Coimbatore retirement homes developer attracts FDI

The Club House at Soundaryam and Santhosham Comfort and Retirement

 Home at Pachapalayam, a project promoted by Covai Property Centre in Coimbatore.

Photo — K. Ananthan

Source :BL:Yoganarayaanan:3 jan 2012

At a time when FDI in retail has generated so much heat, a Coimbatore-based real estate developer is on the verge of clinching a multi million dollar FDI deal for his senior citizens projects in the country with a US investor this week.

He is also open to the idea of launching similar projects in the US aimed at the Indian diaspora as he is confident that the experience gained in India could be used to meet the needs of ethnic Indians settled in the US as it would help the Indians domiciled there to house their elderly relatives in easy proximity to them rather than being separated from them in India.

Without naming the US company with whom he will be inking a deal or revealing how much his collaborator would be investing, Col (Retd) A. Sridharan, Managing Director, Covai Property Centre (India) Private Ltd, Coimbatore, said the US investor would be bringing in ‘millions of dollars' for a stake in the new company.

It would offer the much-needed expertise in assisted care and for providing mental care which are not available widely in India.

Quality services

He said his company, in the six years of its existence, has built about 200 units for senior citizens, mostly in the Coimbatore region, which has provided quality residential facilities to about 350 people.

The idea was to expand this to about 2,500 dwelling units by 2015, taking care of about 4,000 residents and to 5,000/6,000 units that could provide accommodation to about 8,000-9,000 senior citizens by 2018.

The total outlay for this would be in the region of Rs 1,200 crore in the next six years.

Community projects

Beginning in 2005 with 48 villas in Coimbatore, the company has taken up retirement communities' projects across eight cities including Coimbatore, Puducherry, Chennai where work has commenced.

In 2012, it plans to roll out projects in Hyderabad, Chennai, Mysore and Pune (Talegaon) and plans are on the anvil for launching a project in Bangalore.

He said his company has tied up with a US-based company for Assisted Living and Mental Care (dementia and alzheimer), which would offer ‘not only world-class care but also knowledge and training to our people'.

These would be created not only in cities where Serene Retirement Communities are being set up but also in other cities as well and the details would be made public next week.

However, his core company Covai Property Centre, would continue to promote real estate projects.

He said the US collaborator would bring in ‘millions of dollars' as private equity as the company had already invested in nearly eight ongoing projects, the returns from which would be shared proportionately by the two partners.

He said the main advantage of his projects was that these were freehold, and not leasehold properties.

The buyers would have the advantage of a buy-back offered by the company which they could take advantage of when they want to move to assisted living facility or continuous care facility by monetising their investment.

Col. Sridharan said the US outfit was well known for its expertise in the areas of Assisted Living and Mental Care.

Both the privately owned companies have swapped certain equity. While his company would take care of the Independent Living facilities and services, the US partner would provide its expertise in training the staff for assisted care and alzheimer care.

He was open to the idea of extending his services to the US where a large number of Indians were living, separated from their parents living in India and who may be left in senior citizens' homes.

Lack of long-term funds a challenge for housing sector

Source :The Hindu :Dec 26,2011

A series of hikes in key rates by the Reserve Bank of India has put the common man who aspires to own a home in a spot. What is in store for him?

What does the home mortgage business portent for housing finance firms? Srinivas Acharya, Managing Director, Sundaram BNP Paribas Home Finance Limited, puts the issues in perspective in an interview to K. T. Jagannathan.

Excerpts.

How would you look at the year 2011?

Despite talks of slowdown, the year 2011 has been a good year for the home finance sector.

What were the big challenges faced by the sector?

Non-availability of long-term funds and frequent changes in interest rates were a couple of challenges the sector has had to grapple with this year.

The year saw also several rate hikes? What is your view on the current interest scenario?

Where do you see this moving in the medium-term? What impact will this have on the home buyers?

As the Reserve Bank of India itself has indicated, we do not expect any further rate increase unless there is any sudden adverse development not encountered so far.

You had indicated earlier this year that there is a lot of potential in Tier-2 and Tier-3 markets in the South and that there is still untapped potential. How different are those markets compared to the larger metros such as Chennai or Bangalore?

Is there any unique trend that you find in Tier-2 and Tier-3 towns in terms of home buyers and loan disbursement?

Availability of employable personnel in Tier-2 and Tier-3 towns will see offices spring up in these areas in a big way to avoid the metros. Besides, the cost of operations in the metros has gone up steeply and the infrastructure in the metros is not able to keep pace with the expanding horizons.

Better connectivity in terms of data and communication has made concentration in metros irrelevant.

Therefore, Tier-2 and Tier-3 towns will witness growth and together with this, there will be demand for housing.

What is the outlook for the home finance sector in the coming year? What will drive the growth in the sector next year?

Speaking for my company, the outlook continues to be bright. We believe there is still a lot of potential in the South.

We expect this market to continue to grow in the near- to medium-term.

What are the challenges going forward and opportunities for the sector?

Non-availability of long-term funds will continue to be a challenge. The housing demand in Tier-2 and Tier-3 towns will throw up a lot of opportunities.

What is the short-term solution to this long-term fund issue?

Excepting National Housing Bank (NHB), nobody is providing long-term funds for the housing finance firms. We don't have a mature debt market, where funds can be accessed for say a 10-year period. In the current environment, the long-term debt market simply does not exist. The government has to facilitate the development of the long-term debt market.

What is the solution?

Even NHB has now to raise funds from the market like everybody else. Earlier, it was able to raise capital gains bonds.

Now, it couldn't. May be the government could let NHB float long-term tax-free bonds. That could solve the problem to a certain extent.

What kind of initiatives / support do you expect from the industry body to drive faster growth in this sector?

There is no specific industry body for home finance industry. But, the initiatives taken by the NHB, our regulator, for creating a central registry for properties funded by housing finance companies (HFCs) and banks will go a long way in avoiding multiple funding against the same property.

State governments also need to provide some kind of authenticity to property registrations to avoid frauds. Besides, the laws on the anvil for the real estate sector will also bring in a lot of discipline among the builders and will lead to a greater level of comfort and confidence on the part of home-buyers and HFCs.

Specifically for your company, how has the growth been thus far this year? How do you see the next quarter? Also, what kind of growth do you envisage for the company over the next 12-18 months?

We crossed last full year's disbursements during the first nine months itself of the current year and have expanded our presence to 70 offices in India, including opening up newer locations outside the South. We do hope to reach our disbursement target of Rs.1,800 crore by March 31, 2012, which will represent a growth of 50 per cent over last year. In the next year (2012-13), we hope to grow by 40 per cent and settle down at a growth of 25 per cent once we reach annual disbursement of Rs.3,000 crore.

What is your view on the housing prices?

You haven't seen prices going up substantially. This has not happened in Chennai and Southern towns at least. Given the mindset of the buyers in the South, if you over-quote your price, it puts off a typically Chennai buyer. With Metro Rail and such things coming up in Chennai, I feel the population in Chennai will substantially grow and there will be increased demand.

Lack of new orders hits construction sector

Source :The Hindu :NEW DELHI, December 31, 2011

With the economy in a sluggish growth mode, the construction sector is faced with short-term challenges of increased debt levels, sluggishness in new order inflows, execution concerns surrounding their current order books and elongated working capital cycle, leading credit agency ICRA has said.

According to ICRA, while there has been an improvement in the quantum of new projects announced by the government sector in the second-half of 2011-12, this was countered by a sharp drop in new project announcements by the private sector in the same period, with the steepest decline in the period under reference. Resultant new order inflow for companies in the sector has been muted over the past two quarters.

The rating agency said despite having healthy unexecuted order books, almost all construction companies are plagued by a number of slow-moving orders due to issues related to land acquisition; securing requisite clearances; labour shortage and other sector-specific issues such as payment issues plaguing irrigation projects in Andhra Pradesh and issues faced by power projects.

The slowdown in the pace of execution can be gauged by the quantum of stalled projects, which has been steadily increasing since September 2010. 

As of September 2011, the quantum of stalled projects increased by 42 per cent on a year-on-year basis (15 per cent on quarter-on-quarter basis). Consequently, the year-on-year revenue growth of construction companies in the first and second quarters of 2011-12 has been the slowest as compared to the past few years. 

Labour shortages and government welfare schemes such as the National Rural Employment Guarantee Scheme have resulted in higher labour costs. Slower pace of execution and higher input and labour costs affected the operating profits of construction companies, ICRA said.