Real estate funds back in vogue

Source:BS:Raghavendra Kamath / Mumbai April 28, 2010, 0:16 IST

Plan to raise Rs 7,500 crore from domestic institutional and retail investors.

Looking at the subdued demand for realty investments in international markets, Indian fund managers and property developers are betting big on domestic real estate funds.
   

Fund managers and realtors plan to mop up nearly Rs 7,500 crore from domestic institutional and retail investors. At least, four fund managers and a similar number of realtors are either planning to launch or have recently launched their funds.

Offshore funds were a fad among Indian fund managers during the boom times of 2004-08, when several of them, including ICICI Venture, Red Fort Capital, HDFC, Kotak and Fire Capital, launched such funds to tap global investors, bullish on Indian realty sector.

But things seem to be turning in favour of rupee funds.

While Ajay Piramal Group-promoted Fund Advisors is already in the market to raise Rs 500 crore, ICICI Venture and the Aditya Birla Group are planning to raise around Rs 2,000 crore and Rs 1,500 crore, respectively, in the next couple of months, according to sources.

Shashi Kumar C, head of real estate investment advisory at Aditya Birla Financial Services, confirmed the move. An ICICI Venture official said though the plans were in place, the firm had not zeroed in on the exact amount to be raised.

Another home-grown fund house Motilal Oswal recently raised Rs 200 crore and got commitments from investors for a similar amount.

Though ICICI Venture had plans to launch a second offshore fund of around $1-1.5 billion, it could not go ahead due to the slowdown in the realty sector. Also, its key employees, including managing director Renuka Ramanathan, quit last April.

"International money has dried up. That is why most of them are looking at domestic funds," said Ambar Maheshwari, director of investments at DTZ, an international property consultancy. Property developers are looking at new funds because of tight liquidity conditions arising out of drying up of bank credit, slowing home sales and delayed equity issues.

Unitech, the country's second-largest developer, has a fund manager, Unitech Realty Investors, and it recently launched the Rs 300-crore Mumbai Redevelopment Project. It has plans to launch similar such funds to finance its projects. Construction major Shapoorji Pallonji also plans to launch a fund to invest in projects worth $2 billion in the next couple of years.

Mumbai-based Ackruti City has plans to raise Rs 400-500 crore and tied up with investors such as Pacifica and Beekman Helix as partners.

“Developers are thinking that instead of going to a third-party fund manager, they can directly approach the source and raise funds. They can save on margins and fees given to the managers,”said Amit Goenka, national director, capital transactions at Knight Frank, an international property consultant.

Fund managers feel domestic funds offer more flexibility in terms of investment, as offshore funds are governed by foreign direct investment (FDI) norms.

According to FDI norms, 100 per cent FDI is allowed under automatic route, only if the development project has a minimum built-up area of 50,000 sq mt and a minimum capitalisation of $10 million for fully-owned subsidiary and $5 million in case of joint ventures. It further stipulates that original investment could not be repatriated within three years from the completion of minimum capitalisation.

"Domestic funds can be used as debt or quasi-debt structures, but offshore funds have constraints on that," said Sunil Rohokale, ED, ASK Group.

Rents for office space are seen stable in 2010

 Source:Money Control:Apr 26, 2010 at 10:37 

Rents for office space are seen stable in 2010 as increased spending by IT and ITES firms absorbs space put out over the last few quarters, a recent survey by real estate consulting firm C.B. Richard Ellis showed.

The market for commercial space in major Indian cities has seen a boost in demand in the March quarter even as rents remain hobbled by excess supply.

"I don't expect rentals moving up in the near future. The supply is enough, although the market has picked up and office take-up has improved," Anshuman Magazine, Chairman of C.B. Richard Ellis (South Asia) told Reuters.

"It will take time before we see any upward movement in rentals."

The rental values in the central business district of New Delhi appreciated by 4% over the previous quarter while remaining flat in Mumbai, Chennai, Hyderabad and Pune according to the report.

The study across seven major cities forecast rents to remain stable overall while they may ease up in New Delhi and Bangalore due to supply beating demand.

Telecom, FMCG and pharma companies are also taking up office space, even as the IT-ITES sector which is seeing rising demand continues to be the major occupier.

"Unlike last year, the last quarter of 2009 onwards we have seen demand improving, absorption taking place and there is a momentum in the market," Magazine said.

RBI to launch housing index

Source:Press Trust of India / Mumbai April 26, 2010, 17:02 IST

The Reserve Bank has initiated an exercise to set up a housing start-up index (HSUI) to track new residential projects in 31 major cities and measure the changes in construction activities.

The HSUI will cover new residential projects in all major cities including Delhi, Mumbai, Chennai, Kolkata and Bangalore, among others, the RBI said while inviting quotations from consultancy organisations.


The RBI said housing start-ups in a particular quarter would be estimated from the permits issued in that quarter and the various past quarters by using the rates at which the permits got converted into start-ups in the recent past.

"The periodicity of this survey will be once in three years. The agency needs to visit about 350 sites to get the details on house start-ups in each city," the RBI said in the tender notice.
    
The housing index will give insights into consumer activity, as construction of new houses typically require large investment. "It depicts forward trends in the economy. An economy that is growing rapidly has an increased demand for housing and HSUI could be used to forecast demand for new houses," it said.
    
The index would also act as an indicator of economic growth as more houses would lead to increased demand for input materials like steel, cement and credit. The data on housing would be collected for eight quarters. This data will be processed through a co-efficient matrix to arrive at the actual data.
   
It can be noted that the National Housing Bank (NHB) had last year decided to expand an index of residential real estate rates from the five cities it currently covers to 36 cities. The index, called the NHB Residex, which is the country's first official residential property price index, now covers Bangalore, Bhopal, Delhi, Kolkata and Mumbai.