Saturday, April 18, 2009

Builders scandal highlighted by CNN-IBN



18 comments:

Anonymous said...

No crash, stop wishful thinking guys:

http://timesofindia.indiatimes.com/Business/Real-estate-down-but-not-out/articleshow/4419198.cms

Anonymous said...

Bargaining OR Auction?

Bargaining - “One buyer; one seller; one deal.”

Auctions - are used when we have: “One seller; many
(potential) buyers; one deal”, OR “One buyer, many (potential) sellers; one deal.”
The “one” (buyer or seller) usually gets to set the rules.

English (“Ascending”) - Open outcry by bidders until only one bidder is left.

Dutch - Auctioneer calls out a high price and methodically drops it until someone says “mine”.

“Banks though less recognized option from a traditional source sell home loan defaulter’s property usually at a low price tag than market price. Experts say the public and private sector banks sell home-loan defaulters’ property usually at a price tag much lower than market price. According to banks estimation there are several hundred houses in the market for the taking”.
“Auction makes sense for Non performing asset”.

http://banksnews.blogspot.com/2008/
05/banks-auction-old-houses-taken-over.html

ICICI Debt counseling
http://dishafc.org/aboutus.html

ICICI distressed sale arm.
http://www.icicibank.com/Pfsuser/
loans/home_search/hloc.htm


Banks recast home loans to ease layoff victims' worries
"Logically, banks do not stand to lose if they have to wait for even six months because the process of seizing the mortgaged asset, putting it up on sale and realising the proceeds would be equally time-consuming," pointed out VN Kulkarni of the Bank of India-backed Abhay Credit Counselling centre.

http://economictimes.indiatimes.com/Personal-
Finance/Banks-recast-loans-to-ease-layoff/articleshow/4416398.cms


So guys let it fall then only pick up, minimum 50% price cut is guarantee.


Vulture.

Anonymous said...

Watch how auction can bring back the excitement in RE market.

http://www.youtube.com/watch?v=5GyGSbkHF40&feature=related

Anonymous said...

Few takers for realty projects on the block19 Apr 2009, 0220 hrs IST, Neha Dewan & Raja Awasthi, ET Bureau

NEW DELHI: The cash strapped real estate sector is desperately seeking funds to script a revival. And what could be a better way out for the companies than to put their assets on the block. Buyers, however, are still not coming forward. SundayET’s findings reveal that an estimated Rs 4,500 cr to Rs 5,000 cr worth upcoming projects by leading developers around the country are on the block - but takers are very few. Industry sources say that while top names in the business have been able to sell off some assets, a lot more of those still need to be offloaded.

People close to deals say that while there were a large number of developers entering the special economic zones (SEZ) segment during the boom time, now there is almost a reverse wave to get out. Says Rajeev Talwar executive director, DLF Group, “The market over the last six to eight months have witnessed a major slowdown as far as the cash flow is concerned. This has resulted in many developers trying to raise cash by putting few of the assets on the block. What will sell in these conditions are projects which are priced attractively as there is some room for the buyer.” DLF, India’s largest real estate developer, has requested the ministry of commerce
& industry for de-notification of four of its nine SEZs for IT and IT-enabled service projects.

A look at the projects on the block says it all. Real estate major Unitech, for instance, has put its Marriott Service Apartments in Gurgaon up for sale. The developer is in talks with some companies for the project, which stands at an estimated cost of Rs 250 cr. Ditto is the case with DLF which is looking at selling 8 of its hotel plots over the next three months at an estimated cost of Rs 900 crore. The group is also considering pulling out of the Rs 1,000 crore infopark project which was being developed over 54 acres., The case with Parsvnath is no different. The developer is in talks with companies to sell off its four hotel projects in Hyderabad, Goa, Ahmedabad and Lucknow. And Omaxe too is looking for a buyer for its Omaxe Citadel project in Jasola which is worth roughly around Rs 90 to Rs 100 cr.

However, many of these projects are not attracting buyers. So is it a case of high valuation that is acting as a dampener? Sanjay Dutt, CEO, business, Jones Lang LaSalle Meghraj, says that there was fundamentally a valuation problem in the first leg of resale during Q4 in 2008. But that has changed in the first quarter of 2009. “Markets fell considerably in Q1 ‘09. That sent shock waves globally which, in turn, impacted valuations and brought them down. But that still hasn’t happened across the board. Hence, valuations in some cases are still high,” he says. Dutt says that more transactions are expected over the next few months. “Those developers who have aligned to market rates are seeing sales. Those who were adamant about high valuations will be forced to sell on revised value transactions. The next 3-6 months are expected to see more transactions taking place.”

Anonymous said...

Delta closes Indian call centers
PTI
Saturday, April 18, 2009 14:41 IST

Washington: America's Delta Airlines, the world's largest airline, has announced to close down its Indian call centers.

Airlines officials said the decision is driven by poor customer feedback. This could come as a major setback to India's flourishing call centers which provide employment to thousands of youths across the country.

Delta's call in India was handled by a call center of Wipro Ltd.

Media reports said Richard Anderson, the airline's chief executive, told employees in a recorded message on Thursday night that Delta had stopped forwarding calls to India in the first quarter and would be bringing the function back in-house in the US.

"The customer acceptance of call centers in foreign countries is low and our customers were not shy about letting us have that feedback," Anderson said.

A Delta spokesman, was quoted as saying by The Boston Globe that the airlines has hired about 4,500 call-center workers in the US after it ended its current outsourcing operations in India. However, Delta's call centers in Jamaica and South Africa would continue, the spokesman said.

In February, the United Airlines too had announced to end its 165 overseas call center jobs. After the merger of the North West Airlines, Delta is now the world's largest carrier.

It had sent its call centers to India in 2002 to save money, which at that time was estimated to be about USD 25 million a year.

Bharat said...

That video is scary. So the real estate guys were running a massive ponzi scheme rotating money from one project to another..

I think a lot of this money must have already been siphoned off and all these companies will already be in bankruptcy mode. So these buyers will get nothing out of this and no builder will be arrested either. Such is the travesty of real estate in India. I really pity any greater fools who still think of RE as an asset class and think of investing money in RE.

Do what vulture advocates and you will escape all the pain and maybe gain a bit..this market has grown to the point of instability..its teetering and due to fall any point now. Patience...

Swaminathan said...

People whose money is tied up in uncompleted real estate projects are losers and it is unlikely that the government or courts will help them to recover even part of their investments. An unfinished multistory building has 15% compound decay factor. In other words, if the required finishing and maintenance work work is not carried out, the building becomes unlivable and it will be cheaper to demolish such building and construct a new one, rather than maintain it. In short, one can say goodbye to his investments if the project is at standstill.

Anonymous said...

Swami,

How did you arrive at the fact that the building can be demolished? Ofcourse typing in blogs is easy... Have you ever involved in the construction of a house?

Anonymous said...

Indian Madoff?

RE companies in India has seized the home buyers like Madoff. Now this has raised the regulatory concern about the RE companies activities. If one will take a close look at company’s operation it is nothing but a Hedge Fund OR Ponzi scheme.
The non bank finance companies used to raise funds & invest into RE companies. If it is supposed to be project financing, there was no harm but the activities went to extreme level of leveraging for which the innocent home buyers are paying.

Private Equity/Hedge Fund -> DLF Assets Private Limited(NBFC) - > DLF(Real Estate company)

How the projects work?
For an example, launch a 100 Crore project with mere 5 crore owner’s equity (20 times leverage) + tie up with NBFC for future finance. Once the buyers will sign the irrevocable agreement then divert the money to start up another project & repay the return for NBFC.


DLF Assets Private Limited
http://investing.businessweek.com/research/
stocks/private/snapshot.asp?privcapId=36481682

http://indiarealestatemonitor.com/property-articles/
dlf-assets-files-for-ipo-approval-in-singapore/

Hedge Fund

http://www.hedgefundsindia.com/blog/
_archives/2009/2/4/4081047.html

Non-Banking Financial Companies(NBFCs)

http://indiabudget.nic.in/es98-99/chap35.pdf

So guys let it fall then only pick up, minimum 50% price cut is guarantee.

Vulture.

Vik said...

Swami, Please substantiate with facts. I have seen half finished buildings built in the 80s and 90s which were stuck due to litigation or funding. I've not see any one building being demolished due to the reasons mentioned by you. Most of them were constructed.

Bharat said...

Vik, Swami - he is referring to the fact that there is a sequence of events in construction. Whenever construction is half complete and goes through a period of curing/drying without the finishing which is plastering, painting, flooring, water proofing treatment etc..Then there is a discontinuity which translates into leakage, cracking and other issues requiring extensive maintenance work later on in the life of the building. Therefore resulting in upping the cost of maintenance as well as potential hazard...But, I think the cost of razing the building and rebuilding it would be much higher than the cost of extensive treatment.

Therefore in all probability builders would tend to reuse the unfinished structure.

However, a warning to all potential buyers if buildings are half-finished and then completed after a period of say 6 months of lying idle...then it might make sense for buyers to avoid such property.

Pls. check your facts.

Anonymous said...

Those who are familiar with architecture engineering may understand what swami means. There is no cure for decay and an unattended building whose main constituents are iron, steel ,other metals, concrete etc is likely to decay without regular maintainance.

Anonymous said...

The simple fact is that Banks lend only 50-60% against the old (more than 5 years) property.

If property is 15-20 years old it is very difficult to get loan.

Anonymous said...

Thanks for the clarifications.
Vik

Swaminathan said...

When people start living in a unfinished building, they do the regular maintenance work and see that it doesn't crumble. I was talking about unfinished building you notice all over mumbai that are vacant. Such buildings do not last. Even one has paid major chunk of the cost, he can not occupy the building without clearance from the municipality. What I was hinting at was, unless 100% of the required work is complete, do not buy. The risks outweigh the benefits of booking at the construction state. Most builders are in red and current economic scenario is expected to last for some time to come.

shailesh said...

Poll deals: City builders major donors for political parties“Most developers prefer to bet on the ruling party unless they share a personal rapport or business interest with a particular party. Developers are getting calls asking for their contributions and the money paid is considered an advance payment for projects or policies that will be cleared once the party comes to power,” claimed one real estate player.

Trilochan Sastry, professor at IIM-Bangalore and founder member of the Association for Democratic Reforms (ADR), said the declared donations are a miniscule portion of the actual amount. The Election Commission limits poll expenses of candidates to Rs 25 lakh per constituency. “The actual money spent on each candidate ranges from Rs 2 crore to Rs 20 crore and much of this amount is paid in black. As the saying goes, ‘he who pays the piper calls the tunes’. Builders are not shelling out money out of philanthropy. They will extract their pound of flesh, which will not be in people’s interest,” he said.

shailesh said...

Ready to live in a `Nano' home?Take for instance Neptune Group's project coming up in Ambivli near Kalyan. The scheme has 2 BHK flats with a carpet area of 387 sq ft and 1 BHK flats with a carpet area of 233 sq ft, which the builder is selling for between Rs 1,499 and Rs 1,599 per sq ft. In 1 BHK flats, the hall is 82 sq ft, while the bedroom is 78 sq ft and the kitchen measures 38 sq ft. In 2 BHK flats, the dimensions are slightly bigger. "We call them Nano flats,'' said Nayan Bheda of Neptune.

What I don't understand is why Nano homes in Kalyan? There is lot of open space there.

Sansei said...

Guys central elections r over,

state elections due :

builders r going to get further squeezed for funding these politicos/real owners.

Think property prices will spurt one more downward spiral?