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Mangalore real estate developers seek funds

The Real estate developers' body in Mangalore has urged bankers not to compare them with developers in mega cities while extending funds to them.,

Speaking at the inauguration of a home loan fest, organised by the State Bank of India (SBI) here on Saturday, Mr P.M.A. Razak, Chairman of Mangalore chapter of CREDAI (Confederation of Real Estate Developers' Association of India), said loan sanctions are not materialising because bankers compare them with their counterparts in metros.

Stating that NPAs or sub-standard assets are unlikely in Tier-2 and Tier-3 centres in the country, he said a major portion of the present NPAs in real estate sector is by a handful of big developers in the metros.

He said a major portion of the local economy in Mangalore is driven by the real estate sector, as the city lacks mega industries and investments in IT (information technology) sector. More than 65 per cent of jobs for un-skilled workers in the region are generated by the real estate sector, he said.

In such a situation, banks should help the real estate sector by extending adequate funds to them, Mr Razak said.

Inaugurating the fest, the Karnataka Minister for Ports, Mr Krishna Palemar, said home loan and car loan 'utsavs' like this would help customers own their dream house/car. Added to this, such loans will also help boost the growth of the city.

Bangalore realty change rides on metro

Even as the Metro rail chugs on its way up the popularity chart in Bangalore, the government has approved the second phase of ‘Namma Metro’. The 72-km Phase II of Metro will come up at an estimated Rs 27,000 crore, and is expected to be completed by 2017.

Will the coming of the Metro churn — or even marginally touch — the real estate market scene as it did the Capital?
Mr V. K. Sharma, Director and Chief Executive, LIC Housing Finance, at a recent event in Bangalore, said that he expected the metro train service to transform the city in the next three years. He explained the case of how Delhi went through a similar experience after the metro service was started there. Real estate analysts point out that the peripheral property markets in areas like Gurgaon sky-rocketed, thanks to the Delhi metro.

PHASE 1

In October 2011, a 6.7-km stretch between Baiyappanahalli and M G Road, with six stations, was inaugurated. The stretch is Metro’s ‘Reach 1′ part of the East-West corridor of the first phase. Phase I will see a 42.3-km network, 8.8 km of which will be underground on the East-West (Baiyappanahalli to Mysore Road) and North-West (Hesarghatta to Puttenahalli) corridors with 40 stations. The first phase is expected to be completed by December 2013.

IT Corridors

The city’s working population predominantly belongs to the IT/ITeS sectors, and most of the IT/ITeS offices are located in locations such as Outer Ring Road, Electronics City, Whitefield, and Bannerghatta Road. Extending this infrastructural project to include the IT corridors of the city would not only make commuting to office much easier and faster for the city’s working class, but would also help de-congest the fully-blocked roads.

As has been the experience so far with the Metro, the commute between the now-operational Baiyappanahalli and MG Road doesn’t take more than 9 minutes. That very road, at peak-hour traffic, would take anywhere between 30 and 40 minutes (at the minimum), while commuters can cover the distance in around 25 minutes during non-peak hours.

However, not all are convinced that the metro service in Bangalore has made any significant impact to the city’s real estate market, as was expected. “The metro service so far hasn’t been an attraction to the real estate market because the first phase doesn’t offer the desired connectivity,” said Mr Naresh Dandapat, a real estate analyst. He pointed out that on the eastern corridor, a stretch till Baiyappanahalli doesn’t make any significant difference to the property market in Whitefield now, despite both these locations being on Old Madras Road. “In future, when the second phase connects to Mysore Road and Whitefield, peripheral areas would see a better demand,” he added. A timely conception and execution of the project would have helped both existing property owners and developers planning projects in the areas. The real estate market, at its current growth rate, would outgrow the reach of the metro in five years’ time, explained Mr Dandapat.

“Though comparisons are made, it has to be noted that the Delhi metro was opened at the right time. Had Bangalore Metro offered the connectivity to Whitefield now, it would have helped the micro-market’s real estate values better than five years from now,” he explained. Between 2009-10 and 2011-12, the micro-market has seen a 16 per cent growth in property prices, said Mr Dandapat.

The metro train service is expected to transform the city in the next three years, making property markets skyrocket.

Real Estate Firms Drop Overseas Plans, To Stay Grounded in India

Real estate companies, which started venturing overseas around 2006-07, are reviewing their global plans. With the slump in international realty markets, many domestic companies are either withdrawing from weak markets or putting their global plans on hold, reports Business Standard. Raheja Developers, for instance, has shelved plans to enter markets such as Mauritius and Colombo. Hiranandani Group, which has a major presence in Dubai, has changed its strategy. It’s stopped launching new projects, and is focusing on completing existing projects for other developers on a contractual basis. Omaxe has already exited Dubai.

Darshan Hiranandani, director and chief executive officer, Hircon International, a joint venture between the Hiranandani group and ETA Star, told Business Standard the company was not launching any new project in Dubai due to the slump. “Our strategy is to complete the incomplete projects for other developers on a contractual basis.” According to him, 23 Marina in Dubai, which was recently completed, has been sold out. However, the launch of Business Bay, which the company says ‘coming soon’ on its website, will not be for sometime. He was optimistic the market would recover soon.

But Nayan Raheja, director, Raheja Developers, is not so hopeful about prospects of the international market. The Dubai market would not recover, at least in the next five years, he said. “Nobody should be looking at the Dubai market as of today,” said Raheja. Raheja Developers, which was evaluating opportunities to enter Mauritius and Colombo, is giving it a miss in the wake of the global economic and realty gloom. “There is negative sentiment internationally. At this point, we are not even considering venturing out,” Raheja said. Tata Housing is one of the few companies looking overseas at this point. After establishing itself in the Maldives, the company is looking at Colombo in Sri Lanka.
Its managing director and chief executive, Brotin Banerjee, said, “We are confident of finalising a few projects in Sri Lanka this financial year — Colombo will be one of the locations. All these international projects are being planned through separate special purpose vehicles formed for each country or project.” Banerjee said the company was in the final stages of due diligence for two mixed-use development projects of two million square feet each in Colombo. Of this, one could be affordable housing. “With peace returning to the island nation, real estate will be a big growth story there,” Banerjee said. Tata Housing has earmarked Rs 1,000 crore for various ventures in 2011-12. “We work on a multi-city strategy and projects targeting all customer segments and hence, a slowdown in some geographies or customer segments does not adversely impact us,” said Banerjee.

Omaxe Group entered Dubai in 2007, with a goal of expanding in West Asia. But after investing Rs 50 crore (the first instalment of a Rs 1,600-crore project) through a joint venture with Dubai World’s property developer, Nakheel, Omaxe withdrew from the market due to a near lull. “We got the investment back, as Nakheel put the projects on hold indefinitely,” said Rohtas Goel, chairman and managing director, Omaxe. And now, the company has no plan of expanding outside India.

According to Sunil Dahiya, managing director of Vigneshswara Developers and vice-president of the National Real Estate Development Council, it is not just real estate developers, but also construction companies, which are withdrawing from the Gulf. “Indian companies in West Asia, especially into construction projects, are experiencing a near lull, as no major work is happening there. The contractors are not being paid,” he said. At least 10 to 15 construction companies present in the Gulf are suffering from the slump. Real estate consulting firm Cushman & Wakefield’s chief executive for Asia Pacific, Sanjay Verma, said, “For those over expanded, it would be a sensible move to focus on their core strength at this point.”

Leading Developers replaces Maytas in Jubilee Hills Landmark Project

Bangalore-based real estate firm Leading Developers is replacing Maytas Properties, the Satyam group firm that was building Jubilee Hills Landmark along with ICICI Venture and Nagarjuna Constructions Company. The project was stalled after the founder of Maytas Properties and the erstwhile Satyam Computer Services, Ramalinga Raju, got embroiled in an accounting fraud. According to the new deal, Leading will get 40 per cent of the revenues from the project, Economic Times reported, citing sources.

"The real estate company will need to deposit Rs 130 crore, which will be used for construction and will be adjustable against the revenue. The property has over Rs 150 crore of non-performing loan on it," one of the sources said. Sushil Leading, managing director of Leading Developers, had earlier said that his company is looking at a possible tie-up for the property. "We have concluded the due diligence and may buy entire stake or become an additional partner to the project," he had said, without sharing details of the deal. Nagarjuna Constructions Company refused to comment on the transaction. Leading Developers said the legal process was still on.

Originally, Maytas, Nagarjuna Constructions and ICICI Venture held 33 per cent each in the special purpose vehicle that was developing the Jubilee Hills Landmark project. The three companies had bought the 5.7 acres of land for the project from the state government for Rs 335 crore in 2006, which is still the most expensive real estate deal in Hyderabad. "Originally scheduled to be completed by the end of 2008, there has been no progress. However with the new partnership, construction will now start in the next two-three months," said a senior official from one of the partner companies, who also added that there might be a few changes in the project too. Leading Developers has significant presence in Hyderabad and has over 8 million sq ft under various stages of construction across different residential, commercial and retail projects.