DLF gets 11.76-acre Gurgaon plot with record Rs 1,496 crore bid

dlf newsIn a closely contested auction, DLFBSE 1.19 % has emerged as the highest bidder for a land parcel put by Haryana State Industrial and Infrastructure Development Corporation (HSIIDC) spread over 11.76 acres in Gurgaon for a record Rs 1496 crore, said three persons familiar with the development.

The company is expected to pay an additional Rs 143 crore for Transit-Oriented-Development rights. DLF will also have to pay Rs 120 crore for registration of the land parcel, taking the total deal value to Rs 1,759 crore, against the reserve price for the land parcel that was set at around Rs 686 crore.

This is an unprecedented price for a land parcel in the National Capital Region. The deal concluded through an e-auction on Monday night, at a base price of over Rs 127 crore per acre, has surpassed all earlier benchmarks.

DLF and Bharti Realty had emerged as the contenders in the final round out of more than half a dozen developers, including Indiabulls Real Estate, Experion Developers, Emaar Group, Embassy Group and RMZ showing interest in this land parcel.

The second highest bid made by Bharti Realty stood at Rs 1,446 crore.

An HSIIDC official, who requested anonymity, confirmed that a subsidiary company of DLF has emerged as the highest bidder with Rs 1,496 crore. An email sent to DLF remained unanswered till the time of going to press on Tuesday.

As per the bid terms, the allotment letter for the said land parcel will be issued to Aadarshini Real Estate Developers, subsidiary of DLF Home Developers upon payment of 10% of the quoted amount. The balance amount can be paid in installments as per the terms of bid document, DLF said in a regulatory filing.

In November, global home furnishing company Ikea had bought a 10-acre land parcel in Gurgaon for Rs 842 crore through an e-auction conducted by HUDA, the Haryana government’s development agency. The land parcel is located on NH8 behind Oberoi Hotel in Guragaon, and has the potential to develop both commercial and retail spaces.

“This is an extension of the established DLF Cyber City micro market and the deal reconfirms DLF’s long–term commitment to retain control over this NH8 cyber city micro market in terms of pricing, supply and occupier profile,” said Ankur Srivastava, chairman, GenReal Property Advisors. “It allows DLF to revalue its undeveloped FSI in this micro market while using this auction as a benchmark.”

“This is an extension of the established DLF Cyber City micro market and the deal reconfirms DLF’s long–term commitment to retain control over this NH8 cyber city micro market in terms of pricing, supply and occupier profile,” said Ankur Srivastava, chairman, GenReal Property Advisors. “It allows DLF to revalue its undeveloped FSI in this micro market while using this auction as a benchmark.”

The said 11.76 acre land parcel has a leasable potential of around 2.3 million sq ft. The plot has base floor space index of 1.75 times, which would get double to 3.5 times after factoring the benefit of Transit Oriented Development (TOD) rights.

DLF is expected to push this development into DLF Cyber City Developers Ltd (DCCDL), its joint venture with Singapore sovereign fund GIC. Promoters of DLF have sold their 33.34% stake in its rental arm DLF Cyber City Developers Ltd (DCCDL) to GIC for Rs 8,956 crore. The transaction was concluded on December 26, and the company now holds the balance 66.66% in DCCDL.

Currently, the rental arm’s portfolio includes leased space of 27 million sq ft and nearly 4 million sq ft under construction. The joint entity also has access to land bank that has additional development potential of 19 million sq ft.

According to industry experts, the successful bidder will have to lease spaces in proposed development on this plot in the range of Rs 150 to Rs 160 per sq ft a month to achieve a breakeven, given the high amount of bid. Currently, office space lease rentals in this vicinity are around Rs 110 per sq ft and a right mix of retail and commercial development may help the company fetch the expected average lease rentals.

Source : http://bit.ly/2GP5QOr


Japan’s Sumitomo Enters Indian Realty Sector with $2 billion Gurgaon Projects

krisumi-corporation-660_022218052711Japanese conglomerate Sumitomo Corp today announced USD 2 billion township project in Gurgaon as it forayed into Indian real estate sector in collaboration with local partner Krishna Group.

The 50:50 joint venture, Krisumi Corporation Pvt Ltd will build 5,000 flats, shopping mall, office space and educational institution at 65-acre land in Sector 36-A, Gurgaon abutting the Delhi-Mumbai industrial corridor’s Global City.

The project, which will have a total built-up area of 18-18.5 million square feet, will be developed in phases, the two partners announced at a media round table today.

“I want to create a Japanese city here…The first phase will comprise 1.2 million square feet of built-up, consisting of 430-450 apartments and will be completed in 4-5 years,” said Ashok Kapur, Chairman, Krisumi Corp.

Krishna Group, a diversified business house with interests in auto components, media, travel, and entertainment seating, owns the 65-acre land parcel where the mini-township will be built, said Kapur, who is also the head of the Group.

“Idea is to create a niche which Indian market had not seen,” Kapur said adding the apartment that may cost Rs 1-2.5 crore will have quality and facilities equivalent to those costing Rs 15-20 crore at present.

Sumitomo Corp, which has done 300 real estate projects globally, will bring in the expertise and technology for Krisumi City.

“India’s real estate sector is going through an interesting phase. While consumer’s expectations have evolved manifold, most of the traditional developers are finding it difficult to effectively cater to all their requirements,” said Masahiro Narikiyo, Chairman and MD, Sumitomo Corp India.

Narikiyo said the Tokyo-based group has done projects in Japan, the US, China, Singapore, Indonesia and Vietnam.

The company was attracted to India because it “is politically very stable among emerging markets,” he said. “It is governed by democracy, the value we can share.”

Sumitomo Corp has sold over 50,000 (rpt) 50,000 condominiums in Kansai and in the Tokyo metropolitan area over the past 50 (rpt) 50 years. In the office building business, it operates about 3,30,000 square metres of office space in Tokyo and Osaka.

Kapur said the biggest challenge facing the Indian real estate industry today is quality, efficiency, and commitment to timelines, all of which is exactly what Japan is known for.

“Japan is already beyond RERA,” he said .. adding that Sumitomo may enter into more such alliances in India later on.

The project spread over 65 acres will be developed in 7-8 phases over 10 years. While the first phase with 1.2 million sq ft development will have over 450 apartments, the entire project will offer around 5,000 apartments.

“The biggest challenge facing the Indian real estate industry today is with regard to quality, efficiency and commitment to timelines, all of which are exactly what Japan is known for. We are certain that our partner, Sumitomo Corporation, part of the 400-year-old Sumitomo Group, with their extensive global experience in real estate development shall contribute tremendously in creating projects with endearing value for our clients as well as the local communities around it,” said Ashok Kapur, chairman, Krishna Group.

The joint venture company has got most of the approvals for the first phase, which will be launched later this year. The construction of the first phase of the project is also expected to commence this year.

Source : http://bit.ly/2EP74ZK

NRIs Switch to Commercial Realty as Residential Stutter


Non-resident Indians (NRIs) from the US and West Asia are now diversifying their asset exposure and investing more into commercial properties rather than residential due to high risk and the imminent slowdown in the segment.

The preference is also being driven by better returns from the office assets and a fixed income that is being generated by such investments.

“Its returns outperform those of traditional fixed deposits (FDs), mutual funds and Sensex, with an average rental return of 7-8% and overall returns of 18-22%.

Currently, 40% of our NRI clients are investing in Indian commercial real estate through fractional investment,” said Kunal Moktan, co-founder of Property share.

Commercial office space vacancy has almost halved in the past six years due to robust demand from corporates. Office space absorption is not only strong, but pre-leasing is at an all-time high, which is an indication of sustained demand and occupiers’ interest in commercial spaces.

“Over the last one year, we have sold around 1 lakh sq ft of small offices in Navi Mumbai. Of this, 15-20% have been bought by NRIs and this is a significant jump compared to our earlier experience. ,” said Ashok Chhajer, CMD, Arihant Superstructures.
Source : https://goo.gl/kgAXSR

Govt may reduce GST on construction materials

At least two state finance ministers told TOI that a number of items like bath fittings, cement, steel products such as rods used for construction are in the top bracket and do not belong there

GST Council may reduce the number of products in the highest slab, following a series of complaints by state finance ministers, who have argued that several common-use products face a 28% levy, causing hardship to people.

At least two state finance ministers told TOI that a number of items like bath fittings, cement, steel products such as rods used for construction are in the top bracket and do not belong there. “The idea was to classify the goods and services into merit and non-merit goods with the non-metrit goods in the top bracket.
But we have gone beyond that,” said a state finance minister, who has usually sided with the Centre on most issues.

The minister said the “block” was too big and needed to be reduced. On Saturday, CBEC officials had also said that there were far too many items in the top slab.

The second state FM said the issue is expected to be discussed at the next meeting of the Council scheduled in Guwahati, given the concerns expressed by several states.“In the medium-term the aim is to move to fewer slabs,”

The minister said. Finance minister Arun Jaitley had last week reiterated the plan to move to fewer slabs in the future.

Some of the state government officials also believe that the 28% levy was also resulting in sellers evading taxes as it is quite common for shopkeepers to advise buyers to pay in cash, where no invoice is issued.

The talk of reducing the number of products in the top bracket follows finalisation of a concept paper at last Friday’s GST Council meeting.

It was decided that a formula for review, including the need for reduction in slabs, the tax credits available and revenue impact will have to be discussed by the Council in detail before a decision is taken, said a source.

Separately, the government has also announced the establishment of a panel of state FMs, which will review the tax structure for different categories of restaurants for a possible reduction or rationalisation. Restaurants currently face a levy of 12% to 28%, depending on whether they are mereeateries or restaurants in five-star hotels.

In addition, the panel has three other terms of reference, including possible exemption for sales revenue from exempted goods in calculating the overall turnover of an entity, a decision that is fraught with the risk of massive leakage from the government treasury.

The committee will see if the composition scheme can be extended to the outward supply of goods. The scheme allows traders (1%), manufacturers (2%) and eateries (5%) with turnover of up to Rs 20 lakh to Rs 1 crore to pay GST at a flat rate with a lower compliance burden.

In deciding GST rates, the government had opted for a principle of equivalence, where the combined incidence of VAT and excise, or service tax, was factored in. The Centre’s focus was on ensuring that there was no rise in the burden on common-use items, especially those which are part of consumer price index, while protecting its revenue.
Several items such as stationary were put in the top bracket, decisions that have already been tweaked.

At the same time, the GST Council, comprising the Centre and the states, had consciously opted for multiple tax rates in segments such as restaurants and hotels with the luxury segment in the top bracket.
Source: https://goo.gl/cZ9i2S


RBI allows banks to invest up to 10% of REITs’, InvITs’ capital


MUMBAI: In a move to boost spending on infrastructure, the RBI on Tuesday allowed banks to invest up to 10 per cent of the unit capital of single Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

“It has been decided to allow banks to participate in REITs and InvITs within the overall ceiling of 20 per cent of their net worth permitted for direct investments in shares, convertible bonds/debentures, units of equity-oriented mutual funds and exposures to venture capital funds (VCFs),” a Reserve Bank of India notification said.

The apex bank said the permission was subject to the condition that banks will not invest more than 10 per cent of the unit capital of a REIT or an InvIT.

“Banks should put in place a Board approved policy on exposures to REITs/ InvITs which lays down an internal limit on such investments within the overall exposure limits in respect of the real estate sector and infrastructure sector,” the notification said.

Banks will also have to ensure adherence to the prudential guidelines on equity investments, classification and valuation of investment portfolio, Basel III Capital requirements for commercial real estate exposures and large exposure framework, it added.

In its first bi-monthly monetary policy review of the fiscal presented on April 6, the RBI had permitted banks to invest in REITs and InvITs in a measure designed to revive stalled infrastructure projects.

Source: https://goo.gl/LB6Pmz