Thursday, February 04, 2010

Stone shortage to push housing prices up in Pune

This is by far the most ridiculous conclusion one can reach when it comes to the co-relation of stone with housing prices. In the past cement , steel, shortage of land. labor costs, electricty and loan costs were listed as the reasons for prices to move higher. Now add stone to the mix. Dagad ani Dhonde are equally precious when it comes to housing. The Indian Express article is below
Crushed stone is set to become costlier in the city, which may give another reason for builders to jack up prices of projects yet to take off.
The Pune Stone Crushers and Mine Owner's Association has stopped supplying crushed stone, an unavoidable commodity for the construction industry as use of sand is restricted, saying they want to hike prices. "Our association has stopped supplying crushed stone to the construction industry with effect from today.
The supply will resume only when prices of crushed stone are increased," said Pradeep Kand of the association.
He justified the move saying the government had increased royalty on stones, their raw material extracted from mines, and the power tariff too was going up. The other variables, employee salary, cost of diesel, tyre and spare-parts of machines have been on the rise for the last few years, Kand said.
The builders are caught in a bind, as they cannot do without crushed stone since the government has imposed restrictions on use of sand for construction. The move also caught the city builders unawares as there was no prior communication from the association.
Satish Magar, president of the apex builders body in Pune, CREDAI, said if there is no supply of crushed stone for the next few days, then construction activities in the city will come to a halt.
"We will hold a meeting with the suppliers of crushed stone to resolve the issue," he said.
Magar admitted there has been an increase in royalty of stone, but argued that it would not have a big impact on price of crushed stone. "We are yet to be apprised of the exact demand by the association and the hike they seek," he said.
"We can discuss the issue with the association, but one thing is sure, that it will have a cascading effect on property rates. Home buyers will have to shell out more as builders will need to recover the extra cost," Magar said.
However, Kand said builders should not complain as the demand to hike rates of crushed stone was coming after a long gap. "Property rates in the city have more than doubled in the past few years and builders have been making money out of it but stone crushers continued to supply at the earlier rate," he said.
Kand said it was up to the builders to bear the extra cost and not pass it on to customers as they have been doing each time the cost of some raw material went up. The builders so far have been attributing the increase in property rates to increase in rates of steel and cement as also shortage of labour.

Sunday, January 31, 2010

India Swaps to Rise on Record Jump in Rate, Morgan Stanley Says

Let the party begin. BoooYaaah. Loan interest rates will go back to 12-13% from 9-10% a jump of 20%. Expect EMI's to rise by greater then 20%. Borrowing costs for builders will jump too and they will want to pass this to the customer, thereby forcing a further decline in affordability. There are no political compulsions for the government to keep rates low. They will use the next few years to reverse the bogus interest policy implemented by the supposedly independent RBI over the past few years. I feel sorry for speculators in Mumbai as the crash in stock markets is going to resonate loudly in the real estate sector. Be very careful of under construction projects. They will hold the biggest risk to the buyer.

By V. Ramakrishnan and Anil Varma

Feb. 1 (Bloomberg) -- India’s swap rates will surge as the central bank increases the benchmark borrowing costs by a record 1.5 percentage points this year to curb inflation, Morgan Stanley said.

The cost of swaps that mature in a year will rise 0.52 percentage point to 5.5 percent by April, Morgan Stanley India Primary Dealer Pvt. Ltd. said. Reserve Bank of India Governor Duvvuri Subbarao on Jan. 29 estimated wholesale-price gains will quicken to 8.5 percent by March from as little as 0.5 percent in September. He also raised reserve requirements for banks and said interest rates will increase “in future.”

“Inflation is becoming a bigger worry and that sets the tone for higher interest rates going forward,” Manoj Swain, Chief Executive Officer at Mumbai-based Morgan Stanley India Primary Dealer, said in an interview. “Upward pressure on swaps will increase because of the rising requirement to hedge against higher rates and tighter liquidity.”

Read more here