LoftyVistas » 2009

2010 can be brighter for Retail Sector in India

Thursday, December 31st, 2009

The year 2009 has been bad for the real estate sector, particularly for the retail sector. While residential real estate picked up in the last two quarters, retail has been seeing very low demand. According to a report by Cushman & Wakefield, of the 44 malls proposed at the beginning of the first quarter of 2009, just about 18 were delivered by the year end. A number of developers postponed mall projects in 2009 but with a revival of demand in the end of the year, 2010 is expected to see a number of mall projects getting back on track.

“The outlook for the retail sector in 2010 is looking brighter. The festive season has been good and has seen a lot more footfalls. As the market picks up, there will be a revival of demand for retail spaces again,” says Rajeev Talwar, executive director at DLF. Year 2009 saw fresh supply of 5.7 million sq ft of mall space. Approximately 9 million sq ft of mall space was deferred to the future, which is a reduction of 60%. Almost 80% of new mall space in Bangalore was postponed which meant the city saw a vacancy of only 3%.

“I see retailers being cautiously optimistic in 2010. They will expand but with caution unlike earlier,” says Jaideep Wahi, director, retail agency, Cushman & Wakefield. Most large developers had postponed their projects as it was hard for them to lease retail space, he says. In the early part of 2009, developers also faced a credit crunch which slowed down mall plans. This slowdown in mall construction need not be viewed as a negative. The slowdown has helped in maintaining a good supply demand equation, especially for markets which were staring at an oversupply situation.

Delhi-based developer Omaxe launched its mall in Patiala a month back and the response has been good, says Rohtas Goel, CMD, Omaxe. The company though had decided to postpone its 1.5 million sq ft mall Connaught Place in Greater Noida because of lack of demand in 2009. “The retail segment is seeing renewed demand over the last 4-5 months. We are seeing new leasing activity start at our mall in Greater Noida where construction will start in early 2010,” says Goel.

Across the major cities, rentals hardly saw any upward movement since the markets crashed late 2008. Mall as well as main street rentals (except a few locations) continued to remain below the average rental rates of the fourth quarter of 2008, says the report. Some micro markets in the NCR, Bangalore and Mumbai saw a 53%-40% decline in rentals in the fourth quarter of 2009 over the same period last year. Bangalore’s prominent high streets (Brigade Road and Commercial Street) were the only micro markets to post an approximate 10% rise in rentals over last year, indicating the existing demand for premium retail precincts over emerging locations in the city.

Of the 5.7 million sq ft of fresh mall supply in 2009, the largest share of the supply — 1.8 million sq ft came up in Mumbai, followed by Hyderabad (1.1 million sq ft) and the NCR (0.9 million sq ft). Kolkata saw fresh supply of 0.7 million sq ft. Retailers are now very cautious about signing up new space. “It has been a learning for both developers and retailers. The retailer is now asking a lot more questions and is very cautious,” says V Muhammad Ali, head, mall operations, Forum, Prestige Group’s mall division. They area asking questions about the location, about anchor tenants. Ali recalls that during the boom time, no one was asking these questions. “LoI’s were being signed at conferences at that time.”

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Factors that Drive Real Estate Prices in India

Thursday, December 31st, 2009

What drives real estate prices in India? The factors vary from city to city. In most countries, the construction of a noisy airport may be reason for residents to flee, but in India, the prospect of Mumbai’s second airport coming up near Khargar is driving up prices. According to Gulam Zia, national director—research and advisory services, Knight Frank, the Navi Mumbai area — from Vashi to Panvel — is likely to grow faster than other locations in Mumbai.

This is primarily due to the expectation that the new airport could come up here in the next 6-7 years in addition to the trans-harbour link. The entire look of Navi Mumbai could change in the coming few years, as Kharghar and Nerul record multi-fold growth. Noida and Ghaziabad are coming up well due to the metro projects shaping up in the vicinity. There are plans to extend the metro network to Manesar as well. These are the areas that are emerging quite fast and good growth is expected here.

In Chennai, it’s the OMR — which is short for Old Mahabalipuram Road — that is turning out to be the city’s IT corridor. The IT industry is the economic growth driver in the region. Further up, the area around Mahindra World City is also seeing a lot of development. Industrial growth in this region is a huge contributing factor. Overall, a balanced mix of growth is being witnessed in this corridor.

Disruptions over Telangana aside, for Hyderabad, the major growth areas have always been Gachibowli, Madhapur, and Shamshabad. Again, IT is the key driver for growth. A huge amount of supply of real estate can be seen in Hyderabad. “Overall, the city is not as attractive for investment as other southern cities at the moment, or for that matter other cities in our top 10 list,” says Mr Zia. In Bangalore, locations which provide good enough growth from the IT angle include, Sarjapur and the Ring Road junction area. A peculiar aspect to note is that around the Electronic City and Whitefield area, good development is being seen, but these two localities are struggling for infrastructure.

However, these two areas will see good growth in the next two years. The other localities to watch out for include the area around the road connecting the new airport and Hebal, as they are likely to grow considerably in the coming years. In the East, Kolkata is the only city that figures in the top 10 list of cities that are expected to see substantial growth. “Kolkata is also banking on the IT story. Several projects are expected to come up in Rajarhat and Salt Lake. Other emerging locations include Mahesh Tala and Tara Tala. Many new townships are being constructed in Tara Tala, gradually transforming it from an industrial zone to a residential township. This will be a promising area in the future,” informs Mr Zia.

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NRIs and Home Loan India

Thursday, December 31st, 2009

Indians living abroad are equally eligible for housing loans from banks in India, but with some riders. Christmas and New Year see an influx of Indians based abroad. This year is no different. This time, though, the non-resident Indians (NRIs) are taking a closer look at real estate here. The correction in property prices has induced many, who aim to return to India in the near future.

An NRI is an Indian citizen, holding a valid Indian passport and staying abroad for employment, business or vocational purposes. According to the Reserve Bank of India and the Income Tax Act, an NRI can buy real estate in India and avail housing loans on residential properties from banks. They are only denied purchase of agricultural land, farm house or plantation property in the country. Calculation of eligibility and interest rate for NRI loans is not very different from that of the Indian residents.

However, there are some pre-requisites for an NRI loan: checking of the qualifications, their current job profile, past experience, the probability of continuing abroad for the loan tenure, the probability of servicing the loan with an extended tenure in case of return to India, and so on. The loan-to-value (LTV) ratio for NRIs varies from one bank to another, though the calculation is same as in case of a regular home loan. The down-payment for NRI home loan is permitted through direct remittances from abroad through normal banking channels or from deposit accounts in India, including a non-resident ordinary rupee (NRO) account. The income taken into account for calculating the home loan eligibility is the repatriable income, plus any income in India.

There are some additional documents that they need to submit with the application form. These include a copy of the passport and visa and general Power of Attorney (PoA) in favour of a local person as drafted by the bank and duly attested by the Indian consulate at the place of residence. Most banks require the PoA to ease the process of dealing with the borrower. A copy of the appointment letter and contract, salary certificate (in English) specifying name, date of joining, designation and salary details and bank statements for the last six months, both domestic (NRE/NRO/FCNR) and international, and a copy of local income tax returns filed in the country of residence will be needed.

As an NRI, one can enhance loan eligibility by taking a joint loan with a relative. However, for credit reasons, banks allow only a select list of relatives to become joint owners of the property. Repayment of home loans for NRIs is permissible through specific sources, such as remittances from abroad through recognised banking channels or from any deposit accounts maintained validly in India or through a specified close relative. Tax deduction benefits on home loan repayments cannot be availed unless the returns are filed in India.

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SBI Confirms Stability in Home Loan Rates

Thursday, December 31st, 2009

The State Bank of India (SBI) does not foresee any immediate change in lending rates. SBI chairman .P. Bhatt, who was in the city today, said the bank’s initiative in the home loan segment had helped both customers and real estate developers.

“We reduced the home loan lending rates to 8 per cent per annum and as a result developers and customers started returning to the market. Other banks were also forced to follow our footsteps,” Bhatt said.

He claimed there was enough liquidity in the market and credit growth had not yet picked up. “I don’t see any hike in lending rates of the bank in the next six months. There is enough money available in the market and banks are not facing any difficulties in providing credit to customers at this point of time,” said Bhatt.

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Commercial Real Estate can Bounce back in 2010

Saturday, December 26th, 2009

Commercial real estate is hoping for a bounce back in 2010. For 2009 though, the year is ending with a 29% decline in space absorption compared with last year, according to the annual year-end report by real estate consultancy Cushman & Wakefield. The total absorption of commercial space across major Indian cities stood at 26.3 million sq ft in 2009, compared with 37 million sq ft in 2008. This dip was primarily because of a conservative leasing approach by the IT/ITeS sector which accounts for majority of commercial office space taken up (60%) in the country.

But the outlook for the coming year is positive. “With the gradual recovery of the economy, the demand for office space is likely to increase by the second half of 2010,” said Sumit Rakshit, executive director, occupier services at Cushman & Wakefield. Corporates have been cautious about expansion in 2009, both because of the recession and also falling office space rentals. Across India, there has been about 4.6 million sq ft of pre-commitments for space due to be absorbed over the next two years. Of this, Bangalore alone accounts for 2.7 million sq ft. This indicates the revival of the IT/ITes segment, which is the mainstay in Bangalore. IT companies are starting to get new contracts which is pushing them to commit to new real estate costs.

Most micro-markets across the country witnessed 15-25% decline in rentals in 2009 over last year. The last quarter though has seen rentals stabilising, except in few locations such as Mumbai’s Lower Parel which saw the highest fall in rentals by 40% in the past year. Even Delhi saw a rental decline between 3-26% during the year. Because of an acute over supply situation, Gurgaon is expected to see a further fall in rentals. Though 2009 saw a drop in expected supply, major cities recorded 51.8 million sq ft of new office space supply. With corporates starting to relook at leasing large spaces, this new supply is expected to be absorbed in the coming year. “Clients are starting to talk positive,” he added. Cushman & Wakefield sees a revival of rentals across all markets.

“Corporates, too, are realising this. This is the right time to buy or lease property as rentals and capital values are still at their lowest,” he said. On the developer’s side, the positive news is that stalled commercial office projects are being restarted. “2009 was a tenants market. In the coming year, things will start to turn.”

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Pearls Group Opens Four-Star Resort in Goa

Saturday, December 26th, 2009

Real Estate Company Pearls Group has launched its four-star resort at Colva Beach in South Goa. The 50-room four-star resort is set up on an old property, which was completely re-designed at the cost of Rs 30 crore by the firm, which has its hold over businesses like real estate, infrastructure, education, tourism, fast moving consumer goods and media.

Jyoti Narain, Executive Director, Pearls Oceanique Resort said, “The Group already has properties in Himachal Pradesh, Masoori and Gold Coast in Australia. With this the Group has made its foray in Western India. Although we have ventured late in the season, the bookings will be high in the season to come.” Narain added that mid sized budget to higher end tourists will be targeted for the resort, which will provide tailor made service for each guest.

Goa tourism officials said the state has witnessed 30 per cent decrease in the tourist arrival since last year, largely due to economic recession that severely hit tourism. Narain said that the slowdown does not bother them as the Goa property has 70 per cent bookings. The Group is also planning to tie up with chartered flights.

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Developers to Shift Focus on Developing Affordable Housing

Saturday, December 26th, 2009

Over the last 60 years, a lot of development in India has taken place to meet the essential needs of people such as roti, kapada and makaan. Even during the British regime, India did not have slums. Rich people were able to live lavishly and poor people were at least able to own their homes, although small ones, at cheap rates. However, now the paradigm has changed.

Amidst this scenario, public-private partnerships are happening in urban development, including large infrastructure projects where there is a huge allocation of funds by the government of India to the tune of Rs 3 lakh crore. The government is also developing metro projects such as the Andheri-Ghatkopar line, apart from the sea-link project connecting Haji Ali with south Mumbai. The Mumbai Metropolitan Region Development Authority has come up with schemes for rental housing, creating small tenements of 160 sq ft each. It thus becomes imperative for the government to focus on providing affordable housing.

The slowdown of 2008-09 impacted the Indian economy in terms of a liquidity squeeze and business losses to real estate and infrastructure companies. As for the key lessons in terms of costs and resources, I feel real estate companies should not leverage over-debt positions. If they do, they will not be able to face recession. Company debt has to be in proportion to the business. One should learn to manage a business within one’s means. What we at Hiranandani Constructions have done is to understand customers’ needs and fill gaps by making money available through the banking system. Even foreign investors are looking at India with great interest.

Real estate companies can build on their strengths during the revival by being conservative in borrowing and spending funds only on projects that are saleable even in a recession. This is in terms of selling it completely or being leased out. By doing this, developers will be able to make equity suitable for the customer. The stock market is always full of surprises and the extent of a cyclical expectation is not known to anybody. Rather than being dependent on stock market sentiment, developers should be ready to focus on evolving affordable housing concepts.

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UAE Economy unaffected by Dubai World debt, Minister confirms

Saturday, December 26th, 2009

The Minister of Economy, Sultan Al Mansouri, today confirmed that the Dubai World debt problems will not affect the projected three percent growth rate for UAE in 201.

Al Mansouri said that it does not really have a huge reflection on the whole economy of the UAE. Taking into account the debt of several other nations across the world, the issue of Dubai World is much smaller in terms of its impact on the UAE economy.

Dubai World debts are small when compared to debts of few other companies, as they are heavier than those of the Dubai Group. The UAE economy is one body and inseparable, Al Mansouri said.

Al Mansouri said that federal government will deal with future Dubai debt issues on a case-by-case basis. He expressed optimism about improvement in the local and world economy in 2010.

The Minister gave his comments when the Dubai World officials held discussions in Dubai with lenders, aiming to restructure $22bn debt. Last week, the Dubai-Government-owned company, helped its real estate subsidiary Nakheel in repaying Dh.15.1bn on a Sukuk or Islamic bond after receiving $10bn from a bond sale to the Government of Abu Dhabi.

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Dubai Lifestyle City due for completion by 2011

Saturday, December 26th, 2009

Dubai Lifestyle City (DLC) is due for completion towards end of 2011 or first quarter of 2012.

Executed by the ETA Star Group, DLC is a comprehensive lifestyle project. Currently the network infrastructure works of the project is completed, which includes road networks, surface water drainage, telecommunication, irrigation networks, sewage network, street lighting, fire-fighting system and portable water network.

The project was officially unveiled in 2006 and it seeks to promote the unique concept of haute living which includes everything from luxury to digital facilities, sports training, recreational opportunities, fashion, world-class restaurants, theatre, and shopping, said Raza Seddiqi, Executive Director at DLC.

Dubai Lifestyle City will feature 68 Tuscan-themed villas, 120 villettes or apartments, designed by BeverleyHills designer Tony Ashai. About 60 percent of the property has been sold so far. Saleh Constructions has already begun construction of the units.

DLC has also entered into alliances with IMG Academics, Microsoft, JW Marriott and Cisco.
The Senior Vice President at Dubailand, Mohammad Al Habbai, said that DLC offers luxury within a gated community and that its renowned world-class brands such as JW Marriott hotel further strengthens its position as a luxury development.

JW Marriott will develop the living component of DLC, as the first JW Marriott branded residential property world-wide. Apart from JW Marriott, it will run three separate, integrated lodging amenities to fill the requirements of visitors to the city.

The 170-room JW Marriott Hotel, the 46-unit Marriott Executive Apartments, the 152-room Courtyard by Marriott, will all be available to visitors of DLC.

The ground breaking ceremony to mark the commencement of construction was held on 1st December. The IMG Academies (IMGA), the multi-sport conglomerate will also open its first-ever branch outside the US, which will include the Nick Bollettieri Tennis Academy and David Leadbetter Golf Academy.

Dubai has always remained an attractive destination for tourists and residents alike, offering wonderful packages to visitors and lucrative opportunities for investors, Seddiqi said.

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Dubai Properties launches final phase of Shorooq units at Mirdiff

Saturday, December 26th, 2009

Dubai Properties Group (DPG), a member of Dubai Holding, has launched the last phase of Shorooq Community in Mirdiff. The announcement follows the successful leasing of first two phases.

The family-focused development offers 1428 residential units, with studios, single and double bedroom apartments. The development is located in one of the most sought after neighbourhoods in Dubai, with annual leases of Dh.49,000 for studios, Dh.65,000 for single bedroom and Dh.79,000 for double bedroom apartments. Additional discounts are granted for limited time for early bookings.

According to Khalid Al Malek, the CEO of the group, the launch of the last phase of Shorooq Mirdif is a proof to the project’s success in meeting the market demand for affordable and quality family accommodation.

Shorooq is currently a thriving dynamic community offering a range of real estate options from studio apartments to four bedroom villas. The final phase of the community will feature 42 apartment buildings and is a unique alternative to high-rise living, offering easy access to schools, shopping centers, popular Uptown Mirdiff and the new Mirdiff City Center malls.

The development is strategically located in proximity to Rashidiya Metro Station, Dubai International Airport, and is easily accessible from arterial highways including Al Awir Road and Emirates Road.

Salwan Property Management, a subsidiary of Dubai Properties Group, currently manages more than 14,000 residential and commercial units in various locations in Dubai.

At present, the group is leasing residential and commercial units at Jumeirah Beach Residence, Al Khail Gate, Cordoba Villas, Al Razi Residence and Office Park at the Dubai Internet City.

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Archive for December, 2009

2010 can be brighter for Retail Sector in India

Factors that Drive Real Estate Prices in India

NRIs and Home Loan India

SBI Confirms Stability in Home Loan Rates

Commercial Real Estate can Bounce back in 2010

Pearls Group Opens Four-Star Resort in Goa

Developers to Shift Focus on Developing Affordable Housing

UAE Economy unaffected by Dubai World debt, Minister confirms

Dubai Lifestyle City due for completion by 2011

Dubai Properties launches final phase of Shorooq units at Mirdiff

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