The RBI increased its signal rates in its annual monetary policy statement for 2010, because inflation has been growing. By raising the cash reserve ratio (CRR) to six per cent, it signalled its intention to squeeze some cash out of commercial banks into its own treasury. It also raised the rates at which it lends and borrows from banks — all by 25 basis points. “The RBI has set the stage for more rate hikes,” said Abheek Barua, chief economist at HDFC Bank. “If that happens there may be visible impact on the lending rates.”

RBI governor D. Subbarao too did not rule out further hikes. “I will not rule out a mid-cycle action because we do not know how the situation will turn. But we will think many times before we do it,” Subbarao said. Keki Mistry, CEO of home loan lender HDFC, said there was “enough liquidity in the system” implying that banks would not run short of cash following the rate hike and thereby consider raising home loan rates, to feel a demand pinch for home loans that might encourage banks to raise rates. Whether there are further hikes or not will depend on the inflation figures in coming months. And that in turn depends upon the monsoon and global oil prices.

Talwar said housing demand would remain firm. Parsvnath Developer’s chairman, Pradeep Jain, said: “I do not foresee interest rates going upwards. Therefore, there is no concern for the real estate sector.” In a move to rein in the runaway inflation, the apex bank today increased the repo and reverse repo rates by 25 basis points each and the CRR also by 25 basis points. Property consultants also feel that the hike in policy rates would not have any significant impact on the housing sector, which has witnessed a revival in demand for the last one year.

“It was on the expected lines. This would have a sentimental and emotional setback on residential demand, not on office or retail,” Jones Lang LaSalle Meghraj country head Anuj Puri said. However, he cautioned that a continuous increase in the repo rates would curtail the optimistic sentiment of the real estate sector. Knight Frank India national director, residential agency, Anand Narayanan said, “Real estate is having a strong sentiment now. This will not have any significant impact on the buyers.”

But what kind of reception they get and whether they can raise the targeted amount of money will depend upon global investor sentiment, he said. A lot depends on global investor sentiment–which, at the moment, is improving. Appetite is picking up–however, this is also a function of the annual results of the currently listed real estate companies, which are due in April. The potential for IPOs of new real estate companies will emerge at that point,” Puri said.

In 2010, it is anticipated that USD 2-billion worth of private equity investment will come to India, he said. “Private equity funding, apart from the obvious financial support, also helps in improving corporate governance standards of real estate companies,” Puri said. “Private equity interest in India continues, given the market’s risk/reward profile and size. We anticipate 2010 to see about USD 2-billion worth of private equity investment coming in,” Puri said. “PE investment is also instrumental in bringing about transparency and financial discipline, which are now of paramount importance,” he added.

The present escalation in real estate prices is not a bubble building but driven purely by genuine end-users and investors, he said. “The slowdown (in the last year) resulted in residential space affordablity and availability in areas that were previously out of reach for middle-income buyers,” Puri said. “However, the metros are now seeing price escalations in areas where supply is limited. However, there is no indication of a bubble building, since the demand is driven purely by genuine end users and investors and not by speculators,” Puri said.

Earlier, SEBI had refused to entertain the complaint filed by petitioner Kimsukh K Sinha on the ground that it was filed a day before IPO was to close. The court, however, turned down the regulator’s contention and said, “Merely because the public issue was closed, SEBI could not be relieved of its statutory duty to conduct an enquiry into the complaint and into the veracity of the statements made in the Red Herring Prospectus (RHP)”.

Sinha had alleged he had paid around Rs 31 crore to Sudipti Estate which is jointly owned by two DLF group companies — DLF Home Developers Limited and DLF Estate Developers — to develop his two lands at Sohna, Gurgaon but they failed to do so and refused to return the money. He filed FIR against the company which was later closed after investigation.

The bank is planning for new home loan schemes and still continues with its teaser home loan scheme beyond its tenor which ended in March while all other banks have moved out of it. The bank is also on tracks of increasing its retail book which includes personal loans, education loans and car loans with a projected growth of over Rs 35,000 crore for this fiscal. Auto loan segment is the next area of target for SBI after home loans. The bank has set a target growth of around Rs 3,400 crore and plans tie ups with Maruti, Honda and Chevrolet.

“We will continue to aggressively grow our home loan book as well as promotional schemes next financial year by tweaking interest rates wherever possible, as it is asset-backed lending,” said a senior SBI official. Much of its growth in home loan book has come from the special teaser home loan which it started in February 2009. At the end of the financial year 2007-08, the home loan book was just Rs 44,626 crore, which grew by Rs 9,437 crore during the financial year 2008-09 to Rs 54,063 crore.

Besides United Arab Emirates, Emaar is operating in 16 countries including US, UK, France and Canada. Its JV company Emaar MGF is presently planning to tap the capital market in India. Alabbar said that the exercise is mainly aimed at listing the company on Indian stock exchanges, which will bring in more transparency in the company’s operations and thereby help in instilling confidence among the various stakeholders including customers in the company. Talking about the financial crisis, he hoped that it is now over and things will improve. The recently reported financial crisis of Dubai World is manageable and will be contained, he said. “All sectors of the country are performing well,” he said.

Talking about India, he said he was pleasantly surprised as the country has returned to high growth radar. He said that Emaar MGF is doing exceptionally well. In fact, he is so confident that he refused to change the company’s strategy to delve into the affordable housing segment as most of other real estate companies in the country followed to beat the slowdown in the sector. “In order to protect its brand, Emaar MGF will continue to build houses for middle and upper-middle segments,” he said. He said that his group brings in certain quality and specification with its brand, which is not possible in the pure affordable segment. However, he added that it will provide value for money to its customers.

Even during the slowdown period, he said that his company ensured that no project is delayed. In India, he said that all the projects are on schedule. Despite problems and slowdown, the company is ready to deliver all the 1168 apartments of the Commonwealth Games village. He said all the works have been completed and the delivery is being given to the authority.

The report observed that lack of transparency in the residential property market transaction, absence of a single centralised regulator in a vast country like India and limited availability of price information pose important challenges for keeping track of real estate price dynamics and their relationship with financial stability and monetary policy. The report has recommended that the RBI should compile real estate price index on quarterly intervals and to begin with data should be collected for Delhi and Mumbai. Subsequently, RBI could add 11 other cities — Chennai, Bangalore, Hyderabad, Kolkata, Pune, Jaipur, Greater Chandigarh, Ahmedabad, Lucknow, Bhopal and Bhubaneswar

A real estate price index would be a primary index that institutional investors may rely on to sense the performance of the real estate sector. It would capture how real estate performed compared with other asset classes like stocks and bonds and also provide a better understanding of the risk and return for commercial real estate. The index may be used as a basis for developing diversification strategies such as the percentage allocation to real estate to minimise risk for a target portfolio return. It would also be the first available index to measure the performance of income coming from this sector. The group has recommended that RBI should take inputs from banks and select home finance companies on sale and resale prices. This is because builders may not share property price information due to intense competition in the sector.

He was speaking at the launch of ‘The Gem Grove’, a project aimed at the affordable housing segment. It is a joint collaboration between Gem Group and Vision India. Slated to come up at Padur on Rajiv Gandhi Salai with 712 housing units (6 towers) spread across 6.64 acres, it covers a total built-up area of 8 lakh sq. ft. R.Veeramani, Chairman, Gem Group, said “The Gem grove will be a self-contained family community with mid-rise buildings placed well apart from each other without any common partition walls. All the special amenities such as the club house, gyms and sports facilities will be run and maintained by expert consultants.” The project’s one, two, three and four BHK apartments range from 550 sq. ft. to 2,300 sq. ft.

Starting at Rs.2,399 per sq. ft., the Gem Grove will have three blocks ready for occupancy by July 2012 and the remaining three blocks ready for occupancy by May 2013.

Real estate developers

The idea is also to take inputs from the ongoing schemes of rental housing implemented by the state-run Mumbai Metropolitan Region Development Authority, public-private partnership carried out by Maharashtra Housing & Area Development Authority and the slum rehabilitation scheme. MCHI President Pravin Doshi said details of the financial requirement of the project was being worked out. “Residential housing can be made affordable by release of land by the government, increase of FSI, reduced taxes, single window clearance on plans and availability of micro finance. Through this partnership, our endeavour is to arrive at some substantial solutions to cater to the ever growing need of demand for homes,” Doshi said.

However, Doshi was unable to explain what MCHI meant by affordable housing. He said it would depend on location. He repeatedly said MCHI and its members had no hidden agenda: they would not seek any extra favours from the state government for the construction of 5,00,000 affordable houses. According to the information available with MCHI, Mumbai alone has an immediate demand of 1.4 million homes, of which 80 per cent comes from the Rs 3-5 lakh income group. There is also an unmet demand for basic affordable housing in Mumbai and the metropolitan region. MCHI office-bearer Dharmesh Jain said the proposed mass housing project would help increase volume and stabilise the realty market. “Ultimately this will lead to mass consumption,” he noted.

“Although absorption of commercial office space has increased across cities, destinations like NCR, Mumbai, Bangalore and Hyderabad have witnessed large upswings in lease transactions during the first quarter of (calendar year) 2010,” said Abhishek Kiran Gupta, head — real estate intelligence services, JLLM. “Sustained demand upswing from occupiers have led to perceptible strengthening in absorption of commercial office space across Indian cities. The demand, which was initially led by the sunshine sectors like telecom and pharmaceutical industries in 2009, has now been strengthened further by improving conditions in BFSI (Banking, Financial Services and Insurance) and IT/ITES sectors,” he said.

“The IT/ITES companies are eyeing large footplates in suburban micro-markets, where large transactions have been recorded during the first quarter of 2010 in several projects that are under construction,” Mr Gupta said. “Occupiers are also on a lookout for outright purchases, realising the narrow window of opportunity which prevails in the market for sales transactions,” he added. Even realtors are feeling the change that has come about in the commercial markets. “Yes, there is definitely an upswing as far as commercial leasing activity is concerned. The cost benefits of offshoring/outsourcing to India are being evaluated by a much wider audience and therefore we see a lot of new companies scouting for leased premises,” said Nandakumar OP, GM — business development, Prestige Estates Projects.

An overview of global realty markets by JLLM highlighted a similar trend. “As the global business environment becomes competitive, a new generation of companies are being forced to consider offshoring for the first time. Several US companies, including Deloitte and NetApp, have registered significant space requirements in India,” it stated. “While Bangalore has definitely recorded good absorption in the first quarter of 2010, there is marked improvement in Chennai as well. Without doubt IT has been the main contributor of commercial space absorption in south India, followed by the telecom and banking & financial institutions,” Mr Nandakumar said. Prestige itself has three large commercial projects in Bangalore measuring over 30 lakh sq ft each. It also has 16 lakh sq ft of projects lined up in Chennai. The vacancy in Grade A office space (aggregated for seven Indian cities — NCR, Mumbai, Pune, Chennai, Kolkata, Bangalore and Hyderabad) stands at 18.1% in March 2010 which is much lower than those that existed last year.

Similarly, the aggregated vacancy in Grade A retail space stands at 17.5% in March 2010. As far as the retail side of the commercial market is concerned there seems to be a silver lining as well. “Several retailers, both domestic and foreign, are re-charting their expansion plans in India for the next 2-3 years. However, the increase in enquiries from retailers is translating into absorption in select upcoming malls only,” Mr Gupta of JLLM said. Despite strengthening of absorption rates across cities, upswing in market average rentals have not been observed due to thick supply pipeline ready to become operational.