Real Estate-NOV

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REAL ESTATE

1) Getting real on real estate Business Standard, November 2, 2010Masoom Gupte / Mumbai

Investors have various options, but the risk-return game must be played carefully.

The real estate sector has always attracted interest. It is primarily because in good times,it can be a multi-bagger. But the reverse also holds true. Investors, especially the highnet-worth individuals (HNIs), show special interest in this sector. No wonder portfoliomanagement services (PMS), private equity players and builders try to tap them.

Direct investment

Typically, builders like to tap HNIs to invest in properties, when they are starting with

their projects. The investment provides them a platform to promote their project, and thefunds can be used as working capital. PROS AND CONSInvestmentoption Advantage Disadvantage

Direct Investments Ownership resideswith buyer andproperty is usable

Ticket size is thehighest. Hasmanagerial hassles

Real Estate PMS Exposure tovariety of properties starting

at Rs 25 lakh

Typical lock-inperiod of 3-4years. Has fund

managementcharges of 2 percent and profitsharing

Direct StockExposure

Has high liquidityand the leastticket size

A high risk-highreturn option.Evaluation of companies tricky

For an investor, it means an investment of anywhere between Rs 25 lakh and Rs 1-2crore, or even more. This route of investment ensures clear ownership and accessibility.In a direct investment, the entry and exit points can be determined by you. Also, youhave a clear picture of what your commitment entails, says Pranay Vakil, chairman,Knight Frank.

However, before investing in a residential or a commercial property, ascertain your intentions. For instance, if your aim is to earn capital gains, a residential property may be

preferable as the appreciations in property prices are better.

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If you are looking for a regular income, a commercial property has the potential to earnyou a higher rental yield. It can earn a return of 9.5-11.5 per cent annually, as comparedto a four-five per cent return from a residential property.Besides the monetary investment, direct ownership involves managerial commitment.You will have to be hands-on regarding maintenance, interaction with brokers and the

legal aspects of lease contracts. These can increase costs.

Portfolio management servicesA comparatively lower ticket of Rs 25-50 lakh is also an option for diversification. PMSis a collective pool of investments handled by a portfolio manager. They makeinvestment decisions on behalf of the investors.

Investors can get exposure to a variety of residential and commercial properties such asretail, office spaces and warehouses. They can spread the risk over a number of

properties, instead of investing in a single property, says certified financial planner,Gaurav Mashruwala.

Each real estate PMS has its own mandate.Some are builder funds, that is, theinvestments are made in under-construction properties. The profits made on sale areshared among the investors.

Another variant of PMS is a rental-yield fund. Anand Rathi Financial Services andKnight Frank recently launched such funds.

A rental-yield fund invests in office spaces only, and rent provides a regular return. Onthe closure of the fund after six years, investors will earn from the appreciation in thevalue of properties. The investment in a real estate PMS is made in tranches.

Also, there are costs involved such as annual fund management fees and profit sharing.While professional management of the fund can be a benefit, it can also prove animpediment as you have no control over the investment.

Before investing in a PMS product, be sure of the lock-in period. An exit midway, though possible, is not easy.

Direct stocks

Those with limited funds to invest can consider direct stocks. They are also the mostliquid option among others. One needs to consider factors such as the developers land

bank, selling price of properties, the inventory held, the ability to execute the projects, etc before investing in the stock, says Ambareesh Baliga, vice-president, Karvy Stock Broking.

But careful stock picking is required. This is because the movement in realty stocks can be city- or area-centric. For instance, if Mumbai/Delhi property prices are doing better

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than other cities, listed stocks of companies that are doing business are likely to move upfaster than others.

Remember that valuation of real estate companies can be tricky, as well.2) Banks will now lend only 80% of home price

The Times of India, November 3, 2010TIMES NEWS NETWORK

Mumbai:While most banks are in a wait-and-watch mode on their lending and depositrates after the Reserve Bank of Indias decision on Tuesday to hike key policy rates repo and reverse repoby a modest 25 basis points (100 basis points=1%), it is certainthat from now on, anyone applying for a housing loan from a bank will have to pay amargin money of at least 20% of the value of the property. This in effect means that youwill have to shell out more from your savings to buy that house you have

been eyeing for a while. Earlier, this margin money varied between 10% and 15 %.

The RBI also increased the risk weightage of loans above Rs 75 lakh taken for buying property, which could increase the interest rates on loans for high-cost properties. This is being seen as a pre-emptive measure to rein in the possibility of the creation of an asset bubble and a sign that there could be overheating in the property market.

The RBI, with a focus on taming the currently rigid high inflation rate in the economy,raised repo rate (the rate at which banks borrow from the RBI) to 6.25% and reverse reporate (the rate of interest that banks get when they park their surplus money with thecentral bank) to 5.25%.

REALTY CHECK

RBIs move to hike loan-to-value ratio signals danger ahead

These steps were expected by most market players ahead of the policy. The central bank also said that unless anything drastic happens to the economy, it would probably pause inhiking rates for the time being. Simultaneously, IDBI Bank, announced raising depositrates by 10-50 basis points and lending rates, including home loan rates for loans of Rs75 lakh and above, by 25 basis points.

RBI said that loan-to-value (LTV) ratio for housing loans should not exceed 80% andincreased the risk weight for residential housing loans of Rs 75 lakh and above,irrespective of the LTV, to 125%, from 100% now.

It also increased the standard asset provisioning by commercial banks for all housingloans with teaser rates to 2%.

The raising of LTV ratio to 80% means that any new home buyer going for a housingloan, will have to bring in at least 20% of the value of the property while the balance,80% or less, could be financed from a bank or a HFC. Top industry officials feel this is a

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pre-emptive measure and is a warning sign for all in the real estate sectordevelopers,financiers and also the buyersthat there could be danger ahead. The RBI has alwaystaken pre-emptive measures to prevent asset bubbles, particularly in real estate. It is inthis context that the RBI has restricted the maximum loan to value ratio to 80% andincreased risk weights on housing loans above Rs 75 lakh, said Renu Sud Karnad, MD,

HDFC, the mortgage finance major.

Going by tradition, even other housing finance companies (HFCs) not under RBI will perhaps adhere to the same rule of margin money of 20% of the property value. This is because in the past whenever the central bank imposed some new rules related to housingloans by banks, National Housing Bank (NHB), the regulatory body for HFCs, hadimposed the same conditions on these companies. Industry players pointed out that theRBIs steps were more directional since the average LTV in the housing finance industryis at about 67% while average loan size would be between Rs 20 lakh and Rs 25 lakh. Onthe teaser loan rate, industry players pointed out that such schemes which are still beingoffered is expected to end by March 2011.

The RBI measure could also work in favour of home buyers in the form of a either a slowor nil rise in real estate prices. The message from RBI is clear: There is a worry aboutreal estate prices spiralling. This concern will ensure that there is a short-term cap on realestate prices andin the near future it may come down marginally, said Gagan Banga,CEO, Indiabulls Financial Services. A correction in prices should result in higher volumes given the strong macro-economic conditions, Banga added.

As for lending rates, any decision to hike them going forward will depend upon theavailability of funds in the banking system, also called liquidity, bankers and economistssaid. The market was expecting these hikes and have already discounted the same. For lending rates to go up, along with hikes in policy rates, we also need to consider theliquidity situation, Arun Kaul, chairman, UCO Bank said. The combined impact of these two would be reflected in the cost of funds. In case the cost of funds goes up, bankswould hike rates. As of now, we are in a waitand-watch mode, he added.

Although it was clear from the tone of the policy document that reining in inflation andmanaging peoples expectations about the rate of inflation were the RBIs major concerns, it could not completely put the growth factor in the background.

The low possibility of any further rate action in the immediate future and the decision toleave the cash reserve ratio unchanged indicate that RBI wants to keep the monetaryenvironment conducive for growth in the economy, said Chanda Kochhar, MD & CEO,ICICI Bank, the largest private sector bank in the country. RBI has also assured that itwill monitor the liquidity situation closely to avoid choking off fund flows required for growth, she added.

Seen from another perspective, the decision to hike key policy rates could also lead tosome tough times for the RBI itself, market players pointed out. Lured by higher interestrates in the country compared to most developed markets, there could be a rush of foreign

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funds into the Indian debt market, just like the rush of FII money that the stock market iswitnessing at present. The fact that the RBI is also keeping a strict vigil on capital flowsthrough the debt market route was proved when the central banks governor, D Subbarao,dwelt on this topic in substantial detail in his post-policy media conference. It has often

been argued that the widening of interest rate differential between the domestic and

international markets will result in increased debt-creating capital flows. While it is truethat large interest rate differential makes investment in domestic debt instruments andexternal borrowings by domestic entities more attractive, we need to keep in view threeaspects in the Indian context, the RBI governor said. First, the economys capacity toabsorb capital flows has expanded as reflected in the widening of the current accountdeficit. Second, despite the already large differential between domestic and internationalinterest rates, capital flows in the recent period have been predominantly in the form of

portfolio flows into the equity market. This suggests that the interest rate differential isnot the only factor that influences capital flows. Third, in line with our policy of

preferring equity to debt-creating flows, we still maintain some controls in respect of debtflows.

It could be pointed out in this context that in recent times, while several of the top RBIofficials have spoken about controlling capital flows, both through the equity and the debtroutes, the finance ministry has mostly been speaking against any form of capital control.

3) City developers set to raise over $1 billion Business Standard, November 3, 2010Raghuvir Badrinath / Chennai/ Bangalore

It was amongst the most sought-after of destinations for equity investors before the globalrecession took its toll. After a lull for almost two years, the interest is reviving andreviving fast. According to industry estimates, a clutch of realty players are expected toraise in excess of $1 billion through the equity route within the end of the ongoingfinancial year.

Leading the pack is Embassy Builders who are preparing to raise around '2,200 crorethrough the public route followed by Century Builders who are targeting a funding of '750 crore. Brigade Group, Mantri Group, Shriram Properties are targeting '500 croreeach, while a clutch of builders are looking at '200 crore apiece taking the total close to'5,000 crore. This sum is besides the '1,200 crore raised during the past month by PrestigeDevelopers.

Said Anuj Puri, chairman & country head, Jones Lang LaSalle India: With the return of confidence in the sector, Indian real estate players are now once again looking at privateequity funding. Private equity investors, on their part, are definitely interested ininvesting in Indias real estate sector. They expect returns of 20-25 per cent, post tax.These expectations are almost the same as what they were before the downturn however, the structure has changed, as private equity funds are now focusing more oncapital protection. In other words, they seek lower risk even if that means slightly lower returns.

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According to industry analysts, the proportion is heavily skewed towards residential. Thisis attributed to the residential sector being correctly seen as a self-liquidating asset class,while commercial and retail real estate have exit-related concerns due to unavailability of REIT/REMF vehicles in India.

What is more interesting to note that marquee equity investors TPG, Temasek, J PMorgan, and Baring India are lining up for these investments. Some new privateequity funds have recently entered the Indian real estate arena among them AdityaBirla and ASK. All in all, I can say with confidence that private equity investments intoIndia are increasing. In the first half of 2010 alone, India Inc saw over 150 major deals and, significantly, a little over 10 per cent of these were in relation to the real estatesector, Puri added.

J C Sharma, MD, Sobha Developers, while recently sharing the quarterly performacesaid: It is now clear that the economy is growing at over 8.5 per cent growth rate which

has a direct impact on the real estate industry. Inventories are getting absorbed and new projects are being launched. Easy availability of loans and a favorable lending rate arefurther augmenting demand in this sector.

While the equity route is clawing back at a fast clip, the real estate industry still dependsheavily on bank debt, NBFC funding and end-user advances. This is because bank debt isa cheaper option, and also because it offers flexible tenures. Moreover, it is easilyavailable domestically. NBFC funding is also available at cheaper rates and can be repaidearly. This makes it more flexible. Finally, end-user advances represent interest-freefinance.

And as Puri sums it up: After all, what matters most when the chips are down is returnson investment.

4) Patna scores big on realty pricesProperty Rates, At Rs 60 Lakh Per 1,000 Sq Ft, Surpasses NCR The Times of India, November 4, 2010Sachin Parashar TNN

Patna: After being shorn of all its mineral wealth, Bihar seems to have finally put oneover on Jharkhand as reflected in the real estate prices, which have skyrocketed in thestate capital in the past two years.

In fact, property rates in Patna have, unbelievably, surpassed NCR--Noida, Ghaziabadand even in some cases in Gurgaon --and also many areas in the capital. For instance,a1,000 sq ft flat here costs more than Rs 60 lakh.

Riding high on Bihar CM Nitish Kumars development wave in the state, coupled withoverall improvement in the law and order situation, prices in the city now range

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anywhere between Rs 5,000 and over Rs 6,000 per sq ft, which is actually more than theongoing rates in Noida.

In Nageshwar Colony on Patnas Boring Road, the current rate is Rs 5,000 per sq ft. Inthe S K Nagar/Kidwaipur area, it is around Rs 6,000 per sq ft. In Gurgaons Sohna Road

area, which is being touted as the next big destination in the Millennium City, rates range between Rs 4,000 and Rs 5,000 per sq ft. In Noida, hardly 5 km from the City Centre, therates are pegged at Rs 3,500-Rs 4,000 per sq ft. And if thats not enough, check out land

prices. A katha of land (around 1,300-1,400 sq ft) in Nageshwar Colony is now sellingfor Rs 80 lakh. A katha of commercial space on Patnas Exhibition will set you back byRs 1.25 crore.

Builders are, actually, struggling to justify the phenomenal growth. The sudden upswinghas been fuelled by the perception that the government means business.

It has all happened so soon that were not being able to justify it. Even rentals have gone

up drastically. The monthly rental for a 1,500 sq ft flat is around Rs 25,000, which wasunheard of earlier, says Prabhat Kumar, director of Apna Awas Construction.

He cites the example of a building near Boring Road, where flats were being sold for Rs1,200 per sq ft till around two years ago. Now, the price in the same locality has escalatedto Rs 4,000 per sq ft.

5) Scaling greater heightsThe real estate sector growth has contributed a lot towards Pune becoming the second-largest city in Maharashtra after MumbaiThe Times of India, November 4, 2010Pimpri Chinchwad

If you are new to this new Pune real estate boomtown - Pimpri Chinchwad, a moderntwin city situated south-east of Mumbai, in the north-west quadrant of Pune, you mustknow that it is the fifthmost populated city of Maharashtra and has long been famous for

being one of the most prominent industrial destinations outside Mumbai.

The twin cities of Pimpri-Chinchwad, governed by the Pimpri Chinchwad MunicipalCorporation (PCMC), are located 15 km from Pune city centre, and form a continuousurban stretch, adding to the overall Pune urban agglomeration. As already mentioned, thetwin cities contain a thriving industrial belt that primarily consists of engineering andautomobile industries.

In fact, PCMC and Pune, when viewed as a unified geographical unit, make up one of India's largest industrial areas. Pimpri-Chinchwad has therefore contributed a lot to thefact that Pune is the second-largest industrial city in Maharashtra after Mumbai. Thatalone has already spelt gold in terms of the Pune property market - but there's lots more.

Vimannagar

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Kharadi became an area that had vast potential of development, what with its largestretches of barren land. For people not familiar with Pune, it is located close to the cityand Nagar Road. Construction was started in early 2004 as requests had come in fromlocal developers in Vimannagar for land development in and around the place. PMC took

up the initiative as it saw a good potential for development and were keen on private- public partnership to add better infrastructure to the area.

"IT companies in Vimannagar contributed a great deal to its development. Today wehave a variety of high schools and colleges in Vimannagar. Gardens, temples and hugemalls are amongst the recent public works. It is an upcoming pocket and is wellsupported by IT. Potential property buyers in Vimannagar are welleducated technocrats.Commercial properties like that of Marvel Realtors have also reincarnated the looks of Vimannagar. They have a futuristic project called Edge which is shaping up inVimannagar and is talk of the town.

Talegaon

Located in the Sahyadri ranges and between two big cities, Mumbai and Pune, the beltthat houses the hill towns of Khandala, Lonavala and Talegaon has been a lucrativedestination for land developers.

The scenic area that falls in Pune's Maval taluka (sub-district) became famous after several Bollywood stars and rich businessmen built their weekend homes there. The areais located 80 to 90 km from Mumbai and 40 to 50 km from Pune. The real estate boom inMumbai and Pune led to a demand for bungalows here. The 97-km long Mumbai-Puneexpressway provided better connectivity.

"It is not just Pune that is seeing fast-paced development; areas surrounding the city areseeing growth as well. In recent times, locations like Mundhwa, Kharadi, Baner andHinjewadi have become among the most preferred destinations for the IT industry.

"Talegaon, barely an hour-and-a-half hour's drive from Mumbai on the Mumbai-Puneexpressway and just 32 km away from Pune, has been growing in every aspect anddevelopers are now taking up large projects with modern amenities. Talegaon, which hasthe advantage of being close to Lonavala, Pune and Mumbai, is a town in the Sahyadrirange, almost 330 ft higher than Lonavala, which gives it a cool and pleasant climate allyear round. It is well connected by road and rail; one can also get there via the oldMumbai-Pune road or by train shuttling between Lonavala and Pune. There is also a

proposal for an international airport near Talegaon," explains Rushabh Sakla, of Siddhivinayak Group.

The growing population has led to a demand for both residential and commercial spaces,and state government and local developers are making conscious efforts to attractcorporates to Talegaon and its nearby areas by working on improving infrastructure in the

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area like widening of roads and the like. Some of the developers are also offeringshopping malls in their upcoming projects for the first time in Talegaon.

Wakad

Wakad as an area is in demand with businessmen and executives, particularly fromPimpri-Chinchwad, beginning to eye it. The flyover at Wakad junction on the NH4 bypass has played some role in its growth. As Goel Ganga Developments' senior officialstates: "Wakad is the most happening place in Pune's real estate market today. This areahas a great deal of IT development taking place. Looking at the potential of the IT marketwe thought that these areas have a great growth potential. 'These areas have growntremendously in the last five years because Wakad is the gateway to Pune when onetravels via the expressway from Mumbai." Another advantage, he adds, is that Hinjewadi,the IT destination, is just two km from Wakad.

Kondhwa

It is amongst the oldest colonies of Pune city and lies in the south eastern part of the city.Kondhwa has the National Institute of Banking and Management (NIBM). Wanowriearea, under Kondhwa houses huge army medical set-ups like the Armed Forces MedicalCollege (AFMC) and the Command Hospital besides the Artificial Limb Center. It iseasy to travel using public conveyance here, like city buses and autos. There are lots of fine housing complexes in the area too.

It is so easy to lose oneself in the hustle and bustle of big-city life, which is why SobhaDevelopers Ltd. saw it fit to create a contemporary retreat in the midst of what is said to

be the most important area of Pune in the near future - NIBM, Kondhwa.

Situated in an abundantly green 5.6 acres at the focal point of Pune's business district andlocated close to everything one could possibly yearn for, Sobha Carnation not only servesas your fantasy home, it goes a step further and makes your life easier. Renowned for acommitment to nothing less than perfection, Sobha Developers Ltd. makes an honestattempt to outdo themselves each time they embark upon a new venture.

The epitome of a beautiful life is when you are captivated by the attraction of luxury andthe trust of quality that surrounds you. Named after the flower that defines beauty itself,this is the first venture of Sobha Developers Ltd in the burgeoning metropolis of Pune.Boasting of a lifestyle that reflects pure luxury and endless space and nestled amidst themost exquisite landscape, what awaits you are 116 meticulously crafted penthouses,duplexes and three and four bedroom super luxury apartments that span up to 3,863square feet with world-class amenities.

6) INVESTMENT OF CHOICEProperty has successfully outpaced most asset classes, says SHASHI KUMAR The Times of India, November 6, 2010

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It is often said that women have a preference for precious metals and stones while mensettle for property. Today's trend though is clear, property or real estate is gender agnostic; actually it has successfully outpaced most asset classes to become theinvestment of choice.

No nuclear science in understanding why; available land mass is finite and the consuming

populace is expanding, exponentially; simple market dynamics of demand and supply.Add to it the 'wealth gain effect' India has been seeing for most of the last few fiscals, andthe prevailing situation can be inferred as a 'consequence'. Not that this trend was verydifferent earlier. The defining difference was the socio-economic conditions of the peopleand the country. With India finding its place in the global limelight, an overtmanifestation of this prosperity is the meteoric rise of the property markets.

Till recently, buying a home was an event undertaken in the later stage of one's life, after one's retirement, after one sold an ancestral property or However today, it is notuncommon to see 27-year-olds buying a home.

This paradigm shift has been brought in thanks to a multitude of reasons; increasingurbanisation, change in lifestyles and aspirations, increase in income, availability of funding, change in attitude and approach of property developers, attractive offer

propositions the list goes on. Fuelling this change is also increased fiscal awarenessamongst people and the desire to have 'a balanced investment portfolio'. Property is

possibly, that single asset that fulfils most investor expectations. Its tangible, secure, hasgreat growth potential, attracts funding and is reasonably liquid. And, if it is anapartment, you can live in it too!

This opportunity sphere has attracted major corporates who are initiating much neededchanges. Innovations, in design, technology, functionality, customer centricity, financingetc. have made a critical difference. Add to it increasing customer awareness anddemands and this business has gained the status of an industry. So much so that todaythere are Real Estate funds dedicated to funding this industry.

Participating in this opportunity are local and global institutions, with the governmentallowing for FDI (Foreign Direct Investment) in development of realty (albeit withrestrictions). It is apparent that the Real Estate industry in India is a big opportunity togain from. Whether is realty for Residential, Commercial, Retail, IT related,Infrastructure, SEZs or everyone wants a share of the pie.

In the current markets though, residential realty is king. Demand in this segment is huge,running into millions of units. Urbanisation, nuclear families, growth of Tier II and Tier III towns etc. have all considerably spurred growth of this segment. Supply too has beenkeeping pace with projects catering to a wide spectrum of budgets and tastes.

After a pronounced dip, mirroring the global economic crisis in 08-09, most propertymarkets are back on their feet or are getting there rapidly. In fact in certain marketsvaluations have outstripped earlier highs and reached levels unattainable for commonfolks. Also, due to limited regulation of this industry, practices by certain players are

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leaving customers short-changed. Consequently a general perception is created of this business, which is not healthy. The fact though is that for every 'bad apple' there are goodones too. With some amount of research and fact finding, a prospective buyer canidentify the genuine players, invest wisely and gain significantly. Better still; invest inthis opportunity through Real Estate funds who offer returns varying from 20~30% p.a.

Real Estate funds are time bound, purpose driven vehicles which pool money frominvestors for onward investments in Real Estate and related opportunities. Theadvantages begin with experts handling the investments across geographies andcategories, a limited investment corpus that is taken over a period of time, investments

being secured against collaterals, periodic information sharing and valuation of investments and, most importantly, good appreciation and gain. In a nutshell, it offers the

best from this opportunity with minimal pains.

Of course, certain risks, as those faced by any/every investment are also incumbent here.However an experienced fund management team with the right philosophy and strategies

can mitigate most of these seriously.The verdict is out; investing in residential Real Estate is in, and probably the wisestinvestment choice. Without exposure to property your investment portfolio is incomplete.

And if one already has such an investment, then consider making further investmentsthrough a Realty/property fund. Of course, finding information on the offer propositionand erstwhile performances of the offerer will help in making the optimal investmentchoice and gaining well from this opportunity.

QUICK BYTES

REAL ESTATE HAS BECOME GENDER AGNOSTIC, APPEALING TO BOTH MENAND WOMEN

TODAY, IT IS NOT UNCOMMON TO SEE 27-YEAROLDS BUYING A HOMEPROPERTY IS, POSSIBLY, THAT SINGLE ASSET THAT FULFILS MOSTINVESTOR EXPECTATIONS

7) POSITIVE MOVERecently, the Bombay High Court lifted the ban on sand mining, providing a relief to thereal estate industry. Here are some reactions from industry experts...The Times of India, November 6, 2010

SUNIL MANTRI, PRESIDENT, MAHARASHTRA CHAMBER OF HOUSINGINDUSTRY

"We welcome the Bombay High Court's decision to vacate the stay on sand mining inMaharashtra. This would give great relief to the developers, construction contractors andconsumers at large, who were affected by the acute shortage of sand across the state.

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With the HC vacating the stay, sand mining operations would resume now. TheMaharashtra Chamber of Housing Industry (MCHI) welcomes proactive steps by theMaharashtra Government for their new environment friendly sand mining policy."

GOPAL SHARMA, GM - MARKETING AND SALES, GUNDECHA BUILDERS

Due to the ban on sand mining the availability of sand had become an issue and it directlyimpacted the construction works as also there was no other alternative provided whichhas resulted into the delay of the projects. The removal of the ban by the High Courtcomes as a welcome move. Sand, being a natural resource, care should be taken to use itcarefully such that it does not affect the environment and helps in the constructionactivities too.

ALKESH JAIN, COO, NEEV INFRASTRUCTURE

The High Court's decision to lift the stay on sand mining is a good move. The last four

weeks were very critical for the industry and the work was going slow. All the stalledconstruction projects will start in full swing now. Sand costs will also become stable. Thelift is the win-win situation for both the contractors as well as developers.

KAMAL KHETAN, CHAIRMAN AND MD, SUNTECK REALTY

It's a very good thing. Due to the ban, the sand prices were affected. The rise was from Rs3000 to Rs 6000/-Since the ban has been removed, the prices will now come down. Thelast few months were a bad period for the industry as the projects had slowed down dueto paucity of sand. The risk of delivery was a huge issue earlier. However, now thesituation has resolved. If the ban had not been lifted, it would have a huge impact on theindustry.

RAJESH PRAJAPATI, MCHI, PRESIDENT, RAIGAD UNIT

It has been just a few days that the ban on sand mining has been removed and we hopethat the condition will become normal very soon. There was a huge shortage of sandsupply which had put all the construction activities out of gear. It had a great effect on thecost of constructions too as the prices of sand soared up very fast and nearly 70%-80% of work had been stopped. With removal on ban the work can now resume.

RAKESH SANGHVI, DIRECTOR, SANGHVI GROUP

The ban has been lifted. However, the sand is still not available in the market. It will takemore days to stabilise. The rates of the sand are increasing and as of now we are notseeing any corrections in the prices. After Diwali, we might be able to know the exactsituation of the market.

8) REAL ESTATE AND THE ZEN OF OPTIMISMThe Times of India, November 6, 2010

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Indian real estate has the advantages of strong domestic demand and a track record for higher resilience than most developed countries, says ANUJ PURI

Considering the levels of excitement we are seeing once again, the India property market

bears careful watching. Of course, it's not possible to track all of it - with so much of itstill not organised, a lot of what happens in terms of real estate in India still takes placeoff the radar. However, we have been able to zero in on some broad trends for the currentquarter, and I would like to share those.

Before I do that, I'd like to put my thoughts on the possibility of 'double dip' in theeconomy on record. Naturally, the Indian real estate sector would be significantlyimpacted if one occurred, but I seriously doubt that there will be one. I've said it before,and I'll say it again - unlike many developed countries, India has a well regulatedfinancial sector (a fact that stood it in good stead during the global economic turmoil).Also, Indian real estate has the advantages of strong domestic demand and a track record

for higher resilience than most developed countries. Now, a look at those trends. Retail and commercial real estate are following more or less predictable and logical paths, and I'm not stressed about them. On the other hand, India'sresidential real estate sector has been under the spotlight a lot of late - and not always for the right reasons. I'm inclined to take a closer look at what is happening there

RESIDENTIAL REAL ESTATE

The third quarter of 2010 saw 58,901 residential units getting launched against 67,171units in the second quarter of 2010. The absorption rate of residential units stabilised inthe range of 20-21% during the first three quarters of 2010, showing an impressiveincrease from the lows of 9% of the first quarter of last year. Average capital valuesappreciated by 2-4% in this period - a slower growth when compared to the incrementswe saw in previous quarters across Indian residential markets. Be that as it may, realestate investors are back. They are primarily targeting large-scale projects in residential,which have a quick absorption ratio. Their other focus area is integrated projects withmultiple asset classes in commercial real estate.

Residential real estate demand has been put into a partial stranglehold by the spurt in property rates, and quarterly sale volumes have stabilised at about 47,000 residentialunits. Despite a continued focus on affordable housing in the suburban markets, premium

products are back into the market at several locations. However, absorption rates mightdrop if prices continue to display the northward trend we have been observing in therecent past.

During the global financial crisis, residential prices remained flat or took significant dips,depending on the city and location. Today, I note with considerable misgivings that weare looking at price levels in many micro-markets that exceed those reflected during the

peak of the boom period in 2007. Matters are clearly leaving the realm of realism. While

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I expect selective price escalations to happen until the end of 2010, we are very likely tosee corrections related to locations, projects and the degree of unrealistic pricing happenafter that.

INFRASTRUCTURE

Unfortunately, India still falls short on meeting its infrastructure needs. Many projects toimprove accessibility and ease of transport have been announced and even launched, butinefficiency in the public sector is causing the Government to fall short of its investmenttargets in key sectors such as roads, railways and ports. This is worrisome, because any

bottlenecks in infrastructure have direct repercussions on real estate growth.

By 2025, something like 50% of India's population will be living in cities, and our urban population is going double over the next decade. There are already multiple infrastructureissues pertaining to roads, water supply, sewerage, solid waste management and variouscivic amenities to be handled at our urban centres.

Reportedly, the Government is in the process of implementing a series of measuresdesigned to boost funding for the country's infrastructure - including a multi-billion dollar debt fund. The initiative to roll out tax-free infrastructure bonds with a minimum tenureof 10 years will make infrastructure investment more attractive.

IN SHORT

As usual, there are good and bad news. I always like to take a long view of the real estatesector, and the overall outlook is excellent. Considering the steady and ever-increasingdemand, the rapid advancement of transparency and the level of international interest inthe Indian real estate market, it would be difficult even for the most hardened pessimist totake a gloomy long-term view of it - and I'm an optimist.

9) Commercial realty biz hits oversupply hurdleINDUSTRY PINS HOPE ON IMPROVED ECONOMIC ACTIVITYThe Economic Times, November 11, 2010Our Bureau MUMBAI

DEMAND for commercial real estate has not shown improvement in line with theresidential segment in the past one year and has continued to reel under the pressure of oversupply across India, but improved economic activity has now started narrowing thegap between supply and demand in this segment. However, sustainability of themomentum is still a key concern, according to a report on the commercial real estatesector.

Demand for office space registered significant growth in 3Q 2010 (JulySeptember) of 18% over the previous quarter, while supply recorded was lower by 11% in the same

period. This equation has helped bridge the gap between supply and demand down to a

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mere 6% on a pan-India basis, real estate services firm Cushman & Wakefield said in areport.This is significant for the developers as a narrow demand-supply gap will enable them tohold on to current values. However, going forward, with significant supply in the

pipeline, the gap is expected to continue to widen and will keep the market competitive,

the firm cautioned.

Pan-India supply of office space declined 11% over the previous quarter and around 25%from a year ago, and this can be attributed to a slowdown in construction over the pasttwo years and delay in project completion. The supply for this quarter, however, should

be treated as an anomaly and not as a trend, as the anticipated supply for the next 6-9months would see a significant increase on account of renewed construction activities.

According to the report, most companies have shown a clear preference towards ready or near complete spaces, resulting in higher absorption of 9.44 million sq ft as comparedwith pre-commitments of 2.64 million sq ft on a pan-India basis. During the quarter,

Indias financial capital Mumbai recorded a total demand of 1.5 million sq ft, down13.6% sequentially, as most of the pent-up demand was taken up in the first half of 2010.Also in the first half, significant demand was registered for SEZ space, keeping in mindthe new direct tax code which requires occupants to register or occupy space on or beforeMarch 31, 2011 to ensure certain tax benefits.

In Mumbai, supply outstripped demand by a fair margin and with low absorption of freshsupply, vacancy level was 18% notably higher than the previous quarter.

Rising vacancy in Mumbai has kept rental values under check in this quarter and willcontinue to do so in the short-to-medium term. Mumbais office market, unlike manyothers, is expected to see a serious over supply condition in the next 6-9 months as we donot anticipate any significant rise in demand while supply will see a steady rise, saidArvind Nandan, executive director, Occupier Services.

TALL ORDER

Pan-India supply of office space declined 11% over the previous quarter and around 25%from a year ago Mumbai recorded a total demand of 1.5 million sq ft, down 13.6%sequentially Rising vacancy in Mumbai has kept rental values under check in this quarter and will continue to do so in the short-to-medium term, say experts

10) Realty sees rise in PE, VC interest Business Standard, November 12, 2010T E Narasimhan / Chennai

Private equity (PE) and venture capital (VC) investments in the country's real estatesector rose 56 per cent between January and October to $1,338 million (Rs 7,490 crore)from $853 million (Rs 3,924 crore) in this period last year.

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According to sector experts, as the demand for housing is increasing, PE investors areinterested and expect 20-25 per cent after-tax returns.

Chennai-based Venture Intelligence, which compiled the data, says the number of dealsconcluded during the period was 35, compared to 28 last year. Some major investments

included Brahma Managements $145 million infusion in Brahma City Land Parcel inSeptember and a $140 mn in Gurgaon Land Parcel in May.

In July, Indiareit invested $130 mn in SoBO Central. IL&FS-Milestone Group put $125mn investment in HCC Realtys HCC Park in June and HDFC Venture put $106 mn inthe Lodha Groups World One Residential Building in August.

Anuj Puri, chairman and country head, Jones Lang LaSalle India, said With the return of confidence in the sector, real estate players are again looking at PE funding. That said,the industry still depends heavily on bank debt, NBFCs and end-user advances. Bank debt is a cheaper option and also offers flexible tenures. More, it is easily available

domestically. NBFC funding is also available at cheaper rates and can be repaid early.This makes it more flexible. Finally, end-user advances represent interest-free finance.

PE investors, he said, now had the same expectations as before the downturn. However,the structure has changed, as PE funds are now focusing more on capital protection. Or,they seek lower risk, even if that means slightly lower returns.

11) Commercial catalystCommercial property is seeing resurgence in demand, with corporates leasing space for

both back and front office needs, finds Deepika MitalThe Economic Times, November 18, 2010

Commercial realty is now gaining in demand, the recession is a thing of the past,companies are hiring and expanding. It was in the doldrums all over the country for awhile, but now the scenario is very different, the outlook is optimistic, and in Pune thereis definite reason to cheer. The SEZ and STPI stock is huge, but since prices arereasonable, corporates are leasing space for both back office and front office demand.

Jones Lang La Salle India research finds that corporate clients have been quite aggressivein securing space from Q1 2010, and approximately 6,00,000 sq.ft of STPI space has

been leased within the first 2 quarters. (The absorption for 2009 was a total of 1.8 millionsq ft.)

The absorption for SEZ is approximately 10,00,000 sq.ft within the first two quarters.The total absorption for 2010 thus far is 1.7 million sq ft. This is a significant increase indemand and reflects the positive sentiments now prevalent on the market.

All over the country the scenario is good, as the RBI presented data to show that loans tothe commercial real estate sector (bank loans to builders) have risen by 10.4 per cent, or Rs 9,604 crore, to Rs 1,01,662 (outstanding loans) as on September 24, 2010. Loans to

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commercial realty sector in the same period of the last year grew only 1.9 per cent, or Rs1,766 crore. As per the RBIs data on deployment of gross credit by major sectors,increase in loans to commercial real estate is the second highest after the education sector growing at 11 per cent at the end of September 24, 2010. Thirdly, for all banks, 3-10 per cent of total advances is towards the commercial real estate sector.

Ammul Goel, MD, PushpGanga Ventures, says, The presence of a large number of corporate houses is one of the main factors driving the real estate market. They representinfotech, biotech, manufacturing and financial sectors. Hence there is a lot of scope for future expansion. A good environment, infrastructure and good locations attract morecorporates from the national as well as international arena.

Residential projects do well when larger numbers of companies occupy the higher percentage of commercial spaces, which leads to more residential requirements. Thelarge number of educational institutes also drive the residential market. Good growth of the economy is also a major factor in this equation.

Roopa Mudliar, Vice-President, Sales and Marketing, Vascon Engineers Ltd says, Punehas witnessed a huge development in the commercial sector which has impacted theresidential development too. According to our study, one square feet of commercial spacegives rise to four square foot of non-commercial place, be it residential, entertainment or shopping. This has happened in various areas of Pune. The emergence of IT parks inHinjewadi has given a boost to the growth of nearby areas like Wakad, Baner where anumber of residential projects have come up. Magarpatta is another example which hasseen a huge demand for residential housing due to the presence of IT companies. Theupcoming IT parks in Kharadi, Viman Nagar are changing the face of these areas too,which is a clear indication that commercial spaces have given a turn around for theresidential development in Pune.

Prakrut Mehta, National Director - Office & Industrial Agency, Knight Frank India says,Large commercial developments in the outskirts of Pune - for instance Kharadi (Eon)and Hadapsar (Magarpatta) have driven these locations for all round development. All inall, commercial realty has been driven by actual need hence has been far more robust thanretail. Commercial development is the outcome of IT and the industrial growth of Puneso it is the availability of people and residential projects that attracts companies which inturn leads to growth of commercial space.

The Kharadi micromarket is a point in case, as it has been positively affected by theemergence of the Eon Free Zone, a massive 2 million square foot SEZ (only in thesecond phase) that will provide space to large corporates, who in turn will hireemployees. This is a very direct equation that will definitely impact all surrounding micromarkets. Even with just two clusters of Eon operational, the impact can already be seen.Kharadi, earlier considered an outskirt of Pune, is now pushing development in Wadgaonand Keshavnagar, both just dots on the erstwhile Pune map.

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Vivek Rachh, Director - Corporate Solutions, Panchshil Realty, says, "People take adecision to buy in a particular micromarket based on parameters like proximity toworkplace and schools. The quadrant of the city where they are working will naturally bethe one of choice to settle, whether in leased or bought out homes. In a sunrise locationlike Kharadi, the leader or driver is clearly commercial development. The captive

audience coming into the location will push other realty".

Correlating to the proximity of the work place, within a radius of 1 to 3 kilometresKharadi has seen a proliferation of projects in all strata - whether in terms of price or size.The rental market for the vast migrant population that the IT and ITeS sector brings inalso looks at the same radius. This activity has clearly gained momentum in the last threeyears, after the commercial scene looked up.

Large format developments like Magarpatta City, which have taken the parallel approachare those that have seen the maximum impact on the city as a whole and the area in

particular. Hadapsar has changed from just a bhaji market to a force to be reckoned with

thanks largely to such commercial developments. In this, a large part has been the proactive approach of developers who have an interest in getting the generalinfrastructure of the area moving - so we have seen a PPP aproach toward roads, power stations and even social infrastructure like parks. Mehta of Knight Frank says, "PPP isindeed the most effective model to development of any location.. especially theinfrastructure projects".

Concurrently, looking at retail - the other arm of commercial realty, Rituraj Verma, National Director - Retail Agency, Knight Frank India is of the opinion that a mall willnot sell residences, but residences will help malls. Pune is dependent largely on theresurgence of IT, which is happening and will push all sectors. In terms of projected retaildevelopments, the first mover advantage is naturally with Inorbit, and the rest will all bein the running later. The Prestige, Phoenix, Amanora and Magarpatta malls will all add tothe existing retail scene of Pune, but might have a fight on their hands to attract the

buyer. But the Pune consumer will enjoy the ride as being wooed is always pleasant!

On the whole commercial realty is upbeat and developers are bullish on IT and theautomotive sector pushing development.

INPUTS: Suchita Patil

12) Real estate firms to see higher volume growth Business Standard, November 23, 2010Debasis Mohapatra / Chennai/ Bangalore

Real estate companies in South India are hopeful of registering sound volume growth inthe residential properties segment despite recent rate hikes by the Reserve Bank of Indiaas banks hold home loan rates in their bids to improve the advances growth.

Also, unlike other geographies like National Capital Region (NCR) and Mumbai, pricehike is not sharp in South Indian market providing leeway to home buyers.

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The impact of policy rate hike by the central bank is not much in South Indian market as property prices have not risen sharply as in Mumbai and NCR market.

So, prices are in the affordable zone to attract customers and the demand is robust in the

residential segment, Venkat K Narayana, chief financial officer of Prestige Developers,said.

The central bank has recently hiked repo (rate at which banks borrow from RBI) andreverse repo rate (rates at which RBI borrows from banks) by 25 basis points. The central

bank has also come up with additional guidelines tightening real estate norms.

As per the revised guidelines, as the ceiling for loan-to-value (LTV) ratio was fixed at 80 per cent, the banks cant lend to a customer more than 80 per cent of the value of the property. The central bank has also directed financial institutions to increase risk weightsof home loans above Rs75 lakh. Further, the bank has been asked to increase standard

asset provisioning to two per cent in case of teaser home loan rates.Despite the loan-to-value fixed at 80 per cent, the demand will remain robust as usuallyhome buyers put 20-25 per cent of their own money to buy a property, Narayana added.

Prestige Developers, which has a significant presence in Bangalore, Chennai and other South Indian cities, is planning to launch five to six projects totaling 10 million sq ft inBangalore and Chennai by end of this fiscal.

Referring to this issue, S Baaskaran, chief financial officer of Sobha Developers, said,Despite policy rate hikes and tightening of real estate lending norms, demand inresidential segment is robust in Bangalore market.

Most of the banks are holding home loan rates than passing it to the consumer, which ineffect giving consumers the old rates, he added.

Sobha Developers, which has already sold around 1.5 million sq ft by the end of September, is planning to sell another 1.5 million sq ft by end of this fiscal. The companyis also planning to launch two new projects in Bangalore and one project in Thrissur of Kerala by end of this fiscal.

Some of the other real estate developers also echoed similar sentiment.

Bangalore has absorbed around 34,000 units in the first half of this fiscal with a price of around Rs3,000 per sq ft. The outlook for volume growth is also positive as overallrevival in economic activity has ensured robust demand despite rate hike in the recenttime, N L Vaidyanathan, executive director of Nitesh Estates said.

Prices in South Indian market, which had witnessed 10-15 per cent rise in recent time,should not go further, he added.

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Nitesh Estates, which had already launched five projects post listing, will launch 3 projects in Bangalore along with one project in Goa.

About the impact of rate hikes in residential market, Jackbastian K Nazareth, chief

operating officer of Puravankara projects said, There is minimal impact of rate hike onreal demand. Rather, it is sentimental.

He also said that as South India was a conservative market as compared to other parts of the country, the prices were in the affordable range.

Not only the real estate developers are positive about overall demand scenario, bankersare also of the opinion that there are less chances of passing on higher rates to consumer at this point of time.

Despite the rate hike by RBI, most of the banks have not raised rates. This trend is

expected to continue till end of this year, Dillip Mavinkurve, managing director of StateBank of Mysore said.

He also said that floating rate schemes announced by most of the private and publicsector lender were expected to continue in near future to push up advances growth whichother wise was witnessing a slow growth.

13) Loan scam to not impact housing prices: industry Business Standard, November 26, 2010Press Trust of India / New Delhi

Demand and prices of property are unlikely to decline as a result of the housing financescam racket unearthed by CBI earlier this week, according to the country's top developer DLF and consultant Jones Lang LaSalle. "Property prices are sub-set of demand. We do not foresee any negative impact ondemand. Hence, the prices will not come down," Jones Lang LaSalle India Chairman andCountry Head Anuj Puri told PTI when asked about the likely impact of housing financescam on property demand and prices. Puri, however, pointed out that the banks would be more cautious in lending todevelopers, who in turn would have to depend more on other sources like private equityfor funds. Echoing similar views, DLF Group Executive Director Rajeev Talwar said: "Propertydemand depends on the growth of the economy. Any individual misdemeanour shouldnot impact the growth of the real estate sector."

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The views of DLF and JLL differ from HDFC Chairman Deepak Parekh who, yesterday,had said that there could be correction in property prices as a fallout of the housingfinance scam. "Some developers will bring down the prices and sell... the unsold stock with developers

is huge across the country. In this scenario, prices cannot go up definitely," Parekh hadsaid. On November 24, CBI arrested LIC Housing Finance CEO Ramachandran Nair andseven other top bankers for allegedly colluding with Mumbai-based Money Matters insanctioning housing loans meant for individuals to corporates. "There will be repercussions in terms of increased caution by banks while lending todevelopers. Borrowing will become more expensive and the process involved in getting itlengthier as banks increase their vigilance levels," Puri of JLL said.

14) Realty, banking shares continue to feel the heat of CBI raids Business Standard, November 26, 2010BS Reporter / New Delhi

A day after the Central Bureau of Investigation (CBI) conducted nationwide raids andarrested officials in financial sector companies, on charges of corruption, shares of entities concerned continued their southward movement. Stocks of the real estatecompanies remained under pressure, while the public sector undertaking banks also lostvalue.

The corruption charges were made against officials of LIC Housing Finance (LICHF),Bank of India (BoI), Central Bank of India (CBoI), Punjab National Bank (PNB), LifeInsurance Corporation of India (LIC) and Money Matters Financial Services (MMFS), onaccepting bribes from private financiers to route loans to corporate. On a day when the Bombay Stock Exchange Sensitive Index, or Sensex, moved 0.73 per cent south or 141.69 points, to close at 19,318.16, realty index got the hardest hit as itdipped 5.4 per cent, while the bankex fell 1.42 per cent.

Shares of PNB slipped 6.38 per cent to close at Rs 1,183.75. BoI shares dipped 5.85 per cent to Rs 420.30. Stocks of LICHF was down by one per cent to Rs 1,058.10, whilethose of MMFS plunged another 20 per cent for the second day in a row to Rs 425.

Among realty stocks, DB Realty lost the most at 9.99 per cent to close at Rs 235.25,followed by Housing Development & Infrastructure at 9.69 per (Rs 186.45) cent andOrbit Corporation at 8.3 per cent (Rs 80.65).

Shares of India Infoline were down 13.51 per cent to Rs 92.15. India Infoline is under pressure, since it has acted as a lead arranger for Money Matters QIP of Rs 450 crore,said ICICI Securities in a note today.

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ALL FALL DOWNPrice movement of banking and realty stocks

Company Closing price (Rs) Chg %

LICHF 1,058.10 -0.98BoI 420.30 -5.85PNB 1,183.75 -6.38MMFS 425.00 -19.99India Infoline 92.15 -13.51DB Realty 235.25 -9.99HDIL 186.45 -9.69Orbit Corp 80.65 -8.30

Note: % change over previous day Source: BSE

Edelweiss said in a statement, We believe these investigations will have negativeimplications on companies involved and will remain an overhang, both from financialimpact as well as sentiment perspective.In case of LICHF, the note further added, it

jeopardizes the growth prospects on one hand and raises issue of management change onthe other.

15) Half-a-dozen real estate IPOs face delay Business Standard, November 27, 2010Raghavendra Kamath & Ashish Rukhaiyar / Mumbai

The mega real estate loan scam could delay the initial public offers (IPOs) of over half-a-dozen real estate developers because of poor investor sentiment, said bankers andanalysts tracking the sector.

It will be very difficult for real estate entities to raise money through IPOs at this juncture, said Gyan Mohan, executive vice-president and head, investment banking,IDBI Capital Markets.

According to Prime Database, which tracks primary capital markets, eight real estatecompanies have got the final approval from the market regulator to launch IPOs. Theseinclude Raheja Universal, Lodha Developers, Lavasa Corporation and Kumar UrbanDevelopment. Together, they were looking to raise Rs 9,500 crore.

Though it has been said that this is not a systemic risk, investor sentiment has beenimpacted. The sector was anyway facing transparency issues, said Mohan.

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The IPOs are crucial for these developers to repay debt. For instance, New Delhi-basedBPTP was planning to use a fourth of the IPO proceeds of Rs 1,500 crore to lower debt.

I do not think any property developer will bring out a public issue in the currentfinancial year. Those who try IPOs and QIPs (qualified institutional placements) will

have to undergo a lot of scrutiny and due diligence in the coming days, says AmitGoenka, national director, capital transactions, Knight Frank India.

Developers like Lodha agree. The markets are still volatile and previous issues have notdone very well. We may take a view in the new year, said Abhisheck Lodha, managingdirector of Lodha Developers.

The benchmark BSE Sensex has fallen 2.3 per cent, or 448 points, since November 19.

To tap elsewhereDue to delay in raising funds through selling equity and from public sector banks, the

cost of borrowing for real estate companies will rise and developers may have to borrowmore from private banks, non-banking finance companies and private equity (PE) firms, bankers say.

At present, property developers borrow at between 10.5 per cent and 14 per cent,depending on their credit profile. This may rise by 50-100 basis points.

Conditions are quite adverse for the real estate sector. In debt, the cost of funds is basedon the perceived risk. The riskier the assets, the higher is the price. Even RBI hasincreased the risk weight for real estate loans, said a head of fixed-income capitalmarkets at a foreign investment bank.

RBI increased the standard asset provisioning by commercial banks for teaser home loansfrom 0.4 per cent to two per cent, capped the loan-to-value ratio at 80 per cent andincreased the risk weight on loans of more than Rs 75 lakh to above 125 per cent in the

November 2 monetary policy.

Goenka says though private lenders will increase rates, private equity firms cannotincrease their return expectations from developers, as theyve already been asking for 25

per cent returns.

PE firms will get more credible opportunities and put more money in the sector, headds.

However, some developers say funding from public banks will resume once the dustraised by the scam settles. Banks cannot afford to not do business with propertydevelopers as they earn a good spread. Once things settle down, funding will continue asusual, said the chief financial officer of a Mumbai-based listed company.

16) Asia property markets set for tighter regulation

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Business Standard, November 28, 2010Reuters / Singapore

Asia's property markets are set for a continuous drip feed of tighter regulations in comingmonths as authorities try to take the froth out of surging home prices without triggering a

crash.

Last week Hong Kong announced its fifth set of measures this year as it struggles to curbspeculation in its property markets. China, Singapore, Taiwan, Thailand and Malaysiahave also unveiled more stringent regulations in recent months.

But Asian investors' appetite for property seems far from sated with prices continuing toclimb. That will likely prompt governments to raise mortgage requirements again,increase land supply and - in the case of China - impose property taxes.

"My baseline scenario is we will need more measures - the current set worked but their

impact is transitory," said Tim Condon, head of research at ING Financial Markets inSingapore.

Authorities' ability to curb speculation is hindered this time round by the abundantliquidity in the market and central banks' reluctance to raise interest rates too fast amid a

patchy global economic recovery.

Many investors, particularly at the luxury end, are coming to the market flush with cash,meaning measures such as putting a cap on mortgages relative to the value of a propertyaren't as effective as usual.

Hong Kong luxury home prices are now above the peak they reached in 1997 before theAsian financial crisis struck, fueled in part by rich mainland Chinese buying flats in thecity.

Read the newspapers in Singapore and you'll see a string of stories showing new condodevelopments selling all of their flats on the first day of asking.

"We're entering into unchartered waters because just one set of the measures introducedso far this year would have worked in previous times - but what we have right now aremarkets filled with liquidity and historically lower interest rates," said Donald Han, vicechairman at Cushman & Wakefield in Singapore.

Residential prices in Hong Kong climbed 25 per cent from mid-2009 to mid-2010 whilethose in Singapore rose 37 per cent, according to property agency Knight Frank.

LESSONS LEARNT?

Asian policymakers know the dangers of property bubbles all too well. The 1997financial crisis began in Thailand's real estate markets and led to a crash in property

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prices across the region, while the U.S. subprime mortgage meltdown and ensuingfinancial market chaos dragged much of Asia into recession.

In the aftermath of the 1997/98 crisis Asian authorities led the way in designing "macro- prudential measures" to curb credit growth for housing long before the term became the

buzzword of regulators in the west.

These included the use of loan-to-value ratios to cut the size of mortgages people could borrow compared to the value of their house, and limits on foreign currency borrowing.

But despite this experience observers say authorities are still struggling to keep up with pace of the price rises this time round.

"They'd like to think they have learnt the lessons of previous crises but the way the pricerises have gone over the last 18 months or so show that even in a command economysuch as China you can't always control prices as much as you'd like to," said David

Green-Morgan, head of Asia Pacific research at DTZ in Sydney."In hindsight, the authorities should have started releasing more land for construction in2008 but that was during the global financial crisis when it wouldn't have been anobvious policy choice," he added.

Using regulation to control property prices is notoriously tricky because of the spillover effects such moves can have on the rest of the economy.

Federal Reserve Chairman Ben Bernanke argued against measures to rein in the U.S. property market in the years preceding the 2008-09 financial crisis, saying it could have anegative impact on the rest of the economy.

It's not hard to see why many economists now argue that was the wrong approach, butAsian authorities are still likely to tread carefully.

"If China is aiming for around 10 per cent annual GDP growth, a big part of that dependson a healthy property market," said Han at Cushman & Wakefield.

"So rather than taking a sledge-hammer to the market governments will be issuing newmeasures on a bi-monthly or quarterly basis to weed out excessive speculation," he said.

FURTHER MEASURES

So what measures should investors expect and where?

Singapore, Hong Kong, Taipei and various cities across China are highlighted as theareas still most vulnerable to a build up of pricing pressures.

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Hong Kong has already gone in hard and is now expected to give its latest measures sometime to take effect before going back for more some time next year.

Singapore has hinted that it's likely to implement further measures, and is likely to releasemore land into the market as well as introduce more measures that curb speculation such

as higher rates of stamp duty for people who sell properties soon after purchasing them.

"Those who are buying multiple properties, those who are buying for investment, are theinvestors who are on a higher risk of facing more regulatory measures," said Cushman &Wakefield's Han.

China faces an even tougher policy balancing act due to the huge regional disparitiesacross its property markets.

An analysis by Standard Chartered shows that cities such as Shanghai, Shenzhen andChengdu are still facing huge upward pressure on prices while some "second tier" towns

such as Dalian and Tianjin could see homeprices fall as a host of new supply comes on totheir markets.

This means authorities are expected to roll-out property taxes they've been recently piloting in cities where the markets are still frothy, while refraining from any freshmeasures elsewhere.

That, though, is likely to be easier said than done when authorities are still struggling tokeep up with what's actually happening in the markets they're trying to control.

"Introducing such a tax is strewn with technical and political difficulties," said StandardChartered's head of China research Stephen Green in a recent research note.

A recent property tax proposal by Shanghai was reportedly turned down by the StateCouncil because Shanghai had not done an adequate survey of all the apartmentsinvolved, a task that would take months, if not years, he added.

Authorities are still expected to press ahead with these taxes but at a fairly low level,setting progressive rates of between 0.3 to 0.6 per cent of market value per year.

But the bottom line though is that while most Asian property markets have managedexchange rate regimes and relatively low interest rates, authorities will struggle to controlthe market via regulation alone.

"Until and unless you fix the undervaluation of currencies the pressure is always going to be there - in that sense, these property measures will only deal with the symptom and notthe cause," said ING's Condon.

17) Nearly 100 malls to come up by 2012 in seven cities

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Business Standard, November 28, 2010Press Trust of India / New Delhi

Nearly 100 shopping malls are likely to come up by 2012 in seven major cities of Indiaon expectation of increased demand from retailers, according to a report from property

consultant Jones Lang LaSalle (JLL).

Pointing out that the global economic slowdown did impact the retail story 'momentarily',the consultant said the sector has witnessed a rapid adaptation to the ground realities and"is now poised at the right crossroads to take the next giant leap in the coming decade".

According to the report, there are 193 shopping centres are currently operational in Delhi- NCR, Mumbai, Chennai, Pune, Kolkata, Hyderabad and Bangalore.

"Ninety four shopping centres encompassing a total retail space of 37 million sq ft areexpected to be operational during the next nine quarters between Q4, 2010 and 2012

across the top seven metropolitan cities of India," it added.18) Metro outskirts in for realty price correctionPrices Likely To Decline 10-15% By Next Year The Economic Times, November 29, 2010Avinash Nair AHMEDABAD

THE countrys realty sector may be attracting record deals and mega investments, but anervous chatter about property markets cooling off has already begun. Real estate experts

predict that prices could taper off by as much as 10-15% in the outskirts of Mumbai,Delhi, Kolkata, Hyderabad, Pune and Ahmedabad.

This correction, however, will not be as intense as the one witnessed in 2008-09. Pricesare expected to dip gradually in early 2011 and may extend for several months. Theeffects are already evident in smaller realty markets in Tier-II cities like Ahmedabad,where a couple of builders have reduced prices of luxury homes.

Given that there will be an abundance of supply coming to the markets in 2011-2012,there could be a decrease in prices due to oversupply. Burgeoning areas (of cities) willsee minor corrections as more and more supply rolls in, says Ash Sharma, senior vice-

president, markets, Jones Lang LaSalle India (JLL), a global real-estate consultant.

Mr Sharma said the correction would not happen immediately and would not touchmatured locations. A recent pan-India research done by a Gujarat-based marketingstrategy and consulting firm points out that the Indian real estate industry is in for somecorrection in 2011. It (the correction) may start from first quarter of 2011 and last up tothe third quarter of 2012. However, it will be not be too intense as it was during therecession. It is expected that prices may be slashed by 10-15% during this phase of correction, says a research by Ikon Marketing Consultants.

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According to this research, majority of real-estate investors from Delhi, Mumbai,Bangalore, Chennai, Kolkata, Hyderabad, Gurgoan, Chandigarh & Pune are now notwilling to invest at the existing price points. Majority of these investors are keen to exitand book profits on their earlier investments, says Azaz Motiwala, the head of theconsulting firm.

As ET reported earlier, the percentage of investors in real-estate projects in cities likeAhmedabad, Kolkata, Pune and Mumbai had already reached over an unhealthy 50-60%from an ideal 30% (with the rest 70% being actual end-users). Secondly, the rise of residential property prices, which shot up by 30-40% in the last one year, has also givenrise to fears of formation of a bubble in the market.

Pranab Datta, VC & MD, Knight Frank India (a global real-estate consultant) says that a boom in the residential markets that is driving majority of the realty market will continuetill the point the stretch in affordability, on account of rising prices, is bearable.

In some residential micro-markets of Mumbai, the prices have surpassed the 2008-peak levels and this coincides with a large quantum of supply. Particularly in the luxurysegment, if the speed of sales reduces, then we cannot rule out a price correction goingforward, says Mr Datta.

Even the realtors themselves, foresee a correction. There has been an oversupply in theluxury segment in Ahmedabad. While sales in this residential segment have alreadydipped by 10% in the past three months, some of the developers have also been forced tocut down their prices. As per the current trends, the markets are in for a correction,sooner or later, says NK Patel, an Ahmedabadbased developer. Similar are the views of Snehal Mantri, director marketing, Mantri Developers. In markets such as Mumbai andDelhi, where there is a high level of speculative buying, prices have risen sharply andthese markets may witness a correction in prices of properties, she adds.

VERTICAL LIMIT

The correction may start from the first quarter of 2011 and last up to the third quarter of 2012 Tapering may not be as intense as the one in 08-09 & may not touch mature placesThe effects are already evident in Tier-II cities like Ahmedabad, where some buildershave reduced prices of luxury homesRise of property prices last year has given rise to fears of a bubble

19) Profitability of real estate sector to remain subdued Business Standard, November 30, 2010Debasis Mohapatra / Chennai/ Bangalore

Despite a tangible revival in demand in the real estate market, profitability of south-basedreal estate companies will remain subdued in the next quarter as under-construction

projects will take some more time to be recognised in the balancesheet of thesecompanies.

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As per accounting principles, revenue of an under-construction project is reflected in the book of a company after a certain degree of completion of the project. Usually, mostcompanies follow the 30 per cent completion trigger to calculate the revenue on their

balance sheet.

Due to the 30 per cent completion norm, profitability is yet to be reflected in the booksof the real estate companies, Venkat K Narayana, chief financial officer of PrestigeDevelopers, said.

He, however, said that as new projects were launched by companies and with the growthin demand, profitability of companies would see a rising trend.

Referring to this matter, N L Vaidyanathan, executive director of Nitesh Estates, said that profitability of real estate companies were subdued during the last quarter due to the percentage completion rule.

As many new projects are launched in this quarter on the back of the revival in demand,this will take another one to two quarters to reflect completely, he added.

Many real estate companies in south India have registered a flat growth or have seen adip in their net profit during the second quarter of the present financial year. Thosecompanies which have posted higher profitability figures have done so on the back of land monetisation than on higher core earnings.

During the slowdown, many developers had stopped launching new projects. With therevival in the economy, new projects are being launched and those will take time toreflect in the balancesheet, an analyst with Mumbai-based brokerage firm said.

He also said that profitability would remain subdued in the near term for the real estatecompanies.

However, some of the real estate developers have a different view regarding this issue.

Though the accounting principle plays some role, still companies with robust salesgrowth have already shown growth in profit in the last quarter, S Baaskaran, chief financial officer of Sobha Developers said.He also said that the upcoming quarters would register better revenue and profit growthon the back of robust demand.

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