Thursday, November 20, 2008

Fear and Deflation in Vegas

Life comes full circle and the anti-matter version of Fear and Loathing in Vegas is rearing its ugly head. Steel is down 75% per ton, cement is down lows never seen. Stocks like ACC and Tata Steel blue chip Tata companies are getting cheaper by the minute and the center piece of action, DLF and Unitech the darlings of the real estate industry are down 90-95% from all time highs. What does all this data fortell ? To the brokers and the touts of the real estate industry they still are calling for a 8% cut (Sobha in Bangalore ) or another stupid builder who is giving an apt in Mira road free if you buy a super inflated apartment in Santa Cruz. With IICI bank and HDFC bank down 70% banks are in deep trouble. They will be very worried about Non performing assets and will be very reluctant to lend at over priced properties. They also would like their current borroweers to pay thru the teeth to compensate for the NPA's. Looking all around there is doom an gloom. I wonder what the trolls on this blog think.

28 comments:

Anonymous said...

Due to a high demand, rates remain stable

Bella Jaisinghani | TNN


RENT APART: A TALE OF TWO CITIES



Meltdown softens high-end rates

The recession has led to rents falling in south Mumbai, where high-end flats have become cheaper by 10%, and the eastern suburbs, where demand has not stopped prices from dipping. However, landlords are holding rates steady in the western suburbs and Navi Mumbai, where a large number of people are seeking accommodation




Nauzer Bharucha | TNN


Cheaper despite a rush for rentals



Somit Sen | TNN



Slight drop in pockets, but overall there’s little relief



Viju B | TNN

http://epaper.timesofindia.com/Daily/skins/TOI/navigator.asp?Daily=TOIM&login=default


Dear Friends,

This has appeared in todays Times of India Mumbai edition page number 5.(21.11.08)

As i mentioned earlier Mumabi has a huge demand for residental property and that is the reason builders are holding on, we must remember they are also business men with credible IQ.

If we can close the deal with 30% discount pls. go ahead before the interest rates fall. (I am sure it will)

Reports appearing in news paper does not decide the market movement but demand and supply situation.

Mumabi has huge demand and sizeable number of people over here
have money. Let us see how thing unfold.

Vik I must say you are doing a good job by creating a platform to exchange our views. Thanks.

Bindaas Bhai

Anonymous said...

i take deccan herald (bangalore)
in today's property edition, there were literlly no ads. (just a coupe of small ads). the only big ad was some apartment somehere in the outskirts of the city. (they quoting some 14 lacs starting price. and rs 50/sq ft so called special discount for the first 50 bookings :-) )
this is the first time i am seeing such a thing for quite a long time.

Anonymous said...

My Dear Bindaas,
From your earlier posts about interest rates:
Interest rate cuts would have very minimal difference because:
--Even if RBI cuts rates, it is not necessary that banks would do the same. They may in fact increase the rates as there is a major financial crunch all over the world.
--Most speculators are gone, so 70% demand is already vanished.
--The sentiment that housing always goes up has gone from the market.
--Right now masses are worried how to save their jobs and not how to buy houses.

Anonymous said...

Bindaas,
One should view the situation from World view. One should try to understand what the problem is:

The problem is not that the housing prices are falling. The problem is why they went 200% increasing for the last 4-5 years. When Oild goes up, wheat goes up it is inflation and when housing goes up 1000% which is hyper0inflation, is not even reported by Govt. as inflation.

So, try to understand the problem the country and the world is facing. Don't work just on towards your short term greed.

Basically, Govt. is adding fuel to the same old problem that has existed for 4-5 years and not addressing the core problem. Which will backfire again in a year or two. What else can you expect from Chud'ram.

Anonymous said...

I think no matter what happens to interest rates, or if people have a lot of black money, PEOPLE are not willing to spend and get into the market as they don't understand what's going on. And no one knows what is coming next. PEOPLE are going to save whatever they can rather than getting burned again like the Stocks which is also 60% lower then its high.

As a result, there would be very leass buyers, huge inventory and the prices would have to come down. Now it may take 3-6 months or 2 years depending on Govt. policies, but prices have to eventually come to sustainable levels.

Sustainable Level: A house should sell for 120X where X is the monthly rent. If someone is really tempted to buy that house, he can go upto 150X(maximum) to get positive NPV on that property. Otherwise it is a bad investment and money is going to the bank paying for salaries for all those idiot MBAs banks have hired.

Anonymous said...

The low rents and low rise in rents even in mega cities point to the fact that properties are in tremendous surplus. For those who can pay 10K and above, there are literally millions of properties to rent.

For the poorer class, there is indeed a shortage of properties to choose from. However they are not the subject and object of this bubble

Anonymous said...

I am from Mumbai and read the Times of India and Hindustan times.

I think the Times of India has all payroll journalist paid by the Realty sector.

They have only one view with they broker with the RE bastards.

The Times of India is playing the builders games.

I think they want all "Aam Aadmi" to move to Virar and Karjat where most of the elite would have their farm houses.

The TOI has paid stooges who want to mislead the people . So donot belive them at all.

The prices will come DOWN.

Anonymous said...

Vik

Sobha sent me an email this morning offering 8% flat off their apartments in bangalore and pune.

Virendra Singh said...

It is indeed a fact that TOI ( Times of India ) always works hand in hand with the builders. They always publish the pro builder viewpoint and spread the misinformation which would help builders. Times has no ethics , or rather all ethics are on sale for this newspaper. Do not trust any news on real estate that they publish. Even the Hindustan Times, which was like some fresh breeze when it came, has built links with builders and has become unreliable. I can't say about other newspapers as I don't subscribe them, but I guess the builders would have compromised their sanctity too.

Anonymous said...

Of course, otherwise who do you think pays for those glossy "property times" and other supplements? The buyers? Ha! Ha!

Anonymous said...

It is the greed of buyers who fueled this whole thing. Once the buyers understand the market, no builder will get money out of them to fund glossy ads.

Kanekar said...

I am employed in the middle east and have been saving money to buy a flat in mumbai. Over the last 3 years , I have watched the prices going up and at the current price, buying a small apartment in a remote corner in mumbai is not within my means. Now I am hearing about decline in prices, but when i check the newspapers i dont see any decline.

Magicbricks.com shows the graphs going up, meaning home prices increasing. I just can not make any sense out of this. Rs 7500 sq.ft for built of space in kandivili??????? who can afford these flats.

Anonymous said...

Kanekar... magicbricks is run by Times Group

Anonymous said...

Agree there is a huge demand & there will be a much higher demand but the current timing is bad. We will only buy in sale at minimum 50% off. The market mantra is either bull makes money or bear makes money.

See where is your money has gone in past,
http://economictimes.indiatimes.com/Markets/Real_Estate/Four_Indian_realtors_lose_33_bn_in_8_months_Forbes_/articleshow/3741846.cms

Guys, you will very soon receive a summer sale offer of 50% off, today officially they have declared a winter sale of 15% off [ un-officially 30% off].
http://economictimes.indiatimes.com/Markets/Real_Estate/Developers_to_slash_property_prices_by_up_to_15_per_cent/articleshow/3742112.cms

Lot of people is wondering that they are not able to see the decline in prices on web OR in news paper which is not a good place for pricing information. Go to the builder(broker bhai excuse) , show serious interest, then in 2-3 negotiation session you will get the 30% off. So don’t get excited based on web & news paper.

If such a nice real estate investment, http://www.amanora.com/NewLayout/index.aspx causing trouble to citi, how can a similar investment will help us?

Guys let it fall then only pick up, 50% price cut is guarantee.

Vulture.

Anonymous said...

http://economictimes.indiatimes.com/
Realty_stocks_not_part_of_Friday_bash/articleshow/3743763.cms

CHENNAI: Even as markets snapped a seven-day losing streak and sensex rose 5.5%, real estate stocks were grounded. .....

Already saddled with land purchased at peak prices and debts on balance sheet, shares of major players such as DLF, Unitech, Ansal Infra, Peninsula Land lost 4-9 % value on Friday. Investor wealth in major real estate stocks slumped by Rs 2,000 crore on Friday alone.

...
Real estate stocks such as Puravankara Projects, Brigade Enterprises, Parsvnath, Sobha Developer, Omaxe, Kolte Patil and HDIL are in fact quoting at a steep discount to their IPO issue prices.

Most of them have slipped more than 70-80 % from their issue prices.

......

Anonymous said...

@ Anonymous at 651am.

Bennett Coleman and Co. (owners of Times of India) also own Magicbricks.com the property portal. There is a strong relationship with builders as they advertise in their property times. TOI was never an unbiased paper. The Jains always bend to the flow of the political and money river.

Shailesh said...

CNN video on Hongkong

The first section is on Luxury cars and second on real estate. If houses in rich Hongkong are crashing, what is Mumbai to do?

Shailesh said...

To give you all an cost perspective.

Recently my father is involved in housing project in our native place in Gujarat. They are going to build 150 homes on 8 acre lot. The construction involves everything like Roads, Water, Electricity and Houses. On housing front they are talking to contractors. The rates they are getting, Rs. 750 per sq ft. Granted this is not Grade A construction, but not too shabby as well. In city like Mumbai you can double the cost, so may be Rs. 1500. I gurantee you that Rs 1500 is also high, but for sake of argument I will take that number.

With removal of ULCRA, supreme court relaxation on FSI etc... the land rates have gone down. I read on TOI, the going rate for TDR was around 1500. Hence total cost of construction Rs. 3000 per sqft. Paying Rs. 10000 to 15000 per sqft is ridiculous. These are rates are for proper mumbai not far flung distant suburb like Virar or Kalyan.

With so much profit margin built in, Builders have no moral right to get any government money or incentives. On the contrary they can actually sell places at 50% less than peak prices and still make decent profit. No media ever talk about real costs involved in building and how much profit they were raking in.

My advice, dont think real estate for next 3 years. These same builders will be begging for you to buy.

Shailesh said...

Margins too low to slash prices: State realtors

According to Sheth, the average realty prices in Gujarat range from Rs 900 per sq ft to Rs 1,300 per sq ft in smaller towns. Prices in bigger cities like Ahmedabad range between Rs 1,500 per sq ft and Rs 2500 per sq ft.

"As compared to this, average realty prices in cities like Pune, Mumbai or Bangalore range from Rs 3,800 per sq ft to Rs 6,500 per sq ft, which is why realtors there can afford to reduce prices by 5 to 10 per cent," Sheth explained.

Shailesh said...

MMRDA will dangle FSI carrot to pvt land owners

The Mumbai Metropolitan Regional Development Authority (MMRDA) has decided to promote its rental housing project in the Mumbai Metropolitan Region in a rather unique way. Floor space index (FSI) is an incentive that the authority will give to private land owners.

Explaining the idea, Milind Mhaiskar, additional metropolitan commissioner, MMRDA said that since most part of the rental housing project is going to be implemented on the outskirts of the city, the project will need support from private land owners. “The concept is that if a private land owner wants to implement a rental housing project, the authority will give him an FSI of 4. The only condition the MMRDA has is that out of the total FSI of 4, the owner will have to keep FSI of 1 reserved for rental housing. For the rest of the 3, he is free to utilise it for commercial or residential purpose,” he said.

This means that if one has to develop 1000 sq mt of land, he will avail 4,000 sq mt of total buildable area. Out of this, he will have to keep 1,000 sq. mt for rental housing. The MMRDA has planned to create a stock of 5 lakh houses in next five years.

Well all FSI that builders can use.

Shailesh said...

On above article, so 5 lakh rental house creation will give path to 15 lakh market rate houses !!! Wow talk about supply hitting market.

Shailesh said...

Allow commercial activity in ailing IT parks, says CMDA

The official said, "The builders gave us a representation recently stating that IT companies were no longer showing interest in hiring IT parks, owing to which several million sq ft of ready-to-use space is lying idle. It is a national waste and we are alive to the issue. According to present rules, these parks can be utilised only for housing IT companies during the first five years of operation. As far as CMDA is concerned, we have given IT parks an extra floor space index (FSI – the ratio of built-up area to the land area) of 1.5 over and above the normally permissible FSI. We are acting in conformity with the government IT policy. Hence, it is for the government to review the demands of builders."

"In 2004 and 2005, ELCOT convened many meetings in which officials portrayed a rosy picture about the IT sector in the state. We were told that there was demand for millions of square feet IT space, especially on Old Mahabalipuram Road. Now, when there is a crisis and builders are stuck with concrete buildings that serve no purpose, nobody is coming to our rescue. Several builders will sink if there is further delay in resolving this crisis," Challa explained.

Shailesh said...

Pune will not see any cut in home prices

According to a realty consultancy firm, a flat in some of the decent areas commands a price between Rs 3,000 and Rs 8,000 per sq ft, still a distant dream for most prospective buyers.

Blaming it on high interest costs and charges levied by Pune and Pimpri-Chinchwad municipal corporations and input costs, developers said that the prices in Pune have already seen all possible reduction.

“Input costs and charges by civic bodies have taken a toll on our profit margins and we have compromised with profits,” said Atul Goel, managing director, Goel Ganga Group.

Wow, prices of 8000 in Chinchwad? Who would have thunk? I lived there in 1993, and at that time prices were not even 1000.

Shailesh said...

Realty lobbies toe FM line, to drop prices

New Delhi: Claiming they are responding to Union finance minister P. Chidambaram’s request that builders lower prices to generate demand for real estate, two industry lobbies formally called on their members to reduce prices.

The National Real Estate Development Council, or Naredco, asked its members to give price “discounts” of up to 15% to revive sales, two days after the Confederation of Real Estate Developers Association of India, or Credai, told its constituents “to make every effort in lowering prices” across the country.

Wow looks like, New Gimmick in Realtors tools!!! Whats that proverb, "Fool me once Shame on you Fool me twice Shame on me"

Shailesh said...

Yeah right!!!

Realty body calls for 15% price cuts for affordable housing

On the existing projects, the correction is being made since last one year and about 20% to 40% correction has already been done across the country, Let us take the example of Gurgaon, where the apartments were sold at the rate of Rs 5,000 and now the rate is Rs 2,500; in Noida where the rate was Rs 7,000 now the rate is Rs 4,500. So corrections have already been made and we have bared the escalation where the steel and cement prices have gone up by 60–80%. So we haven’t passed that increase to the customers.

Steel prices are way down. And since you are revealing all number, why don't they reveal their cost basis as well. So we can be sure of not paying more than decent profit.

Shailesh said...

With all this real estate talk on the blog, I feel there is simple alternative.

Form a consumer group representing consumers. Make it online and free for people to join. Once you have significant number of buyers, ask Builders to pitch their best on private website. May be do reverse auction.

Anonymous said...

Every body is invited to our vulture strategist group. The strategy is very simple, in the bear market let it fall then only buy. See the example of Barclay & Nomura, they were interested in Lehman’s business (off course the 4th largest investment bank in US.& among top 10 in world) but they never bought it at high price. After Lehman’s bankruptcy they bought it at a penny price in auction.

So guys don’t be impatient, every day low price is guaranteed, next year 50% less is guaranty. The longer the time prices are on hold, the deeper discount is assured.

For pune real-estate we have already got a promotional offer of prices slashed from wadhwani builder, so Kumar builder can hold own apartments. In a village (megapolic) they are selling apartment at 3400 psf rate.

This is a very valid question for SEBI, when the stock prices were overpriced why didn’t they investigated? When prices are falling who asked you to intervene in the free market?

Vulture.

Anonymous said...

Prices will be 30% of what it is now,in two years time.

Or to put it another way,If you buy a property now for one crore, it will be worth 30 lakhs in two years time.(BEST WAY TO LOSE WEALTH)

i know it well cos, I just moved out of a well-known realty firm. The mood is quite sombre among the management as the cash flow is just a shadow of what it was 2 years back. The talk was, if the sales do not improve in the next 9 months (which they doubt will improve), they will be going for sales at a hugely discounted price, whuch will be 50% of what its now.Having said that, this grave mood is in a big national developer with presence in many big cities.So the mood in smaller developers will be one of panic in another 6-9 months time.

Be patient and reap the rewards.Or go buy now and make a fool out of yourself.

(PERSONALLY SPEAKING, I WOULD NOT BUY EVEN AFTER 50% REDUCION COS THE PRICES WILL BE DOWN EVEN FURTHER GOING INTO MEDIUM TERM FUTURE)

RAKESH MEHTA.