DLF woes continues, Q4 net slumps to 39 pct

MUMBAI: India's biggest real estate developer, DLF, plans to focus on building luxury homes and continue selling non-core assets to reduce debt, the company said as it announced a 39 per cent drop in net fourth-quarter profit.

DLF, which builds homes, offices and retail centres, is among several Indian developers struggling to reduce debt and improve profitability as high interest costs and a faltering economy weigh on balance sheets, reports Reuters.

GDP was 6.1 percent in the December quarter, the lowest rate in almost three years. "We expect the current economic and business environment will continue to stay challenging for the next few quarters," DLF said in a statement late on Wednesday.

The Delhi-based developer reported consolidated net profit of 2.12 billion rupees ($37.77 million) for the quarter ended March, compared with 3.44 billion rupees a year ago.Revenue was down about 2 percent at 26.2 billion rupees. Analysts on average expected the company to post net profit of 2.8 billion rupees on revenue of 23.5 billion.

But it is DLF's debt of about $4.32 billion as of December 2011 that has investors most worried. Since 2007-08, DLF's interest expense has jumped nearly six fold and was 17.1 billion rupees for the fiscal year that ended March 2011. Over the same period, net profit tanked 80 percent to 15.4 billion rupees.

DLF, which saw a 37 percent erosion in its share price in 2011, is struggling to meet a target of selling non-core assets worth 60-70 billion rupees by 2012/13 to pare its debt. This includes the sale of global hotel chain Aman resorts, which stalled in January after DLF received lower-than-expected bids, a plot of land in Mumbai which private developer Lodha is close to buying, and its wind turbine business.

As developers struggle to reduce debt, lenders and investors are distancing themselves from the sector. Real estate loans, which comprise nearly 3 percent of outstanding loans in the Indian banking system, rose just 6 percent in 2011/12 compared with 20 percent growth in the previous year, and private equity funding has dried up.

"This clearly shows that sentiment towards investing in real estate has gone away," said Sharan Lilaney, property analyst at Mumbai-based Angel Broking. Shares in DLF, valued at $5.8 billion by the market, closed 2.52 percent lower at 183.45 rupees before the results were announced, in a weak Mumbai market.
The shares, up 0.2 percent this year, are lagging a near-14 percent gain in the real estate index.

Bata India exits realty project near Kolkata

Bata India Ltd has exited its real estate joint venture project at Batanagar in the southern outskirts of Kolkata. The integrated township project was a joint venture between the leading shoe-maker and Calcutta Metropolitan Group.

Rajeev Gopalakrishnan, Managing Director, Bata confirmed, “Yes (we are out of the project). It is being run by our joint venture partners. We are not into it now.”

According to market sources, Bata has received Rs 100 crore upfront in cash for future transfer of shares in the JV company, Riverbank Developers (RDPL), and for development rights. In addition, Bata will receive 640,000 sq ft of constructed space free of cost in the project.

Bata still retains the legal title over the 230-odd acres of land where the project is coming up and shares in RDPL.

Surat to be India's first Eco City

SURAT: The diamond city has taken a step forward to become India's first 'eco city', on the lines of Singapore.

After selecting Surat as one of the three cities in the world for a demonstration project for "eco city" development, UK-based charity The Ecological Sequestration Trust (TEST) has decided to spend nearly Rs 50 crore over a period of five years to build a sustainable development model that will be more environment-friendly, reports TOI.
.
TEST will begin working with its local partner South Gujarat Chamber of Commerce and Industry by July 1.

The funds will be used in setting up a pilot project of green buildings with reduced heat and minimized water use, an intelligent transport system, a system to periodically forecast traffic and weather at different spots on cellphones through global positioning system, road mapping to suggest better routes for travel by own vehicles, setting up prototypes of recycling of used water and setting up efficient transport system that reduces road requirements by half.

Peter Head, head of TEST said, "Surat can be the next Singapore in terms of ecology and water management systems."

TEST which has joined hands with a leading consultancy firm TARU will start the planning for creation of ecologically sustainable mega city by July 1 after working out contractual agreements with local climate change trust and the city advisory board.

Mumbai Grade A Office Rents To Grow 1-2% in Q2

SINGAPORE: Jones Lang LaSalle’s Markets experts have shared their expectations for the office leasing markets in Asia Pacific in the second quarter of 2012.  

In those markets that were experiencing office rental declines in previous quarters, the Markets teams are anticipating a slowdown in the rate of decline, for example a three to four percent fall in Grade A office rents this quarter in Hong Kong compared to an actual 6.3 percent decline in the first quarter. Similarly, in Singapore a fall of three percent is anticipated by the end of the current quarter, compared to an actual 5.2 percent decline in Q1 2012.

Elsewhere in the region it is once again a mixed picture; the Jones Lang LaSalle Markets teams are predicting: 

• Some growth in Grade A office rents in Shanghai, Beijing, Jakarta, Manila, Mumbai and Delhi)

• Grade A office rents to remain stable and show little movement in Tokyo, Seoul, Sydney and Melbourne

• Some declines in Singapore and Hong Kong but at a slower pace than previous months; three percent and 3-4 percent respectively. A decline of around two percent is expected in Ho Chi Minh City.

Jeremy Sheldon, Managing Director, Markets Asia Pacific Jones Lang LaSalle says, “We continue to see the majority of Multi National Corporation’s across Asia Pacific adopt a ‘wait and see’ stance on expansion, given economic uncertainties, which is having a delay effect on their property decisions. This is translating into static rents in some markets, and smaller rental declines in others. We are finding those landlords who can afford to “sit” are doing so, thus holding fairly firm on asking rents. This is resulting in stability in rents for now. Of course each market has very different dynamics, and the one market which stands out again this quarter in terms of the rental growth is Jakarta. The demand for space from companies as a result of the very healthy economic outlook in Indonesia is creating activity in all sectors and locations in Jakarta. For the second half of the year, the economic frailties of the Eurozone and a hard versus soft landing in China will be the determining factor on overall office take-up in the region. However, as inter-regional trade continues to grow and domestic Asian companies perform, we remain positive for the full year.”

Anuj Puri, Chairman & Country Head, Jones Lang LaSalle India, states, “With the Indian financial economy’s cues not being very encouraging, office occupiers continue to defer expansion plans across major Indian cities. The trend of slowdown in growth of office rentals witnessed in Q1 across Mumbai, Delhi and Bangalore continues in Q2. Given the pressure, we expect rentals to remain stable for most micro-markets. Mumbai and Delhi are expected to add significant office supply over the next six quarters, and we have started seeing increasing signs of delayed construction. The next two quarters will decide if the supply side can appropriately accommodate the demand slowdown. However, on a macro scale, the Indian office asset story remains on a positive trajectory as compared to most Asia Pacific office markets.”

Market overviews:

• Beijing: Grade A office rents expected to grow c. five percent in Q2. Companies are looking at more creative ways to fit more people in their current space and overall rental increases are being impacted by deals being agreed with rental caps in place.  If these rental caps were not being offered, the rental increase would most likely be higher. Nonetheless, the lack of Grade A office supply should support rents in the foreseeable future.

• Delhi: Grade A office rents expected to grow 0 - 1 percent in Q2.  Companies are expected to remain interested in office space in the SBD (Secondary Business Districts), though the suburbs will continue to offer competitive rents, thus providing an alternative location to firms looking for new office space.

• Ho Chi Minh City: Grade A office rents expected to decline c. two percent in Q2. We can see signs of accelerating rental declines in the second quarter as some new developments have started pre-leasing with competitive offers. The two newest Grade A buildings in the city continue to face downward pressures in rents due to high vacancy levels, although moderate leasing activity should help to limit rental declines. More mature Grade A buildings should continue to maintain healthy occupancy levels and more stable rents.

• Hong Kong: Grade A office rents expected to decline 3-4 percent in Q2. Limited demand at the top end of the Grade A market is maintaining pressure on rents. There is limited new leasing activity from larger firms in Central, although we are still seeing some smaller new market entries focusing on buildings with smaller floor plates. There is limited relocation activity, mainly focused on lower cost buildings within the same district.

• Jakarta: Grade A office rents expected to grow 7-9 percent in Q2. We are expecting a similar level of take-up of space compared with Q2 last year and pre-commitment levels continue to increase in upcoming projects.  As Grade A vacancy continues to fall to below three percent some firms are being forced to Grade B space.

• Manila: Grade A office rents expected to grow c. two percent in Q2. Take-up is expected to improve as companies are starting to pre-commit to space in office developments again. New demand is coming from the space requirements of a few large MNCs that are choosing to consolidate their global back-office operations to the Philippines. Rental growth is being supported by sustained demand, especially from the offshoring and outsourcing sector.

•  Melbourne: Grade A office rents expected to remain stable in Q2. We are currently seeing lower enquiry levels compared with previous quarters and leasing decisions are taking more time. Large tenants (with requirements larger than 3,000 sq. m) are investigating the suitability of activity based working (ABW) models.

• Mumbai: Grade A office rents expected to grow 1-2 percent in Q2. We expect only marginal rental increase in 2Q12. Developers are likely to refrain from increasing rents to encourage occupiers to finalize transactions that have been on hold for some time (due to caution amongst corporates generally) and also given the high vacancy rates in suburban markets. 

• Seoul: Grade A office rents expected to remain stable in Q2. There is sustained demand from domestic firms, particularly in some recently completed CBD buildings, but lower levels of enquiries from Multi-National Corporations (MNCs); some relocations are being postponed/cancelled and a small number of MNCs are handing back some space.  We expect CBD rentals to reach the bottom of the cycle this year, but rental gains in the CBD are unlikely until next year due to further new supply additions and space coming back onto the market in some buildings as tenants move out.

• Shanghai: Grade A office rents expected to grow 2-3 percent in Q2. Although many tenants still remain conservative in regard to expansion plans, leasing market sentiment is starting to improve as evidenced by higher levels of enquiries and tenant interest. In addition the tight supply situation in the core CBD area is also supporting moderate rental growth.

• Singapore: Grade A office rents expected to decline c. three percent in Q2, less than in the first quarter of the year. Rentals are mostly taking place in new buildings, but there have been very few transactions in the current quarter to date. Landlords of buildings with high occupancy levels remain firm on their rents, which is why we are projecting only minor declines in Grade A rents this quarter. Headcounts remain stable but many companies are adopting a ‘wait and see’ approach towards leasing decisions which is equating to sluggish new demand, particularly amongst large financial services firms.

• Sydney: Grade A office rents expected to remain stable in Q2. Sentiment is being impacted by on-going delays in the completion of larger leasing deals, coupled with less relocation demand. Owners are more willing to increase incentives in order to attract or retain tenants. Limited new supply in 2012 should support rental growth, though the impact is yet to be reflected in rents.

• Tokyo: Grade A office rents expected to remain stable in Q2. Companies continue to prefer buildings with good earthquake protection, so this ‘flight to quality and safety’ is supporting demand for Grade A office buildings in prime locations, and consequently Grade A vacancy is falling slightly. This desire for Grade A space is also helping to buoy demand for new developments due for completion this year, though it is resulting higher vacancies in the wider office market.

China Building & Decoration Fair 2012 to begin from July 08

The 14th edition of China Building & Decoration Fair (CBD 2012) will be held from 08 - 11 July 2012 and is one of the foremost trade shows for the building and decoration industry. Standing out as Asia’s leading trade fair for building decoration, this significant trade event will display case cutting-edge products and services.

Scheduled to be held at China Import & Export Fair Pazhou Complex in Guangzhou,  China Building & Decoration Fair will provide a world-class environment for conducting trade discussions and communication, so as to make it a top-class international trade fair. 

CBD 2012 will be co-held with other events such as Flooring Canton, Sani-CeramEx and CBD-KITCHEN and will be categorized into nine specific sections. The exhibition will be playing host to sophisticated forums and activities and will provide top quality on-site services as well as establishing a superior environment for its trade visitors.

The profile of visitors attending the China Building & Decoration Fair 2012 will comprise of manufacturer, wholesaler, agent, architect, distributor, retailer, importer / exporter, designer, real estate developer, end user, manufacturers of hottest fabrics, soft furnishings, rugs, lights, decorative accessories, objets d'art & home wares.

China Building & Decoration Fair will be exhibiting products such as:  Decorative Hardware: building/decoration hardware, automatic doors, door hardware system and fittings, electric door systems. Decorative Glass/Slide Door: Art glass, special glass, domestic industrial glass, curtain wall glass, glass processing machinery, glass production and production technology, slide door, etc. Door & Window: wooden doors, plastic/Alnico /steel doors, windows, processing equipment & technique, etc. 

Glass: artistic glass, building/decorating glass, industrial glass, glass machinery, etc. Ceiling & Curtain Wall: integrated ceiling, metal ceiling, soft coating ceiling, curtain wall systems and processing machinery, etc. Wallpaper & Fabric: wallpaper, wallpaper adhesive, wallpaper production machinery and equipment, etc. Stairs: wood stairs, steel stairs, other stairs and fittings, etc. Coating & Chemicals: flooring coating, coating packaging, powder, glues, waterproof materials, anti-leaking materials, brushwork tools, etc. Stone: stones materials, stone carving, stone producing equipment, and gardening stone, etc.

From India, Builders Association of India is leading a delegation of entrepreneurs to the four-day event.

NRIs make merry as Rupee keeps falling to new lows

The depreciating rupee may be a concern for the economy, but NRIs are the happier lot as they find the time is ideal for real estate investment in India.  

  

PMA Razak, president, Mangalore Chapter of the Confederation of Real Estate Developers' Associations of India (CREDAI), told TOI that the falling rupee has made investment in real estate an attractive proposition for NRIs. Razak said an NRI who wanted to buy property here had indicated that NRIs were averse to buying property in the Middle East due to the uncertain climate and wanted to invest here as rupee had depreciated by 30% which made investment here attractive. Due to rupee depreciation, a Rs 60 lakh worth of property here now costs United Arab Emirates Dirham (AED) 3.75 lakh, which was costing AED 4.44 lakh just a month back.

The same holds good for all Middle Eastern currencies like Saudi Arabian Riyal (SAR), Bahrain Dinar (BHD) and Kuwaiti Dinar (KWD). Razak says 82% of the bookings in ongoing projects from his firm Plama Developers, of which he is the chairman and MD, are NRIs. A project becomes viable if there are 50% bookings and almost all Mangalore projects have close to 60% bookings,'' he said. Also, he notes that there is a strong demand from Mumbai-based Mangaloreans who want a second home in the city. Making investment attractive is the pre launch rates which are Rs 100 to Rs 50 less per sq ft.

 

At present the going rates for properties in the city range from Rs 4,000 to Rs 4,500 per sq ft and in the outskirts it is Rs 2,700 to Rs 3,500 per sq ft. Inland Infrastructure Developers MD Siraj Ahmed says the inflow of funds into property sector has increased by 25% from the earlier 50% due to rupee depreciation. At the same time not all money is flowing into real estate as NRIs perceive the property prices here are high from returns of investment point of view. So money is also getting locked in high interest deposits,'' said Ahmed whose majority clientele is NRIs.

Vision India Real Estate to launch two projects in Chennai

Chennai-based Vision India Real Estate is planning to launch two projects worth Rs 1,750 crore with bulk of the investment coming from the foreign direct investment (FDI). The company will invest around Rs 300 crore, apart from the land cost.

Vision India, which is currently developing a 680-unit apartment project at Padur near the Old Mahabalipuram Road (OMR) in collaboration with Gem Group, is looking at launching a villa, apartment and plotted residential project on 75 acre at the OMR by the end of this year.

It will also launch a villa and apartment project at the GST Road on the outskirts of Chennai, said Shekar Chandrashekar, who has recently taken charge as the chief executive officer (CEO) of Vision India Group.

“We have so far developed 850,000 sft of space in collaboration with Gem Group. The new projects will add around 1.5 million sft in OMR and 500,000 sft in GST Road in the next five to six years,” he said.

The OMR project is expected to have a project cost of Rs 1,500 crore, while the project cost for the GST venture will be around Rs 250 crore.

“We will be investing a total of around Rs 200 crore in the OMR project, of which at least Rs 100 crore will come in through the FDI route. Since some of our promoters are from overseas, the promoters' infusion will also be considered as FDI,” Chandrashekar told Business Standard.

He added that the 50-acre GST project was also expected to have an investment of around Rs 100 crore and will be launched by the end of 2012 or beginning of next year. The upcoming OMR project will have around 500 plots and 500 villas to be developed in the next five to six years.

Vision India, which is into integrated property development and asset management, has a sister company – Vision USA – in the US, and an affiliated company in Europe.