Wednesday, September 22, 2010

Bad realty loans threaten to nibble at banks’ pre-tax profit

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Home prices have shot up as developers keen to cash-in on the booming economy have bid land prices to new highs in land-scarce cities like Mumbai. For instance, last month, city-based Neepa Real Estate paid Rs 830 crore for an 18-acre plot in Andheri, Mumbai. Earlier, Indiabulls Real Estate successfully bid over Rs 1,900 crore for two NTC mill plots — the 2.39-acre Poddar Mills and the 8.37-acre Bharat Textile Mills property.

Sanjay Dutt of Jones Lang LaSalle, in his blog, has raised the prospects of a real estate bubble in pockets like Mumbai, pointing out that some properties in central Mumbai peaked at Rs 30,000/sq.ft in 2008 and today stand at 38,000/sq.ft. “There is yet another reason for the concern over a bubble building on the market. All developers who had ventured to buy land overseas or across India are now buying only in their primary cities. In other words, Mumbai developers are concentrating on acquiring land solely in Mumbai, and the same is happening in Gurgaon. Investments are now chasing these Tier-I markets, and if this continues, there is certainly the probability of a bubble in residential property by the end of the year,” he said.

15 comments:

shailesh said...

I think cracks are appearing in RE business in Mumbai. Why would Lodha sell large chunk in bulk? They can make more money by selling in retail, one flat at a time....

Lodhas Sell 10% In Tallest Residential Project In Mumbai

MUMBAI: Real estate firm Lodha Developers has raised Rs 500 crore by selling a 10% stake in a project to develop a 117-storey residential tower in Mumbai to HDFC Venture Funds.

“The deal shows the investor’s appetite for quality real estate projects in India,” said Abhisheck Lodha, the managing director of Lodha Developers.

“It’s a very rare deal in India,” said Anuj Puri, Chairman and Country Head of Jones Lang LaSalle India. “In India, the developers complete projects with the money they get from the booking. They ( the developers) typically go to PE investors at a later stage.”

shailesh said...

So much for running out of land argument....

Govt To Unlock 30k Acres In NCR

New Delhi: The National Capital Region (NCR) may soon have 30,000 acres of land available for residential construction, if the government’s steps in this direction bear fruit. The Centre is attempting to fast-track the resolution of disputes over NCR title deeds, which force developers to stay away. NCR is estimated to be short of 5 lakh housing units, and demand is growing at 1 lakh units a year.

The move will spark price correction, releasing over 2 million housing units. The exercise piloted by the urban development ministry and implemented by the NCR planning board, will be kicked off by year-end.

shailesh said...

Well, it seems, Builders dont want TDR at Rs 3000 in Goregaon. I wonder then why are the asking rates are being quoted from 8000+. I bet the construction cost + profit can be 5000.

MMRDA bid to generate Rs 100 cr from TDR falls flat

The Mumbai Metropolitan Region Development Authority’s (MMRDA) attempts at generating over Rs 1 billion (Rs 100 crore) through sale of Transfer of Development Rights (TDR) drew a blank on Monday, the day bids were supposed to be opened. No a single bid was received.

Like slum TDR generated by private developers who rehabilitate slum dwellers, the MMRDA gets construction TDR from the municipal corporation in return for constructing tenements for people displaced by various infrastructure projects. This TDR can be sold to private developers who can use it to construct upto 100 per cent more in addition to the permissible Floor Space Index (FSI) of their project. The TDR can only be used in the suburbs, either in the same civic ward or in any plot to the north of the place where it was generated. “The TDR we put up for sale was generated through construction of tenements in Goregaon. Being a prime area, we expected decent offers. However the state government’s recent decision to allow extra FSI in the suburbs seems to have played the dampener with no one coming forward to purchase the TDR,” said an MMRDA official.

Anonymous said...

Agreed,that every tom , dick and harry is expecting Mumbai real estate prices to go down.. but he is again proved fool and day dreamer,
Where the prices are still not going down. remember Mumbai real estate has only one direction , which is UP.

Desi Batman said...

Anonymous 8:37 AM

remember Mumbai real estate has only one direction , which is UP.


And who in the hell would be able to afford 1.5+ crores.

What kinda of industry/job would pay that to support this 'UP'?

May be movie actors, may be politicians, may be CEOs... who else? Then again for that to happen common people would have to pay for their 'UP' in terms of increase the ticket price for shitty bollywood movies, high tax, high bribes, high cost of products.

Anonymous said...

LODHA BELLISSIMO rumored to have sld apartments at Rs.15000 a sq. ft. when market was was quoting around 23000 apparently in a desperate bid to get funds asthey have to pay huge debt. This is one group which can cause the rupture of Mumbai property market with somany projects but very poor execution n high leverage...

samix said...

Land crunch is the most misleading argument that is quoted in support of a real estate bubble.

Remember, people buy real estate only while it is going up, not when it is loosing value.

Look at Japan, their space problems are worse than ours, still their RE market is in a slump after a major bubble, and yes they did cite the space crunch argument in support of their ever increasing RE price.

Disenchanted NRI said...

I just wonder why the prices are so exorbitant in slum cities like delhi and mumbai. Does posh locality mean similar condition that of Olympic village in delhi. Are these conditions acceptable to the residents.
http://news.bbc.co.uk/sport2/hi/commonwealth_games/delhi_2010/9025907.stm

Why isn't the government stepping in and controlling the real estate prices. I guess most money earned by the spurt is illegally siphoned of to Europe. This is evident from the way Indians in europe buying luxury apartments, cars etc. This generation has replaced the spendthrift arabs of 1980-1990's.

After living 2 decades in Europe, I wanted to settle in India. I find the present situation worse than that was prevailing 20 years back and getting worse.

Desi Batman said...

@ Disenchanted NRI 4:57 AM

I just wonder why the prices are so exorbitant in slum cities like delhi and mumbai. Does posh locality mean similar condition that of Olympic village in delhi. Are these conditions acceptable to the residents.
http://news.bbc.co.uk/sport2/hi/commonwealth_games/delhi_2010/9025907.stm


If 1.2 billion people can live by these standards, why can't rest of the world live? Indian have different meaning of 'posh', for many posh means a 1.5+ crores 3BHK+ house, flat screen TV, 3 hours running water and electricity. Many live a standard life - two or more joint family (6+ people) living in single flat of 2 BHK. Therefore for many that is standard of life and wish others to live by same means. Anything more you have to pay high price.


Why isn't the government stepping in and controlling the real estate prices. I guess most money earned by the spurt is illegally siphoned of to Europe. This is evident from the way Indians in europe buying luxury apartments, cars etc. This generation has replaced the spendthrift arabs of 1980-1990's.
First of all, GOI (Govnt of India) is not for people, consider GOI as separate private corporate. GOI gets BIG money through corruption, registration, taxes and builder lobby. For doing what - nothing! Why would GOI be interested in welfare of people? They are there to make profit for their stakeholders (babus, industrialists).

Indians or any immigrants in western countries florish because of sincere, hard work and the system with what those countries provide.


After living 2 decades in Europe, I wanted to settle in India. I find the present situation worse than that was prevailing 20 years back and getting worse.
Actually it is that India is where it was 2 decades ago (except for increase in malls and corruption), rest of the world was moving ahead with technology, innovations and improvements. e.g. did you look at the photos of CWG laborers? If India is so advanced, where is the basic powerful machinery that can accomplish tasks faster, cheaper, accurate and secured?

Anonymous said...

Conquering Inflation India style

Since the govt. is busy reducing interest rates AKA printing money, the inflation has been going up and the press have been harping on the fact that even the WPI massively manipulated figure was 15% plus now.

So, Pranab and MMS have been making statements that the inflation problem would soon go away. HOW? They changed the index and the weighting!!!

Now inflation is 8.5%! Voila, inflation gone...let's go back to money printing and if people are dying hungry, may they be damned. I wonder whether the swiss have more space in their vaults for the crores these ministers might soon need to hide?

Anonymous said...

Anonymous @ 11:08 AM

I wonder whether the swiss have more space in their vaults for the crores these ministers might soon need to hide?
-- No need to go for swiss bank. Swiss bank doesn't give good returns. Infact we have our own swiss bank - Real Estate. Pump the money into Real Estate, water it with corruption, shameless infrastructure and then watch it grow.

Anonymous said...

http://online.wsj.com/article/SB10001424052748704523604575511110088782860.html?mod=WSJ_RealEstate_LeftTopNews

Another article in the Wall Stree Journal.

Anonymous said...

wall street link requires login
try this

http://webcache.googleusercontent.com/search?q=cache:gXgmitmqg2gJ:online.wsj.com/article/SB10001424052748704523604575511110088782860.html+A+Real(ty)+Risk+For+India's+Banks&cd=1&hl=en&ct=clnk&gl=ca

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rajni sharma said...
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