Saturday, September 26, 2009

Morons of the world unite.

Here we go again. Its start of the hype season for the builders and they are sparing no effort. Here is an article on on such outlandish super luxury apts. There is no mention on who the buyers are, what is their profession, are they using banks to finance loans or how much black money is used to finance these homes. All the hype is meant to persuade the middle class buyer so they can jump back into the market and take loans to buy apts in far flung suburbs. Who the hell cares if there are 1000 people in Mumbai who buy apts priced over 10 crores. Most readers of rediff hardly make a fraction of that. What are these moronic idiots trying to present to the reader ? There could be 10,000 people in a city of 20 million who can afford these apts, what about the 19.999 million people who living in Slumbai ? If you agree with me just post a comment in this section. I will then point this to rediff and let them know that we are not stupid.

Mr. Deepak Parekh, Chairman, Housing Development Finance Corporation (HDFC)

Developers committed a number of mistakes. The first was that they increased prices too much, too soon. Since sales volumes were strong, all developers across the country felt prices should be increased, even though many of the projects were on legacy land parcels. Developers kept raising prices to a point that went out of reach of even the upper class. The second, and more damaging, mistake was that they committed to buy land at exorbitant prices. Developers rushed to buy land as if there is no tomorrow and land is in short supply. Without tying up the necessary funds, developers bought land at unbelievable prices at auctions across the country. There was intense competition to buy land. The government was also increasing prices at each auction. Commercial plots of land in Bandra-Kurla Complex went as high as Rs30,000-35,000 per sq ft. If you add on three years of interest (as buildings take that long for construction), it is just too high. The third mistake was that developers refused to sell stocks that they held as they thought prices will only go up.

All three factors were due to greed—aimed to make quick money and more money. All these could have been avoided if we had a real estate regulator, for which I have been asking the government for a while. We have a regulator for the petroleum ministry and for civil aviation. But we are reluctant to have a regulator for real estate. Agreed that it is a state subject, but the industry needs to be regulated—in good times, you will notice that developers made a lot of money, but their balance sheets were still heavily leveraged. When RBI prohibited banks and housing finance companies (HFCs) from lending against land, developers went overseas to borrow money. Most of the deals were structured as cumulative convertible preference shares (CCPF) and generally carried very high rates of interest. These were convertible into equity in 2-3 years, and developers intended to repay the face value before conversion. Since these structures were categorised as equity, they came under the automatic approval route. Developers utilised these borrowings to purchase land. So, real leverage on developers’ balance sheet was very high.

Mr. Deepak Parekh, Chairman, Housing Development Finance Corporation (HDFC)

Tuesday, September 22, 2009

HDFC Rate cutter offer

In the mortgage business the more you know the better it gets. Ignorance is definitely not bliss.
HDFC has comeup with a scheme called "Rate cutter" for the existing Loan customers . In this ,if you repay 0.5% of the outstanding principal, your interest will come down to 9.5 irrespective of your present rate. If you repay 1.5% , then it comes down to 9%.
There is a huge win for everyone since the differential payout could be in the 30k-50k range but the interest savings are in the lakhs. I have no idea why they don't publicize this but some friends have benefitted from this and are very happy. Hope more folks benefit. Also check with your local bank to see if they are able to match this offer. Enjoy and spread this news. This Diwali is definitely going to good for the HDFC loan borrowers. Kudos to Deepak Parekh for this.