Wednesday, May 13, 2009

BBMP issues warning letters to DLF

If this is happening to DLF, it must be happening to other projects in Bangalore as well. I heard that another project, Mantri Magnolia has been cancelled as well and Mantri is asking buyers to apply for refunds. So much for projects pending approval. The good old days for the builders are over. Deccan Chronicle reports

The country’s biggest realty company, DLF, has been thrust into two unexpected battles. The income-tax authorities have slapped a demand of Rs 400 crore on it. And the Bangalore civic body has issued a public warning that a large DLF project in the city does not have its sanction.

The tax demand, which will be appealed against by the company, arose out of a special audit of DLF’s accounts for 2005-06. A special auditor, appointed by the income-tax department for the purpose, came to the conclusion that the company had earned about Rs 1,200 crore over and above what it had declared in its returns.

The company itself notified the Bombay Stock Exchange about the new tax demand. Ramesh Sanka, group CFO, in a signed statement to the exchange, said, “On May 6, 2009, the assessing officer, pursuant to the audit and assessment proceeding, has issued an assessment order adding…. most of the amount suggested by the special audit report.”

Sanka, speaking to Financial Chronicle, said the company would contest the claim within 90 days, as provided for in the law.

In the statement to BSE, later reiterated by Sanka to FC, DLF said that the root of the extra tax demand lay in the change in accounting method that the company made in 2005-06.

The new method, prescribed by the Institute of Chartered Accountants of India, requires real estate developers and construction companies to switch over from the “conveyancing method” to the “percentage of completion method” (PoCM) for computing revenues and profits.

Sanka said that the company had used the PoCM method in the following years also.

More bad news awaited the company in Bangalore. The Bruhat Bengaluru Mahanagara Palike (BBMP) took out advertisements in newspapers on Thursday, saying the DLF had not obtained its approval or sanction for the Westend Heights project in the city.
Asserting that it was the only competent authority to sanction building plans in the city, BBMP said, “Prospective buyers are advised against purchase of such illegal apartments which are liable for all lawful action that will be initiated, including demolition.”
The BBMP action was an obvious response to advertisements that DLF took out three weeks ago, announcing the sale of apartments in the project, on Bannerghatta Road, at Rs 1,850 per sq ft.
DLF’s homes head for Karnataka, Anantha Naarayanan, told FC that his company had already pre-sold 600 of the 1,000 apartments planned in the 27-acre project for which the outlay would be Rs 400 crore. Construction is yet to begin.
In the advertisement, DLF claimed to have obtained the approval of the Bangalore Development Authority (BDA) for four floors. BBMP officials said the DLF advertisement showed an elevation of 18 floors.
S Subramanya, BBMP commissioner, told FC “it’s clear that people are being taken for a ride”.
BBMP warned that the owners of Westend Heights apartments would not be given occupancy certificates.

Subramanya said he expected DLF to cover BBMP’s advertisement costs and apply for sanction in the proper route.

In a statement DLF claimed that it obtained approvals for the developmental plan of the project through its subsidiary, Annabel Builders & Developers, for S+4 level from BDA. “Construction on the project has not yet commenced and will begin only after obtaining detailed plan approvals from BBMP and other relevant clearances…. The allegations of illegality made in BBMP… are incorrect.”

One of DLF’s customers, Pradeep Jain, said, “I had booked a flat on the sixth floor in. DLF then clearly said that it would get the approval for four floors by May and that for the sixth floor by November. Today when I called the company, it said it had obtained clearance for four floors and would mail me the clearance certificate.”


Kapil said...

Ok, guys summer sell started as I predicted.... Do not complain that you were not warned in advance.

I will provide some more clue down the road.. I know some people ( stupid one) will cry and asked me to reveal my approach, off course that does matter to me. We are here to help each other, you should listen to those who have proven record.

Don't be biased in one direction. Follow the market lead, direction does not matter.

3-5 years real estate market will do very good in India. Grab good project and forget it. India is infant country, there is lot of growth ahead...

Anonymous said...

In depth analysis of Super Housing Bubble in India.

The-Rise-Fall-Of-Realty.Few of the key points

Source of cheap moneyNew FDI norms for realty projects in March 2005 brought in an estimated $10 billion, mostly in partnership with Indian developers. Simultaneously, closely held companies took the IPO route to raise funds. In 2007, real estate companies together raised Rs 14,591 crore, 43 per cent of all IPO money raised. There was not enough stock, nor sufficient projects to absorb this money, causing a price spiral.

False claims by builders. How are they creating artificial scarcity when the market is glutted with empty homes? Desperate builders are on an overdrive to generate some cash flow by offering huge discounts to bait buyers. Two months ago, Mumbai-based Lodha Developers launched Casa Univus, a township of 3,000 apartments, near Mumbai’s Thane suburb. Situated 14 km from the city in the middle of nowhere, the apartments came at an attractive Rs 3,000 per sq. ft, nearly 50 per cent lower than in Thane. The Lodhas claimed it was a great launch with 500 bookings in the first few weeks. That was till another builder, Everest Developers, came along and launched another project 8 km from Thane’s city centre at Rs 2,200 per sq. ft. Everest, too, claimed it had 500 bookings. But enquiries with HDFC revealed that there were hardly any applicants for home loans for these projects. Abhisheck Lodha, director of the Lodha Group, concedes: “Yes, there have been cancellations.”

Similarly, Delhi-based Unitech has launched several new projects including Uniworld Gardens II in Gurgaon Sector 47 and Ananda at North Town, Chennai, at attractive prices. Its old projects, though, are yet to be completed. It even faced street protests from 350 flat owners of its World Spa project in Gurgaon, who have paid 95 per cent of the cost but are yet to get delivery, despite a three-year delay.

A research analyst with a foreign institutional investor who recently toured several DLF and Unitech sites in Gurgaon, says she saw cows grazing at many project locations that were supposed to be underway.

Commercial real-estate in doldrums “The commercial/office space segment is in greatest distress with 195 million sq. ft of ready and under-construction property in the market with few takers,” says Kapoor.

How the gullible buyer was looted in broad day-light? Just check following for the margins

As the property market plummets further, profit margins are being increasingly squeezed. DLF’s FY08 margins of 53.5 per cent slid to 42, 39 and 34 per cent for the first three quarters, respectively, of FY09.

The beggars are in big time trouble. Delhi-based Parsvnath Developers is a good example of the host of over-leveraged realty companies that could turn turtle. Raising about Rs 1,000 crore from its IPO, Parsvnath locked up most of this by successfully bidding for a 123-acre housing plot at Chandigarh for Rs 821 crore in June 2006. The project has stalled and Rs 517 crore has been frozen by Parsvnath’s JV partner, the Chandigarh Housing Board. Then, in 2007, it bid for a seven-acre BEST bus depot land in Mumbai’s Kurla suburb, and announced a Rs 620-crore commercial and housing project. The project is yet to see the light of day. Today, it has virtually shut shop in Mumbai and employees have not been paid for over eight months.

Delhi-based Omaxe has over Rs 1,500 crore debt on its books. It has rolled over Rs 600 crore for a year that was due in September this year, but with sales of just Rs 735 crore for the first nine months of the current fiscal, can it meet its loan commitments? With housing and commercial property not selling, Omaxe promoter Rohtas Goel has announced a business plan to develop airstrips and jails in Uttar Pradesh!

How politicians are helping their Real-Estate friends through RBI by twisting the arms of Banks ? Many developers face a debt trap, having borrowed heavily to acquire prime land and speed up development during the 2005-2007 boom. By mid-2008, most of these realtors had drummed up high debt-equity ratios of 0.8-2.0. This would have been manageable had these companies maintained a sustained cash flow. However, with negligible sales, they are in for big trouble. Many of them would have been in serious default had it not been for the Reserve Bank of India directing banks and financial institutions to help them restructure their loans. These loans have to be ultimately paid after the rollover period; and given the current market scenario, cash flows could be worse a year later.

Anonymous said...


Great go and buy apartments...

If you cant get from builders i am ready to sell at cost price (Price paid + eMI interest) in South (JP nagar 9th Phase) Bangalore... 6 KMs from Jaya Nagar

Let me know if you want to complete the deal and profit from indian housing boom...


Anonymous said...

Who speculated the RE prices?

The global fund managers followed the bull strategy & fueled the RE prices in India. Now it’s time for reversal.

DAL bailout: DLF promoters to raise $760 million from investors

“Sources say, the proceeds of the raise will be invested in DAL and also enable the redemption of the compulsory convertible preference shares issued by DAL to private equity investor DE Shaw”. [D E Shaw runs world’s largest hedge fund.]

Indian property struggles as funds stay away

“Property prices doubled in the two years after India eased rules in early 2005 on overseas investment in its construction industry, partly fuelled by interest from foreign investors”.

"Anything I buy today, I may get at half-price later. We have a decline in front of us," said Gulbir Madan, managing partner at New York-based Brahma Management, which runs a $500 million India-focused property fund”.

Morgan Stanley projects loss for $8bn fund
Investors in Morgan Stanley’s $8bn MSREF VI International fund have been told to expect a 0.7x haircut. The firm will focus on preserving and generating liquidity, deleveraging and de-risking the portfolio and working through debt issues with lenders, LPs learned at a meeting in New York last week.

Citi cancels $1bn Asia fund, hands $400m back to investors

Citi Property Investors has abandoned efforts to raise a follow-on fund to its 2007 Asia focused vehicle and has decided to give back approximately $400 million to investors.

$23bn of opportunistic funds have been put on hold

With LPs struggling to balance declining distributions against pending capital calls, a report by Clerestory Capital shows 32 fund managers in market over the past six months chose to stop or put fundraising efforts on hold. Among the worst hit were funds targeting India and China.

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


Anonymous said...

Laxey proposes board shake up at India’s Hirco

The London-based activist investor Laxey Partners is trying to oust three directors and install an independent chairman in a bid to force changes at Hirco, which develops real estate in the country.

Last month the Hiranandani family’s capitulated to shareholders by deciding not to reverse a loss-making family-owned company into Hirco to bump up the family’s share ownership. Laxey argued that a merger would see existing investor stakes heavily diluted.

Anonymous said...

Dear Vik and all,

Is it possible to let the forum know the CAGR starting from 99 to 09.

I think we will get some insight as on where we stand.

Kind regards,


Anonymous said...

This practice is nothing new as Realty Developers raise booking amount from customers prior to all paper work formalities.

DLF is pulling out of Bidadi "Knowledge City " Project and asking the 450 Cr back from Karnataka govt.

Also I suspect rival builders in the vicinity[Banerghatta Road] who are holding on to inflated prices to loot customers having a hand in this BBMP advertisement as until now BBMP has never issued any such paper advertisements though such practices are so common. Rival Builders want to keep DLF out of Bangalore and hence the cold war.

There is a news item in ET today says BBMP has identified 28 such builders and sent a letter asking them to get approval before selling.They say that they wont issue advt (like DLF) now and not even ready to tell the names. What an assholes...these govt beggers.


Anonymous said...

Office rentals to fall 20% in 2009; realty to recover in 2010

Anonymous said...

On the govt ad front i will appreciate though its done because of pressure from other builders...

Because this sets an example... Now people will ask govt why dont u do for other builders... I dont see any ad from any other govt like,,,

This deserves appreciation... They atleast saved people from DLF gimmicks... Lets spread the news like a wildfire

Bharat said...

Looks like the great unravel has started!

DLF, Unitech, Parsvanath, Raheja they are all getting into the news...

The great bust for the Indian economy is also starting. Now if the NDA comes to power, we might see a bigger unraveling then expected.

Awaiting the great Indian RE Bubble bursting..

Anonymous said...

I wonder where the @$$hole Bindaas Bhai has disappeared?

I guess he has gone into hiding with all his stupid logic when that pension fellow took him on..

All his gyan is out I guess

Anonymous said...

Is there anyone out there?


Anonymous said...

Bulls will take charge now!!!
Jai Ho

Anonymouse said...

"Bulls will take charge now!!!
Jai Ho"

All that is fine but in which direction will the bulls run? away with their tails between their legs or bury their heads in sand and try to dig deeper?

Anonymous said...

If the prices go up its only because of inflation due to RBI's money printing. So BindASS Bhai - you may be right but you will also be poor by that much sooner than you think. There will be no one to hide, since Congress is incharge and Inflation will be back and how. Truly Bhay ho!!

Anonymous said...

Who made housing unaffordable?

Congress govt. policies made housing unaffordable to everybody. After creating economic problems they are now talking about affordable housing, it means first spread disease then sell medicine.

As per the 2005/06 policy changes, it allowed foreign investment banks(NBFC) to speculate in Indian market which caused exorbitant price rise.

Thanks to the global recession which brought down the speculative activities & de-leveraging in the investments. Investments in capital project benefits the society as well as investors as it creates economic opportunities for everybody. Consider an investment in power project which benefit job seekers, investors & consumers. Whereas speculative investments create the boom - burst cycle & cause much more harm to society. In short, we don’t need an affordable housing we need a policy correction.

Stable UPA government to support realty prices, say Developers

“The return of the UPA government in to power will help attract FII money back to the domestic market and arrest steep fall in realty prices,

real estate developers today said”.

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


Kapil said...

Let us start new thread on India's election results impact on market...

Anonymous said...

Bulls are having the bears by their ball i.e. if they have any?

I wonder where my friend BB is?

Lets hope he comes back and add value to this forum which most of us cant see.

BB, Can you please tell me if it is worth buying a house at Bhandup. The asking price is 5.5k for a complex and about 15mins from the station.

I need your help so pls. respond.



Anonymous said...

A kulkarni talking about balls!!

What next?? Joshis claiming to be Waghmare's!!!!!

I find BB being Kulkarni's "friend" very apt though, what could be more fitting than foxes and chickens being friends :))

Anonymous said...

:-) :-)

This is what Bindas Bhai will be doing now and lot of us will be doing
:-( :-(

Anonymous said...

@Vulture 11:30 AM

Thanks for the link

Let these suckers i.e. Real Estate Funds (FII) lick their wounds. Only way to recover money is milking the cows grazing at their partners forlorn LAND BANK.

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