AUGUST 2010 Real Estate Newsletter Editorial Contents Dear Reader, Industry News .......................................................2 The happy days are back. The Sensex has breached the Private Equity News .............................................5 psychological 20,000-barrier and is hovering near it. The rally is fuelled by high liquidity and huge inflows from Regulatory Buzz ...................................................6 overseas fund houses. Public Markets ......................................................7 Land Deals ...........................................................8 The bull-run in the Sensex has rubbed off to the realty market as well. According to a report by JLLM, the total Technology Parks/SEZs .......................................9 market value of real estate under construction in India has Hospitality .......................................................... 10 crossed the US$ 100 Bn mark for the first time in 2010. Of Commercial Properties ...................................... 12 this, Mumbai, where property prices are among the highest in the world, has nearly a 40% chunk. The residential Townships ......................................................... 13 component contributes 66% of this U$100 Bn, while the rest About Avendus Capital ...................................... 14 is contributed to by commercial office and retail space Contact Details .................................................. 14 combined. This growth is backed by a robust inflow of FDI, which has jumped a whopping 80 times between 2005 and 2010 from a mere US$ 40 Mn in 2005 to US$ 3,000 Mn in 2009-10. While the supply-side is steaming ahead, one needs to have a careful watch on the absorption rates. The threat of a supply overhang leaving a glut of inventory, especially in the high-end segment, is very real. Happy Reading! Avendus Real Estate Team Disclaimer: The news contained herein has been taken from published sources as indicated under each item. Avendus will not be held liable for any erroneous data as published in the source indicated. Avendus also does not take any responsibility for any errors or omissions or results of any actions based upon this information. Industry News the country. Since the debt raised was in dollar terms, the refinancing would also be done in dollar terms. RAK EYES INDIA FOR RESIDENTIAL DLF‘s prospects for refinancing becomes brighter SCHEME since RBI has recently permitted take-out financing Financial Chronicle arrangement through ECB under the approved route for infrastructure sectors like sea ports, airports, Burj Khalifa in Dubai, the tallest building in the world bridges, power sector and integrated townships. might have caught the fancy of Indians, however, it is the luxury residential projects in Ras Al Khaimah that THE EMERGENCE OF MIXED-USE RETAIL are vying for Indian consumers‘ attention. Rak FORMATS IN INDIA Properties, a real-estate company promoted by the The Financial Express government of Ras Al Khaimah, UAE, is eyeing Indian consumers for its $3.7 billion luxury waterfront There is no basis for the fear that malls in India will residential project named Mina Al Arab. lose their status as shopping and entertainment hubs now that many mall developers are offering space to NITCO TO INVEST RS 1,000 CRORE IN REAL hotels and offices. The fact is, this is not affecting the ESTATE VENTURES overall mall experience of the customer, since in most The Hindu Business Line cases there are separate entries for the hotel/commercial component and the retail part. The Having completed the expansion project, which reason why mall developers are now offering space to includes two new manufacturing bases with an hotels has more to do with the floor space index (FSI) investment of nearly Rs 205 crore, Nitco Tiles Ltd is and less with utility. In the case of retail, food, on course to revenues of Rs 650 crore this financial entertainment and multiplex, it is not always possible year up from Rs 465 crore it registered in 2009-10. to utilise the complete FSI of the plot. The managing director of Nitco Tiles, Vivek Talwar, said the new plants set up with investments of Rs 125 DELHI FIRMS LAUNCH MORE HOMES crore, in Alibag, Maharashtra, and Rs 80 crore in DESPITE SUPPLY SURGE Silvassa, respectively, will also help the company Mint scale up its export numbers from current five percent of total sales to about 20 percent within two years. Real estate firms in Delhi such as Ansal Properties and Infrastructure Ltd (APIL) and Anant Raj Industries DLF IN TALKS TO REFINANCE $300-MILLION Ltd (ARIL) are launching residential projects as ECB AT 7 PERCENT demand for homes in the national capital region The Financial Express (NCR) doesn‘t show signs of slackening amid a supply surge. NCR saw the launch of 45,000 The country‘s largest real estate developer DLF is in residential units in April-June, surpassing Mumbai, talks with leading domestic banks ICICI Bank and Navi Mumbai and Thane, collectively, which State Bank of India to refinance a $300-million loan it witnessed the launch of 12,000 units in the same had raised via external commercial borrowings (ECB) period, according to Jones Lang LaSalle Meghraj last year. The company is likely to get the debt (JLLM), a property consultancy. The number of refinanced at a rate of around 7 percent. DLF had launches will increase in coming months as raised the debt from Standard Chartered last year at developers focus on homes and existing projects. about 9.5 percent to develop integrated townships in 2 REAL ESTATE RUSH MUMBAI BUILDERS REAP BENEFITS OF The Economic Times (Delhi edition) SLUM REHABILITATION The Economic Times Swanky looking high-rise buildings with chic glass exteriors and the ultra modern finish, were not a part Builders such as the Lokhandwala group, Ackruti, of the landscape of UP till a few years ago. Very few HDIL and Everest, that are said to have earned real estate markets in the world have undergone such around Rs 4,000 crore from the sale of over 400 a dramatic and rapid transformation in such a short properties under the slum rehabilitation scheme span of time. The hectic construction and (SRS) of Mumbai can now claim tax benefits on their development activity in the region has certainly profits, thanks to a Central Board of Direct Taxes completely transformed the skyline of the state. Major (CBDT) notification that exempts SRS projects from cities in UP are witnessing a sustained real estate income tax. The CBDT issued a notification in the demand, which has augmented the entry of many a first week of August granting exemption under the real estate giants like DLF, Ansal API, Rohtas, scheme. The CBDT is the authority that administers Omaxe, UNITECH, Parasvanath and many more, in direct tax. This comes as a big relief to the developers this region. The construction and development of that constructed properties under SRS but were several world class townships, housing projects and unable to claim the tax benefits in the absence of a shopping malls, across the state, are testimony to the notification from the CBDT granting exemption under huge upswing in the real estate market of UP. The the scheme. boom in this sector is also more than evident in the sharp rise in property rates and the massive increase IFC LOOKS AT AFFORDABLE HOUSING in investment in this sector. Improved quality of real PROJECTS IN INDIA estate developments has also triggered a ‗market The Hindu Business Line rally' benefiting owners, occupiers and investors alike. The International Finance Corporation is in talks with Apart from Lucknow and Kanpur, Meerut, Ghaziabad, several real estate developers to create large Noida, Greater Noida, Agra and Vrindavan are the affordable housing projects in India. ―IFC has been some places in UP, where a flurry of construction talking with everybody; there have been discussions work is going on. The development works are with the Tatas and with other corporate groups on flourishing in these towns and cities due to different this,‖ said Paolo Martelli, director, South Asia, IFC. reasons. For example, Ghaziabad is fast growing as ―Everybody‖ includes both real estate developers and an industrial city and it is also influenced by Delhi's housing finance companies, he said. urbanization to a larger extent. Meerut is the fourth largest city in India in terms of its population. If the estimated housing deficit in India is 25 million Likewise, Agra holds significant importance, as it is units, then such a large requirement cannot be one of the major tourist destinations in India. The city tackled completely from a real estate point of view, has seen great growth in terms of infrastructure according to Martelli. IFC can help the Indian sector facilities and industry. Therefore, to fulfill the growing with advice on how affordable housing has been needs of these cities, commercial, industrial and tackled in other countries such as Mexico where individual real estate constructional works are going ―literally, they are building cities at a time, 15,000 to on the anvil in and around. 20,000 homes, costing between $7,000 to $15,000‖. (The Corporation is also in talks with home builder Homex in Mexico for such projects here in India.) 3 But both the real estate and financial sectors here The department may ask the Karnataka government must understand the underlying concept – that such to furnish factual position of the project, wanting to projects will not entail speculating on land. ―I mean if know whether the project has been cancelled by it, a you had to sell 15,000 houses, you cannot speculate senior official said. DLF-Limitless, in its application to the government has requested for granting Limitless on the price of land,‖ said Martelli. With respect to the an early exit from the JV on the grounds that financial sector, one ―cannot look at affordable Karnataka government has not allotted the required housing with the same concept as mortgage,‖ he said. land for the project over the last two years.