TOI in its edition dated May 24 had predicted that the tract of land in Wadala was all set to create a record after the Mumbai Metropolitan Region Development Authority (MMRDA), which controls the land, tweaked tender conditions to allow multiple towers instead of a single ‘iconic’ tower. It also permitted 100% residential construction instead of the earlier stipulation of just commercial. MMRDA officials said this bounty would be redeployed for the city’s transport projects. In 2008, Delhi-based developer BPTP had bagged a 95-acre plot in Noida for Rs 5,000 crore, but the deal was later called off. Till now, DLF’s bid of Rs 1,750 crore for 350.7 acres in Gurgaon last year was considered the country’s highest. But on Tuesday afternoon, Lodha Group beat this record by several times after it outbid three developers for the Wadala plot by quoting double the reserve price. MMRDA had set a minimum rate of Rs 40,000 per sqm (Rs 1,980 crore) and Lodha put in its bid for a hefty Rs 81,818 per sqm.

The six-acre sprawl located in the Wadala Truck Terminal will allow the developer to utilize an unheard of floor space index of 20; average FSI (ratio of permissible built-up area vis-a-vis plot size) in Mumbai is between 2 and 4. This is because the entire FSI available for the Wadala truck terminal is being used up on this six-acre portion.

Via Times Of India

The President of Greater Hyderabad Builders Federation, Mr C. Prabhakar Rao, said some of the large builders who have taken up integrated township and mega projects are those who are facing the heat of servicing loans. This has forced them to bring down prices by about 30-40 per cent to bring back buyer interest. Prices had shot up to unrealistic levels due to the boom in the real-estate market. That was the time when no one doubted the market potential and continued to invest, a good number of them for speculation.

However, after the correction, buyers, who were waiting for lowering of prices, realised that the market had stabilised and was not likely to go down further. They were now coming back into the market with renewed interest, he said. Significantly, due to good supply, buyers have the choice to select a property of choice, that too in a project that is at an advanced stage of construction instead of investing in just a coming up venture or one that is in a proposal stage.

The Chief Executive Officer of Cybercity Builders and Developers, Mr Uttam Korupolu, told Business Line that the market now reflects a positive mood with buyers looking at projects that are attractively priced. Citing the company’s project near Hitech City, wherein apartments are priced at Rs 2,500 per sq.ft in gated community environs, Mr Uttam said that in barely months of launching the project, all the 400 apartments have been booked. This is because projects of similar nature were earlier priced anywhere between Rs 3,500 and 4,000 per sq.ft. Buyers now see value in such properties and are able to relate to them.

They also know that the market has found its bottom, he explained. “Interaction with some of the buyers shows that nearly 25 per cent of those who had booked their properties are actually speculating in the hope that the market will again find its way up,” Referring to the pattern in the core city area, Mr Prabhakar Rao said that the cost per sq.ft now at about Rs 3,000 to Rs 4,000 per sq.ft depending upon the location of the property and the stage of development.

In fact, these were ruling 30-40 per cent higher about 18 months ago. Significantly, small developers who have five floors of built-up structures and relatively fewer number of apartments compared with high-rise projects in the city, are not budging on prices as they have less exposure to loans. It is the large builders who have exposure to bank loans and facing the heat of servicing them who are forced to lower their prices. It is not surprising to see some of the larger developers such as DLF, Mantri Housing, Meenakshi, to name a few, being among those who have priced their projects attractively to woo home buyers. Many other larger developers too are looking at fine-tuning their new ventures, he said.

Some of the multiple apartment project developers, such as Manjeera Construction, recently came up with a festive offer of a two-bedroom apartment with all amenities for Rs 25 lakh, a huge discount. This had led to a rush for bookings. More developers are looking at the affordable segment as this is the space offering much scope for growth. However, the supply in high-cost projects is much more than what the market can immediately consume, they felt.

It is higher cost apartments that are now facing the heat due to job losses in the IT sector. There is some stagnation in this area, said Mr Prabhakar Rao. Many home buyers are now coming out of their shell to invest in projects where they can relate to pricing. They also know that the market has stabilised and banks have begun to lend selectively. For instance, Rainbow Vista project has had nearly 11 banks supporting the venture mainly due to the price structure, Mr Korupolu said.

Asked about the input costs, Mr Korupolu said that the price of steel and cement had come down significantly from the dizzy highs seen in 2007-2008. However, the cost of labour has gone up. This is one area for concern. After considerable uncertainty in the market, the sector is beginning to look up. A recent survey, Festive Reality by makaan.com, shows that buyers are opting for ready-to-move-in homes with direct discounts. The mood too reflects a positive frame of mind, the report finds.

The Chairman and Managing Director of IVRCL, Mr. E. Sudhir Reddy, believes that the real estate market is still not attractive for those who have acquired land in the last two-three years when the prices were ruling high. He argues that it is not an attractive proposition to enter into affordable housing segment as yet. This is because the market has already become aggressive. Unless the Government offers land at lower rates, it would be difficult to offer attractively priced properties.

Via Indian Realty News

According to industry figures, only around five per cent of the estimated over USD 450 billion Indian retail sector is currently organised. Calling for easing of FDI norms, Rajagopalan said, “No industry in India has grown without FDI participation and for retail to emerge as a big player, more FDI should be allowed.” Besides, he said even if FDI norms are not relaxed in the Budget, the government must give a clarification on FII and foreign PE funding route as there is a lot of ambiguity.

Kohli said clarity on the issue will help Indian retailers raise funds from abroad as the global liquidity condition is showing improvement. At present, the government allows 51 per cent FDI in single brand retailing and prohibits any foreign investments in the multi-brand segment.

Via Indian Realty News

Such measures are fairly new for a sector dominated by family-run businesses. “Builders are back with a bang,” said Aditi Vijaykar, executive director (residential) at Cushman and Wakefield India, a property advisory. “They want to try out new locations for projects and are trying to test market a product before launching it.” DLF Ltd, India’s largest developer by market value, said it will not buy land in 2010-11 or launch projects until it has regulatory approvals. Its working capital model will depend on cash flow from pre-sales, customer advances and bank debt. “It is difficult to stop speculative buying, but a system like one home per family is required,” DLF executive director Rajeev Talwar said. “The chances of end users exiting projects are less because property investments are usually a lifelong affair for them.”

Mumbai-based DB Realty Ltd, which has aggressive plans in suburban Pune, is conducting feasibility studies on the sizes and pricing of homes to ensure the right profile for its projects. Consultants said this was rarely done earlier. Shahid Balwa, managing director of DB Realty, did not respond to queries. Also, realty firms that are raising money though initial public offerings (IPOs) are aiming to use the funds for ongoing and proposed projects or to retire debt, said J.C. Sharma, MD of Bangalore-based Sobha Developers Ltd. The firms are monetizing land banks and reworking sales strategies to reach a larger clientele, he said. “This is very different from what realty IPOs in 2006 and 2007, including Sobha, did. That time, everyone was raising money only to buy more land,” added Sharma.

In February, Housing Development and Infrastructure Ltd (HDIL), the country’s third largest developer by market value, announced a 1.2 million sq. ft slum redevelopment project valued at Rs2,000 crore. HDIL, which had turned its focus from slum projects to residential development last year, has big-ticket launches coming up this year. It plans to launch another two or three slum projects in the next six-seven months. Hari Pandey, assistant vice-president (finance) at HDIL, said execution has become crucial for the firm. If pre-sales account for more than half the units of a residential project within three months of its launch, it has a high chance of being self-funded, he said.

“We are outsourcing about 80% of construction work to contractors, which we would do ourselves earlier. This is for speedy delivery as we are also scaling up our plans,” Pandey added. Developers are also looking at special purpose vehicles or joint ventures instead of purchasing land outright. Parsvnath Developers Ltd is looking at a month-on-month delivery target for faster completion. The company wants to construct around 45 million sq. ft of space in the next 24 months, and build around 1.25 million sq. ft in the last quarter.

The company has outsourced construction and appointed a project management consultant to keep a check on the work, as well as tied up with vendors for long-term supply of key materials. “We are also looking at a project-on-project basis of funding either through debt or private equity (PE) channels,” said Pradeep Jain, chairman of Parsvnath Developers. PE investors are also enforcing some good practices. Ramesh Jogani, MD and chief executive of Indiareit Fund Advisors Pvt. Ltd, said developers need to ensure their projects are rational in profile. “Even in residential projects, what is the need to build 30-40 storeyed towers which take five-six years to finish?” asked Jogani. “One needs to travel the middle path and offer mid-range products which assure quality.”

Via Indian Realty News