Updated Pictures of the New Delhi Indira Gandhi International Airport

This is an update to our last post on the airport series. The original article on the new Delhi Airport focused on Terminal 3 while the renderings below are of the entire master plan. If you have studied Singapore’s transformation form 3^rd world country to first, you know the Singapore gained credibility with foreign investors because the modernized the airport and the roads into the city. While India is obviously a much bigger Country, the modernization of the airports is an absolute must. Today, like it or not, foreigners are put off by the out-dated design and feel of India’s airports.

Indira Gandhi International Airport Commercial Masterplan, by RMJM Architects

The site covers 349 hectares and incorporates the development of five grouped schemes. Group A incorporates retail, entertainment and amusement park, Group B - convention centre, 10 hotels, trademart and golf course, Group C is a logistic hob and Group D consist of corporate and IT offices.

The primary design objective was to produce a dynamic and contemporary landmark business and commerce development that matches the status befitting an international airport, whilst providing a new global commercial hub. Sweeping green boulevards through the design provide long clear vistas to the airport terminal using extensive landscaping to frame the views and the entire site as been designed to adhere to sustainable models of development being followed worldwide

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Video: New Delhi International Airport Terminal 3

It's airport day at the India Street. I found this video of the New Delhi airport (Indira Gandhi) on Youtube. A very good presentation.

Below is an artist’s impression of the new interim domestic terminal that will come up between terminal 1A and the arrival terminal. Expected to be completed by June ’08, the 33,000-sq metre complex will have 72 check-in counters

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Editor Musings – ‘Slumgate’ Corruption at the highest levels in Delhi

India’s “Slumgate” as we are calling it is actually good news for India and the rest of the world’s perception of Indian corruption. Good news you may be asking? Well yes, if a small time canteen contractor can openly operate within the halls of power in Delhi and accumulate 50 luxury cars with VIP license plates (which he drove one to work every day), Rs 17 lakh in cash and about 7 kg of gold without anyone in the Delhi Assembly “noticing”; then maybe the days of outright corruption are coming to an end. I say coming to end because if someone were arrogant enough to operate a small canteen business and own 50 luxury cars while working under the noses of India’s political elite, then one can reasonably assume said canteen owner had tacit approval.

However, someone turned in the alleged criminal Ashok Malhotra and remarkably the matter was not swept under the rug. In the past, a matter with this scope that potentially will ensnare officials at all levels of the Delhi government and the Delhi Development Authority (DDA) would have been quickly dismissed or twisted such that only the sacrificial lamb would have been convicted.

Five DDA officials have already been arrested pertaining to the resettlement of the Hudson Lines JJ colony in North Delhi. Under a DDA scheme, all slum-dwellers were supposed to be given a plot each (measuring 20.9 square metres) at Dheerpur, Phase-I in north Delhi.

"However, the accused DDA officials allotted a number of these plots in the name of fictitious persons, using forged identity documents, allegedly at the behest of Malhotra, who subsequently sold these plots at exorbitant rates," said an official.

“Some incriminating documents have also been recovered from his Mukherjee Nagar home in north Delhi, but we can't reveal the details pertaining to the scam as investigations are still underway,” an official added.

One can’t get more low than stealing from the displaced poor. This outrage should be investigated thoroughly without political privilege. In fact The BJP State president Dr Harsh Vardhan said, “A scam of such scale would not have been possible without the connivance of the Chief Minister.” That may be a political play and a statement made in haste, but if the scope of the crime is as we suspect, it’s impossible to believe that those throughout the ministry didn’t have some knowledge of the crime. However, as I said earlier, this is good news because the CBI has exposed the scam where once it would have been dismissed as a "low level petty threat scam". It appears the CBI is serious about cleaning up flagrant corruption.

The Editor

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Big Mistake: New flyovers planned but lack proper pedestrian walkways

By Vipin Agnihotri

No doubt, state of the art expressways and flyovers have make metros of India sophisticated in nature but the absence of proper pedestrian facility takes away the sheen from them. In my opinion, the problem is grave and needs immediate planning.

It has come into the notice of The India Street that in order to improve the transport system the Indian government has planned plenty of routines. Integrated multimodal transport system, will play a prominent part in offering an effective public transport service and hopefully will reduce private vehicles.

If government sources are to be believed, five new metro corridors are planned in addition to the High Capacity Bus Corridor System, elevated light rail transit system and an integrated rail bus terminal.

All in all, the main focus is on the development of more roads and more effective mass transportation. Though, there is no emphasis on the common man- the pedestrian- and his requirement for safe problem free movement space.

There is no doubt in my mind that with steady increase in the numbers of cars and footpaths, pedestrian space in the cities like Delhi and Mumbai has become increasingly marginalized. It is worth mentioning in this regard that in the layout of residential colonies all Indian roads were planned with a pedestrian footpath on either side. In other word, the footpath was meant to be a place for the common man to walk upon and did not belong to the owner of plots adjoining the access road.

But in large chunk of areas the common man right of access to the footpath is not respected. As a matter of fact, plenty of plot owners have sough to beautify the area by making a private fenced garden. “In all new development the system of planning presently being followed, revolves around the requirement of vehicular traffic,” pointed out 78-year-old Radhey Lal.

Theoretically speaking, roads have been widened in India and flyovers have been built in all the major cities of the country without offering safe and convenient facilities for pedestrian to cross over. The requirement for adequate pedestrian space is an absolute must especially in places where large number of people gets together such as in neighbourhood markets and shopping centres.

Unfortunately, here also, the focus seems to be on providing for the movement of vehicles and the parking of cars. Shoppers dodge their way around moving cars, scooters and motorcycles and accidents are frequent and common. Despite this traders have continued to resist the pedestrianisation of shopping streets fearing loss of business.

Examples of shopping areas in Delhi that urgently need to be converted to pedestrian-only status includes Ajmal Khan Road in Karol Bagh, Central Market in Lajpat Nagar, Khan Market, Defence Colony Market and Malviya Nagar.

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Delhi NCR Real Estate 15% Price Correction

By Vipin Agnihotri

There is lot of pressure on the Indian residential realty segment because of abundance of realty projects coupled with increasing interest rates and hike in inflation. In my opinion, fast rate of urbanization, increasing incomes, and growth in the number of nuclear families are some of the reasons that has resulted in the residential real estate demand in India.

Taking this into account, wide array of realty developers has announced their projects in various locations in the NCR region. However, experts believe that the residential value across the country will remain under pressure and few markets could witness a correction to the tune of 15 to 20 percent over the medium term.

It has come into the notice of The India Street that there has been a correction of around 15 percent on an average in the capital market values of land across NCR, with the dip being attributed to the decrease in the number of property buyers in the market.

Recent research has come to the conclusion that over the next few years, close to 530.5 million sq ft of residential space would be developed in Grade A and B category in seven prominent cities of the country. Point to be noted here is that most of the housing shortage in the country exists in the low-income group and economically weaker section.

In terms of statistic, NCR region would have around 191.42 million sq ft of residential space by the year 2009-10. Of this, around 16 percent would come up in the present year and 20 percent in 2008.

If experts are to be believed, the proposed airport at Jevar and other infrastructural developments make Greater Noida an attractive residential destination and is next only to Manesar in terms of planning. When you add this up with the Taj Express Way, there is no doubt that the approach to the region has become convenient.

The south west region of NCR, which includes Bhiwadi, Dharuhera, Rewari and Alwar has plenty of residential projects lined up to be finished by 2009-10, is grappling with the issue of inadequate infrastructure, which has kept the demand muted.

In my opinion, a correction of around 15 percent in the capital value of land across NCR can be attributed to the decrease in the number of property buyers in the market. Number of measures from the Reserve Bank of India has squeezed the real estate market both from the supply and demand side.

No doubt, these measures have curbed speculation to a great extent, yet the end-user driven demand has not been affected much and property transactions are still taking place in the market, though in a far lesser number.

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Karnal Witnessing a Property Price Boom

By Dr Suvrokamal Dutta

The city of Karnal, located midway between Chandigarh and Delhi, is witnessing a boom in property prices, which by the way is far stronger than that seen in other towns of North India.

No doubt, Karnal’s strategic location is one of the reasons for its attraction to investors but you can’t overlook the abundance of good water and clean environs as well. Karnal is located on the bank of the river Yamuna. It has come into the notice of The India Street that the state government has big investment plans lined up for Karnal. The best part about Karnal is that despite being a historic city, Karnal is not over crowded.

The world-class broad highway connecting Delhi, with Karnal means that the national capital is very close to Karnal, which is another plus point for Karnal. If experts are to be believed, the Karnal bypass on the Delhi Chandigarh highway has further fuelled the property boom in the city. Big areas have been aesthetically developed by the state government in the territory opened up by this new road.

As a matter of fact, it is this supply of good property that is keeping the property boom from getting out of hand, making the present time a good point of entry for investors. Karnal city itself is quite attractive, being extremely well planned. The roads are broad and even the slip roads in the planned sectors are broader than many main roads in a city like Delhi.

In addition, there is plenty of greenery in Karnal with extensive parks having been created for the residents. Despite these inherent benefits, property in Karnal still remains affordable and even government officials and executives are buying property there for settling down after retirement.

It is the extension in the northern direction of Karnal, west of the highway going to Ambala that is emerging as the focus of attention for investors. This area is preferred because it is right opposite the well-known Oasis landmark on the National Highway and is a stone’s throw from the historic Karna lake and the golf course.

The pollution free environment has meant that many who would like a residence away from the hustle and bustle of Chandigarh or Delhi are making a beeline for the far less expensive Karnal, where facilities are available which ensure a lifestyle which would come only at astronomical prices in both Delhi or Chandigarh.

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Foul Practices On The Rise

By Dhruva Jyoti Chowdhury

Kolkata, India: Just recently, the District Town Planning Department approached the Gurgaon District administration for lodging an FIR against a Delhi builder for indulging in illegal pre-launching of plots through brokers for a colony in the Haryana town. Another Delhi-based builder is under the scanner of District Town Planner, Gurgaon, for collecting money for pre-launch of a Golf Homes project.

The entire business of pre-launch sale of property revolves around the chain formed by developer, big investors and brokers. The investor comes first in the chain of command who is approached by the developer. He invests in the project, normally on the promise of about 40 per cent appreciation in property price at the time of the launch. Some big- time brokers are also involved in underwriting the project. Keeping in view the dimension of the entire business, some big-time investors have even formed joint ventures with developers on revenue-sharing basis for pre-launch projects.

The broker or estate agent is the most important link in the pre-launch business. “Since pre-launch is not a legally accepted practice, the developer does not come directly into the picture. Moreover, most of the investors cannot approach secondary market to find buyer for their booked property. Therefore, the real estate agent plays a key role while interacting on behalf of the developer with investor and on behalf of the investor to sell the property again in the market,” says real estate expert Rakesh Purohit. And the broker gets good rewards as well since he gets as much as 4-8 per cent commission (double the normal) for high risk pre-launch projects. It is this lure of big money which has drawn shopkeepers, business men and retired people into property brokering business. With such fat incentives, brokers have become bolder and pro-active in the attempt to hook common people to invest in such properties. “It is not just gullible, ill-informed retail investor but even well-educated and well-informed senior corporate executives with heavy pay packets and ESOPs who are involved in this gamble of striking it rich in short time. These people have lot of surplus funds to invest. An entry-level executive couple in an MNC takes home about Rs 16 lakh annually. So besides investing in their first home, they are putting in lot of money in pre-launch properties,” informs a leading broker of Delhi.

A well-known builder that is known more for its interests in non-realty business faces an FIR by Haryana Town & Country Planning Department for allegedly doing illegal pre-launch bookings in Rewari township falling under NCR.

A little known developer under the pretext of pre-launching a residential project in Indirapuram collects about Rs 3 crore and vanishes overnight leaving seven dozen retail investors high and dry.

A leading Delhi-based real estate developer that claims to have pan-India operations is rapped by Haryana government’s Town & Country Planning Department for making a false claim through an advertisement about setting up a housing project near Chandigarh. Following this, a broker through newspaper ads solicited pre-launch bookings in this project for which no permission or license was reportedly granted to the company by the authorities.

Few months back, Jaipur Development Authority issued a caution notice in city’s newspapers warning people against investing in few residential projects of well-known Delhi developers in the city who were allegedly engaged in bookings for these projects.

These are just some of the representative cases of pitfalls of pre-launch properties – a mere tip of the iceberg of such illegal transactions that could well ruin the rosy dreams of retail investors lured by the builder- investor- broker nexus to make fast buck.

Now look at the other side of the story where many property buyers have burnt their fingers in their greed to book huge profits on their investments in a short period.

Rajesh Chopra (name changed), a corporate executive, bought 5000 sq ft of retail space in a mall in Indirapuram developed by a relatively new developer in pre-launch scheme in June-July 2005. He invested close to Rs 50 lakhs on the builder’s promise that the project would be launched in two months’ time and he would then be able to book good profit on his investment. But the developer ran into financial problem and the project was shelved. Having failed to get his money back, Chopra has taken recourse to litigation.

Sumit Khanna (name changed) invested Rs 17 lakhs (more than 25 per cent of the cost of a flat) in a pre-launch scheme floated by a builder in Gurgaon on the understanding that he would be able to earn a handsome profit after the launch in 2-3 months. Now even after a year, the project launch is nowhere in sight.

Another retail investor Raj Singh (name changed) invested Rs 8 lakhs under the pre-launch scheme for a residential project in Faridabad but it is already a year and the promised launch has not been made with the result that his investment is stuck.

There could be many more such cases of gullible and greedy retail investors who have been short-changed by developers in various pre-launch schemes.

Interestingly, this phenomenon of pre-launch is mostly prevalent in Delhi NCR and north India in Haryana, Punjab, Uttar Pradesh and Rajasthan. This is clearly evident from the rush of newspaper ads of pre-launch projects from the north. “This is largely because of the fact that north Indians are more adventurous in risk-taking and they have seen the benefits of financial jugglery by north Indian developers,” says an eminent broker engaged in pre-launch business. Following the pre-launch rush, states like Haryana and Rajasthan have particularly become alert. Says S P Gupta, Administrator, HUDA, Haryana, “Pre-launches without proper license is a serious violation of Haryana Urban Area Development Act and we’re initiating action against the erring developers.”

Though pre-launch sale of properties has been going on for over two years, it has now become much more pronounced with builders going overboard in their zeal to scale up their operations and emerge as pan–India players. And in the process this game of property pre-launch has assumed dangerous proportions. Unlike in the past when mostly investors and brokers were involved in pre-launch business, now more and more small retail investors and end-users are being roped in so much so that small time investors from places like Bhatinda or Jharkhand are being lured to invest in such schemes.

The extent to which this pre-launch business is flourishing can be gauged from the large number of ads from the brokers which appear in newspapers. While some ads carry the names of developers and projects, others are simply about pre-launch opportunities in specific cities.

Pre-launch is being resorted to by developers in order to raise funds and to sell a major part of the project in advance and also to create a hype in the market. This creates curiosity among buyers and as they go on a property-buying spree, the developers sell it on a premium price. And all this without taking the pain of developers getting bank loan for which the builder has to make certain disclosure about his project and finances. Through pre-launch, the promoter can manage to raise 25-30 per cent of his total project cost which is sufficient to purchase land and pay for the necessary approvals as total project cost includes development cost, administrative and promotional expenses including profit margins.

By just paying the booking amount one can claim his or her right to residential and commercial property offered on pre-launch basis.

The understanding is that the builder or developer will do the actual launching of the project at a higher price so that investor at the pre-launch stage can book a profit and exit the project. The company keeps on increasing the price of original booking to create resale market. The rates of return can be quite high as investors make only partial payment to the company at the pre-launch stage.

But then there is a risk involved here as pre-launches are normally done for projects which have yet not been approved by the authorities. In many cases, the developer doesn’t even have the land for his project. There are several instances where developers announce 50-100 acre township project but they tie up only for 10-15 acres of land by giving advance money. Recently, a leading Delhi-based real estate developer, which has a number of group companies engaged in pre-launch bookings, was exposed by the town planning authorities in Sonepat.

Most of these corporate executives do not mind putting their money at risk. Says Ramesh Menon, working for a leading real estate consultancy in Gurgaon, “We deal with lot of corporate executives and 15 per cent of my clients are women. These Gen X executives are investing in pre-launch business with due diligence and with proper risk spread. There’s this financial analyst lady working for a Fortune 500 company who has invested Rs 80 lakh in three different (residential, retail and office) projects. And her target is to grow her money to Rs 2 crore in two years.

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DLF shares draw premium in grey market

The grey market for the initial public offering (IPO) of real-estate major, DLF has become active following announcement of the dates and price band by the Delhi-headquartered company yesterday. The shares of DLF command an unofficial premium of Rs 26-28 a share in Ahmedabad, which is considered as the most active centre for grey market transactions.

The K P Singh-promoted DLF is raising Rs 9,600-odd crore through the IPO. The shares, with a face value of Rs 2 each, would be issued in the price band of Rs 500 and Rs 550.

The grey market is the unofficial market for IPOs and the premium or discounts indicate the level of retail interest in the public issue. It is also considered as an unofficial price discovery mechanism before the listing.

The unofficial premium for DLF in the grey market is lower, in absolute terms, compared with the recent IPOs such as ICRA Mindtree Consulting, Advanta and Global Broadcast Network, where the prices doubled in the first few days after listing. The share prices of ICRA and Global Broadcast Network doubled on the listing day itself.

The grey market premium of Rs 26-28 a share is not small, as the size of the DLF issue is large at 17.5 crore equity shares. The premium indicates that market players expect the retail portion of the DLF offer to be fully subscribed or even subscribed by two times, said a broker who did not want to be quoted as grey market is not legal.

The returns from the grey market are calculated in terms of money invested and the expected allotment of shares. For instance, if a retail investor puts in Rs 1,00,000 in the IPO application, he/she will get 100 to 200 shares at the lower end of the price band. A premium of Rs 26-28 assures the investor a return of 3-6 per cent within a time-frame of a month, the broker explains. All the profit (or loss) would be borne by the person who pays the premium.

The grey market exists in tier-two cities and areas where the investor population is sizeable, though such deals are not legally allowed. The market is vibrant in Ahmedabad, Unjha, Kolkata and some other cities.

The normal settlement in the grey market is trust-based and the brokers have the backing of big brokers who may be based in Kolkata or Mumbai. This market also offers multiple products.

The premiums for the IPOs are forward deals. There is also a product called koshtak. This product offers interest rates on the price paid per application form, depending on the demand for shares. The interest rates are paid for applying for the issue. The allotment and post-listing premium goes to the person who pays the interest rates.

The interest amount or price per application form for the DLF issue ranges between Rs 2,700 and Rs 2,900 for an application worth Rs 1 lakh.

There is a third product known as “subject to.” The retail investors in most of the IPOs, follow the HNIs (high networth individuals) and QIBs (qualified institutional buyers). Some brokers, acting on behalf of promoters, assure certain returns to high networth investors and if the listing price does not give the assured returns, the broker concerned makes good the returns assured.

Source: Business Standard

Home loan rates to stay hard for some more time

By Vipin Agnihotri

Home loan borrowers in India have to wait for a bit before they see interest rates softening up. Home loan experts while speaking to The India Street has said that this can only happen if the Reserve Bank of India (RBI) relaxes few of the fiscal curbs it has imposed on banks.

With loans no longer affordable in nature, and the ongoing correction in real estate prices, there is a possibility that the demand for home loans can slow down marginally. It is worth mentioning in this regard that the home loan industry grew by 25 per cent in 2006-07 compared to the previous year, but fact remains that the growth is expected to come down to around 18 per cent in the current financial year.

In my opinion, the correction phase in the real estate industry would continue till September. But during the festival season the market should see the reversal of the present trend. According to one estimate, real estate price are expected to correct between 15 to 20 per cent in certain pocket from its peak level.

“The real estate sector will again witness the same type of buoyancy it showed last year in 2008,” pointed out Dr Suvrokamal Dutta, real estate expert. Point to be noted here is that demand is a function of cost of funds - the interest rate- and the price of the product. According to Dr Dutta, in the coming eight to 10 months, both these would undergo changes.

There is no doubt that the present trend towards price correction would be finished, and more importantly they would stop falling any further. Simultaneously, if one takes into account the inflation trend, the interest rate would also begin softening during this time.

The main factor is the availability of housing in few areas. Though, there is a strong possibility that prices would remain inelastic in those regions. Furthermore, there were few pockets in almost all the cities where prices had not seen any correction because of the fact that no new products could be made available.

For example, in the case of Delhi, since the demand is far greater than supply, there has been hardly any correction, but experts believes that there is certainly few correction outside Delhi where supply of fresh products is coming or expected to come.

In other word, because of the rise in the interest rate, average size of the home loan in the last one or two years has dip down to Rs 12 lakh from Rs 14 lakh a year ago. The borrowers eligibility has come down due to substantial rise in the interest cost.

Interestingly, banks have not seen any slippage in their book. "The increase in interest rate and subsequent increase in he monthly installments have not affected the portfolio almost all the borrowers are the end users," pointed out Rajiv Sabharwal, Senior General Manager at ICICI Bank, and in-charge of its home loan division.

Fresh dollars heading for Indian realty

New Delhi, India: Nearly two dozen US funds are raising $3.5 billion for investments in Indian realty. This is over and above the $2.5 billion invested by overseas realty funds in India to date. Those raising the money include Wall Street powerhouses such as Blackstone Group ( $1 billion) Goldman Sachs ($1 billion), Citigroup Property Investors ($125 million), Morgan Stanley ($70 million) and GE Commercial Finance Real Estate ($63 million). Others raising the money are: JP Morgan, Warburg Pincus, Merrill Lynch, Lehman Brothers, Warren Buffett’s Berkshire Hathaway, Colony Capital and Starwood Capital.

Considering that most US funds had showed no interest in investing in realty in India, their bullish outlook now has surprised many. The answer lay in the policy changes of February 2005 that allowed 100% foreign investments in construction projects with fast-track approvals. But the real attraction is potential investment returns of 25% and more in Indian projects that might be hard to come by in the US and Western Europe today.

One such determined big player is Goldman Sachs. Today there is a sea change in perceptions. For about a year now, Goldman Sachs’s Whitehall Street Real Estate Funds have been exploring the Indian market and checking out potential investment partners. Some time back, the firm announced its plans to invest up to $1 billion over the next two years in Indian private equity, real estate, private wealth management, and other businesses in the country for its institutional clients. A month later, California Public Employees’ Retirement System invested $100 million in a $400-million real estate fund promoted by IL&FS.

What is attracting investors in particular is India’s urban office space market, which is at 60 million sq ft, compared with New York City’s 400 million sq ft or New Jersey’s 175 million sq ft.

Bangalore has 25 million sq ft of office and high-tech space, of which 9 million sq ft was built last year. For investors, this is a glass half-full or half-empty.

Tishman Speyer is among the first US developers to invest in India. Last year, the New York City-based firm formed a joint development company with ICICI Venture Funds of Mumbai that will have a war chest of $2.5 billion. Tishman Speyer and ICICI Venture Funds are bringing in $300 million each in equity and will invest equally in projects. So far, the Tishman Speyer-ICICI Venture Funds combine has signed memoranda of understanding for two ventures in India. One is a $200-million project for residential and commercial development on 42 acres in Bangalore’s prime Whitefield suburb. The second one is in Karnataka’s Devanahalli , where Tishman Speyer and ICICI Venture Funds are buying a 25-acre plot whose final use has not yet been decided.

Similarly, New York-based developer Vornado Realty Trust has teamed up with The Chatterjee Group, a venture capital firm also located in New York. The Chatterjee Group has more than $1.5 billion in investments, including some in Indian real estate development projects and business process outsourcing operations. Vornado’s investments through this partnership are primarily in the booming market for information technology parks in cities like Bangalore, Hyderabad and Navi Mumbai.

Source: The Financial Express.

Retail: Next big thing in India

By Vipin Agnihotri

Lucknow, India: There is no doubt that retail is the next big thing in India as retail shops are doing a brilliant business at present. Lots of Indians believe that the retail shops are a good idea as they provide goods at a discount. After all, why pay more when you get it for less at the retail shops?

Now the Mega Corporation Reliance too has come into the fray of retail market. A chain of convenience stores with the name of ‘Reliance Fresh’ is now spread across the NCR area with an estimated investment of Rs 8,000 crore ahead of Bharati- Wal Mart. It is worth mentioning in this regard that this tie up has thrown up a big and one of the world’s most attractive retail markets with a population of over one billion.

Apart from groceries, fresh fruits and vegetables along with medicines are also available in the shops with a discount that attracts lots of people to these stores. Interestingly, the entry of the big players in the retail business has also brought in its wake considerable controversy.

But despite that, advocates of chain stores are adamant that their entry will not only change the economy and lifestyle of the Indian consumers but also that of the farmers. For example, the stagnation in the earnings of the Punjab farmers would be a matter of the past. Reliance ‘farm to fork’ project will handsomely contribute to the increased incomes, as the farmers will be getting fair share of the price.

“Indian consumers are smart and they are all price conscious and they want to finish the work as fast as they can. They do not go to a provision store for fun. The retail shops are helping the consumers save more and in some way it is capable of supporting the middle class of India,” pointed out Dr Suvrokamal Dutta, renowned financial expert.

Statistic wise: India’s retail sector is wearing new clothes and with a three year compounded annual growth rate of 46.46 per cent, one can safely say that Retail is the fastest growing sector in the Indian economy. Experts believe that traditional Indian markets are making way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores. What’s more, western style malls have started making their presence felt in metros and second rung cities alike, giving Indian consumer an unparalleled shopping experience.

According to Prashant Jha, correspondent of local business daily, India’s big middle class and its almost untapped retail industry are pivotal attractions for global retail giants interested in entering newer markets. While organized retail in India is only two per cent of the total US $215 billion retail industry, there are some reports, which are depicting that it will grow at the rate of 25 per cent annually, driven by changing lifestyles, strong income growth and most importantly favourable demographic patterns.

By 2010, organized retailing in India will cross the US $21.5 billion mark from the current size of US $7.5 billion. This is quite different to the situation ten year ago when there was not one shopping mall in India. At the present juncture, in Delhi, Mumbai and their suburbs, there are about 700 malls. Organized retailing in small towns in India is growing at an impressive 50-60 per cent annually compared to 35-40 per cent in the bigger cities.

Indian realty in superfast lane

London/Mumbai: London may top the global property rates chart, but it’s high-end Indian real estate prices that are growing the fastest in the world.

A new study — ‘Wealth Report 2007’ — by real estate consultancy Knight Frank and Citi Private Bank shows that prime real estate rates in India, along with those in Russia and China, soared 40 to 50 per cent over the last year. The British capital, in comparison, recorded a price growth of 30 per cent in the high-end segment.

Pranay Vakil, chairman of Knight Frank India, told HT: “India’s most expensive residential properties, at an average of Rs 50,000 per sq ft, would be in Mumbai. This includes properties like the Chattan Bungalow on Malabar Hill or Sunita Apartments on Napean Sea Road.”

Liam Bailey, head of residential research at Knight Frank, said upcoming prime locations included St Petersburg and Moscow in Russia, Delhi and Mumbai in India, as well as Guangzhou and Beijing in China.

The report points to the growing influence of high net worth individuals — defined as those with $10 million (Rs 40 crore) in investable assets — on the global property market. This is indicated by the fact that prices for the most expensive properties rose on average by more than 14 per cent in 2006 compared to a 9 per cent rise in the mainstream market.

Rapid economic development, together with the creation of new wealthy sections of society, led to intense competition for the best apartments and villas in prime neighbourhoods — and boosted prices, the report said.

Bailey said prime property would continue to outperform mainstream markets. “Over the next five years, we believe the trend of growing wealth and greater wealth concentration will continue,” he said. “There will be a significant demand and supply imbalance in the best prime market locations. Price growth this year will be lower than in 2006, although prime markets will outperform mainstream markets by quite a margin.”

Incidentally, London is home to the most expensive residential property in the world. Prime property in the British capital costs $4,590 (Rs 1.87 lakh) per sq ft, just ahead of Monaco at $4,370 (Rs 1.79 lakh).

Hyde Park is among the most expensive in London, commanding a price of $8,000-$10,000 (Rs 3.26 lakh to Rs 4 lakh) per sq ft, said Vakil.

Source: www.hindustantimes.com

Foreign funds bet on real estate

New Delhi, India: With more than 35 big-ticket foreign funds having alreadychecked into the real estate sector India, global realtors, banks and bondhouses from New York to Jerusalem are suddenly finding the opportunity toinvest in India irresistible. If the year 2006 marked some of the country's biggest land deals, the future bets on India realty are set to usher in a gold rush. A study by the India Brand Equity Foundation (IBEF) suggests that the first half of 2007 will see at least 20 more funds making an entry into India. This translates into $10 billion of foreign direct investment in realty. In fact, the study indicates that India would be merely scratching the surface of the potential infrastructure opportunity with $191.51 billion of investments committed over the next five years. The sector is estimated to grow at a CAGR of 15% over the next few years. Merrill Lynch forecasts that the Indian realty sector will grow from $12 billion in 2005 to $90 billion by 2015. Prominent global funds including Carlyle, Blackstone, Morgan Stanley, Trikona and Warbus Pincus are sitting on a total corpus of $12-15 billion, say experts. Eminent global real estate business houses like the Philippines-based Ayala, and Signature group, Och-Ziff Capital, EurIndia and Old Lane from Dubai are keen on sizeable investments into India . While FDI from the UK is also likely to pick up in the next few months, investors in the US, Israel, Malaysia and Singapore want to be a part of the India story. Australian real estate consultancy major LJ Hooker, with 700 odd franchises in South East Asia, has opened its India account with a franchisee in Bangalore. US-based global investment bank Goldman Sachs and Unitech, the largest listed real estate company in India, will set up a special purpose vehicle (SPV) with a corpus of $208.7 million for investments in the real estate sector. DLF Ltd has forged a 50:50 joint venture with Nakheel, the largest property developer of the UAE, for two integrated townships in India at a whopping investment of $10 billion. The Tel Aviv-based $650 million real estate major, Alony Hetz is planning to invest $100 million in various residential projects in the country, mostly in Tier-II and Tier-III cities. Zurich-headquartered Credit Suisse, the world's leading financial house, is finalising on a $1 billion fund to invest in India's real estate sector. Dawnay Day International, the $10 billion UK-based investment company, plans to invest $1.5 billion in Indian real estate in the next two years. Chennai recently witnessed two big-ticket property deals. AIG Real Estate Fund and RMZ Corporation purchased an 11-acre plot at Guindy for $686.9 million and Shyam Kothari, in another deal, bought IDBI's 2.5 acres Boat Club property in Chennai for $40.3 million. Experts believe the sector couldeasily see at least $400-500 million of fresh FDI in the next 3-4 years, a sizeable chunk of which would primarily flow into residential and commercial projects. Source: The Financial Express

Will Property boom sustain in India?

By Dhruva Jyoti Chowdhury

Kolkata, India: Presently, there is no asset bubble, so nothing to worry for people possessing property in the Indian Real Estate segment. After a bullish run for two years, the graph of the booming real estate market seems to have begun to slide. This has resulted in a virtual meltdown in the real estate segment which was considered to be overheated until a few months back. Now the realtors are setting their sight on sub urban areas for development due to the competitive land prices pushing themselves away from the metropolitan high ends. The experts in this segment suggest that in the three primary segments of the real estate development; primarily residential, commercial and retail, the strong growth with sustainability is achievable by the year 2010. Despite of the graph sliding down, ranking fifth in the retail sector from amongst 30-emerging global retail markets, the Indian real estate segment is being predicted to witness an investment of Rs 100 billion the next two financial years. And if the corporate survey is to be believed, the country will also see a steep rise of 1.19 lakh job opportunities in the real estate segment in the next financial year. The good news for investors and developers is a survey conducted by Knight Frank, a global real Estate consulting group. It states that the real estate segment in India is growing at an annual rate of 30% on the overall basis while a 20% growth rate for the organized retail segment by financial year 2012 is in the offing indicating the retail industry witnessing over a Rs. 100-billion investment up to financial year 2010. Industry feedback and business associations indicate that a large number of firms have evinced interest in setting up special economic zones (SEZs). In the commercial space segment, business opportunity is led by the unprecedented outsourcing activity in the country that in turn is driven by Information Technology (IT) or IT-enabled services. Many global firms are setting up back offices and outsourcing their work to India. According to research carried out by Knight Frank, as the trend gathers pace, commercial space requirement will expand to 100-million sq. ft. by financial year 2008. Of this, almost 75% to 80% will be contributed by the IT / ITES industry. Growth in this sector is being fuelled by incentives given by the Government of India, which has attracted huge Foreign Direct Investment. For example, the Dubai-based real estate major Emmar group is busy setting up SEZs in Haryana at an estimated investment outlay of $1.5-billion. Now days, developers are not risking their moolahs on high priced lands and are under heat at this point of time. The main problem persisting in the real estate market is the affordability. With the prices of all the three segments Sky rocketing, affordability has become a cause of concern for the realtors. This is also because of the high interest rates applied on the developers which are virtually passed on the consumers when they buy properties. Another reason for the realtors for backtracking is the increasing prices of not only land but also allied purchases including cement. The developers are feeling the heat as they are also not finding if feasible to control the labour problem at this point of time. The static income level of the middle income grade individuals who are the real investors in the market, has also added to the woes of the developers. Developers feel that the time is ripe when the Government should step in and introduce salt pans for development to woo the foreign investors who are looking forward to invest in the country. After the strict guidelines by the Reserve Bank of India to the banks directing them to only approve loans selectively and to those only with proper approvals for the land, the business has further being held up. While, investment in the residential segment is estimated to cross the Rs. 9,000-billion mark in the next five years, the number of households that are estimated to be built in the next five years stand at over 5-million. And, all this real estate construction is expected to create a surge in the growth for demand of raw materials, such as cement. Presently, 30-million sq. ft. of available mall space in India is expected to increase to 100-million sq. ft. by financial year 2010. Of the total mall space to be developed, around 75% is in cities like Mumbai, Pune, Bangalore and Hyderabad and National capital Region (NCR). The rest will be in Tier-II and Tier-III cities of Nagpur, Ahmedabad, Chandigarh and Ludhiana. And over the next three years, 300 malls are to be developed in the country including those in the sub urban areas. Reliance Industries announced its retail venture with pan-India footprint covering 1500-cities and towns that will involve an investment outlay of Rs. 25,000 Crore.

Merrill Lynch in its report on real estate trends predicts that the number of malls in these five cities - Mumbai, Bangalore, New Delhi, Hyderabad and Pune will to reach up to 250 by the financial year 2010.

Indian Retail Real Estate fund pegged at US $1-Billion

Indian Real Estate: Moolah Raising Tata Group

Joining hands with the Xander Group Inc., a private equity firm through its group company Trent earlier this month, the Tata group has firmed up plans to raise $ 1-billion for an institutional retail real estate fund.

Xander group, through one or more of its fund vehicles will invest in the development of an institutional retail real estate portfolio in India in partnership with high quality Indian developers. Tata Group’s real estate arm, Trent will anchor tenancy rights and participate with Xander in managing the portfolio and monitoring its growth.

The Tata group is not alone, but quite in line with other big retail players like the Future group that controls retail company Pantaloon Retail and has floated two real estate funds, specifically for the retail sector. And, has prompted the Aditya Birla group to also consider floating a real estate for fuelling its own retail growth.

Xander Real Estate Partners, part of the Xander group, have also recently bought a 20% stake in a Reliance Industries and the Maker Group joint venture, to develop commercial, residential and retail real estate.

Organised retail, which currently accounts for only 3% of the $230-billion (Rs. 9, 40,000-crore) is expected to grow phenomenally at 45-55 %, creating a demand for around 220-million sq. ft. of retail space by 2010. Little wonder then, the Tata group known for its rather aggressive business moves will make a big bang entry into the development of such space.

Industry estimates confirm the organised retail space currently available is only around 27-million sq. ft. Another 90-million sq. ft. is expected to be added by 2008 from 263-mall projects of which 18-million sq. ft. each in Delhi and Mumbai, 9.5-million sq. ft. in Ludhiana, 6-million sq. ft. in Chandigarh and 3.6-million sq. ft. in Ahmedabad.

Source: www.ibef.org