Wednesday, August 27, 2008

The new Zamindars of India - TheRussian mafia

Livemint.com reports on apathy of the Goa government to look into illegal land dealings in Goa.
Mumbai: The Enforcement Directorate, or ED, the agency responsible for investigating economic crime in India, has sought information from the Goa government on all companies that bought properties in the state between 2000 and 2007, as it investigates the role of a suspected Russian land mafia.
The agency suspects that some Indian companies that bought large plots in the state could have acted as fronts for Russian owners acquiring land in violation of the Foreign Exchange Management Act, or Fema, said a top enforcement official, who spoke on the condition of anonymity.
The directorate, which has been probing suspicious land transactions, has had little success in tracking such deals.
“Most of these cases are unreported due to the reluctance of state authorities to cooperate with our investigations,” the same official said. “We have asked the Goa government to find out the names of big companies that have bought land for promotion of tourism in Goa.”
Goa chief minister Digambar Kamat declined to comment on the issue in a telephone conversation. He also said a comment through email or fax would take time, citing the state assembly session that’s under way.
Goa, famous for its beaches, tropical biodiversity and a strong Portuguese influence on its culture and architecture, attracts a large number of foreign tourists every year who find it easier to blend in with the diverse local population than in any other Indian state. But parts of Goa have also acquired a reputation as a haven for drug dealers and land mafia.
Last year, CNN-IBN television news channel reported that the Russian land mafia had been throwing out small landholders and farmers, and grabbing prime land in fraudulent deals. Following reports of foreigners buying land in Goa in violation of Fema, the state government handed over details on 21 companies owned by Russian nationals to the directorate and the Reserve Bank of India, or RBI.
According to Ashutosh Limaye, associate director at the property consultant Jones Lang LaSalle Meghraj, increased vigilance over land deals by the police, forest laws and rules relating to coastal regulation zones have stalled land transactions in Goa now.
“The deal makers want to play it safe and are waiting for resolution of the ongoing issues,” he said.”The number of land transactions in Goa has definitely come down as a fallout of the land scam. Many deals, that were at the negotiation stage, have been stalled.”
Still, the “significant decline” in the number of land deals hasn’t led to a sharp fall in prices, which have remained stable, he said.
In May, the directorate issued notices under Fema to the promoters and directors of two companies—True Axis Resorts Pvt. Ltd and Artlibori Resorts Pvt. Ltd, owned by Russian citizens Leonid Beyzer and Valiulin Rashida, respectively, asking them why they should not be penalized. The other directors in True Axis are Pramod B. Walke and Fransico D’Souza, both from Goa.
Beyzer, who still lives in Goa had, in 2005, bought 25,000 sq. m of land, including 19,906 sq. m of prime agricultural land in Morjim, North Goa, for constructing a resort. He was in India on a tourist visa, according to the directorate.
Mint was unable to contact True Axis and Artlibori Resorts because their addresses weren’t readily available.
The directorate also sent notices to directors of another resort firm, Oriental Ambers Pvt. Ltd, only to find later that there was no office at the registered address. It has not been able to trace the local owners of Oriental Ambers either.
According to the enforcement official, under Fema, foreigners can buy land in India if they hold a business visa and have lived in the country for 182 days at a stretch in the previous financial year. Such individuals should also possess documentary evidence of either long-term employment or business or vocational pursuits in India.
Foreigners with business visas can purchase properties in the name of Indian entities registered with the registrar of companies and the local branch of RBI. They can buy land for personal use if they can prove their intention to stay in India for an indefinite period of time. Even then, they are not allowed to buy agricultural and plantation land.
According to the directorate’s investigations, Beyzer founded True Axis and infused capital in the firm as foreign direct investment, or FDI, under the automatic route of RBI available for non-resident Indians. The Indian central bank raised objections later on the source of money.
Under the automatic FDI route, RBI’s prior approval is not required. However, the firm should notify RBI about the transaction within 30 days of inward remittances for clearance.
“We found that True Axis was not using the money for construction of the proposed resort. Now, we have attached the commercial property of True Axis in Morjim and are waiting to hear from the promoters on the show-cause notice,” the same official said.
“We fear that a number of big companies owned by Russians have followed the same route to grab land in Goa,” he added. “The modus operandi of such individuals is to float a company with an Indian partner, who acts as a front to register the firm in Goa. The company then pumps in foreign investment for real estate deals. Once the firm buys the land, it splits from the Indian partner.”
The directorate is investigating more than 400 cases where foreigners from the UK, France and Russia have bought land in Goa under tourist visas.
“Many of them are retired foreigners who are peacefully living in Goa and are harmless, but the real threat is from Russian companies who are illegally acquiring land,” the enforcement official said.
The agency recorded statements of individuals in 100 cases and issued 15 so-called show-cause notices to some of them under Fema last month. According to the directorate, the number of cases of misuse of property laws in Goa can go up to 2,000.

7 comments:

mallapottell said...

looks like Russian Mafia plans to have its operational HQ in Goa. This will help ISI, CIA etc to outsource some of their operations

Shailesh said...

Economist Article.


Indian property - Lights on, nobody home


In recent weeks, however, inflation has tipped over 12%, largely driven by surging oil prices. This has pushed up interest rates and turned property companies into the biggest corporate losers of India’s slowing economy. They have been kicked from several sides. Homebuyers are put off by expensive or elusive credit; banks are rationing credit to developers; prices of building materials like cement and steel have soared. The share prices of property firms are down by 40-70% from their highs earlier this year.

Part of the problem is that when the market was strong, developers piled into the most expensive properties where the biggest profits were to be made. One upmarket enclave in Gurgaon, which boasts a nine-hole golf course and a “cigar lounge,” has sold fewer than half the houses built in the first phase of development, even though it is now more than a year since they went on sale. HSBC reports that sales in the luxury segment have fallen by up to 70% in Gurgaon.

sabbalseshu said...

When your home loan repayment stretches to infinity
As rates go up, the interest part becomes more than the EMI
Vivek Kaul. Mumbai
Savitha B got a shock recently. With increasing interest rates, the remaining tenure on her home loan went up to 65 years.
In early August, she got a letter from the public sector bank she had taken a home loan from. The letter said the interest rate on her floating rate home loan had been increased from 11.5% to 12%. Interest rates had been going up for some time, so she was expecting it. However, that was the less scary part.
The letter said the remaining tenure on her home loan at her current equated monthly instalment (EMI) of Rs5,000 had now gone up to 782 months or around 65 years more. She still had Rs5 lakh principal outstanding on the loan.
The bank obviously would not lend for such a long period of time and given this, the letter told her that she should visit the bank and discuss what needed to be done. Before this letter had come, the interest rate on her loan was 11.5% and the remaining tenure on her loan stood at 333 months.
Nevertheless, there was something that the bank had not told her. Her remaining tenure at the current rate of interest of 12% was not 65 years, but it was infinite, which meant that she would never be able to repay the loan if she continued paying an EMI of Rs5,000 every month.
And why is that? An interest of 12% on a principal remaining of Rs5 lakh works out to around Rs60,000 a year. The total EMIs paid during the year at the rate of Rs5,000 every month would also amount to Rs60,000 (Rs5,000 x 12). Therefore, the EMIs were just taking care of the interest part on the home loan and no principal was being repaid. What this effectively meant was that at an EMI of Rs5,000 Savitha would just keep paying interest on the loan and hence never be able to repay the loan.
How did the bank arrive at a tenure of 65 years? By assuming an interest rate of 11.995%. At that rate, the remaining tenure of repayment comes at 65 years, because with every EMI some part of principal keeps getting repaid.
The solution is simple. If she decides to prepay Rs25,000, her tenure will come down by 40 years to 301 months or around 25 years. She can also increase her EMI. By increasing the EMI to Rs6,000 she could bring down the tenure to 180 months or 15 years — Rs1,000 increase can bring down her tenure by nearly 50 years. By doing both—prepaying Rs25,000 and increasing the EMI to Rs6,000 — her tenure would come down to 157 months or around 13 years.
(Name has been changed on request) 

Anonymous said...

The borrower in this case is stupid to borrow 5L at 11.5% with an EMI of 5000. Even withouth the rise the borrower is paying 5000 x 333 months = 16L as payments for a 5L loan. i.e he/she is paying more then twice the principal as interest. With a payment of 5000/16L per month, he is ultra subprime. Which bank is providing such high risk loans ?

Shailesh said...


Real estate: More pain ahead?


Last year was the most painful in decades for the residential housing market in the US of A. Home prices fell, home ownership dropped, foreclosures soared, and the housing market emerged as perhaps the weakest part of the entire U.S. economy.

But in Indian conditions housing prices maybe set to slide considerably further. Banks and mortgage lenders are raising their lending standards. That means credit will remain tight, boxing out many potential buyers. Interest rates on many mortgages are about to reset, increasing the pain on many borrowers and triggering more defaults. Home inventory is still growing and must be worked off before the market gains some kind of equilibrium.

The Current Housing Market Has Yet To Hit Bottom

In other words, we`re still a long way from the bottom of the current housing market. And there may be some further anecdotal evidence to prove it.

Most homebuilders know the score, of course. But friends who are out looking for homes right now tell me that many sellers remain deluded.

I find the lack of good proper information in the real estate market a big killer of liquidity. If real estate could be listed like equity shares you would know the price of your house (you may not want to buy or sell). Now you are completely at the mercy of a few ``informed`` people in the business. And you can only guess whether they are lying or just hoping. I have met mid level employees holding on to a living house, a second house and an investment house - hugely leveraged. These would be the first guys to get lynched. Of course when you believe your area sells for Rs 7,000 psf and your neighbour sells for Rs 4,800 psf, you get into denial mode. Like my friend Prakash Natrajan says ``My house has a green window, so it will fetch 7000 unlike my neighbor who had a red window`` is Denial mode!

No one has a crystal ball, of course. Even the experts on TV only have a teleprompter?

Shailesh said...

Nice long article


A great opportunity for asset reconstruction funds in real estate

Anonymous said...

By the end of September major world markets would be in a Recession. Lehman Bros in US is toast. With recession and credit crunch, it is quite possible that India's housing bublle may not take 2-3 years to come down 60-70% but could be a freefall in the next 6 months and the prices go down by 40% by Mar-Apr 2009.