Confederation of Real Estate DevelopersAssociation
of India (Credai) plans to file a case against the proposed Goods and Services
Tax (GST).
Acording to the national Vice president of CREDAI Mr Prakash
Challa “Currently we are collecting it from our customers which we don’t want
to. Soon we will file a case at the national level,’’.
He said the service tax would only escalate cost (to
customers). Developers collect money either by charging 4.12 per cent of the
construction cost or by collecting 10.3 per cent from the overall saleable
value.
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One of
leading Real estate firm Ashiana Housing Ltd reported a 32 per cent rise in
net profit at Rs 11.71 crore for the quarter ended June 30 against Rs 8.9 crore
in the year ago period. The revenue grew by 47 per cent to Rs 42.85 crore
during the first quarter of this fiscal against Rs 29.23 crore in the
corresponding period of last fiscal
Ashiana Housing focuses on developing retirement resorts
under the brand name ‘Utsav’. It has developed resorts for elderly people at
Bhiwadi in Haryana and Jaipur in Rajasthan. The company is building a
retirement resort at Lavasa
township project, which is being developed by construction major HCC on
12,500 acres of land near Pune.
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K.K. Birla Group company Texmaco Ltd will soon make a foray
into real estate
development in the national capital.
The company would be developing a residential-cum-commercial
unit opposite Delhi University to begin with.
Speaking to reporters after the company's annual general
meeting on Thursday, Texmaco chairman Saroj Poddar said the Supreme Court had
recently allowed Texmaco Ltd to develop onethird of a 31-acre plot opposite
Delhi University.
The said land earlier belonged to Birla Mills and had been
engaged in a legal tangle for some time.
The remaining two-thirds of the plot opposite the university
would lie with Delhi Development Authority (DDA), the Delhi government's
developmental agency, which will share half the revenue received from any development with the
company.
Poddar added that currently the finer aspects of the project
are being studied with the DDA and would be finalised very soon.
He also pointed out the futility of setting up more wagon
making units in the country when the ones operated by the private sector are
not used to their optimum capacity.
It may be mentioned that Union Railway Minister Mamata
Banerjee had announced setting up four wagon-making units while presenting the
Railway Budget for 2010-11.
Texmaco has recently demerged its core wagon making and
steel foundry business to Texmaco Rail and Engineering Ltd retaining the real
estate business with itself.
The de-merged entity is planning to venture into a new
business of setting up logistics for the Railways via foreign collaboration,
Ramesh Maheshwari, executive vice chairman, said without giving any further
details.
Courtesy Hindustan times dtd 03-08-2010
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In apartments,
rainwater is filtered and harvested from the terrace roof area and channelled
into an open well. Rainwater can also be filtered and let flow into a borewell
through an indirect recharge pit. The cost of the project can be divided
equally among the apartment
owners. Considering that the project's lifecycle is over 50 years, it is a
successful one since huge amount of water will be saved from going waste and
adding to urban flooding. The water can be used for watering plants, washing
vehicles as well as washing clothes and other utilities.
Courtesy ET Realty Dtd. 13-08-2010
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THE SOCIETY
should have a valid conveyance deed of land and building in its favour.
ONCE THE society
members’ consent is obtained, the society should submit the copy of the
conveyance deed, certified copies of the property registration card, the latest
electricity bill, water bill, municipal tax bill, etc to the developer. It
should contain technical details such as the number of open car parking space,
stilt car parking and closed parking allotted to existing society members.
THE DEVELOPMENT
agreement should spell out the broad specifications and amenities to be offered
in the
new building.
THE AGREEMENT
should mention the schedule of payments, tentative date for vacating the flats,
the time period for completion etc. The old building by the members shall be
linked with the plans being approved by the authority concerned. It should
contain a penalty clause if the developer fails to meet the deadline.
Courtesy By: The Economic Times Dtd: July 6, 2010
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The issue of maintenance of rented premises depends a lot on the terms and conditions agreed upon
between the parties and laid down in the lease agreement. The Rent Control Acts
of various States also provide some guidance on this. According to these Acts,
the landlord has a duty to keep the premises in good condition.
Every landlord is bound to keep the premises in good and tenantable repairs. If
the landlord neglects or fails to undertake any repairs which he is bound to
undertake, within a reasonable time after notice in writing, the tenant may undertake
the repairs himself and deduct the expenses on such repairs from the rent to
recover them from the landlord. This is subject to the condition that the
amount so deducted or recoverable in any year does not exceed one-twelfth of
the rent payable by the tenant for that year.
It is the responsibility of the landlord to ensure that the tenanted premises
are habitable and safe. If need be, he should ensure that adequate repairs are
undertaken to ensure this. In case the landlord is unable to do so or is
unwilling to do so, the tenant
may undertake these repairs. He needs
to give proper notice to the landlord about this, specifically mentioning the
nature of problems, the nature of inconvenience caused, the nature of safety
hazards, and the necessary steps required to correct the problem. Moreover, it
should be specifically mentioned that in case the landlord fails to undertake
the repairs within the specified time, the tenant will have them done and will
be eligible to recover the amount spent from the landlord.
However, it should be noted that this would cover only repairs which are
essential and urgent. It would not cover circumstances wherein the tenant wants
some alterations or additions for his convenience. The essential test is if the
repairs are needed to keep the premises safe, habitable and usable.
In case any repairs are to be undertaken, without which the premises are not
habitable or usable except with undue inconvenience, and the landlord neglects
or fails to undertake them after notice in writing, the tenant may apply to the
controller under the Rent Acts for permission
to undertake the repairs himself. He may submit to the controller an estimate
of the costs of such repairs. If any repairs not covered by the amount are
necessary in the opinion of the controller, and the tenant agrees to bear the
excess cost himself, the controller may permit the tenant to undertake the
repairs.
MAHINDRA & Mahindra (M&M), the diversified business group, plans to set
up a 250-acre
special economic zone (SEZ) catering to the
aerospace sector near Bangalore International Airport.
The M&M group has shown interest in setting up the
SEZ, which is going to be built under a public-private partnership (PPP) model,
said a state government official. Besides M&M, other companies have also
put in evinced interest in aerospace SEZ, but their names could not be
ascertained.
“Mahindra Lifespaces, the infrastructure and real
estate arm of the $7.1-billion Mahindra Group, is in preliminary dialogue with
the Karnataka government for developing the aerospace SEZ,” said Anita
Arjundas, CEO, real
estate sector, Mahindra &
Mahindra. “The company has strong experience in this kind of industrial
development zones being the pioneer in the space with its Mahindra World City
at Chennai and Jaipur.”
M&M, which recently forayed into the aviation
sector with the acquisition of two companies in Australia to manufacture
aircraft, recently opened a component-making facility at Malur, on the
outskirts of Bangalore.
The Karnataka government plans to set up second SEZ focused on the aviation
sector. The first facility in Belgaum is an aerospace engineering and
manufacturing SEZ by QuEST Global.
According to the official, the state government has already identified
close to 1,200 acres for setting up aerospace SEZ at Devanahalli and it is
estimated that each company would require a minimum of 250 acres to set up
their facility.
The Karnataka government, during the recently concluded
global
investors meet (GIM), signed MoUs
with a couple of companies planning to invest in the aerospace sector at the
SEZ in Devanahalli.
BEML is planning a Rs 316-crore facility in the
designated zone to provide design & manufacturing services in aircraft
components, sub-assemblies and MRO activities.
Dynamatic Technologies plans to invest Rs 465 crore to
set up aerospace component unit and Starracheckert Machine Tools also plans to
invest 127 crore for the same.
The Karnataka government is expecting the aviation
sector to be one of the state’s key industries. The eco-system of public sector
units engaged in aircraft manufacturing & development, large number of IT
companies and presence of precision equipment manufacturers makes the state an
attractive destination for aviation companies.
Courtesy by: The Economic TimesDtd: July 3, 2010
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VASCON
Engineers has been trading range-bound since its listing early this year and
has not been able to beat the market. In the past one-week, ET Realty index and
BSE Realty gained 5% and 4%, respectively, while the Vascon stock climbed just
about 2%.
Over the
past five months, Vascon’s performance on bourses has not been a great one
either. For instance, it was down 7% in the past three months, the stock was
down 12%.
Vascon is
present in western and southern regions. It recently launched a couple of residential projects, after its IPO and has received a
good response to the same. Selling at an average price of Rs 3,500 per sq ft in
locations like Nashik, Pune and Coimbatore, the company has clocked a lot of
presales. It has also bagged some new EPC contracts and currently its order
book stands at Rs 3,500 crore. The company’s average size of EPC contracts has
increased to Rs 60 crore from Rs 30 crore. Thus, even with a small number of
orders, the company is expected to do well. As the company follows the project
completion method, EPC will form a major proportion of the overall revenue of
the company. For the year ended March ’10, the ratio for real estate and EPC in
total revenue was 20% and 80%, respectively, and for 2011, it is expected to be
30% and 70%, respectively.
Out of RS
115-crore funds raised, the company has repaid Rs 40 crore of loan and the
balance is being utilized as per the issue objectives.
The
company’s net sales increased 47% for the year ended March 31, ’10 at Rs 738
crore compared to Rs 502 crore clocked last year. The Pune-based builder has
been able to cut down its operational expenses, thus, boosting EBIDTA margins
by 70 basis points to 11.6% in the current year. Net profit margins have just
doubled for the same period and are now at 7% at RS 53 crore. Tax outflow was
high on account of certain regulatory provisioning being done. Going forward,
the company expects to maintain its current growth rate, despite having a high
base.
At an annual
EPS of Rs 6.71 and current price of Rs 135.2, the company is valued at 20 times
its earnings. It can’t be compared to standalone contracting companies, as it
has a significant exposure to realty as well. Thus, at the current level, investors can look at entering the
stock.
Courtesy By:
The Economic Times Dtd: June 29,
2010
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Servicing two EMIs will substantially reduce tax benefits on
second flat
The rise in disposable income of the salaried has prompted
bankers to aggressively sell them several of their products, like credit cards
and personal loans. And, now, they are approaching them to give loans for second
homes.
According to reports, the country’s largest bank, State Bank
of India, is wooing existing home owners with agood repayment record with a second home loan. The target age: 35 and
above. The reasoning being that many of these customers have already purchased
a first home and could be willing to upgrade. Or, purchase a second one as an
investment.
“Only existing customers with a very good loan repayment
record have been approached. Since their salaries have risen substantially,
they will be easily able to service a second loan. And credit cards to such
customers,”said an SBI official.
Advantage: While a home buyer gets tax benefits up to Rs 1.5
lakh interest
payments on a first home loan, there is no limit on a second home laon. So,
the entire interest payout is tax free.
Precautions
But while it does make sense in purchasing a second home,
most financial planners would advise that it’s best not to put too much stress
on one’s finances. Ideally, do not take a second home loan until you have
repaid the first one or reduced it substantially. Experts say it is important
to maintain a healthy EMI(equated monthly installment) to salary ratio, not
more than 40-50 per cent. Otherwise, your other expenses might be adversely
impacted and hurt your saving ability.
Pankaj Mathpal, a certified financial planner, said while
upgrading a first home could be good option, a second property may eat into a
person’s savings. Unlike buying a second property, upgrading a property is
easier, as it would involve a lower cost, since the bulk of the capital is
likely to come from the first property. A loan over and above this would help
ease matters.
For example, if one had purchased a property of Rs 20 lakh
around 10 years earlier, the price would have most likely reached Rs 30-35
lakh. Also, the major chunk of the loan would have been repaid. Purchasing a
second property worth Rs 60 lakh would imply that 50 per cent of the money can
be paid from thepurchase
of property. The rest of the amount can be raised through a loan. The bank,
in this situation, will add the outstanding amount of the first laon with the
new loan. The equated monthly installment will also increase, but not
substantially.
Check the return
But if you are purchasing a second home, it is important to
identify areas where a good rent is possible. This will ensure the burden on
salary is reduced substantially.
“Through buying real estate for the purpose of investing is
a good idea and it is a good time to buy, as prices have still not peaked in
many places, be cautious about the area you choose and your loan repayment
capability,” warms Anil Rego, CEO, Right Horizons, afinancial advisory firm.
In fact, if you really want to invest in property, but it is
a strain on your finances, go for a smaller property like a one-room and
kitchen in a good area that will fetch a decent rental.
The important thing is to remember that real estate prices
may stagnate some-times. And, the return on acquisition, especially to satisfy
investment needs has to justify the strain on finances.
Courtesy: BS Dtd: June 24, 2010
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South Asian Real
Estate, a foreign private-equity fund and a fully integrated investment and
development company based in Cyprus and owned by UK- based Duet Group, has
joined hands with Amritsar-based Impact Projects to launch Crescent ParC.
The township will be spread over 104 acres on the Amritsar
bypass. The project is barely 10 minutes drive from the Golden Temple via the
elevated highway. Ashberry Homes has 276 residential units which include one-, two- and
three-bedroom apartments in the ground+4and shift+4 formats.
Courtesy Ht estate Dtd: 12/06/2010
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Answer: You will get a home loan provided you have documented
proof of income. A Form 16 that actually shows a deduction of tax at source
from salary and payment dates to the government would be good proof of income.
Similarly, proof for deduction and payment of statutory dues such as provident
fund and profession tax are also a good proof of income. Salary certificate by
itself will not be sufficient proof of income.
The project is supposed to come up in the next two years. I
am not sure if I should pay pre-EMI or construction linked EMI on the loan
amount. Please tell me which will be beneficial?
Answer: If you pay the pre-EMI or the simple interest till such
time that the loan is completed, disbursed and the construction is complete,
the loan outstanding remains as it is. In case of paying EMI from the time the
loan is disbursed, the loan amount out- standing will gradually reduce. In both
cases, tax deduction benefits on home loan for under-construction property will be
available from the financial year in which the construction is completed.
In option I (where you pay pre-EMI interest), the total amount of interest will
be higher whereas in option II, you will lose the benefit of deduction of
principal payment made during the year in which construction was not complete.
You can make a choice as per your convenience.
Question: How do I increase my eligibility of the home loan
apart from co- applicant's income?
Answer: If you have valuable collateral security such as
shares, mutual funds, insurance policies with high surrender value, etc. you
may be able to enhance loan eligibility.
Question: My father has two properties in his name. He is ready
to sell one of them. Can I legally purchase this property from my father and
take a loan for it? What tax exemptions will I get?
Answer: You can get a home loan to buy your father's
property if your income can justify the loan. You can get tax deduction benefit
of Rs.1 lakh for the principal under section 80 C and if the property is self-occupied
for the interest payable up to Rs. 1.5 lakh under section 24 on a home loan.
The lender will closely examine the value of the property since it is a
transaction between related parties and provide a loan of 85 per cent of the
property value as determined by them or the agreement value whichever is lower.
I intend applying for a home loan.
But I have already taken a personal
loan from another bank, which I am not indicating in my home loan
application. If I show this personal loan I will not be eligible for the home
loan. Is there a way my home loan bank can get my personal loan details and
reject my home loan application?
It is not advisable to with- hold facts from the prospective
lender. In any case, banks will access information regarding a potential loan
borrower's loan, repayment history, etc through credit bureaus such as CIBIL.
It is advisable that you declare the information.
If you are not eligible for a loan, you can take a joint
loan with a co-borrower.
Courtesy: HT Estate Dtd:-15-05-2010
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Owning a
home is a lifelong dream for most of the people. After making substantial
investments in that dream abode, one needs to be insured against future risks
and perils. There are two kinds of policies that a borrower must consider; one
is for the life of the borrower and another one for the property. People many a
times perceive insurance, while buying a home, as an unnecessary expense. In
reality, it is important that a borrower must opt for an additional cover as
per the loan amount even if already there exists as insurance policy in the
borrower’s name. This is because the loan is an addition to the borrower’s
liabilities and that in case of the unfortunate demise of the borrower the
family should be able to continue the existing lifestyle without having to provide
for the loan from the receivables of the existing insurance policy. If the
borrower goes for an added cover, this cover would take care of the home loan
and leave the existing policies to take care of other regular obligations for
which the borrower would have taken them in the first place. There are two main
options while taking a cover for the home loan.
The borrower may opt for a policy where the cover keeps
reducing with the loan
amount as it is repaid. The cover is restricted to the amount of loan
outstanding and thus is adjusted directly with bank in the event of the
unfortunate demise of the borrower. Due to this the cost for this option is
lower than the normal term insurance and the customer ends up getting maximum
benefits at the minimum cost.
The customer may opt for the basic life cover/term insurance
plan for a minimum period equal to the tenure of the loan and amount minimum
equal to the loan amount. In this case the borrower is insured for an amount
equal to the loan amount at the start and remains insured for the same till the
end of the loan tenure. In the event of the unfortunate demise of the borrower,
the nominee gets an amount equal to the loan amount. Part of this can then be
used to settle the loan and the remaining can be used for other requirement as
the case may be.
Similarly the
property insurance also plays an important role in case of hazards like
fire, earthquake etc. and protects the borrower from loss incurred therein.
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DLF on Monday confirmed it had decided to sell its stake in ultra-luxury hotel
group Aman Resorts as part of its planned exit from the hospitality
business, but a sale would exclude Aman’s New Delhi property.
THEcountry’s top real estate company DLF confirmed on Monday
it had decided to sell its stake in ultra-luxury hotel group Aman Resorts as
part of its planned exit from the hospitality business, but a sale would
exclude Aman’s New Delhi property.
DLF CFO Ashok Tyagi told analysts that that the company was looking at
potential investors for Aman, which has 23 hotels across 12 countries
patronised by the super-rich. This portfolio includes the Aman Lodhi, a 68-room
hotel which was commissioned in 2009. DLF hopes the sale of its 97%
stake in Aman will help it pay down debt, which now stands at Rs 14,821
crore following the consolidation of liabilities of DLF Asset Ltd.
DLF bought its 97% stake in Aman in 2007 for $400 million. It is hoping to
raise Rs 2,000 crore from the sale, which is being managed by Goldman Sachs.
Aman’s founder Adrian Zecha owns the remaining 3% stake. DLF did not say why it
planned to retain the Aman Lodhi and what it would do with it after the sale,
but its exclusion is unlikely to matter much to potential buyers, most of whom
would be mainly attracted by its resort properties. The Aman Lodhi is the
group’s first and only city property. DLF has also dropped its plan to sell the
wind energy business. The group has plans to cut its debt by Rs 5,000 crore,
more than half of which — Rs 2,700 crore – will be from the sale of non-core
assets and refunds from various government authorities in the next 12-18
months.
Courtesy:- Economics time dtd:- 18-may-2010
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SENSING a turnaround in the housing market,
financial investors led by high networth individuals (HNIs) are moving in for
the kill, booking houses to resell them later to end users at a premium,
according to realty consultants and developers that ETspoke to.
Typically, investors in the housing market keep a 6-12 month
return in mind, whereas an end-user’s demand is a function of job security and
affordability. “With demand picking up in the residential space, investors are
entering the market rather aggressively,” says Amit Bhagat, managing partner at
ASK Equity Fund, a domestic private equity fund.
Financial
investors today account for about 30% of all sales in residential units in
a sector that’s running short of the peaks witnessed three years ago. Industry
estimates show that almost 70% of the newly launched projects in 2007 were
bought by investors, leaving the rest to end users.
Given the robust economic growth and the fact that prices
are still below the peak level of 2007-08, financial investors are confident
that genuine demand residential as project is going to stay or even increase
further in near term, Mr Bhagat says.
Investor participation is unlikely to touch the boom period
of 2007-08 fiscal, and most are investing in projects where prices are lower
than the peak level, says Anuj Puri, chairman and country head of realty
consultancy Jones Lang LaSalle Meghraj.
Sales of premium residential units are mostly driven by
investors. “Sale of premium houses is not solely dependent on prices but location.
Savvy financial Investors are increasingly cashing in on this segment,” says
Anurag Mathur, MD at Cushman & Wakefield.
Real estate was one of the sectors worst hit by the global
financial slowdown as buyers turned away from the market fearing salary cuts
and pink slips, and banks got wary of lending. “The situation is now changing
as buyers’ sentiments have turned positive thanks to renewed activity on the
employment front and increasing income scenario coupled with benign interest
rates of home loan,” says Anil Kumar, CEO & deputy MD of Delhi-based real estate firm
Ansal API.
During the slowdown, prices of residential units had fallen
in the range of 35%, which has started now started moving northwards.
However, in extended suburbs and tier II-III cities, prices
are expected to remain under control as supply of residential units in these
locations still outstrip demand.
Courtesy ET Realty dtd.14-05-2010
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Namrata Kohli Real
estate finance is a grey area. In reality, realty funding happens through pre
launches. So, a builder typically asks buyers to cough up, say, a third of the
final cost of a house even before the first piles are drilled into the ground. In
effect, very little of the builder's own capital is at risk. This has been the
done thing - an arrangement between builder and buyer, which has been
successful owing to scarcity of housing in the country.
Real estate development business requires constant
acquisition of land for future projects. According to Sharad Jhingan, COO
(private equity fund) at Lanco Infratech Limited, "Due to the short supply
of land and lack of habitable locations and urban infrastructure outside
established locations, a developer starts to sell even before finalizing the
development plans. This is more a reflection of supply-side constraints. A
developer wants to grow as fast as possible. All these methods allow him to
acquire - what to him is the key constraint - land banks."
Even though pre-launches are illegal, a developer realizes
that the penalty for transgression is very light, and public memory is short.
But as Jhingan adds, "The core issue needs to be addressed - that of
increasing the land supply and speedy development of alternative urban centers,
along with strict imposition of penalties similar to what Sebi does."
But equity financing is only a short-term option. Sachin
Sandhir, MD and country head of RICS India shares his perspective: "Yes,
there has been a visible shift towards equity financing for projects. Real
estate companies have been very ambitious in the past and most are already
highly leveraged. Although RBI allowed debt restructuring for a year, there is
an astounding Rs 75,000 crore of outstanding debt with one third of it due by
June 2010. Even as unit sales have picked up, developers have not booked enough
profit to repay their debts. Consequently, other sources like equity dilution
and bulk selling to long-term investors at 30-40% discounts are the present-day
necessities. Developers are also trying to attract PE funds to invest in
short-term, small-format projects with completion schedules of 3-4 years. In
fact, private equity has experienced a phenomenal growth over the last two decades
as institutional investors, seeking higher returns have embraced this
alternative to traditional asset classes." But, cut to reality and equity
is much costlier than debt, so no businessman wants to dilute more than what is
absolutely necessary. Experts feel that almost all sectors in India witness
high leveraging. Real estate is no exception. According to Jhingan:
"Presently, the reason to raise more equity is lack of sufficient cash
flows to service the loans. The fundamental issue is of excessive leveraging in
anticipation of huge profits from fast growth in sales. This did not
materialize and hence developers
now want to raise equity to repay loans. This argument itself is
absurd."
How do private equity funds view Indian property market? It
seems PE funds are both keen and wary of India. They are keen because of
India's growth story, and they are wary because it is difficult for them to
operate in India. They want ease of entry and exit and faster court processes
in case of disputes - lack of transparency and corruption further increases
their wariness.
Ritesh Vohra, MD of Real Estate - Saffron Asset Advisors,
feels that debt and equity will always have a role to play in Indian real
estate. He adds that while equity is required for land purchase, debt would be
required for financing construction, especially in case of office or retail
building, which have a build and lease model. Ankur Gupta, of Ashiana Housing,
agrees: "Both are critical for real estate funding. Joint ventures with
landowners are also part of equity financing, which we have been doing
regularly and find that the best way to get equity financing. Debt in
construction financing works to make sure you are achieving your speed of construction."
Ankur adds, "We do our funding mostly through customer advances and
internal accruals. Secondly, we look at bank lending as they are the two
cheapest form of project financing available."
Private equity funds are bullish in all metropolitan cities
as well as developed Tier II cities. The verticals for investment include
retail, and specifically affordable segments in residential projects, which
spell opportunity for most of these funds. Vohra's fund is focusing on the
residential space - especially the midmarket and affordable housing segment. In
the long term, retail will also emerge stronger and so would commercial
segments.
He says that both these segments need to resolve a few
issues to ensure their long-term attractiveness - for retail it is about
focusing on quality of shopping center management and developing greater
depth amongst the retailer community. For commercial, it is largely about
managing the present oversupply situation in many micromarkets and gradually
moving away from the over dependence on IT. Industrial space and warehousing
are some of the other interesting verticals.
There are many PE funds, which have taken a long-term view
on India and which remain committed to investing here. Equally, there are some
daunted by the unstructured nature of the markets. Bank lending is a very
important source of funding which has emerged and is here to stay. Experts
conclude that bank lending will be an important source of funding for
developers.
FOCAL POINT
In theory, the funding of construction using advance money
from buyers is "fading out" owing to "competition and financial
sophistication" and "foreign investors are queuing up to bring in
equity into our markets" Experts feel that almost all sectors in India
witness high leveraging. Real estate is no exception
Courtesy ET Realty dtd.14-05-2010
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