Friday, June 13, 2008

Mumbai builders in dire trouble

Finally the bubble bursts. I expect atleast a 25-30% correction in the market as people begin to walk away from their highly priced apartments.

MUMBAI: After raking in phenomenal profits since 2004, builders, including some top guns in the industry, could be headed for serious trouble with the real estate market sliding rapidly.

Sources in the construction industry, financial institutions and individual investors have told TOI that several builders have started defaulting on interest payments and some of them have backed out of commitments to purchase land. Many builders are facing a liquidity crunch as sales of apartments are in a state of virtual stagnation. Moreover, politicians who had parked their slush funds with builders are now asking for their money back.

Information gleaned through these sources points to a dismal scenario set to unfold in the coming months. As one property expert who tracks the market minutely put it, “The real estate market has now moved from being under stress to a completely distressed condition.’’

A plethora of recent cases seems to back up this claim.

A leading Mumbai-based developer who belongs to one of the country’s leading construction families has backed out after offering Rs 700 crore to purchase the 18-acre Hindustan Composite land at LBS Marg in Ghatkopar. It’s learnt that the same builder has also walked away from buying 3.5 lakh sq ft of the Pramanik Landmark land in Goregaon after having made an initial payment of Rs 40 crore.

This builder, who has constructed landmark buildings at Colaba, Peddar Road, Prabhadevi and the far-off western suburbs, is believed to have overstretched himself with an exposure of Rs 1,200 crore in the form of loans taken from banks and private individuals.

TOI has also learnt that a Delhi-based construction giant which was in negotiations for a 100-acre chunk of land at Kanjurmarg for about Rs 1,000 crore has suddenly turned around and said that it’s no longer interested.
Another Delhi-based developer, currently undertaking a massive redevelopment project near the western express highway and also redeveloping a BEST bus depot, is facing difficulty in servicing its loans. “This company has started defaulting on interest payments to its bond holders,’’ a source said.

A Mumbai-based developer, who recently purchased a plot in the Bandra-Kurla Complex for a phenomenal price, may also end up burning his fingers, say market sources. A confidential report prepared by a private bank, which was accessed by this newspaper, shows that this builder has a total loan exposure of almost Rs 3,000 crore. “He is finding it difficult to find tenants for his buildings. Even if he were to sell office space outright, he would have to sell it at a minimum rate of Rs 54,000 a sq ft. This is not possible because the record price in BKC today has not surpassed Rs 35,000 a sq ft,’’ said an industry source.

Another construction company that may have overstretched itself is a south Mumbai property redeveloper, said a market insider. “His permissions are coming in very slow and he is faced with huge overheads,’’ he added.

20 km in 2 hours.

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It happens only in Mumbai: 2 hours to cover 20 km!

June 13, 2008

Much has been written about Mumbai's pathetic road conditions.

It may be the country's richest city, and toasted as its commercial capital, but the cold fact remains that it is a city that is unable to build roads that can withstand its annual date with the monsoons.

Mumbai's municipal corporation boasts of a budget that is said to outstrip that of many smaller states, but no amount of money, it seems, can ensure roads that won't fail in the first showers of the season.

It's an annual tradition, Mumbai-kars know, for their civic bosses to reel off statistics to show that this time round they are better prepared for the rains, the roads will hold, there will be no flooding etc. Every year these tall claims unfailingly get washed away in the rains.

But rather than expend words to portray the agony of Mumbai's road commuters,'s Rajesh Karkera and Saisuresh Sivaswamy decided to videograph their journey from home to work, a distance of around 20 km which, in any other city, would take around 30 minutes. On a 'normal' day they are happy if they cover the distance in one hour; now that the rains are here, the journey has taken them even 3 hours.

On Wednesday the duo set out as usual in the morning with a video camera, and this is their record.