Archive for July, 2009

It’s a good time to buy a house

July 31st, 2009

This is a good time for those looking at investing in property, especially a house. The two most important parameters – property prices and home loan interest rates – are favourable, and hence make a good value proposition for property buyers. There are many factors that indicate a rise in these parameters in the medium to long term. Therefore, those looking at investing in property should go for it now.
Here are some factors property investors need to take into account:
Market opening up
Property prices have corrected quite significantly in the last four quarters. As predicted by many analysts and also indicated by the various economic data points, the worst of the global economic slowdown is behind us. The developed economies have started showing signs of improvement and will come out of the recession in the next two to four quarters. The domestic economy was betterplaced during the slowdown and is also showing signs of revival.

The investor sentiment has improved over the last couple of months. There are more enquiries in the property market. Many developers have come out with aggressive plans to market their existing properties as well as launched some new projects. The property rates will move upwards as more demand builds up.
Interest rate good
Currently, the home loan interest rates are quite favourable. The rates have come down quite significantly over the last few months, thanks to the softer monetary policy adopted by the Reserve Bank of India (RBI) during the last 10 months. The RBI cut the repo rate by 4.25 percent – from nine percent to 4.75 percent, the reverse repo rate by 2.75 percent – from six percent to 3.25 percent, and the cash reserve ratio by four percent – from nine percent to five percent.
Taking the cue, commercial banks also reduced lending rates quite significantly. Many banks are offering attractive schemes for new borrowers and loan transfers.
Property – long-term plan
Usually, buying a property is a long-term financial commitment for an individual. Therefore, it is very important to think through various financial aspects around it. There have been many changes in the banking industry during the last 10 years. The interest rates are cyclical. Therefore, it is very important for people looking at taking a home loan to plan their monthly budgets well in order to avoid any defaults.
Here are some tips for borrowers:
Choosing lender: First of all, it is important to choose the right lender. Since a home loan is a long duration factor, it is important to take some time and be a little selective. You can collect feedback on various lenders.
Scheme: The concept of a fixed interest rate for the entire duration of the loan is no longer available or viable. In some schemes, the rate is fixed, but only up to a certain duration and subject to some terms and conditions. Therefore, it is important to check the track record of interest rate revisions and the exit barriers posed by the lending bank such as foreclosure penalties etc.
Budget: Since interest rates have become cyclical, borrowers should be prepared to pay a higher rate during certain periods of the loan tenure based on market conditions. Also, it is important to go through the terms and understand the various fees/charges that come with the scheme.

News Published Under: The Times of India

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Home buyers in no-comfort zone

July 27th, 2009

Developers and consumers are concerned that the interest rates will go up further. 

For all the expectations that preceded its presentation, the Union Budget 2009-10 is a huge disappointment for the real estate sector.

In fact, it has turned out to be a ‘non-event’ for the housing industry. Budget is an income-expenditure statement of the government.

“A single budget speech cannot solve all our problems, nor is the Union Budget the only instrument to do so,” said Union Finance Minister Pranab Mukherjee while presenting his Budget. This statement gives a window of hope to all aggrieved segments of the industry.

The corporate borrowers and others will vie with the over-spending government for the money in the system. This competition is bound to push up interest rates.

Will the government go back to former times and regulate the interest rates? This looks farfetched at the moment.

Home loans these days are linked to the variable interest rates. By moving over to the variable-interest rate-based home loans, housing mortgage providers often justify their asset-liability mismatch (where they lend for long-term while themselves borrowing for medium-term).

In a situation like this where there is a slowdown and a lurking danger of a rising interest rate, any housing loan firm will not sit in a comfort zone just because it has lent at variable interest rates. It is likely that the interest rates will have to be raised.

Borrowers, perhaps, will manage if the rise in interest rates lies within a reasonable band.

What if the rates rise faster and go beyond a band? Like the proverbial sword, an ever uncertain interest regime is holding the borrowers on edge.

What really is the remedy? It lies in opening up the long-term debt market. Insurance firms, pension funds and the like are the right candidates with resources to be led into the long-term debt market.

A robust long-term debt market will rid the sellers and buyers of the home mortgage products of the persistent worry over the oscillating interest rates.

The Finance Minister has haltingly moved to woo the salaried class with marginal sweeteners in the form of a small increase in personal income-tax exemption limit. Any savings made through this would be offset by range of things from rising petrol prices to possible increase in EMI.

There were widespread expectations that Mr. Mukherjee would increase the interest limit for tax concession on home loans. But he did not do that.

The Finance Minister did, however, bring some limited cheers to home loan providers by announcing an allocation of Rs.2,000 crore to the rural housing fund of the National Housing Bank (NHB).

In the absence of a long-term debt market, the Finance Minister could have at least let the NHB issue tax-free bonds to step up re-finance to banks and housing loan companies.

 

News Published Under: The Hindu

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Posted in India Real Estate

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The metro rail will ease traffic congestion that plagues Kochi now

July 24th, 2009

Cochin: As the prospects for metro rail in Kochi have brightened with the Planning Commission giving the green signal, people of the city want the work on the project to begin soon without further delay so that they can escape the traffic congestion being experienced now.

Their apprehensions on these issues are not unfounded, as many infrastructure projects have been in limbo in the city.

While the Delhi Metro Corporation has earned a good reputation for getting work done in record time, work in Kerala will be a different game altogether, believe some of the major builders.

Most builders have welcomed the green signal for the metro rail as the project is expected to provide a good momentum to the overall development of infrastructure. This, in turn, will provide a necessary recharge to the property outlook in the city, they say.

All the same, the work will pose difficulties to people if the government, in association with local bodies, does not develop some of the connecting roads to the arterial roads of Kochi to help ease the traffic flow.

While Sahodaran Ayyappan Road requires repair, parallel roads on either side need to be developed. Similarly, other roads to Thripunithura, entry from the Maradu side and the Vyttila-Kaniyampuzha roads need to be strengthened to lessen the traffic on the main road.

If the work on Pulleppady overbridge gets done, one of the major roads connecting the city to the highway will become open, lessening the traffic on the metro route that will ring the city from north to south.

The construction of metro rail will be a challenge as the size of the existing roads, already congested, will be further reduced. Hence, it is important that the government does the spadework to prepare for a bigger project such as the metro.
News Published Under: The Hindu

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Posted in Cochin Real Estate, Government, Infrastructure Development

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Meet to lay road map for Kerala’s infrastructure

July 22nd, 2009

KOCHI: The Confederation of Indian Industry (CII), in partnership with the State government, is organising a one-day conference on ‘Infrastructure in the time of economic crisis’ on Thursday 23 in the city. This conference is to lay a roadmap for improving the infrastructure in Kerala.

The conference will focus on improving physical infrastructure — roads, metros, railways, mobility hubs, ports, city development, low cost housing, funding options overcoming implementation challenges, policy prescriptions to create a five-point infrastructure agenda, creating world-class urban infrastructure and achieving inclusive growth and need for innovation.

Experts from the infrastructure space at the national level will initiate a dialogue at the conference and throw light on the implementation elsewhere in the country.

The government of Kerala will also exhibit the plans and proposals for project implementation, which will subsequently be taken up for discussion for furtherance.

In India, 28 per cent or 285 million people live in urban areas.

This will go up to 40 per cent by 2021. According to the Planning Commission, India needs an investment of $500 billion in the infrastructure sector from 2007 to 2012.

The Jawaharlal Nehru National Urban Renewal Mission envisages an investment of $20 billion in urban infrastructure by 2012.

The government of India has identified a public-private partnership approach as the cornerstone of its policy and has been actively encouraging foreign direct investment in India’s infrastructure sector.

 

News Published Under: The Hindu

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Real estate sector plans new initiatives in Chennai

July 21st, 2009

Real estate sector plans new initiatives in Chennai

CHENNAI: Several stakeholders in the real estate sector are planning new initiatives in various localities on the fringes of the city with a mix of hope and caution. Perungudi is one such locality.

“Most of the leading retail brands are planning to have showrooms in Perungudi,” says L.Dhayanidhi, vice-president, Chennai Real Estate Agents’ Association.

As some of the recently established retail outlets in the locality have reported relatively better sales, it has given rise to enthusiasm among others planning similar venture, he says.

Interestingly, the toll gate on Rajiv Gandhi Salai has emerged as one of the factors that determine the rentals, particularly commercial space.

Recently, three new companies opted for a commercial space located before the toll gate, he says. According to real estate agents, the commercial rentals beyond the toll gate have a reduced value of around Rs.5 per sq.ft.
 
Many builders agree that they expected the toll way to serve as a catalyst for real estate development, particularly of residential construction projects.

The construction of houses for earning rental income is a lucrative business in Perungudi.
News Published Under: The Hindu

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Housing Board to develop township projects on PPP basis

July 20th, 2009

The Kerala State Housing Board (KSHB) plans to team up with various agencies to develop three township projects totally worth Rs 2,000 crore in Thiruvananthapuram, Kochi and Kozhikode on a Public-Private Partnership, Housing Commissioner Noyal Thomas said.
The projects are to come up in 17.6 acres in Marine Drive in Kochi, worth about Rs 1500 crore; Akkulum in the state capital in 14.5 acres and in 12.5 acres in Kozhikode medical college campus. The Thiruvananthapuram and Kozhikode projects are worth Rs 250 crore each, Thomas told reporters here.
The projects would be notified for selection of developers by this year, Thomas, who is also the Ex-officio secretary of KSHB, said.The projects are expected to take off by this year.
The Board was also in the process of shortlisting consultants for the same which would be finalised after an International competitive bidding process, he said.
The consultants will prepare a detailed project report, help identifying suitable experienced developers and market the buildings once the projects are completed, he said.
“We are also in discussions with various agencies,including Kerala State Industrial Development Corporation (KSIDC) and Kerala Infrastructure Development Authority (KINFRA), who can act as a consortium to participate in the bidding process.”
Thomas said the Board was in talks with New Delhi based National Building Development Corporation (NBDC) as they are interested in the Kochi project.
There are also plans to team up with private builders to develop housing projects.
News Published Under: The Hindu

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Posted in Kerala Real Estate

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Longest railway bridge coming up in Kochi

July 20th, 2009

People in Kochi can take pride in their city having the longest railway brige in the country, cutting across an island over the Vembanad lake.

The 4.62 km Vallarpadam bridge will beat the current record for the longest rail bridge held by the Nehru Setu Bridge near Dehri on river Sone in Bihar by more than a kilometre.

The bridge that snakes its way over the lake is part of the nearly nine KM railway link being built for Vallarpadam International Container Transshipment Terminal (ICTT).

The total cost of the Rail link for the Vallarpadam project, including the railway station and goods yard at Edappally near here was Rs 245.67 crore, but had shot up to Rs 297.10 crore due to escalation of steel prices, he said.

RVNL is a public sector unit under the Railway Ministry, created to implement large projects like the present one, he said. Just as ambitious a project as the railway bridge is the Vallarpadam transhipment terminal project that is expected to handle three million TEUs of containerised cargo a year once commissioned.

The terminal will be run by India Gateway Terminal Ltd., part of Dubai Ports World. A total of Rs 3,000 crore, spread over two phases, will be invested in the project, which will have a capacity to receive vessels upto 8,000 TEUs. 

News Published Under:   Malayala Manorama

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Masterplan for Kollam Technopark approved

July 18th, 2009

The Project Implementation Board of Technopark here has approved the master plan for the development of an IT park at Kollam, adopting the `hub and spoke’ model of development strategy of the government for the promotion of IT and ITES industry in the state.

Technopark, Thiruvananthapuram, the hub, will be developing Technopark, Kollam as its spoke,an official press release said. Chief Minister V S Achuthanandan launched the project in February this year at the site in Kundara near Kollam, where the government had already allotted a 40-acre plot along the banks of the Ashtamudi lake for the project.

The park would soon be notified as a Special Economic Zone (SEZ) and tenders had been called for infrastructure development works like 110 KV substation, internal roads and water supply schemes.

A modern sewage treatment plant is also part of the master plan. “Conceptual design for a modern IT building, measuring half a million sq ft, incorporating the green building concept has been approved.

News Published Under:   Malayala Manorama

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Hi-Tech Infra to invest Rs 600cr in Coimbatore SEZ

July 16th, 2009

Hi-Tech Infrastructure Private Limited, promoted by Coimbatore-based KG Information Systems Limited (KGISL), plans to invest around Rs 600 core over the next two years in building a township at a special economic zone (SEZ), the first SEZ for IT and ITeS sectors being developed at Saravanampally in Coimbatore. Speaking to Business Standard, KGISL managing director, Ashok Bakthavathsalam, said the company was developing the SEZ on 150 acre, of which 65 acre had already been allotted to Robert Bosch India, Cognizant and Perot Systems. Bosch is setting up a research and development centre in the SEZ with an investment of around Rs 250 crore.

Bakthavathsalam said the SEZ was expected to attract investments to the tune of Rs 2,000 crore and generate employment to about 15,000 people over the next two years. “KGISL alone will invest around Rs 600 crore in the SEZ, which will be funded through a mix of internal accruals and debt,” he said. The company is planning to set up a budget hotel, 400 affordable houses and a hospital to supplement the upcoming industries in the SEZ, he said, adding that the company is open to join hands with private partners to promote the township.
“The SEZ will also help other industries to grow in this region. For instance, Robert Bosch facility will not only create additional job opportunities in Coimbatore, but will also benefit the manufacturing sector in and around Coimbatore as Robert Bosch is looking for partners to bring complimentary strengths to what it does,” Bakthavathsalam. Coimbatore, he said, will be the right destination for IT and ITeS companies, which are currently passing through rough times. A business process outsourcing (BPO) company, which will operate out of Coimbatore, can save up to $200 per seat a month when compared to Delhi or other major metros.

“Moreover, there are about 40 engineering colleges and 80 arts colleges, which are producing about 150,000 students every year. Availability of human resources is the biggest advantage.The establishment of the SEZ will also benefit the adjoining villages with the creation of non-IT jobs,” he said.
News Published Under:   Special Economic Zones

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Posted in Infrastructure Development

Govt may Ease FDI to Help Real Estate Growth

July 16th, 2009

The government department responsible for the promotion of industry is proposing easier rules to allow overseas investors to be part of smaller real estate projects and lower capitalisation norms for those which involve facilities related to hospitality or tourism. The department of industrial policy & promotion (DIPP), which handles the FDI policy, in a note drafted for the Cabinet Committee on Economic Affairs (CCEA), has said that FDI should be allowed to flow into realty projects even if the area covered is only 10 acres.

As of now, FDI is allowed in realty projects only if the minimum area covered is 25 acres (or 10 hectares). The move will help realty projects in metros like Mumbai, Delhi, Bangalore, Chennai and Hyderabad to attract FDI. Realty players feel that it is not possible to find 25 acres of land in these cities to make their projects comply with Press Note 2 of 2005, which defines guidelines for permitting FDI in this sector. The industry is keen on business in the metros, as it attracts high-profile customers, but wants FDI to be allowed since the cost of land in these cities is high, making them expensive.
The DIPP has also proposed that the minimum capitalisation norms specified in Press Note 2 can be waived in the case of projects, which involve hospitality and tourism facilities, such as hotels, restaurants or entertainment facilities meant for tourists. Press Note 5 specifies that minimum capitalisation should be $5 million for permitting FDI in realty projects, which involve an Indian partner. In case the project is implemented by a fully-owned subsidiary of an overseas firm, the minimum capitalisation specified is $10 million.

The waiver would be available in case 50% of the built-up area in a project is devoted to hotel and tourism businesses, such as food courts, resorts, restaurants. If 20% of the total built-up area is used for hotel rooms, the waiver will be available. Veterans in the real estate business, who do not want to be identified, said the liberalisation moves were welcome changes that they have been waiting for. These steps, when implemented, will provide relief to high-value projects in metros and projects being developed for the tourism sector.

The move comes as a relief at a time when realty players are struggling to managed debt and lull in business, they added. However, the realty industry is upset that its demand for waiving off the three-year lock-in for FDI in real estate has not been accepted. Many fund houses keep off realty projects due to the three-year lock-in period, industry veterans feel.

 

News Published Under:   Foreign Direct Investment in India

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