DLF’s new luxury property

Real estate giant DLF has announced the launch of its new luxury property ‘The Chanakya’ to bring in brands such as Longchamp, Hunkemoller, G Star Raw, Juicy Couture, La Perla and Chanel Beauty to its Emporio and Promenade malls in 2016. .

Speaking on the launch, Dinaz Madhukar, Senior VP DLF Luxury Retail said, “It’s an exciting time for the retail industry and we are glad that big brands looking to enter India are doing it with DLF,” adding that The Chanakya will offer a mix of bridge to luxury and luxury brands. We have worked with brands Versace and DKNY to get some of their existing retail space for brands like Bvlgari and Tumi at The Emporio.

While brands like Juicy Couture and Chanel beauty already have a presence in other malls in the country, DLF Emporio will house La Perla and Longchamp’s exclusive stores in India. Bvlgari and Tumi also have their exclusive stores in the Emporio.

India’s largest realty firm is going to raise approx. Rs 3,600 crore

As per the recent reports, DLF, the India’s largest realty firm is going to raise approx. Rs 3,600 crore in current quarter by issuing the securities, which is backed by its IT-SEZ and it is the part of DLF’s strategy to replace the debt of higher interest rates. The same report stated that on Tuesday, DLF rallied about 2.27 per cent in intraday trade. However; the stocks must gains to settle on 0.7 per cent which is higher at Rs 139.3.

DLF is also planning to issue its first ever REIT (Real Estate Investment Trust) in the present fiscal to monetize its commercial assets. According to the statement of Ashok Tyagi, who is Chief Financial Officer of DLF, “Currently we are actively working with different rating agencies and investment bankers for CMBS issue (Commercial Mortgage Backed Securities). The more he added that we don’t have any kind of time frame to launch the Commercial Mortgage Backed Securities, but sources are indicating that DLF will launch its CMBS in next two months.

In February 2015, DLF was set to launch its CMBS of about Rs 3,600 crore as a part of SEZ business to improve its quality of debt. In present the company is waiting for SAT (Securities Appellate Tribunal) judgment on the SEBI’s order that had ban DLF from accessing the capital market for 3 to 4 years.

In March 2015, Securities Appellate Tribunal had passed the order on the basis of ‘majority order’ by imposing the ban for next three to four years from the side of SEBI. In 2014, the DLF had launched the country’s first ever CMBS and was successfully raised more than Rs. 900 crore in two rounds of CMBS with the help of two shopping malls in Delhi. Currently the net debt of DLF is about Rs 20,336 crore as per the data on December 31, 2014 out of which Rs 14,000 crore are from the rental arms.

It is expected that soon company will monetize its commercial assets to list REITs (Real Estate Investment Trusts), as per the statement of Tyagi. Whereas; in current fiscal DLF also want to float its first REIT but currently it is subject to receive the requisite approvals. The more he added that Real Estate Investment Trusts now become viable as government has clarified that MAT (minimum alternate tax) will be applicable on the time of actual transfer of these units. Apart from all that the DDT (dividend distribution tax) will continue to be an alternative for some of the real estate players who are looking for REITs. In simple terms we can say that there are 4 to 5 pilot REITs are about to launch in this fiscal year.

It is clear that REITs will help to unlock the value of completed and leased assets which can be used for debt and capex reduction. The DLF is planning to raise the Rs. 3,000 crore via PE (private equity) on each project level, as per the statement of CFO of DLF. However; the discussion is underway with some of the private equity players, but still there are no timeline for such PE deals. Apart from that company is planning to divest around 50 per cent stake in four of the latest projects to PE firms. Now its clear that DLF is looking for the way to raise the funds through PE routes to boost its cash flow because there have been sluggish nature in the sales of houses in last year.

In past one to two year the DLF has land bank from about 300 million sq ft out of which approx. 50 million sq ft is under construction and due to that the share price went up to 1.25 per cent which is Rs 138 piece on the BSE index with market cap of Rs 24,644 crore.

Supertech to raise Rs 500 crore

The leading real estate firm Supertech is planning to list its six of the rented as well as operational malls with REIT (real estate investment trust) to raise Rs 500 crore in the duration of next two years which is the year 2015 and 2016. As per one of the latest survey Supertech has more than 2 million sq ft of retail space in its six malls out of which two are in Ghaziabad and one each is in Noida, Rudrapur, Haridwar, Rudrapur, and Meerut.

However there are few products under construction by Supertech. Currently Supertech is in discussion with one of the Singaporean company which has experience in setting up the real estate investment trust in various real estate markets. As per the statement of officials we are in the starting stage for the listing of our assets and REITs own the properties to get the rental income and distribute it among investors. For real estate investors they provides high dividend with a liquid option where one can invest in the real estate sector.

Most of the real estate firm in the country and as well as some of the private-equity funds are showing interest to set up the REITs because stock market regulator SEBI (Securities and Exchange Board of India) notified its rules to list the trusts in September 2014 with a aim to view and attract more and more funds in a transparent manner, so that real estate developers can pool the money for the development of new projects. But till now no REIT is listed in India and it’s just because the lack of clarity in taxation process. With a aim to encourage local listing, central government is decided to do some capital gains in the favor of sponsors in the Union budget of 2015 at the time of listing of REITs on rental income.

However the capital gain will be applicable for all the direct transfer of same or different assets to any kind of these trusts. But still the budget is not offering any clarity on dividend distribution t as. The major real estate developers such as; RMZ, DLF, Embassy Office Parks, Ambience and many others with PE firms such as; Kotak Realty Fund, Red Fort Capital and Blackstone is known for listing their assets as REITs. They have develop the acquired rent producing assets in past few years as it could attract more than $1 billion or Rs 6,280 crore in 2015 witht eh additional tax benefits announced in the union budget of 2015, said the property consultant from JLL India. However most of the property experts said that in near future more exemptions can be made by the state as well as central government to make its segment more attractive for real estate players.

But it’s clear that the Capital gains taxes will exempted on the transfer of any SPV (special purpose vehicles set up to carry new real estate projects) share by different or same sponsors but at the MAT ( minimum alternate tax) is still applicable. If the minimum alternate tax will be so it will make REITs more attractive for real estate developer, says Shweta Aggarwal, Director of BMR & Associates.

RBI cut key interest rate

With the recent news that RBI has decided to cut the key interest rate, it is expected that this move of RBI will boost the affordable as well as premium housing demand and it also improve sentiments in the sluggish property market. Property consultants and real estate developers have demanded that interest rates should be further reduced. According to one of the realty Magazine, “This move is hope for the reduction in mortgage rates, which would improve residential sales in all over the country that have been suffering from general slackness in recent times. As per the recent research of JLL India, “Housing sales drop by 1.75 lakh units in the primary markets of 7 major cities in 2014 against nearly 2 lakh units in the previous year due to less demand. Happy with softening inflation, RBI decided to cut the benchmark interest rate by 0.25 per cent to 7.75 per cent with a view to boost growth.

Positive views of leading realty developer:

According to Rajeev Talwar, Group executive director of DLF, “It’s an awesome New Year gift and it seems that the finance ministry has putting his effort to convince RBI governor. Given the background of RBI governor, even the small beginning will be marked as big signs of hopes for the Indian economy”. The more he added that, this move would definitely encourage buyers now to invest in new homes or second homes.

Anuj Puri, Global property consultant JLL India Chairman & Country Head stated that “I expect this cut in interest rate to be the first of several to come and these will cumulatively make a big difference for home loan borrowers, as in present, the current interest rate cut will help revive market sentiment, which is very timely”.

Parsvnath Developers Chairman Pradeep Jain, appreciated the RBI decision and stated that realty sector has been struggling from the last 3 quarters with lower demand and more inventories. This decision would help reduction in EMIs and thereby encouraging fence sitters to conclude deals. Developers would also get funds at comparatively lower rates.

This move will instill hope as well as confidence in the real estate industry which is recovering from housing sales is around the corner, stated the Sanjay Dutt, Cushman & Wakefield Executive Managing Director, South Asia. Whereas; David Walker, MD of SARE Homes, said, “This step of RBI will cheer up the markets and hoped that financial institutions will pass on this reduction to customers, which in turn would boost housing demand”.

As per the Lalit Kumar Jain, Chairman of CREDAI, the apex organization of real estate developers, RBI’s decision is as a good beginning but said this is not enough as a reeducation of 200 basis point within short span is needed. Whereas; the Consultant Knight Frank India CMD Shishir Baijal, stated that This decision of RBI is positive approach that would benefit the debt burdened developers and stretched households alike and to comment on this RBI decision Anshuman Magazine, Chairman & MD of property consultant CBRE South Asia, said that this decision is good and in current market situation this reduction in the base rate is an important step in improving home buying sentiments.

According to CREDAI (NCR) President Rohit Raj Modi, “The rate cut will help the real estate developers to expedite projects that were otherwise facing tight fund crunch”. The more he added that home buyers are dreaming to own a home that would also get a boost as we expect an accelerated purchase cycle. Mohit Goel, CEO of Omaxe stated, that this move clearly shows RBI’s shift in stance in favor of positive growth and it is also correct time to usher in a slew of out-of-policy measures such as; to allow the banks to lend more to real estate, easy funding norms and more. Now real estate sector will play role of a catalyst in driving the overall economy.”

Amit Modi the ABA Corp Director said, “This was the most awaited change and development in policy and now easing interest rate will help to revive the health of businesses such as; Real-Estate which are highly sensitive to interest rate movements.” According to Ansal API Vice Chairman Pranav Ansal, “This is so positive step from RBI, which will boost housing sales and improve overall sentiments in the real estate market. The more he added it is a good sign and now real estate sector will look forward to RBI take the drastic steps in its forth coming monetary policy”.

Real estate players are now resorting to the issue of non-convertible debentures (NCD) to raise the capital.

Recently, Intime Properties, a part of the K Raheja Corp group raised Rs 340 crore through the issue of non-convertible debentures with a fixed rate of 9.95 per cent.

According to a statement issued by the real estate firm, the security is a commercial mortgage-backed security (CMBS). The issue was being used to refinance bank debt. It has been rated AAA by India Ratings, according to a statement by the firm.

“INTIME owns and operates 3 commercial office buildings in Mindspace IT Park, Hyderabad, with a total leasable area of 1.71 mn sq f. The property is currently 99% occupied by over 35 clients,” it said.

It may be noted that Real estate major DLF had previously come out with a CMBS issue in May. The NCDs are set to mature in nine years, with options to redeem in the fourth and the sixth year, respectively.

The Raheja group holds 89 per cent stake in Intime, with the remainder held by the Andhra Pradesh Industrial Infrastructure Corporation Ltd, according to the company statement. IDFC Ltd and Credit Suisse Securities (India) Private Limited were the arrangers of the issue.