Budget 2011-12 nothing special about real estate: DG, NIREM

“Today’s budget has not addressed the core issues that have been affecting the Indian real estate sector. However, enhanced housing loan limit of Rs 25 lakh for priority sector lending is a welcome move. It will definitely benefit a particular segment of home buyers as well as developers”, says, Director General of IDS National Institute of Real Estate Management (NIREM), New Delhi.

The DG further says that this budget also shows that though affordable housing is a concern for the Union Government, it is more concerned with LIG and lower level housing. Few of the most important core issues that have not been touched upon in the budget are:

·         Rationalization of stamp duty,

·         Introduction of REMFs,

·         Industry status to real estate sector,

·         Availability of land at concessional rates instead of auctioning at skyrocketing prices

·         Introduction of a system of timely master/city development plans,

·         Guidelines on private participation in rural housing,

·         80-IB renewal etc.

·         Human resource development for real estate and housing sector.

While industry status brings several advantages to the sector, introduction and promotion of REMFs/REITs enables various funds such as pension funds, insurance companies etc invest in real estate assets which in turn brings liquidity.

Special economic zones under the purview of MAT would reduce the benefits that developer used to get from SEZ. Infact, the additional benefits that SEZ offers had attracted developers but with new policy the level of attraction will reduce to some extent.

On the other hand, DG NIREM further adds, enhanced priority home loan limit of Rs. 2.5 million would do no good to the tight affordable housing situation in bigger cities, though it would definitely benefit the LIG segment in general to some extent. However,  interest subversion of 1% on home loan by including loans upto 15 lakh for houses that cost upto Rs 25 lakh for one year will come as a major relief to home loan borrowers from the low income group segment.’’ 

Ascendas India Trust To Buy Phoenix Infocity Assets For Rs 855Cr

BY TEAM VCC

These assets include five of its buildings in Hyderabad's Hitec City area.

Ascendas India Trust (a-iTrust), an Indian property trust managed by Singapore-based Ascendas Property Fund Trustee Private Limited, has signed an agreement with Phoenix Infocity Private Limited to acquire its portfolio of five buildings in Hitec City 2 Special Economic Zone, Hyderabad, in a deal valued at Rs 855 crore.

Of these, two of the buildings, with a total super built up area of 4 lakh sq ft completed and fully occupied, will be acquired with immediate effect for Rs 173.9 crore. The other three buildings, with a total area of 18 lakh sq ft, will be acquired as and when each is completed and is leased out. This is expected to be completed in next 4-5 years. The pricing of these three buildings, which is estimated at Rs 680.8 crore, will be based on the net property income achieved at the time of acquisition, an Ascendas statement said.

According to the deal, a-iTrust has the flexibility to acquire the buildings even when they are partially leased, by paying first for what has been leased, and paying for the balance space as and when it is leased.

The Trust will invest in the construction of the buildings, by subscribing to interest bearing convertible debentures during the construction of the buildings, subject to conditions of pre-leasing of the buildings and the trust’s ability to borrow within specified limits.

The Trustee-Manager will be actively involved in the development of the three buildings. The building design and specifications, as well as leases to be entered into, will be reviewed by the Trustee-Manager, the statement said.

Following this deal, a-iTrust’s presence in Hyderabad grows significantly, from the current 1.7 million sq ft owned to 3.9 million sq ft when all of the five buildings are acquired. The acquisition will strengthen a-iTrust’s position to capture the opportunities provided by the rapid growth of India’s IT industry.

“The acquisition is consistent with a-iTrust’s strategy to grow through acquisition and development. Since a-iTrust’s listing in August 2007, we have developed four buildings (two in 2008 and two in 2010), growing the portfolio from an initial 3.6 million sq ft to 5.9 million sq ft today. A fifth building of 0.5 million sq ft will be completed in mid-2011, bringing the portfolio’s completed space to 6.4 million sq ft,” Jonathan Yap, CEO of the Trustee-Manager, said.

“Upon acquisition of all five buildings, a-iTrust’s portfolio of operating space will increase by 34%, from 6.4 million sq ft to 8.6 million sq ft. On top of this, we own land that can yield another 2.5 million sq ft in Bangalore,” he added.

Upon closing the deal, Hitec City 2 SEZ will be renamed aVance Business Hub. The acquisition, subject to certain regulatory approvals and satisfaction of certain conditions by Phoenix, is expected to close over the next 3 months.

Ascendas, Asia’s premier provider of business space solutions, develops, manages and markets IT Parks, industrial parks (manufacturing, logistics and distribution centres), business parks, science parks, hi-tech facilities, office and retail space. Among its flagships are the Singapore Science Park, International Tech Park Bangalore, Ascendas-Xinsu in Suzhou and Dalian- Ascendas IT Park.

In India, a-iTrust is seeded by four IT parks in India, namely the International Tech Park Bangalore, International Tech Park Chennai, and CyberPearl and The V in Hyderabad.

Bigger opportunity in India's smaller cities

Business Standard : February 18, 2011  

Mumbai: Smaller cities are scoring over metros in terms of growing urbanisation, and cities such as Jalandhar, Aurangabad, Bhubhaneshwar, Agra and Raipur are believed to be the next ‘cities of opportunities’.

According to the latest Morgan Stanley research report, ‘AlphaWise City Vibrancy Index: A Guide to India’s Urbanization’, households in these cities earn more than India’s average urban household.

Centre for Monitoring Indian Economy (CMIE) pegs the quarterly average household income at about Rs 45,000 per urban household, whereas in cities such as Jalandhar, Bhubaneswar, Guwahati and Aurangabad have a quarterly average household income of above Rs 65,000.

The report measures the key drivers of urbanisation such as physical infrastructure, financial penetration, consumer services and job listings in the top 200 cities (by population) in India. The vibrancy index is aimed at helping investors evaluate companies’ strategic positioning in urban centers and monitor sector trends.

Urbanisation is important to the process of city formation and building India’s competitive strength in the global markets, feels Ridham Desai, head of India research and India strategist at Morgan Stanley. “The relative performance of components of the vibrancy index could give us insight into potential for urbanisation. For example, a city’s rate of urbanisation may be low but it may be (that) financial penetration may be high. This gives us potential for consumer services or job creation in that city,” says Desai.

Ban

galore, Hyderabad and Pune are the most vibrant cities among the top 50 cities in India on the AlphaWise City Vibrancy Index. Tier-II cities like Mysore and Meerut rank in the top 10. Ironically, the country’s financial capital, Mumbai, ranks 21st among India’s top 50 cities.

HDFC To Invest In Kaizen PE Fund

BY SIBI SATHYAN; VCCircle

Bottom of Form

Signalling its growing interest in the education space, India's leading home mortgage lender HDFC is making an investment in Kaizen Private Equity, the country's first education-focussed PE fund. This comes close on the heels of HDFC investing Rs 50 crore in Indus World Schools, the formal education venture of Career Launcher.

HDFC will make the investment, whose size was undisclosed, through its wholly owned subsidiary, HDFC Holdings Ltd.

Sandeep Aneja, founder and managing director of Kaizen PE, said the HDFC investment in the fund will help it complete its $100 million fund-raising exercise. He, however, declined to divulge the size citing contractual obligations.

Following the investment by HDFC, Kaizen would now need about 50% more to close India’s first education-focussed fund entirely, he told VCCircle. Kaizen is in the process of raising a $100-million fund and has achieved its first close in December 2010. It has used the proceeds to make its first investment in an undisclosed company, a report in Business Standard said, quoting a press release.
Kaizen has, recently, raised commitment for its debut fund from International Financial Corporation (IFC), the private investment arm of World Bank.

Kaizen's fund expects to raise over 50% of the corpus from institutional investors. The PE fund will look at providing funding to education companies in their growth stage and will also focus on operational improvements in its portfolio companies. The fund would look at typically investing in the range of $5 million to $15 million, according to its website.

Thanks to its non-cyclical nature and huge demand across the KG to PG spectrum, education is one redhot sector if deal data is a pointer. The sector has seen investments of $190 million across 23 deals in 2010, according to VCCEdge, compared to 10 deals worth $128 million in 2009. Beginning of 2011 has already seen several large-ticket deals such as Dubai-based QInvest's deal with FIITJEE and Pearson's strategic acquisition of TutorVista.

Red Fort Capital Investing Rs 200Cr In Ansal Properties JV

BY PALLAVI S.

JV will develop 108-acre township in Gurgaon; This is PE firm's third deal in less than six months. 

Real estate private equity firm Red Fort Capital is picking a 26% stake in a joint venture with Delhi-based Ansal Properties & Infrastructure Ltd for Rs 200 crore. The JV will undertake expansion of a residential project in Gurgaon by developing an additional 108-acre township project adjacent to Ansal’s existing 112-acre Esencia township project in Gurgaon.

Earlier, newsagency PTI had reported quoting unnamed sources that Ansal Properties is looking to raise Rs 350 crore from a bunch of private equity firms for financing some of its projects.

Ansal Properties last June raised Rs 58 crore ($12 million) through a preferential allotment to a string of high net worth individuals besides financial services firm Enam Investment Services. This was part of the plans to dilute 4.5% stake for around Rs 70 crore. Bulk of the investments has been made by three Mumbai-based individuals Roopchand Bhanshali, Akash Bhanshali and Sushma Jain. Enam invested around Rs 8 crore. The fifth investor Sudarshan Securities is likely to pitch in with the balance Rs 12 crore.

For Red Fort this transaction comes as the third deal in last five months. It had picked 24.5% stake in an upcoming office complex project being built by another Delhi-based realty firm Parsvnath Developers Ltd in the capital city’s central business district Connaught Place for Rs 120 crore in October.

In another back to back deal announced last November, Red Fort Capital had formed yet another venture with Parsvnath Developers jointly bidding to develop 5 million sq.ft. residential and mixed-use project on a 38-acre parcel near Connaught Place. This project was secured from India’s Rail Land Development Authority for $360 million.

This were not the first time the two were forming a partnership. The public listed realty company that had also raised Rs 231 crore separately through a qualified institutional placement of shares in October, had also raised a total of Rs 115 crore from Red Fort for 22% stake in Parsvnath La Tropicana, a group housing project of the company in north Delhi.

Indian realty sector has been on a recovery path after seeing the asset price bubble burst in 2008 with credit squeeze and high interest rates. Although the revival was led by rising demand for residential housing projects, commercial realty has seen an uptick for the last six months.

Although slow expansion in the retail sector has held back any sharp momentum to revenue growth, given wide expectations of the upcoming Union Budget opening the retail sector to foreign investment it could come as a positive push for retail realty space.

Assocham Demands Tax Exemption to Promote Affordable Housing

Industry chamber Assocham today asked the government to re-introduce the tax exemption scheme to promote affordable housing in the forthcoming Budget for 2011-12. The chamber also said real estate sector should be accorded infrastructure industry status to allow easier access to loans for its activities. In a letter to the Finance Minister, Assocham Chairman (Real Estate Committee) Navin Raheja said tax incentives under the section 80IB(10) of Income Tax Act “must be extended by at least five years”.

“The realty firms must be encouraged through fiscal incentives to construct small dwelling units at affordable prices, which should go a long way in uplifting the social status of ‘Aam Aadmi’,” he added. In the 2010-11 Budget, the government had announced one- time interim relief to the housing and real estate sector by allowing builders to complete affordable housing projects in five years instead of four years to claim deductions on profit under section 80IB(10) of Income Tax Act.

However, this extension is available for housing projects approved on or after April 1, 2005. Under the existing provision of section 80IB(10), 100 per cent deduction is allowed to developers to build affordable housing projects, provided the project is sanctioned before March 31, 2008. Raheja also said the sector should be accorded the long pending status of an industry for purpose of availing long term and short term finances like other industries.

“The definition of ‘infrastructure’ earlier used by the government and all financial institutions allowed for funding of townships and residential/commercial buildings. This seems to have got de-linked and branded as real estate during the time when land and property prices were spiraling,” he added. The chamber also asked the government to help in purchase of land to develop houses for economic weaker section and low income group. Besides, Raheja said the government should increase the tax saving limit on payment of interests on home loans to at least Rs 2.5 lakh from the existing Rs 1.5 lakh.

Job Oriented Course in Property Sales Launched By EduMark

EduMark, in association with India’s leading real estate management institute NIREM, has started a 3-month job oriented program ‘Diploma in Property Sales & Transaction’. The course is targeted at those who are looking for jobs in the India’s growing real estate and property sector. The key features of this course are class room teaching, on-the-job training with real estate companies and employment on successful completion of the course. The course covers everything that you need to start your career in property sales and marketing. This course is also suitable for those who want to start their own property dealership.

This job oriented program has been launched in response to the acute shortage of trained and educated sales professionals being faced by property brokerage and marketing companies. Moreover, these companies spend huge resources, both in terms of time and money, on training and development of fresh candidates. This program, however, will train participants as per the specific requirements of employers. Therefore, successful participants will be productive from the first day on the job which will save time and resources of real estate employers. Considering the benefits, several real estate companies have already placed their requests for recruitment of successful candidates.

Diploma in Property Sales & Transaction covers important subjects such as sale & purchase of property, transfer of title, title registration, agreement to sales & purchase, real estate agency & brokerage, escrow & settlement process, real estate sales process, closing a real estate deal, property valuation, home loans & mortgages etc. Specialized topics such as tax advantages of home ownership, transaction related to NRIs and PIOs and business skills & procedures have also been covered. However, the most important aspect of this course is the coverage of property sales issues such as property marketing, negotiation and sales techniques, prospecting property buyers, how and where to search property buyers, how to identify and approach long distance property buyers, how to use internet technologies in property sales etc.

Very low course fee is being charged so that maximum number of people draw benefit from this unique and first ever employment oriented program in the Indian real estate and property market.

EduMark is a vocational education and training organisation that specializes in skill and knowledge development of youth for employment in real estate and allied sectors. For further details mail to: edumarkvet@gmail.com or visit: www.edumarkindia.in/courses