real estate weekly news letter 1-7 december 2014

Real Estate News Letter

1st December 7th December, 2014

For private circulation only

CONTENTS

2. Interest Rates

3. Infrastructure

4. Industry News

5. Private Equity News

6. Regulatory Buzz

8. Land

9. Residential

10. Commercial/ Retail

11. Township

12. SEZ

13. Hospitality

14. Input Cost

7. Public Markets

1. Snapshot

Snapshot

Source : NSE

Source : NSE

Note : Data indicates inflation over previous years month Source : Ministry of Commerce and Industry

7.7%

7.0%

8.6%

6.8%6.8%

3.9%

2.2%

1.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Mar/14 Apr/14 May/14 Jun/14 Jul/14 Aug/14 Sep/14 Oct/14

Per cent

WPI-inflation data (primary articles)

-0.4-0.4

0.20.3

-0.3

-0.6

0.1

1.2

0.2

1.27

-1.0

0.0

1.0

2.0

01/Dec 02/Dec 03/Dec 04/Dec 05/Dec

per centTrends in Nifty and CNX realty index

Nifty CNX REALTY

66

47

36

48

41 42 43

34

44

34

20

30

40

50

60

70

01/Dec 02/Dec 03/Dec 04/Dec 05/Dec

Rs billionTrends of FII in equity markets

Buy sell

rates are a few more months away and the

government's efforts to boost infrastructure would

certainly make for a compelling case for a rate cut in

RBI's next policy announcement in February next

year.

J P Gupta, vice-president of Credai-NCR-Haryana

said: We have full faith in the new government and the RBI, but keeping interest rates unchanged is

disappointing. With inflation largely under control,

cheaper housing loans were the need of the

hour.They not only fulfil aspirations, they also have a

ripple effect on growth. Housing affects demand in

several other industries and would have boosted the

overall sentiments in the MARKET.

The Times of India,06 December,2014,New Delhi

Interest Rates

RBI plays safe on credit policy

Experts say that the RBI's decision not to cut policy

rates was expected, although it disappointed

stakeholders of the sector. The RBI left repo rate

unchanged at 8% and reverse repo rate at 7% in its

bimonthly review of credit policy. The CRR, too,

remains the same at 4%. With moderation of inflation

there was great expectation in the industry that the

RBI would cut interest rates in its bimonthly monetary

policy, Sachin Sandhir, global MD (Emerging

Business) and MD (South Asia) of RICS, said. A rate

cut at this stage would have galvanized MARKET

senti ment and helped in growth he said.

Rate cut will help companies with huge debt on their

books.This would have helped companies in the real

estate space, too, which are currently reeling under

high levels of debt. However, consultants say that

RBI's decision to not cut key poli cy rates comes

along expected lines, as recent economic data

suggests that the much anticipated headroom for

easing policy stance is still some way away.

While growth rate of the economy has slowed, the

apex bank continues to be cautious in its fight against

inflation and deepening FINANCIAL stress due to

banks' non performing assets. As the RBI governor

already said in his previous monetary policy

announcement that he would look at base effect while

considering rate cut, the move is well intentioned.

Driven by softening of fuel and food prices, the

wholesale price inflation dropped for the fifth

consecutive month--to 1.77% in October--its slowest

since October 2009. Retail inflation at 5.52% has

been the slowest since January 2012. Prime concerns

like food inflation fell to 2.7% in October, from 9.6% in

May--its lowest level since February 2012.

Interestingly, the RBI was hoping to contain retail

inflation at 8% by January 2015 and to 6% in January

2016.

DTZ, a consultancy firm, said it hoped that the central

bank would soon start cutting interest rates to bring

down the cost of money, so that INVESTMENT

becomes more attractive. It said the cut in interest

(Janakpuri to Botanical Garden). Without this depot,

the line cannot be commissioned, admitted the

official. However, around 1 lakh sqm of DDA land is

yet to be cleared for the construction.

"The land has been officially handed over by DDA but

residents of Shram Vihar, which falls in that part,

have gone to court on the acquisition. DMRC hasn't

been able to access the area as a result," said the

official.

Similarly, on paper, 108 plots in Trilokpuri have been

handed over to Delhi Metro, but in reality, the land is

yet to be cleared for construction work.

Government sources said that after the letter was

received, two of the delayed pockets have been

handed over to DMRC. "The depot at Vinod Nagar

was stuck as the permission for tree-cutting was

awaited. This has now been given to DMRC," said the

source. Also, a part of the land which falls between

the Lajpat Nagar and IP extension stations has been

handed over physically to Delhi Metro.


CCEA clears expansion of highway

projects

The Cabinet Committee on Economic Affairs on

Tuesday approved the four-laning of three national

highway sections Lucknow to Sultanpur, Nagina to Kashipur and Singhara to Binjabahal. The projects

will be carried out in a build-operate-transfer mode,

on a design, build, finance, operate and transfer

basis. The Lucknow to Sultanpur section on the

National Highway 56 in Uttar Pradesh will cost Rs.

1,352 crore including the cost of land acquisition and

the total length of the road will be 126 kms. The

Nagina to Kashipur section on National Highway 74

between Uttarakhand to Uttar Pradesh will cost Rs.

1,471.40 crore for a length of 99 km. The Singhara to

Binjabahal section on National Highway 6 in Odisha

will cost Rs. 1,077.11 crore for the 104 km strech.

The Hindu Business Line,03 December,2014,New Delhi

Infrastructure

Land tangle may delay Delhi Metro

Phase-III

Delay in acquisition of land is putting a question mark

on the completion of the Delhi Metro's Phase-III work.

This is what DMRC boss Mangu Singh had written to

the state chief secretary earlier this month. In the letter,

Singh has clearly warned that if the identified pockets

of land are not handed over immediately,

commissioning of Phase-III could be impacted, and not

completed on time.

The letter, a copy of which is with TOI, is candid about

the impact of non-availability of these pockets of land.

The total area is a measly 307m, said a Delhi

government official. The letter also asks chief secretary

D M Spolia to step in and "avoid the situation". "You

will appreciate that DMRC planned the work to

accommodate the delay in handing over of the land at

the above locations but any further delay now will

affect the completion of Phase-III," says the letter by

the Delhi Metro chief. The letter goes on to say: "The

line cannot be commissioned in time unless the land

pockets are handed over immediately." The letter was

written on November 11. A copy of the letter has also

been sent to lieutenant governor Najeeb Jung.

The pockets of land identified affect line 7 (Mukundpur-

Shiv Vihar) mostly, added the official. "The entire line

is 56.8km long. But the line goes through highly

congested areas, which are slowly being vacated for

the Delhi Metro work," said the government official.

The Mukundpur to Mayapuri stretch, which measures

12.5km is part of the list, as is the Mayapuri-Lajpat

Nagar stretch. Both stretches have land areas,

measuring between 46m and 84m, which is holding up

work. While one 84m stretch consisting of a slum has

held up the construction of the viaduct in Punjabi Bagh,

another 83m stretchagain a slumhas held up work on the Naraina viaduct. The Punjabi Bagh station is

also incomplete because of non-availability of land.

The biggest hold-up, however, is the depot scheduled

to come up in Kalindi Kunj. Here, 2.15 lakh sqm of

land, belonging to the DDA and UP irrigation

department, is set to house the depot for line 8

for land-owners. The Governments role in land acquisition has been curtailed as far as private

enterprises are concerned. These enterprises can

now enter into their own negotiations and arrive at the

price for acquisition, he added. The Bill also requires a Social Impact Assessment, which will outline how

the acquiring parties intend to use the land, and how

the original inhabitants or owners will be rehabilitated.

Ajay Aggarwal, MD, Microtek Infrastructure, said:

The Bill may convey the impression of welfare of farmers or land-owners on the surface, but it will harm

their prospects in future, as industry and the real-

estate sector will avoid investing in areas that have a

history of land disputes.

With the law being enacted, the real estate sector has

no option but to face the repercussions. Project costs

will spiral upwards and implementation will be

delayed. J. Rao, Chairman, Value and Budget

Housing Corporation Pvt Ltd, says the law will have

an overall negative impact on housing for the mass

market segments, including the middle-income group

and the poor.

If the purchase price of land has to be over two- to

four-times the prevailing market price, depending on

the location, just one transaction will drive up land

costs and make projects unviable. Anuj Nangpal,

Managing Director, Investment Services, DTZ India,

said: The Bill walks a tightrope. While an enhanced compensation package ensures that land-owners get

their due, the same would make a project financially

unviable.

Since developers will want to preserve their profits,

there could be more joint development projects

happening, wherein the profits as well as the

resources and risks will be shared.


Property sizes in Mumbai region

falling since 2012: Survey

Sizes of homes across the Mumbai metropolitan

Industry News

Land Bill: Real estate project cost

may shoot up

The Land Bill, passed in the Lok Sabha on Thursday,

may ensure transparency and fair compensation for

farmers, but the slowdown-hit real estate sector feels it

will add to project costs and lead to execution delays.

The Right to Fair Compensation and Transparency in

Land Acquisition, Rehabilitation and Resettlement Bill,

2012 replaces a 120-year-old law.

The highlights of the Bill include a transparent land

acquisition strategy, compensation and rehabilitation

as a matter of right. The industry notes that the cost of

infrastructure projects is likely to go up by almost 3 per

cent and companies will tend to avoid bigger

infrastructure projects because of clauses such as

time-bound execution. Niranjan Hiranandani, Chairman, Housing and Real Estate Committee of the

Federation of Indian Chambers of Commerce and

Industry, and the Housing Committee of the Indian

Merchants Association, said a new law was definitely

needed to replace the existing archaic law. But the

provisions of the proposed law will hike up land costs

multi fold and make most infrastructure projects and

affordable housing projects unviable.

In affordable housing projects land costs can be about

30-40 per cent of the project cost. But if this is to go up

four times or even double, affordable housing will

simply not be possible. Also, the social provisions like

compensating people who have worked on the land,

how are the beneficiaries to be identified? How will the

governments implement this provision especially if the

law is the take effect retrospectively, he asked.

Sanjay Dutt, Executive MD, South Asia, Cushman &

Wakefield, said: The cost of land acquisition will surely go up for all projects, irrespective of them being

Government or private or public-private-partnerships

(PPP). Further, the clause of mandatory consent of 80

per cent of owners for private projects and consent of

70 per cent for PPP projects will delay the process of

acquisition and the projects.

Mayank Saksena, Managing Director - Land Services,

Jones Lang LaSalle India, said the Bill was beneficial

the Mumbai metropolitan region, said CM Devendra

Fadnavis on Monday.

The F E Dinshaw Trust (controlled by Nusli Wadia), A

H Wadia Trust (whose managing trustee is Muncher

Cama of Mumbai Samachar), the Byramjee

Jeejeebhoy family, Veekayal Property and

Mohammed Yusuf Khot trust are the five owners

whose properties are encroached. A Byramjee

Jeejeebhoy spokesperson told TOI that none of its

land is encroached upon.

The announcements came after Fadnavis held a

review meeting on housing at the SRA HQ in Bandra

(East), only the second CM after Sushilkumar Shinde

to do so in a decade.

The F E Dinshaw Trust's encroached land is in

Goregaon, Byramjee Jeejeebhoy sprawl in Malad, A

H Wadia land in Kurla, Veekayal properties in

Kandivli-Borivli-Dahisar belt and Mohammed Yusuf

Khot land in Bhandup. Fadnavis said reasonable time

will be given to the land-owners to initiate the

rehabilitation schemes before the government moves

in. The SRA policy allows 70% of the eligible slum

dwellers to select a builder to provide each family a

269sq ft new house free of cost. As compensation,

the builder receives rights to build larger residences

or commercial space on a portion of the plot for sale

in the open market.

Deshmukh said if the government is forced to acquire

these lands, slum dwellers will be asked to form their

own societies and select a developer as done in

regular SRA schemes across the city. The 600 acres

of the Centre's salt department land the state

government has zeroed in on is located in Wadala,

Kanjurmarg and Vikhroli. Fadnavis said this sprawl

will help increase the public housing stock.

The government also wants to kickstart the much-

delayed Dharavi redevelopment project. "Dharavi

slum is not just residential, but has a large industry

within it. We will have to take into account all these

factors," said Fadnavis. The government is thinking of

giving larger 400sq ft free houses in Dharavi if the

slum dwellers pay the construction cost for 100sq ft,

Industry News

region (MMR) are shrinking over the past two years as

real estate players are developing small-sized

properties keeping in mind the price factor.

The home size has decreased by as much as eight

per cent since 2012 and the trend is likely to continue

as the population grows and property prices increase,

property portal Commonfloor said in its study. "...since

2012, it may be found that property sizes have

constantly decreased, while prices have almost

remained the same or marginally increased," it said.

The trend started as early as 2009 but became

increasingly visible over the last two years.

"One of the main reasons for increasing number of

small-sized properties is the affordability aspect. Prices

in Mumbai have seen a meteoric rise over the last few

years. Yet every individual aspires to own a home

there. Keeping in mind the affordability aspect of

buyers, realty players have started launching

properties that are smaller in size. Buyers don't mind compromising on the size of the properties if they fall

within budget and are in the city limits, the survey said.

"Secondly, the MMR is witnessing a rapid increase in

population over the last few decades. Mumbai is

currently the seventh most populous city in the world

and in the league of Tokyo and Delhi. An increasing

population raises concerns for available space. This

may be considered a key contributor to the reducing

property sizes," it said.

The Economic Times,02 December,2014,Mumbai

State wants citys top five land owners to house slumdwellers

The state government will acquire about 2,000 acres

(equivalent to around 80 Azad Maidans) of encroached

land belonging to five of Mumbai's biggest private land

owners if they fail to come forward to rehabilitate

slumdwellers under the Slum Rehabilitation Authority

(SRA) scheme. In other decisions that will boost

affordable housing, the government plans to free up

600 acres of salt pan lands belonging to the Centre in

the eastern suburbs and the SRA will pay Rs 500 crore

to the state housing authority (Mhada) to buy land in

Anshuman Magazine, Chairman & MD, CBRE South

Asia, said, For the real estate industry, the move may be seen as a lost opportunity. A rate cut at this

juncture could have been the trigger for housing

sales.

Rohit Raj Modi, President, CREDAI NCR, said, "A

rate cut would have been a boon for the sector at a

time when it is coming out of a not-so-good festive

seasons. A mere reformatory announcements from

the Government would not do much if it is not

supported by monetary liberty. We expect the RBI

would consider this while its next review and would

lower key rates to boost real estate."

Samantak Das- Rs.Chief Economist & Director Research, Knight Frank India, said, With the recent sales in the real estate sector remaining subdued

across the country, stakeholders were hoping for a

rate cut this time to initiate tractions in the market.

However, given the current scenario of high optimism

along with economic fundamentals falling in place, the

RBI may look at testing the sustainability of the

economic progress for one more quarter.

The Hindu Business Line,03 December,2014, Mumbai

How Gurgaon was built, licence by

licence, govt by govt

Gurgaon is the story of a new city. Land is its

centrepiece, and also a source of controversy. Since

1981, seven Haryana governments have approved

1,003 licences for land plots in Gurgaon. The

graphics below show how much each government

has allotted or approved to which developer in the last

34 years. It shows that 55% of land allotments in

Gurgaon were made in Bhupinder Singh Hoodas nine-year tenure; that DLF Ltd received most of its

allotments under Congress rule; that builders were

actively acquiring land even after the 2008 credit

crisis left them gasping for cash to finish projects; that

every large developer has its pocket of presence.

BY GOVERNMENTS

From 1982 to 2005, five state governments gave

Industry News

he added. In Mumbai, there are 12 lakh slums

comprising 46% of Greater Mumbai's over 12 million

population.

The CM also called for relaxation of the 500metre

construction ban imposed by the defence ministry in

Mumbai. "This rule applies even in places where there

are no vital installations. Many projects are stuck," he

said, adding that vital installations would be

sacrosanct. The government will issue show cause

notices to builders who have not started work on three

large SRA projects in Kandivli, Sion and Chembur.

Under Section 3K of the Slum Act, it is not mandatory

for the developer to obtain 70% consent in the initial

stages. It empowers the government to direct the SRA

to hand over a large slum cluster for redevelopment to

a builder without inviting tenders or allowing competing

builders to participate in the project.

The CM said slum rehab schemes will be expedited

on 117 BMC-owned plots and 96 Mhada plots, which

are currently encroached.

The Times of India,02 December,2014,Mumbai

RBI Monetary Policy: Realty sector

says it is a lost opportunity

Real estate sector player and industry watchers say an

interest rate cut could have set a trigger for housing

sales. The Reserve Bank of India on Tuesday left its

benchmark rate unchanged saying it still needs more

proof that inflation is under control before it can start

lowering lending rates. Pradeep Jain, Chairman,

Parsvnath Developers, said, RBI is only looking towards taming inflation. It is overlooking the pressure

being borne by key sectors. The recent fall in

manufacturing growth is a live example.

The overall GDP growth forecast has also been cut by

many experts. The RBI should understand that curbing

inflation at the cost of growth is not a wise step. It

should stand up and cut the rates in its next review to

pump funds into the economy and the real estate

sector in particular which is one of the major

contributors to the GDP."

legal rights to the property dealers. DDA had

introduced a clause in its latest housing scheme

preventing successful applicants from selling their

flats for five years, by denying them ownership rights

for that period.

Ganesh Murthy (name changed) is disappointed with

the state of his flat in Dwarka's Sector 29 and is now

considering offers that have already come from a few

property dealers. "I didn't know how small the flat 340

square feet LIG flat was going to be but, as soon as I

saw it, I knew moving here was out of the question.

Three property dealers have approached me which

I'm now considering," Murthy said. A property dealer

has approached him with an offer for Rs 6 lakh. "I

was told that the person who got the flat opposite

mine wants to buy my flat and have two flats, which

would be more convenient for him. So if I get a good

price I'm ready to sign the GPA."

Property dealers say the 2,300 EWS flats in Dwarka,

despite their small size, are attracting premiums of Rs

8 lakh to Rs 15 lakh. Similar prices are being offered

for LIG flats in Rohini's sectors 34 and 35. Best deals

are in store for flats in the best locations, like

Mukherjee Nagar. "For a two-bedroom flat in

Mukherjee Nagar, which was offered for Rs 70 lakh in

this scheme, a seller could easily fetch Rs 30-40 lakh

if he transfers his legal rights to the allottee and sells

it at the end of five years," a property dealer added.

Officials from DDA advise people against making

such deals. "DDA will hand over possession only to

the original allottees after the five-year period. If any

transaction takes place during the intervening time

that will be illegal," Neemo Dhar, spokesperson, DDA,

said.


Expressgrowth - Realty

development along NH-8

NH-8 has been playing a crucial role in facilitating the

growth of commercial and residential INVESTMENTS

along its entire length. Of special interest is the

Industry News

7,400 acres of land in Gurgaon (the first licence issued

in 1981, for 161 acres, has been included in the

calculation). In the next nine years, the Bhupinder

Singh Hooda-led Congress government gave another

9,400 acres, or 55% of all land given to builders in

Gurgaon.

BY TOP DEVELOPERS

In all, licences amounting to 16,795 acres have been

given to 344 developers. Just three developers

account for 38% of the area: DLF (20.5%), Ansals

(9.2%) and Unitech (8.7%). They were the first

entrants, but now they rub fences with many

developers. The presence of other developers has

increased principally during the tenure of Bhupinder

Singh Hooda, even as the cash-strapped top three

pulled back in their land purchases. Further, each of

the top three has tried to build a pocket of presence:

DLF in north-east and east Gurgaon, Ansals in north-

west and Unitech in the centre.

BY YEAR

The maximum allotment happened in 2008, the year in

which the world economy was rocked by a credit crisis.

In India, the real estate sector, where a bubble had

been building, was the worst hit. Starved of cash and

facing tame buyer interest, builders were saddled with

unfinished projects. Yet, in Gurgaon, the state

government kept issuing licences and builders kept

buying: as much as 6,380 acres were given since

2008, or 38% of all land allotted in Gurgaon.

Live Mint,03 December,2014,New Delhi

Takers for DDA flats despite 5-year

rule

Despite DDA's best efforts to keep speculators out of

their latest housing scheme, successful applicants are

receiving offers for their flats based on a General-

Power-of-Attorney (GPA) transfer of rights. Some

allottees who say they are unhappy with the size or

location of their flats are now planning to dispose them

of.

Based on location and size of the flat, allottees are

getting offers from Rs 5 lakh to Rs 40 lakh to transfer

Industry News

stretch that lies in the NCR, developing at a rapid clip

Real estate development along National Highway 8

has seen remarkable progress over the past few

months. A report estimates that there would be JOB

OPPORTUNITIES for 22 lakh people by 2017 in this

zone. Realty projects under construction along NH-8

cover a stretch of 15km through Haryana and present

multiple options to investors in search of early-bird

INVESTMENT opportunities. Residential property

prices on Southern Peripheral Road (SPR) connecting

to NH-8 have seen rapid appreciation over the past

few months. This location holds great INVESTMENT

potential due to the fast connectivity that NH-8

provides to Manesar and Dwarka.

As prices soar in new areas of Gurgaon like Dwarka

Expressway, Golf Course Extension Road, and Main

Gurgaon Sohna Road, buyers are looking at

alternative locations. The INVESTMENT regions and

areas along NH-8 being developed under the DMIC

(Delhi-Mumbai Industrial Corridor) include Manesar-

Bawal Investment Region (MBIR) in Haryana and

Khushkhera-GurgaonNeemrana Investment Region

(KGNIR) in Rajasthan.

The forthcoming 1,483km-long DMIC coming up along

NH-8, where multiple SEZs have been approved by

the government, is attracting FDI in real estate, IT-

ITeS, automobile, glass technology, etc, from Japan,

the US, Korea, China, etc. Conceived as a global

manufacturing and TRADING hub, the project is

expected to double employment potential, triple

industrial output and quadruple exports from the region

in five years.

Honda Motors, Asahi, Saint Gobain, Musasi, etc, have

already set up some of the largest car and glass plants

of the world along this corridor. American companies

like Becton, Dickinson and Company, Hollisters, etc,

also have plans to mark their presence and INVEST in

this zone. Today, the residential subsector is growing

rapidly and the urban population of India is expected to

touch 590 million by 2030. Therefore, in order to meet

the future demand, regional players are expanding to

achieve a pan-India presence.


entities during the period, indicating perhaps a

significant amount of investment in greenfield and

brownfield development, CBRE said.

The commercial office segment, meanwhile,

attracted more than 20 per cent of this total

investment amount during the period in review.

Mumbai attracted the highest investments, followed

by Delhi and Bangalore, the report shows. In terms of

total real estate investments made in Mumbai and

Delhi during the period, land and development stage

transactions spelt nearly 70 per cent and more than

60 per cent of total realty investments in the cities,

respectively.

In case of Bangalore, more than 50 per cent of total

investments were attracted by the commercial office

segment. According to the study, office space

transactions increased by about 20 per cent year-on-

year in the first nine months, with more large-scale

space leases and higher lease volumes on an

average over the previous year across leading cities

in India. Investors were keen to invest in completed

and well-leased core commercial office assets and IT

parks across key cities, it said.

"While investor interest in India and southeast Asia

steadily increased over the first nine months of the

year, this interest is yet to translate into an increase

in investment turnover. India, recorded a sizable

uptick in business confidence following the coming of

a new government earlier in the year," it said.


Dutch fund APG to pump more

money into Indian infra sector

Global institutional investor APG Asset Management

NV is keen to increase its allocation to infrastructure

in India, but prefers to team up with other investors in

club deals, or enter into joint ventures. With pension

assets of close to $490 billion under management,

the Dutch fund manager sees a host of opportunities

in the Indian infrastructure sector. Hans-Martin Aerts,

Head of Infrastructure-Asia, APG, insists the outlook

Private Equity News

PE Funds to put Rs 450 crore into

Lotus Greens Noida project

Private equity funds Clearwater Capital and SSG

Capital Management are investing Rs 450 crore in the

sports city township of Noida-based builder Lotus

Greens, two people aware of developments said. Lotus

Greens is acquiring over 300 acres in Noida's Sector

150 for around Rs 2,500 crore and it will use the Rs

450 crore infusion to make the first tranche of payment

to Noida Authority next week for 230 acre, these

people said on condition of anonymity.

The developer will issue non-convertible debentures

(NCD) to the non-banking financial company (NBFC)

of Clearwater Capital and to SSG Capital

Management, one of these people said. An email sent

to Pramendra Sahel, vice-chairman at Lotus Greens,

did not elicit any response. SSG's general counsel

Richard Yee declined comment on an email query.

Clearwater Capital did not respond to an email

questionnaire. The Noida Authority had awarded the

bid to build the sports city to Lotus Greens in July. The

over low-density project will offer residential as well as

recreational facilities, including a nine-hole golf course.

The Economic Times,05 December,2014,New Delhi

Indian realty market sees $4.5 bn

investment during January-

September: CBRE

Country's real estate market attracted investments

worth nearly $4.5 billion during the January-September

period this year, with Mumbai receiving a significant

part of it, says a report. According to property

consultant CBRE, institutional investors pumped in

$4.5 billion into India's realty sector during the first nine

months of 2014, an indication of improved investor

sentiment after the formation of a new government at

the Centre.

Out of the total investments, land and development

stage transactions attracted the highest quantum of

nearly 60 per cent from domestic as well as foreign

Private Equity News

for Indian infrastructure has improved significantly after

the change in political power in May.

The new Government has a much better power base than its predecessors, and is committed to implement

key reforms aimed at further development and

economic growth. The infrastructure sector is expected

to be one of the key beneficiaries of these reforms, Aerts told Business Line.

Direct investments

APG has been investing in India for several years. In

2012, the company had entered into a deal with the

property development subsidiary of the Godrej Group.

The same year, it had formed a $300-million fund with

investment firm, The Xander Group, to buy leased

office assets in India. The size of the fund with Xander

could be increased to $500 million, with investment in

Mumbai, Bangalore, Chennai, Delhi, Hyderabad and

Pune.

APG has also taken a 13 per cent stake in Lemon Tree

Hotels, a Delhi-based group, and set up the Fleur

Hotels joint venture. Warburg Pincus, a global private

equity investment institution, has a 25 per cent holding

in the hotel chain. Over time, we have made investments (in India) across various sectors. We

started investing through funds, as this allowed us to

get familiar with the Indian infrastructure market. We

are now trying to capitalise on our experience, by

moving away from traditional fund investments towards

direct and co-investments, said Aerts.

Asia focus

In what is termed its largest commitment to the Indian

infrastructure sector, APG teamed up with Piramal

Enterprises in August, to invest $1 billion in

infrastructure projects. APG had announced in May

that it would invest $650 million for a majority stake in

Shanghai e-Shang Warehousing Services, to develop

logistic properties in China, with Warburg Pincus.

Other than India, we consider countries like Indonesia and the Philippines as an attractive investment

destination.

The Hindu Business Line,05 Dec.,2014,Mumbai

There is also likely be an impact on group housing

plots, where ground coverage that was previously

33.3 per cent will now be 50 per cent. This will allow

for bigger apartments to be built, though FAR here

was already 200 under the master plan. No height

restrictions were applicable for group housing plots,

and hence there is no issue for such developments

with regards to height provisions.

A sizeable uptick in the stock prices of listed players

which are likely to be holding prime lands in Delhi notably DLF, Unitech and Anant Raj has been seen.

Better valuation for such land on account of increased FAR for residential plotted developments is

the likely factor behind this increase in their

respective stocks. The impact may be seen in the

short-term, but there should be more going forward

when the mid-term review of the master plan 2021 is

completed and the changes notified by the end of the

year, added Puri.

Experts are, however, keeping their fingers crossed

about the exact impact of this move on the property

prices as it will be clear once the issues of change in

density, number of dwelling units and height are

addressed in detail.

Though no clarity has been given so far on an

increase in the dwelling units allowed on the larger

plots, there is a provision in the draft Delhi Master

Plan 2021 which allows for an increase in the number

of dwelling units. Under this provision, the cost of a

concurrent augmentation of associated civic

infrastructure has to be borne by the developer and

paid to the authority. This provision in the draft master plan can be used to increase the number of

dwelling units, added Puri. Mohit Goel, CEO, Omaxe Limited said, The increase in FAR will encourage vertical and new development

in Delhi. It is a good move by the government to allow

more space for development. This will help stem the

rise in price of homes in Delhi and give a boost to

affordable housing.

The Tribune,01 December,2014,New Delhi

Regulatory Buzz

High hopes over higher FAR

The Central Governments approval for the proposal to increase the FAR in Delhi state recently has got a

positive response from the industry players. The

increase in FAR is for residential plots which are 750

square meters or higher, wherein the FAR has been

increased to 200 from 150. For plots bigger than 1,000

square meters, the FAR has gone up to 200 from 120

and ground coverage has been increased from 40 per

cent to 50 per cent. This move will result in bigger

apartments and with no change in density norms, ticket-sizes may rise as well.

Rohit Raj Modi, President, Credai NCR, said, On behalf of the industry, we welcome this move as it will

address the rising problem of providing

accommodation to all and in realising the dream of

Housing for all by 2022. This extra FAR would definitely help developers with extra space and thus

would help match the demand and supply gap in

Delhi.

Commenting on the impact of this move Anuj Puri,

Chairman & Country Head, JLL India, said, If used judiciously, this provision in conjunction with the

increased FAR can be utilised for increasing the

housing stock on residential plots going forward. Only

then will some movement towards creating more

houses and an associated reduction in prices will be

likely. With height restrictions for individual residential

plots not increased from the current 17.5 meters along

with stilt parking provisions, developments are likely to

remain of same height.

Calling it an opportunity for more vertical growth Vinay

Jain CMD AVJ Group, We appreciate the decision to increase the FAR, though it will only have figurative

difference on the real estate market. FAR has been

increased from 150 per cent to 200 per cent on 750-

1,000 sq. m plots, it has been raised from 120 per cent

to 200 per cent for plots of 1,000 sq. m and above. The

additional FAR allowance will be valuable for

redevelopment in projects. It will positively bring in

more supply in the market and create outlook for more

affordable housing, this is also an opportunity for

developers to grow vertical.

Easy exit norms for foreign

investors in construction sector

It has reduced minimum built-up area as well as

capital requirement and eased the exit norms. To help

attract foreign funds in construction of townships,

hospitals and hotels, the government on Wednesday

relaxed the FDI policy for this sector by easing exit

norms and reducing built-up area and capital needs.

The revised norms relating to construction

development sector has been notified by the

Department of Industrial Policy and Promotion

(DIPP). India allows 100 per cent FDI in the sector

through the automatic route.

The new policy has done away with the three-year

lock-in period for repatriation of investment. The investor will be permitted to exit on completion of the

project or after development of trunk infrastructure,

that is, roads, water supply, street lighting, drainage

and sewerage, a DIPP circular said. It is to be noted here, the official statement issued after the October

29 Cabinet meeting had mentioned that the investor

can exit on completion of the project or after three years from the date of final investment, subject to development of trunk infrastructure.

Under the new policy, the minimum floor area

requirement has been reduced to 20,000 square

metres from 50,000 square metres earlier. It also

brought down the minimum capital requirement to $5

million from $10 million. In case of development of

serviced plots, the condition of minimum land of 10

hectares has been completely removed. Reacting on

the new policy, Chairman & Country Head of JLL

India Anuj Puri said: With the FDI policy now providing investors a much more attractive exit

option...FII interest in the Indian construction sector is

bound to increase.

DLFs Executive Director (Finance) said the easing of exit norms would give flexibility to investors. Smaller projects can now attract FDI with reduction in

minimum built-up area requirement, he added. Although 100 per cent foreign direct investment was

allowed in townships, housing and built-up

Regulatory Buzz

SEBI permits 123 alternative

investment funds to operate in India

Market regulator SEBI has allowed as many as 123

entities to set up AIFs newly created class of pooled-in investment vehicles for real estate, private equity

and hedge funds in less than two-and-half years. The 123 Alternative Investment Funds (AIFs) have been

registered with the Securities and Exchange Board of

India (SEBI) since July 2012.

Of these, around 34 entities got the market regulators approval to operate so far this year (January-

November), 67 in 2013 and the remaining 22 in 2011.

The AIFs that have registered with SEBI in November

are Religare Dynamic Trust, Indus Way Emerging

Market Fund and Carpediem Capital Partners Fund

and those registered in October are Singular India

Opportunities Trust.

The regulator had notified in May 2012, the guidelines

for this new class of market intermediaries. AIFs are

basically funds established or incorporated in India for

the purpose of pooling in capital from Indian and

foreign investors for investing as per a pre-decided

policy. Under SEBI guidelines, AIFs can operate

broadly in three categories. The SEBI rules apply to all

AIFs, including those operating as private equity funds,

real estate funds and hedge funds, among others.

The Category-I AIFs are those funds that get

incentives from the government, SEBI or other

regulators and include Social Venture Funds,

Infrastructure Funds, Venture Capital Funds and SME

Funds. The Category-III, AIFs are those trading with a

view to making short-term returns and it includes

hedge funds, among others.he Category-II AIFs can

invest anywhere in any combination but are prohibited

from raising debt, except for meeting their day-to-day

operational requirements. These AIFs include private

equity funds, debt funds or fund of funds, as also all

others falling outside the ambit of above two other

categories.


Regulatory Buzz

infrastructure and construction developments since

2005, the government had imposed certain conditions.

The government expects the new measures would

result in enhanced inflows into the construction

development sector. The measures are also likely to

result in creation of much needed low cost affordable

housing in the country and development of smart

cities. Between April, 2000, and August, 2014, the

construction sector received FDI worth $23.75 billion or

10 per cent of the total FDI attracted by India during

the period. For affordable homes, the government has

exempted the conditions of minimum floor area and

capital requirement if an investee/joint venture

companies commit at least 30 per cent of the total

project cost for low-cost housing.

The Hindu,04 December,2014,Mumbai

Ashiana Homes-Landcraft to invest

Rs 650 crore on housing project

Realty firms Ashiana Homes and Landcraft Projects

will jointly invest about Rs 650 crore over the next five

years to develop a housing project in Gurgaon.

Ashiana Homes and Landcraft have formed an equal

joint venture to develop the 14-acre housing project,

comprising 750 apartments, located on Dwarka

Expressway.

To fund this project, the JV firm Ashiana Landcraft

Realty has already raised Rs 180 crore from Pirmal

Group private equity firm Indiareit and financial

institution India Infoline."We are coming up with a

premium housing project on Dwarka Expressway. The

construction of first phase comprising 450 units have

started and the second phase would be launched next

year," Ashiana Homes Director Rohit Raj Modi said.

Asked about investment, he said the total project cost

would be about Rs 650 crore including investment on

land, which the joint venture firm had bought from

another realty firm Vatika group.

"We have already raised Rs 180 crore for this project

in a structured deal. The remaining investment would

be funded from advances against sales and

construction financing from HDFC Ltd," Modi said.

The JV is expecting a sales realisation of about Rs

1,000 crore from this project 'Center Court' over the

next five years, he added. The first phase would be

delivered by mid-2017 and the entire project would get

completed by 2019. At present, the company is selling

the flats at a basic selling price of Rs 6,500 per sq ft.

Delhi-based Ashiana Homes is developing projects in

the national capital region, Jaipur and Bhubaneshwar.

Ghaziabad- based Landcraft Projects is building a 90-

acre township and a group housing projects in the

city.


Public Markets

Realty firm Puravankara enters JV

for housing project in Pune

Realty firm Puravankara Projects has entered into a

joint venture for developing a 30-acre, Rs 500 crore

housing project in Pune. Bangalore-based

Puravankara today said it formed JV with the land

owners, Pune-based Oxford Group and Mumbai-

based EKTA World, and the deal was facilitated by

the property consultant JLL India. "We have entered

into joint venture for the development of 30 acres of

prime residential land in Mundhwa, east Pune,"

Puravankara Projects Joint Managing Director Ashish

Puravankara told PTI.

"We will be developing about 1,600 housing units

covering 2 million sq ft area. The project is likely to be

launched by March next year after getting necessary

approvals and it will be delivered in four years," he

added.Asked about investment, he said the

construction cost of this project would be about Rs

500 crore, which will be largely funded from sales

realisation. Giving details about the JV, Puravankara

said the three partners would share revenue from this

project, but did not disclose in which ratio.

He noted that joint venture in Pune marks the

company's foray into the country's western market.

"Pune offers great potential with its changing

demographics and significant demand in real estate,

across segments. Asked about reports of foray into the Delhi-NCR market, he said "there is no immediate

plan" but company would consider if it gets some

"exciting joint venture opportunity".

Puravankara said the company would not buy land for

the development of projects in the Delhi-NCR market.

Puravankara is currently developing 25.52 million sq

ft of projects and nearly 80 million sq ft is in pipeline

over the next 7-10 years. Apart from Bangalore, the

company has presence in Kochi, Chennai,

Coimbatore, Hyderabad and Mysore. It is also

developing project in Sri Lanka.


Land

Patel Engineering sells Mumbai land

for Rs 300 crore

Patel Engineering has sold a 4-acre plot in Mumbai's

central business district, Bandra Kurla Complex, for

about Rs 300 crore as part of plans to sell assets to

reduce debt. Patel Realty, a subsidiary of Patel

Engineering, last week signed a deal to sell the land to

unlisted realty company Kanakia Spaces Ltd, industry

sources said. Patel Engineering's Managing Director

Rupen Patel did not reply to calls made for seeking

comments.

Sources said the company is also in advanced talks

with at least two investors for getting a co-developer

for its 16-acre residential complex which it is building in

Yogeshwari in Mumbai.The deal to get a joint

developer for the Yogeshwari residential complex is

likely to get the company Rs 700 crore, they said. In

September, Patel Engineering had sought

shareholder's approval to dispose off its non-core

assets to cut debt.

In a filing to stock exchanges in late September, it had

said that it is planning to sell assets to reduce debt to

the extent of Rs 1,000 crore. As of March 31, the

company's total consolidated debt was Rs 4,478 crore.


Arihant launches residential project

in Kolkata

Kolkata-headquartered Arihant Group, which has

diverse interests in buildings, roads, bridges and

ports, is now coming up with its new residential

project, Arihant Viento. Located on Maheshtala Road

(Topsia) in close proximity to Park Circus, Arihant

Viento, developers claim, denotes an ultimate urban

living experience in a location dotted with leafy

vegetation, famous eating houses at Kolkatas China Town and flower gardens.

Arihant Viento will house altogether 45 apartments in BHK and 4 BHK configurations. While the 3 BHK

apartments will come with sizes ranging between

1,539 sq ft and 1,790 sq ft, the 4 BHK apartments will

have sizes between 2,317 sq ft and 2,772 sq ft,

Subrata Bhakat sales manager, premium residential,

Somani Realtors, which is marketing the property,

said.

On offer at Arihant Viento will be state-of-the-art high

speed elevators of reputed make and one service

elevator, 24X7 security system with CCTV at ground

floor and intercom, well-equipped fire fighting

arrangement, 24-hour water supply, gymnasium and

indoor game and a host of other features that include

a domestic attendants quarter in each floor with toilet, double height air conditioned community hall, children

play area, drivers waiting area, double height AC lobby on the ground floor, meditation room, well

decorated rooftop, community hall, to mention a few,

Bhakat said.

Developers also promised earthquake resistance

RCC framed construction with infill brick walls,

cement plastering internal wall, overlaid with smooth,

impervious plaster of paris, anodised/powder coated

aluminium window with clear glazing grill in all

windows, sleek CP fitting in light colored sanitary

ware in all bathrooms, among other things.

Arihant Viento is a majestic structure that presents a world of novelties capsuled within acres of lush

greenery. Nestled amidst peaceful environs yet close

to the conveniences of city life, this residential

complex perfectly defines elegance and class. Tailor-

Residential

Casa Grande launches new project

in Coimbatore

Chennai-based realty major Casa Grande Pvt Ltd

(CGPL), which already has a presence in Coimbatore,

has come out with a new project 'Casa Grande Amber'

in Ramanathapuram area in Coimbatore. The project

coming up behind Central Studio would have a mix of

villas and apartments about half-a-km off Tiruchi road

in the city.

In a release, the company said that the new project

was designed keeping in view what the affluent buyers

were looking for.

It would have 13 independent 4 bedroom villas ranging

from 3,360 sq.ft. to 4,041 sq.ft. in size (built-up area)

on a land area of 3,500-4,300 sq.ft. with high-end

specifications. The gated community project would

also have 32 apartments ranging from 1,242 sq.ft to

2,111 sq.ft. in size.

While the villas would have a starting price of Rs.2.3

crore (for a 3,360 sq.ft villa), the apartments are priced

from Rs.49 lakh onwards.

Arun Kumar, founder and MD, Casa Grande,

explaining the salient features of the project, said that

Casa Grande Amber had been "planned with space as

concept with lavish internal and external spaces'' and

claimed it would be "one of the most luxurious

projects'' in the city.

Senthil Kumar, MD - Coimbatore Region, CGPL, said

the project was strategically located with easier

proximity to educational institutions and healthcare

facilities and would meet the aspirations of those who

want a luxurious life within the city area.

He said the villas and apartments in the companys first project at Kalapatti in the city will be handed over

to the owners in January 2015, about three months

ahead of schedule. The new project coming up in

Ramanathapuram area on about 2.1 acres would be

completed in the first quarter of March 2016.

The Hindu Business Line,05 December,2014

Residential

made for those seeking a life of quiet luxury, the

housing complex encompasses artistically crafted

apartments coupled with luxurious amenities, he said.

The apartments at Arihant Viento will come with a price

tag of Rs 5,800 per sq ft. While the 3 BHK apartments

will cost between Rs 88.68 lakh and Rs 1.03 crore, the

4 BHK apartments will come between Rs 1.37 crore

and Rs 1.69 crore. Possessions of these apartments

are likely to be handed over to their new owners by

January 2016.

Financial Chronicle,05 December,2014,Kolkata

Ashiana Housing forays into

Chennai market

Ashiana Housing will mark its entry into the Chennai's

realty space by launching residential projects, one of

them targeted at senior citizens.

The company has entered into a joint development

agreement with Escapade Real Estate to develop a

senior citizen living and group housing projects in the

Tamil Nadu capital.

"Ashiana Housing has has signed a development

agreement, on revenue-sharing basis, with Escapade

Real Estate, a Group company of Arihant Foundations

and Housing, for developing senior living as well as

regular group housing projects," the company said

today in a statement here.

"Chennai is an emerging destination for senior living

homes in southern part of India and we are excited to

enter this market," Ashiana Managing Director Vishal

Gupta said.

The New Delhi-based realty firm currently has four

retirement housing projects in its portfolio - one each in

Jaipur and Lavasa in Pune and two in Bhiwadi in NCR.

The BSE-listed company has so far delivered over

118 lakh sq ft of property and has more than 97.3 lakh

sq ft under development.

The Economic Times,05 December,2014,Chennai

square feet) were finalised by leading corporates from

sectors such as IT/ITeS, banking, healthcare and

manufacturing / engineering.

All of these transactions were for SEZ spaces in the micro-markets of the Outer Ring Road (ORR) and

North Bengaluru, he added.

The Hindu Business Line,01 Dec.,2014, Bangalore

Essel Group acquires Rs 400 crore

worth property in Mumbai

The city's second-biggest ever office purchase marks

stunning recovery from lows for its beleaguered

commercial property market and may portend a

period of rapid growth amidst rising demand and

shrinking inventory.

In one of the largest front-office transaction, Essel

Group, widely known for its media and entertainment

business Zee Entertainment Enterprises, has

acquired 2.20 lakh square feet commercial space in

Marathon Futurex complex at Lower Parel in Mumbai

for overRs 400 crore, said two persons familiar with

the development.

The group will be shifting headquarters from Worli to

this new office spread over top seven floors of

Marathon Realty's tower II. "Essel Group has

identified certain premises in Marathon Futurex at

Lower Parel. This is still under process," said Mukund

Galgali, Executive Vice-President, Essel Group, in

response to ET's email query.

The transaction assumes significance as it signals a

dramatic recovery for Mumbai's commercial property

market after three years of sluggish growth. A dull

show in the first two quarters of the year was more

than offset by a sale plus lease of 1.8 million sq ft in

the third quarter alone. This is half of total nine month

sales plus lease of 3.6 million sq feet concluded in

Mumbai.

Both capital values and lease rentals for office spaces

have been weakening across the country for over

three years now. But optimism about the new

government's economic programme has prompted

Commercial/ Retail

Office space investment: Bengaluru

a cut above other Indian cities

Bengaluru is a notch above Pune or Delhi or Chennai

in the global real estate investment destination. The

city being the epicentre of IT/ITeS and BPO industry

has attracted occupier and investors to work in

tandem. This attraction and recognition of the city on

the global platform has led to higher yields than what

one would get in more mature markets such as

Singapore, Tokyo, Hong Kong, Shanghai and Australia

in the region.

According to Alastair Hughes, CEO-Asia Pacific Jones

Lang LaSalle (JLL), So here (Bengaluru) we are looking at sought of 10 per cent. In matured market, it

is just 3 per cent. This is for the similar profile

properties and great profile of occupiers.

Picking up such properties has no development risk,

so on that basis Singapore is a round about 3 per cent,

Tokyo about 4 per cent, Hong Kong about 3 per cent,

Shanghai between 5 and 6 per cent, these are the kind

of main hubs in Asia, while Australia is another very

attractive place for international investors at about 5

per cent.

Expansion and relocation by IT/ITeS companies

continue to drive the Bengaluru office market. The

Outer Ring Road (ORR) continues to remain the most

preferred location by major occupants, with about 41

per cent of total absorption, followed by CBD and off

CBD (15 per cent). The epicentre of the Bengaluru suburban office market is gradually shifting towards

ORR, which offers location advantages and large

tenant pool to the growing IT and back-office

processing centres. Companies which are in

expansion mode have relocated and have also locked

in large office spaces with favourable rates, said Colliers International, a global property consultant in its

Q3 report.

According to Anshuman Magazine, CMD, CBRE South

Asia, Leasing activity remained upbeat with Bengaluru leading the pack in the country, accounting for almost

60 per cent of the overall space transacted during the

month. A few large-sized transactions (above 1,00,000

Commercial/ Retail

buyers to take advantage of the weakness in the

commercial property market. Purchases on outright

basis and long leases have climbed in recent months

as prices continue to be competitive and easing of

inventory levels for commercial spaces, said property

consultants.

The Zee deal is also a major vote of confidence for

Lower Parel, Worli and Prabhadevi localities which

have emerged as competitors to BKC as a business

district despite transport bottlenecks and flooding

problem during the monsoons.

This is the second largest outright commercial space

transaction based on both area and value terms after

Citigroup's purchase of 2.97 lakh sq ft in Bandra-Kurla

Complex more than two years ago. Most office

transactions including the Goldman Sachs and

Flipkart's deals in Bangalore, have since been

concluded on a lease basis.

"The deal was signed and concluded recently. Fit outs

and interiors work has also been commissioned and

Essel Group is expected to shift its headquarter by the

end of next quarter," said one of the persons

mentioned above.

An email to Marathon Realty did not elicit any

response. Transaction advisor JLL India declined to

comment. Currently, these three areas (Lower Parel,

Worli, Prabhadevi) have office space stock of 11

million sq ft. Of this around 1 million sq ft is available

now as inventory against 4million sq ft three years ago.

"Commercial market has shrugged off the

sluggishness witnessed since last three years.

Enquiries have gone up and deals are taking place

smoothly particularly after June since when the new

stable government was formed," said Rajiv Jain, a

broker operating in south and central Mumbai.


Township

No news in this section for the week

crore-worth income tax concessions and Rs 27,947

crore indirect tax (customs) concessions) given to

these enclaves between FY07 and FY13 did not result

in proportionate benefits to the country in terms of the

objectives behind the SEZs Act.

Earlier, the finance ministry had in a study pegged the

revenue loss at Rs 1.76 lakh crore from tax holidays

granted to SEZs for 2004-10. The CAG report does not

include revenue foregone on account of central excise

and service tax. The commerce department has long

argued that the gains from SEZs to the economy (in

terms of infrastructure creation, employment

generation and exports) outweigh the notional revenue

foregone.

In a study of 79 units/developers in 11 states, it was

found that though they projected an investment of Rs

1.95 lakh core, the actual investment was only worth

Rs 80,176 crore, leading to a 59% shortfall. Similarly,

there was a 74.5% shortfall in export projection and

79.5% shortfall in projections of net foreign exchange

(where exports by an SEZ unit should be more than

imports), the CAG study found. All this led to the

concessions given to these enclaves not resulting in

the expected gains to the economy. gnificant trend in

SEZ growth that the CAG observed was the

preponderance of the IT/ITeS industry. Of the total

SEZs in the country, an overwhelming 57% was in

IT/ITeS while just 9.6% was in the multi-product

manufacturing sector, it found.

The Financial Express,01 December,2014,New Delhi

Land acquired for SEZs sold off, put

to other uses: CAG

Several hectares of land acquired for special economic

zones (SEZ) invoking public purpose were later sold

off or used for other purposes, the Comptroller and

Auditor General (CAG) has found. Among the groups

that diverted land acquired for SEZs are Reliance

Industries and Essar Steel, according to the audit

report. In a report submitted to Parliament last week,

CAG said the SEZs of Essar Steel in Hazira and

Reliance in Jamnagar in Gujarat de-notified an area of

247.522 ha and 708.13 ha respectively, and allotted

SEZ

MAT, DDT waiver for SEZs wont be restored, says govt

On a day when the countrys top auditor observed that special economic zones (SEZs) have barely boosted

economic growth and hinted that the Act was widely

used for land grabbing, the government said in

Parliament that the original waiver for these zones

from the minimum alternate tax (MAT) and dividend

distribution tax (DDT) wont be restored.

In a performance audit report tabled in Parliament on

Friday, the Comptroller and Auditor General (CAG)

said the SEZs set up with the objective of propelling

exports, investments and job creation could not live up

to the promises. Land appeared to be the most crucial and attractive component of the scheme. Out of the

45,635.63 hectares of the land notified in the country

for SEZ purposes, operations commenced on only

28,488.49 hectares of land. In addition, we noted a

trend wherein developers approached the government

for allotment/purchase of vast areas of land in the

name of SEZs. However, only a fraction of the land so

acquired was notified for SEZ and later denotification

was also resported to within a few years to benefit from

price appreciation.

The SEZ Act came into effect in February 2006 and

since then 542 such zones have been approved of,

which 196 are functional. Various tax incentives covering corporate tax, excise and customs are accorded to these zones and units therein. SEZs are

supposed to meet net foreign exchange earner criteria.

The SEZ developers and units had cited the removal of

MAT/DDT exemptions as one of the main reasons

affecting performance, in addition to the economic

slowdown and weak overseas demand. RIL opting to

take 40% of its Jamnagar facilities from the SEZ ambit

was also a dampener.

An 18.5% MAT on SEZ developers and units and DDT

on developers were imposed in the FY12 Budget by

the then finance minister Pranab Mukherjee as the

revenue department in the UPA regime had begun to

see SEZs as drain on the exchequer.

The CAG found that the tax concessions (Rs 55,158

production," the audit said.

Since the enactment of SEZ Act 2005, 576 formal

approvals of SEZs covering 60,374.76 hectares was

granted in the country, out of which 392 SEZs covering

45,635.63 hectares were notified till March 2014. Out

of the 392 notified zones, only 152 had become

operational, and SEZs had no noticeable impact on the

national economy, the audit said.


SEZ

them to ineligible (DTA - domestic tariff area) units.

In case of Sricity SEZ in Andhra Pradesh, the audit

found that 2,070.12 ha of the allotted land was not

used for the intended purpose. This de-notified land

was allotted by the SEZ operators to private

companies such as Alstom, Pepsico, Cadbury,

Colgate, Kellogg's etc.

"Land appeared to be the most crucial and attractive

component of the scheme. Out of 45,635.63 ha of land

notified in the country for SEZ purposes, operations

commenced in only 28,488.49 ha (62.42%) of land,"

the audit said.

The audit found that many developers approached the

government for allotment/purchase of vast areas of

land in the name of SEZ. "However, only a fraction of

the land so acquired was notified for SEZ and later de-

notification was also resorted to within a few years to

benefit from price appreciation," the CAG said.

In terms of area of land, out of 39,245.56 ha of land

notified in the six states, 5402.22 ha (14%) of land was

de-notified and diverted for commercial purposes in

several cases, the audit found. "Many tracts of these

lands were acquired invoking the 'public purpose'

clause. Thus, land acquired was not serving the

objectives of the SEZ Act," the audit said.

As per SEZ Act, 2005, land for establishment of SEZs

needs to be contiguous and the developer is required

to have irrevocable rights over the land. Lands are

being allotted by the state government directly or

through land banks/agencies on the basis of proposals

made by the developers.

The audit also found that at least nine SEZs were

allotted restricted land, such as that of defence, forest

and irrigated land, in contravention of Supreme Court

orders and SEZ norms.

"The acquisition of land from the public by the

government is proving to be a major transfer of wealth

from the rural populace to the corporate world.

Questions have already been raised on account of loss

of revenue on tax holidays and the effect on agriculture

Hospitality


Input Cost


Disclaimer

The information carried by the articles in this newsletter has been gathered from various reports published in

newspapers and magazines. ASK Property Investment Advisors has reproduced the articles and reports

verbatim. ASK Property Investment Advisors does not vouch for the accuracy of the information and is not

responsible for decisions that may be taken on the basis of the information.

This document is being communicated to you solely for the purposes of providing our views on current market

trends. This document is being communicated to you on a confidential basis and does not carry any right of

publication or disclosure to any third party. By accepting delivery of this document each recipient undertakes

not to reproduce or distribute this presentation in whole or in part, nor to disclose any of its contents (except to

its professional advisers) without the prior written consent of ASK Property Investment Advisors, who the

recipient agrees has the benefit of this undertaking. The recipient and its professional advisers will keep

permanently confidential information contained herein and not already in the public domain.

This document is not an offer, invitation or solicitation of any kind to buy or sell any security and is not intended

to create any rights or obligations. Nothing in this document is intended to constitute legal, tax, securities or

investment advice, or opinion regarding the appropriateness of any investment, or a solicitation for any product

or service. The use of any information set out in this document is entirely at the recipient's own risk.

ASK Property Investment Advisors does not accept any responsibility for any errors whether caused by

negligence or otherwise or for any loss or damage incurred by anyone in reliance on anything set out in this

document. The information in this document reflects prevailing conditions and our views as of this date, all of

which are subject to change. In preparing this document we have relied upon and assumed, without

independent verification, the accuracy and completeness of all information available from public sources or

which was provided to us or which was otherwise reviewed by us. Past performance cannot be a guide to

future performance.

No reliance may be placed for any purpose whatsoever on the information contained in this document or on its

completeness. The information set out herein may be subject to updating, completion, revision, verification and

amendment and such information may change materially.

real estate weekly news letter 1-7 december 2014

Documents

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policy rates

rates rbi

growth rate

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moderation of inflation

rates unchanged

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