Saturday, May 17, 2008

Land price correct all over the country

Now that the acreage cost seem to be dropping, the sq/ft price drop should follow.
Economic times reports...

Land prices in the national capital region (NCR), Mumbai suburbs, Bangalore and Hyderabad have corrected by up to 25% as property developers slow down their land purchases. Poor sales and lower availability of credit at higher cost have prompted property developers to end the mad rush to acquire land. Some of the developers have even backed out of land deals which were agreed upon as the slowdown hit the sector.

Prices have come down by up to 25% in Mumbai's distant suburbs, including Thane and Belapur, and pockets of Hyderabad and Bangalore, according to property consultancy firm Knight Frank India. Prices in the NCR, with an exception of Faridabad and Delhi, too have witnessed a correction of up to 25%, says a senior Unitech executive, adding that transaction volume has dried up. Land prices in Faridabad have risen 10-30% in the past 3-4 months.

However, Faridabad is just catching up with its neighbouring locations. The prices in Faridabad are still lower than in Gurgaon or Noida and the current price rise is more towards building a parity with them. Land prices in Delhi are said to be stable.

But a recent land deal struck in Delhi's prime commercial centre Connaught Place indicates that prices in the capital too are cooling off. Parsvnath Developers bought 1.18 acre, jointly owned by Mahajan Industries and Videocon Industries, for Rs 200 crore. The deal came at a discount of almost 17% at Rs 169 crore per acre, compared to what hotel major Leela Group paid for acquiring 3 acres in Chanakyapuri last year for Rs 611 crore.

"Real estate sector is facing a major cash crunch. That's why the companies are focusing on completing the project at hand, instead of adding to their landbanks," says Omaxe executive director Vipin Aggarwal.

Till recently, real estate players were in a land acquisition frenzy, with some players even pledging their equity shares to acquire land. A large landbank was showcased as the biggest asset for a company tapping the capital market. "Most real estate firms have formed big landbanks. So, there is hardly any need for them to go for further acquisition, especially in these times, when money is expensive," said Anshuman Magazine South Asia chairman CB Richard Ellis. Developers are also showing lower interest in agriculture land, once their prime target because of the substantial margins it offered.

At the same time, given the slowdown in the sector, some of the land deals which were earlier agreed upon have also fallen through. "The situation has completely changed since January. The developers are now exiting the deals because they do not think that the project can fetch them the profits they had originally expected," says Knight Frank India chairman Pranay Vakil. The correction is more pronounced in plots of less than 25 acre in size, since they are not FDI-compliant. "For a larger piece of land, there is FDI. But for smaller size projects, there are very few takers," he adds.

Friday, May 16, 2008

Some sense returning to the real estate market

Mint reporting on the slowdown in PE deals.

New Delhi: India’s real estate party may be cooling down rapidly. Global private equity firms say that they would rather invest in the US realty market than in the Indian one because US property prices have fallen so sharply that yields on investments there will be more attractive—without the hassle.

Private equity firms made a beeline for India after the government allowed foreign direct investment in real estate in 2005. They were attracted by returns of 25-30%, but with home prices falling in the US, global private equity firms now believe it makes more sense to park their investments in that country.
See:Realty deals
“Last year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?” asked a senior executive at an international financial services group, who did not wish to be named.
Four out of six private equity funds Mint spoke to said they are no longer investing in India. They didn’t want to be identified.
The US, reeling from a subprime lending crisis, is seeing the worst housing slump since the 1930s. The median price for a single-family home has dropped 7.7% in the first quarter of the year, the biggest decline in at least 29 years, as values tumbled in two out of every three US cities, according to the National Association of Realtors.
Sales of single-family houses and condominiums also fell 22% to 4.95 million at an annualized pace, the slowest in a decade.
“It is true that there are certain transactions in the US where you can get similar returns (as in India) of 25%, such as buying a condominium project or a commercial project,” said Subhash Bedi, director at Red Fort Capital Advisors Ltd, a private equity firm. “When you can get similar returns in India and in the US, global private equity firms which have a mandate to invest anywhere in the world, will prefer the US market because there are lesser risks associated with investments there.”
The Indian market is riskier to invest in because government approvals for projects here take a long time and there is also an execution risk because Indian developers do not have a history of completing projects on time, Bedi said.
Project delays can sometimes run to two to three years and there aren’t enough laws in place to effectively protect investors. There is also no central registry of land titles in India, because land is a state subject and the system of record-keeping and rules vary from state to state, making investing compelling only if the returns are high. In the US, there is a central registry of titles and title insurance can be purchased to protect investors.
India, where property values doubled in a year and, in some cases, tripled in less than two years, is now starting to see some cooling off after values shot up so high that they bordered on the unaffordable, eroding returns and turning away investors. Realty values in Mumbai rival that in Manhattan, New York.
To be sure, while global private equity firms might choose to move their investments to the US, nothing changes for funds dedicated to India as they can only invest in Indian real estate.
There are around 125 private equity funds for real estate in the country, out of which 60% are global funds, according to Venture Intelligence, an agency that tracks private equity.
“It can become increasingly difficult for the local team of a global fund to justify investment in India when you can get the same return for lesser risks elsewhere,” Bedi said. “So, for the short term, say a year, global funds might decide to invest in the US real estate market instead of India.”
“There is a big liquidity crunch in the US,” Bedi said. “It is much less in India when compared with the US because banks here are at least not turning away all borrowers.”
While private equity investment will continue to come into Indian realty, the number of firms chasing developers will be fewer, another senior official at one of the world’s leading financial management and advisory companies said.
“We will see fewer private equity firms, say two or three, chasing a developer unlike last year, when 8-10 private equity players were chasing the same set of companies,” he said requesting anonymity.

Thursday, May 15, 2008

Nusli Wadia sues Gopal Raheja for ‘breaching deal’

Something has seriously gone wrong with this deal now that Mr Wadia is sueing the Rahejas. The Raheja's on their part have encroached on mangrove plantations and conducted massive landfills on the swamp adjoining to Mr Wadia's trust. Some of the complexes there were supposed to be sold to middle and low income groups as per the government statutes. 1 bed-room flats were constructed but these flats were never sold individually but they were sold as jodi-flats to different members of the family. The builders gained IT sops due to the nature of the scheme. Mr Wadia is now asking for his pound of flesh since prices have quintupled over the last 5 years.

MUMBAI: Industrialist Nusli Wadia has dragged builder baron Gopal Raheja to court for alleged fraud and breach of agreement regarding the development of over 400 acres of prime land belonging to the estate of late Eduljee Framroze Dinshaw at Malad (west).

Wadia terminated the agreements with Raheja and his 49 companies on May 12. The development agreements were entered into on January 2, 1995, and April 12, 1995 between Wadia, as the sole administrator of the Dinshaw estate, and Raheja.

Wadia has withdrawn all authority given to Raheja including the powers of attorney given Raheja’s children, Sandeep and Sonali, to deal with the various units, flats and other premises built on the contract land.

In a suit filed in the Bombay high court, Wadia has called upon the Rahejas to raze all construction on the 400 acres of prime land at Malad including three buildings at Palm Springs Centre and four at Unique Commercial Centre.

In the interim, Wadia has sought the appointment of a receiver and that the Rahejas be restrained from carrying out further construction and creation of third party rights on the contract land.

In February, Wadia had filed a suit against Gopal Raheja’s brothers Chandru L Raheja and Suresh L Raheja and their sons. He asked the court to stop the Rahejas from carrying on construction on 200 acres of prime land in Malad (west) belonging to the EFD estate and sought demolition of eight of their commercial towers including the Inorbit Mall, Hypercity Mall, Infinity Towers, IV Dimension, Spectrum Towers, Magnum Tower, Intelnet, Prism Paradigm and Athena, all located off Malad Link Road.

Wadia alleged that Chandru and others had “fraudulently” sold or leased properties constructed on the contract land to their “own sister concerns and shell companies created for the purpose” instead of genuine third parties. Wadia demanded damages worth Rs 350 crore from the Raheja brothers.

CNN-IBN touting the builders line

Mumbai house prices soar but no shortage of takers

Looks like the property marketing folks are at it again. With prices beyond the reach of the common man who will buy. Cushman and Wakefield are pimping the builders by coming out with useless data. If no-one can afford prices have to drop. 11000 per sq/ft in the outskirts of Mumbai is more then most places in the world. The builders will put up a brave face until they will relent. The property prices have not risen due to high demand since as we can see the demand is almost non-existent. Builders with surplus cash have caused inordinate high prices by bidding against each other. Now they are attributing the price rise to the rise of steel, cement and labor costs. The common man could be fooled but right now his wallet cannot support 11000 rs/sq ft. Maybe it can support 4000-6000. 11000 seriously doubt anyone not born with a golden spoon or inheriting is capable of paying so much

IBNlive reports
Mumbai: A two BHK apartment in Nariman Point at Rs 3 crore or even a Rs 11,000 per sq ft apartment in the far-off suburb of Mulund might sound atrociously expensive, but that definitely does not mean there are no takers.

According to the Planning Commission's latest report, urban housing shortage in India in March 2007 was around 24.71 million and is all set to touch 26.5 million by 2012.

Little wonder then that the real estate developers are unwilling to give in to the latest slump and reduce prices.

“The market is not growing at the rate we had expected but we are still not feeling the pinch,” says Manager, Akruti City, Tarang Patel.

“We might even witness a further rise in the already increasing land and steel prices,” says Director, Goel Ganga Developers, Atul Goel.

While the developers are refusing to budge, it is the common man with a limited budget who's feeling the heat.

For the average Mumbai citizen, who is battling inflation and rising interest rates, buying a house is just next to impossible. All that one can do is hope for prices to stabilise to own your dream house.


Prices won't land; buy that Bangalore house now

Faye D'Souza / CNN-IBN

Bangalore: While property markets in various Indian metros brace themselves for an oncoming correction, Bangalore's residential property rates are not about to drop.

According to a report released by property consultants Cushman & Wakefield, the city has witnessed a stabilisation in prices of homes with the residential rates across the city have recorded a growth of less than 10 per cent in the last year.

But experts say even though the rate increments have slowed down, the prices are not about to fall.

“There are indications that housing loan rates will not go up in the near future, which means that there is no fundamental reason for primary residential market rates to come down. It going to remain the same for the next six months and then it will rise again. So now is a good time to make a purchase,” explains Director, Cushman & Wakefield, Anurag Mathur.

The low market sentiment may have affected small developers but sources say big developers have not witnessed a slow down in sales yet.

While this might be the best time for you to buy a house in Bangalore, experts advise those buying property in the city purely as an investment, to wait a couple of months until after the new airport in Devanahalli is unveiled, as it will change the dynamics and the valuations of Bangalore's property market completely.

“The new airport is now reality. At the end of the month when it will open, the entire dynamics will shift. Access is going to change and that will throw up more opportunities,” Mathur adds.

The Cushman & Wakefield report also states that Bangalore has the highest demand for commercial space in the country, which gives experts reason to believe that the increase in jobs being created will result in more demand for housing.

Monday, May 12, 2008

Bandra-Kurla Complex can build more now

Now Mr Ambani and Mr Wadhwa have doubled their investments in a time span of 1 year. Builders are going to rake in a billion dollars by milking this cash cow.
Mint reports

Bangalore: Bandra-Kurla Complex (BKC), a much-sought-after business district in Mumbai, is all set to see frenetic action after Maharashtra state authorities doubled the space developers could build in certain blocks, thereby releasing an additional 8.5 million sq. ft of premium commercial space.
A notification released by the state government on Friday raised the floor space index (FSI) from the existing 2 to 4 on 178ha in G Block in BKC. FSI is the amount of construction allowed on a plot. The higher the FSI, the taller a building can rise.
With the the central business district of Nariman Point nearly saturated, BKC has become popular with large firms.
By some estimates, the rise in FSI will allow the Mumbai Metropolitan Region Development Authority (MMRDA), appointed to develop BKC in 1977, to sell land at a better price and thereby earn revenues of nearly Rs 20,000 crore.
Milind Mhaiskar, joint metropolitan commissioner, MM-RDA, said: “Those who are interested to benefit this additional FSI can approach MMRDA and it (will) execute the process.”
Among the projects in G Block that will benefit from this move is the commercial complex and convention centre of Reliance Industries Ltd on an 18.5 acre plot. G block is at the heart of the finance centre, which also has Citibank, Nabard, ICICI Bank and the Bharat Diamond Bourse.

Sunday, May 11, 2008

Sell or hold your realty investments?

Sell or hold your realty investments? - Outlook Money
Did you put money in real estate during the past year or so with the express objective of gaining through capital appreciation? If yes, depending on a number of factors, you might have a bit of a problem on your hands. For, over the past year, the gains have tapered off.

The decision

The extent of the problem depends partly on your investing horizon. If you had taken a long view and plan to hold it for a decade or so, there is nothing to worry about. While there may be a few ups and downs, returns from real estate have been next only to stocks in the long term.

If, however, you were looking to sell off your property within a year or two and earn some capital gains, that plan may need some tweaking. As mortgages and prices continued their upward journey, since around the middle of last year, end-use buyers started staying away in larger numbers. Merrill Lynch, for instance, estimates that sales volumes in the NCR are down 50-70 per cent from last year.

Whither prices? Prices, too, have softened in areas of high speculative interest as property got priced out of the market. Smart investors like Delhi NCR lawyer Dheeraj Seth, 31, sold his Gurgaon house when real estate was still hot and parked the proceeds in another property that is under development.

In January 2008, the stockmarket tanked, pulling down sentiments, and real estate in its wake. Experts say prices will climb 20-30 per cent off their peaks. Those who have held on to their investments, have clearly missed the top this time around.

Over the hill? "Short-term investors in markets where the values have peaked could explore exiting," says Sanjay Dutt, joint managing director, Cushman & Wakefield, a real estate consultancy firm.

Has the price of your property passed the summit? The following three checks will tell you. First, if prices in the area have gained 100-200 per cent in the past year, says Dutt, they are unlikely to rise substantially soon. Second, if the area has lots of speculators, then supply will continue coming into the market and keep price rise in check. Third, if a property with better location or amenities are coming up nearby, that will keep yours off the coveted list. If any of these is true, sell.

Once you take the sell decision, you have to find the best deal.

The process

The channels. Once you decide to sell, cast the net wide to reach as many prospective buyers as possible. For that, tap both conventional as well as online channels. Contact real estate agents and tell them your asking price and by when you would like to sell. If a project is not sold out, you can also approach the developer's office.

Insertions in newspaper property classifieds also help and can cost up to Rs 1,500. "If it's a ready project where people are living, promote the property within the building complex," says Dutt. There would be people who could pass the word to other interested parties. The same holds true for friends and relatives.

The six-fold path

Evaluate the property sale decision against goals. Factor in loss of tax breaks claimed on mortgage repayments if you sell within five years of buying.

Spread the word. Use both conventional as well as online channels to inform as many prospective buyers as possible.

Get a fix on asking price by benchmarking against the latest sale prices of similar property in the project or the area.

Time your sale. Avoid lean periods and low-interest seasons such as summer or the monsoons.

Be clear about payment terms. Fuzziness here could hit the buyer's plans and jeopardise the sale.

Sign an agreement for sale if you do not have the funds to pay off your loan. Help the buyer with the necessary paperwork.

Most property portals such as, and allow a basic free listing. For example, allows 50 basic listings free, beyond which you will have to pay Rs 200 per listing. If you opt for the fast response listing then you will have to pay Rs 900 per listing.

If you contact a buyer directly, you can save on agent commission, which is usually about 1 per cent of the sale price.

The price. Be realistic and quote a fair price, or actual buyers might pass you over. "Fair value of the property would be the last sale done by the developer in that particular building complex," says Dutt. On that benchmark, put a discount (if rates have softened in the area) or premium (if rates have risen). If there has been no sale in the project in six months, identify projects within 5 km of yours and take the last sale price there as a benchmark.

The timing. Don't sell during lean times. There is no point trying to sell during vacations or during the monsoons, when sales are traditionally low.

The payment. Try and keep the payment norms clear and be upfront about it. This will give the buyer the much-needed confidence in dealing with you.

The mortgage. If you are trying to sell a house that still has an outstanding loan, a fair bit of paperwork will be necessary. The simplest way is to pay off the loan and then sell the house. But that may not be possible always. In that case, you have to sign an agreement for sale with the buyer laying out the payment terms. This document will be registered and stamp duty paid.

Next, you have to get an NOC from the society/builder (in case of an unregistered society). If the buyer wants to take a mortgage for the house, he has to submit fresh documents to the lender. Once that loan is approved, your outstanding, along with prepayment penalty if any, is set off and you are paid the rest. The property papers, if the new buyer has taken a loan, will have to be given to his lender.

The profits

If you make a capital gain on the sale (a tax consultant can tell you how to calculate that), you are liable to pay tax on it unless you deploy it in specific ways. If you use the money to 'construct' a house within three years from the date of sale, the tax is waived.

You also get a break if you use the money to pay for a ready house bought within a year before the sale or two years after. You can also avoid capital gains tax if you invest the gains in specified bonds under Section 54 EC which typically pay 5.5 per cent per annum and have a lock-in of three years.

If you want to invest in other asset classes, such as equities, mutual funds, gold or debt paper, then you will have to first pay 20 per cent tax on the capital gains (after indexation).

And, finally, keep tax implications in mind. If the holding period of a mortgaged property is less than five years, you may lose all the tax benefits you have claimed on loan repayments.

Despite these deterrents, if you are still getting a good deal, sell. But keep in mind all the variables before you sign on the dotted line.

Builders turn politicians

In the past politicians used to become builders like Bhujbal, Manohar Joshi and Uddav thackery in Mumbai. Now its the reverse. It goes to confirm the fact that the construction industry and the political industry are hand in glove and feeding off each other. Either way the common man is at wits end in the struggle to make ends meet in an era of high inflation.

R ealtors in Karnataka are diversifying into politics with political parties increasingly looking for candidates who have the resources to fund their own campaigns—and thanks to real estate prices that have tripled in some parts of the state, money is one thing people in this business have enough of.

The hope that money power will attract enough votes in the elections is strongest in Bangalore, where at least 12 candidates across the city’s 28 constituencies are real estate developers. The trend cuts across party lines and for several developers, this is their first brush with politics.

“The disturbing factor is the role of money (in elections),” said Samuel Paul, a former director of the Indian Institute of Management (IIM), Ahmedabad, who now heads the Bangalore-based non-governmental organization (NGO), Public Affairs Committee. “Its not just real estate, but mining too.” Businessmen could have a much greater self-interest and they could shift policies to suit them, Paul added.

Mine owners from Bellary, the iron ore-rich district of Karnataka, are a powerful lob by with their influence extending across party lines. Three mine owners were elected to the state assembly in 2004, including Anil Lad of the Bharatiya Janata Party (BJP), who is now contesting from Bellary City constituency on a Congress ticket; Santosh Lad of the Janata Dal (Secular), or JD(S); and H.R. Gaviappa, an independent in 2004 who is now the Congress’ nominee from Vijayanagar.

One of the candidates dismissed Paul’s claim and said it wasn’t money that mattered, but love. “Money alone won’t win elections,” said Kupendra Reddy, the owner of Primal Projects Pvt. Ltd and Congress candidate from Bommanahalli constituency. Reddy is among the wealthiest candidates with declared assets of around Rs180 crore.

“Only if you have earned the love of people and have the backing of a party can you succeed,” he added.

“It (the trend of realtors turning to politics) is quite similar to what’s happening elsewhere in the country. Unlike in the past, however, when they funded parties, they want to get into (positions of) power themselves,” said S. Trilochan Sastry, a faculty member at IIM, Bangalore, who heads an NGO, Association for Democratic Reforms.

Meanwhile, the realtors have learnt to speak like politicians.

“My vision is clear. I am for development and I do not want to be known as just another politician,” said N.S. Nandish Reddy, a 37-year-old builder who is the BJP candidate in the K.R. Pura constituency.

Reddy said he won’t be a corrupt politician, because his “family has been fortunate enough to be well-provided for”. One of Reddy’s rivals’ L.

Muniswamy of JD(S), is also a land developer. “I’ve been staying in this constituency all my life and I have been doing social work,” said Muniswamy, 65, who quit the Congress recently because he claimed the party had neglected him.

Other developers in the fray include BJP candidates D.U.

Mallikarjuna from Shantinagar, G. Prasad Reddy from BTM Layout and Satish Reddy from Bommanahalli.

M. Krishnappa of the Congress is running from Vijayanagar while C. Manjunath and M.V. Prasad Babu of JD(S) are contesting from Bangalore South and Padmanabhanagar, respectively.

Bangalore will go to the polls on the first day of the threephase elections on 10 May. The other two phases of voting are on 16 and 22 May.

Some of the poll promises by the political parties may benefit real estate developers. In its election manifesto, the BJP has promised to do away with restrictions on conversion of agricultural land for commercial purposes if it is voted to power, saying the restrictions have led to corruption and caused hardship to the farmers.

“I agree that some of them (candidates) have interests in real estate, but that has no bearing on the reforms we are proposing,” said V.S. Acharya, chairman of BJP’s election manifesto committee.

The party’s reasoning is that while a landowner will not sell land that is yielding a good crop, he should also not be prevented from using a portion of it for non-agricultural activity, which will generate revenue and employment, especially in rural areas. ‘The owner is the best judge,” Acharya said.

This will lead to chaos, says R.S. Desphande, head of the Agricultural Development and Rural Transformation Centre at the Bangalore-based Institute of Social and Economic Change. “In any kind of trade, the trader has a higher information base than the farmer who will lose out,” he added.