Friday, December 26, 2008

Builders ask govt to buy unsold flats

Yet another dumb, foolish, stupid, retarded, moronic, idiotic, asinine, (your favorite adjective) idea to prop the realty market. Trust nitwits like realtors to come up with these pearls of wisdom.
Indian express reports
New Delhi: In the first of its kind bailout demand, real-estate companies are planning to ask the Government to buy out their unsold flats at current market prices and sell these at a later date. The proposal floated by one of the big Delhi-headquartered and listed real-estate companies is one of the many ideas to be hard sold at the Planning Commission tomorrow.

A real estate company’s chairman and managing director who did not wish to be quoted told The

Indian Express, “We will discuss this tomorrow with Planning Commission Deputy Chairman Montek Singh Ahluwalia.” He, however, did not disclose the inventory position of the large firms in India.

According to Jaskirat Singh, owner of Delhi-based real estate broking firm Grand Real Estates, about 30-45 per cent of properties worth Rs 50 lakh and above launched over the last six months remain unsold for DLF and Unitech. In the case of Omaxe, it is 25-30 per cent, he said. These companies do not disclose their ready but unsold assets.

When contacted, a promoter of another leading Delhi-based and listed developer said this was not the only proposal on the table to bail out the sector. “We want states to enter into joint ventures with big real-estate players by offering land as equity. State-owned banks must also be directed to start disbursing home loans now that they do not have a problem of funds,” he said.

To boost consumer demand and give a fresh stimulus to the sector, the companies are also seeking a further cut in interest rates on home loans. “It should be slashed to 6 per cent for loans up to Rs 5 lakh and to 7-7.5 per cent for loans up to Rs 30 lakh. What the public sector banks have done is grossly inadequate,” a developer said. Tax incentives to home buyers must be enhanced and rental income be made tax-free to incentivise purchases, he added.

Stung by the liquidity crisis, real estate companies also want the Reserve Bank of India to refinance the cash gap in existing projects. Most companies are borrowing at rates over 20-22 per cent to complete ongoing projects. “But, now, loans from banks have virtually dried up,” a promoter said.

24 comments:

Anonymous said...

Repeating old comment on Builder's demand.

The below content is not only important to Real Estate Buyers but it’s very important for every Citizen Of India.

As per the RBI analysis, they found bubble in real estate in 2006 & consequently asked banks to reduce the exposure to this sector. Banks tightened the lending norms gradually since 2007.
In 2008, when the bubble has reached at its peak, why RBI is relaxing the lending norms to real estate? It’s a clear sign of systemic corruption in India. Yes, the finance minister asked the RBI to do so. What will be the implication? The toxic illiquid housing debt will come on the balance sheet of Banks which will cause a Banks failure in India same as US. [ Banks will lend money to buyer to buy the house at inflated price , buyer will default & as the house price is much below even after liquidation bank will incur losses.]

Once banks will start failing, whole economy will be in trouble. Then under the pretext of economy saving, they will use tax payer money & print money to save these banks.
What is the effect of printing money? It will increase the inflation & every one has to keep paying high taxes to support the housing which they never bought. Cause on your rupee note the Governor of RBI has promised to pay the debt, on your behalf but without your consent.

If your will compare the scenario, it’s a same as US but one major difference. In US when the bubble busted at that time the housing assets were on the bank’s balance sheet. The real estate companies managed to sell majority of the assets to home buyer who took housing loan. So it’s became problem to Banks & home buyer.
NOTE: There is no Major real estate company failure in US.

But in India still lot of housing is owned by real estate companies, who are desperately trying to pass on this toxic to buyers & banks. The RBI policy change is nothing but the corrupt political decision for builder.

Even after the policy change the greedy Builders were not satisfied & they are demanding to Govt. to buy the pending houses which cost 50 Lakh & above out of public tax money or by printing more money.
--DLF is demanding 8% interest rate. Is DLF is going to decide interest rate in this country? Interest rate is used by RBI to fight against inflation.
---When inflation is still at 7%, why RBI is easing the liquidity?

Guys, please pass on this information to every body & stop the systemic failure in Economy. The systemic failure in economy will result in dire consequences like great depression.

http://rbidocs.rbi.org.in/rdocs/Publications/
PDFs/88980.pdf
Page# 312 to 314


This is a request to VIK please post it on the front page. It’s not only for real estate buyer but for every citizen of India.

Vulture.

Anonymous said...

Bank's ponzi scheme well explained here. This article is also relevent here.

Sincere request - Please dont slog to quell unsatiated hunger of greedy Banks/ Real Estate Builders.

Anonymous said...

This proposal is immoral, unethical and criminal to say the least. Why should I as a taxpayer, bail out some nitwits who got carried away by the real -estate boom? If they can be bailed out, so should I who lost in the stock market. Will the govt buy back my shares are market values of Jan 2008 from me? Also I encourage people to ask the govt to buy back all of their "distressed assets" at acquistion/highly inflated costs. This can include for example your old Fiat cars, your granmother's spectacles, the utensils in your home ANYTHING AT ALL!!!!

Observer said...

It is really private sector employees who are paying "net" taxes to the government. Approximately half of all revenue to the Central Govt comes through customs duties and excise duties. The rest through income taxes and other direct taxes.

Central Govt employees also pay income tax, however, since their salary comes from the overall revenue pool, and their salary is greater than the tax that they pay, they are a net receiver of private sector taxes.

So the moral of the story is, in India it is best to be in some kind of business. Salaried private sector employees are working much harder with much lesser job security compared to public sector/Govt employees. And they get to support the huge burden of Govt. Politicians make absolutely sure they collect their share of all economic activity for their Swiss Bank accounts.

The builders are just following the example of our politicians, and making sure the rest of the population pays a "builder" tax in addition to the "politician" tax.

Anonymous said...

I agree with the posts above. This is unethical and immoral and needs to be highlighted so that the looters do not get away with it.

How do we make people aware and trigger a mass outrage against these kind of scams?

Anonymous said...

The IT companies who were predicting about 20-25 % growth despite global financial turmoil just a few days ago are now making a volte- face through their X’mas presents to the employees. The employees are being sent on compulsory leaves without a pay and will be required to take a salary-cut next year.

The unfortunate consequences e.g. default on home loans/foreclosures are loud and clear.

KPITstaff sent on compulsory fortnight’s leave without pay

Pune : The cheer traditionally associated with the festive season at this time of the year is missing in many IT companies. Local companies are Cos that are hiring feeling the heat of the economic slowdown in the West where companies and their employees are taking longer-than usual holidays.
Technology solutions provider KPIT Cummins Infosystems is one of these. It has sent some employees on compulsory leave and is weighing a salary cut for all employees next year. Sending employees on leave without pay is an effort to reduce operational costs. While a company spokesperson said there was no compulsion in sending employees on leave, some employees told ET: “We have been told to go on a fortnight’s leave without pay,” thus indicating the compulsion behind the leave....

Anonymous said...

Tough times have only just begun for the realty industry

With most developers losing up to 79% of their market capitalization this year, they are hoping the New Year brings good luck. But some experts say tough times have only just begun for the realty industry

Taneesha Kulshrestha

New Delhi:
By the end of the year, the market capital of real estate companies saw a sharp decline. The 14 most prominent listed real estate companies saw erosion ranging between 79% and 95%. DLF Ltd and India Bulls Real Estate recorded erosion in market capitalization by almost 80-85% between 3 December, 2007 and 3 December, 2008. Other major players namely Omaxe Ltd, Parsvnath Developers, Ansal Properties, too saw a decline of nearly 86-90% in the same period.
With these developments, the focus of the sector has shifted back to low cost housing. .......

Shivaji said...

Here is an link to an article I found on the internet

http://www.scribd.com/doc/8942798/TheGreatIndianLoot

Now, our corrupt government may buy the buildings from the real estate barons, so they can further increase their bank balances in Swiss banks. Of course, the politicians will get their commission .

Anonymous said...

Govt knows the real estate sector provides employment to lot of people... Now after selling these flats builders will focus on affordable housing... this week mervyns was moving out of business... so i saw everything for sale and there is so much of rush yesterday...

Guys if you want high end flats pick it now... Else the govt will sell it at higher prices....

Abdullah

Anonymous said...

Guys,

LIC Housing plans to disburse Rs 10,000 cr this fiscal... This is a great booster... I expect the prices to go up from now on for properties which are high end and from reputed developers

http://economictimes.indiatimes.com/Personal_Finance/LIC_Housing_to_disburse_Rs_10K_cr/articleshow/3903870.cms

Pick up flats with the discounts offered by buyers... this is the right time... Dont expect a crash... Ask elders for advice on real estate...

Bindas bhai

Anonymous said...

Khujliwallah(Abdullah)& Dumbass bhai...


Read the writing on the wall.

THERE WILL BE BLOOD!

Anonymous said...

Anon@3:09

Well Said.

However, like everything else in Nature Abdulla and Bindaas also have a role to play. They are the jokers who provide us amusement right now and the jokers we will all remember when the Bubble Bursts in a short while.

@Shivaji,

How do we protest the amount of black money floating in swiss banks? How do we recover it and use it constructively?

Anonymous said...

Banks which are in denial mode please be informed that the tsunami of commercial real estate loan default is on the way.

Stalled projects, stuck payments: architects wake up to harsh realty
As large projects get stalled midway with developers unable to complete them, architects are not getting paid, even after completing their jobs

Madhurima Nandy

....
With projects being shelved and new project launches restricted, developers are unable to pay architects, many of who are now scouting for work and looking at big corporate houses and government projects to sustain themselves.
.......
Architect Puri, who earlier focused exclusively on shopping malls, is now doing a variety of projects to sustain himself through these difficult times.
While Contractor says he hasn’t laid off a single employee, yet, salaries have been frozen and recruitment stopped. He is also moving people from one department to another to use resources optimally.
........

Anonymous said...

TOI Article - Unitech’s financial crunch keeps creditors on tenterhooks

Delhi-based real estate major Unitech is trying out all possible means to raise money—including selling a majority stake in its telecom venture to Norwegian major Telenor—to tide over its liquidity situation. While a number of Unitech’s creditors are watching its fund raising plans closely, several mutual funds are also keeping fingers crossed.

According to industry estimates, fund houses have a combined exposure of Rs 700-1,000 crore in Unitech’s debt papers, mainly through fixed maturity plans. And these papers are coming up for redemption from mid-January to mid-February.

The situation is so critical that one top fund manager recently lost his job for the fund’s excessive exposure to real estate papers in its FMPs, which are giving sleepless nights to top fund house officials.

Anonymous said...

Vik,

I guess someone was collecting rate information... Here is the link on rates for bangalore...

http://epaper.timesofindia.com/Repository/ml.asp?Ref=VE9JQkcvMjAwOC8xMi8yNiNBZDAzOTAw&Mode=G&Locale=english-skin-custom

Vulture/Observer any comments?

Observer said...

Anonymous above:

The situation in Bangalore is very fluid still. The Brigade project on Varthur Road might be attractive for people working in Whitefield, and rates in Whitefield, an area I know well, are becoming more reasonable. Only problem is that Varthur road, while broad, is heavily damaged by rains every time, and driving on those roads may severely damage your car's suspension.

If you can negotiate a 20% discount for projects on Whitefield Main Road, so that the per-sq-ft rate becomes close to 2400, then it may be worth buying. The projects on Bannerghatta road in JP Nagar are becoming more reasonable, however, anything beyond JP Nagar 2nd Phase will increase commute time considerably. JP Nagar 7th phase is really far away from Jayanagar and Koramangala, and traffic is absolutely horrible if you have to commute. The prices on bannerghatta road are probably still overpriced by 25% I feel. If you can negotiate a 25% discount, then it may be worth it. Property in RMV II stage needs at least a 30% discount in my opinion. Do not pay more than 3000 Rs/sqft even in that area. Looking at the rents currently charged for that area, they do not cross 15,000 Rs/month for a 2BHK. So, paying 30L would be the maximum advisable limit for the same apartment.

But I am glad to note that prices are beginning to approach somewhat reasonable values in some areas of Bangalore. If one is confident of his/her job security, then it may be worth starting to negotiate a 20-25% discount on some of these properties. But do not proceed in a hurry. The prices are not going to rise significantly for some time, so take your time.

Anonymous said...

as tech coolie employer Satyam is mostlikely gobbled up by MNC (IBM perhaps), stage is set for US MNCs to extend their stranglehold over remaining Coolie BPO sector like infosys/wipro/TCS etc, This is the same age old ploy like east india company where finally the indians would work for pennies (as they should) in time for sahibs.
Last 4 yrs of easy money has made kaluratnam & ganga singh smug in his ability. Little do they know...
Expect 2-4% growth (& that is optimistc) in next decade for india as realty crashed to 2000 level & stock market langishes in 2500-3500 range.

Anonymous said...

To:Anonymous 5:47 AM

Looks like you are anti Indian. The term ,Coolie' is racist.

Anonymous said...

Anyone who believes that the FIIs in the regime of -ve to 0.25% fed funds rate will once again flock to the Indian shore to inflate the real estate bubble plese read an eye opening article by James Quinn

WHAT HAPPENED TO THE AMERICAN DREAM

........
Supreme Court Associate Justice Stephen Johnson Field further clarified pursuit of happiness in an 1884 opinion:

"Among these inalienable rights, as proclaimed in that great document, is the right of men to pursue their happiness, by which is meant the right to pursue any lawful business or vocation, in any manner not inconsistent with the equal rights of others, which may increase their prosperity or develop their faculties, so as to give to them their highest enjoyment."

Our current system of incentives is inconsistent with the equal rights of others.
.........

This is also true in India. A few buffoons with their reckless spendings have made the lives of common people horrible. A phony growth in prosperity has started cracking and will crumble soon.

Vik said...

@Anon. the prices are compiled by the lobby and most of these developers are unknown. For e.g. Alpine has issues which people on this blog have been pointing out. There is no central place for negotiating. However I saw an penthouse in Mantri Residency on Bannerghatta for 73L on craigslist.com. this was normally quoted for 1.1 crs for over 2 years and now we see these prices. For a 3 BHK + 690 sq ft terrace this may not be a bad option.

Anonymous said...

Actually if the economy tanks..you might find it equally difficult to buy a house or anything. People will be without a job and therefore massive problems for everyone. About the coolie culture, I don't think there is any shame in doing whatever we do as a country/industry. We are doing good and continue to go up the value chain. IBM and Accenture have a head start and also have been beneficiaries of developed countries markets. But, even for them to buy Infy or TCS or Wipro is a dream. I do not think Satyam with its Market Cap shrunk by 75% or so is still an easy target for acquisition. Its just that the promoters have committed an act of extreme folly and also possess a miniscule stake now which has created this opportunity for other IT players.

But, in the near future(a year or so), with global depression/recession looming the quantum of outsourcing will be non-trivial and which translates to fatter pay packets. Indian economy will also boom in the coming years. But just as this is true so is the fact that real estate prices are unrealistic and will decline. The decline can be prolonged by some jokers who will reduce the rate and try to ignite the market..but then fundamentally the real estate market has terminal disease and needs to undergo catharsis. Which will happen. Similarly the stock market will undergo a decline and then over the longer term it will boom again.

Anonymous said...

Anon@11:48 AM
"with global depression/recession looming the quantum of outsourcing will be non-trivial and which translates to fatter pay packets...."

that's why the IT companies are exhorting employees to take a one year sabbatical, sending them on leave without pay, planning salary cut (fatter pay ?), have put the hiring plan on freeze. Please help us understand what kind of outsourcing will take place when the businesses are going bankrupt, the consumer has been pushed to the edge because of reduction in purchasing power (no more easy credit and housing price decline still half way through)with job loss and uncertain future.

Please explain "Indian economy will also boom in the coming years" inspite of developed worlds foreseeing a long and painful recession. Are you a firm believer of a “Decoupling” theory?

Anonymous said...

Anon@12:29 PM

IT companies work like any other companies on the basis of their Revenue funnel and the situation of their cash flow. Most companies looks like the will collapse and have gone into survival mode where they are cutting down projects going slow on payment schedules and so on. IT companies not having a crystal also have gone into a cost cutting mode, also one more thing which happens at times like these is that companies turn opportunistic and look at excising costs which it could not touch. Therefore if you look at TCS, Infy, Wipro - they have not really gone into serious cost cutting mode like they did in 2002-03. They are just shedding their excessive flab and at the same time looking at acquisitions of resources and other force multipliers at bargain basement costs.

On the other hand, The economy right now in the US looks like its going to regurgitate all the excess liquidity it has fed off and be really sick for sometime. While this happens the organizations which survive through this churn will survive purely on the basis of cost containment. The primary source of cost curtailment will be outsourcing along IT/BPO lines. Also, when the dust settles down, in fact in a lot of instances right now too, you can see a wave of M&A taking place. There will be definitely a host of regulatory compliance issues after all this and therefore the size of the IT/BPO outsourcing pie will leapfrog.

India and China are poised to continue growing at high rates, primarily because even if they try to carve their way out of poverty and build infrastructure it will result in a higher GDP growth. Secondly, after the recessionary carnage is over the amount of money in the world will chase higher growth rates and therefore will find its way first to China and then to Emerging markets like India. Its inevitable. One can term it decoupling or weaning away from the US consumer but such is going to be the trend for the next 15 yrs +

Amit said...

Repeating old comment on Builder's demand.

The below content is not only important to Real Estate Buyers but it’s very important for every Citizen Of India.

As per the RBI analysis, they found bubble in real estate in 2006 & consequently asked banks to reduce the exposure to this sector. Banks tightened the lending norms gradually since 2007.
In 2008, when the bubble has reached at its peak, why RBI is relaxing the lending norms to real estate? It’s a clear sign of systemic corruption in India. Yes, the finance minister asked the RBI to do so. What will be the implication? The toxic illiquid housing debt will come on the balance sheet of Banks which will cause a Banks failure in India same as US. [ Banks will lend money to buyer to buy the house at inflated price , buyer will default & as the house price is much below even after liquidation bank will incur losses.]

Once banks will start failing, whole economy will be in trouble. Then under the pretext of economy saving, they will use tax payer money & print money to save these banks.
What is the effect of printing money? It will increase the inflation & every one has to keep paying high taxes to support the housing which they never bought. Cause on your rupee note the Governor of RBI has promised to pay the debt, on your behalf but without your consent.

If your will compare the scenario, it’s a same as US but one major difference. In US when the bubble busted at that time the housing assets were on the bank’s balance sheet. The real estate companies managed to sell majority of the assets to home buyer who took housing loan. So it’s became problem to Banks & home buyer.
NOTE: There is no Major real estate company failure in US.

But in India still lot of housing is owned by real estate companies, who are desperately trying to pass on this toxic to buyers & banks. The RBI policy change is nothing but the corrupt political decision for builder.

Even after the policy change the greedy Builders were not satisfied & they are demanding to Govt. to buy the pending houses which cost 50 Lakh & above out of public tax money or by printing more money.
--DLF is demanding 8% interest rate. Is DLF is going to decide interest rate in this country? Interest rate is used by RBI to fight against inflation.
---When inflation is still at 7%, why RBI is easing the liquidity?

Guys, please pass on this information to every body & stop the systemic failure in Economy. The systemic failure in economy will result in dire consequences like great depression