REVIEW: Top Celebrity Branded Real Estate Projects in India

Move over Donald Trump, India has embraced the celebrity endorsed real estate phenomenon and early word is that Indian celebrities increase purchase prices by 10-15%. The India Street has examined a number of the most prominent celebrity endorsements for real estate builders and projects and has rated them accordingly. The rating is not a statement of the project quality, but a statement on the suitability of the brand ambassador.

Project	Celebrity	Brand Ambassador Rating 1 – 10 (best)
Royal Garden Villas and Resort · Location: Bangalore	Jack Nicklaus – US Golfer	Rating: 8 While Jack is popular in the US, his appeal in India is probably limited. I would have gone for Vijay Singh (yes I know he wasn’t raised in India) due to his heritage.
LVL City · All Projects	Yuvraj Singh – Cricketer	Rating 7: A good choice for LVL but they fail to effectively tie the Cricketer to the project very well
Unitech Grande	Greg Norman – US Golfer - designed the Signature Golf Course	Rating 8: Very good brand ambassador positioning for the project, but I don’t know how much star power Mr. Norman has in India
GVK industries	Sania Mirza – India Tennis Star	Rating: 2 We can’t even find her on their website. It doesn’t make sense to us that she endorse the company or projects since they deal in large infrastructure projects. Just how exactly is she going to help?
Golden Grand · Location: Bangalore · Developer: Golden Gate Properties (GGP)	Ajay Devgan and Kajol – Bollywood Stars	Rating: 9 This power couple is a near perfect fit for the project and should prove to be a benefit to the development. They are featured on the home page as a pair of likeable neighbors.
Nitesh Forest Hills · Bangalore	Shane Warne · Australian Cricketer	Rating: 8 If the Cricket Camp run by Shane Materializes, this endorsement will be revised upward
All of EMGEE’s real estate projects	Bipasha Basu · Bollywood Star	Rating: 9 Due to Emcee wanting to appeal to the young hip generation, Basu is a very good choice
SRK group · Construction Division · SkyWings Development	K.J. Jesudas · India Singer	Rating: 5 Although Jesudas is fairly well known, I’m not sure how this adds much value to SRK’s construction projects. I rate this project a neutral.
Skyline Construction · Bangalore	Rahul Dravid · India Cricketer	Rating: 9 A very good choice for Skyline using him on almost very marketing piece. However, the company fails to tie their projects to Cricket which Nitesh Forest Hills appears to be doing well.
Royal Garden Villas & Resort at Tuscany Hills	Vijay Amritraj · Tennis Star	Rating: 10 A perfect blend of matching the tennis star’s qualities and participation since Vijay will headline the tennis center at Royal Garden Villas. He joins Jack Nicklaus as co-brand ambassadors for this project
MONT VERT TROPEZ · Location: Wakad	Remo Fernandes · India Singing Pop Star	Rating: 5 Like the other singers on this list, I don’t see the developer tying the singer’s style or music to the project. Mont Vert should have added some elements to the project that match Remo. Still, we don’t like singers as real estate ambassadors.
Aamby Valley Project · Location: Lonavala	Aishwarya Rai Amitabh Bachchan	Rating: 10 Perfect brand ambassadors for a near perfect development. This all inclusive city development has everything.
Chadha Group	Kapil Dev · India Cricketer	Rating 9: The facility will have a state of the art sports center including a cricket field. We like this project and the brand ambassador

We like celebrity endorsements as both a buyer and as a method to sell more residential product. The former because it forces the developer or property manager to maintain the project and keep it up to the standards of the celebrity that endorsed it. Can you imagine the Aamby Valley project falling apart and having an irate Aishwarya Rai and Amitabh Bachchan come after you in the press? It would not be good for the corporate image.

I also believe it sells more residential product and at a higher value because customers want to be associated with a top brand. This luxury brand phenomenon cuts across all modernizing cultures around the globe. Lastly, the celebrity effect gives a boost to the developer’s corporate image if managed correctly.

According to Navdeep Malhotra, the maker of A Different Sunday, “If stars can lend fizz to aerated drinks and other consumer goods, then why not real estate? Housing projects are merchandise too and need a selling impetus. However, it also lends a peep into how tough the competition is in the sector and on the chances of sales sagging or plateauing in near future.”

While star power is a new trend in the Indian real estate, some celebrity endorsements make less sense. Currently there are filmstars, cricketers, TV actors and musicians that are acting as “real estate” brand ambassadors. How are musicians adding value to a real estate development unless they tie the musician to something related to musical arts. A community built around a symphony hall or school might work, but a standard real estate development doesn’t seem to be a fit. Moreover, as I rated above, I can’t see how GVK industries receives much value from Sania Mirza because the brand relationship is confusing.

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BSE India launches New Real Estate Index

The Bombay Stock Exchange (BSE), founded in 1875 with 318 members, is the barometer of the Indian stock market. Located at Dalal Street in the central business district of Mumbai, the stock exchange accounts for a market capitalization of nearly USD 1 trillion.

In 1986 BSE introduced SENSEX (SENSitive indEX) comprising of 30 well established Indian companies with the base year 1978 – 79. It is one of the indices the financial world tracks regularly. Since September 2003, “free float market capitalization” methodology is followed. In full market capitalization methodology, the total market capitalization of a company, (including those held by promotors, government agencies etc.), is taken into consideration for computation of an index. But in free float methodology, market capitalization is computed as the proportion of total shares issued by the company, which are readily available for trading in the market. It normally excludes promoters' holding, central/state governments’ holding, strategic holding and other locked in shares, which cannot be traded in the market.

BSE has introduced several indices so far. These include:

BSE 100

BSE 200

BSE Dollex 200

BSE 500

BSE PSU

BSE Midcap

BSE Small cap

BSE Bankex

BSE Teck

BSE Auto

BSE Healthcare

BSE Fast Moving Consumer Goods

BSE Consumer Durables

BSE Metal

BSE 100 comprises of 100 major stocks listed at five major stock exchanges in India at Mumbai, Kolkata , Delhi , Ahmedabad and Chennai. The mid cap and small cap indices represent relatively smaller companies. The teck index includes IT, media and telecom stocks.

Real estate prices, both residential and commercial, have soared up in the last few years in India due to huge demand. Very strong growth has been witnessed in this sector. Many domestic and international investors have been attracted by the Indian real estate industry. More growth is anticipated in the sector since the real estate market capitalization in India is 4.2% where as global norm is 15%.

Several real estate companies have come up with IPOs. The Indiastreet analyzed DLF, HDIL IPOs and Indiabulls Real Estate stock in various articles.

On July 9, 2007 BSE had introduced yet another index – The BSE Realty Index comprising of real estate stocks.

The base year for the index is 2005 and base index value is 1000. Like the Sensex, this index is also computed using free float methodology. 11 scrips are included in the Realty Index, representing about 95% market capitalisation of real estate development companies in BSE - 500 index. On July 9, the index value was reported to be 7333.97.

The following table shows the list of 11 companies, their free float market capitalization and weightage in the Realty Index.

Company	Free float market capitalization (Rs. Crores)	Weightage (%)
DLF Limited	14,542.01	35.94
Unitech Limited	12,773.71	31.57
Indiabulls Real Estate Limited	5,639.65	13.94
Parsvnath Developers Limited	1,375.80	3.40
Ansal Properties & Infrastructure Limited	1,213.38	3.00
Mahindra Gesco Developers Limited	1,096.16	2.71
Sobha Developers Limited	1,011.35	2.50
Anant Raj Industries Limited	890.13	2.20
Phoenix Mills Limited	725.06	1.79
Peninsula Land Limited	707.12	1.75
Akruti Nirman Limited	489.84	1.21

Total free float market capitalization: Rs. 40,464.21 crores

Total market capitalization: Rs. 179,499.70 crores

The following table gives the yearly historical stock prices of the constituent stocks. (Source: BSE web site, www.bseindia.com)

Company	31/03/04	31/03/05	31/03/06	31/03/07	Current
AKRUTI				405.85	499.90
ANANTRAJ		15.82	693.50	1103.45	1299.00
ANSALINFRA 1	19.70	111.95	721.30	527.50	311.45
DLF					590.45
GESCOCORP	21.05	122.45	462.20	568.30	558.20
IBREALEST				298.10	501.40
PARSVNATH				259.00	383.25
PENINLAND	34.25	132.40	661.25	371.70	484.75
PHOENIXLTD 2	1134.15	6105.00	976.25	1603.50	2009.75
SOBHA				800.70	955.00
UNITECH 3	85.05	337.35	2785.45	387.35	542.40

¹ Price adjusted in November 2006 ² Price adjusted in December 2005

³ Price adjusted in June 2006

ANSALINFRA, GESCOCORP, PENINLAND and UNITECH have performed very well in the bull market. GESCOCORP touched a high of 1300 in May 2006 but has fallen considerably since then.

Today’s intraday chart of Realty Index is plotted below, with Sensex by its side as a comparison.

Source: BSE web site www.bseindia.com

http://groups.google.com/group/theindiastreet/web/REALTY.JPG

Today, the sensex has lost 99 points or 0.66% whereas the realty index has gained 249 points or 3.38%. BSE Metal index was the next highest gainer with 162 points or 1.48%. The BSE IT index lost 168 points or 3.34%.

However, considering BSE Sensex with base year 1978 – 79 and base value of 100, it has appreciated nearly 150 times in 28 years. Realty index though, has appreciated nearly 7.6 times in just about 2.5 years. DLF has nearly 36% weightage, Unitech has 31.5%, Indiabulls Real Estate has about 14%. Unitech has appreciated considerably (more than 11 times) in the last 2.5 years. DLF and Indiabulls Real Estate are relatively new issues.

Conclusion:

Sectoral indices (like healthcare, auto, metal, IT, realty etc.) are useful in analyzing how a particular industry or sector has performed over a period of time. Since the constituent stocks are chosen from the same industry, it presents a clearer picture about the sector than the overall index. Real estate industry is being projectd for further growth. We can anticipate that the realty index too performs well in future.

Suggested Readings:

http://www.theindiastreet.com/2007/06/dlf-ipo-overview-dlf-universal-limited.html

http://www.theindiastreet.com/2007/06/hdil-ipo-expected-to-be-winner.html

SUNDARAMURTHY VADIVELU

DLF to invest a third of IPO proceeds in land

Mumbai, India: DLF Ltd has said it would invest Rs 3,500 crore - roughly a third of its planned initial public offering (IPO) - in building up its land reserves. This is significantly lower than its earlier plan of investing Rs 6,500 crore for the purpose.

Announcing its plans here today, DLF said it hoped to raise Rs 9,625 crore through a public issue of 1.75 crore shares in the price band of Rs 500-550 between June 11 and 14.

The new shares on offer will constitute 10.27 per cent of DLF’s post-sale capital. The share sale will give DLF a market value of as much as $24 billion, more than double Unitech’s, India’s biggest property developer.

The real estate major added that it can develop up to 575 million sq ft of real estate space on 10,255 acres (4,150 hectares) of land that it owns or has rights to in 31 cities. The company currently has 44 million sq feet of land under development.

Over half of its land (nearly 5,269 acres) is located in the National Capital Region, 2,708 acres in other major cities and 2,278 acres in the rest of the country.

The company said its current land reserves are sufficient for its planned developments over the next 10 years and provide it with a major competitive advantage, as well as protection against land price inflation.

“We aim to build up land reserves at competitive prices at strategic locations in the country, to gain from them during the upside in the economy,” said DLF Vice-Chairman Rajiv Singh.

While DLF and its subsidiaries own 11.3 per cent of the land reserves, they have sole development rights for 44.6 per cent of the total.

They have agreements to purchase or letters of acceptance for 35.9 per cent of the land, while the rest are joint developments with partners, the company said.

DLF filed its first prospectus in May 2006, which it had to withdraw on account of regulatory objections in August, following complaints by minority shareholders. The company filed a renewed prospectus in January this year. The Delhi High Court recently cleared the issue.

DLF will foray into newer areas in the future, including airport management, financial services, asset management, leisure entertainment and hospital properties, among others.

“We may foray into newer areas if good opportunities are available at any point of time. We can also tie up with foreign partners for the ventures,” Singh said.

DLF is promoted by billionaire Kushal Pal Singh, whose wealth doubled last year to $10 billion, according to Forbes. Singh, 75, a former Indian Army officer, bought land in Gurgaon, 17 miles (27 km) south of central New Delhi, in the early 1980s.

He developed Gurgaon as a significant suburb of the national capital, carving out residential plots and condominiums and commercial buildings that house offices and retail outlets.

Merrill Lynch and Kotak Mahindra Capital will manage the IPO, and Citigroup Inc, ICICI Securities, Lehman Brothers Securities, UBS AG, Deutsche Equities India and SBI Capital Markets will also be the sale arrangers.

Source: BS Reporter.