Thursday, January 26, 2012

CRR cut will help to improve liquidity position of realty sector: realtors

New Delhi:

Realtors gladly have welcomed the Reserve Bank of India’s decision to deduction in Cash Reserve Ratio (CRR) will help to get better the liquidity position of all sectors including realty sector, as well as cited that interest rates should be reduced to shoot up the housing demand.
The cut in CRR will bring in liquidity, which will help to falling real estate sector.
In its 3rd Q review of the monetary policy RBI has injected Rs 32,000 crore into the system by lowering the CRR by 50 basis point.
Pradeep Jain, Chairman, Parsvnath Developers Limited and Chairman, Confederation of Real Estate Developers’ Association of India (CREDAI) said that, “RBI, in its Credit Policy Review has attempted to do a delicate balancing act between the need for growth and urgency of containing price line. In the end it has acted with caution by keeping all rates unchanged and just by reducing Cash Reserve Ratio (CRR) by 50 bps. The tokenism has seen release of Rs 32000 crore for the banking sector to lend. After the negative impact created by thirteen continuous rate hikes, this will prove insufficient to boost the growth. “
That the economic growth has been reined in is clear enough with RBI too reducing the target growth rate. But more critical for the productive sector is consumption of funds by the government sector leaving private investment short of liquidity. In last one and half year the investments have drastically shifted towards public sector which has impacted the private players very badly. Hopefully the Union Budget will correct the aberration and help RBI ease monetary policy. Only then growth will receive the relevant support, Jain said.
For real estate sector in particular, this will serve as a signal that interest rates will now ease. Buyers may opt for floating rate loans at this juncture since the signal is clear. Also the rising input cost will not leave any space for reduction of price. Buyers are expected to take the signal. We only hope that the forthcoming Union Budget will leave RBI room to address the issue of easing monetary policy aggressively, he added.
Echoing the view Gaurav Mittal, Managing Director, CHD Developers Ltd. Member, Governing Council, CREDAI, “We are happy that RBI has taken cognizance of the plight of the productive sector and has lowered the CRR by 50 bps.”
This move will help curb to some extent the negative sentiments in the economy in general and real estate sector in particular. The policy actions are expected to improve liquidity in the system and anchor medium-term inflation expectations, Mittal said.
However this is just an indication that the sequence of rate rise is now behind us. What we will need now consolidation of government finances so that funds are available for the private sector. However the signal will serve as a boost for the real estate sector with sentiments of buyers turning favorable. This move is set to help stimulate growth. We thank Reserve Bank of India for realizing the need of the hour and taking the right decision by not hiking the rates, he added.
Manoj Paliwal, CFO, Omkar Realtors & Developers on Monetary policy also expressed his view on the CRR cut says, “0.50% reduction in CRR announced by RBI is a step in right direction although too less and a bit late. We do not foresee any immediate impact on the interest rate which is disappointing as Real Estate is top notch priority for the common man. Therefore, liquidity for real estate companies will improve only after other sectors have got sufficient funding.”



Posted: 25 Jan 2012 04:24 AM PST

By Accommodation Times
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Vijay Rana | CMD & Co-Founder | vijay@lpcurry.com|

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Tuesday, January 24, 2012

Real Estate Financing

Finance in the backbone of every business, and real estate is no exception, Real Estate is capital intensive industry where huge funds are required. There are many segments which require financing e.g. For acquiring property, construction, reconstruction, renovation or repairing your property. Housing Finance has emerged as a big segment, where a number of housing finance companies are working. In 1977 the first housing finance company namely ‘ Housing Development Finance Company’ (HDFC) was established in Mumbai in housing finance segment. Right from the start HDFC defined lending norms for individuals for purchasing a house with repayment in monthly installments over a period of upto 20 years. In 1987 National Housing Bank (NHB) was established by the Government of India to regulate the housing finance sector in the Country. NHB was to refinance the various housing finance companies against the housing loans they have given to individuals. To-day there is well documented process to give loans to individuals which is followed by all the housing finance companies. There is hardly any market for such a long liability so by compulsion HFC’s borrow for short period for meeting its long term needs and thereby unwittingly gets into the mis-match trap. But the housing finance market in India has recorded robust growth right from the beginning. The increasing loan tenures, increasing loan-to-value ratio and rise in the installment to income ratio, are precipitating high growth rates in the housing finance sector. Financing a building construction project, though accutely needed, was given lukewarm treatment in the beginning, but is accelerating gradually. The government has not yet recognised construction as an industry, hence it is difficult to get project finance from banks and other financial institutions. Project financing is basically financing real estate projects in residential, commercial and long term infrastructure is based upon a complex financial structure, where project and equity used to finance the project rather than the general assets or creditworthiness of the owner. The finance is typically secured by the project assets producing contracts. Presently the real estate financing is growing steadily and creating valued finished property. Fortunately the shadow of sub-prime rate model of financing the housing sector have not fallen on the real estate financing in India, as has happened in USA and Europe.




Posted: 24 Jan 2012 04:47 AM PST

By Accommodation Times

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Thursday, January 19, 2012

Tax benefits and silent Features of proposed tax Free Bond issue, HUDCO

The establishment of Housing and Urban Development Corporation Limited (HUDCO) in 1970 as a sectoral institution for comprehensively dealing with the problems of growing housing shortages and owned Government company with the objective to provide long term finance.

Recently organization has approved loan of Rs. 37,464 cr for housing and Rs. 84,906 cr for urban infrastructure on a cumulative basis up to Dec 2011.
On 11th Jan 2011 body has filed Draft Shelf Prospectus with SEBI and Issue of Tax Free Bonds is likely to be launched by Jan 2012.

Salient features of the proposed bond issue
1. The Bonds are issued in the form of tax-free, secured, redeemable, non-convertible Debentures and the interest on the Bonds will not form part of the total income.
2. In case of over-subscription; allotment shall be on first cum first serve basis up to the date falling 1 day prior to the date of oversubscription and on proportionate basis on the date of oversubscription, in the manner specified in the Tranche Prospectus.
3. CARE has assigned a rating of ‘CARE AA+’ to the Bonds. Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk. Fitch has assigned a rating of ‘Fitch AA+ (ind)’ to the Bonds.
4. The bonds are secured by way of floating first pari passu charge on the present and future receivables of the company to the extent of amount mobilized under the issue. The security cover will be atleast 100% of the outstanding Bonds at any point in time.
5. HUDCO shall pay [xx] % p.a. for Tranche 1 Bonds as interest on the Application amount retained. HUDCO shall also pay [xx]% p.a. on refund of application amount. Such interest shall be paid along with the monies liable to be refunded.
6. Bonds will be issued in Dematerialised form or physical form as specified by an Applicant in the Application Form. The bonds will be listed on NSE and BSE both and will be available in Demat form facilitating trading of these bonds.
7. Investors can pledge or hypothecate these bonds to avail loans.



Posted: 19 Jan 2012 04:20 AM PST

By Accommodation Times


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Wednesday, January 18, 2012

Sharp rise in property prices in Bangalore, Q4-11 report says


Country’s biggest real estate portal 99acrres.com have revealed that the property price trends for the Bangalore region have seen an escalation if we compare per square feet prices (PSF) of Q4-11 over Q1-11.Therefore, although the real estate market seems to have been under stormy conditions, yet Bangalore has seen some price movement.
Commenting on the same Vineet Singh, Business Head, 99acres.com said“Bangalore has seen the high number of new project launches as compared to other cities. Localities in Bangalore North, South & South East have seen a large number of new project launches at various price points and prices being pushed higher over the last 6 – 8 months due to end user buying. The successful launch of the first reach of Namma metro has enabled a higher price push in Indiranagar and has created increased demand in localities around Kanakapura Road & Jalahalli which will soon be connected in the next reach. There is also the new lines of the 2nd phase announced recently for the metro, and the next 3 – 4 years will hopefully see a lot of the infrastructure and commuting ache in Bangalore being reduced and new investment localities have emerged across the city.”
A look at the property prices of areas in East Bangalore shows that all localities have seen price appreciation in Q4-11 when compared to Q1-11. Kaggadasapura and Banaswadi have seen 15% and 17% price appreciation in PSQF prices when we compare Q4-11 prices over Q1-11. The prevailing rates of these localities are at Rs 3000psf (per square feet) for Kaggadasapura and Rs 3400psf for Banaswadi. Indiranagar saw highest action with prices moving up by 21% in Q4-11 over Q1-11.
Barring localities of Hennur Road and Yelahanka which witnessed 5% and 2% dips in property prices, all the other localities in North Bangalore saw price appreciation. Thanisandra and Jalahalli witnessed maximum movement with prices moving up by 28% respectively in Q4-11 over Q1-11.
Prices remained flat in South Bangalore localities of Bannerghatta Road, Electronic City and JP Nagar. Jayanagar, Kanakpura Road and Hosur Road on the other hand witnessed prices rise within the range of 15% and 19% in Q4-11 when compared to Q1-11. BTM layout saw maximum price dip with PSQF prices dipping from Rs. 4072 in Q1-11 to Rs 3728 in Q4-11.
 
 
 
Posted: 18 Jan 2012 04:24 AM PST
By Accommodation Times 

 
 
Disclaimer: Any content mentioned in the mail is for information purpose only and does  not constitute any offer or guarantee whatsoever on the content mentioned above. Prices are subject to change without notice.It is solely your responsibility to evaluate the  accuracy, completeness and usefulness of all opinions, advice, services, merchandise and other information provided and you are strongly advised to check these independently. Loans & Property Curry shall not be liable for any deficiency in service by the Bank/NBFC/builders/developers/sellers/property agents.

Fitch: Negative Outlook for Indian Real Estate Sector in 2012

Fitch Ratings- New Delhi/Singapore-16 January 2012: Fitch Ratings says it has a Negative Outlook for the Indian real estate sector in 2012 due to weak overall demand and higher construction costs, which are likely to continue to squeeze margins.

High equated monthly instalments, resulting from significantly higher interest rates, lower household surplus due to high inflation and high residential unit prices, have reduced the affordability of homes. Both material and labour costs increased during 2011. Residential segment sales, which had improved in Q111, moderated significantly and are likely to continue at the lower levels during H112. 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 space in India, continues in 2012. Demand for retail commercial space is expected to be low in 2012.

Gearing continued to increase for most companies in H211, though the overall gearing of large real estate companies decreased by about 20% from the post-crisis peak of around 0.89x. On the other hand, declining profits resulted in leverage (debt to EBITDA) at high levels in 2011 – at around 7x – and this is expected to continue in 2012, negatively impacting the creditworthiness of real estate companies.

The dependence on operational cash flows to fund growth and service debt is likely to increase. Fund raising options are limited due to the cautious approach of banks, weak equity markets and dwindling investment by private equity funds.

Improved macro-economic conditions leading to improved demand would have the potential to improve cash flows to real estate companies and see the outlook revised to stable. Also, the ability to judiciously use cash from liquidating existing inventories, which would improve capital structures, may result in the selective upgrades of companies in the real estate sector, even while the overall outlook is negative.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM’. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE.




Posted: 17 Jan 2012 12:31 AM PST

By Accommodation Times Bureau
16 Jan 2012


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Friday, January 13, 2012

NRIs focusing on Delhi-NCR market for real estate investment: Ravi Saund, CHD

Factors like commercial prominence, proximity to Delhi, increased net profitability, good connectivity and ROI are some of the main reasons for NRI`s favoring investment in the Delhi-NCR region, says Ravi Saund COO of Delhi based CHD developers to myiris.com.
In the last couple of years Gurgaon has witnessed tremendous growth in terms of appreciating real estate value. The NH8 expressway, recent metro rail link and the upcoming Dwarka expressway or National Periphery road (NPR) have impacted areas that otherwise remained unconnected earlier in a big way, adding to the already booming real estate development in this sector. The growth of commercial sectors in areas near Gurgaon has also given a boost to development of the real estate properties thus adding to increased NRI investments in this sector. Since August 2011, the rupee has depreciated 25% against the dollar, 15% against the euro, 10% against the Singapore dollar and more than 15% against the UK pound. So, NRIs from all over the world are showing a lot of interest in properties in Delhi, Gurgaon, Noida and Greater Noida. The NRI investment in this region has cumulatively increased by 40% in 2011 especially since August 2011 as compared to the same period last year. The steady growth in the mid and affordable housing segment will further increase NRI investment in 2012.

According to Mr. Saund, key real estate trends in 2011 and forecast for the Delhi-NCR market for the year 2012.

A few key trends that affected the real estate segment are:

Liquidity concerns: During 2011,limited access to funds, increasing cost of debt and high construction costs remained a concern for developers. Decrease in gross bank lending (RBI data shows, gross bank lending to real estate sector has grown by 11.6%, compared to 15.7%during the corresponding period last year) and comparatively lesser influx of FDI due to a weak Europe market led to a liquidity crunch for developers in 2011.

Regulatory changes: The sector saw many events which had both political and social impact for the nation. The Noida Land Acquisition problem, demand for separate state for Telangana in Andhra Pradesh, land scams like Adarsh Co-operative Housing Society, LIC Land scam have been events which will mark the start of fresh reforms in the sector.

Not all was gloomy in the real estate segment. Commercial sector grew healthier and stronger in 2011. Retailers continued to expand their footprints. NCR showed highest absorption rate. Mid-income and budget housing segment saw maximum launches and were a success all through.

In the year 2012, the residential market will remain cautious over the short term because of global uncertainty, inflation. A welcome signal is that now there is little chance of further interest rate hikes by the RBI in the first quarter of 2012. The borrowers are not likely to postpone their buying decisions. The possible slowdown in India`s GDP growth rate act as a dampener. But relative to other countries still this will look decent. Still investors will shake off their hesitation when the Indian stock market again becomes a favoured investment destination.

There might be a fall in the sales as we assume that the ratio of sales over the inventory would not be proportional. The construction activities will temporarily slowdown. Hence, there will not be much new project launches in the premium category. However, the mid-segment and affordable-segment are likely to grow. In order to benefit in the long run, developers would have to concentrate on timely execution of projects.


Posted: 12 Jan 2012 03:46 AM PST
 Accommodation Times Bureau

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Wednesday, January 4, 2012

Noida Authority to banned banks, vacate place by 04Feb.

New Delhi:
Following to the Supreme Court’s decision that immediate closure of 21 banks and nursing homes those are operating their commercial activities in residential areas, Noida authority has given an official notice to vacate the residential place before 4th Feb 2012.
In the aftermath of Apex Court’s judegement this is the very first time when Noida authorities have intimated on the issue to stop the commercial activities within the two months.
On Tuesday, after the project engineer’s meeting Noida authority came out with the decision to send formal notices to banks those have violated the norms of land use. According to the senior officials, we don’t want to use force and are in talks with banks to convince them to move out.
However, authorities of 128 bank branches have filed a petition before the Supreme Court for extending two months notice period.




Posted: 04 Jan 2012 04:50 AM PST

By Accommodation Times


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Tuesday, January 3, 2012

Market Player welcomes subvention on prepayment penalty charges on home loan

Banks, Financial Institutions, NBFC’s and privately owned Realty Finance companies give loans to property buyers, they factor in a long-term interest on the principle amount. In the eventuality a customer is keen on pre-paying the balance amount within the first 5 years and before the formal tenure let’s say 20 years. “The lending institution stands to incur a planned loss of ROI through interest for the next 15 years. Hence as a deterrent the institutions implemented a penalty clause for any customers who were keen to foreclose their borrowings,” Manoj Asrani Brand & Marketing Manager -Soham World said. In many cases customers obliged the institutions due to their financial stability. However due to some serious lobbying initiatives by consumer forums and activists, the lending institutions saw this as an opportunity. They terminated the penalty clauses in the hope that HNI’s and service class would actively opt for loans. This action hasn’t really fructified into large borrowings, as the current scenario suggests, there are more than 40,000 residential assets lying unsold in the price range of 1.5 to 4 crore in Mumbai.


Posted: 02 Jan 2012 04:22 AM PST

By Accommodation Times