The real estate market in India is facing a downturn due to a liquidity crunch and rising interest rates. Developers are facing falling sales, price corrections, and a shortage of funds as banks have tightened lending. The Reserve Bank of India's recent interest rate hikes have increased the cost of home loans substantially. Many large developers are facing a 50-70% cash shortfall. While construction financing is still available from banks, land financing has become difficult. Experts expect the market to see a 5-15% price correction and a further slowing of demand over the next 18-24 months until inflation is controlled and interest rates stabilize. The downturn may force some smaller and weakly capitalized developers out of business.
Despite the government's optimism of achieving a growth of about 7% in the Gross Domestic Product
(GDP) this fiscal, chances are it could be below that, at about 6.5% only. But that is one part. The bigger
issue is managing growth in the next financial year. Says Jagannadham Thunuguntla, equity head at
the New Delhi-based merchant banking company SMC Capitals Ltd, "We are in the last quarter of
this financial year. There is hardly any room left to manoeuvre at this stage. In my opinion, the bigger
challenge would be managing growth in the next fiscal."
Despite the government's optimism of achieving a growth of about 7% in the Gross Domestic Product
(GDP) this fiscal, chances are it could be below that, at about 6.5% only. But that is one part. The bigger
issue is managing growth in the next financial year. Says Jagannadham Thunuguntla, equity head at
the New Delhi-based merchant banking company SMC Capitals Ltd, "We are in the last quarter of
this financial year. There is hardly any room left to manoeuvre at this stage. In my opinion, the bigger
challenge would be managing growth in the next fiscal."
Exposure to real estate has risen sharply over the last five years but lending for commercial property relatively low
“Increased cash flows to the real estate sector definitely have the potential to push up real estate prices and could lead to a bubble. Hence, this is something which needs to be monitored closely,” said Soujanya P., group head, public sector bank ratings, Credit Analysis and Research Ltd.
MARKET PULSE, the monthly from ACMIIL, aims to provide insightful perspectives on all aspects of the market, the equity, debt, derivatives,forex, commodities and money markets.
PM Gati Shakti master plan
Inclusive development
Productivity enhancement
Sunrise opportunities
Energy Transition
Climate Action
Financing of Investments
INFLATION
FISCAL DEFICIT
-YEAR For Stock Pickers
-Market Indicators - Check
the important numbers
-Digitization of the Economy was the predominant theme during CY21
and indicators of the
month
Knight Frank India Real Estate (Jan-June 2017) ReportD Murali ☆
Knight Frank India Real Estate (Jan-June 2017) Report
Knight Frank-17H1
Kanchana Krishnan, Knight Frank on 17H1 January-June 2017 India Real Estate
(Residential, office)
Blog post link: http://bit.ly/2upCz7K
"most important thing to understand is that every CRISIS is
temporary and is bound to end – hence there is a saying ‘ Fall is temporary but Growth is permanent’
1.EDITORIAL
2.INSPIRING CASE STORY
3.INVESTING DURING CRISIS
4.MARKET INDICATORS
A MONTHLY NEWSLETTER TO MANAGE YOUR PERSONAL FINANCE
Talent Development in the Islamic Finance Industry--Is It Really Necessary? (...Joy Abdullah
More and more educational institutions, around the world, are offering degree programs and diplomas in Islamic Finance and banking. This is a good sign as it indicates that the growing global Islamic finance industry has a rising demand for competent and trained talent. Why, therefore, are graduates struggling to find jobs after qualifying?
Is Talent Development needed or not?
Wallet4wealth newsletter-jan-2022. In this news letter we have highlighted Union Budget 2022, Inspiring case stories, 5 must do SIPs for 2022, Market indicators etc. Finance minister Nirmala Sitharaman presented her Budget which was based on 7 key priorities.
Exposure to real estate has risen sharply over the last five years but lending for commercial property relatively low
“Increased cash flows to the real estate sector definitely have the potential to push up real estate prices and could lead to a bubble. Hence, this is something which needs to be monitored closely,” said Soujanya P., group head, public sector bank ratings, Credit Analysis and Research Ltd.
MARKET PULSE, the monthly from ACMIIL, aims to provide insightful perspectives on all aspects of the market, the equity, debt, derivatives,forex, commodities and money markets.
PM Gati Shakti master plan
Inclusive development
Productivity enhancement
Sunrise opportunities
Energy Transition
Climate Action
Financing of Investments
INFLATION
FISCAL DEFICIT
-YEAR For Stock Pickers
-Market Indicators - Check
the important numbers
-Digitization of the Economy was the predominant theme during CY21
and indicators of the
month
Knight Frank India Real Estate (Jan-June 2017) ReportD Murali ☆
Knight Frank India Real Estate (Jan-June 2017) Report
Knight Frank-17H1
Kanchana Krishnan, Knight Frank on 17H1 January-June 2017 India Real Estate
(Residential, office)
Blog post link: http://bit.ly/2upCz7K
"most important thing to understand is that every CRISIS is
temporary and is bound to end – hence there is a saying ‘ Fall is temporary but Growth is permanent’
1.EDITORIAL
2.INSPIRING CASE STORY
3.INVESTING DURING CRISIS
4.MARKET INDICATORS
A MONTHLY NEWSLETTER TO MANAGE YOUR PERSONAL FINANCE
Talent Development in the Islamic Finance Industry--Is It Really Necessary? (...Joy Abdullah
More and more educational institutions, around the world, are offering degree programs and diplomas in Islamic Finance and banking. This is a good sign as it indicates that the growing global Islamic finance industry has a rising demand for competent and trained talent. Why, therefore, are graduates struggling to find jobs after qualifying?
Is Talent Development needed or not?
Wallet4wealth newsletter-jan-2022. In this news letter we have highlighted Union Budget 2022, Inspiring case stories, 5 must do SIPs for 2022, Market indicators etc. Finance minister Nirmala Sitharaman presented her Budget which was based on 7 key priorities.
Construction and Architecture Magazine 08 nov dec 2010Remona Divekar
An one to one meeting and exclusive one meeting with the women achiever of country Sullaja Firodia Motwani, MD, Kinetic Motars is the high point of this article.
Page 1 story on current affairs-Industry; finance and infrastructure. Page 5-Story feature on RBI's cut into repo rate. Page 7-In-Person Interview with Umesh Rao, Founder & CEO, Vector Projects. Page 9-International Project Focus- Absolute Towers in Toronto featuring architects Ma Yansong, Youke Hayano and Dang Qun, MAD Principals & Director of Absolute Tower Project.
Construction and Architecture magazine 03 jan feb 2010Remona Divekar
Interviewed one of the best and most humble architect Mr Shashi Prabhu from Shashi Prabhu architects. This is most of landmark and historical place in Mumbai. Wankhede Stadium.
Real estate publication - RealtyReality - Grant Thornton IndiaMarcom18
This publication provides insights on the commercial real estate market, which is bearing the brunt of subdued economic activity, high cost of finance and falling rental incomes.
www.wcgt.in/publications
This presentation was prepared for Larsen and Toubro's Outthink -2016 case study competition. The case was based on project finance, where participants were asked to perform a feasibility analysis of a real estate project.
If you are a commercial realtor and you have clients that have been turned down by a bank you should check out this presentation. If you are interested in having your deal funded by private money please contact Megan Krache at mkrache@sensiblelendingsolutions.com. We are actively lending to people the banks have turned down and are able to lend to people/businesses that have losses on their tax returns.
Keep Your Home Naturally Cool and Warm Out Change in Seasons
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Omaxe Sports City Dwarka stands out as a premier residential and recreational destination, offering a blend of luxury and sports-centric living. Located in the thriving area of Dwarka, this project by Omaxe Limited is designed to cater to modern lifestyle needs while promoting a healthy, active living environment.
MC Heights-Best Construction Company in jhanglaraibfatim009
MC Heights stands as the epitome of excellence in construction within Jhang. With a commitment to unparalleled quality and innovative design, MC Heights redefines urban living in the heart of Jhang. Offering luxurious residential spaces, cutting-edge commercial complexes, and vibrant community areas, MC Heights caters to the diverse needs of modern lifestyles. Our dedication to superior craftsmanship and customer satisfaction ensures that every aspect of MC Heights exceeds expectations, making it the premier choice for those seeking unparalleled sophistication and comfort in Jhang.
Urbanrise Paradise on Earth - Unveiling Unprecedented Luxury in Exquisite Vil...JagadishKR1
Immerse yourself in the epitome of luxury living at Urbanrise Paradise on Earth. These opulent 4 BHK villas, nestled off the prestigious Kanakapura Road in Bangalore, redefine elegance and sophistication. With meticulous craftsmanship, breathtaking design, and unparalleled amenities, Urbanrise Paradise on Earth offers a sanctuary where every moment is infused with luxury and serenity. Experience a life of grandeur and indulgence at this exclusive residential enclave.
500 acres of brilliance await you here at Riverview City which offers modern living, effortless convenience, and a beautiful natural setting. It is a mega township by Magarpatta City in Loni Kalbhor, Pune. Enjoy easy access to work, schools, and fun while experiencing a perfect work-life balance.
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Avrupa Konutlari Yenimahalle - Listing TurkeyListing Turkey
Welcome to Avrupa Konutları Yenimahalle, where luxury living meets unparalleled convenience in the heart of Istanbul. Developed by Artaş Holding, one of Turkey’s leading construction companies, this prestigious residential project offers a contemporary lifestyle experience like no other.
https://listingturkey.com/property/avrupa-konutlari-yenimahalle/
BricknBolt Understanding Load-Bearing Walls and Their Structural Support in H...BrickAndBolt
Load-bearing walls are the backbone of any home construction, providing crucial structural support that carries the weight of the house above. For companies like Brick and Bolt Mysore and Bricknbolt Faridabad, understanding and properly implementing these elements are key to constructing safe and durable buildings.
One FNG by Group 108 Sector 142 Noida Construction UpdateOne FNG
One FNG by Group 108 is launching a new commercial project in Sector 142 Noida. Office space and high street retail shops on the FNG and Noida Expressway. For more information visit the website https://www.onefng.com/
Oeiras Tech City, Developed by RE Capital and REIG, Will Become Lisbon's Futu...Newman George Leech
Oeiras Tech City, a historic development in the Oeiras municipality of Lisbon, is acquired by RE Capital and REIG. It is located on a 93,000-square-meter plot of land and combines co-living, business, and residential areas. It highlights ESG principles and is close to Tagus Park, which improves the urban landscape of Lisbon.
Need MCA leads? No sweat! MCAs are great for small biz funding. Learn how to snag top-notch leads: businesses needing cash, with repayment ability, decision-makers, and accurate contacts. Use content, social ads, lead platforms, partnerships, and capture processes for quality leads.
https://www.leadgeneration.media/blog/b/streamline-your-mca-sales-process-with-pre-qualified-leads
Torun Center Residences Istanbul - Listing TurkeyListing Turkey
THERE IS LIFE IN ITS CENTER!
The most energetic spot of the city that will add utterly different pleasures to your life, with a park that will make Istanbul breathe, delighting indoor and outdoor bistros, cafes, restaurants, the brand-new Food Hall concept, where dozens of unique tastes are served together, market area, cinema, theater, fitness club, SPA and event venue...
All the pleasures that will enrich your lives are awaiting you on the most beautiful side of the city, at Torun Center Residences. In Mecidiyeköy, where the heart of Istanbul beats, business, life and entertainment opportunities are located at the exact center, at Torun Center, the most beautiful side of the city.
Penthouse apartments and different styles of flats from 1 + 1 to 4 + 1, from 100 to 425 square meters in a 42-story residence tower, have been designed for those who want to live in the center of magnificence. Torun Center is the redefinition of a better life with specially landscaped floor gardens, apartment options with private balconies, and automatic glass systems equipped with Trickle Ventilation that offers clean air comfort.
Business and life in the same place
Excellent service
Torun Center has many delightful details, from a swimming pool to sunbathing and resting terrace. With 24/7 concierge services, 24/7 security, valet, technical service, closed-circuit camera system (CCTV), central heating and cooling system, it makes your life easier.
Delightful details
The two-story Torun Center Lounge, with its indoor and outdoor seating areas, children's playroom, private dining and TV lounge, promises unforgettable memories to you and your loved ones with its unique Istanbul view.
Neighboring to the most pleasant square of Istanbul
A few steps from the Torun Center Residences, you can reach the city's most modern city square and open the doors of a quality city life. Torun Center Residences brings together on the same project the long-awaited city life for Istanbul and gourmet restaurants, cafes, gym and SPA, and state-of-the-art cinema and Artı Stage, hosting the most famous plays of the season.
Located at the intersection of alternative public transportation options such as the metro and Metrobus, Torun Center comes to the fore as the most accessible office for both sides of Istanbul. With a central location and rich transportation lines, Torun Center offices make life easier for employees and increase productivity.
Rixos Tersane Istanbul Residences Brochure_May2024_ENG.pdfListing Turkey
Tersane Suites Residences is a luxurious real estate project located in the heart of Istanbul, next to the beautiful Golden Horn. This unique development offers hotel concept residences with Rixos management, making it the perfect choice for both homeowners and investors.
The Tersane Suites Residences offers a wide range of options, from studio apartments to spacious four-bedroom units, all designed to the highest standard. The suites are finished with high-quality materials and feature modern, open-plan living spaces, fully-equipped kitchens, and large balconies with stunning views of the city and sea.
One of the standout features of Tersane Suites Residences is the Rixos management, which provides a truly exclusive and upscale living experience. Residents will have access to a range of luxury amenities, including a fitness center, spa, and indoor and outdoor swimming pools. Plus, the on-site restaurants and cafes provide a taste of the local and international cuisine.
The Tersane Suites Residences also offers a great opportunity for investors, as it provides a rental guarantee program. This means that investors can enjoy a steady income stream, with the peace of mind that their property is being managed by a reputable and experienced team.
The location of Tersane Suites Residences is also unbeatable, with easy access to the city’s main transportation links and within close proximity to the historic center, making it the perfect base for exploring all that Istanbul has to offer.
The SVN® organization shares a portion of their new weekly listings via their SVN Live® Weekly Property Broadcast. Visit https://svn.com/svn-live/ if you would like to attend our weekly call, which we open up to the brokerage community.
Investing In The US As A Canadian… And How To Do It RIGHT!! (feat. Erwin Szet...Volition Properties
=== Investing In The US As A Canadian… And How To Do It RIGHT!! (feat. Erwin Szeto) ===
Ever been curious about Real Estate Investing in the US?? At Volition, for the past 14 years, we have been focused on helping investors invest in over $250M of real estate and generate $100M of wealth in the Toronto market, but we are always open to learning more about other business models and learning from other investors.
The US has always been an intriguing market to invest in. But the US is a big place… if you’re interested in investing in the US, you probably have a lot of questions, like:
☑️ Specifically WHERE should you invest?
☑️ What are the best markets to invest in and why?
☑️ How much are property prices there?
☑️ What are the returns like?
☑️ What is cashflow like?
☑️ Compared to investing in Toronto or other cities in Ontario, what are the benefits / tradeoffs?
☑️ What ownership structure should I use?
☑️ What are the tax implications?
☑️ Can I get financing?
☑️ What are tenants like?
Enter Erwin Szeto, a longtime friend of Volition. Since 2005, Erwin Szeto and his team have navigated the challenging landscape of being landlords in Ontario. Now, they are shifting their focus and guiding their clients' investments toward the more landlord-friendly environment of the USA. This decision comes after assisting Canadian clients in transacting over $440,000,000 in income properties. Faced with issues like affordability constraints, tenant-friendly laws, rent control, and rental licensing in Canada, Erwin sees a clear opportunity in the U.S. Here, there is a significant influx of investments leading to the creation of high-paying manufacturing jobs. Erwin and his clients are poised to capitalize on these opportunities where landlord rights are stronger and there is no rent control.
To facilitate this transition, Erwin has partnered with and become a client of SHARE, a one-stop-shop U.S. Asset Manager. Founded by Canadians for Canadians, SHARE enables as passive an ownership experience as possible for landlords in the U.S., while still maintaining direct, 100% ownership.
Erwin is “Making Real Estate Investing Great Again”!!
Website: https://www.infinitywealth.ca/
Facebook: https://www.facebook.com/iwinrealestate and https://www.facebook.com/ErwinSzetoOfficial
Podcast: https://www.truthaboutrealestateinvesting.ca/
Instagram: https://www.instagram.com/iwinrealestate/ and https://www.instagram.com/erwinszeto/
Elegant Evergreen Homes - Luxury Apartments Redefining Comfort in Yelahanka, ...JagadishKR1
Experience unmatched luxury at Elegant Evergreen Homes, offering exquisite 2, 3, and 4 BHK apartments in the serene locality of Yelahanka, Bangalore. These meticulously crafted homes blend modern design with timeless elegance, providing a harmonious living environment. Enjoy top-tier amenities and a prime location, making Elegant Evergreen Homes the ideal choice for discerning homeowners.
Brigade Insignia offers meticulously designed apartments with modern architecture and premium finishes. The project features spacious 3,3.5,4 and 5 BHK units, each thoughtfully planned to provide maximum comfort, natural light, and ventilation.
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Simpolo Tiles & Bathware
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Referans Bahcesehir which is being constructed, in the center of the most regional destination as Bahçeşehir, shines out with its central location and unique landscape including social facilities such as a fitness center, sauna, sports facilities, children’s playground and recreational areas.
Not only drawing attention for immediate surroundings including commercial centers and private schools but also providing the easily accessible location with closeness to Tem Highway and connection roads, ongoing construction of 3rd Bridge Connection roads and Metro Projects
Bahcesehir is a rising value in the great city of Istanbul… Located at a new transportation junction in the northwest of the City… Located at such a spot that the access roads for the 3rd bridge and for the 3rd Airport will reach the region in 2016. The Marmaray and the Subway will extend all the way to Referans Bahcesehir respectively in 2018 and 2019.
465 flats and 34 stores are designed with an outstanding approach and arranged with a unique perspective offering the following options: 1 plus 1, 2 plus 1, 3 plus 1, 3.5 plus 1, 4 plus 1, and 4.5 plus 1. It is planned so as to safeguard you and your loved ones based upon a modern, technological safety approach. As you experience the joy and luxury here, you will be content and feet at ease.
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https://listingturkey.com/property/referans-bahcesehir/
2. cover story_Real Estate_Aug-08.qxp
8/11/2008
10:13 PM
Page 3
The growing whispers of a slowdown
in the realty market in the country are
increasingly becoming louder. And,
now, with the banks tightening their
cash belts, the real estate market seems
headed for a slump. Shashidhar V &
Remona Divekar find out.
ith the inflation rate breaking the 12
percent barrier, Indian economy is
staring at a phase that could spell
disaster. All sectors of the Indian
economy are facing tough times, the
real estate sector being one of them. Real estate
players are, currently, grappling with dwindling sales,
correction in land prices, tepid demand, and a rising
input cost, even as they face a liquidity squeeze.To
make matters worse, banks have tightened their
positions and hiked the interest rates on home loans
further hitting the property and real estate market.
The Reserve Bank of India’s (RBI) decision to raise
Repo Rate and cash reserve ratio is expected to
only add to the woes of the real estate sector.
Harsh situations do, at times, call for harsh
measures. But, this sustained series of Repo Rate
hikes by the RBI has definitely pushed up the cost of
funding a home by a substantial percentage.The real
estate companies, developers, both big and small, are
in dire need for credit and other sources of capital
to complete projects at hand and also to sustain
their expansion plans.These are visible signs that the
global liquidity crunch has started to impact real
estate companies in India making it difficult for both
small and large realty companies to organise
financing.
Currently, the lending rate of banks is between 18
and 20 percent.The top notch real estate
developers, like DLF, MGF-Emaar, Shobha
Developers, Unitech, Omaxe, Parsvnath Developers,
Hiranandani Group, Ansal API, BPTP Developers and
TDI Group are facing severe cash crunch, as
W
reported in The Economic Times. In fact, the situation
is so bad that most of them have reported a 50-70
percent cash shortfall.
Says Pranay Vakil, chairman, Knight Frank (India)
Pvt Ltd., one of the leading realty consultants in the
country, “You have to be clear about the finance bit.
Banks have not stopped financing projects per se.
What they have done is stopped providing easy
finance for the purchase of land for housing projects.
The cost of land is currently inflated and not realistic.
And, that forms the major cost of the project. So,
those developers who are amidst a project are
caught between the devil on the one side and the
deep sea on the other. On the one hand, developer
who have sold some properties at a particular rate,
cannot now reduce it to sell off the rest of the
properties, while on the other hand, there is no
demand for the rest of the properties at the current
rate. And, that’s why you feel that the real estate
market is facing a tough time.”
Some industry experts aver the liquidity crunch is
artificial, to force developers to pick up cash from
the unorganised market at interest rates as high as
35 percent to 50 percent annually. Says Ajoy Kapoor,
managing director, Saffron Asset Advisors, “The
property markets in India have been witnessing a
downturn in the last six to seven months. Not across
the board but, in several micro markets, property
prices have been going down by 15-30 percent. We
expect this downturn to last at least for the next 1824 months. Having said that, I would add that there is
still demand for property that is correctly priced, in
both residential and commercial segments.”
59
AUGUST 08
3. cover story_Real Estate_Aug-08.qxp
8/11/2008
10:13 PM
Page 4
COVER STORY
phenomenon. “The credit
profiles of the companies are
not affected by the current
situation as credit profiles are
usually individual matters,” he
says.
Correction in prices
“Not releasing funds to the developers may be
specific to an individual company. But, I would like to
mention that banks have stopped financing for
purchase of land but construction finance is still
available,” notes R S Ajmera, MD, Ajmera Realty &
Infra India Ltd., and President, CREDAI. Explaining
further, he says, “Financial institutions usually keep
substantial security margin before lending to any
project. India has robust financial infrastructure like
any developed economy and many alternate means
are available today to raise project finance, like PE
Funds, Mezzanine Finance, Realty funds, etc.” Adds
Anshuman Magazine, chairman and managing
director, CB Richard Ellis, South Asia, “The property
“The market is,
currently, in a state of
extreme flux because of
a liquidity crunch and
muted sentiments.”
Anuj Puri, chairman and country head,
Jones Lang Lasalle Meghraj
60
AUGUST 08
market is slowing down and it’s happening all across
the country. From the developer’s point of view, they
have stock of flats as their source of income, but
even that is witnessing stagnation.The debt market,
on which most of the developers were surviving, is
also stagnating. However, this phase will last for a few
months only.”
Agrees Ajmera, who says that this is a short-term
According to a recent Fitch
report, large development
plans and aggressive land
purchases have led to a
considerable increase in the
financial leverage
(debt/EBITDA) of most
developers, with the smaller
players now being exposed to
liquidity pressures for project execution as well as a
general slowdown in property sales. Says Kishore
Gotety, country head of RREEF India Advisors Private
Ltd., “No business would be able to grow through
aggressive leverage if underlying earnings do not
support such borrowing.Thus, financial discipline
would be important here.”
Some companies are able to access capital, albeit
at very high cost, which, in the long run, may not be
a sustainable solution, especially given the size of the
market and consequent need for large chunks of
capital.The rising inflation and interest rates is leading
to a slackening in property demand; 1-1.5 percent
increase in interest rates could further impact the
real estate sector. A
slowdown in new
project launches
could also delay
refinancing, as debt is
taken as project debt.
India’s monetary
policy, together with
slowing demand and
growing liquidity
concerns possibly has
a negative impact on
the credit profiles of
real estate
companies, notes
Fitch.
Says Anuj Puri, chairman and country head, Jones
Lang Lasalle Meghraj, “The market is currently in a
state of extreme flux because of a liquidity crunch
and muted sentiments. A correction, if any, will take
four to six months to happen, depending on the
market trends in a particular location and the
holding capacity of the developers there. Certain
over-heated micro markets in Gurgaon, Noida, Pune,
4. cover story_Real Estate_Aug-08.qxp
8/11/2008
10:13 PM
Bangalore and other places will,
in all probability, see a 5-15
percent price decline. An
approximate correction of up
to 10 percent is also expected
in places like South Mumbai,
some locations in Mumbai’s
suburbs and certain areas of
New Delhi that have seen
unrealistic price trends.”
Adds Vakil, “The realty
market in India changed
forever on January 20th. And,
as developers would hope, the
market will see a correction in
the next couple of months, if
inflation level comes down.The
issue to be noted is that the market is over-priced
currently.There is minimal demand while there is
enough supply. So, who’s going to blink first – will it
be the consumers, keeping the festive season, go
ahead and invest in the project at the prevailing rate,
or will the developers be forced to bring down the
rates to reflect the real price?”
Very generally, there will be a period of
stagnation, followed by a fall of prices in certain
sectors and locations.The market will then
consolidate itself and rates will once again rise in
tandem with increased demand brought on by a
revitalised economy, renewed purchasing power and
also, market drivers, etc. “The slackening in demand,
coupled with liquidity
crunch, could lead to
consolidation in the
realty sector as
smaller players will
find it difficult to
survive.The current
trend of drop in
demand would
continue for another
18-24 months as
there is no sign of
inflation cooling
down and high
chance of interest
rates becoming harder,” notes Puri.
The government is walking a tightrope in trying to
arrest inflation as well as deal with the liquidity
crunch. Notes Magazine, “The priority of the
government should be to control inflation along with
high interest rates on home loans. So, hopefully, with
the decrease in residential prices and lowering of
interest rates, I hope we will have enough of demand
along with the supply.”
Page 5
Realty Risks
A slowdown in new project launches could also
delay refinancing, as debt is taken as project debt.
The risks would be higher for real estate companies
with a limited track record and limited cushion for
debt financing. While banks have taken a restrained
approach to funding real estate developers, Fitch
expects some of the more established developers to
continue to enjoy access to the loan market. Fitch
also notes that only large players with an attractive
portfolio of ongoing development and an established
track record are in a position to attract capital
through the private equity route.The sharp rise in
construction costs, driven by steel and cement costs,
“The issue is that the
market is over-priced
currently. There is
minimal demand while
there is enough supply.”
Pranay Vakil, Chairman,
Knight Frank (India) Pvt. Ltd.
could impact margins and, hence, liquidity.
Vakil, though, feels that the main reason for the
high cost is due to the rise in the cost of land, on
account of the high demand, and not due to the rise
in the prices of cement of steel. “The rise in the
prices of steel or cement is only marginal when
compared to the cost of the land at which it has
been acquired. For example, the cost of land in a
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AUGUST 08
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Page 6
COVER STORY
“The priority of the
government should be
to control inflation
along with high interest
rates on home loans.”
62
AUGUST 08
the coming months.
“We believe this is a
temporary
phenomenon, I think
by this year-end, the
situation will stabilise,”
he says.
Testing Times
“These are testing
times for any
Anshuman Magazine, Chairman and MD,
economy and, at the
CB Richard Ellis, South Asia same time, occasions
that serve to set
Tier-II city like Jaipur has gone up nearly 300 percent
apart the more focussed professional organisations
in the past two years. Compared to that, the rise in
from the ones that probably are still trying to get
cost of cement or steel is only marginal.”
there. Any professional organisation is quite
Many in the industry feel
circumspect and careful while
that, notwithstanding the final
predicting the future scenarios
verdict on the extent of global
and the market conditions,”
economic slowdown and
states, Anand Sundaram, COO
recovery of financial institutions,
Operations, Market City
real estate players in India may
Management Pvt. Ltd.
continue to face liquidity
Fitch Ratings also notes that
problems in the near future as
the slowdown in the sector
well due to global credit crunch
and the growing liquidity
and unfavourable stock market
concerns have forced some of
the developers to back out of
conditions for raising capital.
land deals, which had been
Slowing demand and product
agreed upon.The sharp
off-take in the residential sector
increase in construction costs –
that is still the largest
driven by increased steel and
component of the Indian real
cement costs – could also
estate sector will put pressure
on developers, especially on
impact margins – and, hence,
smaller developers. Says
liquidity.The rise in the cost of
Kapoor, “On the commercial
raw materials, such as cement
and retail properties fronts,
and steel that constitute a
price points may not hold up as
significant portion of a project’s
construction cost, combined with the fall in the endexpected and may result in pain for the developers.”
product pricing will squeeze developers’ margins.
Some, like Sushil Mohta, managing director, Merlin
“This, in turn will impact liquidity adversely, and
Group, are hopeful that the situation will stabilise in
combined with
restrained lending by
banks, is likely to
result in delayed
project take-offs,”
adds Kapoor.
Property
developers hit by
falling sales and
liquidity issues would
need to reduce list
prices to enhance
Ajoy Kapoor, MD,
demand. But, many
still seem to be
Saffron Asset Advisors
“On the property front,
price points may not
hold up as expected and
may result in pain for
the developers.”
6. cover story_Real Estate_Aug-08.qxp
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10:14 PM
holding on to the
asking price. Sales
have gone a little
slow but the scenario
is not the same
everywhere.The
negative impact will
be only in those
areas where the
supply is very high
compared to the
demand, say industry
observers. Kolkata,
for instance, has not
seen such high supply. “The prices will not come
down because construction costs have gone up and,
in last year alone, it has gone up by 20 percent,”
argues Mohta.
Volumes are expected to
further decline if the
developers persist in holding
on to their current prices –
and buyers anticipate a further
fall with current rates being
beyond reach, with affordability
having significantly declined
with rising interest rates.
Though the sector has already
factored some of the news
impact, there is scope for
further correction. However, as
quoted in Realty Times, many
developers are holding onto
prices and even operating as a
cartel in some prime pockets
like Mumbai.Therefore, say
industry observers, postponing
purchase decisions may not
really be a solution. Despite the fact that volumes
have fallen sharply, established developers are clearly
unwilling to drop prices.
Page 7
“We believe this is a
temporary phenomenon,
I think by this year-end,
the situation will
stabilise.”
Sushil Mohta, MD,
Merlin Group
The tightening bias of India’s monetary policy,
together with slowing demand and growing liquidity
concerns could have a negative impact on the credit
profiles of real estate
companies.The slowdown will
also aid the process of weeding
out some of the weaker entities
within the sector, and increasing
the relative strength of some of
the larger, more established
developers.
PE Please!
While the primary market for
real estate has virtually dried
up, private equity players are
also following a very cautious
approach. Only those
developers who have internal
cash flows and have not gone
for recent land acquisitions will
be able to sustain these tough
times. Earlier, they were seeking
mortgage against property but,
now, credit requirement has forced them to pledge
their own shares for securing mortgage, industry
officials say. Bankers say they may now get more
cautious towards
lending to real estate
developers. Also,
banks need to
maintain their reach
among their clients.
However, it is
possible that all
banks may sanction
loans to only those
developers with
whom they have had
Anand Sundaram, COO – Operations, Market a long and profitable
City Management Pvt. Ltd. relationship.
“These occasions set
apart the professional
ones from those that
probably are still trying
to get there.”
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COVER STORY
Real estate companies have many projects at
hand and the sales have been constantly dwindling.
The persistence of inflationary pressure in the
market will further affect the recovery in the real
estate sector. However, larger, established and wellcapitalised companies with access to banks/financial
institutions would remain better positioned to
manage this risk slowing demand.
Says Gotety, “We would agree to the extent that
companies, who expanded their scale of operations
through aggressive land acquisitions, etc., by overleveraging and generally accessing high cost capital,
will see some strain on their cash flows.This is also
because some of their revenues (on account of
“Banks have stopped
financing for purchase
of land but construction
finance is still
available.”
R S AJMERA, MD, AJMERA REALTY & INFRA
INDIA LTD., AND PRESIDENT, CREDAI
64
AUGUST 08
sales) would have been pushed further in the
timelines. However, companies who have operated
with restrain, got into calculated, planned expansion
programme and have a strong culture of financial
discipline are still well-positioned in this market and
should be able to tide over the current low-liquidity
phase effortlessly.”
He further stresses that banks are definitely more
selective now in lending to real estate
companies than earlier. Also, owing to
higher provisioning and capital
adequacy norms, the cost of lending to
real estate has gone up. As a result,
developers have had to consider
alternative providers of capital, such as
mezzanine and private equity investors.
There will be a slowdown as the
market goes through a correction
phase.
Says Ajmera, “Credit is still available
from banks for construction, if the
project is viable. India has a robust
financial infrastructure like any
developed economy and many
alternate means are available today to
raise project finance, such as PE Funds, Mezzanine
Finance, Realty Funds, etc.”
However, a prolonged slowdown could also
reduce the appetite of private equity. According to
Fitch Ratings, the liquidity risks on account of
significant bullet repayments falling due during the
course of 2008 remain a key challenge across the
board. With access to capital markets likely to remain
limited at the parent level by attracting private equity
participation would remain a key for managing
overall funding and liquidity requirements. But Gotety
feels that committing to purchase large land banks,
without necessarily having a financing plan in place
will be the single biggest factor that will see
developers facing
liquidity pressures.
Second, given the
present slow down in
demand, however
short-term it may be,
will cause cash flow
mismatches in
companies who will
have committed on
expenses (for
expansions,
construction,
marketing, etc.) and
would not see
matching revenues
flow in as expected.They will have to resort to some
short-term borrowings.
Says Puri, “Concerns about liquidity will continue
to plague the market since debt will not be easily
available. Real estate players had traditionally raised
money from debt funds via corporate deposits and
commercial paper. However, debt funds are currently
not eager for more exposure in real estate and are
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Page 9
continuously rolling over the debt advanced to these
players.The primary source for institutional funding
will, therefore, now is private equity.”
The road ahead
Healthy and sustained economic growth, a strong
currency, favourable demographic profile and rising
incomes certainly positions India amongst the world’s
most attractive investment destinations in the real
estate sector. However, it is companies who have
operated with restrain, got into calculated, planned
expansion programme and who have a strong
culture of financial discipline are still well positioned
in this market and should be able to tide over the
current low-liquidity phase effortlessly.
Having said that, though, the real estate sector, like
all other sectors of the economy, will be affected by
inflation, higher interests rates, an uncertain global
macro environment and consequently, reducing
demand in the medium- to long-term.The extent
that companies who expanded their scale of
operations through aggressive land acquisitions, etc.,
by over-leveraging and generally accessing high cost
capital, will see some strain on their cash flows.This
is also because some of their revenues, on account
of sales, would have been pushed further in
the timelines.
Given India’s performance in the last few years,
there are many investors who are still willing to fund
real estate development in the country.These could
take the form of private equity placements, listing on
exchanges, REITS and others. “This is especially true
for the more ‘professionally’ developed assets with a
sound understanding of the business continuum,”
states Sundaram.
(WITH INPUTS FROM RAHUL KAMAT)