Government Mulls Trimming Impact Fee On Real Estate

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

With a slowdown in construction activity and requests from builders’ associations, the municipal administration and urban development (MA&UD) is considering reducing impact fee. The Greater Hyderabad Municipal Corporation (GHMC) and Hyderabad Metropolitan Development Authority (HMDA) are collecting impact fee from builders, especially the ones who build structures above five floors and commercial buildings, as such construction would put more burden on infrastructure.

After the new building rules were issued under GO 86 in 2006, the MA&UD introduced the impact fee in the city. As per the rules, a builder constructing a 15-floor building has to pay Rs 20 crore including impact fee either to GHMC or HMDA. The real estate builders claim it has become a burden to take up big projects coming up in over 10 acres. Apart from this, the city-level impact fee is being collected by the GHMC for constructing commercial buildings, shopping malls and multiplexes in core areas of the city. The impact fee is collected from builders apart from other permission fee.

The builders’ associations are also demanding that fee be collected based on the number of floors instead of the height of buildings. IT firms seek fourmetres per floor instead of normal three for false ceiling and AC ducts. The Builders Forum has asked the government to reduce the impact fee and collect it after completion of the building as the impact (burden) on the infrastructure will be after completion of the building or collect the fee in instalments,” Builders Forum president C Sekhar Reddy told TOI. “The state government will take a decision on the impact fee in a week,” an official said. The city impact fee was enhanced last year by grading the 61 commercial roads into A, B and C categories based on the width and traffic flow on it.

GHMC has been collecting Rs 400 per square feet (sft) on total built-up area in category ‘A’ roads, Rs 300 in ‘B’ roads and Rs 200 in ‘C’ roads apart from the city-level impact fee that is being collected by the GHMC for giving building permissions. If a builder or owner wants to construct ‘A’ category buildings on ‘B’ category roads, they have to pay three times the impact fee instead of what is charged in category ‘B’ roads. Similarly, if builders want to construct ‘B’ category buildings in ‘C’ category roads, they have to pay three times more impact fee.

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ORR May Face Delay As Land Owners Put Up New Demand

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Nearly 740 acres of land is yet to be acquired for the Outer Ring Road (ORR), though the work on the second phase is already on. This is because of opposition from land owners. Even three years after the land acquisition began for the state government’s ambitious project, of the required 5,200 acres of land for phase II, so far about 4,460 acres have been acquired. The land includes agriculture land, plots and institutional land. The HMDA paid Rs 565 crore as compensation and allotted 5,69,000 sq yards of land to the land losers towards land for land compensation.

Following slump in real estate prices, the land losers, who were hitherto demanding land for land, are now reluctant to take land from the HMDA. The works of 62-km ORR phase-II A from Narsingi to Patancheru and Pedda Amberpet to Shamshabad began in December 2007. They were targeted to becompleted by May 2010. Phase II B works from Patancheru to Pedda Amberpet via Medchal, Shamirpet and Ghatkesar are expected to begin in January 2009. Of the total land required, nearly 2700 acres of land is required for phase II A. Though the works were started a year ago, the HMDA is still to acquire 500 acres of land for the Phase II A. While nearly 200 acres of land are in court cases, another 300 acres are to be acquired in areas like Koheda, Kongera and Srinagar where the farmers are not parting with their land for the ORR. Phase IIB requires 2,500 acres.

The government is yet to take over 240 acres in Shamirpet, Keesara and Korremla areas. Apart from this, the HMDA had acquired about 434 acres land for the ORR phase I from Gachibowli to Shamshabad which was opened to the public a week ago. “If the situation continues like this and the land is not acquired, it will be impossible to complete phase II on time,” an officer said. The farmers are not coming forward since of the total 5,200 acres nearly 3,900 acres are agriculture land. ORR proje

Realtors Shift Focus To Around Rs 15-20 Lakh Segment

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Low cost housing that had almost become a bad word for real estate companies is the latest buzzword in the business now hit by an economic slowdown. Companies, which prided in building luxury villas and houses for higher segments, have suddenly started chanting the mantra of ‘affordable housing.’ “Villas for Rs 55 lakh are out, now-a-days apartments for Rs 20 lakh are in. We are targeting young professionals who may not have been affected by the recession (read: non-IT professional) and want their own home,” says an industry observer. Companies now rushing into the Rs 20-22 lakh range include Janapriya Engineers Syndicate, Puravankara Projects, Golden Gate and Modi Builders among others. Analysts, of course, point out that there is no definition of affordable housing and aver: “It’s just that builders think a home that’s priced around Rs 20 lakh is within the reach of more buyers.” A developer reputed for lowcost housing here explains the rationale for many builders now rushing into this segment.

“When considering an expensive home, a buyer will definitely wait a few months for the prices to drop, but this does not happen with affordable homes, because prices are quite low already,” he says, adding, “the effective EMIs on home loans for this category come around Rs 15000-18000 per month, which many can afford.” Real estate companies also think that cheaper affordable houses will draw not only more but also younger customers. Bhanumurthy PVS, deputy general manager of Golden Gate Properties, says, “by keeping the prices low, we are trying to bring down the average age of the home buyer from 25-35 years to 25-30 years.” The company recently ventured to offer 960 sft 2BHK apartments at Rs 19.9 lakh. Nitish Ranjan, a 26-year old says, “Together, my wife and I earn Rs 80,000 per month. It wasn’t difficult to get a home loan since we could convince the banker that we could pay the EMI,” adding that he is not sure if he would have got a loan for a higher amount that a luxury home requires. Apart from the young, retirees are also drawn to houses at this level.

“Even pensioners can afford these homes, when they come with frills like ‘Book now, pay on possession’, life-time guarantees on title deeds and other lucrative warranties,” says V P Arvind, a retiree who recently booked an apartment at Miyapur. Real estate developers are also buoyed by volumes. “Thinner profitability spread over a larger volume will result in large profits,” explains a builder. India’s housing shortage increased from 19.4 million units in 2004 to 22.4 million in 2005-06 and “there has been a steady 25% year on year growth for the past five years in this segment,” says Ravinder Reddy, CMD of Janapriya Engineers Syndicate, adding, “we have already developed 21,000 such apartments, including 12,000 in the last five years.” This unwavering demand has led to a steady price rise in this segment that has never seen a ‘correction’, not even during the current slowdown. “It’s the Rs 50 lakh plus segment that has the jitters; the Rs 15-20 lakh range is still selling fine,” say observers.

In fact, Puravankara Projects recently announced an investment of Rs 80 billion for affordable housing. It plans to develop 64,500 homes and a built-up area over 59.80 million square feet in major cities, including Hyderabad, in the next five years. City-based players are also increasing projects around Madinaguda, Miyapur, Patancheru, University of Hyderabad and Nagole which are either industry hubs or close to the MMTS and metro zones.

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Realty Blues Hit Foreign Hotel Majors' India Plans

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

International hotel chains like Hilton, Accor, Carlson and Starwood are concerned about the viability of their India plans. Many of these hotel chains have tied up with real estate developers like DLF, Emaar MGF, Unitech and Parsvanath to set up five-star hotels. However, fund-starved developers, who are trying to raise money for their core activities like residential and commercial property projects, are understood to have put the hotel ventures on the back burner. A drop in occupancy and room rates, inflow of business travellers and tourists to India have also raised concerns on the viability of these projects, industry sources say.“Out of a total of 1.14 lakh proposed room supply, only 58% or about 66,000 rooms, will actually be developed over the next few years.

So, we feel many announced projects may not take off as planned,” said Manav Thadani, MD, HVS International, a hospitality consulting firm. “Now, debt raising is a difficult process,” says Homi Aibara of Aibara Consultants. Lemon Tree Hotels CMD Petu Keswani said: “Only developer-led hotel projects will face a problem as their priorities are different.” However, when contacted by ET, real estate developers insisted that projects were on track.According to the latest HVS report, cities like Bangalore, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune, where massive new room capacities are planned with real estate operators, are seeing trouble. In Bangalore not more than 60% of the new capacity is likely to come up. The same goes with Chennai, Delhi, Hyderabad, Mumbai and Pune. However, cities like Agra, Hyderabad, Jaipur and Mumbai saw a negative growth in room supply in 2007-08 as compared to 2006-07.The last few months have seen a demand-supply mismatch in tier II cities like Bangalore, Pune, Hyderabad and Chennai. Room rates too have fallen steeply in these markets, making it unviable for real estate developers to go ahead with the planned hotel projects.

This is happening at a time when there is a severe shortage of branded hotel rooms. Unitech MD Sanjay Chandra said: “We have management tie-up with the Marriott Group for three projects, and one of them will be commissioned in January. Other two projects are very much on.” Recent media reports had suggested that DLF’s hotel JV with Hilton had hit a rough patch. However, DLF clarified to the stock exchanges that “DLF’s JV with Hilton is on a firm footing and all plans for the development of hotels stand as originally envisaged”. However, industry sources said DLF has put the hotel project on the back burner for at least a year. An Emaar-MGF spokesperson said there were no change in the hotel plans of the real estate firm and its tie-up with Accor. Says Uttam Dave, president and CEO, Interglobe Hotels and head of development, Accor Hotels India (Accor has tied up with Emaar MGF to launch Formule 1, a budget hotel): “Most of our projects are on track, and so far at least none of our projects have been either cancelled or put on hold, and this includes both managed and investment projects. There have been some delays in the actual development and commissioning of projects, and this has been on account of obtaining development approvals from municipal authorities and not due to real estate values.”

Hyderabad's Richie Rich Beat The Meltdown

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

Despite an economic slowdown, the super rich in Hyderabad are buying homes as expensive as Rs 15 crore.In the city of the Nizams, a privileged few live life kingsize. So despite an economic slowdown, job layoffs and a crisis of confidence, ultra luxury homes that cost between Rs 12 and 15 crore each, are finding ready takers. Among the buyers are not just industrialists and IT czars but many traditionally rich people as well like a tobacco farmer from coastal Andhra and another person who runs a chain of educational institutions."Everyone gets taken care of in the boom period. So during the boom period, these people actually feel left out.

They realise that the period of slowdown of economic activity is when they are kings. So they get all the attention. And they are really liking it," said Amit Bagaria, a real estate consultant. The first of such super luxury projects coming up in Hyderabad is an exclusive gated community of 31 homes, each with a built-up area of 11,800 square feet.Its USP -- it will have no roads and it is the first of its kind car-free locality."The cars have been put below the podium level and on the podium level is a series of homes that do not have fences. So it is a beautiful community space," said Andrew Maynard, an architect.Experts say even though the real estate sector is hit badly by the economic slowdown, the ultra premium segment is bucking the trend.

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