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January 3, 2007

Indian real estate boom of 2006 to further roll in 2007

Filed under: News — admin @ 6:25 am

New Delhi, January 03, 2007 - The real estate boom of 2006 is set to multiply itself in 2007 to get India a foreign capital of over Rs. 8000 crore with leading international investors establishing their presence in its richly rewarding real estate development, providing new employment opportunities for over 2 lakh skilled and unskilled workforce, according to estimates made by The  Associated Chambers of Commerce and Industry of India (ASSOCHAM).

According to ASSOCHAM, overseas real estate giants such as Royal Indian Raj International, Blackstone Group, Goldman Sachs, Emmar Properties, Pegasus Realty, Citigroup Property Investors, Lee Kim Tah Holdings, Salim group, Morgan Stanley and GE Commercial Finance are likely to bring in a collective capital of US $ 80 billion investments to suitably reward  them benefits with India’s opening up of its real estate sector to 100% FDIs.

The ASSOCHAM  estimates point out that the US-headquartered investment bank Morgan Stanley already forayed into India’s booming real estate sector in March 2006 through its real estate investment arm Morgan Stanley Real Estate investing Rs 300 crore (around $68 million) in Mantri Developers Pvt Ltd, a Bangalore-based real estate developer. Morgan Stanley plans to invest more than $1 billion over the next 4-5 years in the Indian real estate sector.

It also points out that Tishman Speyer’s tied up with ICICI Bank to invest $1 billion in the country, while Kotak India Real Estate Fund closed its domestic tranche raising $100 million and this trend will continue to lure many more such investors to retain their interests in domestic real  estate business.

The Chamber is of the view that as the government allowed 100 per cent Foreign Direct Investment in real estate, an efficient regulatory framework, simpler tax regime and proper regulations are imperative to boost public-private participation and bring in managerial and technical expertise.

According to findings, the biggest US pension fund, CalPERS, hedge fund Farallon Capital Management, US-based developer Tishman Speyer and NRI fund Trikona Capital too have drawn plans to invest in the booming market. Domestic funds including Kotak Realty Fund, HDFC India Real Estate Fund, Pantaloon Retail’s Kshitij Real Estate Fund and UTI Venture Fund were also very active.

The two most active investor segments were High Net Worth Individuals (HNIs) and Financial Institutions. Both these segments were particularly active in commercial real estate. With the rules related to investing and repatriation relaxed to a large extent, an estimated 25 million Non Resident Indians (NRIs) living across 125 countries are investing in immovable property in India. NRIs have been keener in investing in residential properties than commercial Properties.

Strong economic growth, rising income levels, growing middle class, increasing urbanization and improving transparency brought resurgence for the Indian real estate sector in 2006 which will continue to grow further in 2007 with easy availability of financing facilities growing still further.

The Chamber forecasts that real estate growth will go from $12 billion in 2005 to $90 billion by 2015. Greater integration with the global economy and the increase of domestic as well as foreign investments are encouraging demand for real estate. Despite ill found doubts of a bubble, foreign investors are lining up.

While HDFC introduced real estate mutual fund in its sector specific mutual funds, Industry major Parasvnath Developers Limited came up with Initial Public Offer, DLF decided to bring IPO, Global big names such as Morgan Stanley, Lehman Brothers, HSBC and ABN Amro queued up to pick up stake in local realty firms, Year 2006 truly belonged to Realty.

Though criticized as an opportunity for the builders to grab land, Special Economic Zones offered tremendous opportunity for the Industry both for the commercial sector as well as for the industrial and logistics sector. The government finalized the guidelines for the development of social infrastructure, besides setting criteria for developers. The Reserve Bank of India directed commercial banks to treat exposure to Special Economic Zones as lending to commercial real estate sector. “However, there is case for relaxing the guidelines for the sector”, stated ASSOCHAM President, Mr. Anil K Agarwal.

According to Chamber, emergence of IT and ITES sector and organized retail are the major growth drivers. Growth of IT and ITES created vast demand of office space and appearance of malls all over the country tendered huge scope for land development. Analysts peg the total demand for commercial office real estate in Bangalore, Chennai, Delhi-NCR, Mumbai, Pune, Hyderabad and Kolkata alone to be over 25 million sq ft in 2006.

Booming hospitality with the booming economy brought additional reasons to cheer for the Real Estate developers. Tier II cities such as Nagpur, Ahmedabad, Vadodara, Indore, Raipur, Jaipur, Agra, Siliguri and Kochi emerged as investment destinations in the current real estate scenario. The development of suburbs such as Navi Mumbai also generated immense opportunities.

“With stock market being highly volatile, investment in real estate has begun to look attractive and competitive with typical yields being 20-25 per cent per annum. Real estate will offer a good investment alternative to stocks and bonds over the coming years” added the President.

Markets also welcomed real estate with a cheer. The public issues of Parsvnath Developers and Lanco Infratech was oversubscribed by more than 50 times and 10 times, respectively. Parsvnath Developers Ltd. made a debut at 80 per cent premium to the offer price of Rs 300 on the BSE. The stock opened at Rs 540 on the BSE. The initial public offering of Sobha Developers Ltd was also subscribed 108.51 times on the bourses.

Eredene, a private equity fund raised $ 100 million earlier this year followed by another private equity fund Trinity Capital, which raised $500 million through AIM. Ansal Properties & Infrastructure Ltd, garnered Rs 681.75 crore through QIP, the overall book was subscribed by over two times. IVRCL Infrastructures & Projects Ltd raised Rs. 555 crore in a private placement via QIP route. The issue was oversubscribed multiple times. IVRCL is the first infrastructure construction company to raise equity through the QIP route.

January 2, 2007

ICICI Bank raise home loan interest rates

Filed under: News — admin @ 6:21 am

Mumbai, January 02, 2006 - ICICI Bank, India’s largest private sector bank, has raised home loan interest rates by half a percent across all tenures with effect from December 18. Other lenders have not yet followed suit.

ICICI Bank’s floating reference rate (FRR) has been increased to 10.75 per cent from 10.25 per cent. For disbursements already availed on or before December 17, 2006, the change in the rate of interest will be effective from the next reset date i.e. from January 1, 2007. Existing fixed rate customers whose loans are fully disbursed, will, however, not be impacted by the increase and their contracted rates will remain unchanged, the bank said.

The increase in rates will apply to existing customers while new borrowers can still get a loan at the old rate. Here is what ICICI Bank says in a FAQ on its website;

I am an existing customer, why is the rate of interest higher than the new customers?
The rate of interest depends on the prevailing rate at the time of disbursement. It could also be different because of special schemes offered by ICICI Bank from time to time.

Are you an existing customer and appalled by your bank’s treatment of existing customers? Let your displeasure be known to your bank and ultimately vote with your wallet.

January 1, 2007

Government forms company for land acquisition in West Bengal

Filed under: News — admin @ 6:24 am

Kolkata, January 2007 - The West Bengal government has floated a company ‘West Bengal Land Holdings’ to acquire acres of land required for industrial projects and SEZs in the state.
The company will be a subsidiary of WBIDC. The state of West Bengal in Eastern India is required to acquire 44,000 acres of land for approved projects such as the Tata Motors car project in Singure (997 acres) and Salim Group of Indonesia’s multi-product SEZ (22,500 acres) amongst others.

Land acquisition has become a political hot potato, with protests by those being dispossessed of their lands and a number of political parties opposing large-scale acquisition. The formation of a company to create a large land bank will allow the State to make good on commitments to the investors it wishes to attract.

RBI seeks improved system for realistic valuation of properties

Filed under: News — admin @ 6:23 am

Mumbai, January 2007 - The Reserve Bank of India has written to all commercial banks asking them to put in place a system/procedure for realistic valuation of fixed assets and also for empanelment of valuers for the purpose. Specifically, RBI has asked that banks should have a Board approved policy in place for valuation of properties including collaterals accepted for their exposures.
RBI has observed that different banks follow different policies for valuation of properties and appointment of valuers for the purpose. The issue of correct and realistic valuation of fixed assets owned by banks and that accepted by them as collateral for a sizable portion of their advances portfolio assumes significance in view of its implications for correct measurement of capital adequacy position of banks.

According to RBI’s guidelines, the valuation should be done by professionally qualified independent valuers i.e. the valuer should not have a direct or indirect interest. Also, banks should obtain minimum two independent valuation reports for properties valued at Rs.50 crore or above.

Banks should have a procedure for empanelment of professional valuers and maintain a register of ‘approved list of valuers’. Banks may prescribe a minimum qualification for empanelment of valuers. Different qualifications may be prescribed for different classes of assets (e.g. land and building, plant and machinery, agricultural land, etc.). While prescribing the qualification, banks may take into consideration the qualifications prescribed under Section 34AB (Rule 8A) of the Wealth Tax Act, 1957. Banks may also be guided by the relevant Accounting Standard issued by the Institute of Chartered Accountants of India.

In addition to the above, RBI has asked the banks to keep the following aspects in view while formulating policy for revaluation of their own properties.

i) The extant guidelines on Capital Adequacy permit banks to include revaluation reserves at a discount of 55% as a part of Tier II Capital. In view of this, it is necessary that revaluation reserves represent true appreciation in the market value of the properties and banks have in place a comprehensive policy for revaluation of fixed assets owned by them. Such a policy should interalia cover procedure for identification of assets for revaluation, maintenance of separate set of records for such assets, the frequency of revaluation, depreciation policy for such assets, policy for sale of such revalued assets etc. The policy should also cover the disclosure required to be made in the ‘Notes on Account’ regarding the details of revaluation such as the original cost of the fixed assets subject to revaluation and accounting treatment for appreciation / depreciation etc.

ii) As the revaluation should reflect the change in the fair value of the fixed asset, the frequency of revaluation should be determined based on the observed volatility in the prices of the assets in the past. Further, any change in the method of depreciation should reflect the change in the expected pattern of consumption of the future economic benefits of the assets. The banks should adhere to these principles meticulously while changing the frequency of revaluation/method of depreciation for a particular class of asset and should make proper disclosures in this regard.

Bangalore apartment on sale at Rs 15 crores

Filed under: News — admin @ 6:19 am

Bangalore, December 24, 2006 - Bangalore-based Century Group is offering ultra-luxury apartments in the posh Palace Orchard area priced at between Rs.12 to 15 crore per apartment. The project will be launched next month and is to be completed by mid-2008.
“The plush apartments will boast the best-of-breed in each category - Poggenpohl kitchen solutions, Dornbracht bath fittings and Gaggenau home appliances,” according to Ravindra Pai, Director, Century Group. The four bedroom apartments will come up in a complex containing 8 apartments on 20,000 sq.ft. The company is also planning to develop another similar project in Koramangala.

The company has reportedly signed up New York based Handel Architects for the ultra-luxury apartments project.

The Century Group is planning to develop part of its land bank and is working on various other projects including a 650-apartment project on 8-acres in Mysore road, an 80-room hotel on Race Course road and a retail complex on Tumkur Road. The Group is also looking to open eight service apartments under the Century Nesters name by mid-2007.

Century Building Industries, a real estate arm of the Century Group, had earlier in October launched their first residential project - Century Corbel, offering 2 and 3-bedroom apartments on a 2-acre plot on Bellary Road.

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