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”.

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.

According to a report by propertyvertical.com, retail growth will not only push demand for commercial property but will drive demand in the residential segment as well. The report, commenting on the causal relationship between growth in the commercial segment and the demand for housing, asserts that rapid commercial development in Delhi and the NCR has led to a spill over of housing growth from Noida to Greater Noida. Gurgaon to Meerut, Bhiwadi and Ghaziabad to Manesar.

The report goes on to state that the next best bet for investors in the NCR is Manesar. Emerging as one of the biggest industrial hubs around NCR, Manesar has become an attractive investment destination. In fact, it is likely to be one of the biggest growth centres in the NCR. The report further states that it has all the ingredients of being the next commercial hub, after Gurgaon, with better infrastructural facilities and tax incentives. It is also likely to emerge as one of India’s major outsourcing hubs, with corporate entities like Honda, Baxter, Suzuki, Stanley, Mitsubishi, Nippon, Toyota and Maruti Udyog setting up shop here. Naturally, such massive corporate and industrial activities not only triggered the need for office space, but have also created a huge demand for residential properties from people who are employed here, and also from those likely to be inducted by emerging corporate sectors.

Ghaziabad, too, has received a major boost due to the Commonwealth Games 2010. There are major hotels with international standards under construction as also huge commercial malls, with some having hotels on top floors. These will be operational in areas like Indirapuram, Vaishali, Kaushabhi and Vasundhra.

The Metros is another development here and has certainly resulted in the appreciation of land prices along the route. According to the report, in the last nine months, residential property prices in Indirapuram have gone up from an average of Rs.1600 per sq.ft. to over Rs. 3200 per sq.ft. This clearly depicts Ghaziabad’s increasing popularity, which will certainly give boost to the commercial segment once residential properties are developed and inhabited.

Bangalore’s transformation, from being a pensioner’s paradise to a bustling metropolis, is thanks to the IT & ITES sectors. “The available talent and cosmopolitan culture of Bangalore are a big draw for corporates. Per capita income in the city is on the increase and the average Bangalorean has a higher purchasing power today,” says J C Sharma, MD, Sobha Developers.

Commercial: According to international property consultant DTZ, Bangalore, which is likely to figure in the top two cities globally in office space absorption this year, will witness an oversupply of 38%, where the supply is pegged at 18.3 million sq ft, while the absorption figures stand at 13.3 million sq ft.

Out of 12 million sq ft of fresh office supply expected in 2007, only 0.5 million sq ft is estimated to be contributed by CBD and Off CBD areas, as per DTZ data. “CBD rentals have been on the rise, between 11 -13 %. This is owing to the fact that the CBD is among the preferred locations in the city,” says Hugh Hamilton, Director, DTZ.

Despite Bangalore’s infrastructure concerns, 6.6 million sq ft of grade A office space was added to in the first half of 2007, as per a Cushman & Wakefield (C& W) report. The S.E quadrant of the Outer RingRoad (ORR), between Marathalli and Sarjapur witnessed an overall absorption of 1.1 million sq ft during the first half of the year. An estimated total supply of 2.1 million is expected in this region in 2007.

Residential: The city saw a 15-20% drop in primary sales across micro markets during the first six months of 2007, as per C& W data. This is attributed to high prices, steep home loan rates and the anticipation of a price correction amongst users. Further, there was no significant increase in prime residential prices during the first half.

“Bangalore has seen an increase in NRI-interest. This should herald an era of the steady growth in the coming months for Bangalore’s residential market,” says Balakrishna Hedge, President, Karnataka Ownership Apartments Promoters Association (KOAPA).

But the city is seeing an increase in villas and plotted development in the suburbs. To the North of the city Grade A projects offering villas are priced anywhere between Rs 1.2 crore on the lower end to over Rs 2.5 crore at the upper end. “In the South, Whitefield alone will see an oversupply situation in the coming months, with dose to 2 500 villas under development, ” said an industry analyst.

Retail: Bangalore is set to witness completion of 15 malls totaling between 5.5-7 million sq ft by end 2008, as per a Jones Lang LaSalle Meghraj estimate. This apart, the city’s landmark retail project, the UB City Mall located in the central business district (CBD) will add 120,000 sq ft to the city’s retail stock by the fourth quarter FY ‘07.

Average rental values in prime malls stood at Rs 150 per sq ft per month. “Rental values will continue to witness a northward trend owning to limited availability of professionally managed retails space,” Jones Lang LaSalle Meghraj local director (corporate solutions) Karun Varma said. Further, adding to the city’s magnetic appeal is the upcoming international airport at Devanahalli.

According to Anurag Mathur, deputy managing director, Cushman & Wakefield, “most of the land between Bangalore—Devanahalli Main Road (NH -7) upto the upcoming airport has been transacted almost 18-24 months ago by prominent developers and the remainder is what is currently being put out to sale.” While the asking rate for an acre on the Devanahalli main road (NH7) ranges between 2.5 crore to 7 crore (in rare cases), deals seem to be dosing within Rs 4 crore per acre, according to industry sources.

While few projects are being announced, the focus for now is on building land banks to be unlocked once the airport gets operational, according to real estate analysts. As per C& W data, the North Bangalore quadrant is to receive 900,000 sq ft of grade A office space stock in 2007. An additional 800,000 sq ft of commerdal stock is under development and the same is expected to be delivered by end 2007 or early 2008.

Source: The Economic Times