and interest on the first self-owned house totally
tax-free. Presently, only interest on housing loans
is tax-deductible, not EMIs.
There
is a strong need to bring down the borrowing costs in
real estate sector and at par with international standards.
Realty is also unhappy with the leasing of commercial
space that was brought under the service tax net in
the last budget.
Since
the government has made a positive move and brought
down the import duty on cement, it should also bring
down the import duty on steel to make sure both cement
and steel are easily available. |
SEBI's
Draft Guidelines for REITs
SINGAPORE:
The Securities and Exchange Board of India has released
draft guidelines on setting up REITs in India in December
which would pave the way for wider participation by
retail investors in the country's booming real estate
sector. Regulators are also mulling over the introduction
of currency futures to help investors hedge foreign
exchange risks, and a new system for the borrowing and
lending of securities.
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Investment of Citi, Merrill in DAL
Global
financial firms Citigroup, Merrill Lynch and DE Shaw
are likely to invest Rs 2,000 crore or $500 million
in the DLF Assets'(DAL) real estate investment trust(REIT)
soon.
Currently, DAL is a privately owned by DLF promoters
and the listed firm has no equity stake in this firm.
DLF is going ahead with its fund-raising plan through
the private-placement route. The company is now in negotiations
with Citigroup and Merrill Lynch apart from US-hedge
fund DE Shaw, who are likely to put in a combined sum
of Rs 2,000 crore in the trust. Citigroup is likely
to be the lead investor in the transaction.
The other
investor, Merrill Lynch, one of the world's largest
securities firm, had bought 49% in DLF's seven housing
projects for Rs 1,481 crore or $377 million. These projects
are spread across the cities of Chennai, Bangalore,
Kochi and Indore. |
| FDI
Waiver
Companies developing several projects simultaneously
are likely to get a waiver on meeting FDI conditions
on some if majority of the projects are FDI-compliant.
Realty companies are subjected to conditions such as
three-year lock-in period and a minimum development
of 10 hectares for bringing in FDI.
This
will particularly benefit real estate companies that
take up expansion plans from time to time. Under the
proposed waiver, such expansion schemes/projects would
be eligible to get foreign funds even if they do not
comply with the required conditions separately on their
own. |
| ASIPAC
to Launch Realty Fund in 2008
Real
estate marketing and consultancy firm Asipac Projects
is close to putting together a real estate fund, in
association with a few institutional investors. The
move by the company is part of a series of initiatives
that will roll out in the coming months, aimed at widening
the scope of the company's services. The first fund
will have an initial corpus of Rs 50 crore and will
invest in real estate SPVs across Indian cities. The
first fund should be in place in six months with investments
in small amounts in SPVs to the extent of 2-3% stake
in specific projects. 2008 will see the company launch
two new strategic business units (SBUs) - an investment
advisory services group and a construction management
consultancy division. Asipac Projects, a Bangalore based
company, today represents about 18 real estate firms.
The company is also looking to extend its services to
Indian business houses that are in the process of unlocking
value from their land holdings. |
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| MARKET
WATCH |
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BPTP
Bags Largest Land Deal
New Delhi based real estate firm
BPTP has bagged the country's largest land deal
worth Rs 5,006 crore. In a fiercely fought Bidding
Battle, BPTP beat the country's largest real estate
firm DLF to win the 95-acre plot in Noida's sector
94. The deal is being seen as a major leap for
BPTP, a closely-held firm promoted by Kabul Chawla.
The company, which sold 5% stake to Citigroup
last year for an undisclosed sum, expects to close
the current financial year with a revenue of Rs
1,200 crore and net profit of Rs 400 crore.
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Global
investment banks to invest in Unitech SPV
Private
equity players Lehman Brothers and Deutsche Bank
are set to make a combined investment of $500 million
in an SPV floated by India's second-most valued
real estate developer Unitech. Talks with Unitech
have apparently reached an advanced state to execute
two commercial projects in Mumbai. The two projects,
located in Santa Cruz, are likely to have a combined
developable office space of 2 million sq ft. The
deal is likely to be closed in the next three weeks,
according to a source.
Unitech has a land bank of 350 acres in Mumbai.
The company is aiming to generate more revenues
from Mumbai than NCR in the next two years. Higher
returns on real estate in the financial capital
was the obvious reason for this move. Unitech had
announced its entry in the Mumbai market last year
with a 97-acre commercial project in Bandra-Kurla
Complex.
The likely Unitech-Lehman-Deutsche deal apparently
drives home the point that although poor market
conditions might have slowed down PE deals, big
money is still following certain opportunities in
India. |
| Biyani
to Invest Rs 4000 cr in Industrial Warehouses
In
order to cash in on India's industrial growth,
Kishore Biyani, plans to invest $1 billion (approximately
Rs 4,000 crore) to buy land and set up industrial
warehouses across the country in the next three
years. His recently-listed firm Future Capital
Holding (FCH) has formed an equal joint venture
with Realterm Global, a part of North America's
leading air cargo distributor Aeroterm, which
has 110 facilities managed and under development
over seven million square feet across 30 markets
globally.
Realterm
FCH has identified 1,000 acres of land and in
the process of mapping out their possible links
with metros and big cities. The target is to create
an industrial warehousing facilities with over
22 million square feet of space in three years.
In addition to buying land and setting up its
own industrial warehouses, Realterm FCH will also
build and operate warehouses for the group's flagship
Pantaloon Retail.
The
enhanced focus on infrastructure, increase in
number of customers and growth of organised retail
will fuel the growth in industrial real estate.
The plan outlay for transportation infrastructure
is pegged at $71 billion while 120 million customers
are estimated to be added by 2010. Also, the organised
retail sector is expected to grow to 10% of total
retail from existing 3% in 2010. However, the
execution of large-scale industrial real estate
projects in time without any cost over-run will
be a challenge.
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| Emaar
Marriott Tie Up
Global hospitality
giant Marriott International and realty
major Emaar MGF are tying up to manage two
more luxury hotels in the country. With
this, the two companies will build and operate
three hotels in the country. Marriott has
already tied up with Emaar to operate a
300-room JW Marriott in Kolkata.
US-based
Marriott International has six hotels in
the country. It recently announced opening
18 new hotels by 2010. Its brands include
luxury brand JW Marriott, upscale Marriott
and Renaissance brands, its moderately-priced
Courtyard by Marriott and deluxe Marriott
Executive Apartments. Marriott has also
tied with Delhi-based realty major Unitech
to develop hotels in the country including
Ritz-Carlton in Kolkata and JW Marriott
in Hyderabad and Bangalore.
Among its 18 upcoming properties, five will
be JW Marriotts in Bangalore, Chennai, Pune,
Kolkata, and Chandigarh, one Ritz-Carlton
hotel in Bangalore, one Marriott hotel and
convention centre in Pune, nine Courtyards
by Marriott properties in Ahmedabad, Amritsar,
Gurgaon, Hyderabad, Kolkata New Town, Noida,
Pune City Center, Pune Hinjewadi and Mumbai
International Airport, two Marriott Executive
Apartments in Hyderabad and Gurgaon, and
an expansion of the Renaissance Mumbai Hotel
& Convention Center. |
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