2012 Outlook- Indian real estate sector: Fitch Ratings

Fitch Ratings has come out with its report on Indian real estate sector.

Negative Outlook: Fitch Ratings' outlook for 2012 for the Indian real estate sector is negative due to weak overall demand and higher construction costs, which are likely to continue to squeeze margins.

Sluggish Demand to Continue: High Equated Monthly Instalments (EMIs), resulting from significantly higher interest rates, lower household surplus due to high inflation and high residential unit prices have reduced the affordability of homes. Purchases slowed significantly during H1 FY12 and are likely to continue at these new levels during the first half of 2012.

The oversupply of commercial space continues in some markets. However, the demand for office space is likely to be maintained at 2011 levels as the hiring momentum of the IT/ITeS sector, the major driver of office spaces in India, continues into 2012. Demand for retail commercial space is expected to be low in 2012. 

Margin Pressure: Depressed demand, together with increased construction costs - both material and labour - have compressed margins and this is likely to continue into 2012.

Regulatory issues: The Reserve Bank of India has continued to increase policy interest rates in 2011. Home loans with step up interest rates were also discontinued by home loan lenders, due to pressure from the RBI. Both these factors have led to an increase in EMIs.

Deleveraging: Gearing continued to increase for most companies in H1-FY2012. Some real estate companies reduced their gearing levels in FY12 by selling non-core assets, like land parcels and IT Parks. Overall, gearing of large real estate companies has decreased by about 20% from the post-crisis peak of around 0.89x. However, declining profits have resulted in leverage (debt to EBITDA) at high levels in 2011 - at around 7x - and this is expected to continue in 2012, hurting the creditworthiness of real estate companies.

Liquidity Pressures: Fitch expects the dependence on operational cash flows to fund growth and service debt to increase. Foreign direct investment (FDI) and private equity (PE) funding has dwindled and a weak equity market no longer makes IPOs a viable funding option. All this, together with the banks' cautious approach, limits fund raising options. Thus, developers of commercial properties, which have stable rentals as a significant portion of total revenues, will have stable credit profiles but the outlook for the industry a whole is negative.

Economic Slowdown: Slowing GDP and the spectre of job losses during the previous downturn in 2008 may lead to the postponement of purchase decisions, further affecting residential demand.

What Could Change the Outlook Demand is Key: Improvement in demand, either due to a decrease in interest rates or the launch of new projects at affordable prices, would have the potential to improve cash flows to real estate companies and change the outlook to stable.

Prudent financial management, together with a slower build up of land banks, increased reliance on project advances and judicious use of cash generated by liquidating existing inventories, will help boost stronger capital structures. This improvement may result in selective upgrades of companies in the sector, even while the overall outlook is negative.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Source: http://www.moneycontrol.com/news/real-estate/2012-outlookindian-real-estate-sector-fitch-ratings_653056.html

IMAX plans 17 theatres in India by 2013

Leading global entertainment company IMAX Corporation plans to have as many as 17 theatres in the country by next year, up from three now, and will soon begin talks with Indian film producers to purchase the rights of Bollywood films for conversion into its own high-tech format.

Canada-based IMAX Corporation CEO, Mr Rich Gelfond, told PTI here on the sidelines of the just-concluded World Economic Forum summit that India is one market where the company has been slow to move forward so far, but things have begun to change now.

IMAX, which has a significant presence in many countries, including the US, has also begun talks with real estate developers in India to have IMAX movie theatres as anchor tenants in their shopping malls.

The company’s IMAX motion picture format is said to be based on its proprietary cinema projection standards that allow it to record and display images of far greater size and resolution than conventional film systems. The company converts movies into this format for display in IMAX theatres, while some movies have also been shot directly in the IMAX format.

“India is one of the very few markets that has been very slow for IMAX to develop and the reasons are the ticket prices have been historically low, most of the films are Bollywood and not Hollywood and multiplexes are small with only four screens mostly,” Mr Gelfond said.

“While it has been challenging for us to expand in India, we have grown rapidly in China with about 81 screens and we have plans to open 200 screens in next two years,” he said, adding, “In India, we have only three screens open right now, but it has been of great interest to us. But now we are moving ahead with our plans in India. By the end of the year we could have 7-8 screens in India and then about 17 by the next year.

“One of the strategic things we are doing is we are taking Bollywood films and converting them into iMax films. In China also, we are showing Hollywood films and also local films,” Mr Gelfond said.

Source: http://www.thehindubusinessline.com/industry-and-economy/marketing/article2844523.ece?homepage=true&ref=wl_home

Real Estate Market In India

With property boom in India spreading across all directions, real estate business is touching a new height every day. Additionally, the growth of this sector depends on the policies adopted by the government to make investments mainly in the economic and industrial sector easier. The new stand chosen by Indian government in regard to foreign direct investment (FDI) policies has inspired confidence an increasing number of countries to make investment in Indian properties.

India has displaced the United States as the second-most suitable destination for FDI in the world. As the investment scenario is changing, India has attracted more than four times foreign investment at US$ 8.96 billion during the first half of 2006-07 fiscal, as against US$ 3.38 billion during the corresponding period of 2005-06. And this achievement is making India amongst the "dominant host countries" for FDI in Asia and the Pacific (APAC).

The positive point of view of Indian government is the key factor behind the unexpected rise of the Indian real estate market. The real estate sector is the second largest employer after agriculture sector in India. Today, this growing sector is witnessing development in all areas, such as retail, residential and commercial in metro cities of India that include Mumbai, Kolkata, Chennai and Delhi & NCR. Easier access to bank loans and higher earnings are some of the primary basis behind the sudden jump in real estate sector.

Why Invest In Indian Real Estate?

Owing to vigorous boom in real estate sector, property in India has become a dream for every potential investor who is looking forward to dig profits. All are eyeing for a share in Indian property market for a variety of reasons:

o The Indian growing economy is on a continuous rise with 8.1 per cent increase witnessed in the last financial year. The sudden boom in Indian economy increases purchasing power of its people and creates demand for real estate sector.

o India is producing an estimated number of 2 million new graduates from various universities during this year, which is creating a demand for 100 million square feet of official and industrial space.

o Fortune 500 companies are in good presence and other reputed companies will attract more companies to initiate their operational bases in India thus arising more demand for corporate space.

o Investments in real estate sector of India are paying huge dividends. More than 70 percent of investors belonging to foreign countries are making profits and another 12 percent are breaking even.

o Aside from IT, ITES and Business Process Outsourcing (BPO), India has shown its expertise in sectors like pharmaceuticals, auto-components, apparels, chemicals and jewellery where it can match the best in the world. These positive inherent characteristics of India are definitely going to attract more foreign investors in the near future

Article Source: http://EzineArticles.com/1169464

Factors To Consider Before Buying Commercial Real Estate

It is a big decision to buy commercial real estate, especially if you are living in countries like the USA or UK. To ensure that you do not end up making a bad investment or costly mistake, here are some factors to consider before buying commercial property.

First, there are real estate agents who only deal with commercial property -- be sure to choose a reputable one. It is important to get assistance from a specialized realtor who only deals with commercial property, to make things easier and less overwhelming. Many people go to agents who deal with multiple property types like international property, commercial, single family residential, office, etc; these are one-stop-shop agents that should avoided. You will get a better experience and a higher level of service from an expert agent who only deals in commercial real estate and nothing else.

Secondly, a thorough inspection is a 'must' prior to investing in commercial properties. Unfortunately, there are people who love to cheat others with frauds. This is why it is necessary to do a thorough inspection and research of the commercial property that is up for sale. Make sure that all the information provided by a seller is authentic, and that you will face no problems in the future with this real estate. A certified commercial property inspector is typically maintained to complete a certified property inspection.

Third, determine whether you want to get commercial real estate in an urban or rural setting. This factor is very important. Suppose you are out to look for a commercial property for warehouse or industrial purposes ---- the features you will look for in the property will be a lot different depending on the urban or rural setting.

Fourth, spend a significant amount of time with budgeting considerations. Keep in mind that the purchase price is not the only expense. Other considerations are items such as property improvements (such as: roof improvements, new landscaping, window replacements, interior space build-out), mortgage interest (if you are borrowing to make the property purchase), real estate taxes, common-area expenses (if buying in an established business park), and more. A property appraiser, if you choose to utilize one, can not only help you with the property valuation, but also with common operating expenses that you can expect to make.

A commercial property investment can be very expensive --- be sure to do all your homework before taking the plunge into commercial real estate ownership!

Article Source: http://EzineArticles.com/6823764

M3M buys 28-acre DLF land for Rs 440 crore

GURGAON: Real estate firm M3M on Tuesday said it has bought 28 acres of prime land in Gurgaon from the country's largest developer, DLF, for Rs 440 crore and will invest another about Rs 660 crore to build a housing project on it. 

"We have purchased 28 acres of land from DLF in Gurgaon where the company will be developing a residential project. We will soon launch this project," M3M Finance head Gaurav Jain told reporters here. He said the company has licences to start construction on this project and would be developing about 1,700 housing units in this project. 

Asked about the total project cost, Jain said: "The total investment would be about Rs 1,100 crore to develop this project that includes the land cost of Rs 440 crore". The project cost would be funded through internal accruals and advances from customers. Gurgaon-based M3M Ltd, which has over 600 acres of land bank, claimed that it was a debt-free company. 

It is building a luxury project -- M3M Golf Estate -- on 75 acres of land in Gurgaon and is expecting a revenue of US $1.5 billion from it. The company has launched more than 10 million sq ft of area worth US $2.5 billion in the past one and a half years. 

DLF has been selling its non-core assets such as hotel plots for the past couple of years to cut debt that stood at Rs 22,519 crore at the end of the September quarter. It had raised Rs 3,480 crore from sale of non-core assets till the second quarter of this fiscal. The plan is to raise a total of Rs 10,000 crore from this process. 

Source: http://timesofindia.indiatimes.com/city/gurgaon/M3M-buys-28-acre-DLF-land-for-Rs-440-crore/articleshow/11442504.cms

Sahara Group plans Residential Complex in Kochi

The Lucknow-based Sahara group has forayed into Kerala with the launch of a 728 residential units apartment complex at Seaport-Airport Road in Kakkanad in Kochi.

According to Sushanto Roy, head of Sahara’s Real Estate Business, the group plans to invest Rs.300 crore in the Kochi project. It has acquired 65 acres at Tripunithura and is scouting for suitable land at other centers in the State.

The Kakkanad project is spread over an area of 14.72 acres and proposes to house 728 residential units. With a total built up area of about one lakh sixty-eight thousand square meters, the project comprises a mix of two to four bedroom apartments, three and four bedroom duplex apartments and penthouses..


The group hopes to deliver the units within a span of three-and-a-half years. The residential units will be priced in the range of Rs.34 lakh to Rs.80 lakh.

Source :  http://www.indianrealtynews.com/real-estate-india/sahara-group-plans-residential-complex-in-kochi.html