Kolkata developers eye other cities on slowdown blues

Limited growth opportunities in Kolkata are forcing city-based developers to explore other markets. Chennai is high on the preference list, followed by non-metros such as Ahmedabad, Raipur and Bhubaneshwar.

Delay in receiving clearances, long turnaround time (for projects) and other inherent risks are some reasons for venturing outside the State.

At least five major developers have firmed up plans for entry in Chennai, while Raipur, Bhubaneshwar and Ahmedabad are the other alternatives.

Harsh Patodia’s Unimark Group, Nandu Belani-controlled Belani Housing Development, Sushil Mohta’s Merlin Group, Pradeep Chopra’s PS Group and the Space Group are planning to enter Chennai.

Merlin is also firming up plans for entry in Raipur and Ahmedabad.

“The signs of a slowdown in Kolkata are imminent. Over the last one year there has not been any upward price movement despite increase in demand. Commercial space off-take has gone down too,” Nandu Belani of Belani Housing Development Ltd told Business Line.

Belani has over the last one year set up an office in Chennai followed by zeroing in on a plot. He plans to develop a residential project. Merlin too is eyeing a residential project in Chennai.

According to Harsh Patodia, President (CREDAI Bengal), apart from expanding operations, the need to de risk investments i.e. having more offerings outside a single city is also a reason. The best bet would be to enter new markets that have similar dynamics as Kolkata.

Chennai, which has moderate presence of private equity players and investors, relatively stable price movement and upcoming infrastructure, along with demand for apartments, offers the best alternative.

Other places such as Ahmedabad have a faster turnaround time and Raipur and Bhubaneswar have fewer local developers. As such these States have come up as logical alternatives.


“In the southern States, people identify with local developers. Many of us are entering into tie-ups with a local player in the region,” Patodia said.

Patodia’s Unimark Group is in final discussions with a prospective local partner for its Chennai entry. Kolkata’s Space Group too has entered into tie up with Chennai’s Olympia Group for joint development.


Market sources, meanwhile, indicate that over the last one year, growth in Kolkata has been stunted. A prime indicator is the price (of apartments).

Till April, the average per sq ft price in the city stood between Rs 3,000 and Rs 5,000, a stable price that has neither moved up or down.

“Developers have been taking a hit on their margins. They are unsure of unsold stock if they opt for new projects. Price is unlikely to move up with the uncertainty in the market,” a developer said.

Delay in obtaining clearances and non-withdrawal of the Urban Land Ceiling Act leading to non-availability of land; followed by increase in registration fees and property valuation; have adversely impacted developers. Large projects are on the back-burner.

Source: Business Line

Residential in, commercial out for real estate bigwigs

Originally published in the Financial Express on 24th October, 2011

Lack of funds, customer aversion to striking advance lease deals and a slowdown in demand for office space have combined to push real estate developers into building more residential apartments than commercial spaces.

“In the residential market, you can pre-sell the space and customer advances can almost fully finance the actual construction ad agiainst the commercial market,” says Pirojsha Godrej, executive director, Godrej Properties.
Godrej Properties (GPL) has put on hold its commercial estate development in Tier-II cities and, instead is now focusing more on residential apartments. According to them the commercial real estate segment turns out to be capital intensive without good returns and residential real estate, on the is more viable, given the way the selling of space takes place in such projects.
“Residential properties definitely give higher returns as, in some of the projects, bookings start even before the ground breaking happens, which is not the case in the commercial space,” says Samantak Das, national head (research), research & advisory services, Knight Frank (India).
Lenders funds developers who have a good track record and are involved in projects that have demand. Consultants say lender risk is linked to muted rentals.”The key risks for lenders to commercial real estate are that rents are not likely to improve for the next 18-24 months,” says Anshul Jain, chief executive, real estate consulting firm DTZ India. “The demand has also been lacklustre in 2011-2012 compared to 2010-2011.”
In Kolkata, Godrej is developing two large information technology parks Godrej Waterside and Godrej Genesis. “We have locked up huge amounts of capital in these projects, but the returns have not been proportionate,” says Pirojsha Godrej. The company, which was earlier planning to develop both commercial and residential properties in Ahmedabad, will now build only residential apartments there.
Many developers agree with Godrej.
As the current economic scenario is gloomy, developers are deferring commercial office space ventures, says Samantak Das of Knight Frank (India). “There is a lot of supply in the market, which can still be absorbed,” he says.
In CY 2010, anywhere between 33 million and 35 million sqft of commercial space was sold; in 2011, it is likely to be 35 million sqft, says DTZ’s Jain. “In 2012, the demand offtake is likely to taper off to 31-32 million sqft, provided the world does not burst because, if that happens, the situation could be akin to the the one in 2009 when the offtake slipped to 23 million sqft from the 40 million sqft in 2007”.
Source: capitalcityscape.over-blog.com

Real Estate Biggies To Compete For Prime Plot near Kolkata

A prime 5-acre plot on the edge of EM Bypass Expressway has caught fancy of Indian real estate giants. Soon, big names including DLF, Reliance Group, Emaar MGF, Indiabulls, Bengal Ambuja Realty, and Paharpur Cooling Towers will be seen competing for it. Kolkata Municipal Corporation (KMC) will put the project to auction. The location of the property is its biggest plus. It is located opposite the Science City Infotainment Complex. Also, it is at a stone throw distance from the ITC Sonar. KMC will offer it on a 99-year long term lease through an auction. Most probably, the land will be used for development of an exclusive commercial-***-residential complex. This region is buzzing with developing commercials and there is huge demand. To add to this, the plot is on the edge of a prime expressway that passes through fast flourishing New Kolkata on the eastern border of the city. 57 corporates have bought the request for proposal (RFP) document containing the terms and conditions! of the auction. The last date to buy the RFP was 5 October whereas the last date for submission of bids is October 15. Reportedly, KMC will use 50% of the proceedings from the auction to set up an art gallery in Rajarhat.
Source: mybangaloreproperty.com