Real Estate Weekly News Letter 27 October 2014- 2 November 2014

Real Estate News Letter

27h October 2nd November, 2014

For private circulation only

CONTENTS

2. Interest Rates

3. Infrastructure

4. Industry News

5. Private Equity News

6. Regulatory Buzz

8. Land

9. Residential

10. Commercial/ Retail

11. Township

12. SEZ

13. Hospitality

14. Input Cost

7. Public Markets

1. Snapshot

Snapshot

Source : NSE

Source : NSE

Note : Data indicates inflation over previous years month Source : Ministry of Commerce and Industry

-0.30.4

0.8 1.0

1.9

-3.9

0.3

3.1 3.2

1.4

-4.5

-3.5

-2.5

-1.5

-0.5

0.5

1.5

2.5

3.5

4.5

27/Oct 28/Oct 29/Oct 30/Oct 31/Oct

per centTrends in Nifty and CNX realty index

Nifty CNX REALTY

38 39

37

44

67

37

39 38 36

52

20

30

40

50

60

70

27/Oct 28/Oct 29/Oct 30/Oct 31/Oct

Rs billionTrends of FII in equity markets

Buy sell

6.3%

7.7%

7.0%

8.6%

6.8% 6.8%

3.9%

2.2%

1.0%

3.0%

5.0%

7.0%

9.0%

Feb/14 Mar/14 Apr/14 May/14 Jun/14 Jul/14 Aug/14 Sep/14

Per cent

WPI-inflation data (primary articles)

Interest Rates

No news in this section for the week

E-tolling on Delhi-Mumbai highway

starts on Friday

From this Friday, one can travel on the Delhi-Mumbai

highway without stopping at any toll plaza, with the

government launching electronic toll collection (ETC).

When vehicles pass through any of the 18 toll plazas

on the Delhi-Mumbai highway, an antenna on the

plazas will detect the RFID (radio frequency

identification) tags installed on the vehicles. The data

will then be sent to a server and, subsequently, the

toll will be automatically deducted from the vehicle/tag

owner's bank account.

Currently, vehicles passing through toll plazas have

to stop and pay a fee, which often leads to traffic

congestion. Though some operators offer the facility

of tag lanes, such tags can only be used at

designated points. Also, these can only be bought at

toll plazas. Now, a dedicated lane, under the brand

name FASTag, will be available at every toll plaza.

The dedicated ETC lanes will also have distinct

colour coding. The government plans to make the

service available at all 350 toll plazas across national

highways by the end of this year.

The aim is to streamline toll collection on national

highways, address malpractices in the process and

avoid traffic jams resulting from toll collection, say

officials in the Ministry of Road Transport &

Highways. Besides, it is expected issues of

overcharging and undercharging, as well as

complaints against under-reporting/non-reporting of

toll collection, will also be addressed.

Every year, an estimated Rs 6,000 crore is collected

from toll plazas on national highways. A new website,

www.nhtis.org, will offer all toll-related information,

including the number of toll plazas between specific

routes, toll fees and toll notifications on the basis of

which fees are charged. One will be able to calculate

the toll she/he has to pay while travelling on national

highways by various modes - car, van, taxi, bus,

truck, etc.

To manage the process of ETC, the government has

set up Indian Highways Management Company Ltd

Infrastructure

Government sets up council for

Infrastructure Projects on Public

Private Partnership mode

The Government of Rajasthan today set up a council

for preparing a policy on Infrastructure Projects to be

taken up on Public Private Partnership (PPP). Chief

Minister Vasundhara Raje would be chairperson of the

council, and PWD, Water Resources, Energy Minister,

Principal Secretary Finance and Advisor (Infrastructure

and PPP) would be its member, according to an official

statement here. Any project costing more than Rs 500

cr would require the permission of the council, the

statement added.

The Economic Times,29 October 2014,New Delhi

RFQ deadline for Navi Mumbai

airport extended

Bidders for the construction of the Navi Mumbai

International Airport (NMIA) have been given an

extension period of six weeks to submit their Requests

for Qualification (RFQ) application after they sought

more time from the City and Industrial Development

Corporation (Cidco), the nodal implementing agency

for the project, to form joint ventures to bid for the

R14,574-crore airport project.

The concerned parties will now have to submit the

RFQ by December 10 from the earlier planned date of

October 30. This is the third time Cidco has extended

the RFQ submission date after the civil aviation

ministry approved the revised tender document for the

proposed Navi Mumbai airport in July. This is the final time that the RFQ submission time has been extended

on the request of bidders who have asked for more

time to form joint ventures to bid for the airport project, a senior Cidco official said. Cidco had earlier extended

the deadline to July 31 from June 28 and then to

September 2 after the bidders sought clarifications on

issues like pre development works, land acquisition,

and airspace management.

The Financial Express,30 October 2014,Mumbai

undertaken in the first phase and is estimated to cost

over Rs 7,000 crore.

The work on boring earth for raising pillars on the NS

corridor started on October 27 in the presence of

Lucknow Metro Rail Corporation (LMRC) Managing

Director Kumar Keshav. LMRC is targeting to

complete this railroad section covering about 8 km

between Transport Nagar and Charbagh railway

station by December 2016.

According to officials, about 40 pillars would be raised

at a distance of 200 metres.

Since, Assembly polls are due before May 2017, the

ruling Samajwadi Party wants the metro project

operational by then, so that it can be showcased as a

success story and epitomise its development agenda.

The project has been designed to cater to the

projected population in Lucknow in the next 25 years.

Metro Man E Sreedharan is the principal advisor to

the Lucknow Metro project. In the starting, a senior

bureaucrat was appointed as the MD of the project.

However, he made way to a technocrat for faster

completion of the project.

The project had been stalled for the last several

years. During the Mayawati regime, the project could

not move beyond the route alignment stage, thanks to

the differences over funding model.

On March 3, Yadav had laid the foundation of

Lucknow Metro depot near the airport. Earlier on June

27, 2013, the state government had given its formal

nod to the proposed LMRC project.

Lucknow City has a population of about 4.5 million.

There has been tremendous horizontal growth in the

state capital with rapid development of suburban

areas. In such a dynamic scenario, a modern urban

rapid rail transit system is imperative for a growing

city like Lucknow to facilitate faster commuting and

decongesting ever increasing road traffic.

Business Standard,31 October 2014,Lucknow

Infrastructure

(IHMCL), with equity participation from the National

Highways Authority of India (25 per cent),

concessionaires (50 per cent) and financial institutions

(25 per cent). IHMCL has tied up with Axis Bank and

ICICI Bank for clearing house services and offering

RFID tags to users through franchises/agents and at

points of sales near toll plazas.

The ministry has also made necessary amendments

in the Central Motor Vehicle Rules, 1989, for

installation RFID tags on vehicles. The project was

conceptualised by the United Progressive Alliance

government, which had constituted a committee on

using ETC technology on national highways under the

chairmanship of Nandan Nilekani, former chairman,

Unique Identification Authority of India. The committee

had examined the technologies available for ETC and

recommended the most suitable one.

Keeping in mind user convenience, the rate of

acceptance and ease of implementation, passive RFID

(based on EPC, Gen2, ISO 18000-6C Standards for

ETC technology) was adopted, said ministry officials.

So far, ETC technology has been installed at 55 toll

plazas. And, their integration with Central Clearing

House operators on the Delhi-Mumbai route via

Haryana, Rajasthan, Madhya Pradesh, Gujarat and

Maharashtra, has almost been completed.

A pilot project for an interoperable ETC system on 10

toll plazas between Mumbai (Charoti) and Ahmedabad

has also been tested and seamless ETC on this

section is underway.

Business Standard,30 October 2014,New Delhi

Lucknow Metro Rail project gathers

steam

Lucknow Metro Rail, one of the flagship projects of

Uttar Pradesh Chief Minister Akhilesh Yadav, has

started to gather steam with actual ground work

starting this week. Lucknow Metro is proposed in two

corridors North-South (NS) and East-West corridors. The proposed 23-km NS corridor, which

would connect Lucknow airport to the city, is being

of which just 2% of the inventory is in undeveloped

areas in each city. While sales have slowed down in

Mumbai as well, the real reason is more to do with

high prices. "NCR is a very inefficient market where a

lot of projects were launched in undeveloped areas,"

says Pankaj Kapoor, MD of Liases Foras. Take for

instance the Dwarka-Manesar Expressway. Its

location in Gurgaon is closest to Delhi and several

projects were launched here a few years back but

work on the expressway has not been completed yet

though some builders are close to giving possession

to buyers.

"As the level of sales dropped, the interest of

developers in creating social infrastructure also

reduced," says Samarjit Singh, managing director of

IndiaHomes, a real estate brokerage firm. Over the

last few years, a number of scams and project related

issues that have cropped up across NCR have also

scared buyers. While project delays are a big issue,

cases against developers such as the one where the

Competition Commission of India slapped a fine of Rs

630 crore on DLF for unfair trade practices in a few of

its Gurgaon projects, or environmental concerns such

as those around development near the Okhla Bird

Sanctuary, have added to the gloom.

SPECULATORS

And while the real estate market in every city has its

share of speculators - investors who don't really want

to live in the flats they buy and essentially see them

as an investment they can flip quickly to other buyers

the NCR has far more than its fair share. In NCR, well over 50% of those who buy property think of it as

a short-term investment, pushing builders to launch

hundreds of projects over the last few years without

so much as a thought to the main premise of real

estate location. "The problem in the NCR is peculiar," says Mudassir Zaidi, national director -

residential at Knight Frank India.

"Prevalence of investors is compounding the problem

as they are also selling their inventory, undercutting

developers on price as they do not have the holding

capacity." When the economy was riding high, these

investor-buyers flipped properties at ease within six

months of buying them, thus making a killing and

Industry News

Urban areas in and around Delhi

constitute 40% of unsold real estate

in top eight cities

Urban areas in and around Delhi account for a

stunning 40% of unsold real estate in India's top eight

cities. So, why is it so gloomy in NCR? Why does

Bangalore and even Mumbai look better?

THE PROBLEM

The NCR has a total of 303.48 million sq ft (about

303,000 apartments) of unsold real estate, according

to property research firm Liases Foras. At the current

pace of sales, this stock requires another 53 months to

be completely sold off. In comparison, for the Mumbai

region, the figure is about 48 months while it is the

lowest for Bangalore at 19 months. For the top eight

cities combined, the 765 m sq ft of unsold space will

require at least 35 months to be sold.

The festive season this year has failed to bring cheer

to builders despite many of them doling out offers

which include ones where buyers have to pay 10% of

the apartment cost upfront and the rest at the time of

possession. Brokers say they are getting a lot of

enquiries from buyers but not too many conversions.

Riding on improved sentiments, home sales in the

NCR are up about 10% over the previous quarter, but

sales are still not happening at the pace that is usually

associated with the festive period. In good years,

builders were able to garner almost 30-40% of their

sales for the entire year during this threemonth period.

BUILDING NOWHERE

But it's not just the size of the unsold 'inventory' that

makes Delhi the worst off among the real estate

markets of larger cities. 56% of the unsold real estate

in NCR is in areas which are currently uninhabitable. In

other words, while the apartments have come up, the

other essential infrastructure roads, sewage systems, or water connections have not. In comparison, the Mumbai Metropolitan Region (MMR)

has 168 m sq ft (168,000 apartments) and Bangalore

has 113 m sq ft (113,000 apartments) of unsold space

to bring their benefits to bear on the market.

"While demand exists, it is still held in abeyance by

various economic factors, including the natural lag

between the announcement and implementation of

the government policy catalysts," he said. Likewise,

the Reserve Bank has held on to current interest

rates in favour of safeguarding against further

inflationary trends. "It will take several more months

for the market to get into convincing forward

momentum again.. the festive season did not bring

the kind of momentum that was hoped for," Puri

added.

"There is also an expectation that home loan rates

may come down in the next 2-3 quarters as the

government is taking initiatives to tame inflation. If the

interest rates come down, we will see a surge in sales

from the second or third quarter of 2015," Vasudevan

noted. Developers, on the other hand, have been

addressing the situation by offering selective

discounts and incentives, the success of which has

varied across cities and locations. Those with greater

holding power continue to wait for the market to pick

up so that sales velocity will accelerate, Puri said.

"During the festive season, developers generally

launch new projects as well as offer various

incentives to attract buyers. However, over the last

few quarters, there has been a slowdown in new

launches as the inventory levels itself are very high,"

Samruddhi Realty Chief Executive Madhusudan K

said. He further said developers are currently

concentrating on clearing the inventory and are

offering discounts and other incentives to attract

buyers.


Delhi Metro: Growth engine of NCR

market

In the run up to expanding its footprint in various

areas of the Delhi NCR, Del hi Metro has hugely

boosted the prop erty markets in Delhi, Ghaziabad,

Noida, and Gurgaon. The announcement of each new

corridor brings with it a push in property prices, on

Industry News

raising prices. But the same market is now gasping for

breath as actual buyers started to pull back in an

uncertain market.

"There is a logjam in NCR because the trust deficit

about the builder community here is the worst

compared to other cities," says Singh, pointing out that

the list of developers still maintaining their reputation is

now very small in the NCR. Buyers, he says, now

prefer buying apartments in completed projects or in

ones that are at a very late stage of construction.

Kapoor of Liases Foras says in locations where social

infrastructure is in place and the price too is

compelling, home sales are still robust.


Festive season fails to bring cheers

for real estate

Despite recovery in market conditions and sentiment,

this festive season has failed to bring in cheers to the

real estate industry as home buyers continue to remain

cautious, according to industry experts. Festive season

is generally considered as the most important time for

the realty sector as it records the highest number of

sales, which is nearly 20-25 per cent more than non-

festive period.

"The real estate industry has always witnessed a rise

in sales during the festive season especially on the

back of freebies and incentives offered by the

developers. However, despite recovery, there is no

improvement in sales during the festive season,"

IndiaProperty.com Chief Executive Ganesh Vasudevan

told PTI here today. He said, "the demand from

property buyers has increased compared to the last

few quarters. This is witnessed from the number of

enquiries we are receiving. But this is not translating

into actual transactions as buyers have adopted a wait

and watch approach."

According to Jones Lang LaSalle India Chairman and

Country Head Anuj Puri, though there is a recovery in

sentiment, the events that have catalysed it - namely

the new government at the Centre and "its pro-

business policies favouring realty"- will need more time

The 11km-long Mundka-Bahadurgarh line is pushing

prices along this stretch, while the property market on

the proposed Metro link between Dilshad Garden and

New Bus Depot (Ghaziabad) has seen a lot of activity

in the area after the announcement. This stretch is

going to benefit areas in the vicinity of Shahid Nagar,

Raj Bagh, Rajendra Nagar, Shyam Park, Mohan

Nagar, Arthala, Hindon, and New Bus Depot in

Ghaziabad. Connecting Badarpur with Faridabad, this

Metro line in Phase III will benefit Sectors 5, 9, 11, 12,

13, 15, 16A, 17, 18, 21A, 21B, 24, 27A, 27B, 27D, 28,

30, 32, 39, 43, 44, 46, 47, Dayal Basti, and Ashoka

Enclave in Faridabad.

Rakesh Yadav, MD of Antriksh Group, says: The realty market of Noida has gained quite a lot from

Metro connectivity, as this district bordering Delhi was

in dire need of smooth connectivity with the national

capital. Like the Mumbai locals that have been

instrumental in pushing life there, today it is hard to

imagine life in the Delhi NCR without Delhi Metro,

especially during office hours.

Ajay Kumar, CMD of Ace Group, says: Metro connectivity is a game changer for the real estate

industry as a whole, as historically , it has been

proven that transport infrastructure has had a positive

impact on the real estate sector. Delhi has undergone

a phenomenal transformation with the construction of

the Metro, mak ing commuting convenient, cheaper

and faster. We are very happy with the development

authorities of Noida and Greater Noida for coming

together with the DMRC for the two Metro

extensions.

Sandeep Bedi, director (Strategy & Systems) of

BPTP , says: The proposed Metro track along Gurgaon Expressway will help clear any uncertainty

in the minds of homebuyers and investors who were

counting upon this decision, which to them means

secure investment.

Manish Agarwal, MD of Satya Group says: Delhi Metro is not only the lifeline of the entire Delhi-NCR

region but also has been a source of property boom

in the areas it has passed.

The Times of India,27 October 2014,New Delhi

Industry News

average, by 20-25% in the nearby areas.

Developers and builders cash in on Metro connectivity

to their projects, putting it at the top of their USP list,

while end users and investors, too, prefer to buy into

such projects for great connectivity to offices and

higher returns, respectively . The proposed 11.5km-

long Metro link from Dwarka Sector 21 to IFFCO

Chowk will drive the property prices on this route. The

construction of Metro along Dwarka-Gurgaon

Expressway has been approved by the government

and it has been taken up as an early-bird project by

Delhi-Mumbai Industrial Corridor Development

Corporation (DMICDC), New Delhi--a government of

India organization.

Noida development authority recently signed a MoU

with DMRC to construct two new Metro links--29.7km-

long line from NoidaGreater Noida through Noida

Expressway and 6.7km-long line from City Centre to

Noida's Sector 62. The construction will start soon and

is likely to be completed by 2017. The Botanical

Garden-Kalindi Kunj Metro link, under construction,

may be short, but it provides strategic linkage

connecting South Delhi to Noida. With this, the

property prices here have seen steep rise. In line with

the complete connectivi ty plan, Delhi Metro connects various parts of Delhi to three districts of the NCR --

Noida, Gurgaon, and Ghaziabad and stops right at the

border of Faridabad-193km of Metro track in all. The

average daily ridership figure of 23 lakh is enough to

gauge its impact on people's lives.

For the next phase of development, Phase III (covering

140km) and IV are going to be crucial. Corridor-wise,

Dwarka-Huda City Centre corridor has significantly

impacted the property prices on this stretch and has

particularly benefited Gurgaon. It got further boost from

Rapid Metro, which is set to connect various parts of

Gurgaon with Delhi Metro. Similarly , Noida City

CenterGreater Noida West link has been benefiting the

property prices on its route covering Sectors 50, 143,

144, Pari Chowk, Bodaki, etc.

As per the plan, Delhi Metro will also reach Faridabad

and Bahadurgarh districts in Haryana. For the last 12

years, Delhi Metro has become the fulcrum for realty

development, shaping the market in a big way .

per cent), Delhi (-3 per cent), Surat (-2.4 per cent),

Dehradun (-2.1 per cent) and Lucknow (-0.5 per

cent)," NHB said.

The Residex for the quarter April-June, 2014 has

taken into account the price trends for residential

properties in different locations and zones in each city

and is based upon the transaction data received from

Central Registry of Securitisation Asset

Reconstruction and Security Interest of India

(CERSAI). The data based on actual transactions are

put through a model that depicts the trend in the

market, NHB said.

The Economic Times,01 November 2014,New Delhi

Industry News

Housing prices rise in 18 cities by

up to 3.9 per cent: National Housing

Bank

Housing prices appreciated in 18 major cities by up to

3.9 per cent in April-June over the preceding quarter

while property rates fell in six cities including Delhi,

according to National Housing Bank (NHB). In the

national capital, housing prices dropped by 3 per cent

during the first quarter of this fiscal compared with the

January-March 2014. Maximum price increase was

witnessed in Pune by 3.9 per cent, while Chandigarh

saw highest fall of 4.4 per cent, according to NHB's

'RESIDEX'.

NHB had launched housing index 'RESIDEX' in July

2007 to track the movement of housing prices on a

quarterly basis. It currently covers 26 cities. Prices in

two cities -- Hyderabad and Raipur -- remained

stagnant. "The movement in prices of residential

properties for the quarter April-June, 2014 has shown

marginal increasing trend in 18 cities ranging from 0.5

per cent in Bhubaneswar to 3.9 per cent in Pune, and

fall in 6 cities ranging from -0.5 per cent in Lucknow to

-4.4 per cent in Chandigarh in comparison to the

previous quarter January-March, 2014," NHB said in a

statement.

The appreciation in property prices in majority of cities

tracked by NHB comes at a time when the domestic

real estate sector is reeling under a lingering slowdown

for last 2-3 years. Maximum increase was observed in

Pune (3.9 per cent) followed by Coimbatore (3.5 per

cent), Indore (3.3 per cent), Guwahati (3.2 per cent),

Patna (2.7 per cent) and Kolkata (2.4 per cent).

Housing prices appreciated in Ahmedabad by 1.91 per

cent, Vijayawada (1.88 per cent), Mumbai (1.75 per

cent), Chennai (1.72 per cent), Ludhiana (1.4 per

cent), Bhopal (1.3 per cent), Kochi (1.2 per cent),

Jaipur (0.99 per cent), Faridabad (0.96 per cent),

Bengaluru (0.93 per cent), Nagpur (0.6 per cent) and

Bhubaneswar (0.5 per cent).

"Six cities have shown decline in prices over the

previous quarter with maximum fall observed in

Chandigarh (-4.4 per cent) followed by Meerut (-3.6

Besides reducing the built-up area requirement to

20,000 square metres (sq m) for attracting FDI,

investors, in the new norms, will be allowed to exit on

completion of the project or after three years from the

date of final investment, whichever is earlier.

Minimum capital requirement has also been halved to

$5 million and the government is now permitting 100

per cent foreign ownership of projects in the

construction sector through an automatic route.

Analysts say this move will be a positive for

developers with existing joint development/

investment arrangements with foreign investors they will gain as their addressable market will

expand. Also, developers with large land banks will

benefit with potential increase in demand for land. At the company-specific level, developers like Godrej

Properties, Brigade Enterprises and Mahindra

Lifespaces, who have existing joint

development/investment arrangements with foreign

investors (APG Group, GIC Singapore and Standard

Chartered, respectively), will benefit as their

addressable market will expand, says Aashiesh Agarwaal, an analyst tracking the sector with

Edelweiss.

Further, developers with large land banks Sobha Developers, DLF and Jaypee Infratech will also gain with potential increase in demand for land.

Within our coverage universe, Sobha Developers

(buy rating), Godrej Properties (hold rating) and

Brigade Enterprises (buy rating) are likely to be key

beneficiaries, he adds. Oberoi Realty, according to an ICICI Securities report, continues to stand out

among publicly-listed Indian realty developers with

the strongest balance sheet and a quality asset

portfolio, which provides ample room for growth and

ability to optimise returns going ahead.

While cashflows have been muted in the past two

years, ICICI Securities believes new planned

residential launches in the next six months in Mulund,

Andheri, Goregaon, Worli and Borivali land parcels

provide nearly 4x FY10-FY14 sales booking potential over the next five years, which will alleviate

these concerns.The move, while lowering the

threshold for new investment, will facilitate larger FDI

inflows in the construction sector that accounted for

Private Equity News

HDFC arm, Singapore firm invest in

Bangalore residential project

HDFC Investment Trust II, an investment company

under mortgage lender HDFC Ltd, and Singapore-

based Superior Investments have together invested

60 crore in a residential project in Bangalore. Legal firm J Sagar Associates (JSA) advised and assisted

Superior Investments and HDFC Investment Trust II, in

connection with the investment of the residential

project in Whitefield, Bangalore by Sterling Gated

Community Private Limited (SGCPL).

Sterling Gated Community is a special purpose vehicle

formed by Ramani Sastri and Shankar Sastri, who

have more than 30 years of experience in developing

real estate projects in Bangalore and are the founders

of the Sterling group. SGCPL is developing a

residential project with 147 units of 3-BHK and 4-BHK

configurations, planned over a part of larger land

parcel owned by SGPCLs associate company, Sterling Urban Development Pvt Ltd (SUDPL). The

remaining land is being developed as Villa Grande,

comprising 243 villas, with Phase-I complete and

Phase-II ongoing.

As part of the transaction, JSA advised the landowner,

SUDPL, about the execution of a joint development

agreement in favour of SGCPL. The transaction

involved a corporate due diligence on SGCPL, drafting,

negotiating and finalising the agreement as well as

other documents.

The Hindu Business Line,31 October 2014,Mumbai

Godrej Properties, Brigade,

Mahindra Lifespace to gain from FDI

in construction

Realty stocks rallied on Thursday, a day after the

government relaxed norms for foreign direct

investment (FDI) in the construction sector. The S&P

BSE Realty Index was the top sectoral gainer that

moved up nearly 3.5 per cent. Unitech, HDIL and DLF

were among the top gainers that rallied 8.5 per cent,

six per cent and 4.9 per cent, respectively.

Private Equity News

about 10 per cent of total FDI inflows in India over the

last decade, analysts say. The reform would now allow foreign investor to invest in smaller projects

spread over land parcel of about three four acres. In the near-term, we expect the policy to support housing

and commercial office projects in metro cities such as

Delhi and Mumbai, where project size is generally

small, yet requires heavy investment due to expensive

land parcels and high construction cost, says Neeraj Bansal, partner and head, real estate and construction

sector, KPMG in India.

Though the government has relaxed rules for FDI,

analysts do not expect money to start flowing

immediately, though they agree this is a step in the

right direction and reflects the governments intention towards reviving the sector. Relaxing FDI norms will open up the capital markets thereby attracting

investments into the sector.

However, we foresee another 8-12 months for the

decision to bear fruit, said Shishir Baijal, chairman and managing director, Knight Frank India.


Cabinet may take up plan to

liberalise FDI in construction sector

The union cabinet is likely to consider on Wednesday

a proposal to liberalise foreign direct investment in

construction sector. The department of industrial

policy and promotion (DIPP) has proposed

substantial easing of norms for affordable housing

and the 100 smart cities envisaged by the new

government that took charge in May.

The proposal, if approved, will also help infuse more

funds into the debt burdened sector and facilitate

faster completion of projects. "FDI in construction

note is with the cabinet for approval and will likely be

considered on Wednesday. Comments from various

ministries and departments have been incorporated,"

said a government official.

Under current rules, 100% FDI is allowed through the

automatic route in development of townships, housing

and built-up infrastructure, subject to stringent

conditions and a three-year lock-in. The norms

mandate minimum capitalisation of $10 million for

wholly-owned subsidiaries and $5 million for joint

ventures with Indian partners.

Developers will be exempt from restrictions in size,

minimum capitalisation and exit, if they commit 30%

of project cost to affordable housing.The sector

attracted $1.2 billion in FDI in 2013-14, down 8% from

the previous fiscal. DIPP, the nodal agency for FDI,

has proposed relaxation in norms related to built-up

area, capitalisation and lock-in period. It has

proposed that the minimum built-up area be cut to

20,000 sq metres from 50,000 sq metres while the

minimum capitalisation be halved to $5 million from

$10 million and from $5 million to $2.5 million for joint

ventures with Indian partners.

Minimum built-up area in case of serviced housing

plots is proposed to be cut to 5 hectares from 10

hectares and the minimum lock-in period of three

years after the completion of the project is proposed

to be dropped. The government hopes the easier

rules will also help faster completion of projects

delayed by a squeeze on funds due to elevated debt

Regulatory Buzz

Reits, InvITs will need tax sop thrust

Tax incentives are key to the success of Real Estate

Investment Trusts (Reits) and Infrastructure

Investment Trusts (InvITs), a senior Sebi official has

said. In September, market watchdog Sebi had notified

the norms for listing of business trust structures, Reits

and InvITs, that would help attract more funds in a

transparent manner into realty and infrastructure

sectors. Both the structures, norms of which were

approved by the regulator in August, would get tax

incentives.

Countries like Singapore and Hong Kong had launched Reits but did not give any tax incentives

because of which these did not kick off well. The whole

Reits structure is motivated by tax benefit. If it is given,

then it will work or else it will not," Sebi executive director Ananta Barua said according to a PTI report.

Realty players and investors have been seeking more

clarity on the taxation structure for newly-created Reits

and InvITs.

Barua said there were four levels of taxation involved

in both Reits and InvITs, which need to be addressed.

Taxation is involved at four stages first while structuring and transferring assets to Reits or InvITs;

second when they distribute income to its investors;

third when they are traded; and fourth time when there

is an exit. These are heavy stages so tax issues have

to be addressed, he stated.

For both trusts, the minimum initial offer size should be

Rs 250 crore with a public float of at least 25 per

cent.The minimum asset base for these trusts to get

listed is Rs 500 crore.

To ensure transparency, these trusts would be subject

to stringent norms on disclosure as well as related

party transactions, Sebi has said.

Reits and InvITs are required to make investments

either directly or through special purpose vehicles

(SPV). In case of publi-private-partnership projects,

money can be put in only through SPV.

The Tribune,27 October 2014,New Delhi

packages to be announced by the government," said

a minister.

Of the nearly 30,000 acres to be pooled for the

capital, the government will acquire 15,000-18,000

acres in the first phase. A crucial meeting of the

cabinet sub-committee on land pooling will be held on

October 30, where a final call on the compensation

package is expected to be cleared. The government

wants to begin the negotiation process immediately

after that.

According to the draft plans, the government is

contemplating giving at least 1,100-1,200 sq yard of

developed land to farmers in return for every acre

acquired. It is also contemplating offering an annual

compensation ranging from Rs 25,000 to Rs 40,000

per acre till the portion of the developed land is

returned to the owner.

Although, the present prices in the earmarked villages

are between Rs 1 crore and Rs 3 crore per acre, the

government does not consider them to be realistic.

The government also believes that the farmers might

not oppose giving away their lands as they can get

not less than Rs 2 crore for 1,000 sq yards of

developed land once the capital is ready. "In fact, they

might get more than what they are anticipating now

as land in the vicinity of the capital will have high

premium," said a minister.

The Times of India,29 October 2014,New Delhi

Affordable housing gets leg up, FDI

norms eased

Finally, there is some good news for the real estate

sector. In a major relief to the ailing housing sector,

the government on Wednesday eased foreign direct

investment (FDI) norms in construction sector, which

will boost affordable housing and bring in copious FDI

flows. The long-awaited decision taken by the cabinet

chaired by prime minister Narendra Modi has more

than halved minimum built-up area requirement for

FDI in construction to 20,000 sq meters from the

present 50,000 sq metres. Finance minister Arun

Jaitley had promised this relaxation in the budget.

Regulatory Buzz

levels.

If the proposal is accepted, investors are likely to be

able to exit projects on receipt of occupancy and/or

completion certificates issued by the competent local

authority or after Foreign Investment Promotion

Board's nod.


17 villages identified for land

pooling

Uncovering its capital city plans, the AP government

has decided to pool land in 17 villages of Guntur

district in the ? rst phase. As reported by TOI earlier, it

has exempted Amaravati from the first phase. Sources

said the government has earmarked Tullur, Nekkallu,

Kuragallu, Mandadam, Velagapudi,

Uddandarayunipalem, Rayapudi, Dondapadu,

Neerukonda, Borupalem, Nelapadu, Sakhamuru,

Nidamarru, Malkapuram, Mudha Lingayapalem,

Lingayapalem and Abbarajupalem villages for the

initial land pooling exercise. They added that the

government has zeroed in on these villages in view of

the absence of high priced paddy fields there.

"We want to begin the process of land pooling from

November 1," confirmed agriculture minister and

member of the land pooling committee, Prathipati

Pullarao. A senior offcial of the rank of principal

secretary is expected to closely monitor the process.

"We want to complete the firrst phase within three to

six months," said a senior revenue official.

Sources said chief minister N Chandrababu Naidu is of

the view that farmers who are resisting land pooling

will fall in line once the process is successfully

completed in the upland areas of 17 villages in Tullur

mandal.

"The government felt that there could be some protests

from farmers of Amaravati, Tadepalli, Mangalagiri and

Ta tikonda and hence has decided to take up land

pooling there in the second phase. If farmers do not

agree even then, we will go for forcible acquisition. We,

however, suggest all of them to make use of the best

developed plots will mean pieces of land where trunk infrastructure, including roads, water supply,

street lighting, drainage and sewerage, have been

made available.

The state government/ municipal/ local body

concerned, which approves the building /

development plans, will monitor compliance of the

above conditions by the developer.

Projects using at least 60 per cent of the FAR/FSI for

dwelling units of carpet area not more than 60 sq mt,

will be considered as affordable housing projects.

Investment in the construction development sector

has a multiplier effect on the economy by way of

infrastructure creation, substantial employment

generation over the entire spectrum from unskilled

workers to engineers, architects, designers as well as

financial and other supporting services.

Further, it creates the demand for products of a

number of related industries including those in the

manufacturing sector, like cement, steel, fittings and

fixtures and others. Besides its employment and

income generation potential, greater investment in the

sector would help to augment the available housing

stock including affordable housing and built up

infrastructure for different purposes.

Enhancement of the affordable housing stock is an

urgent need in order to stem the proliferation of slums

in and around the cities, the statement said, adding

the sector witnessed steadily rising FDI from 2006-07

to 2009-10 after which the levels of inflows have been

much lower.

In order to step up investment in construction

development with its backward and forward linkages

for many other sectors of the economy, it is believed

that some liberalisation and rationalisation of the FDI

policy on construction development could be the

necessary catalyst to give a boost to the sector, it

said.

Financial Chronicle,30 October 2014,New Delhi

Regulatory Buzz

The cabinet also halved minimum capital requirement

for such projects to $5 million from $10 million. The

move was aimed at attracting more foreign investment

in construction and real estate sector, an official

statement giving details of the cabinet decision said.

Real estate developers saw the move as a major help

to the cash-starved realty sector to raise funds. DLF

managing director, Rajiv Talwar, said it was a welcome

decision and a prompt response to address the woes

of the sector, hit hard by the economic slowdown.

This would usher in huge investment into the countrys realty sector. The affordable segment will benefit

hugely by these relaxations. The government is taking

the right steps to revive the sector, Talwar said. Support also came from other leading realty

companies. Niranjan Hiranandani, managing director,

Hiranandani Group, said, The government's focus on affordable housing would require 25 million houses

and with the relaxation in the norms to allow foreign

direct investment in construction these funds could be

raised easily.

It would now be much easier for the sector to raise the required capital for construction, Hiranandani added. The relaxation proposal was moved by the

department of industrial policy & promotion (DIPP) to

attract more foreign investment in construction and real

estate sector that is facing a severe liquidity crunch in

the last few years.

Although 100 per cent FDI is allowed in townships,

housing and built-up infrastructure and construction

developments since 2005, only $23.75 billion had

flowed into sector, which was a relatively small amount

compared to some of the other sectors. Though the

sector has huge potential for foreign investment, the

flow was just ten per cent of the total FDI inflows into

the country.

The projects that commit at least 30 per cent of the

total cost for low cost affordable housing would be

exempted from minimum built up area and

capitalisation requirements with a minimum three-year

lock-in period, the official statement said. The cabinet

decision, however, came with certain riders. The Indian

investee company will be permitted to sell only

developed plots. For the purposes of this policy,

Public Markets

Sobha Q2 sales bookings drop 12%

to Rs 559 crore

Real estate firm Sobha Ltds sales bookings fell 12 per cent to Rs 559 crore during the second quarter of

this fiscal due to poor demand. The company had

posted a sales bookings of Rs 632.3 crore in the

year-ago period. The company during the quarter

achieved new sales of 833,991 sq ft valued at Rs 559

cr with an average realisation of Rs 6,703 per sq ft, Bangalore-based Sobha said in its operational update

for the July-September quarter.

Sales volume dropped to 833,000 sq ft during the

second quarter of the present fiscal from 1 million sq

ft in the year-ago period. However, sales realisation

improved 6.32 per cent to Rs 6,703 per sq ft. During the quarter, the company has delivered a stable and

consistent performance in all its southern markets.

The real demand in the northern and western markets

as a whole continues to be weak and the company

remains cautious about these micro-markets in the

medium term, Sobha said.

The company SAID there has been an uptick in the

general business sentiments post formation of the

new government at the Centre. Whilst the steps being taken by the new government enthuse

optimism, the same is yet to translate into a

significant revival of demand in the real estate sector, it added.

During the first six months of this fiscal, Sobhas sales bookings fell to Rs 1,041.2 crore from Rs

1,235.1 crore in the corresponding period of previous

year. Sobhas sales bookings stood at Rs 2,343 crore during the full 2013-14 financial year but missed the

target of Rs 2,600 crore due to the slowdown in

demand, especially in the NCR-Gurgaon region.

With the approaching festive season and an expected improvement of overall performance in the

second half of the fiscal, the company remains

positive about achieving the guidance set for the year

(2014-15 fiscal), Sobha said.


Land


the rise, damaging buildings fully or partially. This has

necessitated us to think in favour of providing an

insurance coverage benefiting apartment owners, he added.

Asset Homes has entered into an agreement with

New India Assurance Company to offer the coverage

called Insured Asset Scheme. As per the MoU, all

villas and apartments to be purchased henceforth

from Asset Homes will be covered against damages

caused by fire, earthquake, lightening, explosion,

aircraft damage etc for a period of 25 years. It is for the first time in the country that a builder is offering

such an insurance package, he said.

The insurance company has agreed to extend a

similar package for existing apartments of the

company, for which discussions are in progress with

resident associations. Considering all eventualities,

the need of the hour is to extend insurance coverage

to buildings, CJ Philip, Deputy General Manager,

New India Assurance Company said.

The Hindu Business Line,27 October 2014,New Delhi

Purva Evoq in Chennai

Puravankara Projects Limited, has launched Purva

Evoq, a first-of-its kind contemporary residential

project at Chennais prime location Guindy. Overlooking the Chennai Race course, Purva Evoq

will have 181 premium homes in 3, 4 and 5 BHK

formats that will have contemporary design ideas to

blend with the grandeur of the architecture in the

project. The faade of this project has been designed

by a renowned international architectural firm from

Germany taking inspiration from the Chettinad

architecture of south India, and cloaking it with

modern day luxuries. When fully occupied, the

collective financial wealth of the residents is

estimated to be in upwards of US$ half a billion (Rs

3000 crore), making it possibly one of the wealthiest

residential enclaves in Chennai. The palatial looking

building will have world class features, a landmark

entry arch and gate, large chandeliers and marble

clad lobby. Each apartment will have a royal white,

Residential

Green signal for entire SmartCity

project

SmartCity Kochi has received environmental clearance

for the entire project covering 246 acres, even as the

construction of the first IT building is fast nearing

completion. Gigo Joseph, CEO, said the environmental

clearance was received in July last year for the 6.5

lakh sq ft first IT building (SCK01), and later the

company applied for the rest of the project, which has

now been cleared.

According to him, not less than 8.8 million sq ft built-up

area will be developed, with substantial area left for

greenery and open spaces, attracting companies from

within India and abroad. Joseph said the

environmental clearance was given at the meeting of

State Environment Impact Assessment Authority

Kerala (SEIAA-K) followed by the State Expert

Appraisal Committees (SEAC) recommendations. He said SEAC appreciated SmartCitys effort in presenting a clear-cut master plan of the project. Now, as the

decks have been cleared for the entire project, the

company will speed up the construction of

infrastructure. SmartCity has entered into agreements

for joint development of infrastructure with leading IT,

hospitality, realty and education companies to make

the hub an integrated township.

The Hindu Business Line,27 October 2014,Kochi

Asset Homes to sell insured

apartments

The Kerala-based Asset Homes has introduced a new

concept of bundled insurance coverage in all its newly

constructed dwellings. This new initiative was taken to

counter eventualities arising out of all natural and

manmade calamities, says Sunil Kumar, Managing

Director, Asset Homes. The financial loss caused by

recent cyclone Hudhud and devastating Kashimir

floods to building structures has prompted the

company to go in for an insurance coverage, he added.

Incidents of natural calamities and manmade disasters such as terrorism, bomb explosions are on

has been sluggish for nearly two years, high-value

deals have continued to defy the trend in the last few

quarters. In one such trans action, private equity firm

Xander's founder and chairman Siddharth Yog bought

a sea-facing apartment at the famous Samudra Mahal

building in Worli for Rs 40.5 crore.

Last year, another sea-facing duplex apartment in a

building on Mount Pleasant Road in south Mumbai's

Malabar Hill locality was sold for Rs 57 crore, or

around Rs 1.35 lakh a sq ft, making it the most

expensive residential property transaction on a per sq

ft basis.Several high-profile figures from the corporate

world are among those who have homes in Raheja

Viverea, which is spread across eight acres. They

include HDFC vice-chairman and CEO Keki Mistry

and private equity firm KKR's CEO Sanjay Nayar. The

missions of Germany, Australia and Canada also own

apartments in the complex. Johnson & Johnson and

Mondelez India Foods Ltd (formerly Cadbury India)

have also bought apartments there for their

respective CEOs.

The Economic Times,28 October 2014,Mumbai

Vaswani pre-launches luxury

project in Blore

Vaswani Group has pre-launched a luxury residential

project, Vaswani Exquisite, in Bangalore. It is

adjacent to Zuri Hotel, ITPL Main Road, Whitefield.

With slim towers rising in an arc overlooking the

Hoodi lake, this project promises its residents an uber

luxurious living experience.The project is a high rise

with G+24 floors and offers three and four bedroom

apartments ranging between 1,750 sq ft to 2,800 sq ft

respectively with price starting from Rs 1 crore. The

project also comprises well designed penthouses.

The building sanction has been received and

construction is likely to commence shortly. A limited

number of units have been released for booking up to

the 16th floor, at special pre-launch prices, the

company said in a statement.

The strategic location of Vaswani Exquisite cuts

down on travel time for its future residents working in

Whitefield area, with proximity to major IT parks,

Residential

large, hi-tech main door along with a panic button in

the master bed room and dining area as well as marble

clad living room, wooden floor in master bedroom, gas

leak detectors in kitchen and luxury fixtures. The

residents will have access to a 5-star concierge

service as well as several amenities on rooftop that

include a stately sky/ cigar lounge, sky gazing

observatory, hard scape paved area with seating, well-

lit terrace garden, evergreen gazebos, jogging track,

infinity pool and private offices, among others.

The Tribune,27 October 2014,Chennai

HSBC buys duplex for Rs 60 crore

in South Mumbai locality

HSBC has bought a luxury duplex apartment

overlooking the Arabian Sea in south Mumbai's

Mahalaxmi locality for around Rs 60 crore, said two

persons familiar with the development, making it one of

the most expensive such purchases in the country.

While the hottest property market in the country does

have apartments valued at Rs 100 crore under

construction, this is the highest reported transaction for

a flat so far in terms of absolute numbers.

"The deal is concluded and the registration was done

recently. Total consideration for the apartment also

includes stamp duty and registration charges," said

one of the persons mentioned above. The 8,000 sq ft

apartment located in the Raheja Viverea development

overlooks the Mahalaxmi racecourse and golf course

has been bought by the bank to house its India chief

executive officer, currently Stuart Milne.

On the basis of built-up area, the deal is valued at Rs

75,000 per sq ft. Going by carpet area5,000 sq ftit's almost Rs 1.10 lakh per sq ft. The deal is in the list

of costliest transactions on a per sq ft basis on both

these measures. The apartment is located on the 40th

and 41st floorsthe top twoof one of the three wings of the complex, which was completed in 2012. HSBC

bought the apartment directly from developer K Raheja

Corp.

HSBC India declined to comment as did the

transaction advisor CBRE. Although the realty market

Residential

healthcare centres, educational and entertainment

hubs, the statement claimed.

Kailash Advani, chief executive officer, (southern

operations) Vaswani Group, said, With the presence of the Export Promotion Industrial Park and ITPL,

Whitefield has become a hot-spot for most people in IT

and ITeS sectors. Apart from corporate houses, well

known educational institutions, business parks and

commercial complexes have also come up in and

around the area. With increasing demand in the micro-

market, we saw an opportune time to prelaunch this

project.

Financial Chronicle,30 October 2014,Bangalore

Commercial/ Retail

Forum Group starts building Rs 500

crore mall in city

Kolkata-based real estate developer Forum group has

commenced construction of Rs 500 crore shopping

mall and office space complex at Rasulgarh square in

Bhubaneswar. Titled as 'Esplanade by Forum', the

project will consist of a 4 lakh square feet shopping

mall including an eight-screen multiplex and 2.5 lakh

square feet luxury office spaces. Additionally, the

project will have parking facility for over 1000 cars.

Speaking about the project, Vidyut Saraf, deputy

managing director of Forum Group said "the entire

500-crore project will be executed by Leighton Group

from Australia, one of the world's biggest contractors.

The facade of the project is inspired by Odisha's

famous weave pattern and will use materials never

before used in India." Forum Group has been investing

in Odisha for over 35 years now. One of its group

companies UAL is amongst the state's largest fibre

cement sheet producers. Another company SAPL is in

the process of setting up a Rs 2000 crore Titanium

venture near Chhatrapur in Ganjam district.

Business Standard,29 October 2014,Kolkata

important role in the rationalisation process. For

example, Mexico citys chaotic bus service got transformed into the most dependable public

transport using ICT, through demand-supply

matching and providing better service to the

commuters. We can also learn from other countries in

improving public transport ticketing using ICT.

Japans FeliCa or Londons Oyster card are great examples of hassle-free ticketing service.

The concept of smart cities should be incorporated in

the urban planning bodies and a holistic approach is

required. How about integrating transportation and

traffic planning with urban planning? This will make

the urban planning department completely

responsible and accountable for a citys traffic and public transportation. Why should the traffic police be

responsible for traffic planning? Instead, we should let

the traffic police focus on educating and improving

responsible driving among the public.

How many times do we get frustrated at the utter lack

of coordination between government organisations

resulting in wastage of effort/money and causing

public nuisance? Roads are nicely tarred and within a

few days the sanitation/water supply department

begins work on the same stretch of road! As a first

step, can we get such simple things aligned amongst

urban local bodies and fix ownership?

The government should expand on the PPP-based

initiatives and replicate success stories in passport

service and airports. Further, Nobel laureate Jean

Tiroles suggestion to improve the PPP model through periodic independent evaluation is worth

considering in India as well. Further, e-governance

must be given the right thrust as it can bring in better

transparency and can reduce corruption.

Creating the right ecosystem

India needs a strategy to enable and sustain a strong

smart city ecosystem. The government must embark

on an initiative making innovation as an enabler for

Indian smart cities. The sole aim should be realising

affordable India-specific solutions.

Township

A smart way to create 100 smart

cities

Prime Minister Narendra Modis vision to create 100 smart cities has resonated well both in India and

across the world. While each state is pitching 4-5 cities

to figure in the final list, many countries have shown

interest in supporting the initiative in specific states.

Recently, France offered to invest in creating smart

cities in Himachal Pradesh.

The idea of smart cities is timely considering that

urbanisation is inevitable. Sample this: as much as

75% of population in advanced countries live in cities,

and 70% of worlds population will live in cities mainly in developing countries over the next 30 years. During

this period, India is projected to add about 400 million

people in urban areas.

While smart city as a concept has gained popularity

over the past few years, there is vagueness in the

definition. Rightly so, as multiple aspects including

governance, public transport and traffic, waste

management, entertainment and safety, among others,

need to be considered.

A recent survey by the IESE Business School, called

Cities in Motion, rates Tokyo, London and New York as the top smart cities in the world. The survey

considers parameters including governance, urban

planning and environment. The survey indicates that

these three cities have a clear vision and consistent

implementation of their strategic urban plans.

Rationalising/integrating urban bodies

Should India create 100 new smart cities or improve

the existing ones? India has 53 cities with over 10 lakh

population and there are hundreds of smaller cities. It

makes sense to improve existing cities and aim at

making them smart rather than creating new ones which are bound to take significantly longer time.

It is a given that each Indian city has different priorities.

We need to rationalise the existing infrastructure and

then look for improvement. Here, information and

communications technology (ICT) can play an

Township

Institutions of national importance such as the IISc,

IITs and IIMs produce some of the best talent in the

country.

Can we utilise this talent more effectively? Also, can

these institutions be held accountable in certain areas

from conceptualisation to implementation?

The ministry of human resource development (MHRD)

should consider adding specific aspects around smart

cities such as introducing urban planning as a

specialised course. Subjects such as traffic and

transportation engineering should also be popularised.

Students should be encouraged to pursue specialised

courses by creating the right demand environment.

ICT will play a major role in enabling smart cities and

India is quite uniquely positioned in terms of the IT

ecosystem. We have the technology know-how, skilled

and mature manpower. IT industry, often seen as

export-oriented, can have a great opportunity to make

significant contribution in enabling e-governance or

providing high-end analytics that can help the common

man.

The success of participative governance (where the

government departments and the general public work

closely in prioritising improvement actions for the city)

has been patchy in India. Reports suggest that few

cities such as Surat and Pune have performed well,

but most large cities have miserably failed. There can

be many valid reasons, but we need government bodies to show much more willingness to embrace

public participation.

It will take a while for Indian cities to figure among the

worlds best smart cities. Thats fine and perhaps Janaagrahas annual survey of Indian cities could be a starting point for assessing Indian cities on smart city

parameters.

A holistic approach is needed in rationalising the

existing systems. Making our cities smart is a milestone, and not an end-goal in Indias quest to create top-class cities.

The Financial Express,28 October 2014,New Delhi

SEZ


Hospitality


Input Cost


Disclaimer

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newspapers and magazines. ASK Property Investment Advisors has reproduced the articles and reports

verbatim. ASK Property Investment Advisors does not vouch for the accuracy of the information and is not

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which are subject to change. In preparing this document we have relied upon and assumed, without

independent verification, the accuracy and completeness of all information available from public sources or

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No reliance may be placed for any purpose whatsoever on the information contained in this document or on its

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amendment and such information may change materially.

Documents

Real Estate Weekly News Letter 27 October 2014- 2 November 2014