ASK Property Investment Advisors to raise INR 10 Billion by December

India’s ASK Property Investment Advisors aims to raise a 10-billion-rupee ($219 million) fund by December in a bet on the long-term case for property in Asia’s third-largest economy. The real estate-focused private equity firm, which manages assets worth more than 9 billion rupees, is in talks with developers in five of India’s largest cities to deploy the funds, Amit Bhagat, chief executive officer and managing director, said. 

“In the downturn, if you invest, chances are there for superior returns,” Bhagat told Reuters. Slowing economic growth is mounting pressure on property prices in India, which are expected to “correct partly” in locations such as Bangalore and Chennai, Bhagat said. “We will invest in cities and suburbs, not extended suburbs. The fund will focus on residential projects in Mumbai, Pune, Chennai, Bangalore and the Delhi area, he said. ASK has already received commitments for more than half of the 10 billion rupees it is plans to raise, he said. The first fund of 3.4 billion rupees, raised in 2009, has been fully invested, Bhagat said.

Real Estate Companies Adding Rs 14 crore debt a Day

The debt load of 11 listed real estate companies in the country has risen 15 per cent, or by Rs 5,000 crore, to Rs 38,500 crore in the last 12 months. That’s nearly Rs 14 crore of debt added every single day. Most of the increase happened in the latter half of the last fiscal which ended on March 31, DNA reported, citing an analysis by Aashiesh Agarwaal and Adhidev Chattopadhyay, analysts with Edelweiss Securities. A huge chunk of this — or Rs 21,520 crore — is being borne by DLF. That number is up 16.6 per cent, or by Rs 3,060 crore, from Rs 18,460 crore in the last 12 months. Meaning, DLF alone added more than Rs 8 crore per day to its debt bloat. 

What makes things worse, Agarwaal and Chattopadhyay said, is developers are finding it tough to generate enough cash flows to take care of interest payments. That makes it difficult for realtors to even think of reducing the debt load in the medium term, they said. Amit Goenka, national director, capital transactions, at Knight Frank India said the cost of servicing this debt has also increased in the period from 14-15 per cent to around 18 per cent for listed players. “The situation may be worse for the unlisted players — they will have to cough up another 200-300 basis points,” he said. Interest rates on home loans have risen more than 200 basis points in the last 12 months due to which loan sanctions are also getting delayed.

The critical issue for realtors over the next 12 months would be to ensure their debt load doesn’t enlarge, especially since fund availability is constrained and many loans are coming up for repayment in this fiscal. The net debt story for the listed realtors is mostly about three players — HDIL, Unitech and DLF, points out another analyst with a foreign brokerage. While DLF has started looking at options to reduce debt, HDIL and Unitech continue to say they are comfortable, but we don’t think so,” the analyst said. The overall debt may stabilise than go up. In the context, a good traction in sales becomes another crucial imperative, he added.

Realtors based out of Bangalore have been the best in this regard, the Edelweiss duo said. Not surprisingly, Sobha Developers and Prestige Estates have both managed to reduce their debt levels — Sobha by 7 per cent from Rs 1,400 crore to Rs 1,300 crore in the last one year, and Prestige Estates by 37 per cent from Rs 1,900 crore to Rs 1,200 crore in the same period. Realtors operating in the National Capital Region near New Delhi, on the other hand, have had a mixed run, while those in Mumbai continue to grapple with slowing sales. How will all this affect property buyers? “There could be project delays and worse, project failures. It could also translate to more distress sales of projects midway to stronger players and compromise in quality - more so among the unlisted players,” Goenka warned.

Oberoi Realty Ropes in Samsung C&T Corporation for its Luxury Project in Mumbai

Real estate firm Oberoi Realty has brought on board Samsung C&T Corporation as its general contractor for its ambitious mixed-use, high-rise luxury project in Worli, Mumbai. The deal marks the entry of Samsung C&T, which has constructed many of the world’s tallest landmarks including Petronas Towers in Kuala Lumpur and Burj Khalifa in Dubai, in the Indian real estate space. 

“This association will enable us to strengthen and grow our vision of bringing the best international construction practices to India and contribute one more landmark to the skyline of Mumbai,” Vikas Oberoi, chairman and managing director, Oberoi Realty, told DNA. To be developed by Oasis Realty, a joint venture between Sahana and Oberoi Realty, the development will feature a luxury hotel, luxurious branded residence (managed by a hotel operator) and high-end commercial office space with a likelihood of luxury retailing area.

The hotel and branded residences, industry sources were quoted as saying, will likely be operated by luxury hotel company, Mandarin Oriental Hotel Group. YeonJoo Jung, president and CEO, Samsung C&T, said the deal was a remarkable milestone for the company as it would be their first such project in India. “We apply extensive experience, expertise and knowledge in construction and project management especially for high rise buildings, therefore the successful completion of this iconic building would also be vital for our future growth in the Indian market,” said Jung.

The Oberoi project is likely to be launched this October. Sources said details of the Oberoi project have not been made public as yet because, “the developer is still in the process of getting a clear picture on the floor space index allocation for it”.

Delay Hit Home Buyers to Take Legal Action against DLF after CCI Order

At a time when the Anna wave has enthralled the entire nation, capturing imagination and consciousness of millions of Indians to protest against corruption and injustice, real estate - one of the sectors perhaps most vulnerable to fraudulent practices - is facing the wrath of aggrieved buyers. Encouraged by an order of the Competition Commission of India (CCI) against DLF, the largest realty developer, home buyers hit by project delays and sudden change in building plans are considering legal action either through courts or the CCI. 

Lawyers in Delhi, Mumbai, Bangalore and Kolkata have been approached by people whose dream homes remain a distant dream as real estate developers keep postponing projects and missing delivery deadlines. The CCI order has come as a huge boost to those looking for relief as some have decided to move the courts or the CCI, while some others are weighing the options, said lawyers. Law firms have started receiving queries from consumers on how they could seek intervention of the CCI against developers.

The competition watchdog on Tuesday slapped a penalty of 630 crore on DLF for taking undue advantage of its dominant position in the market. The commission found DLF guilty of commencement of residential project The Belaire in Haryana’s Gurgaon without approvals, increasing the number of floors mid-way through the project, delay in project completion, and forfeiture of booking amount of some buyers.

Customers at Kolkata West International City, an integrated township project spread over 400 acres in the capital of West Bengal, are thinking of approaching the CCI, as the project is far behind its delivery timeline. Even the first phase of the project, scheduled to be delivered in 2008, is yet to be completed.

“We did not move court till now because we did not want to get into legal complications. Not even consumer court because the flats are not yet ready. Some of us who have been given possession letter have approached consumer court but a verdict is yet to be out. On the contrary, we have approached West Bengal government seeking their intervention in the subject. Now, we and our lawyers plan and take a call on approaching CCI in a week’s time,” said KWIC Buyer’s Welfare Association president Abhay Upadhyay. The project, which is a mix of housing and commercial establishments, is being developed by the Salim Group of Indonesia and the Universal Success Group of Singapore, with support from the Kolkata Metropolitan Development Authority.

In a similar such instance, a home buyer Shahnawaz Deriya, along with a group of customers at residential project Sagar City in Andheri suburb of Mumbai, has been fighting for over a year against the builder Cordcon Constructions for delay in delivery for four years. The group has already filed a case in the State Consumer Court, but is now seeking legal opinion to get the intervention of the CCI against the developer. “Yes, we are handling few inquiries that have come after the CCI’s order on DLF,” said H Jayesh, Founder & Partner at law firm Juris Corp.

Omaxe Planning to Invest 600cr on Land Acquisition

Realty firm Omaxe is planning to invest up to Rs 220 crore in the next six months on land acquisition. Meanwhile, the company also targets to cut its gross debt by about Rs 225 crore in this fiscal from Rs 1,477 crore as on June 30. It spent Rs 83 crore on land acquisition in the first quarter of the current fiscal. 

“We believe that we will be spending Rs 200–220 crore on land acquisition in next six months,” Omaxe vice president (investor and strategic relations) Sumit Arora said in a presentation. He, however, did not share details such as where and how much land will be acquired. “As far as land acquisition is concerned, in the first quarter the company spent around Rs 83 crore and acquired land majorly at Chandigarh… We have another 50 acres in Chandigarh and we have added some more land at Lucknow,” Arora added. 

Speaking about the company’s debt position, he said: “We have reduced the net debt by about Rs 75 crore on quarter to quarter basis. So, as on March 31, our gross debt was Rs 1,552 crore and today it stands at Rs 1,477 crore.” The company continues to reduce its debt further during the ongoing fiscal, he added. “For the whole fiscal, we are quite confident that we will be able to reduce this number to around Rs 1,250 crore, which will include Rs 227-230 crore of deferred land payments,” Arora envisaged.