Wednesday, November 18, 2009

RIL mulls entry into low-cost housing

After successfully dabbling in organised retail in 2006, Mukesh Ambani, chairman of India’s largest private sector company, Reliance Industries (RIL), has now set his eyes on no-frills, low-cost housing.

RIL holds a land bank of 5,000 hectares in Haryana through Reliance Ventures, a subsidiary of RIL created by forming a joint venture with Haryana State Industrial Investment Development Corporation and over 4,840 hectares through the Navi Mumbai SEZ, in association with Cidco (the Maharashtra government’s industrial and township development arm).

“RIL is sitting on a huge land bank with regard to its special economic zones (SEZs) in various locations. It could be putting that to commercial use for mega housing projects in the no-frills category,” said an analyst from a Mumbai-based broking firm who tracks RIL closely.

“Entry of corporate houses like RIL will be good for the market, as it will uplift the real estate sector into an industry. Every business house that enters the sector, be it Godrej, Mahindra, Piramal, Tata and now RIL, will help in making the procedures in the sector more transparent,” said Rajeev Talwar, Group Executive Director, DLF.

Article link


shailesh said...

'India needs Rs 3.6 lakh cr investment in housing in 5-yrs'

"Over the next five years, we need 26.5 million additional housing units, investment requirements of over Rs 3,60,000 crore and need to re-house 62 million persons who live in urban slums," HDFC, Joint Manging Director, Renu Sud Karnad, said at a function here.

Observing that action in the real estate sector is decisively shifting from the metros to the smaller cities, Karnad called for increased commitment to the housing sector from the market participants.

"We have to seriously question ourselves about our commitment to housing. We are indeed faced with a series of great opportunities brilliantly disguised as impossible situations, but we should not give up," she said.

Anonymous said...

I think there is an oversupply already in the Indian housing market. It is just that the prices are too high that normal people cannot afford.

These low cost housing is not going to solve much unless the price of high priced RE comes down by 60% or so. Otherwise this low cost houses would be selling at same high prices in a few years and would again become unaffordable to masses.

I think India has yet to see the reality of what US has done to the world economy. And when that unfolds, all this talk about low cost housing will disappear as soon as the prices tumble of the existing inventory.

I drove around a lot of new developments around Delhi and Mumbai. Just by looking at the parking and lights in the flats, the occupancy rate seems to be even less than 30%. If they build all these low cost housing, it will crash the RE in India badly. Moreover, it could be just a way by Tata's and Reliance to raise money from public as they will not complete the projects in the next 5 years at least.

Anonymous said...

FHA, Prime Mortgage Defaults at Record Highs on U.S. Job Losses
By Kathleen M. Howley

Nov. 19 (Bloomberg) -- Foreclosures on prime mortgages and home loans insured by the Federal Housing Administration rose to three-decade highs in the third quarter, driven by the biggest job losses since the Great Depression.

One out of every six FHA mortgages was late by at least one payment and 3.32 percent were in foreclosure, the highest for both since at least 1979, the Mortgage Bankers Association said today. The delinquency rate for prime fixed-rate mortgages, considered home loans with the least risk, rose to 5.8 percent and the foreclosure inventory rose to 1.95 percent.

Job losses are driving homeowners to fall behind on mortgage payments and declining home prices mean many of them can’t pay off the loans by selling properties, said Jay Brinkmann, the Washington-based trade group’s chief economist. U.S. companies have eliminated more than 7 million jobs since December 2007, the biggest contraction since the Great Depression in the 1930s. The U.S. unemployment rate jumped to 10.2 percent in October, the highest since 1983.

shailesh said...

When MBAs aspire to become clerks

There are 300 applicants for each clerical post at SBI [ Get Quote ], mostly engineers/MBAs, for a job that just requires a Class 12 qualification, says Shyamal Majumdar.

The server of State Bank of India (SBI) crashed last year when two million candidates applied for 20,000 clerical posts. The written examination had to be conducted over four shifts as the bank just could not find enough venues where the tests could be held.

A year on, the country's largest bank faces an even bigger dilemma. It has 11,000 clerical posts on offer, but has received 3.4 million applications. That's about 300 applications for every vacancy.

Shriniwas K said...

Shirdi Waaleee ... Saai Babaaaaa ...

shailesh said...

A likely revival in the real estate sector could well be jeopardised because of the irrational exuberance of builders. There are others concerns too. It is likely that from next year, the first instalments of restructured debt of most of these builders would become due. According to RBI data, there was a 55% year-on year (y-o-y) growth in August 2009 in bank loans to the realty sector compared to the 46% y-o-y growth in August 2008.

It is this huge exposure to the high beta sector that led RBI to increase provisioning norms on realty loans by banks. Developers will need to ensure that cash flows are sufficient to service their debt. That will call for a focus on increasing volumes and not prices.

Not too long ago, property registrations rose by 20% starting March 2009. The growth continued at a monthly average of 7%. However, builders seem to have got carried away and misread the pent-up demand with the result that price started to rise in August 2009. The impact was felt immediately — a 13% drop in flats registered in August. The trend continued in September. The decline was attributed to ‘pitr paksh’, a period considered inauspicious for buying homes. However, with October being no different, it is clear that the going will not be easy for the realty sector.

Anonymous said...

Stupid Shailesh

360,000 Crore for 26.5 million units
This means each unit for Rs 1,35,000 .

Are you going to give them 7' by 5' rooms.?

Or Alternately it means there is huge margin in building flats.

Anonymous said...


After reading a lot of your posts, I looked up the BSE Realty Index and looked at the top 4 companies in terms of index weightage.

DLF (50% weightage!) Price/Earnings = 185 and Earnings/Share = 2 rupees!!

Unitech Price/Earnings = 67 and Earnings/Share = 1.22 rupees!!

Indiabulls Price/Earnings = 607 and Earnings/Share = 0.37 paise!!

The only outlier seems to be HDIL. But then I remembered HDIL being raided by Tax Authorities, which was immediately hushed up. So, like Satyam if you declare false earnings you need to pay taxes on those false earnings and if you do not have the earnings, how will you pay taxes for those false earnings? So HDIL seems to be a fraud...

But all the other Real Estate Companies practically have no earnings!!! Which means no one is buying and their Balance Sheets show a lot of the "other income" category, which means that their earnings if any is through non-real estate sources (like lending or investing etc..)!!!

The PE's are phenomenal...they are all phenomenally overpriced, after they have fallen so much. It looks like the Real Estate sector is mostly hot air!!

Anonymous said...

Nov. 20 (Bloomberg) -- Asian policy makers are studying capital controls to limit “hot money” inflows that may stoke asset bubbles and force their currencies to appreciate.

Officials from India, South Korea and Indonesia are among those expressing concern over overseas capital stoking stock and real estate prices. Indonesia’s central bank is “seriously” studying a limit on inflows to short-term bills, Senior Deputy Governor Darmin Nasution said yesterday. Taiwan last week banned international investors from placing funds in time deposits.

Anonymous said...

India may take steps to slow capital inflows if foreign investment surges, Finance Secretary Ashok Chawla said yesterday. Policy makers may set a limit on the amount of money that local companies can borrow from abroad, the Economic Times reported, citing a Finance Ministry official it didn’t name.

Foreign funds purchased a net 732.5 billion rupees ($15.77 billion) of Indian stocks this year, after being net sellers in 2008, sending the rupee 4.7 percent higher and hurting sales at exporters including Gokaldas Exports Ltd.

Anonymous said...

By: Gene J. Koprowski Article Font Size

Asset prices have risen dramatically during the last six months, much like housing prices appreciated during the last decade, raising alarms that a crash could be coming in the equities market, writes economist Robert Samuelson.

Writing in Newsweek, Samuelson reckons that since March 9 the U.S. stock market has climbed by more than 50 percent. This is nothing short of a speculative frenzy, not based on underlying economic fundamentals, he says.

“An index of stocks for 22 emerging market countries — including Brazil, China and India — has doubled from its recent low. Oil at about $80 a barrel has increased 150 percent from its recent low of $31,” he writes.

“Gold is near an all-time high around $1,090 an ounce. Meanwhile, the dollar has dropped against many currencies. Haven't we seen this movie before?”

shailesh said...

Anon 4:42:

I agree with your analysis completely. Some of my posts are generally just links to News articles. So not my views / opinions all the time.

Though I buy decent amount of India's growth story, but there is lot of hype in media. Esp. lot of Re articles are basically being pushed by hidden interests.

Indian have traditionally high attractiveness toward Real Estate. None of the property I have looking in last few years make any sense from pricing perspective. Just last week some agent told my in-laws, prices for 1 bhk in Andheri east for 50 lakh. You can rent the same place for 15K per month. All sound financial basically thrown out of window. I think one has to pretty much wait for few years before reality will set in.

shailesh said...

Speed at the cost of salt pans

MUMBAI: The Mumbai Metropolitan Region Development Authority (MMRDA) has already started work on the 22km Eastern Freeway that will connect Fort in south Mumbai to Ghatkopar on the Eastern Express Highway. However, in order to complete the project - the deadline for which is July 2011 - the development authority will have to first get permission to acquire a 700-meter stretch of salt pan land along the Port Road near Sewri. This land is home to migratory birds including the flamingos.

According to them, a presentation has been submitted to the salt commissioner at Jaipur who has forwarded the proposal for clearance to the Department of Industrial Policy & Promotion. "We expect to hear from them soon. We have started the process of land acquisition, in anticipation that we will get the clearance," said Kawathkar.

WTF!!! We have Salt Commissioner !!! What needs to be his job qualification, select the best salt?

Anonymous said...


I am about to close a deal in

Saraswati Apartments, Madhu Vihar,
Patparganj, Delhi.

It is a 3 BHK Flat in high rise society. Owner is asking for 80 lakhs, me insisting on 70. Both of us have decided to keep brokers out of this deal.

Anyone familiar with the area please let me know their valuation of the flat.

Thanks in Advance

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