Property-seekers might think Delhi-NCR has the maximum appreciation potential within a year’s time. However, according to the latest property index released by real estate portal Makaan.com, it’s the Mumbai real estate market which beat all Indian cities in terms of price escalation over a period of 12 months. Mumbai has bucked the economic slowdown by witnessing a whopping 24.7 per cent jump in prices between January and December 2009. During the same period, realty rates in Delhi-NCR rose by 8.8 per cent.

But other emerging residential destinations such as Hyderabad and Bangalore have witnessed a fall of 7.7 and 2.2 per cent, respectively, the index added. However, Pune market gained significantly by 9.9 per cent. The survey revealed that all these five cities — Delhi- NCR, Mumbai, Pune, Hyderabad and Bangalore — witnessed a drop in property prices in the first six months — January to June — due to slump in the market. But the subsequent gain came following the launch of various affordable units. These units have now achieved premium value across India.

The study said property prices increased by another 12.8 per cent nation-wide during the surveyed period of 12 months. Commenting on the price rise, Anupam Mittal, chairman and managing director (CMD), Makaan.com, said, “Prices in Mumbai have gone up dramatically but it has not been able to touch the peak of mid- 2008. However, the trend should continue in the near future.” The primary reason for the price rise in Mumbai’s market could be attributed to expansion of the peripheral areas.

Abhishek Kiran Gupta, head (research), Jones Lang LaSalle Meghraj, said, “Among the huge population base, there is always a component of people who seek to own property. With more and more suburbs getting developed, there are always opportunities to enter the residential market at a relatively affordable level.” Gupta added, “They will benefit from the inevitable price rise as these areas develop in terms of connectivity and infrastructure. Therefore, there is also a perennial demand for owned residential properties among those who can afford the capital outlay necessary to avail of the investment potential of Mumbai’s high appreciation rates. Lowered home loan interest rates serve to keep this demand at a healthy level.”

New project launches from developers such as Hiranandani, Mantri Developer, Mahindra Lifespaces and Orbit have also added to this rate rise. As per the latest data made available by Gurgaonbased research firm PropEquity, Mumbai will offer 172 million sq ft of residential space by 2012. Its eastern suburbs — Thane and Navi Mumbai — have become favourable investment destinations. Delhi-NCR, too, has upcoming suburbs such as Faridabad, Greater Noida, Noida, Ghaziabad and Gurgaon. Small towns in the distant suburbs like Hapur, Meerut, Sonipat, Panipat, Palwal and Kundli have, however, taken a backseat.

In comparison, Delhi-NCR falling behind Mumbai could be attributed to the oversupply of residential units and commercial spaces, according to Rakesh Kaul, COO, Ansal API. He said, “In Delhi-NCR, one would find that there are three different states with different policies and investor sentiments. Moreover, there is an oversupply in the residential as well as the commercial segments. This had led to a drastic drop in the prices till the middle of the year.

Rajeev Malik, Head, India and ASEAN Economics, Macquarie Securities Group, gave his views on where to invest money. Well for me personally, real estate in some cases still looks more attractive. At the end of the day, it is very much an individual risk appetite and portfolio requirements as such. Equities would be an important point. Bonds look rather risky in the sense that even if you look at the US, it has already had a pretty good run with the broader dynamics, there, it is difficult to see why yields are not going to go higher, especially with the monetary cycle a few quarters down the line shifting gears.

In India, specifically you come into the broader issue that from a foreign investor perspective, equity markets remain the most open and they have had the best possible run. I also think specifically with equities in India, there is a sizable number of foreign investors who have not had a chance to gain exposure to the extent that they would want for a kind of a secular story and that’s emerging in India, which perhaps might explain why every time you see some correction, 10% or so, it always tends to trigger a bit more buying.

Damac Properties, the luxury lifestyle developer, said that the enabling works at two of its developments - Water’s Edge and Commercial Square at the Business Bay are making good progress, with the main contracts to be awarded in spring this year.

The Commercial Square is a 21 storey office tower, while Water’s Edge is a 20 storey commercial waterfront development located at the heart of Business Bay.

Both the developments are now under construction with contractors already making good progress on shoring, fencing, ground clearance activities, said Damac.

The General Manager of Damac Properties, Ziad El Chaar, said that the progress of work at Business Bay locations is a further indication about the continued commitment by the company to construct and develop plans for 2010.

Last year, Damac completed two of the four commercial projects at Business Bay, namely, the XL Tower and the Business Tower. These are likely to be completed by first half of 2010.

With several projects already underway at Business Bay, the good progress make by the two projects of Damac in the their early stages, no-doubt leaves a positive note, said El Chaar.

The revival of growth in the information technology (IT) industry is rubbing off on the real estate sector, too. With all large infotech companies back in hiring mode, there has been a spurt of activity in the commercial real estate segment. Take the case of Tata Consultancy Services (TCS), the country’s largest IT company. It is expanding existing facilities as it takes in more people, while also setting up new ones. “We will look at aggressive hiring in the current quarter to match our talent needs with the business demand, which is definitely increasing. This invariably means that we are expanding our existing facilities at Ahmedabad, Chennai and Mumbai, along with new ones in Pune and Kolkata,” a company spokesperson said.

Network Appliance Incorporated recently acquired a piece of land in Bangalore to expand India operations. Executives at the company accepted that they had bought a piece of land in Bangalore for expansion, but declined to comment further on the project as they were in the quiet period prior to the earnings announcement. Noida-based QA InfoTech is planning to move to a campus that will be almost double the 50,000 sq ft it currently occupies in three separate facilities. “We are planning to move to a campus that will be 80,000 to 100,000 sq ft in the next two-three months, where we plan to consolidate all three offices, and also to ensure that we have space for more employees,” Founder and CEO Mukesh Sharma said. QA Infotech has 400 employees at present and plans to hire 100 more engineers over the next 12 months.

“We have witnessed an increase in the number of enquiries from the IT sector this quarter (ending March). This is primarily due to the expansion these firms are doing in terms of hiring more manpower. We have seen a demand for office space in the range of 25,000-30,000 sq ft from the IT sector and this is definitely going to increase in the next couple of months,” DLF Group Executive Director Rajeev Talwar told Business Standard. DLF is the country’s largest real estate developer. For Santosh Kumar, CEO (operations) at leading property consultant Jones Lang LeSalle Meghraj, it is the revival of the US economy that has encouraged IT companies to start looking at India again for expansion.

“This has helped the real estate market in the country. In the last few months, we have seen an increase in the number of enquiries from IT and IT-enabled services companies. Compared with last year, there has definitely been an increase of 20 per cent in enquiries and this is expected to grow further in the coming period,” Kumar said. Most IT hubs like Hyderabad, Chennai, Gurgaon, Bangalore and Mumbai are witnessing higher demand for office space from IT companies. “From zero enquiries from IT companies in the last 12-15 months, we have seen quite a large number of enquiries coming in for office space in the last month,” a Delhi-based real estate company Parsvnath’s Chairman Pradeep Jain said

The news that in 2009 India produced more Dubai real estate buyers than any other country may not be a big surprise – but it does trigger the question: when will India reciprocate, and allow the rest of the world to easily buy a stake in its real estate? India’s role in Dubai is easy to explain. Firstly, India is an increasingly-wealthy location with plenty of trusts, consortia and individuals wanting to invest, and their demand has always been for high quality and often landmark projects.

Secondly, other markets with long histories of buying in Dubai (chiefly the UK, which produced the second largest group of investors last year) have been hit by their own recessions and credit restrictions. More surprising is that Pakistan and Iran should come third and fourth in terms of nationalities of investors in Dubai. As it stands, a foreign national of non-Indian origin who is resident outside of India cannot buy any ‘immovable property’ (that is, real estate) in India. To be eligible they must be resident for 183 days in a financial year. This figure was chosen as it exceeds the duration of a tourist visa, which is 180 days – and which, incidentally, specifically states you are now allowed to purchase property while in the country under its jurisdiction.

India has also acted to close the main loopholes which exist – by accident or design – in many other countries which allow non-residents to buy if they jointly do so with residents. Indian statutes specifically say that a non-resident Indian (NRI) or a resident person of Indian origin (PIO) cannot buy a property jointly with a foreigner.

To keep themselves insulated from external buyers, India has also made it very hard for real estate to be purchased by companies. The law states that a foreign firm with a place of business in India can purchase property – but only on the strict proviso that it “is necessary for, or incidental to, carrying on his business”. There are plenty of enforcing officers who inspect properties to make sure this restriction is enforced.

NRIs, whether Indian citizens or foreign citizens of Indian origin, do not need permission to buy property if the seller is an Indian citizen. A foreign national of Indian origin is “any person either of whose parents or any of whose grand-parents was born in India as defined in the Government of India Act, 1935″ or any person who held an Indian passport at any given time.

The scope for exploiting loopholes in all of this is very limited – even leasing is difficult for foreigners – so why is India so strict? When globalisation has opened so many other territories of the world, when other nations with noble national identities have internationalised their real estate industries, why is India holding out? Undoubtedly a nation with such extensive poverty may feel politically-constrained and its government will not want to be accused of selling potential future wealth to global speculators and investors. Historically, of course, the country remains sensitive to any perceived repeat of its past when it was a colony of the UK.

In any case, and with justification, the Indian authorities can point to the extraordinarily high-priced real estate markets that exist in many of the country’s big cities today, even without the presence and pressure of foreign purchasers – and despite some parts of the country facing unrest and other internal difficultiesd. Mumbai, New Delhi and Bangalore have the most expensive commercial and residential property markets in the country; their house prices in particular are comparable to New York, London and Tokyo, thanks mainly to the low volume of available developable land. Despite the global recession, which has hit some export aspects of India’s wider economy, the country is buoyed by an 81 per cent rise in the Mumbai stock index in 2009, so prospects for this year are considered very good. With things looking up why, some might ask, does India need foreign investors?

I think the answer is simple; it needs a global stake in its real estate, now, to stay competitive in the long term. North America, Europe and parts of the Middle East remain, for the moment at least, the most wealthy parts of the world and, as they recover from recession, they will look for new investments. If the ‘I’ in Bric makes investment difficult, then those wealthy nations – and their funds, consortia and invidividuals – will quickly move on, instead, to Brazil or China or another emerging market. The last thing India needs is to miss out on a generation of investment from around the world. It should let them in, and soon.

Having launched its premium business hotel, Courtyard by Marriott in Ahmedabad, leading hospitality player Marriott International Inc. is now looking at opening seven more hotels across the country in luxury, boutique and moderate segments. Marriott International, which runs hotels brands including The Ritz -Carlton, JW Marriott Hotels & Resorts, Marriott Hotels & Resorts, Renaissance Hotels & Resorts and Courtyard by Marriott, opened its 10th hotel and fifth Courtyard by Marriott hotel in India.

Talking about the company’s plans, Rajeev Menon, area vice president, India, Malaysia, Maldives & Pakistan, Marriott Hotels India Pvt Ltd said, “With the launch of Courtyard by Marriott in Ahmedabad, we have now 10 hotels in India. Also, there are 30 more hotels being developed across the country. Of these, seven will be opened in 2010 including three JW Marriott in Bangalore, Chennai and Chandigarh, one Marriott in Pune, one Renaissance in Bangalore and two Courtyard by Marriott in Pune and Mumbai.”

The hospitality player has forayed into Gujarat with Courtyard by Marriott through a partnership with real estate developer, Pacifica Companies. In India, the company manages around 2,500 rooms while “over 6,000 more are under construction”. According to Menon, Courtyard by Marriott, Ahmedabad features a choice of accommodation of 130 deluxe rooms, 22 executive deluxe rooms and 12 courtyard suites for business and leisure travelers alike. “We expect to see an occupancy of 70 per cent in this hotel. We are banking on Gujarat’s strong connections with the US and UK where travelers are familiar with the Marriott brands,” added Menon.

The brand Courtyard by Marriott, launched in 1983, has grown into one of Marriott’s largest brand and the world’s 12th largest lodging chain with more than 8,000 hotels worldwide. Across its 21-odd brands, Marriott runs over 3,100 hotels in 70 countries.

Hardik Shah, who deals in real estate in Vapi town of south Gujarat, is a busy man these days. Vapi has been a favourite location for industrialists from Mumbai who want to set up plants in Gujarat because they find the state more investor friendly. On Wednesday, he was with a client near Sanjan trying to identify land for a medium-sized petrochemical unit. “Of late, inquiries from Mumbai have increased substantially for suitable land near Maharashtra’s border with Gujarat. These people are upset with parochialism in and around Mumbai,” says Shah.

Obviously, Amitabh Bachchan is not the only Mumbaikar who is rooting for Gujarat. The shrill tone of ‘Amchi Mumbai’ is driving investments towards Gujarat. S Sukeja, director of a firm which makes cranes, says, “Though we are based in Mumbai and we had planned some expansion in Thane, we have now decided to relocate the new unit to Gujarat.” This, according to government officials, has pushed up realty prices by at least 10 to 15 per cent in just the last two weeks. “Normally, realty deals in Gujarat take place only after Uttarayan. But the trouble in Mumbai has only spurred interest here,” a collector of a south Gujarat district told TOI.

“Of late, investors from Mumbai and Hyderabad have come here due to political disturbances there,” said Jaxay Shah, president of Confederation of Real Estate Developers’ Associations of India (CREDAI), Gujarat chapter. That this should happen in a year when both states are celebrating their golden jubilee is also significant. The hype around Swarnim Gujarat is creating an air of positivity around the state at a time when its neighbour is trying to slam the doors on ‘outsiders’. So, be it a large infrastructure firm, which is planning to shift a substantial part of their operations from Mumbai to south Gujarat, or a leading company that is close to setting up a steel plant in the state instead of Maharashtra, the list is growing long.

“The number of inquiries from companies in Maharashtra has certainly gone up in the past one year ever since the Marathi ‘manoos’ thing started,” say senior state government officials. “Some of these investors are of course Gujaratis who are feeling increasingly uncomfortable in the neighbouring state,” he said.

The residential prices in Dubai increased 0.7percent during the final quarter of last year, in comparison to the third quarter of the same year, reported a recent research.

The increase which reflected in the new Sales Price Index for Dubai (SPID) has been launched by REIDIN.com in partnership with Real Estate Regulatory Agency (RERA) and Dubai Land Department (DLD).

The new service is hoped to offer the market with a series of indices and data to improve transparency across the market and help real estate professionals to analyze residential price trends, the Company said, in its statement.

Currently, the prices of villas increased by 2.6 percent during the fourth quarter, but dropped by 19.7percent in 2009, in comparison to the prices during Q4 2008.

Among the 10 main districts covered by the index, is the Palm Jumeirah, where the prices indicated a rise by 2 percent quarter on quarter. The quarterly figures for both Emirates Hills and Jumeirah Lake Towers dropped by 19 percent during the same period, the company said.
The CEO of REIDIN.com, Ahmet Kayhan, said that ensuring accuracy of market data and relevance to local market conditions is of topmost priority. This is the motive behind appointing an Advisory Committee, comprising academicians and industry professionals from various emerging economies to monitor the quality of indices.

Apart from this, a Property Indices Oversight Committee has been established, which is responsible for reviewing and recommending changes in index policies and procedures required by data elements, in qualifying properties, in reviewing monthly index production and in initiating actions considered necessary to assure index statistical integrity, Kayhan said.

There has not been any major upturn in the Dubai real estate market, as it continued to remain sluggish during the final quarter of 2009 with lease rates continuing to fall, said the CB Richard Ellis Report.

The Dubai Land Department statistics indicate that the total number of transactions fell 17.7 percent, touching 520 during the fourth quarter of 2009, compared to the same period the previous year.

The lease rates for Dubai residential units recorded a marginal decline in 2010, as considerable volume of new homes reached their final stages of construction, reported CB Richard Ellis.

As for the commercial office space market, the lease rates had already bottomed out, with rents reflecting levels during 2005, the brokerage firm said, while adding that rates in the central business district area will remain the same, as there may not be any major supply in the short-term.

However, new commercial office areas are already seeing high vacancy rates and are likely to see a dip further, as landlords continue to give greater incentive packages when they compete to woo tenants, CB Richard Ellis said.

Even the apartment rates will drop this year, they said.

Fitch Ratings in a Special Report, said that its 2010 Outlook for the Indian real estate sector remains Negative; however, the sector could exhibit signs of stability by the second half of the year. Fitch notes that the fundamentals of India’s real estate sector are improving, as seen by better liquidity and improved demand in the residential segment. The agency expects growth in 2010 to be driven by government support, especially for the affordable housing segment, improved access to debt and capital markets, and the recovery of real estate demand. Yet, there are concerns that the government may roll out moderately adverse policies to keep property prices in check when economic conditions become more stabilised. In addition, the government may also find it politically difficult to provide a supportive environment if developers continue to increase real estate prices.

In order for Fitch to take a more favourable view of the sector, sustainable operating performances and continued deleveraging by developers over a longer period will be key positive factors, which the agency expects to see during the second half of the year. Demand for both residential and commercial real estate segments slowed down considerably in H109, with a significant drop in property prices. However, H209 witnessed some revival, particularly in the residential segment. Enhanced affordability, lower mortgage rates, and better job security have helped revive demand for homes.

Conversely, demand in the commercial segment remains weak, primarily impacted by over-supply and the scale-back of expansion plans by corporate India. During the crisis, the Information Technology/Information Technology Enabled Services (IT/ITES) sector, where the bulk of the demand for India’s commercial office spaces come from, adopted a conservative staffing approach. This has led to demand lagging behind supply; however, Fitch expects demand for commercial spaces to improve in H210 consequent to the expected resumption of hiring in key sectors like IT/ITES and financial services. That said, based on the current commercial spaces under construction, oversupply risk persists in the sector, which would keep lease rentals under pressure in 2010.

The affordable entry or low-income housing segment is expected to remain the primary growth driver for the Indian residential sector in 2010, and its potential is supported by the government. Affordable housing will require better and more efficient construction practices from homebuilders to maintain overall operating margins, as this segment generally has lower margins and a shorter construction and sales cycle. These factors should also reduce working-capital requirements. A more favourable overall economic environment in India and improved market sentiment on the part of homebuyers should clearly have a positive effect on the credit quality of homebuilders.

Overall, credit metrics are expected to recover in 2010, as developers should be able to improve their capital structure, operating margins, and liquidity. Fitch notes that a substantial amount of equity funds raised has been utilised in the repayment of debt and interest costs, which has helped in developers deleverage. However, risks remain as significant repayments would be due in H2FY11 and FY12 from restructured loans. The ability of leveraged players to service their interest costs and fulfil their immediate term debt/land obligations continues to be a concern.