CEMENT INDUSTRY HIT BY REALTY SLOWDOWN

The slump in the realty sector, which accounts for about 65 per cent of the total cement consumption in India, has affected the cement sector. Since most realtors are facing a severe cash crisis, it is quite unlikely that too much real estate development will take place in the near future. IT/ITES segments account for about 75% of the office space across India and lower growth in employee recruitment for the sector shall translate into muted demand for cement. Cement exports have also declined from 10 million tonne (mt) in FY05 to 2.1 mt between April-December 2008 on account of additional capacity addition and the real estate slowdown in the Middle East region, which is the main export market for Indian cement producers.

SLUGGISH REALTY MARKET TO JUMPSTART AGAIN

Measures announced by the Central government to stimulate the economy by ensuring cheaper loans for homes and industry has raised hopes for people in the real estate and banking sectors. Banks like IDBI Home Finance, ICICI and SBI are anticipating that demand for home loans would increase by 20% in a couple of weeks as queries for home loans have already started pouring. People are now inquiring about home loans after finding that the Union government has decided to make loans cheaper, said a senior bank official. Bank officials also feel that steps being taken by the government to revive the economy would also end all the rumours that have affected the loan business more than the global slowdown

GOLDMAN SACHS BUYS A RS 30 CRORE STAKE IN INDIABULLS REAL ESTATE

Foreign fund Goldman Sachs Investments Mauritius (India) has bought shares worth Rs 30.84 crore in Indiabulls Real Estate through open market transactions. As per the information on bulk deals available on the National Stock Exchange, Goldman Sachs Investments Mauritius bought 20.89 lakh shares at Rs 147.64 per piece aggregating to Rs 30.84 crore.

MHADA INVITES BUYERS FOR LOW-COST HOUSES

For those looking for affordable homes in Mumbai, Maharashtra Housing and Area Development Authority (MHADA) has announced a sale of 3, 863 flats built by it. Ranging from 225 sq ft to 870 sq ft, the prices of these flats vary from Rs 3.5 lakh to Rs 45 lakh depending on the size and location. The homes will be allotted depending on the income of the applicants and Mhada has chalked out four sections: economically weaker sections for income up to Rs 8 thousand per month, low income group (Rs 8 thousand - Rs 15 thousand per month), middle income group (Rs 15, 000 - Rs 20, 000 per month), and higher income group (Rs 20, 000 and above per month). In case the number of applications exceeds available flats, Mhada would resort to drawing lots by a computerized lottery system.

INDIABULLS REAL ESTATE'S $ 400 MN GDR CONCLUDES

Indiabulls Real Estate has recently concluded its $ 400 million Global Depository Receipts (GDR) offering with the allotment of over 3.87 crore equity shares. The board of directors allotted 3,48,83,720 equity shares of Rs 2 each as underlying shares representing equal number of GDRs. Pursuant to the over allotment option exercised by the sole underwriter Merrill Lynch International, the company issued 38,75,968 equity shares. Each GDR of $ 10.32 represents one equity share. Accordingly, the total number of equity shares alloted underlying the GDRs amounted to 3,87,59,688 thus concluding the aforesaid GDR offering of the company. Merrill Lynch was the sole book runner for the offering, which is understood to be the first fund raising by any Indian developer in the international market. Earlier in May, the shareholders of the company had approved a special resolution authorising the board to raise $ 600 million through international offerings, including GDRs, American Depository Receipts and Foreign Currency Convertible Bonds. Shares of Indiabulls Real Estate were trading at Rs 474.90, up 1.38 per cent on the BSE.

ING REAL ESTATE TO INVEST IN INDIA

Dutch property manager ING Real Estate plans to invest in India, Turkey, Europe and the Americas to meet demand and benefit from relatively high returns. The real estate unit of financial services division of ING Group, which managed 94.4 billion euros ($130.2 billion) in property globally as of March 31, plans to invest 0.5 to 1 billion euros in these two countries by early 2008. Returns in India and Turkey are expected to be higher than the 4-7 percent generated in Western Europe and North America. Increased demand from customers is another reason for ING Real Estate's expansion into these two markets. ING Group desires to participate in markets that grow. This is also a reason why they started investing in Scandinavia in 2005 and central Europe in 1993. ING has been in China since the early 1990s. ING Real Estate, which last year bought Canada's listed Summit Real Estate Investment Trust, does not plan to take over local companies in India or Turkey. The company is also eyeing investments in Western Europe and the Americas via its Atlas Infrastructure Fund, set up earlier this year. This is the market where investors want to be now. Today, one should think of returns between 12 and 14 per cent on infrastructure projects. Therefore, ING Real Estate would not quickly make investments in East European countries such as Ukraine and Russia, as they lack sufficient availability of investment grade property, transparency, and a stable legal system, thereby making investment returns not very attractive.

HDFC ENTERS HOME EQUITY BUSINESS

HDFC, India's largest housing finance company has made a big move in the home equity business by offering loans against property at 13.25%. This could turn out to be a big business opportunity for the lender since most of its borrowers pre-pay home loans. The finance through the home equity route makes available finance at a cheaper rate than, say, auto finance or personal loans with easier repayment schedules. HDFC expects a big demand for this product from borrowers who have cleared their mortgage dues. This loan would also be available to existing borrowers, if the market value of the property is much higher than the outstanding home loan. The advantage of this loan over the existing top-up loans is that there is no Rs 5-lakh ceiling, which is applicable on top-up loans. Asset Plus, as this product is called, is not a new product from HDFC in the true sense. However, it is now structured differently and is aimed at assisting customers to meet their immediate financial requirements while they continue to occupy their homes. Also, if compared to a personal loan, the interest rate on Asset Plus is lower and loan term is much longer. This gives a borrower the option to spread the loan repayment over a longer period of time, in effect reducing the immediate financial burden.. Interest rate for Asset Plus loans will be charged from 13.25% onwards on floating rate loans and the loan term against residential premises is 15 years while the term for non-residential property is 10 years, subject to the age of customers. The product entitles customers to loan sizes beginning from 50% of the market value of the property. Subject to the market value of the property and loan eligibility criteria, HDFC's customers can have a total exposure of up to 70% of the market value of the property and at the same time get an interest rate, which would be lower than non-HDFC home loan customers. The eligibility criterion for Asset Plus is that the property needs to be freehold, self-owned and fully constructed, with a clear and marketable title. One can also mortgage a joint property by having all owners as co-applicants for the loan. Although a small business in India, loans against home equity are big business in developed market like the US. However, since this involved increased leveraging, the loan product increases the market sensitivity to interest rates and real estate risks.