DLF TO RAISE RS 10,000 CRORE IN 3 YEARS THROUGH ASSET SALE

Owners Sell 9.9% In DAL For Rs 3,860 Crore In Open Mkt Transactions

DLF, India’s largest real estate company,

is looking to raise Rs 10,000 crore in the next 2-3 years through sale of its

treasury investments, land parcels and real estate projects, said its vice-chairman

Rajiv Singh.

Mr Singh’s family, promoters of the cash strapped DLF, had sold 9.9% stake in the

company on Wednesday for Rs 3,860 crore in open market transactions.

ET Now had first reported on Thursday that DLF promoters were selling stake. Capital

group picked up close to 5% stake in DLF, while HSBC, GIC and Fidelity bought smaller

stakes. The transactions were done at Rs 230 per share. DLF shares closed marginally

down at Rs 234 at NSE on Wednesday.

On the timing of the stake sale, Mr Singh said, “If it was the best or the worst, one

would know only in hindsight, but it was surely the right solution in the current

circumstances.” DLF had mopped up Rs 9,000

crore in an IPO less than two years ago. The company’s shares had peaked in

January 2008, crossing Rs 1,200 but declined to a low of Rs 124 earlier this year.

Mr Singh said he started thinking of the stake sale only a few weeks back, adding a

successful qualified institutional placement (QIP) by rival realty firm Unitech too

played a part in promoter’s decision to sell stake. “Unitech’s QIP did give a positive

signal that investors were interested in buying stocks. It really helped,” he said.

The funds raised through the stake sale will be advanced to privately held promoter

group company DLF Assets (DAL), which purchases properties from DLF. Mr Singh said he

was still working on the form of fund infusion in DAL, as to whether it will be in the

form of equity or some other instrument. The fund infusion in DAL will be used to buy

hedge fund DE Shaw’s $400 million (Rs 2,000 crore) investment in DAL and also to pay

back to DLF around Rs 1,600 crore.

Besides this, DAL is expecting to raise Rs 2,000 crore in debt through securitising

its rental income this year. Together, these fund raising initiatives at DAL will

bring down DLF’s receivables from DAL from Rs 4,900 crore to around Rs 1,300 crore.

A panel of independent directors is working on ways to integrate DLF and DAL. DAL will

continue to exist as an independent entity, but its ownership may change, Mr Singh

said. Therefore, DAL will not be merged with DLF, but may become a subsidiary of DLF.

While elaborating on DLF’s plans to raise Rs

10,000 crore through sale of assets and its portfolio of investments, Mr Singh

did not give details of its portfolio of investments, but said negotiations with

buyers are currently under way. The company will also sell some of its hotel projects

and certain businesses such as wind power to raise the amount.

The sale proceeds will be used to repay part of DLF’s Rs 14,000 crore debt. “Our

target is to halve our debt this year,” he said. The assets that will be disposed off

are “not contributing revenue in the short-term and are not strategic in the

long-term”, he said.

DLF had earlier this month said it would raise Rs 5,500 crore through asset sale in

FY10. The company expects to raise Rs 3,500 crore by the beginning of the third

quarter this fiscal. The sale of promoter’s stake has come just days after the closure

of DLF’s buyback programme, which had attracted criticism from some analysts for not

making the best use of cash. Mr Singh defended his decision saying, “The company

decided on buyback at a time when the economy was still not falling off the cliff.”

On housing market, Mr Singh said the demand has started picking up. “The worst is

over. But I will still be cautious and say that recovery is at least four to five

months away,” he said, adding that he didn’t see scope for further price correction.

Courtesy:- ET dt:- 14-05-09

THINGS LOOKING BRIGHTER

With prices of newly launched apartments coming within the reach of end users, the realty sector has started looking up.

After witnessing an acute slowdown during the third and fourth quarter of 2008, the
real estate sector has shown some recovery in the first quarter of 2009 ending March 31. If trends of absorption for the period January-March 2009 are any indication, a report prepared by Prop Equity Research suggested there has been a surge in absorption in majority of the cities. A recent study conducted by Prop Equity across Mumbai, Bangalore, Chennai, Hyderabad, and Gurgaon in NCR reveals that absorption has been high among the residential new launches in the first quarter of 2009 in Mumbai, Chennai and Gurgaon. The study attributes the success rate in absorption to the price correction and reduction in unit sizes introduced by developers in these cities. However, Bangalore and Hyderabad, which witnessed fewer new launches during the period, experienced a low absorption.

The real estate sector experienced one of the worst kinds of slowdown in demand because of rise in the interest rates in the January-March 2008, by almost 2 percentage points, to 12%. At the same time, the prevailing prices of residential apartments in most of the cities made them unaffordable for most buyers. The situation further worsened after global financial markets got affected due to the failure of banks and brokering houses in the US and Europe. This also affected Indian real estate market very badly and demand plummeted. According to the report, While October-December 2008 saw the nadir with absorption of only 1,113 units in Mumbai, the first quarter of 2009 witnessed the launch of over 14,478 residential apartment units and a corresponding absorption of 5,746 units. As against this, during October-December 2008, 3,096 units were launched, the report said. Similarly, in Gurgaon, during January-March 2009, 815 units were sold while 4,490 units were launched. As against this, in October-December 2008 quarter, only 587 units were sold from 3,708 units launched. Hence, both the absorption and launch figure showed sign of recovery.

The report says the main reason for increase in absorption of the new launched products is drop in the per sq ft rate and the reduction in the size of the units, which brought their prices within the affordable range of buyers. The report says most of these units were launched at a price almost 40% lower than the average pricing of apartments that were available in the first quarter of 2008. The average unit size of these apartments was also lower by almost 35%.

According to Samir Jasuja, founder & CEO of Prop Equity, "The increase in this high absorption trend can be attributed to price correction and reduction in unit sizes adopted by developers. This encouraging trend is indicative that the markets are poised for a recovery if proactive measures are adopted by
the real estate community to offer the right product at the right price to the consumers."

This trend continued in Gurgaon and Chennai where the new launches have witnessed high absorption after the unit sizes were reduced and average prices corrected by almost 15% to 25%. As anticipated, 61% of the total absorption in Gurgaon and 58% of the total absorption in Chennai in the first quarter of 2009 was constituted by the newly launched residential apartment units.

Courtesy:- ET dt:- 08-05-09

# UNITECH PLANS $250MN QIP ISSUE TO PART-PAY DEBT

Unitech Ltd, the country second-biggest real estate developer, plans to raise as much as $250 million (Rs 1,250 cr) through private placement of shares to qualified institutions, company officials said, to repay part of its debt of over Rs 8,000 cr

The New Delhi-based developer plans to raise the funds by the end of this month, a company official, said declining to be identified. The company is planning to reduce Rs 1,000 cr of debt on its books by June this year.

Unitech Managing Director Sanjay Chandra and key officials of the company have been in Mumbai over the past couple of days to gauge investor sentiment. The
real estate company has hired UBS and IDFC as arrangers for issue. A Unitech spokesperson declined to comment.

Unitech’s move comes after the developer withdrew its application with the Foreign Investment Promotion Board (FIPB) in February to raise Rs 5,000 cr fro the sale of securities. A year earlier, the company planned to raise Rs 7,500 cr through a qualified institutional placement or QIP.

The recent rally in the stock market seems to have encouraged Unitech to revive its QIP plan. The company’s stock has climbed 70 per cent since March 9, while the benchmark Sensitive Index has risen 32 per cent. The company’s stock rose more than 14 per cent in the past two trading sessions and closed at Rs 42.05 on Thursday.

"With markets recovering from its lows,
Unitech has started working on the issue,’’ said an investment banker who declined to be identified. “The dilution cold be as much as 1/6th of the market cap.’’

If this QIP goes through, it will be the first such placement in as many as eight months after the Securities and Exchange Board of India changed QIP norms. Last August, the Sebi had amended pricing norms for QIPs by allowing companies to fix the price based on the average price of two weeks. Earlier, companies had to fix the price based on six-month average prices. Not a single QIP issue, however, has hit the market since then.

QIP deals, which were struck during the bill run at hefty premiums, have now turned sour because of the sharp fall in the valuations of listed companies.

The mark-to-market (MTM) value of QIP deals raised between March 2006 and March 2009 has fallen 73.47 per cent to $1.75 billion (about Rs 8,841 cr) from $6.58 billion (about Rs 33,245 cr), according to data from SMC Capital.

Courtesy:- BS dt:- 10-04-09

DEMAND PULL

There is cautious optimism among the buyers after a drop in prices. After a significant drop in interest rates, a further 10-15% drop (depending on location) in prices is believed to be luring buyers. With the average home loan size hovering at Rs 15 lakh, according to the largest home financing company HDFC and the ticket size for a 2BHK ranging from Rs 45-80 lakh, there is a big disconnect. The developers have finally realized that neglect of the strong middle class was a big blunder. And their focus has now shifted towards the affordable housing sector. This could bring buyer confidence back into the market.

STOCK MUSINGS

It might be good time for the
home buyers, but the situation is not the same for investors of real estate companies. The stock market has taken a beating and the real estate stocks have been hammered beyond recognition. There are no visible signs of recovery, at last in the next 12 months. This has left the investors in a lurch. However, tough times like these call for tough decisions.

As we all know, the demand has dried up, be it in the residential segment, retail or commercial. Many companies have committed huge funds towards ambitious projects. The completion of those projects, however, appears to be a bleak possibility. This would affect the companies’ cash flows and have a bearing on revenues as well. In fact, some developers are diverting the limited funds to complete the low-margin affordable residential projects. Realising the potential demand in this category, some developers have even launched new projects. Despite the huge demand, this is a volume game with lowmargins. The business model of companies is therefore shifting from high-margin luxury apartments or villas to thin-margin mid market housing, thereby reducing the overall profit margins of the group company.

It is advisable for real estate sector has become organized recently, there needs to be clarity on the area (carpet or built-up) at which prices should be quoted. The stamp duty and registration charges have to be rationalized inline with the drop in prices. Multiple state laws, single window clearances and title clearances are other reforms that must be introduced to boost the country’s second-largest employment generating sector.

Courtesy:- Et dtd:- 16-03-09

#

Ashish Gupta outlines some instances when the rent paid is allowed as a deduction

while arriving at total taxable income

An individual is allowed a deduction on the rent he pays for
the house occupied by

him. The relevant provisions are contained under Section 80GG of the Income Tax

Act. In commuting the total income of an assesses, he is allowed a deduction on the

expenditure incurred towards payment of rent for any furnished or unfurnished

accommodation occupied by him. The residence should be rented for his own use only.

In order to avail this deduction, the assesses should be self-employed or a salaried

employee. The deduction is not restricted to salaried employees only as is the case

with house rent allowance (HRA). Further, he should not have received a HRA at any

time during the previous year. In case he had received a HRA during any part of the

previous year, the deduction under Section 80GG is not available to him. The assesses

should file a declaration in Form 10BA furnishing the expenditure incurred by him

towards the payment of rent.

However, the Income Tax

Department may prescribe other conditions or limitations, regarding the area or

place in which the accommodation is situated, after taking into account other relevant

considerations.

Normally, most salaried employees get HRA and accordingly the deduction on rent paid

is governed by the provisions related to HRA under the Income Tax Act. The biggest

advantage of this deduction is that it is available even to self employed people who

stay in rented accommodation.

Amount of deduction is limited to the least of these amounts:

 Rs 2,000 per month
 25 percent of total income for the year (excluding long-term capital gains and some

specified incomes, before allowing deduction for any expenditure under this Section)
 Expenditure incurred in excess of 10 percent of total income towards rent

(excluding long-term capital gains and some specified incomes, before allowing

deduction for any expenditure under this Section)

The deduction will not be available to an assesses in case a residential accommodation

is owned by him, his spouse or minor child, at the place where he ordinarily resides

or carries on his business. Also, the deduction will not be available to an assesses

in case a residential accommodation is owned by him at any other place, provided this

accommodation is occupied by the assesses, and the concession available for a

self-occupied house has been claimed by him under Section 23 for this property. In

such a case, no deduction will be allowed on the rent paid, even if the person does

not own any residential

accommodation at the place where he ordinarily resides or carries on his

business.

These provisions enable self-employed people and others not in receipt of HRA to claim

deduction on the rental expenses incurred.

Courtesy:- FT dt:- 05-04-09