Tuesday, April 07, 2009

Buyers rights and consumer activism

It seems that apt buyers have woken up to the internet and are organizing and ganging up against builders in ways never seen before. In the old days, media was controlled by few select companies or the government. Consumers had to resort to telephones, type-writers and sit-in dharnas to have their voice heard. In this new age of instant connectivity, builders are facing the music by irate buyers who are getting increasingly impatient for their purchases. Most of these buyers on delayed projects are paying a high rate of pre-EMI in addition to the EMI they will end up paying once the loan tenure begins. They also have to account for the loss in rent they have to incur for their present accommodation. They are bleeding slowly and it is high time builders be held accountable for their losses. For too long have buyers been herded around like sheep.


Livemint.com reports. Kudos to the Wall Street Journal for voicing the problems of the masses. Most Indian newspapers write soft marketing articles how it is a great time to buy. Its time for the Times group of companies to take some journalism lessons from the WSJ. If only Vineet Jain can get some time from posting Holi pictures on his Indiantimes website.


After using a portion of his retirement money to buy an apartment in Gur gaon, on the outskirts of New Delhi, S.K. Bangia pursued the developer for almost a year to get the purchase agreement. He eventually got a letter cancelling the allotment of the flat, Bangia says.

The 62-year-old former bank manager booked the apartment in a Raheja Developers Pvt. Ltd project in December 2007, the month that he retired, in his and his son’s name. His son wanted to borrow a home loan to finance part of the cost.

“They did not give (me) a buyer’s agreement and an approved sanctioned plan of the project, without which no bank gives a loan,” says Bangia, who sent a legal notice to the company in November, demanding the sanctioned plan and buyer’s agreement. A sanctioned plan is a project layout approved by the local urban development authority.

Homebuyers are taking recourse to consumer forums and the courts and online activist groups to resolve grievances against real estate developers. As slowing economic growth and a property market downturn cause cash-strapped realtors to abort or delay projects, property buyers are increasingly being forced to turn consumer activists.

Bangia, who approached a consumer court last month, claims he was targeted because he was trying to involve other buyers in his fight. He wants double the 9% interest Raheja Developers paid him on the money it eventually refunded him. Raheja, which charges 18% interest for delayed payments, says it’s following the rules.

“As per the terms of agreement to sell, it is mentioned that the company will give 9% interest,” said a Raheja Developers official who didn’t want to be named. “I am not familiar with this particular case...” One reason for the increasing incidence of disputes is a decline in real estate valuations, which is prompting buyers who had booked property at high prices in the past to seek refunds and switch to cheaper developments, said Anuj Puri, chairman of Jones Lang LaSalle Meghraj.

“It is (also) true that many projects of developers have got delayed for genuine reasons—may be because of lack of finance or whatever—and at the same time the tolerance level of buyers has gone down,” he said.

25 comments:

gadadhari_bhim said...

Bangalores Mobster Turned Mogul

Bharat said...

Good report and something which makes imminent sense. I think faced with a bubble burst the builder-politician-news-real estate agent (BPNR ?)lobby has entered a phase of denying that there is any crisis. What this report serves to highlight is that there is a crisis and its going to get worse. Which in conjunction with the hysterical denial of the BPNR lobby makes one feel that the worst is close at hand.

Anonymous said...

IT - Work for only 10 days in a month at 50% of current salaries

Wipro Technologies, India's third-largest software company, for instance, has asked employees on the bench, who have not been billed for a long period, to work for only 10 days in a month at 50% of their current salaries.

Another way in which the Azim Premji-owned Wipro is pruning staff cost is by allowing workers from Wipro Technologies, which oversees global business, to move to Wipro Infotech, the domestic arm for its IT services business.

The company is also encouraging migration of workers from Wipro Technologies to its BPO operations to snip employee cost.

It has also introduced the sabbatical scheme, where it is sending employees on a 2-3 years leave. It will be paying 20% of an employee's salary while he is on a sabbatical.
Bigger rival Infosys Technologies had also come out with similar scheme early this year.

A senior executive, who did not wish to be named, said the response to it has been very low because employees feared they would not be taken back if they went on a leave now.

"They (employees) are not even going on privileged leave because they are worried that they will lose their job," he said.

And this fear among code writers is not unfounded. Over the last few quarters, they have already taken a hit on their variable salary. Variable salary is that component in a pay, which is based on the performance or achievement of business goals

Anonymous said...

Wolf’s Cry

If you will not buy, there will be dire consequences.
All these wolves are talking about consequences but they don’t
want to reduce the prices. When prices were going skyrocket high where were these wolves? At that time they didn’t had time to think about consequences.

Builders associations released a number of advertorials but none of it explained the rationality behind the pricing. Yes, you can discuss about all sorts of news & dream home
but don’t talk about pricing.

Builders are now making propaganda that they employ unskilled labors, why can’t they provide the payroll, ESI & PF details of employee?

God grinds slowly but he grinds finely.

http://www.hindu.com/2009/04/
09/stories/2009040957451800.htm


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


Vulture.

Anonymous said...

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

You have this foot note for all your correspondence. Are you taking guarantee of 50% cut.. You look very funny to me.

Anonymous said...

DLF customers take to Gandhigiri to get money back

Customers who have booked flats in New Town Heights, the project being developed by the country’s largest real estate developer DLF Ltd, at Gurgaon, near Delhi, are planning to take the Gandhigiri route to show their “disappointment” with the execution of the project. Around 200-300 of them are planning to gather at DLF’s office tomorrow, to give out roses along with their exit letters to the company.

Meanwhile the company, which is facing a similar problem from its Chennai customers on account of the Garden City project, has agreed to pay back the booking amount between April 30 and September 30, 2009 to those who have given exit letters so far.

The Gurgaon group, which consists of around 700 customers who have booked flats in New Town Heights, is planning to go with bouquets of flowers with exit letters to DLF’s office on Saturday, said a core member of the group who doesn’t want to be identified.

He said a recent poll among the members shows that over 70 per cent of them want their money refunded since the company has not started any construction work at the project site. The member added that most of the customers had paid around 42.5 per cent of the total cost of their flats.

Anonymous said...

HCL goes for salary freeze, bonus cutbacks

Ankit April 03 , 2009 ,16:26 IST


They are fooling the entire world with employee first claims!! They have gone for flat 25 % Salary cut, reduction in travel allowances etc. They are making employees travel by train and in some cases not even reimbursing travel expenses. The 2 so called deployment chances are BPO opportunities for HCLT Business line employees, which is just another way of saying Good Bye!! Kudos to Management Guru, Vineet, for yet again, finding a new way of fooling around by creating this so called "Smart league" wherein, people are expected to be flexible enough to take BPO roles, even though they may be champions of there technologies and past projects!

Anonymous said...

In the name of "delivery excellence and operational efficiency" the India IT companies are slashing monthly pay by 40 to 60% (laying off) of hapless employees.

Anonymous said...

Pune stud-farm owner told to shell out Rs 60k cr in taxes
THIS IS THE HIGHEST INCOME TAX DEMAND MADE BY THE DEPARTMENT
M Padmakshan MUMBAI

HASSAN Ali Khan, the studfarm owner from Pune, who hit the headlines a few years ago for allegedly holding over $8 billion in Swiss banks, has been asked to pay Rs 60,000 crore tax by the Income-Tax (I-T) department.
Mr Khan had assumed a larger-than-life image ever since his premises in Pune were raided by I-T officials two years ago, not merely because of the huge fund involvement, but largely on account of rumours that he was the conduit for several corporates, politicians and even big names in the show business.
Interestingly, however, even if Mr Khan does not pay the tax, the I-T department can do little to recover the amount. This is because Mr Khan does not own assets that are valuable enough to recover even a fraction of the tax demand. According to I-T sleuths, all he owns are a house in Pune, a few race horses and a car. Mr Khan, according to them, has no steady stream of income.
The I-T department had made an attempt to access his account in Swiss banks under the provisions for mutual exchange of information outline in the Double Taxation Avoidance Agreement (DTAA). However, it was told to route their request under the Mutual Legal Assistance Treaty, which is a time consuming procedure, that involves launching of prosecution against the tax payer in India and issue of a Letter Rogatory by a court of law.
Recovering the amount from the Swiss banks now appears to an uphill task given the formalities involved. The enforcement directorate, which also investigated the case, had sent two officials to get the information on Mr Khan’s Swiss accounts, but they returned almost empty handed.
A formidable obstacle in the way of accessing the overseas accounts is the Swiss banking secrecy laws, which are complex enough to indefinitely delay investigations. Even though the US pressure post 9/11 has forced some banks loosen the rules, it has not made much difference. Most Swiss banks still bluntly refuse to share information on account details.
The tax demand on Mr Khan is the culmination of the proceedings that began two years ago with the I-T department’s investigation wing carrying out a raid at his office and premises. The documents seized from his premises indicated that the money was being parked away abroad over a period of time. “We have documents that tell us the existence of accounts held abroad. We raised the demand on the basis of the figures we have found in these documents,” said a senior I-T official.
With the addition of interest and penalty, the tax demand on Rs 35,000 crore has surged to Rs 60,000 crore. Probably, this is the highest tax demand by the Indian I-T authorities till date. The late Harshad Mehta, who was behind ‘92 securities scam cases, had received a cumulative tax demand of Rs 16,000 crore, while his assets with the custodian of the Special Court was valued at Rs 3,500 crore.
While assessing Mr Khan’s income, I-T sleuths have also included the income mentioned in the documents seized from the premises of his associates. In order to pre-empt legal complications later, the department had also made separate assessment for about Rs 20,000 crore in the name of Mr Khan’s associates. Mr Khan has moved the first appellate authority on tax matters, Commissioner (Appeal), against the demand.

K said...

Look at this one...I knew about Father and Mother...but even son is an useless jerk...

http://www.expressbuzz.com/edition/story.aspx?Title=Rahul+Gandhi,+spin+doctor&artid=7/Ycr41wlSU=&SectionID=d16Fdk4iJhE=&MainSectionID=d16Fdk4iJhE=&SEO=A+P+J+Abdul+Kalam,+Mohd+Azam+Khan,+Mulayam+Singh+Y&SectionName=aVlZZy44Xq0bJKAA84nwcg==

Anonymous said...

In last couple of weeks stock market across the world made a rally & it raised a question about economic rebound. The worldwide stock market rallied because US banks showed a profit after a year. It was a sign that economy may come out of recession.
The economic free fall is slowed down, means it will bottom down soon which is the hope for recovery. Housing market is still not showing bottom & as per the analyst it will take another year or more to reach bottom. Failure to fix the housing market, govt. is now separating the housing issue from the rest of the economy.

http://roomfordebate.blogs.nytimes.com/2009/
04/06/the-economys-green-shoots-real-or-imagined/

Do you think the layoff scenario will change in a year?
Salaries will go back to 2007 level soon?
Even assuming that economy will recover today, first corporate will come in profit by trenching the employees then only unemployment & salary scenario will improve.

After failing to sell the RE, some disgruntled builders & apartment sellers are now trying petty tactics like spreading news about dire consequence, making fun of others, vandalizing some economists.

Thanks anon@ 11:51 AM for making MY FOOT note as YOUR HEAD note.


Residential property rates may fall 35%

“Realty brokers in India expect residential property prices to settle down at a 25-35% discount on the current listed prices over the next couple of
months, according to a recent survey.”
http://economictimes.indiatimes.com/
Residential-property-rates-may-fall-35-per-cent
-in-India/articleshow/4387266.cms

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

Vulture.

Anonymous said...

Indian IT industry may cut 75,000 jobs this year

The Indian IT industry, already under pressure since the downturn began in the US financial, banking and insurance markets last year, is likely to see around 75,000 job losses this year, according to senior executives of leading software companies.

http://economictimes.indiatimes.com/
Features/Layoffs-in-IT-sector/Indian-IT-
industry-may-cut-75000-jobs-this-year/
articleshow/4387141.cms

Anonymous said...

Great achievement by chidambaram - I know lot of the guys are hard core fans of chidambaram/manmohan and ingeneral cong govt

http://specials.rediff.com/money/2009/apr/08sli1-tax-refunds-being-diverted-to-fake-accounts.htm

Bharat said...

As usual Eco times is waking up 6 months after everyone in the country knows there is significant inventory of Housing as we head into a deflationary cycle.

http://economictimes.indiatimes.com/Market-News/Residential-mkts-may-see-oversupply/articleshow/4390175.cms

Also, there is the usual vested interest like Niranjan Hiranandani who is either blatantly lying or is totally deluded!

Anonymous said...

there has been lots of reports of indian economy recovery by the shysters in the media and sleek and sly gurus. The fact of the matter is indian economy is just beginning to feel the pain that will last min 2 yrs.
Talking to my homeless parents who know the situation firsthand, i can only hope the braggarts in the media would eventually reap what they have sowed.

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

vulture

Anonymous said...

Dear anon@5:15 AM,

I respect your views & opinion, but you can use own signature.

Thanks,
Vulture.

Anonymous said...

Any comment about

DLF Capital Greens, Shivaji Marg

Delhi

Rate 5000/- per sqft.

I think this is good deal in Delhi.

Anonymous said...

The zombie scheme of real estate developers/builders has started crumbling down. The techies who were at onsite for 3/4 years during 2003/07 constitute a major chunk of speculators. They have purchased 2/3 flats and have rented these flats to the own colleagues (mostly a group of bachelors who share the exorbitant rent). The recent steps of IT industry i.e. reducing the salaries to peanuts, putting freeze on new hiring, laying off will make sure that the tenants will opt for lower rents or all together shift to other flat. This will put pressures on owners to deleverage the investments. Only two options are available for the SPECULATORS i.e. either put up with the higher EMI (the banks are not going to reduce the interest rates of home loans considering the ballooning NPAs) or reduce the liabilities. In both the cases they are going to loose. The other group of speculators (gap analysis manager, escalation manager, account manager...spending the VALUABLE time trading shares online) are in the final stage of packing the bags at onsite and heading home.


So if you have patience then don’t even opt for ready possession flats. The market has slowly started flooding with the distressed sales.


2,100 Infosys employees face axe

Bangalore: With companies keen on maximum utilization of employees and low tolerance to poor performance in the backdrop of global economic turmoil, nearly 2,100 employees in software firm Infosys have faced the axe.
“Some of these employees have been asked to go while some have left on their own,” V Balakrishnan, CFO of the city-headquartered Nasdaq-listed company, told PTI today.
Prior to asking the employees to leave, they were put on a performance improvement course and those who showed no improvement were asked to leave while some others quit, he said.
“Tolerance to poor performance is very low given the current economic scenario,” said Infosys CEO Kris Gopalakrishnan.

Anonymous said...

Where's the slowdown? Good life still goes on


12 Apr 2009, 0248 hrs IST, Neha Dewan, ET Bureau


Print EMail Discuss Share Save Comment Text:



NEW DELHI: Did someone say the R word and luxury too, all in the same breath? Forget it! Even a cursory look at the string of launches, price Design trends for 2009
Commodities barons' sports assets
increases and flamboyant product lines flooding the Indian luxury market right now, and you’d almost forget about any slowdown.

Beating the slowdown blues, a lot of leading luxury players have gone ahead to introduce their brands in the country. While the ultra-luxurious Aman property opened recently in the capital, the Radisson MBD hotel in Noida also launched its 11-room luxury wing, Prive.

Tanishq opened its luxury store Zoya in Mumbai a couple of months back, while Swiss watchmaker Tag Heuer introduced a new high-end cell phone range in its store at the high-end Emporio mall earlier this month. Italian luxury home decor and accessories brand Baldi entered India just a few weeks back.

Clearly, luxury brands are more than confident about sailing smoothly, irrespective of the downturn. While they may seem to be confident where launches are concerned, they appear almost cocky when it comes to prices. In fact, they are actually jacking up prices.


Luxury consumption, they feel, has not primarily been hit by recession unlike European and American markets. “India is growing at a rate of 5.5% which is better than most other economies. In a way it’s a good time to establish business right now,” says Manishi Sanwal, general manager, watches and jewellery, LVMH India.

Tag Heuer and Christian Dior, promoted by the French luxury group, will increase its prices by 8-10% this month. Sanwal, however, adds that this has been due to the fluctuations in the rupee-dollar rates. “We are only increasing prices by 8-10% against the 25% differential that has happened due to rupee depreciation. We are mainly bringing it on par with international prices.” The brand launched its high-end cell phone range in the market barely 10 days back with a steep price tag starting at Rs 2,20,000!

Priya Sachdev Chatwal, CEO of TSG International which has brought brands such as Alberta Ferretti, Lanvin and Moschino to India, too, says that new collections and promotions will go forward as planned. “India has not been that badly hit. We will go ahead with our plans. Also, the degree of luxury consumption could vary from city to city. In cities such as Delhi and Mumbai it is mostly a psychological mindset as they are cash rich and not very affected by the recession.”

For other players too, it is business as usual. And if that means a price increase in synch with the annual schedule, so be it. Geneva-based luxury jewellery brand de Grisogono will be stepping up prices by 6-8% this month. The brand entered India in December ‘08 and has seen consistent sales over the last few months. The price increase, according to the company, happens worldwide and will not deter demand.

Our response has been great and the increase will not impact us as a brand. True luxury has come back into time as people want to make a concerted approach on where they are spending," says Sunil Rai Singhania, general manager, Vama and Co, distributors of de Grisogono in India.

In fact, many brands admit to an upswing in profits even though other industries may be struggling to stay afloat. Leading US luxury brand Judith Leiber saw an increase in sales of 40% in Q1 '09. Madan Assomull, chairman, Marigold Group, promoters of the brand in India, feels that uber-luxury brands are less affected in the present economic climate with a good demand still steady for hand finished, and limited edition products. He admits that prices will be as before only if the rupee vs $ differential doesn't go up further in 2009.

"Our imports are dollar priced and one has seen a devaluation of the rupee vs $ of over 12% in the past 9 months (approx Rs45 to Rs 51). Judith Leiber India is currently absorbing the exchange loss," says Mr Assomull. The silver lining is that the economic situation has helped many kickstart business in these bad times.

Shantanu Mukerji, country manager, Zegna India, says: "This is the best time to start business. The decision to launch may not always be one based on demand. The present scenario can offer unique strengths to brands in terms of real estate costs, media and operational costs."


Mr.Confused

Anonymous said...

Opportunity’ in realty chaos

Even if property prices and interest rates fall, ‘sentimental recession’ in the buyer’s mind may put off purchase.


Mr SUNIL ROHAKALE, EXECUTIVE DIRECTOR, ASK INVESTMENT HOLDINGS

Suresh Parthasarathy


Vidya Bala



Unless interest rates drop to a compelling level of 7 per cent, there may not be a significant pickup in residential demand, says Mr Sunil Rohakale, Executive Director, ASK Investment Holdings. This Wealth Advisor has nevertheless chosen to launch a real estate private equity for Indian investors. Mr Rohakale explains as to why this fund, which will predominantly invest in residential units, was chosen to be launched during a downturn. He also explains the reasons for the slowdown in demand and how a realty fund may be a superior option for investing in real estate.

Excerpts from the interview:

How does investing through realty fund score over direct investing in realty or buying realty shares?

For one, there is concentration risk of buying a property as against the diversification that a fund offers. Two, investing in a realty fund amounts to stepping into the developer’s shoes instead of buying from the developer. In other words, one can benefit from the extra margin enjoyed by a developer. Three, direct investing in realty has additional costs such as stamp duty and registration and recurring costs such as property taxes. Four, the question of when one should exit and who should moot such an exit would arise in direct investing. Five, maintaining a building/flat and leasing and managing it is a hassle.

In investing in realty through stocks, one loses control of money and cannot have much say in the capital efficiency. A private equity fund keeps full watch over money flowing in and out of the project and ensures that there are no diversions. Risks attached to a project – including those related to reputation, completion and title – are evaluated by experts in the fund. A private equity fund with a clear-cut strategy and which is not open ended can, therefore, score over the other options of investing in real estate.

With realty sector being overshadowed by various concerns, would investors not view your fund as a high-risk investment?

Historically, real estate, whether land or house or office space, would have grown to 3-5 times the cost. With GDP growing from 5 per cent to 9 per cent, the home buyer’s profile too has changed. So if one sees the changing profile of a customer (from a lender’s perspective) the average age of a borrower was 47 in 1998 and he was looking for a Rs 3.5-lakh home loan and was happy with a 70 per cent loan to value ratio. In 2004, the average age of the borrower was 38 who wanted Rs 7 lakh of home loan and the loan to value was 80 per cent. In 2008, this profile changed to a 32 years, wanting a Rs 15-lakh loan, with a 90 per cent loan to value ratio.

The point that I am trying to make is that the customer has moved from being a risk-averse Indian to a risk-taking Indian; from a low-income individual – whether government or bank employee or working in a private company – to a higher income individual, with higher surplus income.

When did the home buyer’s demand wane?

Housing became unaffordable for many, as developers began to make luxurious houses. When this happened, interest rates too went up from 7 per cent to 12 per cent between 2004 and 2008. This also reduced affordability. Property price hikes also added to the fuel.

A 0.5 per cent increase in interest rate means an increase of Rs 30 per lakh of EMI. Interest rates have gone up by almost 500-600 basis points. Where the individual EMIs was Rs 50,000, a 6 percentage point increase in interest rate leads to EMI becoming Rs 65,000. Now, where am I going to pay that additional Rs 15,000 from? Initially banks were kind to increase the term… but you can’t be an 80 years when the loan matures.

You were talking about the sharp hike in interest rates. Was this not accompanied by a huge jump in income levels as well, especially in the last 10 years?

Correct. If you see HDFC’s data it says that 22 times of your annual income was needed to buy a house sometime in 1995-96. Today, you need six times your annual income to buy a house. But worldwide this figure is 3-4 times. So there is still scope for either incomes to rise or property prices to decline.

Our observation is that in India, the income of government employees has risen 6-7 per cent CAGR in the last 10 years. Private sector employees earn 12-15 per cent more. The knowledge economy – primarily IT and IT-enabled services, banking and insurance and telecom – which has been the driver of growth for quite some time now, has seen a salary increase of 15-20 per cent CAGR in the last 6-7 years. So an average Indian has seen a 12-13 per cent increase. Property price in the same period has increased by more than 13 per cent, affecting affordability. If you take the property price index of NHB, a property in Bangalore priced at Rs 100 in 2001 had gone to something like Rs 230 in 2007 (this works out to a CAGR of 15 per cent). This growth is definitely far more than the rise in income. The quality of houses and amenities offered have also changed between 2001 and now, thus putting additional burden on affordability.

Now that interest rates are declining, would housing demand pick up?

Unless interest rates drop to a compelling level of 7 per cent from the 10.5 per cent, there may not be a significant pickup. In our country, 6.5 per cent mortgage rates have happened. This will bring EMIs to a reasonable level; the original level where the borrower will once again have his surplus.

Even if this happens and property prices comes down, the ‘sentimental recession’ in the buyer’s mind may put off his purchase. He is today worried about the economic uncertainties, his job, whether the factory would work three days or five days and so on.

So what is the opportunity that you see in real estate today?

In any private equity investment, the investor is more concerned about the entry point. We do not see an opportunity to enter at the land stage because land has already been aggregated in the last two to three years. So entry has to be in the development stage. The opportunity for us is to get into those residential projects, where the plan approvals are already in place and the construction is about to start; or where construction has been started but there is no financial closure.

Secondly, there is opportunity for investment at the asset level rather than at the holding company level. The latter needs exit opportunities such as IPOs; this makes it more uncertain. We do not want to be a builder but a facilitator of the asset development so that we have control over the execution.

The third point is that SEZs and townships have longer gestation period, are decade-old projects and are not meant for an investor with a horizon of five to seven years.

Similarly, the current rentals in malls have become so unaffordable to the tenant that his business is no longer viable. Tenants have started re-negotiating fixed rents. So we feel that these segments are ahead of times, although there will be opportunities for long-term players.

We were looking at a five-year period, and therefore these did not fit our bill.

As the first three years have already been given for the developer to acquire land, the question here is how much time would be required to build a three-lakh-sq.ft or a 100-flat residential project? Architecturally, 30-36 months is a reasonable time for a 100-flat project when the plans are approved.

So, do you expect the demand to revive by the time the projects you enter into are completed?

A revival may take another 18 months. By then some amount of interest rate decline and price correction is likely to happen. I do not rule out another 25-30 per cent correction. So, a total correction of 50-60 per cent from the peak prices is very much possible. While we would reach a neutral stage in the December quarter, with a stable Government, clarity on jobs and income and improvement in global economy, transactions will start happening from the September quarter of 2010 onwards. The current journey of developers launching projects, at lower rates and lower sizes is a step towards liquidity and affordability for various segments. So we will use the next 24 months to deploy our funds.

We will collect 20 per cent of the application money and the rest over 24 months to provide value proposition to investors.




Q Why have you chosen the top cities alone for your investment?

We feel that residential demand is intact and thought that city-centric residential projects which are self-liquidating should be our focus for 70 per cent of our fund. We feel that the top seven cities are much more attractive – so Mumbai, Bangalore, Chennai, Pune, Delhi, Hyderabad and Calcutta – in that order. Why these cities? Because 50 per cent of the top spends in infrastructure under the Jawaharlal Nehru National Urban Renewal Mission project is going to be in the top 7 cities. Two, the job creation post revival is going to be much faster in these cities. The talent availability for the next level of expansion will be available in plenty here. The capability, quality and size of the developer in these cities is much better than in smaller towns.

But 30 per cent of our portfolio will be invested in completed, fixed income generating office space. We will not enter speculative commercial or in other words commercial space under construction or those not occupied. I call this speculative because - take Bandra Kurla complex, which touched something Rs 400 per sq ft, has melted to Rs 250 per sq ft. Similarly in Worli what was at Rs 500 per sq ft has come down to about Rs 300 per sq ft.

http://www.thehindubusinessline.com/iw/2009/04/12/stories/2009041250531300.htm

Anonymous said...

I am working with a leading bank it is just matter of months where we see interest rates at 7%. (Herd mentality will draw people to invest in real estate)

I would advise people to buy properties now. Our study says that the stock market after election (if the govt is stable) will move above 15k and recovery across the industries will happen including exports in coming quarters.

Pls. use your head properly and don’t get carried away by this blog or my post.

Believe in your conviction and take a decision. We seldom buy properties/shares if we see price moving up right in front of our eyes. Hence when we see that the prices have come down it is worth taking the risk then timing the market thinking that the markets will fall further.

Sit with cash negotiate hard and buy.

I feel the bears in this group will be proved wrong by this year end.

I am neither a broker nor an investor but after reading this blog I felt I must also share my views.

Regards,

Atul Kulkarni

Vik said...

Atul

Thanks for taking the time to write about the confidential aspects of your bank. If prices correct to reasonable levels and approach affordability why would I have a problem in buying

Now convince me that I can buy a 1crore 2 bed apt at 12% interest earning 10L a year and don't tell me to goto Kalyan and commute 6 hours a day for work

shailesh said...

Slum TDR rates crash as redevelopment deals fall apart

The market for transfer of development rights (TDR) generated from slum enclaves has crashed over the past one year. With the slump in the real estate market, the rate for slum TDR has dropped from an all-time high of over Rs 4,300 a sq-ft in March 2008 to around Rs 1,000 a sq-ft this month.


Sources said the price of slum TDR could fall further with an expected 24 lakh sq-ft slum TDR stock ready to hit the market in the next one month. Among those planning to sell huge chunks include slum redevelopers like HDIL, DB Realty and Sumer Builders.

"There is going to be a huge supply of slum TDR, but the current demand for it is negligible because of the slowdown in the property market. Its rate might fall below Rs 1,000 a sq-ft once this stock hits the market,'' said a source.

So TDR costs 1000 Rs per sqft, the construction costs are about 1000 to 1500 Rs per sqft. And builder charging Rs 6000 to Rs 20,000 is ok? The realistic price in most Mumbai suburbs in my opinion is from Rs 3000 to Rs 6000, nothing more. It may take some time, but once new crop of supply becomes available, the prices will drop.

shailesh said...

Home buyers wary, bankers uncertain

“People have clearly adopted a wait and watch policy on the prices,’’ the executive added. Though prospective home buyers are flocking to the exhibitions, developers say genuine enquiries are drying up and the conversion rate has dropped. For instance, Hiranandani group’s Hirco had received 4,000 enquiries for its Panvel township in the last property exhibition held in October. This year, the company expects only 800-1,000 enquiries.

“Nearly 40 per cent of faces that we see at these events are same. We expect a conversion rate of 5 per cent from exhibitions like this, whereas earlier we used to see a conversion rate of 15 to 20 per cent during such events,’’ said a manager with Hirco.

Hirco has sold 225 apartments out of 375 apartments it launched in Panvel, on the outskirts of Mumbai, in 2 months. “We launched only 373 flats due the current environment. Otherwise, we would have sold 2,000 apartments in two months during good times,” he said.

Buyers agree that most of the top developers have launched houses in the mid-income segment and that their options have increased,but they are reluctant to take chances.

“Though prices are still high, they have fallen by small fraction. Earlier, we could not think of buying a flat, now we can look to buy one. But we will go only with reputed builders and completed construction even if we need to pay a little more,’’ said Bhupinder Singh, a private bank execeutive.

“The developer’s financial profile keeps changing very fast in the current downturn. If they do not get payment from buyers, builders will stop work. they will not pay from their pockets,’’ he said.

shailesh said...

South Mumbai out of reach? Buy a home in NY

One of the few places in New York with two-bedroom apartments for $180,000 (Rs90 lakh), Flatbush in central Brooklyn has the allure of affordability, which worked well in drawing H Patel from Gujarat five months ago.

"My daughter studies at New York University so we just wanted a base in the US," said Patel.

A Mumbai rice exporter, who did not want to named, said he used the market weakness to buy a house in Florida; "I bought a three-bedroom house at Regal Palms in Orlando, Florida, for $190,000. It's great -- we can use the clubhouse. The grounds have heated pools, sun decks, and tennis courts. I wouldn't get a deal like this in Mumbai."

If you prefer a pretty spread to a city flat then 'Brokeback Mountain' country is tough to beat. Clearwater Montana Properties Inc has a listing for a 9.81-acre parcel in Philipsburg, Montana, for $220,000. You will be presiding over your own hunting cabin, trout-filled creek, and wildlife, including deer and elk.