Saturday, December 12, 2009

Hyderbad real estate set for steep fall

As speculators abandon their bets, end-users will finally get a chance to realize their dream of owing their own house. Investors with multiple properties better bail out now, else risk a steep erosion in prices. Times of India articles normally try to spin any story towards a bullish angle, however this time they are helpless.

Hyderabad's real estate sector was in a state of shock on Thursday, just hours after the Centre conceded to the demand for a separate

Telangana state. Speculating that the move would further dampen the already crippled industry, realtors were seen making their own calculations about the future of their business in the city. Apart from a few optimistic voices, most realtors opined that the T decision would spell doom for real estate in Hyderabad and result in a steep fall in the property value.

"We will go back at least by five years in terms of growth," said Khaja Asif Ahmed of Stellar Project Management Consultant, adding, "It will take at least two to three years for the political unrest to settle and till then no investor from outside would put his money here." According to his prediction, the industry, which is still battling the recession ghost, is set to hit a new low over the next few months.

City realtors say that Hyderabad, as part of Telangana, would also disrupt the flow of sentiment-driven investments. "So far people from all over the state invested in Hyderabad because of its status as the capital of Andhra Pradesh. But if it becomes part of Telangana, people would think twice before picking up property here," said a Kukatpally-based realtor Madhusudan admitting that it would indeed be a long haul before the sector gains momentum. "Until a clear separation takes place, there will be no new investments," Madhusudan said.

A common sentiment that seemed to be riding high among most players from the sector was that of ‘protecting Hyderabad' from the turmoil by declaring it as the joint capital of two states. "Our fear of stagnation in transactions (purchases) can be best addressed through this move. That way the value of properties in the city would remain unaffected and investors too would feel secure," said Ashwin Rao, director, Primus Developers. Though Rao is one among the few optimistic builders who feel that the industry would be back on track, only after an initial glitch of a few months, he says that the common capital stand would be ideal to arrest the slump in the realty business.

No new skyscrapers in Mumbai till water project is completed

The Mumbai real estate market, which is just about getting back on track after the economic slowdown, is now headed for a bigger crisis.

With the city facing acute water scarcity, the Maharashtra Chief Minister, Mr Ashok Chavan, told the winter session of the Assembly at Nagpur that no new skyscrapers will be permitted in Mumbai till the Middle Vaitarna Project is completed in 2012.

This is the largest water supply project being built to meet the city's ever-increasing demand for drinking water. However, real estate projects that have been accorded permission would be given water. The city gets about 2,900 million litres a day against a demand for 3,500 MLD.

The Government move would mean that revenues from stamp duty and development charges would take a hit. Besides, the move would also hurt the finances of developers who had invested considerable sums to acquire land and begin construction. It would also adversely impact home-buyers who had got loans to purchase property. And, in an already skewed demand-supply scenario, the Government action could further fuel demand and raise property prices as well.

Mr Sunil Mantri, President-elect, Maharashtra Chamber of Housing Industry, said it would be utter chaos if such an order were implemented. Apart from the commercial and residential projects, there were slum redevelopment projects as well. Development should not be halted and in case there was no option, one should consider total dependence on water tankers and borewells.

As it stands, 25-30 per cent of the city depended on tanker supplies. Mr Mantri said the chamber would appeal to the chief Minister to rescind the order in the larger public interest.

“We have to learn how to manage the crisis. Recycling and water harvesting could help at such times,” said Mr Abhisheck Lodha, Director, Lodha Group.

Mr Lodha said since the Government intention was to curb new constructions, residents might not require more than six-nine months' supply from alternative sources, given the construction period of around two years for projects. “In any case, a good monsoon next year could change the entire scenario,” he added.

Mr Mayur Shah, Managing Director, Marathon Group, said there was hope as the Government was working on a lot of water projects. Any impact of the proposal would be temporary and a good monsoon could change the tide.

Water storage and distribution are key issues that needed to be managed better, said Mr Anand Gupta, General Secretary, Builders' Association of India.

Mr Gupta said since the 15 per cent water cut came into force construction work in Mumbai was being done with tanker supply and borewells. However, the Government stood to lose revenue in terms of development charges and allied income associated with construction activity. It could also create financial tangles as both developer and home buyer would have availed bank loans. Moreover, it could leave thousands of construction labourers jobless after the existing projects got over.

Charging that storage and distribution were major bottlenecks in the current water supply system, Mr Gupta said the Government should look to entrust the job to private players if it is unable to manage it effectively on its own.

Thursday, December 10, 2009

Telangana effect on Hyderbad real estate

After the Satyam/Maytas fiasco, the crisis surrounding the bifurcation of AP and the creation of the state of Telanagana could be nail in the coffin for speculators in the Hyderabad real estate market. It is interesting that speculators will now swing towards Vizag, Vijayawada and Warangal as they exit the bubbling Hyderbad market. Land prices in Hyderbad have quadupled over the past 4 years but it appears that the T-factor has pricked the balloon faster then expected. Investment is never without risk and this has been proven yet again by the surprise events which can bankrupt even the savviest investor.
Here is a Times of India article which reports 20000 crores been invested in Hyderbad real estate by Rayalseema/Coastal Andhra politicians. I wonder where do they get these numbers from. Is there a survey carried out by Times which queries each politician and then adds up the figures ? So from the looks of this article it appears that politicians only care about real estate in Hyderbad, Telangana or AP doesn't matter.

Hyderabad Blues
A question of a Telangana without Hyderabad, those from Andhra and Rayalaseema declared the current state capital was common property and should be declared an Union Territory. The demands are based on a complex mix of political, emotional and material logic. Many politicians from the other two regions have invested heavily in property in and around Hyderabad including the ritzy Jubilee Hills, Hi-tec City and Shamshabad, areas where the outer Ring Road and new international airport
have come up and jacked up realty. Of the 23 AP districts, 10 are in Telangana, nine in Andhra and four in Rayalaseema. For the Telangana supporters, Hyderabad is the heart of the region and can never be given UT status. "By right, Hyderabad deserves to be the capital of the new Telangana state. Historically, all the Telangana districts have actually been part of the erstwhile Nizam-ruled state of Hyderabad of which the current city was the epicentre. If Hyderabad is shared with people of the other region, then the heart of Telangana is will be taken away," said one Congress leader from the region. Another reason for the Telanganites' opposition to Hyderabad being made a UT is lack of contiguity with other regions. "The state capital is surrounded completely by the Telangana districts. Therefore, for the people of Andhra and Rayalaseema regions, Hyderabad can never function as an administrative capital," said the leader. Those clamouring for UT status for Hyderabad base it on the cosmopolitan nature of the city. "To preserve its cosmopolitan character and accelerate its growth as an hub of IT, biotech, pharma and other emerging technologies, it has to be made union territory....The demographic profile of the city has changed tremendously over the years and today the native inhabitants constitute only a modest percentage with those from the other two regions, different states of India and abroad forming the majority," said BC welfare minister M Mukesh Goud in a letter to Congress president Sonia Gandhi on Wednesday, in which he urged her to declare Hyderabad as UT. But there are more material reasons for seeking UT status. Goud, who wrote the letter, is from Hyderabad. Health minister Danam Nagender, who also is an advocate of Hyderabad as Union Territory, is also from Hyderabad. According to sources, several ministers from the Andhra and Rayalaseema regions have invested in property worth crores of rupees over the last decade or so in and around Hyderabad. "They stand to lose heavily in case Hyderabad is retained with Telangana as property values are bound to fall," said an observer. Interestingly, when the Telangana issue was raging three years ago after TRS president K Chandrasekhar Rao parted ways with the Congress and launched an agitation, there was not much of a demand for Hyderabad as Union Territory. "That was because the real estate business was booming in the state and efforts were on to build a new capital for the divided Andhra state in the Mangalagiri-Guntur-Vijayawada region. Therefore, leaders of these regions had no objection to Hyderabad remaining part of Telangana. But after the real estate bust, the Andhra and Rayalaseema leaders re-invested heavily in and around Hyderabad. Their total investments here would be more than Rs 20,000 crore," said one politician in the know. As a result, the fight for Hyderabad is set to be fiercely contested. But with the Andhra regions up in arms a day after the Congress gave the green signal for Telangana, the Rosaiah regime tottering and the possibility of the assembly passing the resolution on Telangana becoming difficult, the fight for Hyderabad may just recede into the background for the time being. But it is sure to be raked up when Telangana inches towards becoming a reality.
Hindu reports
IT professionals worried over Telangana developments

Hyderabad, Dec. 10
The Chidambaram statement on the formation of Telangana State on Wednesday night created ripples in the IT industry in Andhra Pradesh.
The subject turned into intense discussion in most IT companies, with the employees discussing the pros and cons of division of the State. The industry employs about 2.5 lakh people, mostly from outside of Telangana region.
“It (the Telangana factor) would have a very bad impact on the IT industry. We won't get new companies here and the existing companies might cut down their operations here,” Mr K. Kunal, a HR consultant for a leading IT company, told Business Line.
A Managing Director of another IT company echoes this view. “I am neither pro- nor anti-Telangana. But what I would like to have is serenity which is the hallmark of the city. Customers are postponing their visits on hearing the news of violence,” he pointed out.
"The issue is not whether Telangana happens or not. The real concern is the loss of productive time in the last few weeks. We need to restore normalcy," Mr J. A .Chowdhary, Chairman of The Indus Entrepreneurs (TiE), said.
Mr C. Bhaskar, working for a telcom services company, has a different view. “This is just a temporary phase. Companies invest in places where they find the right eco system. The city could establish an eco system with good IT infrastructure and skilled manpower,” he argued.
“Now that there is clarity (on the issue), there will be no trouble for work and logistics. The worst is over,” he observed.
Mr T. Navin, working for a multi-national firm, said that some people were not bothered at all. “We have bought houses here and the status of the city is not going to change. Why should we bother?”
The IT exports from State were put at Rs 12,000 crore in the first half ended September, 2009, reflecting a flat growth rate as a result of the economic slowdown. It expected to reach Rs 35,000 crore in 2009-10 as against Rs 32,500 crore in the last fiscal.
There, however, is a silver lining for the IT industry. A real-estate developer admitted that the costs of properties would come down drastically. “For those, who wanted to expand their facilities, it is a good time as prices of realty have already crashed in the IT investment triangle being planned by the Government,” he said.

Monday, December 07, 2009

Emaar shares plunge as UAE markets tumble

Looks like all the High net investors (HNI's) investors are going to soon be HNS (High net suckers). Emaar tried hard to raise funds in early 2008 but due to the US market crash, the Indian market went soft. Now the sand shifted under their own feet. I wonder how Indian regulators like SEBI and all the Indian stock brokering underwriters didn't flinch a bit examining the Emaar books. It goes to show rigged the Indian stock market is. The Reliance power script is still trading at 145, far from the peak it reached from the IPO. Investors in India have to be super careful. Trust no one should be the Ekam Sat when it comes to Indian markets. As far as Shah Rukh goes, he can entertain the Sheiks this new year and make up for his losses in the Dubai market. What happens to the poor suckers who lost their shirt and cannot shake a leg ?

Emaar shares plunge as UAE markets tumble AFP/File – A view of Dubai's Marina area shows high-rise buildings being built by Emaar. Shares in Dubai's …

by W.G. Dunlop W.g. Dunlop – 2 hrs 33 mins ago

DUBAI (AFP) – Shares in Dubai's giant property developer Emaar dropped the maximum-allowed 10 percent on Monday as stocks in the United Arab Emirates took a fresh tumble over Dubai's debt woes.

The Dubai exchange slumped 5.84 percent and Abu Dhabi's market dropped 1.68 percent, after both on Sunday had recovered some of the heavy losses they sustained last week.

Emaar, developer of the world's tallest building, Burj Dubai, led the downward charge on the Dubai Financial Market. Emaar shares dropped the maximum 10 percent.

The company's shares had closed 3.55 percent up on Sunday, following heavy losses last week.

By its close the DFM had settled at 1,744.83 points, a day after a rise of 1.18 percent, to 1,853.13 points.

The Abu Dhabi Securities Exchange dropped to 2,628.24 points at the close of trading on Monday, a day after having closed up a hefty 3.89 percent at 2,673.12 points.

Wadah Taha, chief investment officer at the Dubai-based Zarooni Group, attributed the continued troubles in the two exchanges to the lack of information on developments regarding the debt-laden Dubai World conglomerate.

"I think the fear is still there, the fear which affects the market sentiment and investor psychology," Taha said.

"The main fear today is due to the meeting between Nakheel and its creditors," he said. Nakheel, which is part of Dubai World, is reportedly to meet with its creditors this week to discuss rescheduling its debts.

There is also a lack of clarity regarding which banks and companies are exposed to Dubai World, Taha said.

"The picture needs to be more clear, more transparency is required," he said. "The volatility of both markets will remain high unless we deal with the issue of transparency."

Meanwhile, Saudi Arabia's exchange fell slightly on Monday, closing down 0.99 percent. Its TASI index closed 0.33 percent up on Sunday at 6,309.05 points, but fell to 6,246.50 points by its close on Monday.

The Kuwaiti stock market was likewise down, closing 0.79-percent lower, at 6,678.9 points, while Bahrain's small exchange dropped slightly, closing at minus 0.07 percent.

Bucking the trend, Qatar and Oman's stock markets were up on Monday.

Qatar's exchange rose 1.06 percent, closing at 7,132.26 points, while Oman's market went up 0.32 percent, to close at 6,302.170 points.

Both the Dubai and Abu Dhabi markets suffered heavy losses last week over Dubai's debt troubles. The Dubai index plunged 12.5 percent over a two-day trading period, while Abu Dhabi's slumped 11.6 percent.

The sharp falls came after Dubai on November 25 requested a freeze of payments on the debt of its largest conglomerate, Dubai World, which is liable for 59 billion dollars.

The request raised fears of a debt default by Dubai and sent jitters through global financial markets. The emirate's debts are estimated to total at least 80 billion dollars, with some estimates as high as 120 billion dollars.

On Monday, Dubai department of finance head Abdulrahman al-Saleh said Dubai World could sell some of its assets in the United Arab Emirates and abroad to strengthen its financial situation.

"The sale of assets is a normal measure to strengthen the group's financial situation in these circumstances," Saleh said in an interview with Al-Jazeera television.

He also reiterated the Dubai government does not guarantee Dubai World's debts, but said the "Dubai Financial Support Fund," which he chairs, "has helped companies affected by the financial crisis, including Dubai World."