Friday, February 01, 2008

Another hypester on CNBC

It seems like this gentleman has a vested interest in some Mumbai real estate companies. If you look around Mumbai there are hundreds of towers under construction with most of them not being sold. These hired guns are responsible for hyping the market without any fundamentals. As for Chennai and other cities prices are still around 3-5k per sq/ft. In Mumbai we are taking of 8k+ on average. If other cities dont have purchasing power, how come Mumbai is different. Apart from the business community Mumbai is full of lower income neighborhoods. All you need to do is take the train and look at the mass number of people 10-15% of whom can afford the high prices. For the rest its life as usual in lower quality homes and shanties. Its high time these hype creating analysts are bought down to earth

Speaking to CNBC-TV18, Nalin Kumar of JM Financial said that markets like Mumbai will continue to see an upward bias in pricing. He added that tier III cities and Chennai will see price correction.

Excerpts from the exclusive interview with Nalin Kumar:

Q: We been speaking to the industry majors at large over the last couple of days and the overall sense is that with interest rates peaking off, prices could actually remain stable to slightly see a negative buys? Is that something that you concur with?

A: I largely concur with that it is more a function of the markets; some markets will see a negative in price and there are some markets, which will actually stay stable and certain markets like Bombay actually may continue to witness upward buyers.

Q: The more important in shadow on the Bombay realistic market could come from the Bombay Stock Exchange markets, the fact that they have sagged a bit and at least about 15-20% of their highs and it is not improbable that they could go down again. In such a scenario do you think that there could repercussions even in hot markets like Bombay?

A: I think Bombay is largely driven by the fact that there isn’t adequate supply at each level in the market. So Bombay will still do well. Having said that, if the stock market continues to remain weak or stagnating, people may use profits from one market to offset losses from another markets and that could have an impact on the real estate prices. But it really requires a sustained two-three month downtrend for this to happen. It won’t happen if markets are down and are weak and then come right backup.

Q: Could you give us some of the cities that you see a price correction in and consequently even a price appreciation in metros or in B or C cities?

A: In my opinion, Tier III cities will see the fastest decline in prices once real estate starts correcting. In terms of other cities, which have run-up fairly and rapidly, we have Chennai which is run-up fairly, quickly and that could see a correction. In north, NCR region has a lot of supply coming on and that could see a correction, of course the Tier II, Tier III cities like Chandigarh etc. have equal levels of pressure coming on them.

Q: What are the reasons that you expect corrections? Is it an oversupply issue? Why do you think the real estate market is headed for a correction in certain quarters?

A: There are multiple factors again which would bring the real estate markets to the correct levels. First of all and the most important in my mind is what the pricing is for the end user and many of these properties are now getting out of reach of the end user that it was designed for. So if we leave out the extremely premium end of properties, I think many of them which may have earlier being priced at a Rs 50 lakh price range are now worth a crore and so the end user kind of moves away and he can’t buy.

The second thing is there is too much investment into land, there is a lot of construction that is proposed to come up and once the supply eventually hits the market, you will see a significant stabilization in prices.

Q: One last word on this spate of IPOs that are starting to reemerge in the real estate segments specifically with regard to Emaar that they have to revise its price band to a little lower. Do you think some of these companies may be coming out of aggressive valuations at this point of time given the kind of momentum that the stocks have actually seen?

A: My sense is that eventually the market will find the right price point for capital raising exercises. Now the fact that a lot of real estate companies are looking to raise capital is reflective of the fact that they need to have cash on their balancesheets because hard times maybe ahead. They may have looked at aggressive valuations and the market has not been happy with those valuations and therefore they are coming back with valuations, which are slightly lower than what they had ideally been hoping for achieving.

Q: Do you think real estate prices in Bombay will stabilize or inch up?

A: I think the supply in Bombay is low and visible supply for the next 12-months continues to remain low and I feel that prices will stay static to rise upwards. I think it’s difficult for Bombay to drop dramatically.

Thursday, January 31, 2008

Loan rates cut . Expect more cuts in the near future

With the Federal Reserve cutting rates by 1.25% over the past 3 weeks, RBI will be forced to follow suit and cut by atleast 0.5 to 0.75. I expect the loans rates to go down to 9.75 floating in the near future. Its best for borrowers to wait few more months for the RBI to cut rates before jumping the gun. Housing supply is abundant so the builders are in no hurry to raise prices, rather one can negotiate upto 10-15% and I think they will oblige if you are willing to write a check the right next moment

Times has the article on HDFC cutting loans

MUMBAI: Finally there is good news for people who have taken a loan with a floating interest rate to buy their dream homes. HDFC, the leader in the home finance business, has decided to cut interest rates on floating rate home loans for all its existing customers by 25 basis points. With the leader cutting rates, the market expects it will be only a matter of time before other players follow.

On Thursday, HDFC said it would cut its retail prime lending rate (RPLR) — the rate to which all its interest rates are benchmarked — by 25 basis points to 13.75% per annum from the 14% earlier. The cut is effective from February 1. It has, however, kept its floating rate for new customers unchanged at 10.25%.

This means all HDFC floating rate customers will see a cut in rates by a quarter of a percentage point. However, the effective date for each will vary. "The advantage of a cut in RPLR will accrue to all the existing floating rate customers over the next three months based on their respective reset dates," HDFC said in a release.

The other major players in the sector are ICICI Bank and SBI. ICICI Bank is still to take a decision on revising its housing loan rates. A top ICICI Bank official said its decisions on home loan rates were based on its cost of funds. "We will continue to watch the market closely." Till Thursday evening, SBI had not taken any decision on home loan rates.

Tuesday, January 29, 2008

GST in chennai is the new destination

Hot property: Property developers are focussing on the area adjoining GST Road as infrastructure is much better and connectivity to the city by road and rail is of good quality.

The population influx towards GST Road is set to touch several lakhs, property developers predict.

The new residential projects follow on the heels of announcements of several Special Economic Zones (SEZs) in the area.

Among the new Special Economic Zones are one proposed for Information Technology companies and one for renewable energy generation equipment.
Despite complaints that infrastructure within the Maraimalai Nagar township, proposed as a satellite city to the metropolis, is not up to the mark, property continues to be bought and sold in and around the area.

Annai Builders, dealing with property in Maraimalai Nagar, had bought 50 acres in the township. Some 560 plots have been sold, representatives of the company said.
Another 560 plots would be coming up in the area. Most of these would be residential, while some land could be put to commercial use, they speculated.

Property development in the area is significantly on the increase. Land prices are currently Rs. 200 per square foot and are set to increase, they add. Information Technology companies are also moving to the locations around GST Road since it possesses excellent connectivity and more affordable housing and office space, builders say.

The new Information Technology Special Economic Zone coming up at Madurantakam, for instance, would bring in at least 30,000 new people, believes P. Suresh, Managing Director, L&T Arun Excello Realty. The Mahindra World City already houses several Information Technology companies including Infosys and Accenture, points out Hari Nagaswaran, Executive Vice Chairman, Hallmark Infrastructure.

They have also launched an integrated township project at Vallanchery with housing units priced upwards of Rs. 55 lakh.
There are about 650 apartments in the first phase and more than half have been booked, Mr. Suresh says.
The integrated township would be offering several facilities, including a Vidya Mandir School that would prioritise admission of residents in the township.
“We were initially unsure what the response to an integrated township would be,” he recalls, adding the response has been very good with people expressing a preference for easy access to all facilities at walking distance.
The township would include hotels, landscaping, a water body and green surroundings, he promises.
There is plenty of room for more players in the area, Mr. Suresh believes. The Special Economic Zones are likely to act as an engine of growth in the area, bringing in more infrastructure and housing projects. The Old Mahabalipuram Road boom is over, says Mr. Nagaswaran confidently.
The region is too crowded and property prices are dropping. A lot of office space in the corridor is vacant, he finds. While government officials believe that the Old Mahabalipuram Road would see a lot of activity once the remaining phases of work are completed, property developers with special interests in the GST Road feel otherwise.
There is an increasing focus on GST Road area as infrastructure is much better and connectivity to the city through road and rail of good quality, he believes. Mr. Suresh echoes the belief. Suburban trains ensure that commuters can reach, say, Parry’s Corner in 50 minutes, while the same journey by road would take up to two hours, he says. This makes the location ideal for those with a spouse who might have to commute into the city, while their place of work is nearby

Monday, January 28, 2008

Insane housing prices in Mumbai

I came across the table of values from the site and its astounding to see prices in Mumbai keep on escalating over the past few years. Certain areas like Santacruz have seen in prices triple in the past 3 years. I'm not able to figure out how many transactions take place at these prices. At these rates a 2 bed room apt measuring 1000 sq/ft could go for over 15M to 30M rupees in an A grade building. With 40 rupees to a dollar we are taking about 400-900$ per sq/ft. With these prices I could very well purchase in New York ..., not speak of other places in the US

'A' Grade Bldg.
'B' Grade Bldg.
'C' Grade Bldg.
Cuffe Parade / Colaba
Rs.35,000 - 60,000*
Rs. 22,000 - 30,000
Rs. 15,000 - 18,000
Marine Drive / Nariman Point
Rs. 40,000 - 50,000
(NCPA Only)
Rs. 20,000 - 25,000
Rs. 15,000 - 18,000
Malabar / Cumballa Hill
Rs. 35,000 - 60,000*
Rs. 22,000 - 30,000
Rs. 15,000 - 18,000
Napean Sea / Warden Rd.
Rs. 35,000 - 60,000*
Rs. 22,000 -30,000
Rs. 15,000 - 20,000
Rs. 30,000 - 40,000*
Rs 16,000 - 22,000
Rs.12,000 - 16,000
Rs. 18,000 - 22,000
Rs. 13,000 - 18,000
Rs. 10,000 - 12,000
Rs. 18,000 - 30,000
Rs. 13,000 - 18,000
Rs. 11,000 - 12,000
Khar / Santacruz
Rs. 16,000 - 18,000
Rs. 12,000 - 16,000
Rs. 8,500 - 10,000
Rs. 16,000 - 20,000
(Sea facing)
Rs. 9,000 - 11,000
Rs. 8,000 - 9,000
Lokhandwala / Versova
Rs. 9,000 - 14,000
Rs. 6,500 - 9,000
Rs. 5,000 - 5,500
Rs. 9,000 -11,000
Rs. 6,000 - 8,000
Rs. 4,500 - 5,500
Mumbai Property rates per sq.ft. Updated as on 5th Jan 2008