Fine dining cos eye smart casual formatOlive, Speciality, Indigo Uncork Gastropubs, Bistros & Delis With Affordable Rate Cardshttp://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=TOINEW&BaseHref=TOICH/2013/09/16&PageLabel=18&EntityId=Ar01801&ViewMode=HTML

India’s fine dining pioneers are busy serving up smart casual formats like bistros, delis, cafes, and pubs — segments within the country’s $13-billion organized restaurant industry that show no signs of slowdown blues. Anjan Chatterjee’s Specialty Restaurants, which runs brands like Mainland China, A D Singh-led Olive Bar and Kitchen, Indigo of Mumbai and Shruti Shibulal-backed Avant Garde Hospitality, are opening more young and affordable hangout doors across top metros.

Olive Bar and Kitchen is taking its Bangalore-born gastro pub Monkey Bar to other cities, with Delhi and Mumbai first in the list. Olive holds 60% stake in the pub chain started by its two chefs Manu Chandra and Chetan Rampal, who have 20% stake each. Aditya Birla Private Equity-invested Olive itself has taken the bistro route to expand into cities like Hyderabad and Pune. 

Specialty Restaurants, which is the largest operator with 106 units, has created a new vertical, Beverage and Modern European Cuisine, to look into the changing dining patterns. While Mainland China would continue to expand, Chatterjee is aggressively pushing ahead in opening pubs, cafes and bistros under two new brands Hoppipola and Mezzula respectively. 

Manu Chandra of Monkey Bar said young, casual and affordable formats like theirs offered brands where you “don’t go to be seen, but to let your hair down and hangout”. Keeping expenditure tight and rate cards reasonable, Chandra plans to open seven outlets in the next two years. With food ingredients costlier by 25% in the last three months and manpower costs up 20% over last year, these bistros, delis, and pubs help restaurateurs to optimize costs and drive better performance and efficiency, said analysts tracking the sector. 

“People are looking for places to go where they can easily walk in and not feel conscious — smart places that serve quick food, not fast food, which are reasonably priced,” said chef Abhijit Saha, founder of Avant Garde Hospitality, which operates restaurant brands Caperberry and Fava in Bangalore.Saha has finalized major expansion plans on a smart casual, no-frill restaurant format. The chef — who has on board Shruti Shibulal, daughter of Infosys cofounder and CEO S D Shibulal, as an investor — is drawing up fresh fund-raising plans.

Together with quick service restaurants, the casual dining space accounts for 70% of the country’s organized restaurant business, revealed data from the National Restaurant Association of India. Pubs, bars, clubs and lounges have a 12% market share, while cafes account for 8%.“Today, nobody sits down for a four-course meal, orders a bottle of wine, and enjoys the meal over a conversation. People want to sit down, roll up their sleeves and

have something quick,” said Rahul Akerkar, founder of Indigo Restaurants. After a decade in Mumbai, Akerkar is taking the flagship Indigo brand to Delhi. 

And many of these youth outlets are smaller formats by design. “Monkey, for instance, won’t be more than 4,000 sqft. Nobody likes to walk into an empty place,” said Chandra. REASONABLY PRICED. Cheaper formats help restaurateurs optimize costs and improve efficiency as well as performance. This negates to some extent the 25% rise in ingredients’ costs in last 3 months and 20% hike in labour rates last year. Casual dining space, coupled with quick service restaurants, accounts for 70% of India’s organized restaurant business.

Housing loans home in on best ratehttp://www.thehindubusinessline.com/todays-paper/tp-oncampus/housing-loans-home-in-on-best-rate/article5132406.ece

If you’ve taken a home loan, get ready to tighten your belt, for interest rates have begun to creep up once again. The base rates of leading banks (which decide lending rates), after falling by 50 basis points between April 2012 and May 2013, have risen by 25 basis points in the past one month.After the RBI’s liquidity tightening measures in July, short-term borrowing costs for banks have gone up by 1 to 2 per cent. This has resulted in banks raising their lending rates to safeguard their margins. So what should you, the home loan borrower, do? Shop around for the best deal, of course.

Best deal for new bies

But first, let’s get some background. While market interest rates have certainly shot up, it hasn’t affected all banks equally. That’s why more private sector banks than public sector banks have raised their rates in the last month. Four private sector banks have so far raised their base rates. ICICI Bank raised its base rate from 9.75 per cent to 10 per cent. HDFC Bank, which had the lowest rate among all banks, raised its rate by 20 basis points to 9.8 per cent. Axis Bank and Yes Bank have also raised their base rates.Most public sector banks, however, have held on to lower interest rates for their home loans. Only Union Bank and Andhra Bank have raised their base rates. SBI, which has the largest home loan portfolio among banks, has the lowest base rate of 9.7 per cent and is yet to increase it. As for housing finance companies (HFCs), HDFC increased its retail prime lending rate, on which home loan rates are benchmarked by 25 basis points to 16.65 per cent.

After these tweaks, most banks and HFCs offer floating rate home loans in the range of 10.6-10.75 per cent. If rates are your primary consideration, SBI offers the lowest one at 10.1 per cent for loans above Rs 30 lakh. Therefore, it is SBI you must go to if you want the cheapest home loan. SBI hasn’t hiked its lending rates so far. Even if it does, with the next best rate at 10.65 per cent, SBI’s rates may still remain attractive after the hike.

But it would be good for new borrowers to put off their home loan decision until the RBI’s next monetary policy review due on September 20. This would be critical to decide on the future direction of rates.

If the central bank continues its tight liquidity measures, more banks could be raising rates, including SBI. But if the measures are rolled back, banks may put a stop to further rate hikes and loans from private banks may possibly get cheaper.

Fixed or floating?

But why go in for a floating rate loan at all? Why not avoid all this confusion and lock into a fixed rate loan, you may ask.

That would be a particularly bad idea at this juncture.

Interest rates in the economy are poised at fairly high levels today with the 10-year benchmark gilt yield at a five-year high. Given that interest rates too tend to go through up and down cycles like other variables, locking into fixed interest rate loans now is a losing proposition for the borrower. Especially so as interest rates are bound to cool off from these levels in a year or two. That is when you should take a call on fixed rate loans.

Remember that banks and HFCs also charge a fairly steep premium for the predictability offered by those fixed rate loans. Most fixed rate home loans today charge 11.75 per cent per annum, almost 100 basis points more than floating rate loans. That’s Rs 3,500 more on your equated monthly instalment (EMI) on a Rs 50-lakh home loan for 15 years.

Then there are banks and HFCs offering fixed rates of interest for the initial two or three years after which the loan gets converted into floating rates.

If at all you are keen on some predictability in your EMIs, dual-rate loans may be one option. These loans offer fixed rates for the first couple of years which are then converted into floating rates. For instance, LIC Housing Finance offers an attractive scheme for women called Bhagyalakshmi which offers 10.35 per cent fixed for two years, after which the loan gets converted into a floating rate one.

Switch or reset?

The decision is easy for new borrowers, but what must borrowers with older loans do? Switching to a cheaper loan is an immediate option. But moving to a cheaper home loan will be futile if the new lender immediately pegs up rates.

Hence we advise borrowers to consider switching only if the rate differential between their existing loan and the new one is at least 50 basis points. In this case interest savings will be significant and it will also insulate borrowers from future rate hikes.

There are two ways of making the switch and reducing your EMI. One option is to reset your loan rate with the same bank. The other option is to switch to a new lender offering a lower rate. The decision has to be based on a cost-benefit analysis.

Cost: When you try to reset your interest rate within the same bank, the bank will usually charge a conversion fee based on the nature of the loan. If you want to move from a fixed rate loan to a floating rate loan, then the charges are usually in the range of 1.75-2 per cent on the loan amount and also include service charges.

For instance, ICICI Bank charges 1.75 per cent in case of conversion from pure fixed loan to floating rate loan, while Axis Bank charges 2 per cent. However, in case you want to

convert your higher floating rate to a lower floating rate loan, then the charges are around 0.5 per cent in most cases.

In case you switch between banks, prepayment charges for floating rate schemes have been done away with. But there is a charge in the case of pre-closure of fixed loans. In most cases, the penalty is around 2 per cent on the loan outstanding. Besides this, a processing fee, which ranges from 0.5 to 1 per cent of the loan is also charged. There could be an additional service charge too. Here again, SBI is the only bank that offers to take over your loan at a flat Rs 1,000 (valid till {+t} {+h} September 30, 2013), an option you must certainly consider.

Benefit: The benefit clearly is the interest savings you make on swapping your loan. The size of the benefit varies with the amount of loan outstanding (the higher the amount, the more you save), remaining term of the loan (longer the term, higher the savings) and the interest differential (bigger difference means more savings).

What do you save?

So how much exactly would you save for taking all this trouble? Let us assume that you had taken Rs 50 lakh home loan for 15 years at 10.4 per cent. After the recent hike you are now stuck with a home loan rate of 10.65 per cent. The lowest rate now offered by SBI at 10.1 per cent offers more than a 50 basis point reduction in your interest rate. If you decide to move to this scheme, then your EMI will come down by Rs 1,699 to Rs 54,036.

This amounts to savings of Rs 3,05,868 in interest over the tenure of the loan. If you can manage to pay the higher EMI and reduce your tenure instead by one year, your savings will nearly double.

Even if SBI increases the rates by say 25 basis points, you will still save Rs 930 per month on your EMI and Rs 1,67,385 on your entire interest outgo. Remember, in the case of SBI, the takeover fees (on switching from other banks) is capped at Rs 1,000. This makes it more attractive.

However, in case of switching from a fixed rate loan to a floating rate one, remember there is an additional prepayment charge of 2 per cent which may shrink the benefit. In this scenario, only a rate differential of 1-1.5 per cent will make the deal worthwhile. The markets may wait with bated breath for the RBI’s September 20 review to decide which way interest rates will head. But as a home loan borrower, there’s no need for you to wait. It is best to do your homework now.

Realtors lure customers with new schemeshttp://www.business-standard.com/article/companies/realtors-lure-customers-with-new-schemes-113091600034_1.html"Developers would soon come out with new schemes to attract buyers. They are in the process of reworking their marketing strategy now, with the festive season round the corner," said an analyst.

The real estate subvention scheme or 80-20 home buying plan, recently banned by the Reserve Bank of India (RBI), is now being replaced by other offers to attract buyers.

"After 80:20 and 75:25, the developers have to find new means to sustain themselves to overcome the slowdown. There is a liquidity crunch in the sector. With Diwali around the

corner, they don't want to miss any opportunity," said another analyst tracking the sector.

According to market estimates, Diwali constitutes about one third of developers' sales.

The home loan schemes of 80:20 and 75:25 allowed buyers to pay upfront money, 20 or 25 per cent of the total cost and no EMI for the next three years. It had become very popular especially with first-time home buyers, wherein, they could easily pay rent and no EMI for a certain number of years.

Victory One, which is coming up with a limited edition luxury project in Greater Noida West - Amara, has put up  banners, assuring buyers of a timely delivery.

The company's website says it would give possession in three years. If not, the developer promises to pay back Rs 15 a sq ft every month to buyers.

Then, there are projects hardselling add-on facilities such as air conditioners in all bedrooms, lights and fans in all rooms, and modular kitchen. Some are even giving customised colour options for walls, floor tiles and wooden flooring.

Also, realtors are announcing annual sale on projects to lure customers. During this sale, Supertech for instance, talked about 40 per cent payment now and balance on or near possession. The minimum investment started at Rs 7 lakh and the offer was valid till Sunday on 28 projects.

Supertech chairman and managing director R K Arora said, "We have come with a scheme for our unsold inventory, wherein buyers can pay 40 per cent initially and rest on possession. It is not a subvention scheme, as the apartments would be ready in six months to one year."

He also said that the company was offering 80:20 schemes only in some of its projects, so there wouldn't be much of an impact on the sales following the RBI order.

RBI had recently asked banks to link the disbursal of home loans to stages of construction to protect the interests of buyers and contain the fallout of 'innovative' housing financing schemes.

Want to buy a house? Keep it on hold if you are not desperatehttp://www.business-standard.com/article/pf/want-to-buy-a-house-keep-it-on-hold-if-you-are-not-desperate-113091500693_1.html

Sumanta Rudra, head of infrastructure and administration at VFS Global, has decided to defer buying a property. "I am expecting a correction in property prices. I will only take a call about buying after the elections."

With the festival season coming, there will be a plethora of advertisements in newspapers and your email boxes will be flooded with promotional mailers goading you to buy property with catchy lines such as "Buy before property prices go up further", "Get the best discount," etc.

However, many like Rudra are unwilling to get carried away. They feel deferring the

decision will work in their favour. Of course, there are other issues. As a banker says, "Given the tough economic conditions, most people are unwilling to part with liquidity. So, even if there are great deals, the feeling is "let's wait for some more time". Add to that the Reserve Bank of India's (RBI) red flagging of the 20:80 schemes due to fears of default from builder and people are unwilling to commit, at least for the time being.

It is not that corrections haven't taken place. Prospective buyers are offered teaser price cuts of 5-10 per cent in Mumbai and Delhi and slightly over 10-15 per cent in other cities.

For example, in February 2012, a four-bedroom flat in Jolly Maker 1 at Cuffe Parade, one of Mumbai's most expensive residential areas, was sold for Rs 29 crore. The transaction was reported widely as the highest-ever price for a residential apartment. Today, a similar flat in the same building will not fetch more than Rs 24-26 crore.

According to National Housing Bank's Residex, an index for property prices, property prices at Cuffe Parade and Malabar Hill of South Mumbai have fallen by almost nine per cent in April-June 2013 compared to January-March 2013. Even for Mumbai as a whole, the Residex shows a slight dip in prices. The trend is similar in 24 out of the 26 cities for which the National Housing Bank provides data.

In order to sell, some builders are giving free car parking and/or bearing the stamp duty and registration. "However, no builder will admit to it since it will send out distress signals to other potential customers," points

out Om Ahuja, CEO-Residential Services, Jones Lang LaSalle, India.

The question, for the likes of Rudra, is whether it will fall further. V K Sharma, managing director and CEO of LIC Housing Finance, feels if you are buying property for investment, then you should wait for some time. "A major appreciation in prices from the current levels looks difficult. If you are not in urgent need, then it is better to hold your buying decision for now," he says.

If you are looking at buying your first property and, more important, one in which you intend to stay, the traditional answer is: Don't look at prices. The answer stays the same, but with a caveat - prices are unlikely to run away in the near future, so delaying the decision is unlikely to hurt substantially. If you want to buy now, ask for discounts. Faced with oversupply, developers will be more than willing if they are convinced you are a serious buyer.

Little appreciation in the near futureThe real estate sector has been in trouble for some time. However, prices have been resilient because builders have received funding from potential buyers (through home loans), private equity and investors. Meanwhile, builders have launched projects, which are yet to be sold. In Mumbai itself, some 10 million-plus flats priced at over Rs 1 crore are said to be lying unsold.

Meanwhile, new projects have been launched even as existing projects haven't sold out completely. Obviously, capital appreciation is not something most experts expect. Anand Moorthy, head (real estate services) at RBS Financial Services, says there is humongous supply in most residential areas, even in the secondary market. Investors should not

expect more than five-to-eight per cent growth in prices in most cities for the coming one-two year horizon for realistic gains. Another reason to wait, especially for investors, is because real estate is not liquid.

Anuj Nangpal, managing director (investor services ) at DTZ India, says: "The anticipated downward pressure on prices is expected to prevail in the short-term owing to significant inventory overhand across most micro markets. Additionally, the recent hike in home loan interest rates along with continued slowdown in economic environment has further dampened sentiments amongst prospective end users. The consequent drop in demand has further limited any opportunity for price appreciation in near future," he says.

Is this a buyer's market? Some feel that buyers are on a stronger wicket. Lalit Jain, chairman of the Confederation of Real Estate Developers Associations of India, says: "Our costs have increased substantially. In fact, we have sent an advisory to our members saying they can sell at the lowest prices due to the liquidity crunch. What customers are getting today is the best price and at the first possible trigger, at the first signs of economic situation improving, prices will go up. Developers are giving good bargains even to individual buyers."

There are some things that will work in your favour while bargaining. While those looking to buy should bargain for good rates, they should not hope for the developer to offer it to them. "There is very high probability that you can get discounts. In a market like Mumbai, a discount of even five per cent is good. In other markets, you can get 10-15 per cent or even 20 per cent," says Sanjay Dutt, executive managing director (south Asia) of Cushman & Wakefield. Buyers with pre-approved home loans in hand are in a position to bargain for a better price. In fact, simple things such as going with your family members and with a cheque book to make the downpayment will show you are a serious buyer and ensure good discounts.

Since October-January is considered an auspicious time to buy property, this is when builders offer discounts on the price or give benefits such as stamp duty waiver or freebies such as kitchen cabinet or air-conditioners in the house. So, if your builder is not offering any of these facilities, you can bargain and ask him to reduce the price to that extent.

If you are looking to buy a property in a premium project, going with an up-front payment will ensure you get discounts. The retail market is largely broker-driven. So if you approach the builder directly, you can straightway ask for a two per cent discount on the price. You can also ask to include the loading and ask the builder for a discount. Loading is the carpet area (the actual usable area of the house) minus the super built-up area (non-habitable area such as staircase, veranda etc). In Mumbai, Thane and Pune, the loading is 40-50 per cent; in Chennai, Bangalore and Hyderabad it is about 30-35 per cent, while in Gurgaon it is 35-40 per cent.

"Compare carpet loading factor and amenities cost. Builders have a decent spread and now they are willing to sacrifice some of it," says Moorthy of RBS Financial Services.

Waiting periodAccording to Dutt, the good time to invest in real estate is between now and March 2014, the festival period starting with Ganesh Chathurthi and ending with Gudi Padwa. There is also a good chance of getting attractive deals in land and residential apartments because of the market conditions, with lower sales and new supply hitting the market.

"Once the general elections are over and there is some political and economic stability, the

window of opportunity will be over," says Dutt.

In fact, with harder rules on project approvals, land acquisition and taxation on property coming in, developers will have to raise prices to stay relevant in the market and solvent in their businesses. However, there are enough existing projects and inventory with many builders, which will have to be cleared before the impact of the Land Acquisition Bill comes into play.

Reality check for the real estate markethttp://www.livemint.com/Money/XoZDS7jjLW4gbh0IVnkVnL/Realty-check.html

Subdued sentiment in the residential real estate market is mirrored in the sales volumes and inventory levels. In spite of the regional variance, data collated by Edelweiss Research indicates an annual 3.7% contraction in sales volumes for the quarter ended June, and a 2.7% shrinkage from the preceding three months.

More glaring is the fact that, in spite of sales contraction across most markets except Bangalore and Hyderabad compared with the March quarter, inventory levels across the country’s leading cities are elevated. Chennai, the market touted as the most stable, has the highest inventory of 44 months, followed by Mumbai and the national capital region. Inventory increased after a spurt in approval of new projects about six months ago that led to increased momentum in new launches.

The economic slowdown and no sign of interest rates cooling off have led to high inventory across realty markets in leading cities. This is likely to keep residential property prices under check. Experts envisage more incentives for buyers in some regions like Chennai and even a 5-10% price cut in regions like Mumbai and the national capital region. The report says that it may well be a year before the inventory pipeline is cleared in markets like Pune. As for Hyderabad, political issues related to Telangana are a deterrent for property deals at the moment.

The Bubble has Bursthttp://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETBG/2013/09/16&PageLabel=12&EntityId=Ar01200&ViewMode=HTML For years, real estate has been a preferred investment in India. This was driven by favourable demographics, shortage of housing, a move to nuclear families, easy credit and increase in black money that required storage. The RBI released excess liquidity into the system during 2009-12, as part of stimulus. This found its way into real estate via various transmission channels and aided a bull run in the sector. 

This was supported by factors like high inflation, negative real returns on financial instruments such as fixed deposits, and choppy equity markets. Today, residential real estate is now priced at an average yield of 2%. This is indicative of a huge bubble in the sector. After a decade, many factors are converging, setting the stage for a deep correction in the Indian real estate sector. 

Today, the rupee has depreciated considerably from year-ago levels. The RBI has also tightened monetary policy. Tighter monetary conditions will force Indian banks to start deleveraging: today, they are running a high investment-to-deposit ratio of 108%, instead of the usual range of 95-100%. The direct real estate-related lending — including mortgages, construction loans and loans against property — amounts to $235 billion, or 25% of the outstanding loans in the banking sector, up from $20 billion, or 12%, in 2004. 

The period from 1997 to 2003 witnessed deleveraging by Indian banks and overleveraged companies. In that period, property prices corrected by more than 50% in the Mumbai metro region (MMR). Foreign flows into India are drying up. Foreign private equity funds invested over $20 billion into Indian real estate during 2006-13. The developers were supposed to make housing affordable but, instead, fuelled real estate prices across the country by hoarding finished inventory, diverting money to other projects and investing in land banks for future use. After 7-8 years, these funds are reaching their end of term and, so, would have to sell their holdings. 

Towering Elections Soon Real estate has been a store for illicit funds. The need for funds in upcoming central and state polls will accentuate the outflow of money from this sector over the next 18 months. The fiscal deficit funds consumption with policies like farm loan waivers, pay hikes for government staff, NREGA and food security schemes. Subsidies remain high and all attempts towards fiscal consolidation remain a distant dream. Today, subsidies account for 42% of gross fiscal deficit, exactly double the size of a decade ago. 

The transmission of fiscal deficit will move in the following way: from corporate to banks to government, and finally landing to people in the form of increased direct and indirect taxes. We are in an era of low growth, accompanied by lower investments by the private sector. 

The slower growth of real personal disposable income per capita over the last few years is a factor slowing demand. NSSO surveys indicate that India is witnessing jobless growth in the formal sector for the last 10 years. Given all this, the ability of the average Indian to afford real estate in our cities is already under serious threat. Government records suggest that there are only 35 million taxpayers, about 3% of the population. Only 1.5 million declare annual earnings of more than a million rupees. A recent report by Cushman & Wakefield suggests that more than 30% of apartments under construction in Mumbai are priced at more than. 1 crore per apartment. 

Caution, Correction Ahead These things together show that wealth is concentrated and tax evasion is rampant in India. The current real estate prices represent affordability for very few. Today, common man has to shell out 20 years of his savings to afford a house. All these factors are setting the stage for a deep correction in real estate prices. Asset price bubbles have occurred and burst across asset classes, countries and times. Japan witnessed its lost decades on the back of a real estate bust; the US has still not recovered from its subprime mortgage crisis. 

Build a New Map Indian policymakers need to seriously think about an approach to make housing truly affordable. Both the RBI and government have to collaborate in this. The recent measure by the RBI, to caution banks on 20:80 scheme, is welcome. But much more needs to be done. Measures taken by the Chinese and Singapore governments, to restrict price expansion in the housing sector — like reducing loan-to-value ratio and differential taxation on profit and interest rates for second home loans — point the way for India. The time has come to deflate the real estate bubble in an orderly manner to save financial institutions and households, and to channelise public resources for productive purposes, failing which the financial consequences can be disastrous. 

ITC Hotels, Ravi Pillai sign pacthttp://www.business-standard.com/article/companies/itc-hotels-ravi-pillai-sign-pact-113091600377_1.html

ITC Hotels has tied up with Bahrain-based India-born billionaire Ravi Pillai to manage five of its hotels under the Welcome Hotel and Fortune brands in India and Dubai.

For the Pillai-led R P Group, this is the second big tie-up with an Indian hospitality chain. Two years ago, it had bought Leela Hotel’s Kovalam property for Rs 500 crore. The duration of the management contract was not disclosed.

The properties, under the new memorandum of understanding, would open in Kerala under the brands Welcome Hotel Raviz and three Fortune Raviz hotels in Dubai and Kozhikode. Raviz is the hotel brand of the R P Group. In India, Pillai has invested Rs 1,000-1,500 crore in the past year, mostly in the hospitality sector.

R P Group is also building two five-star hotels in Kozhikode. It has business interests in construction, healthcare, travel & tourism and education sectors, with an annual turnover of $3 billion. ITC Hotels and R P Group signed a pact for managing these hotels on Sunday.

Real estate inventories close to record highhttp://www.business-standard.com/article/companies/real-estate-inventories-close-to-record-high-113091600779_1.html

Inventories in the residential real estate market are close to an all-time high in all the major cities in India.

Builders in Mumbai are sitting on an inventory of 48 months. Delhi is sitting on an inventory of 23 and Bangalore on 25 months. This is above the comfortable level of 14-15 months. Analysts said these are close to the levels of 2007, when the residential real estate market's inventories were at an all-time high.

Jones Lang Lasalle, in its latest report, RBI Bans 80:20 Schemes: Correction On The Cards?, says due to these high inventory levels in seven major cities, a price correction is likely. “Inventory levels in the leading seven cities in India are much higher than the comfortable industry levels seen eight-10 months ago, which is between 14 and 15 months’ of unsold supply.

As a result, the ability of the market to cling to current prices is under severe stress,” said Ashutosh Limaye, head, research and real estate intelligence service, Jones Lang LaSalle India.Mudassir Zaidi, regional head, north, Knight Frank, said, “Five to seven quarters of

inventory are comfortable. Anything above is worrying. Already, these markets are stressed as the supply has already come, whereas demand is not-so-stable.” “I think buyers would start having some confidence after next Diwali, once polls are over and there are some decisions on the economy,” said another real estate broker. 

The report, based on the inventory levels of the second quarter, said though price cuts were inevitable, there would be a resistance to cut due to the land cost. However, there could be a correction in the mid-income segment in the range 12 per cent to 18 per cent, depending on specific projects and builders’ holding capacity and financial strength.

“A correction in prices beyond this would affect developers’ profitability to a non-acceptable extent,” said the report.Land prices as a percentage of project cost are 60 per cent in the cities and 40-60 per cent in the suburbs. Niranjan Hiranandani, managing director of Hiranandani Group said the 80:20 or 75:25 schemes would impact the market more in the north, as it was an investor-driven one. “These schemes are meant more for the investors who pay 20 per cent initially and want to earn profits when the projects are completed.”

There are 50-100 projects in Mumbai–Thane under these, said experts. In other cities, the number is double. “The real-time rise in property prices (adjusted for inflation) in Tier-I cities since first quarter, 2012 has not exceeded four per cent-five per cent, a fact that could dissuade developers from reducing property prices significantly,” said the report.

Realtors hopeful of sales revival in festive seasonhttp://www.business-standard.com/article/companies/realtors-hopeful-of-sales-revival-in-festive-season-113091600927_1.html

Realtors in the state are pinning hopes on the ensuing festive season for revival of sales in the sluggish real estate sector.

Real estate developers are re-adjusting their construction patterns to the affordable housing segment for tapping the opportunities in the category which has largely remained untouched.  The cost of the housing units in the segment range from Rs.8 lakhs to Rs.15 lakhs.

“We were earlier focusing on high-end customers, now the emphasis has shifted to budget range which accounts for about 70 per cent of the demand. The queries for low range houses, particularly for studio apartments within the city limit, is on the rise from bachelors working in IT and other sectors,” said D S Tripathy, joint secretary, Credai (Confederation of Real Estate Developers’ Associations of India).

Realtors say, the incentives promised in the new affordable housing scheme of the state government are luring the players to shift to the affordable housing segment as the demand for the higher segment is staring at saturation.

Following the setbacks from certain recent developments such as the weakening of rupee against dollar and the recent crackdown on the chit fund companies, realtors are hopeful of better sales in the forthcoming festival season.

There are also hopes that the non-resident Indian (NRIs) will invest in the sector due to weakened rupee and the negativity in the market, created by some unscrupulous chit fund companies which had strayed into real estate sector, will gradually fade away, Tripathy

added.

The city police has already quizzed some builders for their alleged links with scam tainted chit fund firm, ArthaTatwa and its proprietor, Pradip Sethi who is currently in jail for misappropriating crores of public money.

Binay Krishna Das, President, Credai-Odisha said, “People are normally in mood to buy properties in the festive season starting from October to January.

As per the internal Credai estimates, the housing units worth Rs 8,000 crores are under construction and another Rs 6,000 crores will be infused into the sector for building about 11,000 housing units in next three years. Of these, 6,000 units will be constructed in the affordable housing segment.

Credai-Odisha will be organising ‘Property Expo-13’ starting from November 8. Nearly 120 real-estate companies, financial institutions and building material companies are expected to participate in the three day event.

“About 5000 housing units will be show cased in the expo”, Das added. This year the regional chapter will also organise training sessions for construction workers on issues like improving quality and customer satisfaction.

Small, medium hotels in HP worried over new tax formulahttp://www.business-standard.com/article/sme/small-medium-hotels-in-hp-worried-over-new-tax-formula-113091601030_1.html

Small and medium-scale hotels in Himachal Pradesh are running from pillar to post to ensure that their voice is heard on the new luxury tax which is likely to be implemented very shortly under the Himachal Pradesh Tax on Luxuries (in Hotels and Lodging Houses) Amendment Act, 2013.

According to sources in the state's tourism department, the tax was earlier levied on the actual amount that hotel guests were charged; now it will be imposed on the approved (printed) tariff of the luxury accommodation provided by the hotel or on the charges fixed by the government, whichever is higher. This is being done to augment the luxury tax base and prevent leakages.

Commenting on the HP government's proposal, Ajit Butail, convenor of CII's Himachal Pradesh committee on tourism, said that there is serious concern within the hotel industry in the state about the proposal. Based on the industry's feedback, he said, a representation had been submitted to the state government seeking annulment of any such proposal.

"We understand that the government is contemplating levying a luxury tax on the rack rate for hotel rooms, as against the previous system of charging it on the actual amount that consumers were charged. This will severely affect the hospitality industry in the state, which is already among the highly taxed segments in the state," he said.

The tourism industry in the state is already under stress in the aftermath of the Uttarakhand cloudburst and landslides, and the new tax could further aggravate its problems, he noted. Tax is universally a percentage of the amount received and cannot be on an amount that is not realised, which would lead to over-taxation, he observed.

Butail added: "Tourism is a vital sector for the economy of the state with multiplier effects on entrepreneurship and employment in the state. There is a need to make collective efforts toward leveraging the inherent strengths of the state and incentivising the related segments to move tourism in Himachal Pradesh up the value chain."

Akash Garg, director, Timber Trail Resort Ltd, said that that hospitality sector was already over-taxed in state. "We pay 10 per cent luxury tax and 7.42 per cent service tax. The present system allows us some amount of flexibility as we can offer some discount to corporate clients who get us bulk business. The lean months witness low footfalls and a discount on room tariffs helps to meet our variable costs."

HP's hotel industry wants the state government to withdraw the proposal, because tourism is the backbone of the state's economy. There are close to 100,000 hotel rooms in HP, a large part of them in small and medium-sized hotels.

Spectre of bubble-burst looms over housing sectorhttp://www.thehindubusinessline.com/todays-paper/tp-corporate/spectre-of-bubbleburst-looms-over-housing-sector/article5135972.ece

The year was 2007. The real estate market, like the Indian economy, was on a roll. And Manish Khanna was busy house-hunting in Mumbai. His weekends were spent looking for an affordable deal in a good locality.

But every weekend, when Khanna sought to finalise a deal, the prices would have risen by Rs 200 to Rs 300 a square foot over the previous week.

When he finally bought a flat in Navi Mumbai’s Nerul locality, Khanna paid Rs 5,200 a sq. ft. for a property that had cost Rs 4,200 a sq. ft. when he first checked it a month earlier.

Those were the heydays of real estate. Incomes were growing and so was the demand for real estate, while property supplies were limited.

Cut to 2013: builders are sitting on piles of unsold inventory and debt, demand has slowed down in metros and big cities, projects are stalled, private equity firms are exiting the sector and new projects are selling at discounted rates.

The long real estate party finally seems to have come to an end.

Correction phase

According to data from property research firm Liases Foras, sales in five key cities — Mumbai, Pune, Chennai, Hyderabad and Delhi-National Capital Region — declined in the April-June quarter from the January-March period.

The April-June quarter saw sales of residential properties drop 13 per cent in Delhi-NCR, 12 per cent in Mumbai, 15 per cent in Pune and seven per cent in Chennai.

As a result, prices are seeing a correction — the inventory of unsold houses has touched a whopping 669.95 million sq. ft.

“A correction phase has started. The market has shifted from investors to end users. Investors cannot hold on to properties forever and this supply is coming back to the market at discounted rates,” says Pankaj Kapoor, founder and MD at real estate consultancy Liases Foras.

In Faridabad, prices are down 15 per cent in the secondary market, while in Gurgaon, they have declined by about 20 per cent.

Anshuman Magazine, Chairman and Managing Director at real estate services firm CBRE, agrees that there is a price correction in the high-end residential segment in Delhi and Mumbai.

According to a recent report by CBRE reviewing the residential market in the first half of the year, although supply surged compared with the second half of 2012, end-user demand remained low.

This, the report notes, was because of weak economic sentiment, prevailing property prices and high home-loan rates.

Mumbai Worst-hit

Mohit Goel, CEO of Delhi-based developer Omaxe, says the worst-hit market is Mumbai because rates had shot up there in the last few years. “That time has gone and it will never come back. There was a dearth of supply then. Today, everybody with some land has got into real estate,” he adds.

Normally, builders have inventory, which can be sold in seven to eight months. However, this time around, the level of inventory could take up to 30 months to be sold, says Kapoor. That should be enough to give sleepless nights to builders and developers. Most have huge debts on their balance sheets.

DLF had a debt of Rs 20,369 crore at the end of June, while Unitech had reported a debt of Rs 5,642 crore at the end of FY13. Housing Development and Infrastructure (HDIL) was sitting on nearly Rs 7,000 crore of debt at the end of June.

Clearly, it will be a while before things get better for the sector.

How realtors lost the plothttp://www.thehindubusinessline.com/todays-paper/tp-corporate/how-realtors-lost-the-plot/article5139272.ece

Their sales have slowed down and they have a mountain of debt to repay. And that is forcing real estate developers to sell non-core assets and look for other ways to raise money.

HDIL’s promoters, for instance, have pledged nearly 96 per cent of their holding to raise funds.

DLF has been on a divestment spree since September 2011, selling a 28-acre plot in Gurgaon to developer M3M, NTC land in Mumbai to the Lodhas, and an IT Special Economic Zone in Pune to Blackstone. It has also exited wind-turbine projects in Gujarat and Karnataka and is still trying to divest its stake in luxury hotel chain Aman Resorts.

The tough environment is also forcing developers to sell properties at lower rates.

“There is a lot of pressure. Sales have gone down and cash-flow issues have arisen. Properties are being sold at prices not normally given,” confirms Lalit Kumar Jain, Chairman of CREDAI (Confederation of Real Estate Developers’ Associations of India).

Apart from the slow offtake, developers are also grappling with higher construction costs, which have reduced their margins.

The per sq. ft. cost of construction for a seven-storey building was Rs 1,200 two years back and that has now risen to Rs 1,700.

The overall material cost, including sand, steel and cement, has gone up by 40 per cent while per-day rates for unskilled labour have gone up from around Rs 140 to Rs 200. For skilled labour, rates have risen from Rs 400 to Rs 700.

“Labour is now a scarce commodity. People don’t want to leave villages,” adds Jain.

In part, this is because of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which offers 100 days of work every year to each rural household at a wage rate of Rs 174 a day.

Moreover, with elections round the corner and approvals for infrastructure projects hard to come by, developers will have less room to increase prices.

“Besides, the money from politicians, which gets invested in real estate, is currently being diverted to elections. So, developers are forced to sell at lower rates to generate liquidity,” says an analyst, speaking on condition of anonymity.

Slow burn

The current stagnation in the market is the result of an imbalance created during the last six-seven years, when land parcels were sold at high prices.When the real estate boom was at its peak, builders valued their land at exorbitant rates, created special purpose vehicles (SPVs) with fund managers and launched projects at high rates. To get investors to put money into a project, they quoted high prices, promising quick appreciation.

The result is that while per capita income during the last five years has grown at a CAGR of 13.9 per cent (without adjusting for inflation), property prices have appreciated by over 21 per cent in Mumbai, 13.8 per cent in Pune and 11 per cent in Chennai.

Vicious Cycle

Given the bullishness in the market, investors poured in money in the hope of making quick profits.

Thereafter, they sold their assets at even higher rates to other investors with the same promise of price appreciation in a few months. The price thus rose with every transaction and people got richer buying and selling houses.

The cycle ended only when a real user bought a property, at a very high rate. In today’s scenario, this trading in houses cannot go on due to the liquidity crunch and because real buyers are cautious about big-ticket investments.

Sunil Rohokale, MD of ASKgroup, which manages a PE fund that invests in residential projects, says returns on plain residential projects are better than those on longer-gestation projects, such as Special Economic Zones, industrial parks and commercial buildings. “There is nobody to buy those assets right now,” he points out.

Prices of residential real estate may rise 20-25%: Parsvnath Developershttp://www.thehindubusinessline.com/todays-paper/tp-marketing/prices-of-residential-real-estate-may-rise-2025-parsvnath-developers/article5139322.ece

Real estate major Parsvnath feels there are clear indications that residential property prices may rise by nearly 25 per cent in the coming quarters. Pradeep Jain, Chairman, Parsvnath Developers, attributes this to raw material costs, macro-economic conditions, funding issues and the recently passed Land Acquisition Bill. In an interview with Business Line, Jain says the company will focus on executive and fast-track deliveries. Parsvnath is currently working on 49 projects with a total area of 76 million sq ft. Edited excerpts:

What is the signal in the property market, both commercial and residential?

Prices of residential real estate may rise 20-25 per cent. (Basically) because of (rising) cost of raw material as also the recently approved land acquisition Bill. In the commercial segment there was sluggishness, but it is bottoming out. There has been no slump in demand in the residential segment.

So, where will your focus be on — execution or new launches?

In the last two years, we have been focusing largely on execution. We have just launched a commercial project in Connaught Place in Delhi. This project will be built at a cost of Rs 300 crore. We are expecting sales realisation of over Rs 1,000 crore from the project on saleable/leasable area of 1.3 lakh sq ft.

Commercial real estate has seen slow offtake. So, why launch a commercial project now?

In fact, there has been a jump in lease rentals by almost 30-40 per cent. We used to lease projects at Rs 80 per sq ft about two years back. However, this stands at Rs 140 per sq ft now.

What is your current debt position?

Our current debt stands at Rs 1,200 crore. We are targeting to bring it to well below Rs 1,000 crore by the end of this fiscal. The debt reduction will be largely through execution and new launches.

How is the Rail Land Development Authority (RLDA) project shaping up?

It is a mixed-use project. We recently paid the second instalment of Rs 500.86 crore against 38 acre of rail land that we bought for Rs 1,651 crore. We are developing this project in partnership with private equity firm, Red Fort Capital.

Do see the recent RBI notification on interest subvention scheme affecting the residential business?

We launched the ‘House of Happiness’ scheme, in which 25 per cent payment needs to be made upfront and the balance 75 per cent on possession. We received an overwhelming response and have booked more than 700 units under the scheme.

The new guidelines will help streamline the sector and will curb delayed delivery of projects. These will also restrict developers from diverting 80 per cent of the loan amount to other projects. Developers will have to maintain a timeline for construction to get the next installment from banks.

RBI & FinMin considering 'funding for lending’ scheme to enable cheaper auto, realty loanshttp://economictimes.indiatimes.com/news/economy/policy/rbi-finmin-considering-funding-for-lending-scheme-to-enable-cheaper-auto-realty-loans/articleshow/22671709.cms

The Reserve Bank of India and the finance ministry are evaluating a 'funding for lending' scheme that will result in cheaper loans for sectors such as housing and automobiles. To achieve this, banks will be allowed to borrow from RBI at rates 1-2% lowers than the market under a special scheme. "Refinancing under this scheme will enable cheaper auto and home loans," said atop official involved in the discussions. "The big advantage of such a scheme will be to bring down borrowing rates for housing and auto without cutting policy rates," the official said. 

A scheme with exactly the same name was launched by the Bank of England and UK Treasury in July 2012. The UK version appears to be similar to the one being discussed in India, with the Bank of England providing funding to banks and building societies for extended periods at lower rates. The UK scheme aims to encourage banks to reduce the rates they charge small and medium firms. Officials involved in the discussions said a final decision was yet to be taken. Hence, the September 20 credit policy, the first under RBI Governor Raghuram Rajan, may not see any announcement on the scheme. However, the proposal is likely to become a reality given the government's desire to encourage growth. 

The auto and real estate sectors have been hit hard by the slowdown and have been clamoring for a stimulus package. But given the government's compulsion to restrict fiscal deficit to 4.8% of GDP, there is little scope to cut excise duty on automobiles, the traditional mode for a stimulus. A top official said the expected rise in consumption will revive demand and production, and hopefully set in motion a virtuous cycle.

There are, however, a few voices of concern. Those opposed to the plan say the move will boost liquidity and stoke inflation further. But proponents argue that high inflation is because of food prices.

Rising defaults by short-term realty investors add to developers’ woeshttp://economictimes.indiatimes.com/markets/real-estate/news/rising-defaults-by-short-term-realty-investors-add-to-developers-woes/articleshow/22674303.cms

Short-term real estate investors, a source of quick funds for housing projects, are increasingly defaulting on payment to developers, as economic slowdown and rising cost of living keeps regular homebuyers on the fringes, narrowing exit routes for speculators. 

A large number of such investors— who generally buy multiple properties and sell them in six to eight months for quick gains—are approaching developers for refunds, and in some cases even taking them to court, according to some real estate consultants. 

"The number of defaults by short term investors has gone up in recent months," said Navin Raheja, president of National Real Estate Developers' Council. 

India's property market has slowed over the last few quarters. The slump is more pronounced in its housing segment, where developers are offering discounts to push sales. In the resale market, homebuyers are ready to wait it out. This has not just raised inventory and pinned down prices, but also shrunk the pool of buyers that short term investor’s target. 

"A developer's cash flow goes for a toss when investors don't pay up," said Samarjit Singh, managing director of India Homes, a property broking firm. "Cancelling a booking is the worst option for a developer." 

According to property consultants, short-term investors have cornered 50%-60% of newly built homes on the Dwarka-Manesar Expressway in Gurgaon and about a third of homes coming up in Noida-Greater Noida Expressway. The equation would be similar for the different suburbs of Mumbai, they said. 

While some speculators managed to exit these properties before the slowdown set in, a large number of them are still stuck for want of buyers. Many over-leveraged investors who had picked up properties in the last one year are now willing to offload apartments at handsome discounts, sometimes even going up to 30%. 

While the discounts are a big attraction, the sentiment in the property market because of the higher inflation, jobs cuts, increasing interest rates and an environment of massive uncertainty all around is pushing end-users to stay away from the real estate market. 

Real estate speculators generally pay 20%-30% of an apartment's value over about six months. When the housing project developer increases prices, these short-term investors sell their apartments to either other investors or end-users at a profit. 

"These were the investors who would bring in the much needed liquidity for the developer at the beginning of a project," said Santhosh Kumar, chief executive officer, operations, at Jones Lang LaSalle India. 

According to a Noida-based broker who did not wish to be named, developers generally use such investors to increase prices. "Many developers would offer special rates to them

for coming in early, sometimes even before all approvals for a project are in place. The investor was happy because he entered the project at a much lower price than a regular buyer and exited with a good profit," the broker said. 

In view of the situation, some developers are keeping short-term investors out of their newly launched projects. "They are weeding out such investors by running personal wealth checks on potential investor and asking them for their bank statements before selling homes," said Abhay Khemka of Khemka Investments and Properties in Gurgaon. "They are also asking brokers to do tougher due diligence before bringing in investors." 

From chefs to cheese, your 5-star dining may soon go localhttp://www.business-standard.com/article/companies/hotels-may-replace-foreign-cheese-chefs-to-cut-import-bill-113091800737_1.html

A leading luxury hotel chain known for its speciality restaurants is now rethinking whether it wants to get foreign chefs any more, while Marriott International has already told local vendors to match the quality of international food items like cheese. The idea is to cut on huge import bills.

The expensive wine cellars and Scotch collections have become even more so — thanks to the rupee’s exchange-rate woes since May this year.

The import cost for the food and beverage section, which normally ranges from four per cent to 15 per cent of hotels’ total cost, depending on star rating and specialty restaurants available, has jumped 7-10 per cent over the past three months.

“Hotels are now becoming more cautious. Costs are increasing in terms of payroll, raw material, power and fuel. Imports have to be cut as profit margins are getting squeezed,” says Veer Vijay Singh, chief operating officer, Vivanta by Taj. The hotel will soon take a view on increasing the prices and its list of imported items. It is also taking steps to deal with this challenge in other ways, such as by using Indian staff, instead of expats.

“We are gauging the circumstances. In many areas, we cannot compromise on quality and authenticity. But some of the imports can be cut. So these things need to be worked out,” Singh adds.

Hotels are also avoiding importing expensive kitchen equipment like grills, refrigerators, etc, and substituting those, instead, with “equally good” Indian technologies. At the same time, all companies are trying to make the most of their supplier and contractor relationships — to get the best deals.

“We have started focusing on our inventory management. We are buying frequently and only as much as required. We also have interactive kitchens which reduce food wastage,” says Rajan Bahadur, chief operating officer of The Grand, Vasant Kunj, New Delhi.

Food items account for a major chunk of what a hotel imports on a daily basis. From Amsterdam cheese to German sausages, pastas, olive oil, special sauces and even items of guest amenities in the room are, at times, sourced from abroad. “In some cases, we are talking to our vendors. We are considering every element of import and looking at ways to compare those with local produce, and switching over wherever possible. Quality remains the prime focus,” says Rajeev Menon, area vice-president for South Asia and Australia,

Marriott International.

Most companies feel the rupee’s recent depreciation against the dollar and a rising inflation rate has posed a double whammy. “Hotels are visiting every operational cost head. Taking steps like minimising recruitment, promoting internally at a lower cost, reducing power consumption and deferring plans of upgrade,” says Patu Keswani, managing director, Lemon Tree Hotels.

Rush for holiday homes pushes up realty priceshttp://articles.timesofindia.indiatimes.com/2013-09-18/chennai/42182290_1_holiday-homes-3-crore-realty-prices

The upper-middle class families' desire to own holiday homes where they can unwind on weekends is driving realty prices up in many hill stations and coastal locales within driving distance from metros. With 8% to 12% appreciation per annum, many holiday home locations in the country are comparable or better off than some of their urban counterparts that are constrained by space limitations, says realty consultant Jones Lang LaSalle (JLL).

While some have their second homes in hill stations like Lonavala and Ooty, within two to three hours' drive from their first homes in Mumbai and Coimbatore, there are others who head towards lonely beaches on the East Coast Road near Chennai or farmhouses in places like Mehrauli, Bijwasan, Rajokri and Chattarpur in the National Capital Region, says JLL India residential services CEO Om Ahuja. Prices of second homes in most locations across the country are upwards of Rs 1 crore.

Ahuja says lifestyle quotient is low in most metros where property prices are prohibitively high. "There are insurmountable space limitations in locations close to office hubs and central business districts. Hence, in the choice of first homes, people sacrifice comfort and natural ambience with a view to cutting down on commuting distance," says Ahuja. Indians who buy holiday homes hail from middle and top management segments, mostly in the age bracket of 35-45, he says.

Preferred locations for second home buyers in Mumbai are Lonavala, Alibaug and Karjat. Some go as far as Panchgani, Mahabaleshwar and Goa. However, by far, Lonavala is the favourite, where many leading builders offer row houses and bungalows. While the price of row houses range from Rs 1.5 crore to Rs 3 crore, bungalows cost Rs 2.5 crore to Rs 5 crore. Those who have a penchant for the coast, head towards Alibaug. The proposed Sewri-Nhava Sheva sea link may push realty market in the region. Goa is the costliest among the lot, where villas range from Rs 75 lakh to Rs 6.5 crore.

"Hill stations and waterfront locations appreciate faster than urban centres because demand is high in such places, but supply is limited owing to restrictions on development," says Lalit Kumar Jain, MD of Pune-based Kumar Builders. Despite competition from other hotspots, Mysore has stood the test of time as a favourite second home destination for Bangaloreans.

But there is nothing to beat Delhi's NCR in pricing, which has a healthy farmhouse culture, where independent villas are priced between Rs 3 crore and Rs 14 crore. Many outlying areas of Hyderabad, where the affluent had set up farmhouses about three decades ago, have appreciated by 30 to 40 times over the past 15 years, says C Shekar Reddy of CSR Estates.

Similarly, prices have appreciated by 75 to 100 times along the coastline between Chennai and Mahabalipuram over the past one decade. The entire East Coast Road is dotted with bungalows and villas that range from Rs 1 crore to Rs 15 crore. Some own half-a-dozen farmhouses with even independent swimming pools on the ECR, most of which have been rented out to CEOs of multi-national companies. The trend of owning second homes on ECR started in early 2000, says Indiaproperty.com CEO Ganesh Vasudevan. Though Yelagiri in Vellore district of Tamil Nadu showed some signs of promise a decade ago, it has failed to live up to expectations owing to low altitude.

Home prices could drophttp://www.thehindubusinessline.com/todays-paper/tp-corporate/home-prices-could-drop/article5143271.ece

Real estate developers are realising that they cannot hold on to inventory forever. Until now, they had shied away from lowering prices, but now, they will have to book sales to gain some liquidity.

The slowdown is forcing investors — those looking to make quick capital gains — to find a real buyer and cash out. “They need to book losses now as the end user is no longer willing to pay unreasonable rates,” says Pankaj Kapoor, MD of Liases Foras.

That means price cuts. And freebies to lure customers. Already, builders are offering free ACs, modular kitchens, iPads, gold coins and even cars with homes.

With the coming festival season, there should be more such inducements as developers try to rack up sales. Already, a home buyers’ festival in Mumbai, which brings together developers and potential buyers, is advertising a cash-back offer of up to Rs 50 lakh. One developer is offering an international holiday to rope in buyers.

Tough market

CBRE MD Anshuman Magazine says that project launches in the mid to high range are seeing a correction. And so are under-construction projects.

But will all this be enough to bring buyers back to the market? Probably not.

“Our salaries have not increased in the last two years. While buying a house is the top priority for me and my husband, I think it would be prudent to wait than stretch our finances during times of uncertainty,” says Vijaya Krishnan, a Mumbai-based advertising professional.

Shwetank Pandey, working with a bank in Delhi, says he will wait till early next year before making a decision. “Prices may fall further just before elections. March-April will be a better time to purchase a house,” he says.

And this is where the risk lies for developers. They are willing to give concessions, but there might not be many takers right now, leading to tougher times in the quarters ahead. There have been job and pay cuts across sectors, and inflation has increased the cost of living. Worse, any economic recovery will take time.

All this is enough to keep those looking for capital gains sceptical about investing in housing right now. As Lalit Kumar Jain, Chairman of CREDAI (Confederation of Real

Estate Developers’ Associations of India), says: “When sentiment goes down people don’t buy even at a good price.”

Right time for buyers

In his advisory to developers last month, Jain has suggested they “sell at your bottom most possible rates and create liquidity; cut costs at all levels — administrative, marketing and construction. And create awareness about sales and prices going down”.

Sell at lower rates and get cash: that seems to be the only formula for developers to keep going right now.

“It is important to get liquidity right now,” explains Jain.

For home buyers, it could just be the right time to go ahead.

Nevertheless, CBRE’s Magazine says buyers need to be cautious: “There are too many moving parts; there is too much uncertainty. Anybody putting in money now will have to take a longer term view as it may take up to three years for prices to appreciate in a slow market.”

He adds that buyers need to do some due diligence. They need to study the background and execution ability of a developer, the location of a project, and the infrastructure and scope for improvement in prices in that location. These are the factors that will decide the property’s valuation for a future sale.

But for those looking to buy a house for use and not for capital gains, immediate appreciation is not a concern. They could consider taking the plunge now.

Hotel industry margins to hit 5-year low in Q2: ICRAhttp://www.thehindubusinessline.com/todays-paper/tp-marketing/hotel-industry-margins-to-hit-5year-low-in-q2-icra/article5143326.ece

Rating agency ICRA has said the Indian hotel industry’s margins for the July–September quarter will ebb to a five-year low of 7-8 per cent on the back of a decline in RevPAR (revenue per available room), due to this being a seasonally weak period and because of becoming costlier consumables.

According to the agency, with uncertain demand conditions and further supply additions, the outlook for the hotel industry during 2013-14 remains negative. The down-cycle in the hotel industry has stretched to five years, as compared to past hotel industry cycles globally, which have 1-2 years of lows, preceded by 5-6 years of highs.

Hoteliers agree, saying it is a tough year even at the property level. Shabin Sarvotham, General Manager, Radisson Blue Resorts Temple Bay, a popular beach resort on the outskirts of Chennai, says occupancy level went for a toss during the period. “Most resorts along the coast are having a tough time filling up the rooms, particularly during week days.”

ICRA says that in the last five years, margins have dropped to 18 per cent from a high of 37 per cent in 2007-08.

Virender Razdan, General Manager, ITC Windsor, Bangalore, says because of the increased supply and falling occupancy levels, rates too almost bottomed out. He says even the second half of the year looks unpredictable. Companies are cutting down on travel. As most city hotels depend on corporate travellers, this will dent the topline of hotels, he said.

Foreign tourist

Foreign tourist arrivals too will be slow during 2013, growing by 2.8 per cent for the first seven months up to July, compared to 8 per cent during the corresponding period last year. However, ICRA expects higher in-bound travel in the months to come.

Kaushik Vardharajan, Managing Director (South Asia), HVS Global Hospitality Services, a consultant for the hotel industry across the globe, says rates have come under pressure because of the economic slowdown. Companies are looking to cut costs. This would reflect on occupancy levels of hotels, which would drag RevPAR. “However, this year margins would at best be flat, if not marginally better than last year, as the inventory pipeline has nothing much for the next several months to come and there seems to be a growth in leisure travel,” he said.

According to the Hotel Industry Survey 2012-13, conducted by HVS Global Hospitality Services, the nationwide Rev PAR recorded a 5.2 per cent drop in 2012- 13 over the previous year with the five-star segment registering the maximum decline (8.7 per cent), followed by the three-star segment (4 per cent).

It attributed the downswing to increased supply during the year. The year saw an addition of around 9,000 branded rooms – representing an increase of around 11 per cent over the previous year and 138 per cent since 2006-07.

Builders at Pvt Lenders’ Mercy as Prices Plungehttp://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETBG/2013/09/20&PageLabel=5&EntityId=Ar00501&ViewMode=HTML

The stress among real estate developers is now showing clearly. Private moneylenders are back in demand with small and midsized real estate developers picking up short-term money at interest rates as high as 42% a year to avoid the prospect of reducing property prices. With home sales dropping and banks being picky about lending to the sector, many real estate developers are facing a liquidity crunch, which would eventually force them to reduce prices to book sales. This, they fear, could induce a downward spiral in property prices. 

According to the National Housing Bank’s residential housing index, Residex, 22 of the 26 cities it tracks have already seen a marginal decline in home prices in the April to June quarter. A recent report by property research firm Liases Foras puts the cumulative nationwide unsold inventory at 670 million sq ft, or around 6 lakh apartments, putting further pressure on real estate developers. 

“Raising money even at exorbitant rates, developers hope, will help them fend off this crisis situation and keep prices steady till the economy picks up,” says Ambar Maheshwari, managing director of corporate finance at property consultancy Jones Lang LaSalle. 

Recently a Noida-based developer who had managed to sell only 30% in his housing project and needed money to pay some government charges and continue construction, borrowed 20 crore from a local money lender at 4% a month for a few months and a collateral that was at least twice the value of the loan. If he hadn’t, the only option for him would have been to covertly sell some apartments at a discount and continue construction. Since he borrowed, he was able to reach a certain construction milestone after which construction-linked payments of his existing customers came in. 

A small Chennai-based builder, who did not wish to be named, says the market is very tight and even raising . 30 crore from banks and PE funds is difficult today for a small developer. “This is where money lenders come in, even though they charge us steeply.” When a developer does not have enough money to continue construction, the first impact is that existing buyers stop paying installments, explains Anckur Srivasttava, chairman of GenReal Property Advisers. “He then has no option but to cut prices or go for such expensive money,” he adds.

While developers of some repute are able to raise money at 2-3% a month, the smaller ones are even paying close to 4% a month with greater collateral. The desperation level, of course, varies from developer to developer which is being seen as an opportunity by several HNIs, exporters and diamond merchants, entrepreneurs and family offices. Take the case of Rajesh Mehta, chairman of Bangalore-based Rajesh Exports, one of India’s biggest gems and jewellery exporters: he has invested close to 700 crore in such transactions. 

“We are seeing huge pain in the market but are very selective in who we work with. There’s demand for such money even from the best of developers,” says Mehta, who has lent to mostly Bangalore-based developers at interest rates in the 2.5% to 3.5% a month range.The former owners of Patni Computers that was sold to Nasdaq-listed IT services company iGate for $1.2-billion (. 5,450 crore) at that time have been investing their money in different spheres that includes buying completed real estate assets and also lending to real estate companies. They recently lent to a Bangalore-based developer at an interest rate in the 20-25% a year range.

Real Estate Regulation Bill to draw fair industry practices, accountabilityhttp://www.business-standard.com/article/economy-policy/real-estate-regulation-bill-to-draw-fair-industry-practices-accountability-113091901135_1.html

The Real Estate Regulation and Development Bill is set to encourage fair practices in real estate dealings and will fix accountability with the developer at every stage of development, according to real estate experts.

The Real Estate (Regulation and Development) Bill 2013 seeks to establish the Real Estate Regulatory Authority to protect the interest of consumers in the real estate sector. The Bill is for regulation and promotion of the real estate sector and to ensure sale of plot, apartment of building, as the case may be, in an efficient and transparent manner.

The Land Acquisition and Rehabilitation & Resettlement Bill is expected to reduce litigations and delays in projects by providing defined guidelines for land compensation. Furthermore, the changes to the Special Economic Zone with respect to relaxation to the

minimum built up area criteria are a step in the right direction, providing an impetus to real estate developers, according to latest report on real estate by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Ernst & Young (EY).

Said Venu Gopal, executive director, EY: "Revisions in SEZ guidelines helps unlock value from investments and assists in faster completion of the project, thereby easing liquidity pressure. The focus of funding has moved from plain vanilla equity deals to debt and structured products. Valuation presents a significant challenge to equity deals. Mezzanine debt and structured funding helps bridge the gap between the expectation of promoters and investors."

Developers are shedding non-core activities to de-leverage their balance sheets and reduce the outgo on account of interest. Several developers are exploring asset-light models such as joint development agreement (JDA) to reduce the impact of funding land purchase. "In tight liquidity conditions, JDAs help developers make optimum use of capital by simultaneously entering multiple projects. Better realisation on account of an upside from future cash flows helps land owners as well," added Venu Gopal.

According to the report, the Indian real estate sector is going through a paradigm shift, driven by regulatory developments and new trends in the industry, which will facilitate increasing efficiency and transparency. The country's demographic advantage, rising urbanisation and income levels, growing middle class and planned infrastructure investment of Rs 55 lakh crore in the twelfth Five-Year Plan (FYP) indicate a robust long-term prospects for the sector.

FICCI - EY's white paper on "Building New Dimensions For Real Estate Growth", addresses issues in the sector including IT-enabled business transformation, fraud vulnerability and mitigation, and effective workforce management. It also highlights several policy interventions in the sector, new emerging asset classes and developments in the South Indian real estate market.

Developers have started focusing on new asset classes such as affordable housing, senior living, education and healthcare real estate which provide promising investment opportunities. The medical city concept is gaining visibility on the back of extensive budgetary focus on health and family welfare by the Indian government. Medical tourism is also set to grow in future due to India's cost advantage and is likely to be the primary driver of health cities.

Entertainment-related real estate, such as sports cities and amusement parks are unique emerging asset classes in India. The report added that 'transit-oriented real estate' (TORE) involves development of industrial hubs, townships, retail and office space around major airports, industrial corridors, dedicated freight corridors and metro rail.

The modernisation of major international airports, development of dedicated freight corridor and national manufacturing zones (NMZs), existing and upcoming metro rail projects in key cities have driven the growth of TORE in the country, as per the whitepaper.

Said J C Sharma, chairman, FICCI sub-committee on South India Real Estate and VC & MD, Sobha Developers Ltd, "Traditional methodologies in the industry have been put to test, providing an exciting phase for developers to evaluate new growth channels. Development of these emerging asset classes is gaining momentum in almost all urban centers of the country. The need is to harness the potential in an efficient manner."

Home, Car Loans to Give a Throbbing Headachehttp://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETBG/2013/09/21&PageLabel=1&EntityId=Ar00105&ViewMode=HTML

The festive season may not hold much cheer for those planning to buy a home or a car, thanks to Raghuram Rajan’s unexpected move to raise the repo rate. Mortgage and auto loan borrowers may have to pay more as banks plan to raise interest rates in response to the monetary policy announcement. 

The central bank governor himself was circumspect when asked how he expects banks to react. “I expect bankers to set rates appropriate to the cost of funding,” Rajan said. “I hope they will look into their cost of funding and see how that has changed to take (a) decision. My sense is that is what most of them do. I don’t want to micromanage their process. Let us see what they come up with.” State Bank of India Chairman Pratip Chaudhuri was, however, fairly explicit on the course the country’s largest bank plans to take.

“We will need to hike our deposit and lending rates substantially. We will have to augment liquidity. The busy season is coming. There is huge demand for loans as the commercial paper and external commercial borrowing market is non-existent.” He also expressed disappointment with the policy.

Higher Repo Rate may Force Builders to Offer Discountshttp://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETBG/2013/09/21&PageLabel=3&EntityId=Ar00304&ViewMode=HTML

The upward revision in repo rate by the Reserve Bank of India (RBI) is likely to increase pressure on real estate developers to offer discounts in the upcoming festive season, as they struggle to clear their inventory at a time when demand is tepid and interest rates are rising. 

HDFC, ICICI Bank and Axis Bank raised interest rates on home loans last month, while State Bank of India (SBI) did so on Thursday. And on Friday, the RBI raised the rate at which the central bank lends money to commercial banks by 25 basis points. “Discounts are now inevitable,” said Sanjay Dutt, executive managing director for South Asia at real estate services firm Cushman & Wakefield. 

This festive season is likely to see just a tenth of last year’s new project launches, according to an estimate by the Confederation of Real Estate Developers’ Associations of India (Credai). “Developers will want to sell their unsold inventory instead by using innovative schemes and discounts. Rising interest rates, though, will lower sentiments and could impact sales,” said Credai chairman Lalit Kumar Jain. The festive season usually generates about 20% of the annual home sales. But demand has been severely hit this year due to the economic slowdown, higher inflation and job cuts in several sectors. The spike in interest rates can only add to the industry’s woes, developers said. “If interest rates go up, demand will be impacted slightly,” said National Housing Bank chairman RV Verma. 

Home prices fell in 22 of the 26 cities in the quarter to June, according to the National Housing Bank’s residential housing index, Residex, “If developers really reduce prices, some sales should happen this festive season. This is an opportunity for them to clear their inventory pile,” said a senior SBI official, who did not wish to be named. 

DLF’s group executive director Rajeev Talwar termed the increase in repo rate a missed opportunity. “There was a need to lower rates to stimulate demand,” said Talwar. According to property research firm Liases Foras, close to 670 million sq ft of stock is lying unsold with developers, as home sales have fallen over the past few quarters. 

“We will not be launching new projects this festive season. Instead, we will focus on delivering old projects and will offer schemes and discounts to get rid of our inventory,” said RK Arora, managing director of Noida-based developer Supertech. Several developers are poised to launch new schemes for existing projects and also offer innovative payment structures, said Ankur Srivastava, chairman of Gen Real Property Advisers. “They are also repositioning parts of existing projects to stir sales,” Srivastava said.

Freebies Are Now Inevitable DEMAND HAS BEEN HIT this year due to the economic slowdown, higher inflation and job cuts in several sectors.

HOME PRICES FELL in 22 of the 26 cities in the quarter to June 

ACCORDING TO PROPERTY research firm Liases Foras, 670 million sq ft of stock is lying unsold with developers, as home sales fell over past few quarters.

AIMS TO ADD 8.9 MILLION SQ FT OF RESIDENTIAL SPACE THIS FISCALhttp://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETBG/2013/09/21&PageLabel=3&EntityId=Ar00301&ViewMode=HTML

Sobha Developers, a Bangalore-based real estate firm, has revived its mall projects in anticipation of a growth in demand for retail space after the government eased foreign investment norms in retail. The developer plans to build two malls with retail space of 200,000 sq ft and 350,000 sq ft in Bangalore and Thrissur, respectively, its vice-chairman and managing director, JC Sharma, told ET. 

While the Thrissur project is expected to be ready by the end of this fiscal, the Bangalore mall, on hold for over four years because of the economic slowdown, would be completed by FY 2017, he said. “Three years from now, the market will be better for retail and we plan to have both premium and high-street brands in the upcoming mall projects,” Sharma said. “We understand the current headwinds and continue to be positive due to resilience in Chennai, Bangalore and Kerala markets.” 

Commercial real estate developers in India are refocusing on mall projects after the government eased FDI norms in retail to attract multinationals such as Walmart and Carrefour. Unitech, DLF and Oberoi Realty are some of the other developers who have revived stalled plans. According to a recent report, Mumbai and Chennai together added 1.65 million sq ft of new supply to national stock in Q2 2013, up 65% compared with 1 million sq ft in the first quarter of 2013. 

“The government’s recent measures on FDI policy may encourage developers to complete their existing retail projects sooner, as they respond to increased demand for retail space from international retailers seeking to capitalise on the amended FDI policy,” says the DTZ Property Times Retail report. 

Sobha is also looking at entering new geographies like Kochi, Kozhikode and Hyderabad, according to Sharma. The developer aims to add 8.9 million sq ft of new residential space this fiscal. According to Sharma, the company sold residential property worth. 602.8 crore in the last quarter compared with . 479.4 crore a year ago. “Sobha was able to sell properties at higher prices despite an overall slowdown in housing demand,” Sharma said, adding the company sold 0.92 million sq ft of residential space in the quarter ended June.

“We are not revising our target for the year and expect to sell 4.2 million sq ft of residential space for about . 2,600 crore in FY 2014,” Sharma added. The developer is also eyeing distress sales. It plans to build apartments on 16,200 sq ft of space it recently bought in a premium locality of Bangalore. Currently, the builder is executing 45 real estate projects across six cities and 40 contractual projects in nine cities. Sobha, which has a debt equity ratio of 0.6, had total debt of. 1,230 crore as on June 30. On Wednesday, the company’s shares closed 2.57% up on the National Stock Exchange. 

Scaling New Heights GOVT HAS EASED FDI NORMS in retail to %attract multinationals such as Walmart and Carrefour ACCORDING TO A REPORT, Mumbai and Chennai added 1.65 million sq ft of new supply to national stock in Q2 2013 

SOBHA IS ALSO LOOKING AT entering new geographies like Kochi, Kozhikode and Hyderabad.