For private circulation only

Real Estate News Letter

27h October 2nd November, 2014

CONTENTS
1. Snapshot
2. Interest Rates
3. Infrastructure
4. Industry News
5. Private Equity News
6. Regulatory Buzz
7. Public Markets
8. Land
9. Residential
10. Commercial/ Retail

11. Township
12. SEZ
13. Hospitality

14. Input Cost

Snapshot
WPI-inflation data (primary articles)
Per cent
8.6%

9.0%
7.7%
7.0%
7.0%

6.8%

6.3%

6.8%

5.0%

3.9%

2.2%

3.0%

1.0%

Feb/14 Mar/14 Apr/14 May/14 Jun/14

Jul/14

Aug/14 Sep/14

Note : Data indicates inflation over previous years month

Source : Ministry of Commerce and Industry

Trends of FII in equity markets

Rs billion

67

70

60

52
50

40

44
39 39

36

37 38

38 37

30

20

27/Oct

28/Oct

29/Oct
Buy

30/Oct

31/Oct

sell

Source : NSE

4.5

Trends in Nifty and CNX realty index

per cent

3.1

3.5

3.2
1.9

2.5
1.5

0.3

0.5
-0.5
-1.5

0.4

0.8

1.0

29/Oct

30/Oct

1.4

-0.3

-2.5
-3.5

-3.9

-4.5

27/Oct

28/Oct
Nifty

Source : NSE

CNX REALTY

31/Oct

Interest Rates
No news in this section for the week

Infrastructure
Government sets up council for
Infrastructure Projects on Public
Private Partnership mode
The Government of Rajasthan today set up a council
for preparing a policy on Infrastructure Projects to be
taken up on Public Private Partnership (PPP). Chief
Minister Vasundhara Raje would be chairperson of the
council, and PWD, Water Resources, Energy Minister,
Principal Secretary Finance and Advisor (Infrastructure
and PPP) would be its member, according to an official
statement here. Any project costing more than Rs 500
cr would require the permission of the council, the
statement added.
The Economic Times,29 October 2014,New Delhi

RFQ deadline for Navi Mumbai

airport extended
Bidders for the construction of the Navi Mumbai
International Airport (NMIA) have been given an
extension period of six weeks to submit their Requests
for Qualification (RFQ) application after they sought
more time from the City and Industrial Development
Corporation (Cidco), the nodal implementing agency
for the project, to form joint ventures to bid for the
R14,574-crore airport project.
The concerned parties will now have to submit the
RFQ by December 10 from the earlier planned date of
October 30. This is the third time Cidco has extended
the RFQ submission date after the civil aviation
ministry approved the revised tender document for the
proposed Navi Mumbai airport in July. This is the final
time that the RFQ submission time has been extended
on the request of bidders who have asked for more
time to form joint ventures to bid for the airport project,
a senior Cidco official said. Cidco had earlier extended
the deadline to July 31 from June 28 and then to
September 2 after the bidders sought clarifications on
issues like pre development works, land acquisition,
and airspace management.
The Financial Express,30 October 2014,Mumbai

E-tolling on Delhi-Mumbai highway

starts on Friday
From this Friday, one can travel on the Delhi-Mumbai
highway without stopping at any toll plaza, with the
government launching electronic toll collection (ETC).
When vehicles pass through any of the 18 toll plazas
on the Delhi-Mumbai highway, an antenna on the
plazas will detect the RFID (radio frequency
identification) tags installed on the vehicles. The data
will then be sent to a server and, subsequently, the
toll will be automatically deducted from the vehicle/tag
owner's bank account.
Currently, vehicles passing through toll plazas have
to stop and pay a fee, which often leads to traffic
congestion. Though some operators offer the facility
of tag lanes, such tags can only be used at
designated points. Also, these can only be bought at
toll plazas. Now, a dedicated lane, under the brand
name FASTag, will be available at every toll plaza.
The dedicated ETC lanes will also have distinct
colour coding. The government plans to make the
service available at all 350 toll plazas across national
highways by the end of this year.
The aim is to streamline toll collection on national
highways, address malpractices in the process and
avoid traffic jams resulting from toll collection, say
officials in the Ministry of Road Transport &
Highways. Besides, it is expected issues of
overcharging and undercharging, as well as
complaints against under-reporting/non-reporting of
toll collection, will also be addressed.
Every year, an estimated Rs 6,000 crore is collected
from toll plazas on national highways. A new website,
www.nhtis.org, will offer all toll-related information,
including the number of toll plazas between specific
routes, toll fees and toll notifications on the basis of
which fees are charged. One will be able to calculate
the toll she/he has to pay while travelling on national
highways by various modes - car, van, taxi, bus,
truck, etc.
To manage the process of ETC, the government has
set up Indian Highways Management Company Ltd

Infrastructure
(IHMCL), with equity participation from the National
Highways Authority of India (25 per cent),
concessionaires (50 per cent) and financial institutions
(25 per cent). IHMCL has tied up with Axis Bank and
ICICI Bank for clearing house services and offering
RFID tags to users through franchises/agents and at
points of sales near toll plazas.
The ministry has also made necessary amendments
in the Central Motor Vehicle Rules, 1989, for
installation RFID tags on vehicles. The project was
conceptualised by the United Progressive Alliance
government, which had constituted a committee on
using ETC technology on national highways under the
chairmanship of Nandan Nilekani, former chairman,
Unique Identification Authority of India. The committee
had examined the technologies available for ETC and
recommended the most suitable one.
Keeping in mind user convenience, the rate of
acceptance and ease of implementation, passive RFID
(based on EPC, Gen2, ISO 18000-6C Standards for
ETC technology) was adopted, said ministry officials.
So far, ETC technology has been installed at 55 toll
plazas. And, their integration with Central Clearing
House operators on the Delhi-Mumbai route via
Haryana, Rajasthan, Madhya Pradesh, Gujarat and
Maharashtra, has almost been completed.
A pilot project for an interoperable ETC system on 10
toll plazas between Mumbai (Charoti) and Ahmedabad
has also been tested and seamless ETC on this
section is underway.
Business Standard,30 October 2014,New Delhi

Lucknow Metro Rail project gathers

steam
Lucknow Metro Rail, one of the flagship projects of
Uttar Pradesh Chief Minister Akhilesh Yadav, has
started to gather steam with actual ground work
starting this week. Lucknow Metro is proposed in two
corridors North-South (NS) and East-West
corridors. The proposed 23-km NS corridor, which
would connect Lucknow airport to the city, is being

undertaken in the first phase and is estimated to cost

over Rs 7,000 crore.
The work on boring earth for raising pillars on the NS
corridor started on October 27 in the presence of
Lucknow Metro Rail Corporation (LMRC) Managing
Director Kumar Keshav. LMRC is targeting to
complete this railroad section covering about 8 km
between Transport Nagar and Charbagh railway
station by December 2016.
According to officials, about 40 pillars would be raised
at a distance of 200 metres.
Since, Assembly polls are due before May 2017, the
ruling Samajwadi Party wants the metro project
operational by then, so that it can be showcased as a
success story and epitomise its development agenda.
The project has been designed to cater to the
projected population in Lucknow in the next 25 years.
Metro Man E Sreedharan is the principal advisor to
the Lucknow Metro project. In the starting, a senior
bureaucrat was appointed as the MD of the project.
However, he made way to a technocrat for faster
completion of the project.
The project had been stalled for the last several
years. During the Mayawati regime, the project could
not move beyond the route alignment stage, thanks to
the differences over funding model.
On March 3, Yadav had laid the foundation of
Lucknow Metro depot near the airport. Earlier on June
27, 2013, the state government had given its formal
nod to the proposed LMRC project.
Lucknow City has a population of about 4.5 million.
There has been tremendous horizontal growth in the
state capital with rapid development of suburban
areas. In such a dynamic scenario, a modern urban
rapid rail transit system is imperative for a growing
city like Lucknow to facilitate faster commuting and
decongesting ever increasing road traffic.
Business Standard,31 October 2014,Lucknow

Industry News
Urban areas in and around Delhi
constitute 40% of unsold real estate
in top eight cities
Urban areas in and around Delhi account for a
stunning 40% of unsold real estate in India's top eight
cities. So, why is it so gloomy in NCR? Why does
Bangalore and even Mumbai look better?
THE PROBLEM
The NCR has a total of 303.48 million sq ft (about
303,000 apartments) of unsold real estate, according
to property research firm Liases Foras. At the current
pace of sales, this stock requires another 53 months to
be completely sold off. In comparison, for the Mumbai
region, the figure is about 48 months while it is the
lowest for Bangalore at 19 months. For the top eight
cities combined, the 765 m sq ft of unsold space will
require at least 35 months to be sold.
The festive season this year has failed to bring cheer
to builders despite many of them doling out offers
which include ones where buyers have to pay 10% of
the apartment cost upfront and the rest at the time of
possession. Brokers say they are getting a lot of
enquiries from buyers but not too many conversions.
Riding on improved sentiments, home sales in the
NCR are up about 10% over the previous quarter, but
sales are still not happening at the pace that is usually
associated with the festive period. In good years,
builders were able to garner almost 30-40% of their
sales for the entire year during this threemonth period.
BUILDING NOWHERE
But it's not just the size of the unsold 'inventory' that
makes Delhi the worst off among the real estate
markets of larger cities. 56% of the unsold real estate
in NCR is in areas which are currently uninhabitable. In
other words, while the apartments have come up, the
other essential infrastructure roads, sewage
systems, or water connections have not. In
comparison, the Mumbai Metropolitan Region (MMR)
has 168 m sq ft (168,000 apartments) and Bangalore
has 113 m sq ft (113,000 apartments) of unsold space

of which just 2% of the inventory is in undeveloped

areas in each city. While sales have slowed down in
Mumbai as well, the real reason is more to do with
high prices. "NCR is a very inefficient market where a
lot of projects were launched in undeveloped areas,"
says Pankaj Kapoor, MD of Liases Foras. Take for
instance the Dwarka-Manesar Expressway. Its
location in Gurgaon is closest to Delhi and several
projects were launched here a few years back but
work on the expressway has not been completed yet
though some builders are close to giving possession
to buyers.
"As the level of sales dropped, the interest of
developers in creating social infrastructure also
reduced," says Samarjit Singh, managing director of
IndiaHomes, a real estate brokerage firm. Over the
last few years, a number of scams and project related
issues that have cropped up across NCR have also
scared buyers. While project delays are a big issue,
cases against developers such as the one where the
Competition Commission of India slapped a fine of Rs
630 crore on DLF for unfair trade practices in a few of
its Gurgaon projects, or environmental concerns such
as those around development near the Okhla Bird
Sanctuary, have added to the gloom.
SPECULATORS
And while the real estate market in every city has its
share of speculators - investors who don't really want
to live in the flats they buy and essentially see them
as an investment they can flip quickly to other buyers
the NCR has far more than its fair share. In NCR,
well over 50% of those who buy property think of it as
a short-term investment, pushing builders to launch
hundreds of projects over the last few years without
so much as a thought to the main premise of real
estate location. "The problem in the NCR is
peculiar," says Mudassir Zaidi, national director residential at Knight Frank India.
"Prevalence of investors is compounding the problem
as they are also selling their inventory, undercutting
developers on price as they do not have the holding
capacity." When the economy was riding high, these
investor-buyers flipped properties at ease within six
months of buying them, thus making a killing and

Industry News
raising prices. But the same market is now gasping for
breath as actual buyers started to pull back in an
uncertain market.
"There is a logjam in NCR because the trust deficit
about the builder community here is the worst
compared to other cities," says Singh, pointing out that
the list of developers still maintaining their reputation is
now very small in the NCR. Buyers, he says, now
prefer buying apartments in completed projects or in
ones that are at a very late stage of construction.
Kapoor of Liases Foras says in locations where social
infrastructure is in place and the price too is
compelling, home sales are still robust.
The Economic Times,27 October 2014,New Delhi

Festive season fails to bring cheers

for real estate
Despite recovery in market conditions and sentiment,
this festive season has failed to bring in cheers to the
real estate industry as home buyers continue to remain
cautious, according to industry experts. Festive season
is generally considered as the most important time for
the realty sector as it records the highest number of
sales, which is nearly 20-25 per cent more than nonfestive period.
"The real estate industry has always witnessed a rise
in sales during the festive season especially on the
back of freebies and incentives offered by the
developers. However, despite recovery, there is no
improvement in sales during the festive season,"
IndiaProperty.com Chief Executive Ganesh Vasudevan
told PTI here today. He said, "the demand from
property buyers has increased compared to the last
few quarters. This is witnessed from the number of
enquiries we are receiving. But this is not translating
into actual transactions as buyers have adopted a wait
and watch approach."
According to Jones Lang LaSalle India Chairman and
Country Head Anuj Puri, though there is a recovery in
sentiment, the events that have catalysed it - namely
the new government at the Centre and "its probusiness policies favouring realty"- will need more time

to bring their benefits to bear on the market.

"While demand exists, it is still held in abeyance by
various economic factors, including the natural lag
between the announcement and implementation of
the government policy catalysts," he said. Likewise,
the Reserve Bank has held on to current interest
rates in favour of safeguarding against further
inflationary trends. "It will take several more months
for the market to get into convincing forward
momentum again.. the festive season did not bring
the kind of momentum that was hoped for," Puri
added.
"There is also an expectation that home loan rates
may come down in the next 2-3 quarters as the
government is taking initiatives to tame inflation. If the
interest rates come down, we will see a surge in sales
from the second or third quarter of 2015," Vasudevan
noted. Developers, on the other hand, have been
addressing the situation by offering selective
discounts and incentives, the success of which has
varied across cities and locations. Those with greater
holding power continue to wait for the market to pick
up so that sales velocity will accelerate, Puri said.
"During the festive season, developers generally
launch new projects as well as offer various
incentives to attract buyers. However, over the last
few quarters, there has been a slowdown in new
launches as the inventory levels itself are very high,"
Samruddhi Realty Chief Executive Madhusudan K
said. He further said developers are currently
concentrating on clearing the inventory and are
offering discounts and other incentives to attract
buyers.
The Economic Times,27 October 2014,New Delhi

Delhi Metro: Growth engine of NCR

market
In the run up to expanding its footprint in various
areas of the Delhi NCR, Del hi Metro has hugely
boosted the prop erty markets in Delhi, Ghaziabad,
Noida, and Gurgaon. The announcement of each new
corridor brings with it a push in property prices, on

Industry News
average, by 20-25% in the nearby areas.
Developers and builders cash in on Metro connectivity
to their projects, putting it at the top of their USP list,
while end users and investors, too, prefer to buy into
such projects for great connectivity to offices and
higher returns, respectively . The proposed 11.5kmlong Metro link from Dwarka Sector 21 to IFFCO
Chowk will drive the property prices on this route. The
construction of Metro along Dwarka-Gurgaon
Expressway has been approved by the government
and it has been taken up as an early-bird project by
Delhi-Mumbai
Industrial
Corridor
Development
Corporation (DMICDC), New Delhi--a government of
India organization.
Noida development authority recently signed a MoU
with DMRC to construct two new Metro links--29.7kmlong line from NoidaGreater Noida through Noida
Expressway and 6.7km-long line from City Centre to
Noida's Sector 62. The construction will start soon and
is likely to be completed by 2017. The Botanical
Garden-Kalindi Kunj Metro link, under construction,
may be short, but it provides strategic linkage
connecting South Delhi to Noida. With this, the
property prices here have seen steep rise. In line with
the complete connectivi ty plan, Delhi Metro connects
various parts of Delhi to three districts of the NCR -Noida, Gurgaon, and Ghaziabad and stops right at the
border of Faridabad-193km of Metro track in all. The
average daily ridership figure of 23 lakh is enough to
gauge its impact on people's lives.
For the next phase of development, Phase III (covering
140km) and IV are going to be crucial. Corridor-wise,
Dwarka-Huda City Centre corridor has significantly
impacted the property prices on this stretch and has
particularly benefited Gurgaon. It got further boost from
Rapid Metro, which is set to connect various parts of
Gurgaon with Delhi Metro. Similarly , Noida City
CenterGreater Noida West link has been benefiting the
property prices on its route covering Sectors 50, 143,
144, Pari Chowk, Bodaki, etc.
As per the plan, Delhi Metro will also reach Faridabad
and Bahadurgarh districts in Haryana. For the last 12
years, Delhi Metro has become the fulcrum for realty
development, shaping the market in a big way .

The 11km-long Mundka-Bahadurgarh line is pushing

prices along this stretch, while the property market on
the proposed Metro link between Dilshad Garden and
New Bus Depot (Ghaziabad) has seen a lot of activity
in the area after the announcement. This stretch is
going to benefit areas in the vicinity of Shahid Nagar,
Raj Bagh, Rajendra Nagar, Shyam Park, Mohan
Nagar, Arthala, Hindon, and New Bus Depot in
Ghaziabad. Connecting Badarpur with Faridabad, this
Metro line in Phase III will benefit Sectors 5, 9, 11, 12,
13, 15, 16A, 17, 18, 21A, 21B, 24, 27A, 27B, 27D, 28,
30, 32, 39, 43, 44, 46, 47, Dayal Basti, and Ashoka
Enclave in Faridabad.
Rakesh Yadav, MD of Antriksh Group, says: The
realty market of Noida has gained quite a lot from
Metro connectivity, as this district bordering Delhi was
in dire need of smooth connectivity with the national
capital. Like the Mumbai locals that have been
instrumental in pushing life there, today it is hard to
imagine life in the Delhi NCR without Delhi Metro,
especially during office hours.
Ajay Kumar, CMD of Ace Group, says: Metro
connectivity is a game changer for the real estate
industry as a whole, as historically , it has been
proven that transport infrastructure has had a positive
impact on the real estate sector. Delhi has undergone
a phenomenal transformation with the construction of
the Metro, mak ing commuting convenient, cheaper
and faster. We are very happy with the development
authorities of Noida and Greater Noida for coming
together with the DMRC for the two Metro
extensions.
Sandeep Bedi, director (Strategy & Systems) of
BPTP , says: The proposed Metro track along
Gurgaon Expressway will help clear any uncertainty
in the minds of homebuyers and investors who were
counting upon this decision, which to them means
secure investment.
Manish Agarwal, MD of Satya Group says: Delhi
Metro is not only the lifeline of the entire Delhi-NCR
region but also has been a source of property boom
in the areas it has passed.
The Times of India,27 October 2014,New Delhi

Industry News
Housing prices rise in 18 cities by
up to 3.9 per cent: National Housing
Bank
Housing prices appreciated in 18 major cities by up to
3.9 per cent in April-June over the preceding quarter
while property rates fell in six cities including Delhi,
according to National Housing Bank (NHB). In the
national capital, housing prices dropped by 3 per cent
during the first quarter of this fiscal compared with the
January-March 2014. Maximum price increase was
witnessed in Pune by 3.9 per cent, while Chandigarh
saw highest fall of 4.4 per cent, according to NHB's
'RESIDEX'.
NHB had launched housing index 'RESIDEX' in July
2007 to track the movement of housing prices on a
quarterly basis. It currently covers 26 cities. Prices in
two cities -- Hyderabad and Raipur -- remained
stagnant. "The movement in prices of residential
properties for the quarter April-June, 2014 has shown
marginal increasing trend in 18 cities ranging from 0.5
per cent in Bhubaneswar to 3.9 per cent in Pune, and
fall in 6 cities ranging from -0.5 per cent in Lucknow to
-4.4 per cent in Chandigarh in comparison to the
previous quarter January-March, 2014," NHB said in a
statement.
The appreciation in property prices in majority of cities
tracked by NHB comes at a time when the domestic
real estate sector is reeling under a lingering slowdown
for last 2-3 years. Maximum increase was observed in
Pune (3.9 per cent) followed by Coimbatore (3.5 per
cent), Indore (3.3 per cent), Guwahati (3.2 per cent),
Patna (2.7 per cent) and Kolkata (2.4 per cent).
Housing prices appreciated in Ahmedabad by 1.91 per
cent, Vijayawada (1.88 per cent), Mumbai (1.75 per
cent), Chennai (1.72 per cent), Ludhiana (1.4 per
cent), Bhopal (1.3 per cent), Kochi (1.2 per cent),
Jaipur (0.99 per cent), Faridabad (0.96 per cent),
Bengaluru (0.93 per cent), Nagpur (0.6 per cent) and
Bhubaneswar (0.5 per cent).
"Six cities have shown decline in prices over the
previous quarter with maximum fall observed in
Chandigarh (-4.4 per cent) followed by Meerut (-3.6

per cent), Delhi (-3 per cent), Surat (-2.4 per cent),
Dehradun (-2.1 per cent) and Lucknow (-0.5 per
cent)," NHB said.
The Residex for the quarter April-June, 2014 has
taken into account the price trends for residential
properties in different locations and zones in each city
and is based upon the transaction data received from
Central
Registry
of
Securitisation
Asset
Reconstruction and Security Interest of India
(CERSAI). The data based on actual transactions are
put through a model that depicts the trend in the
market, NHB said.
The Economic Times,01 November 2014,New Delhi

Private Equity News

HDFC arm, Singapore firm invest in
Bangalore residential project
HDFC Investment Trust II, an investment company
under mortgage lender HDFC Ltd, and Singaporebased Superior Investments have together invested
60 crore in a residential project in Bangalore. Legal
firm J Sagar Associates (JSA) advised and assisted
Superior Investments and HDFC Investment Trust II, in
connection with the investment of the residential
project in Whitefield, Bangalore by Sterling Gated
Community Private Limited (SGCPL).
Sterling Gated Community is a special purpose vehicle
formed by Ramani Sastri and Shankar Sastri, who
have more than 30 years of experience in developing
real estate projects in Bangalore and are the founders
of the Sterling group. SGCPL is developing a
residential project with 147 units of 3-BHK and 4-BHK
configurations, planned over a part of larger land
parcel owned by SGPCLs associate company,
Sterling Urban Development Pvt Ltd (SUDPL). The
remaining land is being developed as Villa Grande,
comprising 243 villas, with Phase-I complete and
Phase-II ongoing.
As part of the transaction, JSA advised the landowner,
SUDPL, about the execution of a joint development
agreement in favour of SGCPL. The transaction
involved a corporate due diligence on SGCPL, drafting,
negotiating and finalising the agreement as well as
other documents.
The Hindu Business Line,31 October 2014,Mumbai

Godrej Properties, Brigade,

Mahindra Lifespace to gain from FDI
in construction
Realty stocks rallied on Thursday, a day after the
government relaxed norms for foreign direct
investment (FDI) in the construction sector. The S&P
BSE Realty Index was the top sectoral gainer that
moved up nearly 3.5 per cent. Unitech, HDIL and DLF
were among the top gainers that rallied 8.5 per cent,
six per cent and 4.9 per cent, respectively.

Besides reducing the built-up area requirement to

20,000 square metres (sq m) for attracting FDI,
investors, in the new norms, will be allowed to exit on
completion of the project or after three years from the
date of final investment, whichever is earlier.
Minimum capital requirement has also been halved to
$5 million and the government is now permitting 100
per cent foreign ownership of projects in the
construction sector through an automatic route.
Analysts say this move will be a positive for
developers with existing joint development/
investment arrangements with foreign investors
they will gain as their addressable market will
expand. Also, developers with large land banks will
benefit with potential increase in demand for land. At
the company-specific level, developers like Godrej
Properties, Brigade Enterprises and Mahindra
Lifespaces,
who
have
existing
joint
development/investment arrangements with foreign
investors (APG Group, GIC Singapore and Standard
Chartered, respectively), will benefit as their
addressable market will expand, says Aashiesh
Agarwaal, an analyst tracking the sector with
Edelweiss.
Further, developers with large land banks Sobha
Developers, DLF and Jaypee Infratech will also
gain with potential increase in demand for land.
Within our coverage universe, Sobha Developers
(buy rating), Godrej Properties (hold rating) and
Brigade Enterprises (buy rating) are likely to be key
beneficiaries, he adds. Oberoi Realty, according to
an ICICI Securities report, continues to stand out
among publicly-listed Indian realty developers with
the strongest balance sheet and a quality asset
portfolio, which provides ample room for growth and
ability to optimise returns going ahead.

While cashflows have been muted in the past two

years, ICICI Securities believes new planned
residential launches in the next six months in Mulund,
Andheri, Goregaon, Worli and Borivali land parcels
provide nearly 4x FY10-FY14 sales booking
potential over the next five years, which will alleviate
these concerns.The move, while lowering the
threshold for new investment, will facilitate larger FDI
inflows in the construction sector that accounted for

Private Equity News

about 10 per cent of total FDI inflows in India over the
last decade, analysts say. The reform would now
allow foreign investor to invest in smaller projects
spread over land parcel of about three four acres. In
the near-term, we expect the policy to support housing
and commercial office projects in metro cities such as
Delhi and Mumbai, where project size is generally
small, yet requires heavy investment due to expensive
land parcels and high construction cost, says Neeraj
Bansal, partner and head, real estate and construction
sector, KPMG in India.
Though the government has relaxed rules for FDI,
analysts do not expect money to start flowing
immediately, though they agree this is a step in the
right direction and reflects the governments intention
towards reviving the sector. Relaxing FDI norms will
open up the capital markets thereby attracting
investments into the sector.
However, we foresee another 8-12 months for the
decision to bear fruit, said Shishir Baijal, chairman and
managing director, Knight Frank India.
Business Standard,31 October 2014,New Delhi

Regulatory Buzz
Reits, InvITs will need tax sop thrust
Tax incentives are key to the success of Real Estate
Investment
Trusts
(Reits)
and
Infrastructure
Investment Trusts (InvITs), a senior Sebi official has
said. In September, market watchdog Sebi had notified
the norms for listing of business trust structures, Reits
and InvITs, that would help attract more funds in a
transparent manner into realty and infrastructure
sectors. Both the structures, norms of which were
approved by the regulator in August, would get tax
incentives.
Countries like Singapore and Hong Kong had
launched Reits but did not give any tax incentives
because of which these did not kick off well. The whole
Reits structure is motivated by tax benefit. If it is given,
then it will work or else it will not," Sebi executive
director Ananta Barua said according to a PTI report.
Realty players and investors have been seeking more
clarity on the taxation structure for newly-created Reits
and InvITs.
Barua said there were four levels of taxation involved
in both Reits and InvITs, which need to be addressed.
Taxation is involved at four stages first while
structuring and transferring assets to Reits or InvITs;
second when they distribute income to its investors;
third when they are traded; and fourth time when there
is an exit. These are heavy stages so tax issues have
to be addressed, he stated.
For both trusts, the minimum initial offer size should be
Rs 250 crore with a public float of at least 25 per
cent.The minimum asset base for these trusts to get
listed is Rs 500 crore.
To ensure transparency, these trusts would be subject
to stringent norms on disclosure as well as related
party transactions, Sebi has said.
Reits and InvITs are required to make investments
either directly or through special purpose vehicles
(SPV). In case of publi-private-partnership projects,
money can be put in only through SPV.
The Tribune,27 October 2014,New Delhi

Cabinet may take up plan to

liberalise FDI in construction sector
The union cabinet is likely to consider on Wednesday
a proposal to liberalise foreign direct investment in
construction sector. The department of industrial
policy and promotion (DIPP) has proposed
substantial easing of norms for affordable housing
and the 100 smart cities envisaged by the new
government that took charge in May.
The proposal, if approved, will also help infuse more
funds into the debt burdened sector and facilitate
faster completion of projects. "FDI in construction
note is with the cabinet for approval and will likely be
considered on Wednesday. Comments from various
ministries and departments have been incorporated,"
said a government official.
Under current rules, 100% FDI is allowed through the
automatic route in development of townships, housing
and built-up infrastructure, subject to stringent
conditions and a three-year lock-in. The norms
mandate minimum capitalisation of $10 million for
wholly-owned subsidiaries and $5 million for joint
ventures with Indian partners.

Developers will be exempt from restrictions in size,

minimum capitalisation and exit, if they commit 30%
of project cost to affordable housing.The sector
attracted $1.2 billion in FDI in 2013-14, down 8% from
the previous fiscal. DIPP, the nodal agency for FDI,
has proposed relaxation in norms related to built-up
area, capitalisation and lock-in period. It has
proposed that the minimum built-up area be cut to
20,000 sq metres from 50,000 sq metres while the
minimum capitalisation be halved to $5 million from
$10 million and from $5 million to $2.5 million for joint
ventures with Indian partners.
Minimum built-up area in case of serviced housing
plots is proposed to be cut to 5 hectares from 10
hectares and the minimum lock-in period of three
years after the completion of the project is proposed
to be dropped. The government hopes the easier
rules will also help faster completion of projects
delayed by a squeeze on funds due to elevated debt

Regulatory Buzz
levels.
If the proposal is accepted, investors are likely to be
able to exit projects on receipt of occupancy and/or
completion certificates issued by the competent local
authority or after Foreign Investment Promotion
Board's nod.
The Economic Times,29 October 2014,New Delhi

17 villages identified for land

pooling
Uncovering its capital city plans, the AP government
has decided to pool land in 17 villages of Guntur
district in the ? rst phase. As reported by TOI earlier, it
has exempted Amaravati from the first phase. Sources
said the government has earmarked Tullur, Nekkallu,
Kuragallu,
Mandadam,
Velagapudi,
Uddandarayunipalem,
Rayapudi,
Dondapadu,
Neerukonda, Borupalem, Nelapadu, Sakhamuru,
Nidamarru, Malkapuram, Mudha Lingayapalem,
Lingayapalem and Abbarajupalem villages for the
initial land pooling exercise. They added that the
government has zeroed in on these villages in view of
the absence of high priced paddy fields there.

"We want to begin the process of land pooling from

November 1," confirmed agriculture minister and
member of the land pooling committee, Prathipati
Pullarao. A senior offcial of the rank of principal
secretary is expected to closely monitor the process.
"We want to complete the firrst phase within three to
six months," said a senior revenue official.
Sources said chief minister N Chandrababu Naidu is of
the view that farmers who are resisting land pooling
will fall in line once the process is successfully
completed in the upland areas of 17 villages in Tullur
mandal.
"The government felt that there could be some protests
from farmers of Amaravati, Tadepalli, Mangalagiri and
Ta tikonda and hence has decided to take up land
pooling there in the second phase. If farmers do not
agree even then, we will go for forcible acquisition. We,
however, suggest all of them to make use of the best

packages to be announced by the government," said

a minister.
Of the nearly 30,000 acres to be pooled for the
capital, the government will acquire 15,000-18,000
acres in the first phase. A crucial meeting of the
cabinet sub-committee on land pooling will be held on
October 30, where a final call on the compensation
package is expected to be cleared. The government
wants to begin the negotiation process immediately
after that.
According to the draft plans, the government is
contemplating giving at least 1,100-1,200 sq yard of
developed land to farmers in return for every acre
acquired. It is also contemplating offering an annual
compensation ranging from Rs 25,000 to Rs 40,000
per acre till the portion of the developed land is
returned to the owner.
Although, the present prices in the earmarked villages
are between Rs 1 crore and Rs 3 crore per acre, the
government does not consider them to be realistic.
The government also believes that the farmers might
not oppose giving away their lands as they can get
not less than Rs 2 crore for 1,000 sq yards of
developed land once the capital is ready. "In fact, they
might get more than what they are anticipating now
as land in the vicinity of the capital will have high
premium," said a minister.
The Times of India,29 October 2014,New Delhi

Affordable housing gets leg up, FDI

norms eased
Finally, there is some good news for the real estate
sector. In a major relief to the ailing housing sector,
the government on Wednesday eased foreign direct
investment (FDI) norms in construction sector, which
will boost affordable housing and bring in copious FDI
flows. The long-awaited decision taken by the cabinet
chaired by prime minister Narendra Modi has more
than halved minimum built-up area requirement for
FDI in construction to 20,000 sq meters from the
present 50,000 sq metres. Finance minister Arun
Jaitley had promised this relaxation in the budget.

Regulatory Buzz
The cabinet also halved minimum capital requirement
for such projects to $5 million from $10 million. The
move was aimed at attracting more foreign investment
in construction and real estate sector, an official
statement giving details of the cabinet decision said.
Real estate developers saw the move as a major help
to the cash-starved realty sector to raise funds. DLF
managing director, Rajiv Talwar, said it was a welcome
decision and a prompt response to address the woes
of the sector, hit hard by the economic slowdown.
This would usher in huge investment into the countrys
realty sector. The affordable segment will benefit
hugely by these relaxations. The government is taking
the right steps to revive the sector, Talwar said.
Support also came from other leading realty
companies. Niranjan Hiranandani, managing director,
Hiranandani Group, said, The government's focus on
affordable housing would require 25 million houses
and with the relaxation in the norms to allow foreign
direct investment in construction these funds could be
raised easily.
It would now be much easier for the sector to raise
the required capital for construction, Hiranandani
added. The relaxation proposal was moved by the
department of industrial policy & promotion (DIPP) to
attract more foreign investment in construction and real
estate sector that is facing a severe liquidity crunch in
the last few years.
Although 100 per cent FDI is allowed in townships,
housing and built-up infrastructure and construction
developments since 2005, only $23.75 billion had
flowed into sector, which was a relatively small amount
compared to some of the other sectors. Though the
sector has huge potential for foreign investment, the
flow was just ten per cent of the total FDI inflows into
the country.
The projects that commit at least 30 per cent of the
total cost for low cost affordable housing would be
exempted from minimum built up area and
capitalisation requirements with a minimum three-year
lock-in period, the official statement said. The cabinet
decision, however, came with certain riders. The Indian
investee company will be permitted to sell only
developed plots. For the purposes of this policy,

developed plots will mean pieces of land where

trunk infrastructure, including roads, water supply,
street lighting, drainage and sewerage, have been
made available.
The state government/ municipal/ local body
concerned, which approves the building /
development plans, will monitor compliance of the
above conditions by the developer.
Projects using at least 60 per cent of the FAR/FSI for
dwelling units of carpet area not more than 60 sq mt,
will be considered as affordable housing projects.
Investment in the construction development sector
has a multiplier effect on the economy by way of
infrastructure creation, substantial employment
generation over the entire spectrum from unskilled
workers to engineers, architects, designers as well as
financial and other supporting services.
Further, it creates the demand for products of a
number of related industries including those in the
manufacturing sector, like cement, steel, fittings and
fixtures and others. Besides its employment and
income generation potential, greater investment in the
sector would help to augment the available housing
stock including affordable housing and built up
infrastructure for different purposes.
Enhancement of the affordable housing stock is an
urgent need in order to stem the proliferation of slums
in and around the cities, the statement said, adding
the sector witnessed steadily rising FDI from 2006-07
to 2009-10 after which the levels of inflows have been
much lower.
In order to step up investment in construction
development with its backward and forward linkages
for many other sectors of the economy, it is believed
that some liberalisation and rationalisation of the FDI
policy on construction development could be the
necessary catalyst to give a boost to the sector, it
said.
Financial Chronicle,30 October 2014,New Delhi

Public Markets
Sobha Q2 sales bookings drop 12%
to Rs 559 crore
Real estate firm Sobha Ltds sales bookings fell 12
per cent to Rs 559 crore during the second quarter of
this fiscal due to poor demand. The company had
posted a sales bookings of Rs 632.3 crore in the
year-ago period. The company during the quarter
achieved new sales of 833,991 sq ft valued at Rs 559
cr with an average realisation of Rs 6,703 per sq ft,
Bangalore-based Sobha said in its operational update
for the July-September quarter.
Sales volume dropped to 833,000 sq ft during the
second quarter of the present fiscal from 1 million sq
ft in the year-ago period. However, sales realisation
improved 6.32 per cent to Rs 6,703 per sq ft. During
the quarter, the company has delivered a stable and
consistent performance in all its southern markets.
The real demand in the northern and western markets
as a whole continues to be weak and the company
remains cautious about these micro-markets in the
medium term, Sobha said.
The company SAID there has been an uptick in the
general business sentiments post formation of the
new government at the Centre. Whilst the steps
being taken by the new government enthuse
optimism, the same is yet to translate into a
significant revival of demand in the real estate sector,
it added.
During the first six months of this fiscal, Sobhas
sales bookings fell to Rs 1,041.2 crore from Rs
1,235.1 crore in the corresponding period of previous
year. Sobhas sales bookings stood at Rs 2,343 crore
during the full 2013-14 financial year but missed the
target of Rs 2,600 crore due to the slowdown in
demand, especially in the NCR-Gurgaon region.
With the approaching festive season and an
expected improvement of overall performance in the
second half of the fiscal, the company remains
positive about achieving the guidance set for the year
(2014-15 fiscal), Sobha said.
Business Standard,27 October 2014,New Delhi

Land
No news in this section for the week

Residential
Green signal for entire SmartCity
project
SmartCity Kochi has received environmental clearance
for the entire project covering 246 acres, even as the
construction of the first IT building is fast nearing
completion. Gigo Joseph, CEO, said the environmental
clearance was received in July last year for the 6.5
lakh sq ft first IT building (SCK01), and later the
company applied for the rest of the project, which has
now been cleared.
According to him, not less than 8.8 million sq ft built-up
area will be developed, with substantial area left for
greenery and open spaces, attracting companies from
within India and abroad. Joseph said the
environmental clearance was given at the meeting of
State Environment Impact Assessment Authority
Kerala (SEIAA-K) followed by the State Expert
Appraisal Committees (SEAC) recommendations. He
said SEAC appreciated SmartCitys effort in presenting
a clear-cut master plan of the project. Now, as the
decks have been cleared for the entire project, the
company will speed up the construction of
infrastructure. SmartCity has entered into agreements
for joint development of infrastructure with leading IT,
hospitality, realty and education companies to make
the hub an integrated township.
The Hindu Business Line,27 October 2014,Kochi

Asset Homes to sell insured

apartments
The Kerala-based Asset Homes has introduced a new
concept of bundled insurance coverage in all its newly
constructed dwellings. This new initiative was taken to
counter eventualities arising out of all natural and
manmade calamities, says Sunil Kumar, Managing
Director, Asset Homes. The financial loss caused by
recent cyclone Hudhud and devastating Kashimir
floods to building structures has prompted the
company to go in for an insurance coverage, he added.
Incidents of natural calamities and manmade
disasters such as terrorism, bomb explosions are on

the rise, damaging buildings fully or partially. This has

necessitated us to think in favour of providing an
insurance coverage benefiting apartment owners, he
added.
Asset Homes has entered into an agreement with
New India Assurance Company to offer the coverage
called Insured Asset Scheme. As per the MoU, all
villas and apartments to be purchased henceforth
from Asset Homes will be covered against damages
caused by fire, earthquake, lightening, explosion,
aircraft damage etc for a period of 25 years. It is for
the first time in the country that a builder is offering
such an insurance package, he said.
The insurance company has agreed to extend a
similar package for existing apartments of the
company, for which discussions are in progress with
resident associations. Considering all eventualities,
the need of the hour is to extend insurance coverage
to buildings, CJ Philip, Deputy General Manager,
New India Assurance Company said.
The Hindu Business Line,27 October 2014,New
Delhi

Purva Evoq in Chennai

Puravankara Projects Limited, has launched Purva
Evoq, a first-of-its kind contemporary residential
project at Chennais prime location Guindy.
Overlooking the Chennai Race course, Purva Evoq
will have 181 premium homes in 3, 4 and 5 BHK
formats that will have contemporary design ideas to
blend with the grandeur of the architecture in the
project. The faade of this project has been designed
by a renowned international architectural firm from
Germany taking inspiration from the Chettinad
architecture of south India, and cloaking it with
modern day luxuries. When fully occupied, the
collective financial wealth of the residents is
estimated to be in upwards of US$ half a billion (Rs
3000 crore), making it possibly one of the wealthiest
residential enclaves in Chennai. The palatial looking
building will have world class features, a landmark
entry arch and gate, large chandeliers and marble
clad lobby. Each apartment will have a royal white,

Residential
large, hi-tech main door along with a panic button in
the master bed room and dining area as well as marble
clad living room, wooden floor in master bedroom, gas
leak detectors in kitchen and luxury fixtures. The
residents will have access to a 5-star concierge
service as well as several amenities on rooftop that
include a stately sky/ cigar lounge, sky gazing
observatory, hard scape paved area with seating, welllit terrace garden, evergreen gazebos, jogging track,
infinity pool and private offices, among others.
The Tribune,27 October 2014,Chennai

HSBC buys duplex for Rs 60 crore

in South Mumbai locality
HSBC has bought a luxury duplex apartment
overlooking the Arabian Sea in south Mumbai's
Mahalaxmi locality for around Rs 60 crore, said two
persons familiar with the development, making it one of
the most expensive such purchases in the country.
While the hottest property market in the country does
have apartments valued at Rs 100 crore under
construction, this is the highest reported transaction for
a flat so far in terms of absolute numbers.
"The deal is concluded and the registration was done
recently. Total consideration for the apartment also
includes stamp duty and registration charges," said
one of the persons mentioned above. The 8,000 sq ft
apartment located in the Raheja Viverea development
overlooks the Mahalaxmi racecourse and golf course
has been bought by the bank to house its India chief
executive officer, currently Stuart Milne.
On the basis of built-up area, the deal is valued at Rs
75,000 per sq ft. Going by carpet area5,000 sq ft
it's almost Rs 1.10 lakh per sq ft. The deal is in the list
of costliest transactions on a per sq ft basis on both
these measures. The apartment is located on the 40th
and 41st floorsthe top twoof one of the three wings
of the complex, which was completed in 2012. HSBC
bought the apartment directly from developer K Raheja
Corp.
HSBC India declined to comment as did the
transaction advisor CBRE. Although the realty market

has been sluggish for nearly two years, high-value

deals have continued to defy the trend in the last few
quarters. In one such trans action, private equity firm
Xander's founder and chairman Siddharth Yog bought
a sea-facing apartment at the famous Samudra Mahal
building in Worli for Rs 40.5 crore.
Last year, another sea-facing duplex apartment in a
building on Mount Pleasant Road in south Mumbai's
Malabar Hill locality was sold for Rs 57 crore, or
around Rs 1.35 lakh a sq ft, making it the most
expensive residential property transaction on a per sq
ft basis.Several high-profile figures from the corporate
world are among those who have homes in Raheja
Viverea, which is spread across eight acres. They
include HDFC vice-chairman and CEO Keki Mistry
and private equity firm KKR's CEO Sanjay Nayar. The
missions of Germany, Australia and Canada also own
apartments in the complex. Johnson & Johnson and
Mondelez India Foods Ltd (formerly Cadbury India)
have also bought apartments there for their
respective CEOs.
The Economic Times,28 October 2014,Mumbai

Vaswani pre-launches luxury

project in Blore
Vaswani Group has pre-launched a luxury residential
project, Vaswani Exquisite, in Bangalore. It is
adjacent to Zuri Hotel, ITPL Main Road, Whitefield.
With slim towers rising in an arc overlooking the
Hoodi lake, this project promises its residents an uber
luxurious living experience.The project is a high rise
with G+24 floors and offers three and four bedroom
apartments ranging between 1,750 sq ft to 2,800 sq ft
respectively with price starting from Rs 1 crore. The
project also comprises well designed penthouses.
The building sanction has been received and
construction is likely to commence shortly. A limited
number of units have been released for booking up to
the 16th floor, at special pre-launch prices, the
company said in a statement.
The strategic location of Vaswani Exquisite cuts
down on travel time for its future residents working in
Whitefield area, with proximity to major IT parks,

Residential
healthcare centres, educational and entertainment
hubs, the statement claimed.
Kailash Advani, chief executive officer, (southern
operations) Vaswani Group, said, With the presence
of the Export Promotion Industrial Park and ITPL,
Whitefield has become a hot-spot for most people in IT
and ITeS sectors. Apart from corporate houses, well
known educational institutions, business parks and
commercial complexes have also come up in and
around the area. With increasing demand in the micromarket, we saw an opportune time to prelaunch this
project.
Financial Chronicle,30 October 2014,Bangalore

Commercial/ Retail
Forum Group starts building Rs 500
crore mall in city
Kolkata-based real estate developer Forum group has
commenced construction of Rs 500 crore shopping
mall and office space complex at Rasulgarh square in
Bhubaneswar. Titled as 'Esplanade by Forum', the
project will consist of a 4 lakh square feet shopping
mall including an eight-screen multiplex and 2.5 lakh
square feet luxury office spaces. Additionally, the
project will have parking facility for over 1000 cars.
Speaking about the project, Vidyut Saraf, deputy
managing director of Forum Group said "the entire
500-crore project will be executed by Leighton Group
from Australia, one of the world's biggest contractors.
The facade of the project is inspired by Odisha's
famous weave pattern and will use materials never
before used in India." Forum Group has been investing
in Odisha for over 35 years now. One of its group
companies UAL is amongst the state's largest fibre
cement sheet producers. Another company SAPL is in
the process of setting up a Rs 2000 crore Titanium
venture near Chhatrapur in Ganjam district.
Business Standard,29 October 2014,Kolkata

Township
A smart way to create 100 smart
cities
Prime Minister Narendra Modis vision to create 100
smart cities has resonated well both in India and
across the world. While each state is pitching 4-5 cities
to figure in the final list, many countries have shown
interest in supporting the initiative in specific states.
Recently, France offered to invest in creating smart
cities in Himachal Pradesh.
The idea of smart cities is timely considering that
urbanisation is inevitable. Sample this: as much as
75% of population in advanced countries live in cities,
and 70% of worlds population will live in cities mainly
in developing countries over the next 30 years. During
this period, India is projected to add about 400 million
people in urban areas.
While smart city as a concept has gained popularity
over the past few years, there is vagueness in the
definition. Rightly so, as multiple aspects including
governance, public transport and traffic, waste
management, entertainment and safety, among others,
need to be considered.
A recent survey by the IESE Business School, called
Cities in Motion, rates Tokyo, London and New York
as the top smart cities in the world. The survey
considers parameters including governance, urban
planning and environment. The survey indicates that
these three cities have a clear vision and consistent
implementation of their strategic urban plans.
Rationalising/integrating urban bodies
Should India create 100 new smart cities or improve
the existing ones? India has 53 cities with over 10 lakh
population and there are hundreds of smaller cities. It
makes sense to improve existing cities and aim at
making them smart rather than creating new ones
which are bound to take significantly longer time.
It is a given that each Indian city has different priorities.
We need to rationalise the existing infrastructure and
then look for improvement. Here, information and
communications technology (ICT) can play an

important role in the rationalisation process. For

example, Mexico citys chaotic bus service got
transformed into the most dependable public
transport using ICT, through demand-supply
matching and providing better service to the
commuters. We can also learn from other countries in
improving public transport ticketing using ICT.
Japans FeliCa or Londons Oyster card are great
examples of hassle-free ticketing service.
The concept of smart cities should be incorporated in
the urban planning bodies and a holistic approach is
required. How about integrating transportation and
traffic planning with urban planning? This will make
the
urban
planning
department
completely
responsible and accountable for a citys traffic and
public transportation. Why should the traffic police be
responsible for traffic planning? Instead, we should let
the traffic police focus on educating and improving
responsible driving among the public.
How many times do we get frustrated at the utter lack
of coordination between government organisations
resulting in wastage of effort/money and causing
public nuisance? Roads are nicely tarred and within a
few days the sanitation/water supply department
begins work on the same stretch of road! As a first
step, can we get such simple things aligned amongst
urban local bodies and fix ownership?
The government should expand on the PPP-based
initiatives and replicate success stories in passport
service and airports. Further, Nobel laureate Jean
Tiroles suggestion to improve the PPP model
through periodic independent evaluation is worth
considering in India as well. Further, e-governance
must be given the right thrust as it can bring in better
transparency and can reduce corruption.

Creating the right ecosystem

India needs a strategy to enable and sustain a strong
smart city ecosystem. The government must embark
on an initiative making innovation as an enabler for
Indian smart cities. The sole aim should be realising
affordable India-specific solutions.

Township
Institutions of national importance such as the IISc,
IITs and IIMs produce some of the best talent in the
country.
Can we utilise this talent more effectively? Also, can
these institutions be held accountable in certain areas
from conceptualisation to implementation?
The ministry of human resource development (MHRD)
should consider adding specific aspects around smart
cities such as introducing urban planning as a
specialised course. Subjects such as traffic and
transportation engineering should also be popularised.
Students should be encouraged to pursue specialised
courses by creating the right demand environment.
ICT will play a major role in enabling smart cities and
India is quite uniquely positioned in terms of the IT
ecosystem. We have the technology know-how, skilled
and mature manpower. IT industry, often seen as
export-oriented, can have a great opportunity to make
significant contribution in enabling e-governance or
providing high-end analytics that can help the common
man.
The success of participative governance (where the
government departments and the general public work
closely in prioritising improvement actions for the city)
has been patchy in India. Reports suggest that few
cities such as Surat and Pune have performed well,
but most large cities have miserably failed. There can
be many valid reasons, but we need government
bodies to show much more willingness to embrace
public participation.
It will take a while for Indian cities to figure among the
worlds best smart cities. Thats fine and perhaps
Janaagrahas annual survey of Indian cities could be a
starting point for assessing Indian cities on smart city
parameters.
A holistic approach is needed in rationalising the
existing systems. Making our cities smart is a
milestone, and not an end-goal in Indias quest to
create top-class cities.
The Financial Express,28 October 2014,New Delhi

SEZ
No news in this section for the week

Hospitality
No news in this section for the week

Input Cost
No news in this section for the week

Disclaimer
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