Rupee depreciation hurts infra returns, reviews suggest Equity exits painfull

The depreciating rupee may have helped improve property sales to NRI buyers, but it isn’t helping the saviour of real estate developers — private equity firms — which are not only stuck with their earlier investments, but can’t raise fresh funds either.

Indian currency’s record depreciation against the greenback and weak property market have restricted realty private equity offshore funds’ fresh fund raising efforts as well as trapped their earlier investments since FDI gates were opened in 2005. The rupee has depreciated nearly 27 per cent since April 1 to touch a record low of Rs 68.63 against the dollar on August 28. Over the past two years, when most of these exits were being planned, the currency has slipped 46 per cent to touch this level.

It has almost wiped out foreign private equity funds’ meager returns from real estate, and any exit now will lead to at least 25-30 per cent loss in dollar terms. “The environment for raising fund from overseas investors is not very conducive. Offshore funds that have invested during the last few years when the US dollar was quoting at Rs 42-52 will find it challenging to offer good returns now because of the fall of the rupee and weak underlying market,” says S Srinivasan, CEO at Kotak Realty Fund.

Investments made in Indian real estate sector are cumulatively estimated to be around $15 billion since foreign direct investments were allowed in the sector. Around 20 per cent of this was expected to get an exit in the past two years, but seems a distinct possibility now. Private equity firms with offshore funds are in a state of flux not only because of their stuck investments and delay in project completions, but are also concerned about not being able to raise fresh funds in the current scenario.

“Most capital in Indian real estate was invested at the exchange rate of around Rs 40 to a dollar with the expectation of 25 per cent returns. The current phase of currency depreciation would impact the real estate sector adversely as foreign investors would wait for the full cycle to play out and exchange rate to settle down before taking any fresh investment calls,” says Rajeev Bairathi, executive director, capital transaction group and north India, Knight Frank India.

Most real estate funds that have invested at dollar rate of around Rs 40-45 are likely to get an exit after these seven years at more than Rs 60, which is a loss of around 30 per cent in the currency itself. Moreover, most assets, given the weak property market, have not seen any major appreciation.

“Although rupee has depreciated a lot since these funds invested in projects and is showing no signs of returning to 2006-07 levels. As funds are coming to an expiry and savvy investors are likely to press for exit even at a loss as they are aware that most currencies globally are also following a similar trend,” says Ramesh Jogani, Managing Partner of private equity realty firm Indian Property Advisors. According to him, several funds that have already tried to exit their investments in the past two years and have had little success, may not be able to hold on to their assets for long in anticipation of the dollar-rupee parity reverting to its Rs 45 level.

Private equity investment in Indian real estate nose-dived in the first half of 2013. For the first six months this year, real estate private equity investments were recorded at $276 million (Rs 1,638 crore), 46 per cent lower than a year ago. Private equity funds invested $514 million (Rs 3,050 crore) in the first half of 2012, says a recent report of Cushman & Wakefield, an international property consulting firm.

Bhairathi of Knight Frank does not expect significant foreign capital to flow into the country until the macro environment stabilizes. “This in our view would take at least another two to three quarters and the next general election might offer major triggers for the capital flow to resume. Till such time, it would be extremely difficult to raise fresh offshore funds. Further, the disbursement of capital on the already announced deals might be put on hold till stability returns,” Bhairathi says.

While many experts are concerned about the probable exits at losses and their impact on further fund raising activity, there are some who differ. “In rupee terms, returns are still good. A fund or fund manager cannot be held responsible for currency risk and most seasoned investors usually hedge their position on their own. As an after effect, the sharp depreciation in rupee is likely to result in increasing these hedging costs incurred by investors at their end,” says Shobhit Agarwal, MD, capital markets, Jones Lang LaSalle. Agarwal accepts that the rupee depreciation will impact the fund raising efforts as investors’ investment allocations will change hereon. But, he is also hopeful that it will not stop the capital flow completely.

Private equity deals, given their structure and longer tenure, are not covered through any hedges and this leaves room for sharp impact of currency risk on exits. “In the past five years, currency has depreciated by 3-4 per cent compounded annually depending on tenure of the fund. There will be cases where funds will put exits on hold and wait for rupee to appreciate for better returns,” says Amit Bhagat, CEO and MD, ASK Property Investment Advisers. The 2013 fall is not a sustainable phenomenon and is a matter of concern, but it is not a long term event, he says.

Source: economictimes.indiatimes.com/markets/real-estate/realty-trends

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Latest Reviews on Bangalore Infra Market

The proposed Mumbai-Bangalore Industrial Corridor is expected to connect Bangalore City in the north-western side of the city along Tumkur Road. Since the last 7-8 years (since 2005/2006), Tumkur Road and its surroundings are witnessing significant augmentation and improvement in terms of infrastructure in general and connectivity in particular.

Some of the key infrastructure projects rendered operational in the area in the recent past include the Elevated Expressway, Bangalore-Mysore Infrastructure Corridor (BMIC) and Bangalore International Exhibition Center (BIEC).

Other on-going and proposed infrastructure initiatives are Metro Rail Phase 1 & 2 and Peripheral Ring Road. These infrastructure projects, along with the proposed Mumbai-Bangalore Industrial Corridor, are expected to significantly improve the physical characteristics of the area.The result will be the development of large integrated projects, as there are large industrial land parcels waiting to be unlocked for quality real estate development with the growth of economic drivers in the area.Until the recent past, the population of this micro-market had a low socio-economic profile – it was dominated by blue-collar workers as the area was a hub for small scale industries manufacturing ancillary parts for PSUs, automobile industries, garment industries, etc.

Over a period of time, the area saw the arrival of large Indian and multinational industrial entities such as Kennametal, Widia, ITC , Volvo, BOC , Reliance Packing Industries, etc.Since last 4-5 years, the area is being viewed as one of the fast developing micro-markets in the city, as is evidenced by the launch of some large real estate projects complemented by key infrastructure initiatives.This has vastly improved the characteristics of the area, which now has good availability of large land parcels due to the unlocking by sick industrial units at competitive prices, and a visibly changing socio-economic profile of the resident population.

Some of the large developments envisaged then (now completed) are Brigade Gateway Project on 40 acres land parcel, BIEC, Taj Vivanta – Tumkur Road, etc., to mention a few.Till date, about 17 residential apartment projects launched and an there is expected to supply about 5,099 units in the micro-market on a cumulative basis.Some of the graded developers like Brigade, Prestige and Sobha have also ventured into this market and are targeting the upper-middle income, middle and upper-lower income segments.Social infrastructure facilities like hospitals and schools are already in place and are acting as catalysis for residential development in the area.

Most of these social infrastructure developments are adequately catering to the existing residing population. With the proposed Mumbai-Bangalore Industrial Corridor, this micro-market is expected to benefit from an increase in much-needed economic driver, which will significantly increase demand for all core real estate asset classes like residential, commercial / office, retail, hotel, industrial infrastructure, etc.

Some of the commercial / office and retail developments envisioned during 2005/2006 within this micro-market and its surroundings are operational now. These include the Brigade Gateway Project – an integrated development comprising residential apartments, commercial / office, retail and hospitality which is currently known as ‘Brigade World Trade Center’.Commercial Grade A developments in the area account for about 260,000 sq. ft., which includes Brigade Rubix at HMT Township (about 180,000 sq. ft. of office space) and 80,000 sq. ft. of office space by IBC Developers within the residential development of Platinum City.

Tumkur Road is also fast emerging as an attractive destination for stand-alone developments and graded shopping complexes. This is evident from newly launched Brand Factory at 8th Mile, McDonalds, etc. along with ‘vanilla ‘ stores having brands like United Color of Benetton, Wrangler, Levis, Lee and Woodlands.

The proposed Mumbai-Bangalore Industrial Corridor is likely to leverage the residential, commercial and industrial infrastructure along with existing, ongoing and proposed infrastructure initiatives in terms of transforming this micro-market into a major growth node for the city.

We see the emergence of an important economic hub catering to the city in general and the micro-market in particular. The area within a 4-5 km radius along both sides of Tumkur Road is likely to develop into an influence zone for the proposed Mumbai-Bangalore Industrial Corridor in terms of residential belts like Magadi Road, Hesaraghatta, Jalahalli, etc. up to Yeshwanthpur.

Metro Rail Extensions To Spawn New Residential Locations

The Bangalore Metro Rail Project is envisaged as a major game-changer for Bangalore City in terms of inter-connecting different parts of the city and reducing traffic congestion on city roads, and significantly cutting down the commuting time.Phase 1 of the Metro Rail Project largely covers the city centre, running a total length of 42.3 km through two corridors – the East-West Corridor (about 18.10 km linking Baiyappanahalli and Puttenahalli along Kanakapura Road) and the North-South Corridor (about 24.20 km liking Mysore Road with Tumkur Road till Hesaraghatta Cross). Phase 1 is likely to be commissioned by 2014.

Details of the proposed Phase 2 of the Metro Rail Project, consisting of four extension lines and two new lines with a total length of 72.095 km and 61 stations are given below:The four proposed extension lines under Phase 2 are expected to provide much-needed ‘last mile’ connectivity to commuters and also optimize the utilization of Phase 1. The two new lines traverse through some of the densest and traffic-congested areas of the city, and will offer faster connectivity to the Information Technology Industry. The Phase 2 is planned to be completed within 5 years from the date of approval by the Government of India.

With Phase 2 covering a large part of the city, especially fast-growing locations like Whitefield, Mysore Road, Tumkur Road and Bannerghatta Road, these areas are likely witness further development in terms of all core real estate asset classes for the following reasons:

* Metro Rail Projects are being developed across the world’s high-density corridors because they provide vastly improved connectivity. This phenomenon is likely to be seen all along the alignment in Bangalore as well, resulting in substantial development

* There is a proposal to permit a maximum FAR of 4.00 (against the current average FAR of 2.50) all along the Metro Rail alignment within 500 meters on both sides of the Influence Zone. This additional built potential of the properties along the influence zone will be able to make use of this additional FAR, as land values along these corridors are very high

* Improved connectivity and reduced travel time may encourage the city population to prefer suburban locations for residential purposes (to avoid residing in high-traffic areas), which would further catalyse the development of social infrastructure like schools, healthcare, retail developments, leisure and entertainment facilities, etc. in the suburban locations due to the further development of residential catchments.

Considering the combined coverage of both Phase 1 and Phase 2 of Metro Rail Projects, all localities up to the BMIC Corridor alignment within Bangalore City are likely to witness significant growth over next 5-7 years.

Name of the Line Description Length of the Line (km) No. of Stations
Baiyappanahalli to ITPL – Whitefield Extension of Eastern Line of Phase-1

15.5

14

Mysore Road Terminal to Kengeri Extension of Western Line

6.465

5

Hesaraghatta Cross  to BIEC Extension of Northern Line

3.77

3

Puttenahalli Cross to Anjanapura Township (up to NICE Road) Extension of Southern Line

6.29

5

Gottigere – IIMB – Nagawara New Arterial Line with a 13.79 km Underground Line.

21.25

18

RV Road to Bommasandra New Line with Interchange Station at RV Road Station in the Southern Line of Phase-1

18.82

16

Source: moneycontrol.com/news/real-estate/heresupdatebangalores-real-estate-market_935591.html

How Real Estate Brands can leverage Buyers and Developers Confidence

brand
Moving away from a scenario where buyers needed to negotiate their deals with mostly unorganized companies against the backdrop of an unregulated environment, the situation is now set to change as most builders are taking up brand-building as a serious task.
With builders gradually recognizing the need to have a strong brand value and enhance customers’ overall experience, buyers could now look forward to superior quality of construction, internal and external amenities, facility management services and post-possession services, among other things.
On the other hand, developers believe that brand-building will help them garner better pricing from the market participants, given the rising interest from private equity funds, unorganized companies considering joint development agreements and Reits (real estate investment trusts) being relaunched.
Right-Buyers
What’s for the buyers?
Given the fiercely competitive scenario among real estate developers in India, brand perception becomes a critical yardstick for potential investors, evaluating options in the Indian realty space.
Better services: Many leading developers have moved away from the traditional set-up, where a single sales/marketing team manages multiple functions and have created different teams within the overall sales and marketing gamut. For instance, on-site teams manage the initial booking formalities. Once the customer completes all the formalities, he is assigned a dedicated customer relations manager, who looks into the rest of the formalities, ranging from sending demand notices to processing of payments and paperwork at the time of key hand-over.
Developers have further split the formal sourcing function into different teams, comprising property agents, specialized workforce to manage the sales outreach, non-resident Indian clients and loyalty programmers. For instance, teams handling loyalty programmers interact with existing clients and seek references for expanding the customer base.
Superior construction quality and better amenities: As much of a developer’s credentials are driven by past track record, most companies keen on building a strong reputation will essentially focus on offering customers superior quality of construction and completing projects as per schedule. Additionally, buyers can also benefit from the peripheral facilities offered by developers including schools, swimming pools and clubs, among other things, all within a single gated township. In fact, most leading developer firms consider external facilities as a powerful branding tool to hard-sell their properties across several markets.
realestatedevelopment-tcabrerizo-green
What’s for the developers?
Benefits from premium pricing are not restricted to buyers of residential units alone.
Developers believe that carrying a strong brand image will help them negotiate deals at a higher price compared with their unorganised or lesser-known counterparts. This sharpens their competitive edge and helps enhance their market value and brand image even in the international market.
Moreover, small-sized developers that are not well-known but own plots have started entering into joint development agreements with large companies to leverage upon the established brand value and proven track record of the latter. Both benefit from better pricing of the developed land. Private equity funds are also showing strong interest in the real estate sector, across top 10 cities. Additionally, high net worth individuals and financial institutions, which are keen to invest in the Indian property market, may see an avenue in the form of Reits that the Securities and Exchange Board of India, the capital market regulator, plans to reintroduce.
The way forward
Looking ahead, as the real estate market gathers greater momentum and newer projects are launched, the brand value of developer firms could emerge as an important benchmark, driving property purchase decisions for buyers. It would help buyers access key information about the builders’ track record, quality of completed projects and overall customer satisfaction.
Source: livemint.com/Money/RLgtsaruUndTEPG5GcOvwO/How-real-estate-brands-will-help-homebuyers-and-developers.html

News : Bill to curb real estate woes in Rajya Sabha

dreamz infra reviews bill

A bill seeking to protect home buyers from unscrupulous developers and builders and having provisions like jail term of up to three years for offences like putting up misleading advertisements about projects repeatedly, was introduced in Rajya Sabha on Thursday.

The bill also intends to make it mandatory for developers to launch projects only after acquiring all statutory clearances from relevant authorities. It makes it mandatory for builders to clarify the carpet area of the flats as well.

Introducing the Real Estate (Regulation and Development) Bill 2013, Housing Minister Girija Vyas said the bill seeks to establish the Real Estate Regulatory Authority to protect the interest of consumers in the real estate sector.

Ms. Vyas also said the bill is for regulation and promotion of the real estate sector and to ensure sale of plot, apartment of building, as the case may be, in an efficient and transparent manner.

The bill will also facilitate the establishment of an Appellate Tribunal, which will hear appeals from decisions, directions or orders of the Authority and related matters.

The Union Cabinet had approved Bill on June 4. Under the bill, there will be a model builder—buyer agreement which is expected to reduce ambiguities in real estate transactions.
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Real estate agents will also be asked to register with the regulator, a move that is expected to help in curbing money laundering. The bill that seeks to provide a uniform regulatory environment to the sector, was earlier opposed by private developers but the government stuck to it on the argument that it will infuse transparency.

It has provisions under which all relevant clearances for real estate projects would have to be submitted to regulator and also displayed on a website before starting construction.

The bill has tough provisions to deter builders from putting out misleading advertisements related to the projects carrying photographs of the actual site. Failure to do so for the first time would attract a penalty which may be up to 10 per cent of the project cost and a repeat offence could land the developer in jail.

Source: realtyfact.com/bill-in-rajya-sabha-to-regulate-real-estate/

10 fold rise in Luxury properties in major Indian cities

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Prices of luxury properties in key Indian cities including Mumbai, the national capital region (NCR) and Bangalore have appreciated 10-fold in the past decade, according to a report released on Monday by real estate consultant Jones Lang LaSalle.
Luxury projects yield much higher returns to developers than projects geared towards the affordable and mid-income segments, the report said.
“Because of the tendency of ultra-luxury projects to garner extremely good pre-sale volumes, their developers are generally able to secure significant fund flows to capitalize the completion of their projects,” via report. “While it is equally true that the input costs for luxury housing are also much higher, the developer stands to benefit from the increased visibility of his brand among highly affluent, top-end clients.”
The demand for housing in the luxury segment often outpaces the supply in cities like Delhi, Gurgaon, Mumbai and Bangalore.
“The ultra-luxury housing segment is comparatively recession-proof. As most of the buyers in this category include successful entrepreneurs and business tycoons, their financial appetite is not limited to or governed by the economic considerations,”
“A significant percentage of buyers for such projects is able to self-finance their investments through their saved earnings…the quantum of impact that luxury projects face in times of economic uncertainty is significantly lower when compared to residential projects aimed at other categories,”

Source : http://www.livemint.com/Politics/7AI54G7MxqbtcveNPIhkwO/Prices-of-luxury-properties-in-Indian-cities-rise-10fold-R.html

Reviews on Bangalore Infra Investment by Dreamz

dreamz infra reviews

Still on hunt for your dream home and yet confused where to settle down. Reviews on Bangalore has portrayed itself has one of the buyers delight over the years in residential market. Bangalore has maintained its charm in the buyers community and has always garnered interest over the wide spread options offered in the section. Top reasons for investment in the section are accounted to be Quality, Institutional and infrastructure development.

Bangalore has leveraged the increase in urbanisation, also fetching more number of white collar professionals and rising incomes has always helped the demand soaring for residential units. Compared to other metros Bangalore offers good quality homes at best prices. Bangalore also boosts highest per capita incomes and has highest quantum of commercial space in india. This has paved way to many builders in developing residential projects in the city and also in the suburbs.

dreamz infra reviews

Dreamz Infra has also imbibed the developments and is aggressively working on multiple projects with world class amenities. It has inculcated customer satisfaction to the utmost importance.

Residential projects been a part of the development, Bangalore has also seen a steady rise in the institutional development. No wonder in saying it has emerged has a major educational hub in the country fondering the interest of investors to hop in. Youngsters form a major tribe in the city who usually work for services sector staying in rental/shared apartments and with the likes of top-end amenities like swimming pool, gym, clubhouse etc. With a desire of maintaining a flamboyant style they usually don’t hesitate to invest .

Bangalore has a very stable infrastructure, topping all, it has a wide variety of options available in choosing between apartments, villas, row houses, gated communities… with varying price ranges. Bangalore is promising and growing drastically in compared to other metros.

Why Infographics ? Dreamz Infra Reviewed Tips

Hello Dear Readers,

We have received many queries from our beloved readers, querying why we have incorporated infographics in our recent posts. Now to start with, we have been acquainted to traditional text and pictures from the past. Which many would like and want to continue as a tradition, under the advent of technological advancements there has been splendid developments in the way information is shared and consumed. So why would be stand back, Infographics has actually changed the mindset of people, with easy understandable graphical presentation of more complex data is made possible. Easy to understand and delightful to read and share. In dreamz Infra we always promote and follow innovation and sharing infographics is a new trend we have acquired recently.

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