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Knight Frank finds property prices falling in select markets

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India Real estate news, real estate news india, Track2Realty, Track2Media, india realty news, realty news india, shriram group, shriram properties, india property news, property news india, 99 acres, 99acres.com, ndtv.com, ndtv, aajtak, india tv, zee news, times property, ht estatesDeclining property sales coupled with stretched balance sheets is bound to remain a concern in the short-term, leading to a moderation in property prices in some markets, says a report by market research firm Knight Frank.

The report says the real estate sector’s ability to service debt is bound to determine the hold on price of new projects. While the debt-equity ratio at less than one indicates a comfortable leverage situation, the ability of operators to service debt has taken a beating,

According to the Reserve Bank of India data, as of June, outstanding bank credit to the real estate sector was Rs 5.31 lakh crore While 78 per cent of this exposure is towards the housing loan segment, the remaining 22 per cent have been to real estate developers.

An evident trend is the decline in banks’ exposure towards commercial real estate lending. Growth has come down from 23.2 per cent in June 2011 to 4 per cent in June 2012, says the report titled “Economy and Realty @ Glance.”

The firm said that in the short-term, factors other than demand will influence the direction of property prices, given the declining sales.

Since January 2010, the RBI has increased the repo rate by 325 basis points. Coupled with the stringent lending norms for the real estate sector, this has sent the interest rate spiralling for the sector, it adds.

Between FY10 and FY12, although debt increased by a marginal 0.4 per cent, interest cost increased by a significant 81 per cent. Increase in project completions during the period also led to higher interest cost recognition, the report states, adding that the momentum of the industry has slowed with profitability taking an even bigger hit.

During the five-year period between FY-2008 and FY-2012, while sales value of the real estate sector had gone down 15 per cent, net profit dropped almost 67 per cent, primarily on account of interest cost going up five-fold.

Desperate times in realty leading to unprecedented restructuring-III

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By: Ravi Sinha

Track2Realty Exclusive

India Real estate news, real estate news india, Track2Realty, Track2Media, india realty news, realty news india, shriram group, shriram properties, india property news, property news india, 99 acres, 99acres.com, ndtv.com, ndtv, aajtak, india tv, zee news, times property, ht estatesThe unprecedented restructuring of project portfolio, selling of land bank, exiting non-core business and the job cuts have yet not led the Indian real estate into the desired comfort zone. The realization to shed the flab has on the contrary left some of the developers to outsource the project execution and pay more.

For instance, leading players like DLF and others have completely outsourced the project execution in the expert hands of infrastructure biggies like Larsen & Tourbo and Shapoorji Pallonji.

Mid size developers with limited resources and cash crunch can’t even afford that luxury. As a result, specialised profiles are very much in demand in the sector as sales drop across the country with some metros and leading micro markets showing alarming trends. Marketing gurus of realty sector who made fortunes during the hey days are baffling for explanations today and builders have no inclination for high flying white collared professionals but opting for those specialised profiles who can tide them over the slowdown.

Most of the realty companies have either shed or are in the process of shedding flab. At the same time they are on prowl for cost managers, technical auditors, legal experts, energy efficiency specialists, quality surveyors, and construction project managers.

Projects are stuck and millions of square feet remain unsold , forcing developers to hire a second set of CEOs to handle more work and fund managers who can sell off excess land-banks .

Cost managers are being cherry-picked to create a more efficient and decentralised system. Bengaluru-based Brigade Group is scouting for a second COO of projects, a technical auditor and a specialist in automation. The COO will focus on operational issues and report to the company president, who will look at the macro picture. Among other profiles the company is hiring  a technical auditor who will ensure that buildings are constructed with compliances on track and budget in mind.

It is also looking for an automation specialist to aid mechanisation and reduce dependence on additional workforce, said Jagan Mohan, VP HR for the Bengaluru-based company.

“There is a slowdown in the market and if builders do not finish projects on time, they will lose customers,” said Sachin Sandhir, South Asia MD of Royal Institute of Chartered Surveyors, an independent regulatory body of realty professionals.

Ascendas to buy Shriram SEZ for 500 cr

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India Real estate news, real estate news india, Track2Realty, Track2Media, india realty news, realty news india, shriram group, shriram properties, india property news, property news india, 99 acres, 99acres.com, ndtv.com, ndtv, aajtak, india tv, zee news, times property, ht estatesSingapore-listed technology park developer Ascendas is close to acquire an IT Special Economic Zone of Shriram Properties in Chennai for about Rs 500 crore, said banking sources close to the development. Ascendas, which owns a string of business parks in India, is said to have pipped competing offers from other global investors Tishmen Speyer, Xander Group and Mapletree, a real estate arm of Temasek.

Shriram Properties is the privately held real estate unit of the $9-billion southern conglomerate Shriram Group. Ascendas is the leading  bidder for the 1.3 million sq ft special economic zone, which counts Accenture and Mahindra Satyam among others as tenants, and is part of a large integrated township located near the Chennai international airport.

The SEZ has potential to develop 3.2 million sq ft business space due to be completed in the next two years. Ascendas is expected to clinch a deal only for the already tenanted space and won’t have any right of first refusal for the development in the pipeline, said one of the sources mentioned earlier.

Shriram’s IT SEZ is part of a larger mixed use development on a 58 acre land, which it had bought from Standard Motors Factory in 2006.

Ascendas India Trust (a-iTrust), listed on the Singapore Stock Exchange, owns marquee technology parks in Bangalore, Chennai and Hyderabad. It has 92% stake in International Technology Park Bangalore (ITPB) and 89% stake in International Technology Park Chennai  (ITPC), with the state governments being minority investors in both the projects. a-iTrust, which builds and operates business parks, is the only listed Indian property fund for global investors.

The latest deal is part of the global investor interest in Indian business spaces catering to technology clients. Private equity firm Blackstone Group acquired 1.8 million sq ft technology SEZ of real estate developer DLF in Pune for Rs 810 crore last year.

It also struck a similar sized investment deal with Embassy Group for one of the largest IT SEZs in Bangalore. Private equity firms and global investment houses are allocating a part of their portfolio to risk free income yielding assets, such as IT business parks, which provide 9% to 12% assured returns besides providing capital value appreciation.