Saturday, September 19, 2009

Slow demand crimps India property rebound: PE fund

Finally people are getting the fact that the Indian bubble has popped. The unwinding in high priced locations will be slow just like air leaking out of a balloon. and this is the Economic times reporting. Good job guys to report the ground reality. Full article here

Sourav Goswami, managing director of Walton Street India Real Estate Advisors, sees the most potential in middle-income and affordable housing in top-tier cities and expects land that was initially earmarked for high-end development will be shifted to lower-cost housing as strapped investors sell at a loss.

"There are deals in the marketplace now where funds are offering to sell down some of their land positions at 50, 60 cents on the dollar. And once they do that, the next fund that's buying in at a much lower basis has the ability to sort of re-engineer, sort of reposition the product," he said.

Chicago-based Walton Street manages $3 billion globally. It has invested $200 million in India, including a position in a high-profile township project in Kolkata.


Also Read
→ Step carefully while buying a property
→ Rakindo, Appaswamy strike Rs 100-crore deal
→ Mafatlal puts city property on the block
→ HDIL to pay tax on Rs 350 cr more, says didn't evade tax


Once-soaring property prices in India tumbled by as much as 50 percent during the global financial meltdown as an asset price bubble collapsed, and while prices have crawled back by roughly 20 percent, Goswami said they have a long recovery ahead.

"I really think that even the 20 percent recovery from the lows may have gotten ahead of itself a little bit, and I think maybe you'll just see it stall here for a little bit before it starts to pick up again," he said in an interview.

Much of the bubble was driven by high-end, high-margin projects, and Goswami said the pool of buyers for such offerings has shrunk in the wake of the global financial crisis.

"To really sell into the marketplace you need to make sure that you're building something that the local population can afford," or a monthly mortgage of about 40 percent of a buyer's income, he told Reuters TV.

39 comments:

Anonymous said...

WAKE UP GUYS!!!!
To each his own. That is the law of this world. Property prices are going up atleast for now and it’s a reality in today’s realty market. Period. The reason is very simple – the India housing bubble community is just a drop in the ocean. We can’t prevent the herd mentality of the entire Indian populace, however much you try.
Each individual finally says this to himself – main khareed raha hoon baaki sabko golee maar, I don’t care.
It’s a different issue that he is shooting himself as all of us would think but then everyone is thinking that way. Probably some of us in this forum as well.
So follow all the laws, theorems, postulates, case studies and much more that you have been learning in this forum to make the best purchase decision; apply your own common sense and judgment and Buy if you are an end-user.
NT

Anonymous said...

Sadly, I find myself agreeing with NT. A lot of people have stopped waiting and are buying.

Venkat ND

Anonymous said...

Genuine Home buyers please don’t risk your hard earned money. Let these gamblers (bankers, brokers, IT Techies) take risks. Please stay away from this giant ponzi scheme. All the talk about the "Green Shoot" is bakwaas when in fact the markets are being denied their natural course of correction.

The Real Estate companies, builders are beggars and have avoided the "the huge amount loans" by rolling over the debts. The real estate lobby in collusion with the Banks is trying to prop up the market.

Had the government & the Reserve Bank of India not interfered, the housing prices would have collapsed. This will not continue for a long time. Let these suckers suffer.

That’s from the horse’s mouth. Recovery? What recovery?
September 17, 2009


That’s a long way off, which is why San Francisco Fed chief Janet Yellen sounded more like Nouriel Roubini in this week’s presentation “The Outlook for Recovery in the U.S. Economy” in S.F.:

With slack likely to persist for years , it seems likely that core inflation will move even lower, departing yet farther from our price stability objective. From a monetary policy point of view, the landscape will continue to present challenges. We face an economy with substantial slack, prospects for only moderate growth, and low and declining inflation. With our policy rate already as low as it can go, it’s no wonder that the FOMC’s last statement indicated that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period .” I can assure you that we will be ready, willing, and able to tighten policy when it’s necessary to maintain price stability. But, until that time comes, we need to defend our price stability goal on the low side and promote full employment.”

That’s from the horse’s mouth. Recovery? What recovery?

The consumer is maxed out, private sector activity is in the tank, and government stimulus is the only thing keeping the economy off the meat-wagon. Bernanke might not admit it, but the economy is sinking into post-bubble malaise.

Anonymous said...

Recession to continue until 2012

Nobel winner Joseph Stiglitz predicts recession's end: not now, but 2012
Sam Gustin
Sep 17th 2009 at 11:40AM

Did you hear? The recession is over! Or at least it will be in the foreseeable future! And several of our leading economic sages have said so, so that makes it true. Or does it? Not when there's a prominent naysayer like Joseph Stiglitz. The Nobel-winning economist, a former head of the World Bank and now a professor at Columbia University, has a blunt -- if characteristically bearish -- warning of more economic turbulence ahead.

Stiglitz's outlook is anything but rosy. Americans must prepare for the recession to continue until 2012 -- practically, if not technically

Still, economic conditions have improved over a year ago, Stiglitz allows. "We're no longer at the precipice, but there are many bumps ahead," he says. " The couple million homes in foreclosure, commercial real estate, high unemployment, mean that some people are not going to be able to repay loans that are outstanding. The banking system is by no means out of the woods. There is reason to believe that there will be continue to be bankruptcies of the banks."

Stiglitz is particularly troubled by the continued failure of small to medium-sized banks that provide the lifeblood of capital to the country's small businesses. "That will impair the 'real' sector, and create more unemployment, and contribute to the vicious weakness and downward cycle of the economy."

Anonymous said...

People are buying houses?!! LOL!!

They say a sucker is born every minute...if suckers are buying houses let them...I will wait. As discussed earlier renting is always a better option. I have done my maths and at these rates, I will rent and wait.

Anonymous said...

That your choice to rent, keep your landlord happy :-)

Anonymous said...

The landlords have been bamboozled by the bankers… let these suckers crush under ballooning EMIs.. they are slaves of Housing Finance Companies/Bankers.

Anonymous said...

SubPrime mortgage problem has turned into SuperPrime Residential Mortgage issue...( along with Commercial Real Estate rearing its ugly head). In US the home owners having good credit history and ability to pay the EMIs, are just walking away from the houses. They know that the banks are playing the dirty tricks with them and don’t want to spend the precious life working hard to pay the cheaters.


Homeowners who 'strategically default' on loans a growing problem
By Kenneth R. Harney

September 20, 2009


Reporting from Washington - Who is more likely to walk away from a house and a mortgage -- a person with super-prime credit scores or someone with lower scores?

Research using a massive sample of 24 million individual credit files has found that homeowners with high scores when they apply for a loan are 50% more likely to "strategically default" -- abruptly and intentionally pull the plug and abandon the mortgage -- compared with lower-scoring borrowers.

National credit bureau Experian teamed with consulting company Oliver Wyman to identify the characteristics and debt management behavior of the growing numbers of homeowners who bail out of their mortgages with none of the expected warning signs, such as nonpayments on other debts.

~ With foreclosures, delinquencies and loan losses at record levels, strategic defaults and walkaways are among the hottest subjects in residential real estate finance. Unlike in earlier academic studies, Experian and Wyman could tap into credit files over extended periods to identify patterns associated with strategic defaults.

Among researchers' findings are these eye-openers:

* The number of strategic defaults is far beyond most industry estimates -- 588,000 nationwide during 2008, more than double the total in 2007. They represented 18% of all serious delinquencies that extended for more than 60 days in last year's fourth quarter.

* Strategic defaulters often go straight from perfect payment histories to no mortgage payments at all. This is in stark contrast with most financially distressed borrowers, who try to keep paying on their mortgage even after they've fallen behind on other accounts.

Anonymous said...

Anonymous 10:25 said...

The landlords have been bamboozled by the bankers… let these suckers crush under ballooning EMIs.. they are slaves of Housing Finance Companies/Bankers.

Not as simple as you say it all depends at what price the landlord has brought!!!

GK said...

Ok guys. I have decided to take the plunge. The buy is at 3200Rs psqft. Builder name is adarsh, project site at outer ring road bangalore. 50% from savings, 50% goes to EMI. For living.

In final stages on negotiation. Will be finalized tomorrow.

GK said...

Also, Some projects near ORR, bangalore like divyasree, have sold out all 3bhk. 4/5 bhk are still available with them.

Lots of resale in sobha apartments in ORR again. At 62lkh+reg for lower floors.

Newly launched ozone evergreen has sold of all 3bhk. This is more like budget apts. 2bhk basic cost comes to 20-21lkh.

Anonymous said...

The rentals are nothing compared to the EMI. The risk is not there, nor is there the headache of property taxes, maintenance and what have you...Let the Landlord worry about it..

What is the worst thing? Shifting? That's nothing compared to heart attack from EMI over head and losing jobs due to global recession.

Anonymous said...

I've decided to be a renter and maybe for a long time. I looked at the calculations and renting makes more sense in my case. I can easily rent in 1/3rd the price I pay for mortgage without any overhead expense plus the freedom to move in case of job move/layoffs.

I feel that the looking at the world scenario the RE prices may fall and maybe substantially in India as there had been no correction there so far.

Currently I'm focussing on new job skills as looking at EU and USA, there maybe many layoffs coming to Indian IT sector in the next few years. Unless US or Europe does good, the IT companies will not get money for their projects in India. Moreover, with dollar crashing, I don't know what happens if the dollar goes down a lot and Rupee appreciates. Most IT business and stock market from abroad is based on currency arbitrage. If dollar crashes, a lot of things in India are toast unless RBI also depreciates rupee.

So, renting makes more sense in the confusing world economic scenario. I'm keeping my cash and earning a handsome interest that I can live on in case of any job loss. My wife is very cooperative and supportive of all my decisions. We both are not listening to the family pressure of buying.

Anonymous said...

Dollar will not collapse because everybody is equally bad .

UK National Debt

The UK national debt is the total amount of money the British government owes to the private sector.

At the end of July 2009, UK public sector net debt was £800.8 billion at the end of July (or 56.8% of National GDP) – Source: Office National Statistics [1]

Excluding Financial sector intervention, public sector debt is £658.1 billion or (46.6% per cent of GDP)

Since 2008, National Debt has increased sharply because of:

- Economics Recession (lower tax receipts, higher spending on unemployment benefits)
- Financial bailout of Northern Rock, RBS and other banks.

Although 56.6% of GDP is alot it is worth bearing in mind, that other countries have a much bigger problem. Japan for example have a National debt of 194%, Italy is over 100%. The US national debt is close to 71% of GDP. [See other countries Debt] . Also the UK has had much higher National debt e.g. after second world war it was over 150% of GDP.


Reasons Why Dollar Will not Collapse

1. Fall against Whom?

The US economy is facing difficulties. But, so is the Eurozone economy, and Japan. It is not clear that any other country could cope with having a strong currency. US debt is high, but so is European debt. Japanese National debt stands at 195% of GDP, it makes the US look positively, frugal. The point is that although the dollar looks weak, so do most other major currencies.

2. Dollar is already weak.

Using purchasing power parity, the dollar is already undervalued against the Euro and Yen. Europe is already struggling with a high value of the Euro. If the Euro was to keep rising, it would cause further problems as the Euro economy slips into recession. This is why Gold looks such a good investment at the moment.

3. The Chinese don't want to lose All their Dollar Investments.

Because China has so many dollar assets, they have a vested interest in preventing depreciation in the dollar becoming a rout. Also, China is aware that their economy relies heavily on exports to America. They wouldn't want that source of demand to completely dry up. Therefore China would like to avoid a collapse in the dollar - not out of altruism but self interest.

Anonymous said...

I don't think US Dollar will collapse but I'm pretty sure that RE in India will collapse in years to come. Indian masses are dumb to think that these RE prices are real. With people losing jobs, salaries being slashed, IT companies not getting enough business, stock market is in a new bubble, RE prices in India cannot sustain.

The summer rally is over. The prices will come down by at least 50-60% all over. Just a matter of few years.

People(RE owners) don't have money to pay for bare essentials, how would they pay for hefty mortgages. The bankers are going to be exposed in the next 6 months colluded with the builders. A major scam of this century.

Anonymous said...

ADVERTISING BLITZKREIG

The last few days the TOI Delhi and HT have given us enormous numbers of ads for housing projects, including many fullpage ads.

Clearly builders are trying to capitalise on the end of Shradh and the start of festive season.

I am willing to bet that the news is going to be full of how the recession is over, how this is the best time for RE, how prices are going up next month etc.

It is clearly a big advertising push by the RE companies to hook buyers. Better watch out and bargain hard.

Clearly, the huge ads which have come out - there are not enogh buyers for so many. There is a glut of new project being announced.

On the other hand, many friends and relatives are actively looking to buy in Delhi NCR.

I guess by November December we will know whether the customer took the bait or not. Or whether all these projects will fill 10% orders only and then get put on the back burner.

Venkat ND

Anonymous said...

I'll be happy to see many people buy. The more the people buy, more it will add to the bubble and sooner it would burst even after Govt. stimulus and builder/banker cartel strategy.

I would be happy to see a lot of people who are buying now and all who bought in the bubble cry later and go bankrupt. This is how they would learn a lesson. And it would take at least 10 years for them to come out of this massive loss in RE.

Anonymous said...

The foreign ad infinitum tap of finances has run dried for the Indian Real Estate Developers. Let the gamblers ( developers, brokers, bankers, politicians and IT Techies) buy and sell the homes among themselves to prop up the market. Please dont disturb them.

When your enemy is making a very serious mistake, don't be impolite and disturb him. — Napoleon Bonaparte

With the second inning of recession due to misguided monetary and fiscal expansionary policy in full rage, it is only a mater of few days when the Great Indian Real Estate Bubble gets burst.

Just check what is happening with the economies of the advanced world.

Public debt hits £800 billion - the highest on record

September 19, 2009
Public debt hits £800 billion - the highest on record


Britain is clocking up debt at a rate of £6,017 per second as the Government struggles to balance the books. With tax receipts plummeting because of the recession, state borrowing grew by £16.1 billion last month — almost twice the entire budget for the 2012 Olympics.

Net borrowing for the first five months of the financial year stood at £65.3 billion, compared with £26.1 billion at the same stage last year. Total borrowing soared past the £800 billion mark for the first time and total state debt as a proportion of national output reached 57.5 per cent.

Just to pay the interest on its ballooning debts the Government must find more than £30 billion a year — about £500 for every man, woman and child in the country.

The figures from the Office for National Statistics (ONS) show that tax receipts in August dived by 9 per cent compared with August 2008, while public spending rose by almost 3 per cent. The widening gulf was bridged by borrowing. Spending on benefits grew by £900 million to £13.5 billion as unemployment soared.

Taking fright at the figures, foreign exchange dealers sent sterling diving to a four-month low against the euro. The value of the pound fell by more than 1 per cent against the dollar.

Anonymous said...

The masses in India are crying over prices of daal and rice and inflation and some idiots here are talking about buying crores of flats.

When it comes to food and energy, people can't afford and they call it inflation. When the house prices triple in value from 30 lacs to 90 lacs, everyone is quiet. WTF.

Inflation is inflation, the CPI index looks at housing values or not.

Anonymous said...

Vik -

Guys you have missed the important news...

http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=5269

Please make this as post; we will like know the views of BB like.

Kannan

Anonymous said...

GK -

Adarsh at palmretreat at ORR is land dispute. My friend is stuck with it for the last 3.5 years. You cannot register your property.

Kannan

GK said...

Kannan,
Are you sure about it? They have huge land area. Any idea which are all under issue? In fact heard that adarsh sold the nearby land to intel. I have not yet checked their papers yet.

One of my team mate had brought it during launch, and was telling me that he has not registered yet. And the reason he was telling was due to possession delay. And I already seem few families living there.

Anonymous said...

I wanted to ask few specific questions to experts on this forum. Your help is much appreciated. I am considering buying a builder floor in South Delhi but after seeing many options I have few doubts on the legality of some of the properties I have seen. Brokers tell different stories on these questions based upon the inventory they have and inventory they want to push out. Following are few of the property types that I would like to seek your opinion on.

1) 500 Sq Meter plot has 4 dwelling units on each floor. All of them are registered and are freehold. I have seen their separate electricity meters as well. This building does not have 3rd floor so no issues there. But is it legal to build so many dwelling units on a single floor?

2) 160 Sq Yard plot and having single dwelling unit on 3rd floor. It is again freehold and registered. Is it legal?

p.s. The rates varies between 5000 psft to 8000 psft depending upon construction and location (in GK, CR park, East of Kailash)

Thanks in advance

Vik said...

Your best bet is to contact a lawyer and get the papers verified and validated. There are a thousand crooks in this business and before you spend one paisa of your hard earned money, ask a lawyer his legal opinion. As for the prices vis-a-vis location, GK seems good at 5000.

Anonymous said...

GK -

I am sure about that. Please join the yahoo group set up for Adarsh Palm meadows and read the mails.

One advice to all who like to buy now.... Join the yahoo groups of the respective projects. There is one for every project...because suckers now more educated and work in new economy companies.

You can read all the emails..do it before buying it. I am part of almost all bangalore's big projects.Its really interesting.

Kannan

GK said...

Thanks kannan.
I searched for the palm retreat yahoo groups. And found only tower 2 group. Do you have the link for tower 1 or for the project in general?

Anonymous said...

http://in.groups.yahoo.com/search?query=adarsh+palm

Anonymous said...

check out this link for latest pricing index throughout mumbai--

http://www.housingprices.com

Anonymous said...

Check out this link for latest pricing index in mumbai reality business --

http://www.housingprices.com

Anonymous said...

Thank you Vik,

5000 psft is only for 3rd floor in CR park (of not so well construction). Minimum for GK I found is 6500 psft which still is a good deal (but you will have to put up with no parking, congested space and so on and on this particular property no bank loan).

GK said...

kanan,
I am not sure about ur data. I just joined "adarshpalmretreat_blr" and could see multiple people completed registration for tower1 of pal retreat. So what are issues you are talking about?

if possible can you mail me?

shailesh said...

Well it seems there are lot of plans for mumbai on paper.

THE “TRANSFORM” PROJECT

Venkateswaran K Iyer said...

anon@6.06

5000 or 6500 psf is too low - suspiciously low for GK2/CR Park/ EOK. Should be more like 10,000 - 15,000 depending on the quality of construction, colony road size etc, for 1800 sf builder floors.

Is it on regular plot or lal dora adjacent to the colony? If banks are not lending, that is also a danger sign - most likely it is a lal dora property without clear title and without proper permission.

At 5000 Rs you cannot even get a DDA flat in the region.

Venkat ND

Anonymous said...

Adarsh Palm Retreat

http://indiahousingbubble.blogspot.com/2007/05/unscruplous-builders-in-bangalore.html

GK - I will give you the details. Hold on till tomm.

Anonymous said...

HUL to sell 7 residential properties in Gurgaon, Mumbai

http://www.livemint.com/2009/09/22163403/HUL-to-sell-7-residential-prop.html?h=B

New Delhi: FMCG major Hindustan Unilever has put up a total of seven residential properties for sale in Mumbai and Gurgaon, which could fetch around Rs35 crore.

The company has made public announcement that it is selling five residential properties in Mumbai’s prime locations of Cuff Parade and Vile Parle, which includes four two-bedroom and one three-bedroom flats.

The total saleable area is around 6,796 sq foot. As per real estate consultants CBRE’s property price estimates of these localities, these residential units could together be worth around Rs28 crore.

HUL is also putting on block two residential plots at Gurgaon, which has a total area of 840 sq metres.

As per market estimates the minimum price for plots are estimated to be Rs2.5 crore each.

Query sent to the company seeking details of the property sale remained unanswered.

The company, however, had earlier said that it may sell some of company-owned properties in Mumbai to unlock business value.

HUL is understood to own around 25 residential properties in Mumbai’s prime locations, including as Malabar Hills, Church Gate and Andheri.

**********

I dont know why they are selling now...Mumbai and NCR is going to go up another 100%..in 2 years.

BB - Looks like good oppurtunity for you to buy.

IMF Guys are selling gold when the entire india is buying gold... Looks like everyone except Indians have become nuts...out of mind. :))

Kannan

Anonymous said...

Kannan:
India has for sure gone nuts. They need some more time to get back to senses. And a good bashing by a market fall would correct the insanity.

Anonymous said...

I am a bear but i cannot fathom how long the patience of bears like us will withstand. The prices have honestly not reduced so the point saying now is the time does not hold good. while prices have shot up it has not fallen down. I am seeing the patience of many bears like me withering off. I believe i can withhold for another coupla years. then i gues si have to partake my hard earned money for a dingy place. I believe i would have two options then , the dollar could have devalued so much that settling in US would make more sense though i dont want to. else i might have to go to a smaller town which has not seen the price rises as seen in chennai bangalore mumbai or NCR. The job opportunities might not be there but i guess a decent schooling system and medical infrastructure would be present. will not pay 4500 per sq.foot for a place with no proper roads, sanitation and electricity. it is such a shame that though we have the money we are not able to purchase a decent place to live. talk about india being a place to live. my foot !! wish the RBI and their crony bank network have the balls to demand repayment of debt from the builders. unless that happens the inevitable is going to prolong as much as it can .

Average Middle class Indian Buyer

Anonymous said...

U.S. mortgage delinquencies set record

Mon Sep 21, 2009 12:29pm EDT
By Nick Zieminski

NEW YORK (Reuters) - High U.S. unemployment keeps pushing up the rate of mortgage delinquencies, which could in turn drive personal bankruptcies and home foreclosures, monthly data from the Equifax Inc credit bureau showed on Monday.

Among U.S. homeowners with mortgages, a record 7.58 percent were at least 30 days late on payments in August, up from 7.32 percent in July, according to the data obtained exclusively by Reuters.

August marked the fourth consecutive monthly increase in delinquencies, and the report showed an accelerating pace. By comparison, 4.89 percent of mortgages were 30 days past due in August 2008, while in August 2007, the rate was 3.44 percent, Equifax data showed

The rate of subprime mortgage delinquencies now tops 41 percent, up from about 39 percent in each of the prior five months

rajni sharma said...
This comment has been removed by the author.