Mumbai-based property developer Oberoi Constructions, led by billionaire Vikas Oberoi, is planning a Rs 4,000 crore ($1 billion) initial public offer by year end.

Oberoi Constructions has hired investment banking major Morgan Stanley to value the company. The real estate developer plans to issue fresh shares under the IPO, however, the exact dilution of the stake is not known. The company plans to use the IPO proceeds for land acquisition and fund upcoming projects including the Oberoi Garden City and four and five-star hotels across the country.

“We have executed many major projects in Mumbai and have a good land parcel in the heart of the city. We will not go for pre-IPO placement of shares,'’ said Vikki Oberoi, managing director of Oberoi Constructions.

The company has a land bank of 130 acres mainly in the western suburbs of Mumbai. It has eight residential, commercial and retail projects under construction with a development potential of 21 million sq ft, he said.

On volatility in the stock market and hammering of realty stocks, Oberoi said, “Stock markets will distinguish between the performers and non-performers. We are confident of a good issue,'’ he said.

The company is building Oberoi Garden City, an 80 acre composite realty project including office complexes, malls, schools and residential townships with expected revenues of Rs 8,000 crore (Rs 80 billion).

The company has plans to build such projects in all the major cities including Chennai, Bangalore and Hyderabad among others.

These projects will be spread over 80-100 acres. Based on land prices in different cities, these projects have a land acquisition cost of Rs 400 crore (Rs 4 billion) to Rs 500 crore (Rs 5 billion) and a construction cost of nearly Rs 2,000 crore (Rs 20 billion).

“We are expecting revenues of Rs 4,000 crore from these projects in three years,'’ said Oberoi. The company has also placed a Rs 2,000 crore order with construction major L& T for executing its realty projects.

Oberoi has tied up with Westin Hotels and Resorts of global hospitality major Starwood Hotels for its five-star hotel at Oberoi Commerz in Mumbai.

The company has acquired land for four more hotels in Mumbai and Pune. It is also scouting for properties wherever the company is building Garden City projects. The company will have five hotels, in the four-star and five-star categories, in the next five years, he said.

“Our first hotel will open by 2009 beginning. We have plans to open one hotel every year for the next five years. Starwood will be a preferred partner for our hospitality venture,'’ Oberoi said.

Apart from the IPO proceeds, the company is planning to use internal accruals for the development of upcoming properties. Oberoi also added, “the company would also go for infrastructure projects if they contain real estate element”.

BPTP Group, a Delhi-based real estate developer, said the price it paid for the Noida property i.e. Rs 130,207 per square meter, is reasonable and was thought through. “We had decided on the amount well before, it was not a knee-jerk reaction to compete with other bidders (such as DLF). The location, infrastructure and connectivity makes it an ideal commercial place,” director Sudhanshu Tripathi.

BPTP on Tuesday won the rights to develop 94 acres of commercial land at Noida, in the National Capital Region, by outbidding the country’s largest realtor DLF Ltd, which offered Rs 1,17,000 per square metre, and Omaxe, which bid Rs 80,100 per square metre.

BPTP plans to create “the financial hub of north India” in the area, called Bank Street, which will include five-star luxury hotels and corporate offices. Tripathy said upon completion, office rentals in Noida would be more than its arch rival city Gurgaon.

The construction cost for the financial city will be around Rs 3,000 crores and the total cost of the project is expected to be around Rs 9,000 crores.

BPTP also has 2,000 acres of land bank. “We will have the building plans ready in the next 6-7 months,” Tripathi said. The company, which does not have any “immediate” plans to go for projects in South India, said it is in talks with the UK-based renowned architects Foster and Partners and Germany’s Aedes for the project.

The office space in Sector 94, running along the Noida and Greater Noida Expressway, would cater to the needs of a commercial place of companies and will not include any IT parks or buildings. “It is going to be 100% corporate offices and will not include any IT buildings or BPO call centers as they pay better rentals. There are no corporate offices in Noida, and with this deal, we plan to change that,” Tripathi said.

Pune is witnessing tremendous growth in real estate sector, both in commercial and residential space. With an objective to showcase the finest properties of Pune, a leading online real estate company is organizing a two-day property show, for the first time on March 15 and 16 at Royal Western India Turf Club, Solapur Road, Pune. Around 20 leading real estate developers will be participating in the show and over 5000 property seekers are expected to visit this mega property show in two days. The Pune property show is expected to do deals worth 18 crores.

Pune is amongst the fastest growing cities in India and is experiencing a rapid need for increase in infrastructure. The city has seen rapid increase in real estate activities over the last couple of years. The city accounts 12% of all the traffic coming on the portal, with more than 10000 listed properties from the city.

Affordable housing: There is a large demand for houses and projects below 60 lakhs, developers are still focusing on premium projects above this value. This trend for affordable housing will continue for the next 1.5 years, and developers will have to come up with more projects within the 60 lakhs bracket until the premium projects have some very exclusive features to attract. So this concludes that there is a difference in the demand and supply requirement.

Life Insurance Corporation Housing Finance (LICHF) is set to launch a new venture capital fund for realty projects.

The size of the fund, which is awaiting regulator approval, is likely to be Rs 3-3.5 billion. LICHF`s new realty fund is expected to invest in residential projects. LICHF had taken a 5% stake valued at Rs 75 million in the new Rs 1.5-billion credit card arm of LIC, which is likely to begin operations in six months.

As part of its overseas expansion plans, LICHF will open a new office in Singapore. Currently, it has branches in Dubai and Kuwait. Meanwhile, LICHF Care Homes, a subsidiary of LICHF, is planning to open residential units for senior citizens in Punjab, Orissa, Kerala and West Bengal. The first project was unveiled in Bangalore.

During April 2007-February 2008, the company sanctioned Rs 73.85 billion against Rs 48.88 billion in the same period last financial year. Disbursements stood at Rs 59.41 billion compared to Rs 41.99 billion.

HONG KONG India will have at least 50 property-related initial public offerings in the next year as the real estate industry booms, according to Anish Jhaveri, the head of equity sales at HSBC Holdings in India.

“With the opening of the real estate sector, there’s a lot of need for funds,” Jhaveri said in a recent interview in Hong Kong. “The government has been giving very proactive support to the whole sector.”

The real estate market in India is worth about $12 billion and is growing at about 30 percent a year, Ernst & Young said in a report last month commissioned by the Federation of Indian Chambers of Commerce and Industry. Rising incomes, easy financing and population growth are driving demand for housing and luring overseas investors.

“The appetite for real estate IPOs will be there,” K.K. Mital, chief investment officer at Escorts Asset Management in New Delhi said a phone interview Friday. “The young work force is looking for real estate investment, and the financing is available, the banking system is supporting this growth.”

Jhaveri said that venture capitalists and overseas investors were poised to invest over $5 billion in the Indian real estate sector, without providing more details. “People are seeking more clarity” on possible changes to property regulations before investing, he said.

His forecast takes into account the possibility that India could allow real estate investment trusts, or REITs, to invest in the nation’s property industry. Still, of the 50 real estate related IPOs that he predicted would take place in the next year, he only expected a “small” number to be REITs.

In the past year, India had eight initial share offerings by engineering and construction companies, which raised $478 million, according to Bloomberg data. That compares with the six initial public offerings raising $304 million in the previous 12-month period.

Indian billionaire Kushal Pal Singh’s real estate company, DLF Universal, is seeking to revive the biggest Indian share sale once regulators decide on a complaint by shareholders. The New Delhi-based company plans to submit offer documents to regulators, paving the way for an offering by early December, Saurabh Chawla, the finance vice president of DLF, said in a phone interview Friday.

India is short of 20 million housing units, according to a study by Housing Development Finance. That shortage will get worse, according to UBS analysts, citing the growing population and increasing affluence. Asia’s fourth-largest economy grew 8.9 percent in the three months to June from a year earlier.

ICICI Home Finance expects Kolkata to contribute in a big way to the residential financing market in the next 3 years.

“Although the residential financing market space in India is about Rs 1 lakh crore and the market in Kolkata is around Rs 2,000 crore, it is expected to grow at a much faster rate compared to the other metros in the next 2-3 years,” said Sunil Rohokale, the managing director and CEO of ICICI Home Finance.

Saturation in other markets will give a boost to the market in Kolkata. Mumbai leads the residential financing market with a share of 10 per cent, followed by Delhi and Bangalore with 9 and 7 per cent respectively.

“Slowly, but steadily, the other markets are getting saturated and the Kolkata market, being relatively cheaper, provides a better alternative,” he added.

Rohokale also attributed Kolkata’s rise to the state government’s proactive role in promoting lower and middle income segments, where affordable housing is possible.

“The West Bengal government is looking for inclusive growth and by providing incentives, by encouraging public private partnerships not only in the higher-end segment like commercial buildings but also in the middle and lower segments as well, which consist of mostly small housing projects,” he said while talking to Business Standard on the sidelines of an interactive session at Credai Bengal Real Estate Conclave.

It would be in the affordable housing segment, where most of the private investment is going to come, feels Rohokale.

In the last two years, the real estate market attracted an investment of around $7 billion, including $3 billion from equity. Of this, the share of Kolkata was around 3.5 per cent, amounting to $150 million.

“There is a huge demand in Kolkata for affordable housing flats, which range between Rs 15 lakh and Rs 25 lakh, but the developers are most active in the premium-range flats between Rs 25 lakh and Rs 50 lakh. Hence with the state government providing incentives, affordable housing space looks most attractive in Kolkata,” Rohokale added.

Source: http://www.business-standard.com