Sunday, December 30, 2007

Dream homes and reality checks

It was some time in the early '70s that Minal Chinchkar's parents sat down and made a list of the family's future financial goals. The main goal was to educate the children, and to own a house. Initially, money flow was extremely tight. His father, a professor of accounts and economics working for the Maharashtra government, started out with a salary of merely a few hundred rupees. They could only dream of owning a house.

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Tuesday, December 25, 2007

QVC Realty, India’s first venture capital-funded real estate company, plans to invest Rs594-792 crore in 2008 in new and existing projects


The Bangalore-based QVC Realty, which had raised $100 million of venture capital funding in April this year from IL&FS Investment Managers Ltd (IIML), has already committed $80 million to date.

IIML is the private equity arm of Infrastructure Leasing and Financial Services Ltd. (IL&FS)


QVC currently has two township projects of about 10 million sq. ft in Gurgaon.

QVC Realty has a land pool of 300 acres.

QVC will go for a second round of funding by mid-2008 and plans to raise up to $200 million.

Prakash Gurbaxani, QVC chief executive officer, said a major part of the new funding will also come from IILM and that QVC may go to the market in order to raise funds, if the company thinks it necessary to do so.
- livemint

Related Stories:
1. First venture-funded Indian real estate company, QVC Realty of Bangalore, plans to invest Rs 2,500 cr for two townships in Gurgaon
2. QVC Realty, Bangalore, India’s first venture capital funded real estate company is looking to raise around $100-$200 million from private equity firms

Monday, December 24, 2007

Fitch Ratings affirms the National rating on Sobha Developers Limited's (Sobha) short-term debt programme at 'F1(ind)'

The rating reflects Sobha's strong market position as a premium residential property developer in South India, and its established track record in the contract construction sector.

Sobha has over a decade of experience in the residential property market in Bangalore, and recently expanded to Trissur and Pune, with plans to enter other cities such as Mysore, Chennai and Coimbatore in the next one to two years.

Sobha has land reserves of 4,012 acres as of October 2007, spread across ten cities.

Its contract construction business has been primarily driven by a long-standing association with Infosys, and the company continues to be associated with Infosys' domestic campus expansion plans.

Meanwhile, the rating is supported by relatively stable cash flows from the contractual construction business which also continues to diversify the revenue streams of the company.

Sobha's financial leverage (Debt/EBITDA) improved in FY07 following an Initial Public Offering, part of the proceeds of which have been used to repay debt and project-related expenses.

As of November 2007, Sobha had 36 ongoing real estate projects, consisting of 11.97m sq feet of saleable area. These consist of 30 residential projects (11.5m sq ft) and six commercial projects (0.4m sq ft). On the contractual construction front, Sobha has 31 projects (8.46 m sq. feet) under execution.

Nonetheless, the rating is tempered on account of Sobha's plans of extending its real estate business to new cities, and its proposed entry into the retail and hospitality segment, where it is a new entrant.

Fitch notes, however, that Sobha has contractual construction experience in the new cities where residential properties are proposed to be developed, and has some familiarity with these markets.

Although Sobha has added new clients in its contractual construction business, a large portion of contractual revenues (90% in FY07) continue to come in from Infosys, adding concentration risk to this business segment.

The higher contribution of real estate to total revenues could also make the company more vulnerable to volatility in this sector that has seen a sharp price rise over the last three years.

Moreover, land might have been acquired during the last two to three years at increased prices, which could affect the company's margins in the event of a fall in property prices.

Fitch expects free cash flows over the next few years to remain negative, as Sobha continues to expand its operations and acquire additional land. While the residential real estate projects are funded in part by customer advances, the increasing contribution of commercial projects (hotels, retail and office space) could result in a higher requirement of working capital.

These are likely to increase overall debt levels and financial leverage in the short to medium term.

Successful foray into new geographies and achieving planned growth without adversely affecting debt metrics could act as positive triggers for the rating.

However, the rating could be adversely affected by additional significant debt-led projects and a downturn in the residential real estate segment in Bangalore, from which Sobha derives a majority of its revenue.

Sobha, founded in 1995, is a leading real estate developer operating in South India.

It derives its revenues from: real estate development and sales (64% of FY07 revenues), contract construction (26% of FY07 revenues), and manufacturing activity.

In FY07, Sobha earned revenue of INR11.86bn and Net Income of INR1.62bn. The total Debt / EBIDTA was 2.3x in FY07, with total debt / equity at 0.7x.
Moneycontrol India

Monday, November 26, 2007

D.S. Kulkarni chooses Netherland's International investment company Kardan as a JV partner in DSK's 250 acre multi-services SEZ at Fursungi, in Pune!

D.S. Kulkarni Developers Ltd. (DSKDL) has signed a term sheet ('TS') with international investment company Kardan's (Kardan N. V.) subsidiary GTC Real Estate N.V. (GTC RE) to develop a phased commercial and residential project, multi service SEZ, at Fursungi, near Hadapsar in Pune, India.

The project comprises 1.5 to 2 million sq.m. of building rights on a land plot of approximately 1 million sq.m. DSK is planning to develop approximately 2/3 area for commercial development and 1/3 for residential.

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According to BNR Nieusradio, DSK and Kardan will establish a 50%-50% joint venture (JV). DSKDL will transfer to the JV a land plot of approximately 1 million sq.m. In consideration for its share in the JV, GTC RE will transfer, in installments, the current Indian Rupee equivalent of $ 95 million (EUR 64 million).

The first installment of the current Indian Rupee equivalent of $ 55 million (EUR 37 million) will be paid upon fulfillment of certain conditions precedent, including the receipt of necessary permits.

The balance of the consideration will be paid in two further equal installments based on certain milestones as agreed between DSK and Kardan.

The closing of the transaction is subject to certain conditions precedent, including the approvals of the boards of directors of both parties, due diligence and the signing of a detailed agreement.

D. S. Kulkarni Developers Limited (DSKDL) is a public company listed on the Bombay Stock Exchange and the National Stock Exchange of India Ltd. since 1993. DSKDL is active in real estate in India since 1981 and has developed over 1 million sq.m of space. DSKDL is the real estate arm of the DSK Group, which is also active in the automotive, IT, Education and Pharmaceutical sectors in India.

GTC RE, the real estate division of the Kardan Group, holds a 46.1% stake in GTC SA, one of the largest real estate developers in CEE.

GTC RE is active in Europe through GTC SA and GTC investments B.V., and in China through GTC Real Estate China Ltd.

GTC RE'S shares are listed on the Tel Aviv Stock Exchange and are included in several of its major indices.

Kardan currently holds (directly and indirectly) a 65.7% stake in GTC RE.

Monday, November 19, 2007

The UK-headquartered Knight Frank Group will launch a $250 million India-focused real estate fund

According to rediff news, the Knight Frank India offshore fund will raise investments from high net worth individuals and other investors from the UK and will have an investment threshold of $0.5 million and above.

The knight Frank fund will invest in FDI-complaint projects in India. The fund-raising is expected to begin by January 2008 and will close in a couple of months.

Rutley Capital Partners (RCP), Knight Frank's real estate private equity and investment management arm, is expected to spearhead the launch of the India fund.
Though the company is awaiting certain approvals, it has started discussions with potential investors and is putting a management team to run the fund.

Knight Frank India Executive Director Keku Cola is expected to head the new fund and the group has also roped in Pranav Datta from Mahindra Gesco to head one of its operations.

Though Knight Frank India is operating in the country for the last 12 years and has four offices in Mumbai, Gurgaon, Pune and Bangalore, the new fund will operate independently and have a separate team.

Along with its US-based real estate partner Newmark Knight Frank, the Knight Frank Group's global network encompasses more than 165 offices in 36 countries across six continents. It has over 5,300 professionals and handles some $36.1 billion worth of commercial, agricultural and residential real estate annually.

Flickr Photo: I'm Frank, Knight me.: Mr Radiohead's photos

Saturday, November 17, 2007

Ajay Piramal Group company Piramal Enterprises enters into a joint venture with Sunteck Realty and Infrastructure to develop properties in India

The joint venture (JV), called Piramal Sunteck Realty Pvt Ltd, will focus on high-end real estate projects in metros and tier-II cities and plans to invest Rs 1,000 crore in the next one year.

According to Business Standard, The Piramal Sunteck Realty Pvt. Ltd. will undertake its first project, a commercial/IT park of over a million square feet, at Sion in Mumbai.

In addition to ultra luxury residential projects, the JV will develop commercial projects, mixed-use townships and SEZs.

"Residential properties will comprise 65 per cent of our portfolio while commercial and others will constitute the rest," said Ajay Piramal, chairman, Piramal Enterprises.

Piramal said the Piramal Sunteck Realty Pvt. Ltd. would fund the projects from the promoters' equity and private equity funds.

"We will strive to leverage the synergies of both the groups to emerge as one of the top realty companies in the country in the coming years," Kamal Khetan, chairman, Sunteck Realty Ltd. said.

Recently, Kotak Realty Fund has picked up 10% stake in Mumbai-based developer Sunteck Realty for Rs 140 crore.


The Ajay Piramal Group group already has exposure in real estate through its real estate fund INDIAREIT, which has a total corpus of $470 million.

INDIAREIT (INDIAREIT Fund Advisors Private Limited) has both domestic and offshore funds.

Led by an entrepreneur personality, Mr. Ramesh Jogani, Managing Director and CEO, INDIAREIT, brings a developers perspective in choosing the projects with an inherent assurance of delivery and successful implementation of the projects.

Currently, INDIAREIT manages a corpus of about Rs 1,800 crore, which includes an offshore fund, in which 3i, a major private equity and venture capital firm, is a cornerstone investor.

Over 70 per cent has been deployed and of eight projects in progress, the fund managers have initiated the process of a partial exit in three. “Strategic exits in a Bangalore retreat comprising villas, a commercial property and a residential venture in Mumbai have raked in returns of 2-2.5 times, within a span of two years,” said Mr Jogani.

INDIAREIT plans to raise Rs 3,800 crore through domestic and offshore offerings by March 2008:


Managerial expertise in real estate domain

Entry after the project is conceived by Developer and Project involvement throughout the life cycle of the project - from land acquisition, development, marketing to sale of finished product with endeavor to safeguard the interest of the customers to the fund

Fund based capital return profit sharing rather than project base profit sharing

No control over crest and troughs but Innovative deal structuring to protect the downside

INDIAREIT' investment: Blue Ridge, Hinjewadi, Pune:

Paranjape Schemes's 138 acre, world class township, Blue Ridge at Hinjewadi in Pune, we all know, was launched on October 27, 2007 and all 2, 3, 4 and 5 bhk flats were booked by noon next day. Even the waiting list of second phase was also closed by the evening after 400 bookings. Launching of the Blue Ridge has become a historical event.

Brief Profile of Mr. Ajay Piramal:

Ajay Gopikisan Piramal (52) (B.SC.(HONS.), Master In Management Studies -Jamnalal Bajaj Institute, Advanced Management Programme, Harvard Business School, USA.) heads the Piramal Enterprises Group.

Piramal Enterprises has interests in pharmaceuticals, pharma research, glass containers for pharma, cosmetics and perfumery industry and financial services.

Ajay Piramal's presence in the pharmaceutical industry has been widely recognised. He is a member of the World Economic Forum's Governors' Forum on Healthcare.

Ajay Piramal is also the Chairman of the Drugs and Pharmaceuticals Committee of the Confederation of Indian Industries and a member of its National Committee.

Ajay Piramal was earlier a member of the Prime Minister's Council for Trade and Industry, the Prime Minister's Task Force on Pharmaceuticals and Knowledge-based Industries amongst others.

Recently, Ajay Piramal was conferred the 'Entrepreneur of the Year' Award of the UK Trade & Investments India Business Awards by Prince Andrew, Duke of York.

Indian Real Estate Joint Ventures:

Banking on the higher yields from real estate projects, a number of companies have formed joint ventures to develop properties in India.

Future Group company Kshitij had formed a JV with Singapore's Capitaland to develop malls.

US private equity funds Starwood Capital and Walton Street Capital entered into a agreement with property developer Shriram Properties to develop a Rs 5,500 crore integrated IT township and auto park in Hindustan Motor's Uttarpara plant in West Bengal.

You Don't Own Real Estate. Real Estate Owns You.

Building wealth through real estate depends on your ability to distinguish among the three types of real estate ownership – investment, speculative, and personal. If you don’t know the differences, you may soon discover that you don’t own real estate, real estate owns you.

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Tuesday, November 13, 2007

Kolte-Patil Developers, Pune, plans to raise about Rs. 275 crore from the capital market to fund its land acquisition and proposed future projects

The shares would be issued at a price band of Rs125-145. The issue would open on 19 Nov 19 and close on 22 Nov.

IPO: The public offer comprises 1.9 crore equity shares of Rs10 each that would be issued through a 100% book building process. The net issue would constitute 25% of the post issue paid-up equity capital of the company.
The shares would be issued at a price band of Rs125-145. The issue would open on 19 November and close on 22 November.

Land Acquisition: Kolte-Patil has earmarked an investment of Rs264 crore for completing the acquisition of 21.58 million sqft of land.
“We will invest Rs264 crore for completing the formalities for acquiring 21.58 million sq ft of saleable area,” Dayal said.
From the IPO proceeds, Rs176 crore would be utilised for this purpose, he said, adding the remaining would come from internal accrual. “The balance amount from the IPO will be kept for construction activities of the current and proposed projects,” he added.

ICICI Venture: The company has a 50:50 joint venture with ICICI Venture Fund Management Company for developing two integrated townships and one IT park.
ICICI Venture is our partner in developing two townships of 400 acres and 80 acres in Pune. We are also constructing an IT park with them,” the Group CEO said

Pune and Bangalore: Kolte-Patil is a developer of residential, commercial complexes, IT parks and integrated township projects. It currently has a land bank of 39.88 million sq ft area (about 755 acres) and out of this, 17.80 million sq ft of saleable area is under construction, Dayal added.
As on September 30, the company had developed about 4.01 million sq ft of saleable area.
Further, it was developing 28 projects that includes 24 in Pune and four in Bangalore.

Expansion: The company’s projects are currently limited to Pune and Bangalore only, he said, adding “we are planning to expand our activities to Chennai, Hyderabad, Nagpur, Nasik, Goa, Mysore and Aurangabad.”
The company had a total consolidated income of Rs252.44 crore in 2007 fiscal with a an adjusted profit after tax of Rs83.56 crore.

Friday, November 9, 2007

Chief Minister Vilasrao Deshmukh’s office is now trying to market Bhandara, Chandrapur, Nagpur, Raigad and Nanded as new investment destinations

With investment flow into areas other than the high-profile Mumbai-Pune corridor gaining speed and volume, the state government has now decided to shift focus on infrastructure development to smaller towns across Vidarbha, Marathwada and Konkan regions.

Arguing that such a step will bring equitable development in the state, Chief Minister Vilasrao Deshmukh said, “Unless there is uniform development in every region, the overall well-being of the state will remain a distant dream.” In fact, the CM’s office is now trying to market Bhandara, Chandrapur, Nagpur, Raigad and Nanded as the new destinations for investments.

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Earlier, the government’s insistence to market new destinations other than Mumbai-Pune had often sent investors scouting for locations in other states. Last year, when a private investor sought 500 acres of land in Mumbai for a university, the government promptly refused, sending the investor to Orissa. However, the state is insisting on preparing the grounds to draw investors to new locations within the state.

With 78 mega projects fetching an investment of Rs72,000 crore, the government is expecting direct and indirect employment generation to benefit 1,29,184 people.
In fact, Finance Minister Jayant Patil, who has been harping on improving the communication network, argued that it was “high time we focussed on smaller towns like Jalna, Nanded, Jalgaon and Latur as new destinations for investment. We can achieve this only with proper connectivity through railways and roads.”

A senior secretary in the ministry of finance said, “It is not an easy task even now to market new destinations. Whether it is a private project relating to new educational institutions or industrial units, investors still ask for land adjoining Mumbai and Pune. But we have been working hard to convince them to explore new avenues and partly succeeded in doing so.

How else does one exlain Core Minerals being ready to invest Rs2,500 crore for the alumina plant in Ratnagiri or Supreme Petrochemicals’ Rs1,115 crore at Raigad, Ispat India’s Rs2,000 crore investment in Raigad.”
: Govt looks beyond Pune: Shubhangi Khapre: DNA.

: Flickr: Photos:
1. Gurinder Singh
2. ashtarhalkar
3. photoprofiler
4. Rajendra Pradhan
5. achanak13

Tuesday, November 6, 2007

Tier II and Tier III Cities to Invest in India

Map based look at major cities to invest in India Realty

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Tuesday, October 23, 2007

Kotak Realty Fund picks up 10% stake in Mumbai-based developer Sunteck Realty for Rs 140 crore

Kotak, originally uploaded by kaushikmajumdar2006.

Kotak Alternate Opportunities India Fund:

Kotak Realty has routed the investment in Sunteck through investment fund 'Kotak Alternate Opportunities India Fund'. This would be one of the first investments from the new $400 million realty fund recently raised from domestic investors by Kotak Realty.

Equity and Convertible Preference Share:

The investment will be done through a combination of equity and convertible preference shares, which on conversion will result in a 10% stake in the company, on a fully-diluted basis.

Expansion and Diversification:

Sunteck Realty would utilise funds to expand its real estate developments within Mumbai, and diversify into other geographical locations: Goa, Pune, Nagpur, Chennai and other key tier-II cities.

Saturday, October 20, 2007

The Reserve Bank of India has recommended to the finance ministry a series of measures to curb investment flow of venture funds [FM8579-29]

These measures are expected to help check part of the huge inflows of foreign capital, particularly since the last week of July, and plug loopholes in foreign investment norms. Writes Anindita Dey in her story "RBI suggests more curbs on VC funds" on Business Standard.

Venture Finance for mature sectors like real estate:

RBI has suggested restrictions on investments by venture capital funds in sectors that are already developed and booming. RBI has said that venture funds by definition should be investing in high-risk ventures in which entrepreneurs are unable to access capital and not in mature sectors like real estate.

Isn't real estate "high-risk venture"? Do banks finance for land acquisition? Ask any builder, nobody will say Indian Real Estate is a 'mature sector'. In short, this has become a love triangle and RBI is not happy with Indian Real Estate's "affair".

Overseas borrowing without restrictions!:

RBI has suggested that FDI in real estate be brought under the approval route — such investment is currently under the automatic route.

The RBI has suggested that there should be end-use restrictions for investments by foreign venture capital funds.

It has also sought a time-frame within which companies have to allot shares to foreign entities after receiving advance payments. This is designed to curb a practice by Indian companies of using advance payments from foreign sources as loans and then returning the money.

Such transactions amount to overseas borrowings without restrictions. Overseas borrowings are currently locked in for a minimum of three years and the interest paid is capped at 150 basis points above the benchmark London Interbank Offered Rate (Libor) for borrowings of three years and above; and 250 basis points above Libor for borrowings of five years and more.

Thanks to sub-prime crisis, at least Indian real estate investors have become less critical of the RIB's policies.