Pain in real estate, but builders refuse to cut prices

22G tainted Unitech is embarking on a mega fundraising drive and attempting India's largest real estate asset sale. Its London AIM listed Unitech Corporate Parks or UCP has put a Gurgaon IT SEZ on the block for Rs 2,800-3,000 crore. At these valuations Unitech stands to raise Rs 1,100-1,200 crore for its 40 percent share. Sources say that the UCP board arrived in India on July 11 to kickstart the sale process.

Also Read: Mahalaxmi Cresec buys 23 lakh shares of Indiabulls Real

Jones Lang LaSalle has the mandate to submit the bids. The deadline ended on June 12. Sources add 11 parties had expressed interest including Blackstone, GIC, IDFC, Xander, Sun Apollo, Morgan Stanley, and Tishman. Built on 27 acres this notified IT SEZ called Infospace is spread across 3.6 million square feet. Approximately 2.4 million square feet or 67 percent has already been leased and another 0.19 million square feet is committed in hard options. Tenants include Bank of America, RBS, Accenture and Sapient, among others.

The big question is - how exactly have Unitech and Jones Lang LaSalle arrived at a valuation of Rs 2800-3000 crore? The average rental at Infospace is Rs 64 a square foot and the total annual revenue projection between rental and maintenance works out to Rs 280-300 crore. Unitech is expecting a 10 percent cap rate as that is around the level the deals have closed around in the recent past and therefore one can get an asking price of around Rs 3000 crore. Infospace is one of the five operational assets in UCP's portfolio in the National Capital Region (NCR) and Kolkata.

It is a well documented fact that Unitech initially wanted to exit UCP via a listing in Singapore. Unitech is now embarking on selling each of these assets separately.

After Emaar, another Middle Eastern giant is eyeing a piece of the Indian real estate. We are talking about Qatar Investment Company that's clearly bullish on India. It recently invested a whopping USD 1.26 billion in telecom giant Bharti Airtel and is now focused on the Indian property market. Sources say a term sheet has been signed with the Bangalore based real estate firm RMZ Corp. RMZ and Qatar Investment Company are expected to execute around eight to nine commercial projects spread across Bangalore, Chennai and Pune cumulatively across approximately 20 million square feet.

In an attempt to improve sales, recently, developers across India have been coming out with attractive schemes, be it the 20:80 interest subvention scheme, gold coins at time of launches and even special discounts post lunches for a very limited time perhaps like a weekend. How exactly are launches and prices panning out?

In the NCR, Cushman & Wakefield has noted almost a 40 percent drop in new launches. But

Shveta Jain, Executive Director - Residential, Cushman & Wakefield India says, "I think the mood is very positive. What is happening is the markets are getting more streamlined, the so to say speculation or the investor activity which was driving NCR is sort of getting out of the window. So, from that aspect the markets are becoming healthier in nature."

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