Saturday, February 14, 2009

ICICI CEO and DLF talk price corrections

Looks like the banks are exerting pressure on the builders to dispose off inventory and pay their debts. DLF has slashed prices of its Bangalore Bannerghatta road prices to Rs 2000 per sq/ft.
Now with Banerghatta road at 2000rs, what should be the prices in Whitefield, Devanahalli, Electronic City all peripheral locations to Bangalore. With DLF starting a price war, the small builders will be squeezed to liquidate their holdings. Brigade, Prestige and Sobha might have the holding capacity to wade thru the DLF marketing blitz. Incidentally DLF did the same in Chennai for its project on OMR road. However even after 1 year of booking, there is hardly any construction activity on that project. Incredible as it sounds, the price of thin air is still Rs 2000 rs. Realistically this concrete jungle of G+19 floors should take another 4 years to complete. God save the investors.

Reuters reporting.

India property prices need to fall 20 pct or more-ICICI exec

MUMBAI, Feb 14 (Reuters) - The incoming head of India's largest private bank ICICI Bank (ICBK.BO) said real estate prices needed to fall by 20 percent or more as the market corrects amid the economic slowdown, the Times of India reported on Saturday.

Prices need to fall by "maybe 15-20 percent, or maybe more", Chanda Kochhar, who is set to become chief executive of the bank, was quoted as saying.

"Piecemeal corrections have already happened ... But they also need an adjustment in the paradigm."

Kochhar said there was no pressure on the bank's books from souring housing and auto loans.

"Maybe a little delayed, but there is no real increase in losses or non-performing assets," she said according to the report. "But we have not only substantially tightened credit norms there, we have also budgeted for any losses that may arise there."

She added interest rates and loans were expected to fall. (Reporting by Ruchira Singh; Editing by Jan Dahinten)

Wednesday, February 11, 2009

Al-Jazeera's coverage of the Indian housing bubble

Unfinished projects, shattered dreams, uncertain future, rampant greed, no accountability. This is what I was afraid of. Parsavanath and others builders need to take a lesson from this crash. Gravity is universal. In the credit unwinding spiral, there is the genuine buyer who is going to pay the price for the greed of the few. Lesson to be learnt for buyers. Go with completed projects and haggle hard. This is your time. Any investment in a project which is kicking off or half completed is destined to drag longer then you ever expected.

Here is Parsvanath's pricing At $400k per apt, at Rs 7000 per sq-ft, this is a price headed for a 50% correction in the next few years. I hope the couple hasn't take loans. If they have they will be bleeding pre EMI interest of close to 1.5L a month, not to mention the EMI interest which will kick in. This is a real life scary situation. God save these guys.

Thanks to Anon @ 9:34 am for the link

Monday, February 09, 2009

DLF feels the heat of CNBC's coverage


CNBC-TV18 learns that the company's Garden City project in Chennai is on shaky ground. CNBC-TV18 has access to e-mails of buyers of the project, including an online survey showing that over 50% of them want to pull out. The company started bookings last April and promised to sign the agreement within 45days. But nearly one year later, the project has not even got the necessary approvals.

Of the reported 1800 apartments sold in the project, nearly 53% of buyers want an out according to the survey citing delays in signing the buyers agreement. Other reasons including cost price, which DLF had hoped would be their USP has also gone against the company. At the
time of announcing the project DLF had quoted prices of 2800 per square foot, while the prevailing rates was around 3300 square foot. The prices now average between 1700-2700 per square foot and buyers are demanding that the company revise prices.

The final approval required is the stamping of the drawings by MSB panel. The panel meeting was completed on Jan 28, 2009 and we are expecting the final stamping approval anytime now. The price of Rs 2,800 per square foot is in itself the lowest price compared to prices charged by leading national and local brands and we are discussing this with an open view and are yet to take a decision.

When contacted, a DLF spokesperson said, ”The final approval required is the stamping of the drawings by MSB Panel. The panel meeting was completed on 28 Jan 2009 and we are expecting the final stamping approval anytime now. The price of Rs 2800 per square foot is in
itself the lowest price compared to prices charged by leading national and local brands. We are discussing this with an open view and are yet to take a decision.”

There are other issues as well; buyers want an Undivided Share Land clause to be signed by the company. Also; clubhouse facilities, which DLF claimed were exclusively for buyers' use, is now being thrown open to outsiders as well.

What are the options now available to the buyers? A minority section of say they might just re consider their decision to pull out if the company meets their demands. The others though say that they want their money refunded and have given the company till February 12 to do

Sunday, February 08, 2009

Hiranandani Faces Penalty, Denies MMRDA Violation Claims

How many thousands of crores have been paid to the politicians and babu's for this scam to go unnoticed for 23 years. It will be naive to think, Hirananadani is going to accept these acccusations without bringing down the house. These same allegations should be levied on the Raheja's for selling Jodi flats in the Malad(w) link road area where they have destoryed all the mangroves. These scams are part of the Indian scenario and nothing will be learnt. The Satyam case provides enough evidence that whistle blowing on these scams are just lip service to further personal agendas. The Indian legal and political system is of the rich, for the rich and by the rich. All the common man can do is to be vigilant and aware and not get caught up in this cesspool of corruption. In the past some reports have suggested Hiranandani was given the Powai land at 40 paisa per sq ft. The government officials who approved this paperwork should be prosecuted before Hiranandani. If someone approves such a deal, any moron with an iota of grey matter will take it. Why blame Hirananandani for a ultra ineffecient corrupt system ?

By ugesh sarkar, Section Real Estate
Posted on Thu Feb 05, 2009 at 09:38:36 PM EST
In what could be the highest penalty imposed on a builder for alleged gross violation of land misuse, the Mumbai Metropolitan Region Development Authority (MMRDA) has recommended to the state urban development department that developer Hiranandani Group be made to pay a penalty of Rs 2,000 crore. Though the developer is yet to receive a notice of levy for the amount, Niranjan Hiranandani, MD, Hiranandani Group, has denied the charge in totality, stating that the state agency was unaware that no development in the area had been done without obtaining the necessary permissions and sanctions of government departments.

Meanwhile, the metro authority has charged the builder with constructing large apartments instead of the 40 sq m and 80 sq m flats, for which permission was accorded. The second charge is for building commercial complexes in violation of the original agreement and the third, an add-on penalty component, for utilisation of transfer of development rights.

Hiranandani said development rules and notifications, since the 23-year-old Powai Area Development Scheme, comprising 92.2 hectares, was signed, had undergone changes and consequently implemented after sanctions during different periods. The MMRDA has used the current ready reckoner rates to compute the alleged violations to arrive at the penal sum of Rs 1,993 crore.

The Powai Area Development Scheme was not classified under any scheme for weaker section / lower income group of the society, he said adding that a Bombay High Court decision in 2005 stated that the development at Powai was not for any weaker section / lower income group of the society and the same does not apply to the said lands.

On increase in the size of tenements, Hiranandani said the scheme came after a tripartite agreement was signed on November 19, 1986. Under the agreement, there was a condition restricting sizes of the tenements. However, the MMRDA permitted the amalgamation of tenements as per its order dated August 18, 1989.

The larger premises were constructed utilising transfer of development rights subsequently, when the TDR concept was introduced in 1991. During the period when the tripartite agreement was executed, the development by TDR was not available.

The Bombay High Court is hearing public interest litigation petitions pertaining to the project development.

The MMRDA has also recommended that all concessions extended to the builder be withdrawn, to which Hiranandani said he had not availed himself of any concessions thus far.