CREDAI to Tackle Corruption through Time Bound Action

CREDAI (Confederation of Real Estate Developers Associations of India) on Thursday presented a time-bound programme to the government to tackle the menace of corruption in the real estate sector. “The Confederation today presented a time-bound action plan to union urban development minister Kamal Nath at the two-day 11th National Conference (NATCON) of CREDAI in Singapore,” said a CREDAI official. CREDAI national president Lalitkumar Jain, said the developer community was being branded as being corrupt. He said the confederation woud seek an appointment with the prime minister to discuss ways and means to check the cancer of corruption instead of indulging in blame game.

“This country is, sadly though, rated to be one of the most corrupt nations of the world. Any citizen of this country will feel hurt and humiliated. The real estate sector is rated to be the biggest contributor to this notoriety. I and all my colleagues in real estate feel greatly insulted,” said Jain. He added that developers were victims of the system and not the beneficiaries. Jain said the real estate sector was being branded as the breeding ground for black money and corruption. “It is the various government procedures and delays in clearances that rise to corruption. We curse every person who exploits us to give us a legitimate permission which we deserve instantly and without any illegitimate demand,” he said.

Talking about the long process of clearances, he said this process involved connecting with more than 150 people in about 40 departments of central, state government and municipal corporations. “After investing heavily in land, even a day’s delay in approvals adds to the costs. And in desperation and when speed becomes important, the concept of speed money creeps in,” he pointed out. Every developer has to obtain 40 certificates, NOCs and clearances. “The McKinney report to the Government of India as long ago as in 2001 said that land approval related hurdles are costing 40% higher to home cost,” he said. CREDAI presented two key documents to Kamalnath - a compilation of best practices by some state governments that can be emulated by the rest of the country and a comprehensive checklist for approvals.

India’s Real Estate Stocks May Recover Soon

India’s real estate stocks have attractive valuations after plunging 83% from their peak and are likely to rebound within two years, according to Macquarie Group. India’s real estate industry is grappling with rising borrowing costs, shrinking access to credit and a decline in demand as record prices make homes unaffordable. The Bombay Stock Exchange’s 14-stock Realty Index has dropped from its peak in January 2008, while the benchmark Sensitive Index surged to a record last November.

“This is one of the most bombed out, neglected and despised spaces in Asia,” Mark Matthews, a Singapore-based strategist at Macquarie Group , Australia’s biggest investment bank, said in a phone interview. “It’s in a distressed environment like this that one can find value.” India’s property index is trading at 1.4 times book value, less than half of the benchmark measure’s 3.4 multiple, according to data compiled by Bloomberg. The country’s developers are expected to face “large-scale distress” amid rising borrowing costs and shrinking access to credit that may force them into fire sales of assets, Knight Frank said.

Indian developers will have to repay Rs 1.8 trillion ($40.4 billion) of debt to state-run banks, private-equity funds and other lenders over the next two to three years, Amit Goenka, national director of capital transactions at the Indian unit of London based Knight Frank, said on April 21.

Shares of developers that survive will surge several fold over the next few years from where they are, Matthews said. He’s focusing on companies with low debt, high free cash flow, and a good product, he said. The Realty Index is up 20% from this year’s low on February 24. It fell 0.3% on Tuesday. Prestige Estates Projects is the brokerage’s top pick in the industry. The Bangalore-based developer, which is in a retail property venture with Singapore’s CapitaMalls Asia, has a low debt-to-equity ratio of 0.3, Matthews said. India’s property industry is going through a similar phase as Thailand almost two decades ago, when the industry was hit by oversupply Matthews said.

Indian realty sector pledges to maintain transparency

Agencies

Singapore: The Indian real estate industry, whose image has suffered after a series of corruption scandals, pledged to maintain transparency and quality towards all its stakeholders at a convention organised here.

Hundreds of developers, who gathered here for the 11th annual convention of the Confederation of Real Estate Developers' Association of India (CREDAI), also promised to become more sensitive to the interests of their stakeholders.

CREDAI, the apex body representing private real estate developers in the country, also presented a revolutionary document under "mission transparency" to remove corruption from approval system and thereby making housing cheaper.

Urban Development Minister Kamal Nath, who inaugurated the conference, said, "this demonstrates a huge change" which is commendable.

"The fact that the conference is being hosted in Singapore -- an excellent example of well planned and executed urban development and housing -- will serve as an inspiring example for the Indian development community present here in large numbers," the minister said.

He also said that the real estate sector "has image deficit", but the reforms "you have made yourselves" is going to change the perception.

Highlighting the problems of real estate sector, CREDAI president Latit Jain said, "Delays in approvals, which take two to three years, is costing the developers immensely and in turn passing onto the customers.

"We are actually burdening the middle class by adopting harsher policies," Jain said, and called for adopting a single-window clearance system.

The developers body also presented a comprehensive check list to Nath. It claimed that if their suggestions are implemented, it will increase housing stock by 100 per cent and create 100 per cent more jobs.

"It will also generate more than 100 per cent more revenue for all government authorities concerned ... service tax, VAT, development charges and stamp duty," Jain said.

Nath said the government would consider the suggestions and take appropriate action to ensure sustainable growth.

Source: Financial Express

Debt may force builders to go for distress sale: Study

Bloomberg

The real estate industry is expected to face “large-scale distress” amid rising borrowing costs and shrinking access to credit that may force developers into fire sales for assets, according to Knight Frank LLP.

Developers will have to repay Rs 1.8 lakh crore ($40.8 billion) of debt to state-run banks, private equity funds and other lenders over the next two to three years, said Amit Goenka, national director of capital transactions at the Indian unit of Knight Frank. Their cash flow may also be under pressure as creditors seek earlier repayments, he said.

“I see large-scale distress coming up,” Goenka said in an interview on Thursday. “Right now it’s more of financial jugglery which is keeping builders alive for a few months before everything starts to cave in.”

Small privately held developers may go “belly up” and the industry will see large-scale mergers and acquisitions and more distressed sales, Goenka said. The central bank’s interest rate increase this year to curb inflation has led to tighter liquidity and higher borrowing costs for developers. The Reserve Bank of India last month raised the repurchase rate to 6.75% from 6.5% and boosted the reverse repurchase rate by 25 basis points to 5.75%.

Many property companies raised capital at interest rates of between 21% and 25% from finance companies, while sales volumes dropped by about 50%, Sanjay Dutt, CEO of business at the Indian unit of Chicago- based Jones Lang LaSalle, said last month.

Home inventory levels have climbed to 28 months in Mumbai, the highest among the six cities tracked by Liases Foras, a real estate research company whose clients include Housing Development Finance Corp, India’s largest mortgage lender.

Developers who had access to cheap capital after the 2008 credit crisis are now facing a cash crunch as the equity fund raising route has been shunned by investors. Banks have also cut lending amid a bribery probe in November and the central bank has tightened provisioning rules.

Real estate debt outstanding with state-run banks is about Rs 1.6 lakh crore while those at private equity funds stand at almost Rs 1 crore, Goenka estimates. Private lenders are owed about Rs 0.4 crore, he said.

“It’s clearly a debt trap, the story has turned and will only get more dramatic this year,” Goenka said. “I do see shades of the 2008 crisis playing out with some failures in the industry.”

Mumbai, the country’s most expensive real estate market, had a record number of unsold housing units, Goenka said. Still, he doesn’t expect developers to slash prices.

Real Estate Developer Rakindo to invest Rs 300-400 crore in Various Coimbatore Projects

Rakindo Developers Pvt Ltd, the real estate master planner and developer, has plans to invest about Rs 300-400 crore in this fiscal (2011-2012) across various real estate developments, at its Kovai Hills project in Coimbatore. The investment entails the development of a golf course, a golf academy, a sports complex, a club-house and few residential spaces at the 850 acre property. The funds will be generated mainly through internal accruals and customer advances.

Here it deserves a mention that Kovai Hills is a golf-centric integrated township near Perur, Coimbatore, set to be built on an 850 acre property that is host to hill ranges, an 18-hole championship golf course, world class villas and unparalleled luxury amenities, swamped by an abundance of nature.

Speaking to Realty Plus, Shiva Lakshmanan, assistant vice president (business development), Rakindo Developers, informed, “For the next one year, we plan to invest around Rs 300-400 crore across various developments at the Kovai Hills project. This includes some residential space, a golf course, a golf academy, a sports complex and a club-house.” The sports complex is expected to include 3-4 outdoor and indoor sports like tennis, badminton, cricket, table-tennis, squash, etc.

“Other than the regular sports activities, we will also be having coaches at the academy who will train and help all those who are interested in various sports activities. Hence all aspects of being physical will be entertained at the academy,” Shiva further added.

Their ongoing development at Kovai Hills includes an affordable housing project called Orchids, which will be handed over within the next one year. Two other residential spaces where work has already started are titled Slopes and Highlands. These too will be developed in the next one year and are expected to be completed by 2013.

The group is also in the process of advanced talks with hospitality players for their Kumarakom Wetlands and Chennai Marina projects. These projects are currently in the pre-development stages and will be launched in the next fiscal.