Real estate firms may raise funds via IPO route

After a long time, real estate companies could hit the fund-raising trail. The reason is improvement in investor sentiment.

According to Pankaj Jaju, group head, strategic corporate group, Axis Bank, some that wanted to float public issues in 2011-12 but did not proceed might look at tapping the equity markets in six to nine months. The Mumbai-based Lodha group, Delhi-based Emaar MGF, Neptune group and Hindustan Construction’s Lavasa Corp were among those planning to float Initial Public Offerings (IPOs) three to four years earlier but did not.

“Around Rs 20,000 crore of IPOs were planned in 2011-12. Some will want to tap the markets now,” Jaju said at a real estate conclave organised here on Friday by the Confederation of Indian Industry. “In six months, realty stocks have gone up 60 per cent.”

According to Bloomberg, Lavasa Corp plans to float an IPO this financial year. Axis Bank and Kotak Mahindra Capital are working on it, the agency said, adding the company planned to file a draft prospectus next month to the capital markets regulator Securities and Exchange Board of India. Lavasa had planned to raise Rs 2,000 crore in 2010, Bloomberg said.

Nayan Bheda, managing director, Neptune group, said: “Not now. We will look at an IPO in some time. The gestation period in real estate is taking longer and it could pose a challenge in declaring quarterly results.”

According to sources, listed companies DLF, Phoenix Mills and others such as the Embassy-Blackstone combine could come out with real estate investment trusts and list these if the government gives them tax concessions.

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India a favorite of US firms for investment: Citi

India remains a consensus favourite investment destination for companies in the United States, largely on the back of a 'Modi-Rajan-Commodities trinity', global financial major Citigroup said in a report on Monday.

While India is not totally insulated from the adverse global cues emanating from slumping crude oil prices and depreciation in the Russian currency, "it is relatively better-off", economists at Citi said.

In its report, the American financial services firm said, "Unsurprisingly, India remains a consensus favourite both as an absolute and relative play due to a trinity of factors - business-friendly Modi government; pro-active RBI Governor Raghuram Rajan and commodity tailwinds."

Listing out factors in favour of the country, Citi's economists said in the report that the country is a net importer of crude, its macro fundamentals are improving and rising foreign exchange (or forex) reserves are giving a further boost.

"Following a strong market performance in 2014, most investors were of the view that the on-going cyclical and structural upturn could result in India continuing to outperform in 2015, albeit at a modest pace," the report added.

However, the global banking firm said that despite high expectations, memories of the 2013 taper tantrums have resulted in investors remaining on guard and watching out for potential risks.

Among major concerns for investors are NPA issues in the banking sector, stand-offs in Parliament denting the reform momentum and limited space on the fiscal side.

"Many feel that the first full budget of the BJP government in February 2015 will provide useful insights on the path ahead," the report said.

While estimating that the domestic economy is likely to edge back to 7 per cent growth rate and lower inflation, Citigroup noted, "Unlike the 2013 taper tantrums, when India had a high current account deficit, elevated inflation and weak growth, India's fundamentals have improved".

"However, we re-iterate there is no room for complacency as generalised EM risk aversion could result in reversal in portfolio flows and external debt de-leveraging," Citi economists added.

Source: Business Today

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Cabinet defers approval to real estate bill

The Cabinet on Wednesday deferred the Real Estate (Regulation & Development) Bill, which seeks to ensure consumer protection, establishing regulatory bodies at Centre and states for ethical and transparent business practices in the real estate sector. Sources said the housing ministry has been asked to review the bill to explore how it can be made more consumer-friendly and to have better provisions for promotion of low-cost housing. 

Low-cost housing and roof to all have been identified as a focus area by the Narendra Modi government and it has promised shelter to all by 2022. TOI has learnt that there was also a suggestion during the Cabinet meeting that the provisions relating to Centre-state issues need to be made clearer in the bill. 

Government has included the bill as one of the legislations for passage during the current session of Parliament. The bill was introduced in the Rajya Sabha last August and referred to the parliamentary standing committee. Though the committee had made several recommendations particularly in favour of consumers and greater check on unscrupulous developers, the housing ministry has rejected most of them. 

These include checking the antecedents of project promoters before their registration is done, and ensuring that developers who have defaulted in two earlier cases be blacklisted. But the ministry rejected this arguing that such a provision will work as a deterrent for the sector. Similarly, the panel had suggested the promoters be made to enclose names of contractors, architects and structural engineers, which was also turned down. The panel had also recommended all real estate agents involved in sale of secondary market projects also need to be regulated. But this was not accepted. 

Nevertheless, there are also several provisions in the revised bill to protect the consumer's interest. This included the condition that prohibits a developer to change the plan in a project unless 2/3rd of the allottees have concurred for such change. This has reference to recent cases in Noida where a developer had changed plans and built towers to increase economic viability without taking buyers into confidence. 

Earlier the housing ministry's move to allow builders to divert up to 50% of buyers' investment for a specific project to other projects had come under criticism. The original bill had mandated the developer to put 70% of the buyers' investment to an escrow account to be used only for construction of that project. 

TOI on November 25 had reported how the real estate lobby was trying hard to push for this dilution.

Source: The Times of India

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Real Estate: Why India can build hope

The real estate sector may be hung over from a two-year downturn, but developers say that one thing never changes: The right product at the right ticket size always sells.

Real estate developers had hoped that the election of a stable government would boost their fortunes. It’s been six months since the Narendra Modi-led NDA has come to power, but there has been no noticeable change in demand. Unsold inventory continues to pile up across the country. High interest rates and a sluggish sub-5 percent GDP growth in FY14 have resulted in people holding on to their purse strings. The fallout is that real estate prices have barely budged over the last two years. But sentiment is picking up, and cities like Bangalore have developed a vibrant and healthy real estate market. 

As part of the fifth session of the ‘Forbes India CEO Dialogues: The Leadership Agenda’, industry leaders shared their views on the steps needed to revive the sector. Boman Irani, chairman and managing director of Rustomjee Group, Subodh Runwal, director, Runwal Group, Khushru Jijina, managing director of Piramal Fund Management, Ashish Puravankara, joint managing director of Puravankara Group and Sunil Kaushal, chief executive officer of India and South Asia at Standard Chartered, discussed a roadmap to get the sector growing again. 

Developers on the panel believed that there would be an uptick in prices within six months, once there is a correction of interest rates. Financiers, however, said that this is at least 12-18 months away. 

Excerpts from a discussion moderated by R Jagannathan, editor-in-chief, Forbes India.

R Jagannathan: We have certainly seen a turnaround in sentiment. Is that percolating down to the real estate sector?

Boman Irani: Yes. People have started noticing that there is a strong government, which has made all the right noises. The government started with something as simple as the ‘Swachh Bharat Abhiyan’ (Clean India Campaign) and then made a grand announcement promising homes for all by 2022. People feel good about these measures. Emotion is what drives purchase, and real estate is driven by a desire to improve one’s lifestyle. The fact that everyone is hoping that the GDP will improve and interest rates will come down is adding a lot of positivity on the ground.

The flipside is that our industry has a lot of pundits and they like to make tall statements, often crying foul about prices being too high. This brings down public sentiment. They have still not started making the right noises. For the end user, any time is the best time to buy, provided he finds what he is looking for in his budget. 

Jagannathan: Bangalore is driven more by fundamental demand and less by investors, unlike, say, Mumbai. Do you see any change in demand?

Ashish Puravankara: Bangalore has been quite stable for the last 2-3 years. One distinct change that we have noticed is that pre-sales have seen a very good response. Earlier, we would sell 10-15 percent when we launched a project. Now we are selling 40-50 percent in the first three months of a launch, and these are at good prices. The end-user demand is very strong. People who come to the city because of their jobs end up staying back. Hence, there is a lot of demand.

Jagannathan: Mumbai is a different market from Bangalore in that there are a lot of speculative investments. With that in mind, do you think Mumbai would take longer to revive than Bangalore or Chennai?

Subodh Runwal: If you look at Mumbai from a 30-year horizon, you’ll see that real estate has outperformed all asset classes. What we are witnessing now is a temporary blip, but if you look at a good developer, you will see that his projects are still selling out quickly. Recently we had people queuing up at 5.30 am for a project we launched.

Source: Forbes India

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Global firms in talks to invest in Indian real estate

Property and equity firms from Malaysia, Singapore and other Asian countries are weighing the Indian real estate market, following the Centre’s move to relax foreign investment norms in the sector.

Recently, the government had relaxed norms for foreign direct investment (FDI) into the sector, including a cut in the minimum built-up area required to 20,000 sq m from 50,000 sq m; the initial capital required was halved to $5 million. According to norms, 100 per cent FDI is allowed in real estate projects.

Many developers have started discussions with foreign firms for possible ventures, according to two independent consultants tracking this segment. “But the deals are likely to be struck only after 6-12 months; FDI won’t start coming in immediately,” said one of the consultants.

The chief executive of a leading developer based in Gurgaon confirmed his company was talking to many foreign investors for launching few projects. “We have received a few proposals and we are evaluating those. Our only concern is foreign investors want fixed returns over a period of time, which might be difficult, considering the situation of the realty market,” he said, on condition of anonymity.

Experts say the real estate sector is sitting on a huge pile of inventory, adding with low sales and a cash crunch, the FDI relaxation has come at the right time. CBRE’s South Asia chairman and managing director, Anshuman Magazine, said, “The real estate and infrastructure sector is starved of funds. This announcement will widen the base of investors, especially mid-sized financial institutions. It will also encourage new development projects in prime areas of large cities and tier-II towns.” Anuj Puri, chairman and country head, real estate consultancy firm JLL, said, “The government’s decision to relax FDI rules in the construction sector comes in the nick of time for Indian real estate. Meanwhile, developers continue to reel under high levels of debt, even as the channels of funding have shrunk. The easier rules will aid the completion of projects, delayed by a squeeze on funds due to elevated debt levels.”

During 2000-2013, India’s realty sector had received FDI of about $22 billion, 11 per cent of the total FDI into the country during the period. But following a slowdown, foreign investment in the sector has slowed — from $3.1 billion in 2011-12 to $1.3 billion in 2012-13 and $1.2 billion in 2013-14. During April-August this year, $446 million has flowed into the sector. Projects that commit at least 30 per cent of the total cost for low-cost affordable housing will be exempted from the minimum built-up area and capitalization requirements, with a three-year lock-in period. According to the revised norms, projects with at least 60 per cent of the floor area ratio/floor space index for units of carpet area not exceeding 60 sq m will be considered affordable housing projects.

Also, 35 per cent of the total number of units should be constructed for the economically weaker sections, with a carpet area of 21-27 sq m.

Source: Business Standard

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Tips to Avoid Real Estate Regrets

There are some very common regrets experienced by real estate buyers and investors; and this is especially true for majority of the first time home buyers. However, the good news is that many of these mistakes are avoidable. The best part is that you don't need to be a real estate expert to avoid these regrets, you just need to plan and prepare in advance and of course avoid common mistakes. In fact, you just need to follow the suggestions and tips that are given below and you are sure to avoid the emotional turmoil created by a real estate regret.

Hire the services of a property lawyer
It is overwhelming to even imagine that the property that you bought is being claimed by someone else. Moreover, in India, legal hassles and property cases take decades to be resolved and it is the most unsolicited situation for any home buyer. That is the reason why the title deed of the property that you buy must have a clear title deed. To avoid this very detrimental real estate mistake, one must hire the services of a legal expert who can confirm the authenticity of the title deed. It may cost of you a small amount, but is certainly worth the peace of mind that you get in return.

Research and invest in a property with a good appreciation potential
The last thing that any real estate investor wants to do is to get stuck with a property that is hardly appreciating, or worse is depreciating; especially, as it is glum to sell a real estate property at a loss. To avoid this real estate regret, you must indulge in a thorough research, speak to reputable real estate brokers and weigh the pros and cons of investing in a property in that specific locality. More often than not, the appreciation of a property depends on a number of factors such as proximity to educational institutes, hospitals and shopping avenues, and hence these aspects must be considered carefully before investing in a property.

Compare property prices in the locality
One of the most known regrets of real estate buyers is that they paid too much for their property. Before buying a real estate property, you must ensure that you are purchasing the property at the lowest possible price. You must negotiate with the seller before buying, and more importantly you must know the property rates in that locality to negotiate efficiently. You do not want to be in a position where you know that someone bought a similar property in the same locality for much less, do you?

Do not buy property under peer pressure. Analyze your financial condition and buy a property only when you are in the position to bear the weight of monthly EMIs. Last but not the least; make a list of all that you want in your property and then determine on the purchase of a house that ticks all the boxes in the list. This is to ensure that you do not regret the purchase at a later stage, especially as buying a property is a costly affair and is simply not easy to buy a second property very soon.

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Massive real estate boom in AP

Andhra Pradesh is witnessing a real estate boom post bifurcation, with property registrations doubling in the 13 districts during the last few months as compared to the same period last year. Real estate speculation in the hope of capitalizing on the demand for land and frenzy over the construction of the new capital are said to have contributed to the massive spurt in land transactions.

Expectedly, Krishna and Guntur districts topped the list. According to sources, the 13 districts recorded a revenue of Rs 1,469.95 crore through land registrations between June-October 2014 as compared to Rs 624.83 crore during the same period last year. Krishna district, which was initially tipped to account for the major portion of the new capital region, recorded the highest revenue from land registrations post bifurcation. As against 44,281 registrations between June-October last year, the district reported 91,215 transactions worth Rs 236.5 crore this year.

However, when it comes to the number of transactions, Guntur topped the list. The district, which entered the race after the state government identified Tulluru, Mangalagiri, Tadepalli and Guntur mandals as part of the proposed capital region, reported 99,310 land registrations with a revenue of Rs 202.59 crore during the June-October 2014 period. "Our officials in the districts are complaining that they need more staff to provide quick service to realtors. In Krishna and Guntur districts, there is heavy rush and people are being told to come back two to three days later to get their document registered. We are planning to send more computers, scanners and give orders to appoint more outsourcing personnel to meet the demand," explained senior officials in the AP government.

The sudden spurt in land registrations is attributed to the construction of the new capital city in Krishna and Guntur, as realtors in all 13 districts have shifted their focus to these two districts. They have opened their offices in either Vijayawada or Guntur and appointed local people as agents to get information about land for sale.

"Land on the outskirts of Guntur and Vijayawada has recorded the highest price hike during the last one year. For example, land near Vijayawada, which was available for Rs 10 lakh per acre a year ago, is now being quoted at Rs 6 to 10 crore. Land around Guntur city, which was purchased for Rs 10 lakh an acre just one year ago, is being sold for Rs 5 to 6 crore," said a realtor, who has shifted base from Visakhapatnam to Guntur.

The state government's decision to go for land pooling has jacked up the prices of even those land that will not fall in the capital region. Nuzividu, which is almost 50 km away from the proposed capital region, is also witnessing a spurt in real estate prices. According to sources, the prices of land between Gannavaram, Hanuman Junction and Nuzividu have shot up astronomically during the last six months. "We bought about 500 square yards of land in Nuzividu for Rs 15 lakh at the rate of Rs 3,000 per square yard six months ago. Now, we are seeing people offering Rs 50 lakh for the same 500 sq yards," said a Nuzividu resident.

A similar boom is being reported in Eluru, Tadepalliguem, Bhimavaram, Machilipatnam, Tenali, Bapatla, Narsaraopet, Chilakaluripet and Sattenapalli towns, all of which, like Nuzividu, are far away from the proposed capital region. "Vijayawada and Guntur are experiencing a rapid real estate boom as was witnessed in Hyderabad about a decade ago. And like it happened there, this region too might witness a bust, but at present, the land prices have shot up beyond the reach of the middle class," said an official.

Source: The Times of India

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