Hyderabad Real Estate: Market Update May 29, 2009
1.0 FY 2009 Year in review
Based on our interactions with the key market players in Hyderabad, the residential segment of Hyderabad real estate market is likely to recover by the third quarter of FY 2010.
Major residential property launches in FY 2009
In FY 2009, Hyderabad has seen significant investments into the residential real estate market from local players, national and international majors across various segments of the market including premium luxury, premium, affordable and low cost housing.
National real estate companies
In FY 2009 national real estate companies have launched the following large projects in the residential market of Hyderabad.
• Lodha Group has launched its premium luxury apartments named Lodha Bellezza at Eden Square - Kukatpally.
• DLF has launched its project - Lake District - The Summit at Kokapet in the affordable housing segment.
• Mantri Group has launched its Celestia a residential and commercial project near the financial district Gachibowli in the affordable housing segment.
Local real estate companies
Leading market players such as Indu Projects, Janapriya, Prajay, Aditya Constructions, Bharat, Ramky, Nagarjuna, PBEL, Sree Srinivasa, Sri Aditya homes, SMR Holdings, and others have launched many new large projects in FY 2009 across various segments of the market, while other major such as Aparna, Aliens, Jain. L&T and others have been executing their large projects.
Market size in FY 2009 has shrunk
In the last two quarters of FY 2009, residential property transactions have come to virtual standstill and have affected players across the Hyderabad market. We estimate that the market size for residential property in FY 2009 to have shrunk by about 60% as compared to FY 2008.
Builders going slow
Leading developers in the city have gone slow on their projects and have prioritized on a few projects due to tight liquidity and working capital issues. While large luxury segment builders such as Lanco are now building only 13 residential towers as against the stated 26 towers in their sales prospectus due slackening demand, others large builders have either postponed their construction activities by a few quarters, restructured their projects or have scrapped the projects altogether. The status of Hyderabad’s largest integrated township at Tellapur being built by the ICICI Venture Capital, Nagarjuna, US-based Tishman Speyers consortium, comprising development of over 400 acres and saleable area in excess of 30 million square feet is uncertain, while execution at Maytas property project Maytas Hill county, bachupally is moving at a snail’s pace.
No significant unsold inventory
Most Local builders in Hyderabad use the JV route to build projects, while large local builders and national players buy land and build projects. In Hyderabad, builders presently do not have any significant unsold inventory of completely build projects. However, many of the projects which lie unsold are projects under execution and are likely to be delivered in the next two years or projects which have been announced and are still under the foundation stage.
Builders under stress to raise capital
Many Hyderabad builders have raised significant capital from VC, PE funds in the period between FY 2006 to FY2009. In most cases, valuation of projects has been very high and VC/PE funds today are stuck with the stock of unlisted companies/SPV vehicles, whose value has declined significantly. With bank credit tough to get in FY 2009, builders have raised capital by selling assets, tapping high net worth individuals, while few have raised capital from foreign friends and investors.
QIP route for Hyderabad builders – ruled out
With very few listed real estate firms in Hyderabad, raising capital through today’s favorite instrument qualified institutional placement (QIP) route for Hyderabad firms might be ruled out. With many builders/companies under stress, vulture funds/high net worth Individuals are on a look out for distressed asset sale.
Changing focus of builders
The focus of builder’s upto the first two quarters of FY 2009 has been on the premium luxury and luxury segment of the market. The market has changed by third quarter of FY 2009 and builders have realized that the market for premium segment has reached a dead end and have gone back to their drawing boards to launch new projects targeting the affordable segment of the market. DLF, which was one of the early entrants to tap the affordable housing market in Hyderabad, has managed to book more than 120 apartments as on April 2009, despite tough market conditions.
Residential Prices – Hyderabad – An analysis
Prices – National Housing Board – Residex Index for Hyderabad
NHB Residex has come out with property price movements for various cities in India. An analysis of Hyderabad data reveals that property prices have declined significantly in West Zone in the period Jan-Dec 2008 as compared to the year 2007. Similarly the South Zone and Central Zone have declined marginally, while North Zone has shown marginal appreciation, the Other zone (Shamshabad Zone) has recorded significant appreciation on account of the opening of new airport.
2.0 Will the market recover in FY 2010?
Major Launches in FY 2010
Even in difficult market conditions, builders in Hyderabad have launched new projects in FY 2010. A few large projects launched include
• Botanika by Koncept Ambience. – A premium luxury segment project near Botanical Gardens in Kondapur.
• Rainbow Vistas launched by Cybercity Builders & Developers Pvt Ltd and Ashoka Developers & Builders Ltd in the affordable housing segment of the market near Kukatpally.
FY 2010 Outlook: Pricing pressure on residential real estate is expected continue, while demand likely to firm up
Residential transactions improving: Builders are witnessing significant enquiries in Hyderabad after the new government formation at both the state and centre. After a long lull, in the month of May 2009, builders have been able to sell properties at new price points in the market for both affordable housing, villas and premium housing. Builders, who have offered value deals to customers, have been able to report best sales in the last few weeks.
Delinquent property auctions likely: Banks have seen significant Housing mortgage loans delinquencies in FY 2009 on account of slow down in IT sector and recession in the economy. We expect banks in Hyderabad to auction delinquent property from the second/third quarter of FY 2010 and it is likely to have an impact on pricing of both existing projects and new project launches.
Bank Lending rates – To dip further: While RBI has announced sweeping cuts in repo and reverse repo rates in the last two quarters, banks have been reluctant to cut their Prime Lending Rates (PLR) and have been lending to new customers at below PLR rates, while existing customers have been paying at PLR rates. With the likelihood of a further rate cuts by RBI in June 2009, home loan rates are like to soften by a further 50 basis points.
Tightening norms by Housing finance companies
Housing finance companies are tightening lending norms/standards and loan to property value is likely to about 70-80% in FY 2010, which would mean that the days of easy housing loans from banks is over.
IT Outlook – Uncertain: The outlook for IT sector in FY 2010 and 2011 still remains uncertain on account of global recession and many IT customers who want to buy property are hesitating in view of the difficult market conditions and are watch the market developments keenly.
Market Outlook: Industry players in Hyderabad hope for a revival of the market in FY 2010 on account of stable outlook for the Indian economy with a projected GDP of 6%. Likely recovery of the US economy, revival of global markets, stimulus packages to the real estate sector by both state and central governments and finally the likelihood of Telangana issue to be on the backburner for another five years are the other factors which might aid the revival of the market. As of May last week 2009, property prices across Hyderabad in the last one year have corrected by more than 25-35% and today are at December 2007 levels. With declining prices, demand is reviving slowly and is expected to firm up from the third quarter of FY 2010.
By Marutish Varanasi
(The author is with VRNETConsulting.com and has authored a comprehensive report on Hyderabad Real Estate Market focusing on residential, commercial, retail and hospitality segments of the market). His contact mail ID is marketing@vrnetconsulting.com
Certification
VRNETConsulting is a market research and consulting firm which does and intends to do business with companies covered in this research report. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this market research report. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The recipient should independently evaluate the investment risks. VRNETConsulting and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report.
Friday, May 29, 2009
Saturday, March 1, 2008
Impact of Budget
An interesting post on the impact of budget on realty sector in Businessline - 1/03/08.
Realty sector upbeat on I-T exemption
Our Bureau
Mumbai, Feb. 29 Realty majors found cause to cheer the budget on concessions extended to other sectors.
Mr Ravi Ramu, Director, Puravankara Projects Ltd, said reverse mortgage proceeds not to be treated as income tantamount to a tax free pension for home owners post-retirement and should provide a fillip to home builders, since owning a home in old age has now become more attractive from a return, and an old age financial security perspective.
The introduction of a right of set-off of dividend distribution tax paid by a direct subsidiary of a parent company with the DDT paid by the parent will be a large benefit to real estate companies who have, or intend setting-up subsidiaries.
Construction costs are expected to come down due to duty and Cenvat reduction. The housing sector will take a boost due to the increase in income-tax exemption limit and new tax slabs will increase affordability of EMIs.
“The realty sector will also benefit as IT SEZs stand to gain due to non-extension of tax exemptions currently available to Software Technology Parks (STPIs) as the new investment in IT sector will now come into IT-SEZs,” said Mr Sanjay Chandra, Managing Director, Unitech Ltd.
“The long-awaited demand for industry status for the real estate would have gone a long way in providing the desired impetus to the growth of the sector which is highly capital intensive,” said Mr Pradeep Jain, Chairman, Parsvnath Developers.
“A tax benefit under Sec 80 I (B) for hospitals is a paradigm change and we expect a new generation health technology entering into Tier-II and III cities. The sops given to infrastructure and housing sector in rural areas is a welcome move, however, the reduction in duties and service tax benefits directly to consumers would have propelled the demand for realty. The reduction in input cost of cement, steel etc will definitely benefit the sector,” Mr Jain said.
Realty sector upbeat on I-T exemption
Our Bureau
Mumbai, Feb. 29 Realty majors found cause to cheer the budget on concessions extended to other sectors.
Mr Ravi Ramu, Director, Puravankara Projects Ltd, said reverse mortgage proceeds not to be treated as income tantamount to a tax free pension for home owners post-retirement and should provide a fillip to home builders, since owning a home in old age has now become more attractive from a return, and an old age financial security perspective.
The introduction of a right of set-off of dividend distribution tax paid by a direct subsidiary of a parent company with the DDT paid by the parent will be a large benefit to real estate companies who have, or intend setting-up subsidiaries.
Construction costs are expected to come down due to duty and Cenvat reduction. The housing sector will take a boost due to the increase in income-tax exemption limit and new tax slabs will increase affordability of EMIs.
“The realty sector will also benefit as IT SEZs stand to gain due to non-extension of tax exemptions currently available to Software Technology Parks (STPIs) as the new investment in IT sector will now come into IT-SEZs,” said Mr Sanjay Chandra, Managing Director, Unitech Ltd.
“The long-awaited demand for industry status for the real estate would have gone a long way in providing the desired impetus to the growth of the sector which is highly capital intensive,” said Mr Pradeep Jain, Chairman, Parsvnath Developers.
“A tax benefit under Sec 80 I (B) for hospitals is a paradigm change and we expect a new generation health technology entering into Tier-II and III cities. The sops given to infrastructure and housing sector in rural areas is a welcome move, however, the reduction in duties and service tax benefits directly to consumers would have propelled the demand for realty. The reduction in input cost of cement, steel etc will definitely benefit the sector,” Mr Jain said.
Friday, February 15, 2008
Housing Prices
An interesting article on tracking Housing prices from NYT. Hope when will be see an index for residential property in India...
Tracking Housing Prices
Why the Numbers Conflict
(See Corrections & Amplifications item below.)
By David Wessel
From The Wall Street Journal Online
Predicting how much worse the U.S. housing market will get is tough. The future is never certain. But when it comes to home prices, getting a clear picture of the recent past turns out to be surprisingly hard as well.
That's confusing to homeowners, who fret about the value of what for many is their single largest asset. There is a huge psychological difference between a slower climb in the value of one's house and an outright decline -- and, as a result, a difference in the political reaction.
Tracking home prices is harder than tracking the price of stocks, which are traded constantly in public view on exchanges. And it's harder than tracking the price of toothpaste. That just involves sampling posted prices on grocery-store shelves and Web sites.
Discuss
What is happening to housing prices in your community, and how much worse do you think things will get? Share your thoughts.
The two best -- though far from perfect -- measures of housing prices are the Office of Federal Housing Enterprise Oversight's index and the gloomier Standard & Poor's Case/Shiller index. Both are based on a concept, developed in the 1980s by Karl Case of Wellesley College and Robert Shiller of Yale University, that looks at repeat sales of the same houses.
Ofheo's index says home prices rose nationally by 1.8% between the third quarters of 2006 and 2007. But the S&P/Case-Shiller national index of home prices was down 4.5% in the same period. The Ofheo index showed a 2.16% increase in house prices in Chicago; the Case-Shiller index showed a decline of 2.48%.
Those discrepancies persist even though both barometers avoid distortions that occur in other widely cited measures -- such as the National Association of Realtors' median home price -- that reflect the mix of homes actually sold in a given month as well as the change in prices. Such measures rise in months when a lot of high-end houses are sold and fall at times when a lot of low-end houses are sold.
The Realtors' measure fell 6% in 2007. The group says the index was pulled down by a drop in the number of high-end home sales, which have been hurt by disruptions in the market for mortgages exceeding $417,000, the maximum mortgage giants Fannie Mae and Freddie Mac are allowed to guarantee.
The big picture here is clear: House prices rose rapidly in the early years of this decade. They have stopped rising in many places. And, in many markets, they are now falling. (Even Ofheo's index showed a quarterly decline at the end of 2007.) And prices don't appear to have touched bottom yet. But Charles Calomiris, a Columbia University economist, says, "Too much weight is being attached to the Case-Shiller index. ... Housing prices may not be falling as much as some economists say they are."
With house prices so central to the economy right now, there is intense public (as well as scholarly) interest in why these two carefully constructed measures differ.
Ofheo gets a steady stream of inquiries from ordinary homeowners trying to figure out what's happening to the price of their houses, and offers an online calculator to make estimates. Ofheo's quarterly numbers -- to be released monthly beginning in March -- go into the Federal Reserve's estimates of household wealth. Case/Shiller is increasingly prominent and is the basis for future contracts that allow investors to bet on the price of houses.
There are a couple of very big differences. The Ofheo index relies on data collected by Fannie Mae and Freddie Mac, which Ofheo regulates, so it excludes loans too big for Fannie and Freddie to guarantee (those exceeding $417,000) or too shaky (the riskiest of the subprime). Case/Shiller includes those, but its data are limited to 20 major markets because it relies on the costly process of going to local property records for data. One of Mr. Calomiris's complaints is that house prices in these markets may be doing worse than those in other places.
A recent dissection of the two indexes in 10 metropolitan areas by Ofheo economist Andrew Leventis, posted on the agency's Web site, sheds some light on other differences. Part of the discrepancy is technical, such as different approaches to adjusting data when there's a long interval between repeat sales of a house.
But puzzles remain. It turns out, for instance, that prices of low- and moderate-priced homes with mortgages that aren't guaranteed by Fannie and Freddie are falling particularly sharply, buoying the Ofheo index -- even though that index includes plenty of other of low- and moderately priced homes in the same neighborhoods.
Of course, by the time the experts get the measures perfected, we'll be onto a bubble in some other asset market.
Email your comments to rjeditor@dowjones.com.
-- February 15, 2008
Corrections & Amplifications:
In addition to its widely followed 20-city survey of home prices, S&P/Case-Shiller publishes a national home price index based on data from more than 100 metropolitan areas. The original version of this column incorrectly said the data is limited to 20 major markets.
Tracking Housing Prices
Why the Numbers Conflict
(See Corrections & Amplifications item below.)
By David Wessel
From The Wall Street Journal Online
Predicting how much worse the U.S. housing market will get is tough. The future is never certain. But when it comes to home prices, getting a clear picture of the recent past turns out to be surprisingly hard as well.
That's confusing to homeowners, who fret about the value of what for many is their single largest asset. There is a huge psychological difference between a slower climb in the value of one's house and an outright decline -- and, as a result, a difference in the political reaction.
Tracking home prices is harder than tracking the price of stocks, which are traded constantly in public view on exchanges. And it's harder than tracking the price of toothpaste. That just involves sampling posted prices on grocery-store shelves and Web sites.
Discuss
What is happening to housing prices in your community, and how much worse do you think things will get? Share your thoughts.
The two best -- though far from perfect -- measures of housing prices are the Office of Federal Housing Enterprise Oversight's index and the gloomier Standard & Poor's Case/Shiller index. Both are based on a concept, developed in the 1980s by Karl Case of Wellesley College and Robert Shiller of Yale University, that looks at repeat sales of the same houses.
Ofheo's index says home prices rose nationally by 1.8% between the third quarters of 2006 and 2007. But the S&P/Case-Shiller national index of home prices was down 4.5% in the same period. The Ofheo index showed a 2.16% increase in house prices in Chicago; the Case-Shiller index showed a decline of 2.48%.
Those discrepancies persist even though both barometers avoid distortions that occur in other widely cited measures -- such as the National Association of Realtors' median home price -- that reflect the mix of homes actually sold in a given month as well as the change in prices. Such measures rise in months when a lot of high-end houses are sold and fall at times when a lot of low-end houses are sold.
The Realtors' measure fell 6% in 2007. The group says the index was pulled down by a drop in the number of high-end home sales, which have been hurt by disruptions in the market for mortgages exceeding $417,000, the maximum mortgage giants Fannie Mae and Freddie Mac are allowed to guarantee.
The big picture here is clear: House prices rose rapidly in the early years of this decade. They have stopped rising in many places. And, in many markets, they are now falling. (Even Ofheo's index showed a quarterly decline at the end of 2007.) And prices don't appear to have touched bottom yet. But Charles Calomiris, a Columbia University economist, says, "Too much weight is being attached to the Case-Shiller index. ... Housing prices may not be falling as much as some economists say they are."
With house prices so central to the economy right now, there is intense public (as well as scholarly) interest in why these two carefully constructed measures differ.
Ofheo gets a steady stream of inquiries from ordinary homeowners trying to figure out what's happening to the price of their houses, and offers an online calculator to make estimates. Ofheo's quarterly numbers -- to be released monthly beginning in March -- go into the Federal Reserve's estimates of household wealth. Case/Shiller is increasingly prominent and is the basis for future contracts that allow investors to bet on the price of houses.
There are a couple of very big differences. The Ofheo index relies on data collected by Fannie Mae and Freddie Mac, which Ofheo regulates, so it excludes loans too big for Fannie and Freddie to guarantee (those exceeding $417,000) or too shaky (the riskiest of the subprime). Case/Shiller includes those, but its data are limited to 20 major markets because it relies on the costly process of going to local property records for data. One of Mr. Calomiris's complaints is that house prices in these markets may be doing worse than those in other places.
A recent dissection of the two indexes in 10 metropolitan areas by Ofheo economist Andrew Leventis, posted on the agency's Web site, sheds some light on other differences. Part of the discrepancy is technical, such as different approaches to adjusting data when there's a long interval between repeat sales of a house.
But puzzles remain. It turns out, for instance, that prices of low- and moderate-priced homes with mortgages that aren't guaranteed by Fannie and Freddie are falling particularly sharply, buoying the Ofheo index -- even though that index includes plenty of other of low- and moderately priced homes in the same neighborhoods.
Of course, by the time the experts get the measures perfected, we'll be onto a bubble in some other asset market.
Email your comments to rjeditor@dowjones.com.
-- February 15, 2008
Corrections & Amplifications:
In addition to its widely followed 20-city survey of home prices, S&P/Case-Shiller publishes a national home price index based on data from more than 100 metropolitan areas. The original version of this column incorrectly said the data is limited to 20 major markets.
Tuesday, February 12, 2008
FSI changes in Hyderabad
FSI Changes in Hyderabad - What it will mean to supply ????. Only after a detailed analysis of the government order will the impact of the change be known. Read this interesting from Deccan Chronicle dated 12/02/08.
Hyderabad, Feb. 11: Reliance’s 100-storey tower and a signature structure of similar elevation by Lanco Hills are among several ambitious projects likely to come to nought with the state government’s move to reintroduce height restrictions based on Floor Space Index. Besides the Lanco and Reliance projects, the Tishman Speyer-led consortium’s proposed 400-acre integrated township at Tellapur will also be hit.
The government had last year removed limits on building height calculated by FSI. Official sources told this correspondent that the Chief Minister, Dr Y.S. Rajasekhar Reddy, had asked the municipal administration and urban development department (Maud) to reintroduce FSI and cap it at 1:2.5. The Chief Minister said there had been several complaints about unlimited building height leading to congestion and environmental problems.
The sudden U-turn by the Chief Minister has come as a shock not only to developers but officials as well. Sources said even Maud was clueless on the policy change, which builders have termed a retrograde step. While introducing new building rules recently, the department scrapped FSI and said built up space would be determined as per set backs and road width. It also allowed unlimited height if the plot abuts a road at least 100 feet wide.
Under FSI mode, the built up space permitted is based on the area of the land where the construction is made. With FSI at 1:2.5, builders will get only 22.5 sq. ft for every square yard of land. “In real terms, the built up space will be even less because the government intends to include common areas and balconies also in the FSI,” a senior official pointed out.
The 100-storey Reliance tower is planned on less than 30 acres. With FSI, a building of that height would have to be built on at least 40-50 acres of land, the official said, adding that the Lanco Hills project faces a similar problem. The proposed IT parks in Gachibowli and Raidurg where Delhi-based BPTP Ltd plans 60-floor structures, a 30-storey residential project at Bachupalli, mall and entertainment centres by Prestige and Parsvanath Developers at Kukatpally and DLF’s hotel project will all be affected by the height restrictions.
“The government said scrapping of FSI was revolutionary,” a top city realtor protested. “Agencies like Andhra Pradesh Industrial Infrastructure Corporation, Hyderabad Urban Development Authority and AP Housing Board touted it as their USP while selling land for hundreds of crores.”
Hyderabad, Feb. 11: Reliance’s 100-storey tower and a signature structure of similar elevation by Lanco Hills are among several ambitious projects likely to come to nought with the state government’s move to reintroduce height restrictions based on Floor Space Index. Besides the Lanco and Reliance projects, the Tishman Speyer-led consortium’s proposed 400-acre integrated township at Tellapur will also be hit.
The government had last year removed limits on building height calculated by FSI. Official sources told this correspondent that the Chief Minister, Dr Y.S. Rajasekhar Reddy, had asked the municipal administration and urban development department (Maud) to reintroduce FSI and cap it at 1:2.5. The Chief Minister said there had been several complaints about unlimited building height leading to congestion and environmental problems.
The sudden U-turn by the Chief Minister has come as a shock not only to developers but officials as well. Sources said even Maud was clueless on the policy change, which builders have termed a retrograde step. While introducing new building rules recently, the department scrapped FSI and said built up space would be determined as per set backs and road width. It also allowed unlimited height if the plot abuts a road at least 100 feet wide.
Under FSI mode, the built up space permitted is based on the area of the land where the construction is made. With FSI at 1:2.5, builders will get only 22.5 sq. ft for every square yard of land. “In real terms, the built up space will be even less because the government intends to include common areas and balconies also in the FSI,” a senior official pointed out.
The 100-storey Reliance tower is planned on less than 30 acres. With FSI, a building of that height would have to be built on at least 40-50 acres of land, the official said, adding that the Lanco Hills project faces a similar problem. The proposed IT parks in Gachibowli and Raidurg where Delhi-based BPTP Ltd plans 60-floor structures, a 30-storey residential project at Bachupalli, mall and entertainment centres by Prestige and Parsvanath Developers at Kukatpally and DLF’s hotel project will all be affected by the height restrictions.
“The government said scrapping of FSI was revolutionary,” a top city realtor protested. “Agencies like Andhra Pradesh Industrial Infrastructure Corporation, Hyderabad Urban Development Authority and AP Housing Board touted it as their USP while selling land for hundreds of crores.”
More on New Hyderabad Airport
An interesting post from Deccan Chronicle dated 12/02/08 on Hyderabad Airport.
Hyderabad, Feb 11: The Rajiv Gandhi international airport at Shamshabad is the best in its class with the world’s best brains in airport design and passenger services joining together to execute the first-ever greenfield airport under public-private partnership in the country. “The new Hyderabad airport has several firsts to its credit. We have put together the best international companies to work with us to complete the project eight months ahead of the schedule and give passengers the best of world class services,” said GM Rao, chairman of GMR Group, which executed the mega airport project in the otherwise sleepy village of Shamshabad in the backward Ranga Reddy district 30 km from here.
In an exclusive interview to this newspaper on Monday on the eve of the calibration tests at the new airport, Mr Rao elaborated that Rajiv Gandhi international airport at Shamshabad is the first airport in India to go for LEED Certificate for incorporating green design elements. It is a non-polluting airport and passengers will have fresh air to breathe. “It is also the first airport to have integrated terminal Authorities believe that those who want to build Greenfield airports in the PPP mode would surely study Shamshabad, which has incorporated global best practices, as the most successful model.
“Passengers can enter the airport from the national highway No. 7 and from Srisailam highway,” said Mr Rao, who was happy that the rain god blessed his mega venture immediately after the puja ahead of the calibration tests. The airport has the best brains working in all its sectors. “The cargo operation will be handled by Menzies, the business hotel by Accor with Novotel brand and flight catering by LSG Sky Chef and Sky Gourmet,” said Mr Rao. The fuel farm operation and maintenance would be undertaken by Reliance Industries, duty free and retail by Nuance and Shoppers Stop, parking by Tenaga and airport lounges by Plaza Premium of Hong Kong.
“Our business philosophy is to work with the best international companies,” he said. “We have chosen them through a transparent selection process.” The airport medical centre will be manned by Apollo Hospitals and pilots will be trained by the Sabena Flight Academy while the maintenance contract has been given to Faber Malaysia. Even the house-keeping has been handed over to Sinar Jernih of Malaysia and ISS Integrated Services of Singapore. The bookstores will be run by Landmark and Odyssey.
Mr Rao said GHIAL had got the help of renowned aviation and construction experts including Prof. Rigas Doganis, fellow of the Royal Aeronautical Society, Prof. Amadeu Odoni of MIT and Prof. John Kasarda from North Carolina University. “We got the help of experts who designed Oslo and Hong Kong airport,” said Mr Rao. “The works of the passenger terminal building was taken up by China State Engineering Construction (Hong Kong) Limited.”
Mr Rao said a team had visited Bangkok to study how the existing airport there was converted to a greenfield one. “Since we know the problems which Bangkok faced, we have made our strategies accordingly,” he said. “The shifting from Begumpet to Shamshabad on March 16 will be a smooth affair. We will be running 120 special buses to several points in the city. The fare will be just Rs 95.” By all counts, the Begumpet airport would close down after March 16, though there are demands from some quarters that it be kept open.
Hyderabad, Feb 11: The Rajiv Gandhi international airport at Shamshabad is the best in its class with the world’s best brains in airport design and passenger services joining together to execute the first-ever greenfield airport under public-private partnership in the country. “The new Hyderabad airport has several firsts to its credit. We have put together the best international companies to work with us to complete the project eight months ahead of the schedule and give passengers the best of world class services,” said GM Rao, chairman of GMR Group, which executed the mega airport project in the otherwise sleepy village of Shamshabad in the backward Ranga Reddy district 30 km from here.
In an exclusive interview to this newspaper on Monday on the eve of the calibration tests at the new airport, Mr Rao elaborated that Rajiv Gandhi international airport at Shamshabad is the first airport in India to go for LEED Certificate for incorporating green design elements. It is a non-polluting airport and passengers will have fresh air to breathe. “It is also the first airport to have integrated terminal Authorities believe that those who want to build Greenfield airports in the PPP mode would surely study Shamshabad, which has incorporated global best practices, as the most successful model.
“Passengers can enter the airport from the national highway No. 7 and from Srisailam highway,” said Mr Rao, who was happy that the rain god blessed his mega venture immediately after the puja ahead of the calibration tests. The airport has the best brains working in all its sectors. “The cargo operation will be handled by Menzies, the business hotel by Accor with Novotel brand and flight catering by LSG Sky Chef and Sky Gourmet,” said Mr Rao. The fuel farm operation and maintenance would be undertaken by Reliance Industries, duty free and retail by Nuance and Shoppers Stop, parking by Tenaga and airport lounges by Plaza Premium of Hong Kong.
“Our business philosophy is to work with the best international companies,” he said. “We have chosen them through a transparent selection process.” The airport medical centre will be manned by Apollo Hospitals and pilots will be trained by the Sabena Flight Academy while the maintenance contract has been given to Faber Malaysia. Even the house-keeping has been handed over to Sinar Jernih of Malaysia and ISS Integrated Services of Singapore. The bookstores will be run by Landmark and Odyssey.
Mr Rao said GHIAL had got the help of renowned aviation and construction experts including Prof. Rigas Doganis, fellow of the Royal Aeronautical Society, Prof. Amadeu Odoni of MIT and Prof. John Kasarda from North Carolina University. “We got the help of experts who designed Oslo and Hong Kong airport,” said Mr Rao. “The works of the passenger terminal building was taken up by China State Engineering Construction (Hong Kong) Limited.”
Mr Rao said a team had visited Bangkok to study how the existing airport there was converted to a greenfield one. “Since we know the problems which Bangkok faced, we have made our strategies accordingly,” he said. “The shifting from Begumpet to Shamshabad on March 16 will be a smooth affair. We will be running 120 special buses to several points in the city. The fare will be just Rs 95.” By all counts, the Begumpet airport would close down after March 16, though there are demands from some quarters that it be kept open.
Rethinking on India Back Office.
Read an interesting article on the rethinking the India Back Office story from www.wsj.com. While it is true that there is a rethink on India being the Back Office of the world, the current market dynamics suggest otherwise. With about $400 billion of losses due to sub-prime crisis and more to come from the credit card delinquencies from leading financial institutions the outlook for outsourcing to India looks rosy.
Rethinking the India Back Office - source : wsj.com
Some Western Firms Weigh Selling
Their Units as Costs Rise, Dollar Weakens
By JACKIE RANGE
February 11, 2008; Page A6
NEW DELHI -- Many of India's back-office businesses -- the industry that propelled this nation onto the front lines of global commerce -- may soon be changing hands.
Some of the largest outsourcing units are still those belonging to Western companies, including Wall Street's biggest banks, which set them up here in recent years to take advantage of India's low-cost, educated labor force. Now, many of the big companies could soon be looking to get out of part or all of the business by selling either to Indian companies that specialize in outsourcing services, to private-equity firms or through initial public offerings.
The reason: The costs for big companies of having their own Indian units are rising sharply -- India's skilled-labor wages are shooting up -- and many, particularly financial-service companies, are looking to cut their overhead as the U.S. economy slows and the credit crunch takes its toll. The dollar's weakness, which makes doing business in India comparatively more expensive, is another incentive for Western companies to leave the sector.
Moreover, a study by consultants McKinsey & Co. and Nasscom, the Indian tech and outsourcing industry group, found that, on average, company back offices -- or "captives," as they are referred to in the tech and outsourcing industry -- were less efficient than companies run by outsourcing firms that specialize in the business. For some types of back-office work, captives' costs are 30% higher. The survey found that the higher costs didn't lead to lower staff turnover or better-quality work.
The scale of many of these individual deals is expected to be small, mostly in the range of $50 million to $100 million. But together they could total sizable numbers at a time when deals elsewhere are expected to become scarce because of the economic slowdown in the U.S. and elsewhere.
"As U.S. companies come under pressure, in a recessionary environment, I think this will be a good way to cut their costs -- and also get some money," said Amitabh Chaudry, CEO of Infosys Technologies Ltd.'s fully owned business-process outsourcing arm, Infosys BPO Ltd.
India's tech and business-process outsourcing industry is growing fast and has been a big factor in boosting economic development here. Nasscom says sales for the industry totaled more than $47.8 billion in the year to March 31, 2007, up almost 10 times over the past decade. The Indian tech sector was 5.4% of the nation's gross domestic product in fiscal 2007, up from 1.2% in fiscal 1998.
Four or five years ago, setting up a unit in India made sense: Shift the accounts, tech department or customer-care center to India and cut costs by 45%. Many American and European companies rushed to do it. Swiss bank UBS AG has a back office employing about 2,000 in tech hub Hyderabad. Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and HSBC Holdings PLC have their own, too.
For some companies, such offices have now become a headache. Once the initial benefit was felt, companies found it hard to keep on top of their costs. Salaries and the cost of office space jumped. Staff turnover has been high, and companies are having to spend on headhunting fees and training.
India, however, remains a low-cost destination that offers a large quantity of people with the often-special skills required to make such businesses work, says Pankaj Kapoor, an analyst at ABN Amro Asia Equities in Mumbai. Although costs have risen, they remain substantially lower than in the U.S. or Europe. While some companies have begun to move their back-office operations to lower-cost countries such as Vietnam, Mr. Kapoor says he thinks many -- particularly the more complex back-office functions -- will remain in India. But at the same time, Western companies are still likely to look for ways of getting those functions off their balance sheets, he adds.
Not all back-office operations are suitable for sale or for operation by another company. Functions that are very central to a business or are too sensitive to be outsourced are likely to stay owned by the parent company, says Viju George, an analyst at Edelweiss Securities, a financial-services firm in Mumbai. Companies that market themselves as having an India presence, often as a low-cost benefit to clients, are also unlikely to sell, Mr. George says.
But already, sales are happening. Genpact Ltd., a business-process outsourcing concern, was spun out of General Electric Co. and listed on the New York Stock Exchange in August. GE and private-equity concerns General Atlantic LLC and Oak Hill Capital Partners remain big shareholders.
Travelport Group, a U.K. travel-services company that is owned by private-equity concern Blackstone Group LP, in December sold Travelport ISO, its Indian back-office operation, to Mumbai-based Intelenet Global Services Pvt. Ltd., a company 80%-owned by Blackstone. At the same time, Intelenet unveiled a deal to buy Upstream, an international outsourcing company, from its major shareholders based in Fargo, N.D. Together, the deals were valued at $75 million.
Back offices also have changed hands as part of bigger outsourcing deals. As part of a $250 million outsourcing contract last July, Infosys bought three back offices in India, Thailand and Poland from its client Philips Electronics NV of Amsterdam for $28 million.
Citigroup Inc. has eyed a sale of its Indian back-office unit, Citigroup Global Services Ltd., people familiar with the matter say. Citigroup declined to comment. And United Kingdom insurance giant Aviva PLC said a strategic review of its Indian offshore business, Aviva Global Shared Services Pvt. Ltd., had come to the early conclusion that partnership, in a variety of forms, could be a better alternative to its current back-office set up. Aviva is now in talks with "a very small number of parties before reaching a final conclusion," the company said in a statement.
--Vibhuti Agarwal contributed to this article.
Write to Jackie Range at jackie.range@dowjones.com
Rethinking the India Back Office - source : wsj.com
Some Western Firms Weigh Selling
Their Units as Costs Rise, Dollar Weakens
By JACKIE RANGE
February 11, 2008; Page A6
NEW DELHI -- Many of India's back-office businesses -- the industry that propelled this nation onto the front lines of global commerce -- may soon be changing hands.
Some of the largest outsourcing units are still those belonging to Western companies, including Wall Street's biggest banks, which set them up here in recent years to take advantage of India's low-cost, educated labor force. Now, many of the big companies could soon be looking to get out of part or all of the business by selling either to Indian companies that specialize in outsourcing services, to private-equity firms or through initial public offerings.
The reason: The costs for big companies of having their own Indian units are rising sharply -- India's skilled-labor wages are shooting up -- and many, particularly financial-service companies, are looking to cut their overhead as the U.S. economy slows and the credit crunch takes its toll. The dollar's weakness, which makes doing business in India comparatively more expensive, is another incentive for Western companies to leave the sector.
Moreover, a study by consultants McKinsey & Co. and Nasscom, the Indian tech and outsourcing industry group, found that, on average, company back offices -- or "captives," as they are referred to in the tech and outsourcing industry -- were less efficient than companies run by outsourcing firms that specialize in the business. For some types of back-office work, captives' costs are 30% higher. The survey found that the higher costs didn't lead to lower staff turnover or better-quality work.
The scale of many of these individual deals is expected to be small, mostly in the range of $50 million to $100 million. But together they could total sizable numbers at a time when deals elsewhere are expected to become scarce because of the economic slowdown in the U.S. and elsewhere.
"As U.S. companies come under pressure, in a recessionary environment, I think this will be a good way to cut their costs -- and also get some money," said Amitabh Chaudry, CEO of Infosys Technologies Ltd.'s fully owned business-process outsourcing arm, Infosys BPO Ltd.
India's tech and business-process outsourcing industry is growing fast and has been a big factor in boosting economic development here. Nasscom says sales for the industry totaled more than $47.8 billion in the year to March 31, 2007, up almost 10 times over the past decade. The Indian tech sector was 5.4% of the nation's gross domestic product in fiscal 2007, up from 1.2% in fiscal 1998.
Four or five years ago, setting up a unit in India made sense: Shift the accounts, tech department or customer-care center to India and cut costs by 45%. Many American and European companies rushed to do it. Swiss bank UBS AG has a back office employing about 2,000 in tech hub Hyderabad. Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and HSBC Holdings PLC have their own, too.
For some companies, such offices have now become a headache. Once the initial benefit was felt, companies found it hard to keep on top of their costs. Salaries and the cost of office space jumped. Staff turnover has been high, and companies are having to spend on headhunting fees and training.
India, however, remains a low-cost destination that offers a large quantity of people with the often-special skills required to make such businesses work, says Pankaj Kapoor, an analyst at ABN Amro Asia Equities in Mumbai. Although costs have risen, they remain substantially lower than in the U.S. or Europe. While some companies have begun to move their back-office operations to lower-cost countries such as Vietnam, Mr. Kapoor says he thinks many -- particularly the more complex back-office functions -- will remain in India. But at the same time, Western companies are still likely to look for ways of getting those functions off their balance sheets, he adds.
Not all back-office operations are suitable for sale or for operation by another company. Functions that are very central to a business or are too sensitive to be outsourced are likely to stay owned by the parent company, says Viju George, an analyst at Edelweiss Securities, a financial-services firm in Mumbai. Companies that market themselves as having an India presence, often as a low-cost benefit to clients, are also unlikely to sell, Mr. George says.
But already, sales are happening. Genpact Ltd., a business-process outsourcing concern, was spun out of General Electric Co. and listed on the New York Stock Exchange in August. GE and private-equity concerns General Atlantic LLC and Oak Hill Capital Partners remain big shareholders.
Travelport Group, a U.K. travel-services company that is owned by private-equity concern Blackstone Group LP, in December sold Travelport ISO, its Indian back-office operation, to Mumbai-based Intelenet Global Services Pvt. Ltd., a company 80%-owned by Blackstone. At the same time, Intelenet unveiled a deal to buy Upstream, an international outsourcing company, from its major shareholders based in Fargo, N.D. Together, the deals were valued at $75 million.
Back offices also have changed hands as part of bigger outsourcing deals. As part of a $250 million outsourcing contract last July, Infosys bought three back offices in India, Thailand and Poland from its client Philips Electronics NV of Amsterdam for $28 million.
Citigroup Inc. has eyed a sale of its Indian back-office unit, Citigroup Global Services Ltd., people familiar with the matter say. Citigroup declined to comment. And United Kingdom insurance giant Aviva PLC said a strategic review of its Indian offshore business, Aviva Global Shared Services Pvt. Ltd., had come to the early conclusion that partnership, in a variety of forms, could be a better alternative to its current back-office set up. Aviva is now in talks with "a very small number of parties before reaching a final conclusion," the company said in a statement.
--Vibhuti Agarwal contributed to this article.
Write to Jackie Range at jackie.range@dowjones.com
Monday, February 11, 2008
TCS launches 2nd campus in Hyderabad
After Deccan Park it is Synergy Park from TCS in Hyderabad.
BS Reporter / Mumbai February 11, 2008
Tata Consultancy Services (TCS) has announced the launch of its second global delivery centre (GDC) in Hyderabad.
According to an official release issued today, Synergy Park in Gachibowli will be the largest TCS facility in the city. Built over an area of 50 acres with a capacity of 8,000 people, the campus is being built in two phases; the first phase is already operational while the construction of phase two will commence in April 2008.
Synergy Park is an approved special economic zone (SEZ) and will serve global TCS customers in industry segments like telecommunications, media & entertainment, government, healthcare & life sciences, hi-tech, manufacturing, retail as well as banking & financial services with a focus on technology areas like enterprise solutions, assurance services and infrastructure services as well as IT services.
Speaking on the occasion, CEO and MD, S Ramadorai, said: "The inauguration of Synergy Park is a significant milestone for our operations in Hyderabad and underlines the importance of the city as a key center in our global network delivery model."
"With a strong education eco-system, plentiful talent and good infrastructure, Hyderabad has emerged as a leading IT destination and the city will continue to play a significant role in our growth plans", Ramadorai added
BS Reporter / Mumbai February 11, 2008
Tata Consultancy Services (TCS) has announced the launch of its second global delivery centre (GDC) in Hyderabad.
According to an official release issued today, Synergy Park in Gachibowli will be the largest TCS facility in the city. Built over an area of 50 acres with a capacity of 8,000 people, the campus is being built in two phases; the first phase is already operational while the construction of phase two will commence in April 2008.
Synergy Park is an approved special economic zone (SEZ) and will serve global TCS customers in industry segments like telecommunications, media & entertainment, government, healthcare & life sciences, hi-tech, manufacturing, retail as well as banking & financial services with a focus on technology areas like enterprise solutions, assurance services and infrastructure services as well as IT services.
Speaking on the occasion, CEO and MD, S Ramadorai, said: "The inauguration of Synergy Park is a significant milestone for our operations in Hyderabad and underlines the importance of the city as a key center in our global network delivery model."
"With a strong education eco-system, plentiful talent and good infrastructure, Hyderabad has emerged as a leading IT destination and the city will continue to play a significant role in our growth plans", Ramadorai added
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