Slowdown In Real Estate Business Due To Hike In Steel Price

General | By mahendra | 2008 Trackbacks (0) Add comment   

As the dark clouds of an economic slowdown gather over the world, prices of construction materials have started to slide in the city. A few months earlier, prices of key commodities like sand, bricks, steel and wood had reached dizzy heights, now they are in a free fall. Sales of all these products have also come down from 25 to 40 per cent. However, the cost and sale of cement cont inues to remain stable even after mounting demand from contractors involved in construction of various irrigation projects across the State. Analysts attribute this to slowdown in real estate business in the State capital as well as in Vijayawada, Tirupati and Visakhapatnam. The meltdown has indeed slowed the construction activity with several Real estate developers hesitating to take up new ventures.

While some of them are only focusing on completing the ongoing projects, others are in a quandary over launching new projects. Steel erodes For instance, the cost of steel had touched Rs.40,000 to Rs.50,000 per tonne a few months ago, while sand and bricks zoomed up to Rs.6,000 and Rs.26,000 per lorry load respectively. These were all-time highs and gave jitters to middle-class families in accomplishing their dream of owning a house. The prices and sales of these products have now tumbled drastically. At present, the price of steel range from Rs.35,000 to Rs.37,000 per tonne, and sand and bricks stood at Rs.5,000 and Rs.18,000 per lorry load respectively. “Steep rise in fuel prices coupled with drop in sales led to the decrease in prices of sand and bricks”, said a supplier Vinay Kumar Yadav in Secunderabad. At least three lorry loads of sand used to be delivered everyday and now it is hardly one lorry load for every three days. “It’s a double blow for us with prices and sales decreasing”, he lamented. With sales of timber also coming down almost by 50 per cent, traders are requesting the government to reduce 12.5 sales tax to four per cent.

“As wood is most commonly used product, we appeal to the government to reduce sales tax to overcome losses”, said Sridhar Malani of Padma Timber Agencies in Bowenpally. Cement prices, however, remain stable. In Hyderabad, the retail premium brand cement range from Rs.230 to Rs.240 per bag and Rs.215 to Rs.222 per bag in Vijayawada. “Cost of the cement did not increase because there has been no substantial rise in its prices in the international market”, said Ramesh Chandro, Managing Director of Coramandel Cements Ltd. Another factor for present ‘precarious’ situation in real estate business is increasing demand for separate Statehood for Telangana region. As the leaders of all the main political parties declared support for Telangana, developers are now adopting a ‘wait and watch’ policy until next general elections. Some of them are not coming forward to develop independent houses into apartments with 60:40 per cent profit in even well developed colonies like East and West Marredpally, Sindhi Colony Begumpet and Sainikpuri.

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RAKIA Signs MoU With AP Govt To Develop Hyderabad Economic City

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Ras Al Khaimah Investment Authority (RAKIA), the government body responsible for the socioeconomic growth of the emirate, has announced that it has recently signed a memorandum of understanding (MoU) with the Andhra Pradesh Industrial Infrastructure Corporation (APIIC) to establish the US$ 5 billion Hyderabad Economic City, an integrated financial hub and health care city.

The MoU was signed by Wahid Attalla, Member of the Board, Rakeen, the real estate development arm of Ras Al Khaimah Investment Authority (RAKIA), and APIIC Chairman and Managing Director B P Acharya, in the presence of Andhra Pradesh Chief Minister Y S Rajasekhara Reddy. The financial component of the mega project will include infrastructure facilities to support a full range of financial services, while the state-of-the-art health care city will provide complete facilities for clinical and non-clinical services. Hyderabad Economic City is part of several large-scale satellite townships being developed by RAKIA and master developer Rakeen in several key cities across India.

Commenting on the MoU, Dr Khater Massaad, CEO, RAKIA said: "The partnership with the Andhra Pradesh government for the development of the Hyderabad Economic City is in line with RAKIA's strategy to fortify its portfolio of global investments. India's fast-growing economy has opened a wide range of business opportunities, and we intend to build on this momentum to further expand our activities in the country and across the region. Furthermore, we believe that this new development will strongly support India's continued economic progress and open more opportunities for growth and prosperity.

" Hyderabad Economic City's financial sector will provide essential infrastructure to support back-office operations for banking, insurance and asset management companies. It will also provide key facilities to host corporate centres for financial services, product markets, capital market and trading operations, IT services, business processing operations, plug-and-play intelligent buildings and IT parks. The integrated health care component of the mega project will incorporate world-class hospitals, medical colleges, research services for clinical trials, a comprehensive drug delivery system, and facilities for stem cell research and genetic research, among others.

RAKIA is also developing several other townships across the country through RAKINDO, RAKIA's joint venture company in India. Over 3,000 acres of land has been earmarked for various projects in Coimbatore, Chennai, Kumarakom, Hosur and Cochin, each with a projected cost of US$ 2 billion.

AP Gets Re 1 Trillion Domestic Investment

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Andhra Pradesh and West Bengal have emerged as the country’s top two investment destinations for domestic private sector firms. The southern state is the only one to have attracted capital expansion (capex) plan commitments in excess of Rs 1 trillion in the first half of 2008.

Andhra Pradesh which attracted Rs 1,08,559 crore investment is followed by West Bengal with over Rs 93,000 crore during the same period, according to a survey by industry chamber Assocham. The figures are for the period before the Tatas pulled out their ambitious Rs 1,500-crore Nano car project from the state.

In its study titled ’Regional Investment Ann-ouncements’, Assocham said the eastern region came on the top for attracting private sector investment announcements, followed by southern and western regions. “One-time vibrant northern India for investors has slipped to a poor position number four in terms of luring investments by the private players,” it said.

The central region, comprising Madhya Pradesh and Chhattisgarh, was ranked last with the minimum share of 8.87 per cent in the total investment announcements. The western region ranked third and Rajasthan (Rs 80,776 crore) outpaced Maharashtra (Rs 65,632 crore). Northern states attracted investments to the tune of Rs 123,905 crore. Haryana and the NCR grabbed Rs 50,595 crore and Rs 38,237 crore.

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HMDA To Sell 82 More Plots In Hyderabad

General | By mahendra | 2008 Trackbacks (0) Comments (1)   

Unperturbed by the poor response to its earlier auction drives, the Hyderabad Metropolitan Development Authority is preparing for a fresh round of auctions. This time the HMDA has decided to auction a few more sites along with those which were not bought earlier. In September, the HMDA put up as many as 99 plots for e-auction of which tenders only 17 were finalised.

Now, HMDA is planning to sell 82 plots, including some new plots in hyderabad. The new sites have been added to the list as a special attraction to woo builders and developers who have not been evincing keen interest in investing in real estate sector off late. Plots up for grabs are located at Nandgiri Hills layout, Asifnagar new layout, Huda Techno Enclave, Madhapur (SectorI), Ramchandrapuram (chandanagar), Tellapur Residential Complex, Nallagandla Residential Complex, Vansthalipuram Residential Complex, Miyapur Residential Complex, Asifnagar(old) Residential complex and Mushk Mahal Residential Complex.

“This time we are adding additional infrastructure features to the land area and auctioning those plots so that people can apply tenders in large numbers. Earlier, plots were auctioned without any infrastructure specifications which yielded a very poor response. The formalities of on-line auctioning will be completed in two days before opening on-line auction in the coming week.

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Townships Have No Land

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Twenty-two satellite townships planned to be set up around the Outer Ring Road have remained on paper three years after the erstwhile Hyderabad Urban Development Authority announced them. The reasons are said to be many: Slump in the real estate market; problems in land acquisition and widespread agitations by farmers and political parties.Efforts by the government to rope in private parties and get the townships started in the public private partnership mode also fell through, with real estate giants keeping away. The HMDA, the successor of Huda, tried its best to raise money by auctioning land but builders and developers stayed away.

The townships were planned at Medchal, Goudavelli, Dommara Pochampally, Bowrampet, Aliyapur, Sultanpur, Khardanur, Paatighanpur, Edulanagulapalli, Kollur, Balapur, Nadargul, Thorrur, Munaganuru, Kuntluru, Korremul, Rampalli, Cheryala, Dharmaram and Shamirpet. With land owners, particularly farmers, objecting to land acquisition by the HMDA, the officials announced a change in some sites. The new sites are at Mankhal, Adibatla, Raviryal, Srinagar, Turka-yamjal, Injapur, Tellapur and Gacchibowli where the government has acquired about 3,000 acres of land.

Work was supposed to start on these projects within six months after they were announced but not a brick has been set till date. The government announced that it will come up with a township policy which would propose handsome compensation to land owners, particularly farmers, from the benefits to be accrued out of township projects."The government is sitting on the policy. Unless the government announces the policy, townships cannot be started," sources said. Mr Sridhar Chitturi, officer on special duty (OSD), on the Outer Ring Road, HMDA, told this correspondent that it would be feasible to start work on townships after the new policy is announced. According to him, the policy is likely to offer land owners 50 per cent share in the benefits accruing from townships.

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Reliance Infra Plans To Raise Funds In Phases

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In a tight credit market where real estate developers are scurrying for funds to launch their projects on time, Reliance Infrastructure Ltd plans to raise funds in multiple rounds for its 100-storeyed trade tower and business district project on the outskirts of Hyderabad. A new player in real estate, Reliance Infrastructure, part of the Reliance-Anil Dhirubhai Ambani Group, needs about Rs4,000 crore in the first phase to pull off a large part of the project, which will be executed at a cumulative cost of Rs8,000 crore in the next three-five years.“We will have to raise the money in two-three phases from banks, though we intend to develop the project in one go,” said a senior official of Reliance Infrastructure in charge of the Hyderabad project, who is not authorized to speak to the press. Last November, Reliance Infra, which is a two-thirds partner in the project that is to be implemented through a special purpose vehicle (SPV), won the bid. The other stakeholders in the venture are Bangalore-based Sobha Developers Ltd (technical partners) and Andhra Pradesh Industrial Development Corp.

with 23% and 11% stake, respectively. The project is the business group’s first venture into the real estate, with the second being a mixed-use project planned on about 220 acres, which it got by winning the contract to build a metro rail line between the New Delhi railway station and the international airport. Considering the current market downturn, the SPV has decided to lease, rather than sell, the tower, which will be the central attraction in the 77-acre project. “Leasing out space is much more flexible when property prices are on a downward slope and you don’t relinquish ownership rights. However, we will lease out the space in phases in the next few years,” said the same official. With capital values per square foot touching Rs6,000, building residences in the tower has been ruled out. Hospitality and commercial office space will be built instead. Construction costs will also double from the 60th floor upwards. These will be resistant to high wind velocity. Superior quality of steel is required to construct such buildings.

However, 10 months after winning the bid, construction is yet to start and the project is still at the planning stage finalizing the design and appointing project consultants. There is no hint at when construction will take off. An August office space report by Cushman and Wakefield Inc., a property advisory firm, said Hyderabad witnessed fresh office space supply of 755,000 sq. ft in the second quarter, about 12.5% of the expected 6 million sq. ft supply this year. Deferred pre-commitments, primarily attributed to supply overleaping absorption during the quarter, indicated a situation of oversupply. Though vacancy rates in the city have been low, there are areas with large unleased concentration of grade B stock of office space, the report said. Pawan Swamy, managing director (markets) of Jones Lang LaSalle Meghraj, a property consultancy firm, said, “Hyderabad will be over-built in the next six-eight months with a lot of fresh supply coming in. Though leasing offers better returns, selling is easier in the current market. Only developers who can hold on to their properties can afford to lease out space, but the good part is that the value of a property is higher after you lease it.” “It is a challenge to put up 4 million sq. ft of space for lease in the current market situation because of a demand-supply disbalance. Hyderabad is also going to face a problem of over-supply soon, with a lot of development happening,” said Santosh Martin, chief executive officer of Bangalore-based Divyasree Developers Pvt. Ltd, which is primarily into office space and has a hospitality venture coming up in Hyderabad.

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HMDA Needs Time For Zonal Offices

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The Hyderabad Metropolitan Development Authority’s proposal to set up zonal offices at different parts of the city to provide better access to the citizens will take more time to take shape. The plan includes five zonal offices in Hyderabad for easy access to the HMDA. The offices have been proposed to be set up at Ghatkeshar, Kompally, Kokapet and Shamshabad. One is yet to be decided, though the HMDA officials said it may be set up at Narshingi. “We have recently visited Kompally and Ghatkeshar. The buildings are still under construction and it may take more than a week to set up the centres,” the officials added The offices will include various departments like planning, engineering, accounts and estate. A committee will soon visit Chevella, Sangareddy, Bhuvanagiri, Ibrahimpatnam, Pochampally, Narsapur, Shamirpet, Keesara, Maheshwaram and Kothur to inspect the buildings and finalise them for the proposed offices.

The expanded jurisdiction under the HMDA include 16 mandals of Hyderabad, 10 of Medak district, 22 of Ranga Reddy district, two of Mahabubnagar and four mandals of Nalgonda district. Meanwhile, the HMDA office at Madhapur could take another two years to be completed. Rs 50 crore has been sanctioned for the complex. It will come up near the National Academy of Construction. The design of the offices will be finalised in two weeks, said the HMDA chief engineer, Mr Vivek Deshmukh.

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