Real Estate

The Buddhadeb Bhattacharjee government is planning to pass on a portion of the price appreciation to farmers through a compensation and rehabilitation policy. This could be one way to pacify farmers in Singur or elsewhere, who are unwilling to take compensation cheques calculated at existing prices.

The West Bengal Industrial Development Corporation offered Rs 9 to Rs 12 lakh an acre to farmers in Singur for Tata's small car factory. However, land prices in the area have increased by more than 400% since the acquisition notification was issued. In Singur, land is now selling for Rs 50 lakh an acre.

The commerce and industries department is planning to return the excess land, if any, and pass on the capital gains to the farmer. The proposal may find a place in the new compensation and rehabilitation policy for landlosers that the chief minister is likely to announce in the Assembly soon.

Elaborating on the proposal, commerce and industries minister Nirupam Sen said: "For instance, we might acquire 350 acre for a project where the real requirement is 300 acre. The additional 50 acre will be developed along with the project and later returned to farmers who gave the land."

He added: "The government is contemplating a mechanism to plough back the price appreciation after developing the surplus land and distribute it among the farmers concerned." Sen's proposal is unique because the Compensation and Rehabilitation Bill pending with the Union government does not have any such provision.

This is the first time NHB has proposed such a scheme. "This is a new initiative which will provide liquidity to lenders and free up capital. This will ultimately channel more resources to the housing finance sector. This will also ease pressure on home loan interest rates," NHB executive director RV Verma told ET. Here's how the proposed structure will work -- NHB would hold the purchased assets on its balance sheet for onward securitisation. In the process, the portfolios will get more seasoned with NHB. In other words, it will act as a warehouse of mortgage assets to be securitised and then sell to investors without diluting the standard of the assets.

Kolkata Metropolitan Development Authority (KMDA) is inviting bids for setting up a five-star hotel and a chain of other commercial establishments on 18 acres near the Kolkata logistics hub off Kona expressway.

KMDA officials said they have already started receiving applications. “There are three separate plots, covering about 10 acres, five acres and three acres respectively. The 10-acre plot is for setting up the five-star hotel. The other two plots are “free use” lands, open for different kinds of commercial establishments, like hotels and resorts,” said a senior KMDA official.

Officials said nearly 100 companies have bought the pre-bid documents. “They would now be asked to furnish details of
their expertise and finally, some of the firms would be selected for taking part in the bids. The bidding would take place on July 31,” said a senior official.

Red Fort Capital which manages three active funds under its aegis including an offshore and a domestic fund for Indian real estate market, as well as a hedge fund for listed Indian entities - is already in talks with some of its existing investors for floating the new fund, which would invest in infrastructure projects in the country. It may also rope in new investors to the proposed fund.

Growing infrastructure
“The new fund is likely to be over $600 million and will focus on projects such as ports and power, amongst others. In fact, some of our existing investors approached us for a fund in the infrastructure, a sector whose risk profile is very different than the real estate segment. Globally, the returns for infrastructure projects are in teens whereas in India it averages at about 20 per cent,” Mr Subhash Bedi, Director and Partner, Red Fort Capital Advisors, told Business Line.

He said that in future, the investments in infrastructure projects could also find synergies with the projects that Red Fort has funded in the real estate sector. “For instance, there could be synergies between port projects and development of warehouses,” he pointed out.

The pre-qualification bid was completed July 10 and the final bid will take place within three months, said Sudip Datta, vice-president at project adviser Infrastructure Leasing and Financial Services Ltd (IL&FS).

The project will be a public-private partnership between the Security Printing and Minting Corp under the finance ministry, owner of the mint, and the winning bidder.

IL&FS, selected by Security Printing as the project adviser, has already prepared the project report, though the revenue sharing model is yet to be worked out.

The 179-year-old heritage structure, standing within a 12.5 acre compound off the Hooghly river, was used for minting coins and manufacturing medals and decorations before Independence but fell into disuse after the facility was shut down in 1952.

The chairman and managing director of Jai Balaji Industries Limited, Mr Aditya Jajodia said at a Press conference in Kolkata very recently that they were unable to acquire requisite land. "As a result, we are yet to start work on the concerned project," he further said: "We had planned to start work on 1,400 acres of land at one time, but the concerned authorities have allotted only half the requirements, resulting in a delay."
Meanwhile, Mr Dipak Ranjan Kar, district magistrate of Purulia, expressed his displeasure on the laid back attitude of the Jai Balaji Group. While talking to The Statesman on Monday, he strongly criticised the authorities of Jai Balaji, who have not yet begun their construction work or even spared land.

"You see, we have already allotted nearly 700 acres of land for Jai Balaji, but they are out of range," the district magistrate of Purulia added:
Mr Tapan Chakraborty, sub-divisional officer of Raghunathpur, who was also present at the chamber of DM, Purulia, on the day, informed: "We have not acquired any land for Adhunik Group of Industries and Shyam Steel, so far."

Earlier, Mr Buddhadeb Bhattacharjee laid down the foundation stone for a 5 million tonne integrated steel plant, a 3 million tonne cement factory and a captive power plant of 1,215 MW for Jai Balaji on 16 October 2007. They will invest Rs 16,000 crore for the grand project on 3,800 acres of land at Durmut.

"Earlier, it was a remote area but now it is well connected with Asansol and Burnpur industrial areas," he said. "More industrialists have agreed to come forward to set up industries at Raghunathpur." he further added.

Fitch, the global rating agency, on Tuesday revised the outlook on India's long-term local currency to negative from stable.

Though India's rating still stands at BBB, Fitch's lowest investment grade, the revised outlook means that the country is a whisker away from being rated 'speculative', which is euphemism for junk rating.

Fitch's action follows a warning by Standard & Poor's rating agency on Friday that India's rating could be lowered thus, if the current credit deterioration continues for a longer period.

Takahira Ogawa, S&P's credit analyst, in a note on Friday had said that India's credit profile has worsened in the past 12 months but added that "the upside and downside risks to its 'BBB' rating are currently balanced."

Fitch has gone a step ahead and actually changed the outlook on India's domestic ratings.

Hotel Hindusthan International, Kolkata-based five star hotel group and The Elgin, heritage hotels operational in north Bengal, have been roped in for hotels in the township, said Rudra Chatterjee, executive director of Luxmi township.

This apart, Neotia Elbit will be setting up a hospital and a City Center mall, to be operational by 2009.

A school from the Birla Group was already operational in the township.

According to Harshavardhan Neotia of Ambuja Realty Group, "Most of the flats in the first two phases of the project have been sold out. We expect another two phases to be completed in two years."

A society of 100-odd past and present teachers of IIT Kharagpur is among the many aggrieved parties queuing up to file cases against realtors, some of them big players. The commonest complaints are delay in delivery of flats and failure to provide the amenities promised at the booking stage.

"There has been a sudden increase in the number of cases against realtors," an official of the commission said. "We are following the directive of the national commission to expedite these cases and have stopped giving adjournments."

For members of the IIT-Kharagpur Housing Society, the wait for their property developer to deliver on his promise has stretched beyond four years. These teachers had purchased 12 plots of land on Kailash Ghosh Road, in Behala, seven years ago and assigned a property developer to build flats there. According to the agreement between the society and the realtor, the flats were to be completed by 2004 and handed over to their respective owners after 90 per cent of the construction cost was paid.

The companies embarked on major projects in Kolkata in the last couple of months but none is able to expedite them, albeit for different reasons.

Construction at Uniworld City (Unitech's project on EM Bypass Road) has stopped because there are no funds. "The company is now seeking joint venture partners and private equity money," a source familiar with the development said.

The project was to be executed in five phases but even the first one hasn't been completed.

Unitech paid thrice the existing rate to buy land for the project Rs 33 crore per acre.

A Unitech spokesperson, however, denied the development saying construction was on and bookings have begun.

No. 1 realtor DLF isn't much better off, either. It won a global tender for developing Bengal's largest public private partnership (PPP) venture in Dankuni.

But due to inordinate delays in land allocation, the project has been put on ice, sources said.

But sustaining them proved to be a different ballgame altogether and now, many of these malls have become defunct or been converted into commercial spaces. The story isn't exclusive to Gurgaon.

Mall developers in other metros and tier-I cities are set to meet the same fate, say retailers.

If retailers who conduct business in these malls are pessimistic, the situation is clearly grim.

Though no official data exist on the number of malls being developed, industry reports peg the number of malls coming up in India in the next three years at 350. Of these, about 200 may reach completion.

Govind Shrikhande, chief executive of retail chain Shoppers Stop, doesn't think even 80-100 of these malls would survive. "There is only so much that a specific catchment area can absorb successfully," he says.

Srinath Sridharan, the vice-president and head of strategic alliances at Wadhawan Holdings, which owns the Spinach, S-mart and Sabka Bazaar retail chains, presages far darker times.

"You have to be optimistic to say only half of the malls becoming defunct. I feel 80% of them will not even see the light of day. Retailers today cannot afford the high rentals being demanded. It's difficult to say if rentals are a part of sales or the other way round," he says.

Mumbai recorded a 16 percent drop in registrations in the year to March 31, and sales may fall further across India's major markets if developers hold on to prices, Fitch said. Fitch has rated its short-term outlook on the industry as negative.

``The slowdown will also aid the process of weeding out some of the weaker entities within the sector, and increasing the relative strength of some of the larger, more established developers,'' Sandeep Mulik and Roopa Raman, analysts at Fitch Ratings, said in the report in Mumbai today.

Some developers face fund shortages and may tap buyout firms as investors sell real estate stocks on falling sales. Still, a prolonged slowdown may damp the appetite of private equity funds, forcing smaller developers to either borrow at higher rates or default on their obligations, Fitch said.

The central bank on June 24 raised interest rates to the highest in six years to contain inflation that accelerated to 11.63 percent in the week ended June 21, the fastest in 13 years.

The government has activated a committee to oversee their land water and coal requirements. A separate committee has been set up to check on water conservation methods.

"We have 14 to 15 proposals for new steel plants," said industries minister Sabyasachi Sen. The new projects include JSW steel project in Shalboni with an investment of Rs 38,000 crore, a plant by Jai Balaji Group in Purulia with an investment of Rs 16,000 crore and a plant by Videocon Group in Asansol .

The committee, headed by S K Bhattacharya, former MD of Durgapur Steel Plant, will screen the proposals.

Sources in the state government said land and other requirements of the proposed plants may be curtailed depending on availability and local factors like public mood.

A separate committee is being set up to look into the water requirements for the plants, Sen added.

These two projects, with 400-500 units, involve an investment of around Rs.10 billion each.

'We have received proposals from the DLF group as well as the Siddha group for setting up clusters of such units at Rajarhat in Kolkata,' WBREDA director S.P. Gon Chaudhuri said.

'We have agreed in principle for the DLF proposal but are yet to weigh Siddha group's proposal,' he said.

The units would have solar panels on the terrace to generate power for residential use; excess power, if any, would be sold to the state grid.

'They proposed to build 400-500 houses spread across 70 acres. Apart from solar power, the projects would also have rainwater harvesting capabilities as well as equipment to convert waste into energy,' Gon Chaudhuri said.

These units would be built with green materials, which are made by consuming lesser amounts of energy in comparison to traditional building materials.

The two proposals come close on the heels of WBREDA's Rabi Rashmi Abasan project, India's first commercial solar housing scheme.

Refusing a go-ahead to the proposals, the government has sent them to the industrial reconstruction (IR) department for a "thorough" evaluation. Industries minister Nirupam Sen has asked Pawan Ruia, chairman of the Ruia Group, to meet him on July 14 and place his case all over again and answer queries on the proposals. The industries minister told TOI, "We haven't taken any decision on the SEZs yet."

Six months ago, Pawan Ruia -- earlier branded as Sen's favourite investor for buying out Dunlop just before the 2005 Assembly elections -- submitted the proposals to the union ministry of commerce and industries. He was confident of getting a no-objection-certificate (NOC) from the state.