Saturday, December 15, 2012

AL Jazeera's news segment on India's housing bubble

Investors lose thousands of rupees per day as construction workers cannot make ends meet for daily needs. A tale of two India's.

Thursday, November 29, 2012

RBI says no to restructuring of real estate loans (to builders)

Copy paste from ET website

MUMBAI: The Reserve Bank has turned down banks' demand for restructuring stressed real estate loans without providing for potential losses, a move that could mount pressure on builders to lower prices as banks push to recover loans.

The central bankBSE 1.01 % believes that if banks are permitted to restructure the loans without providing for losses, they will lose the urge to insist on prompt payments from builders, who in turn would continue to hold onto prices even if sales are slack, two bankers familiar with the discussions said.

Builders will get the benefit of paying the same loan over a longer period without feeling the pinch to repay, RBI Deputy Governor KC Chakrabarty is supposed to have told bankers in a recent meeting, said the two bankers who did not want to be identified.

Banks will be at ease once the loan is prevented from becoming a sub-standard asset, Chakrabarty said.

Buying a home to get cheaper as RBI says no to restructuring of real estate loans
Real estate prices have been rising steadily since the government prodded the central bank to give a one-time benefit for restructuring of real estate loans during the credit crisis in 2008.

But in most parts of the country, prices have soared through the roof, bringing down home sales. If banks pressure developers, it could lead to a fall in prices.

Home prices at an all-India level rose 6.7 per cent in the first quarter of this fiscal, data from the Reserve Bank of India shows. Transaction volumes rose 9.3 per cent.

While property prices have been rising across the board, transaction volumes have been falling in cities such as New Delhi, Bangalore, Kolkata and Chennai.

Bankers had sought a special dispensation due to rising bad loans that are eroding their profitability.

Total real estate bad loans, net of provisions of all commercial banks, rose 55 per cent to Rs 64,900 crore on March 31, 2012, from Rs 41,700 crore on March 31, 2011. State-run banks' share in this was Rs 59,100 crore, up 64 per cent from Rs 36,000 crore.

Currently, banks have to classify restructured loan of a real estate company as bad loan the moment it is reworked.


Attribution - 

Copyrights: Economic Times  (TOI - Bennett Coleman)

Disclaimer: copied for information purposes only

It will be fun to see how builders (and their politician masters)  will now force the Government owned banks to backdoor restructure the RE loans dished out to builders

Correct me if I am wrong but -
SBI, HDFC, LIC and ICICI are the top mortgage lenders in the country.

Ironically the same bankers (and their politician masters ) are making it worse to get home loans by charging ridiculous pay off fees, unnecessarily high interest rates, horrible customer service, unrealistic stamp duty and VAT.

Sunday, November 04, 2012

Loan growth stonewalled by surge in house prices, crashes to 5-month low as buyers fail to turn up

Its Diwali and all as per the norm, this is the season for making big purchases like houses and cars. Unfortunately this year is turning out to be damp squb. Very high inflation has pushed daily budgets of most middle-class citizens to the brink. Nobody in the right mind is making any big purchases. Anybody with an account with a bank is hounded by retail bankers pushing loans and investment. Most are not buying the bait. Existing loan owners have seen their EMI tenure extended by 10 years to a maximum of 30. One friend of mine complained he has been servicing the interest for the past 2 years and has added almost nothing to the principal. The flat now has cost him more then what he has paid even after regularly paying the EMI. 

The black magic of compounding of loan interest is only experienced by the borrower. 

Brokers tell me that the market has a gone silent for loan properties over 1 Cr in Mumbai. The only buyers in the market are those who trade up/down their existing properties depending on their need. No Gujarathi NRI's are interested in the market. Hurricane Sandy has hit a  huge number of Gujarathi's business owners in NY and NJ. I just heard from one who wants to dispose of his Mumbai property.. Here are pictures from Hurricane Sandy. The devastation to property is just mind numbing.  With so much damage to houses it seems that housing rental market is going to give the newly displaced a new shock. 

Economic Times  article is here

MUMBAI: Growth in home loans has slumped to a five-month low despite banks showering potential buyers with attractive schemes and lower rates due to soaringreal estate prices. 

Buyers are holding back since an over-24% increase in prices in the past one year is putting homes beyond their reach despite banks lowering interest rates by 100-150 basis points in the past four months. A basis point is 0.01 percentage point. 

Home loans have grown by 11.2% year-on-year in September, compared with 15.6% in the same month a year ago. The latest growth rate for home loans is the lowest since April. 

"Interest rates have a limited role to play in house sales," said VK Sharma, CEO at LIC Housing FinanceBSE 0.54 %, India's second-biggest mortgage lender. "Home prices affect sales more than interest rates. If the house price range is within the capacity of the middle class, then sales pick up." 

Facing slowing demand for loans from corporates, banks have been pushing retail loans, especially mortgages, since it is one of the safest forms of lending. But steep prices are stalling sales. More than 80,000 flats remain unsold in Mumbai and the financial capital has lost its crown as the fastest-growing market. 

Thursday, October 18, 2012

Vadra bubble in Bikaner too. land prices jump 40 times

No one can make up these stories. Truth is stranger then fiction. Here is another article on how land prices in Bikaner a medium sized town in Rajasthan jumped 40 times after Robert Vadra started his investments. It looks like Robert is responsible for the misery of Indian's when it comes to housing.

DNA report is below. Full article is here

In a flurry of deals between June 2009 and August 2011, Robert Vadra purchased at least 20 plots of land collectively measuring more than 770 hectares in Rajasthan’s Bikaner district, in a region that would see prices spiraling soon after.
A clutch of investors, including Vadra, apparently privy to information on upcoming industrial projects in the vicinity, reaped huge profits with land values appreciating by up to 40 times since 2009.
Click here to read the list of plots
Data from the office of the registrar in Bikaner shows 20 properties Vadra purchased through companies, including Real Earth Estates Pvt Ltd, North India IT Park Pvt Ltd, and Skylight Realty Pvt Ltd. All the deals were executed on his behalf by Mahesh Nagar, brother of Haryana Pradesh Congress Committee member Lalit Nagar. These companies together invested Rs2.85 crore in barren land here during this period.
“Vadra clearly misused his position as the son-in-law of Sonia Gandhi,” said Devi Singh Bhati, six-time MLA of the Kolayat tehsil where most of the Bikaner deals took place. “The land was purchased either in the knowledge that industrial projects would be announced, or circumstances were created to bring projects to the area.”

Monday, October 15, 2012

Vadra and cronies to blame for India's housing bubble.

Economic times writes here on Robert Vadra's role in inflating India's housing bubble. Looking at the data we can safely conclude that India's housing bubble is been inflated beyond limits by politicians and their black money dealings with builders with tacit support of public sector banks. The property flippers and NRI's are just pawns in this real game where the biggest transfer of wealth and land to politicians has been done in broad daylight with everyone from the law enforcement and the fourth estate turning a blind eye to this mega scam of massive proportions. NREGA and all schemes for the poor of the country are just eyewash to win votes so these greedy politicians can accumulate wealth which can be measured in astronomical units.

During 2009 and 2010, Vadra bought 25 apartments in DLF Capital Greens, a premium project constructed on a 38-acre land that DLF acquired from DCM Shriram and the Lohia Group in 2007 for Rs 1,675 crore. While the builder launched the first phase of the project at around Rs 4,500-5,500 per sq ft, the prices subsequently increased to Rs 10,000 per sq ft. Vadra brought these apartments in the first phase and sold them in 2010-11.

He also booked 15 apartments in DLF Magnolias, a premium project next to a company-owned golf course on the Gurgaon Golf Course road that is nearing completion. Of these, he has already sold 13 apartments and still retains two units.


Here is the summary of Shriram Subramanium on investing in real estate stocks. Full article here.

The ongoing DLF  - Vadra controversy has brought to light the blatant transgressions that real estate companies - listed and un-listed - adopt in India. Real estate companies have never been known to be high on transparency and corporate governance. This is just a reflection of the deeper morass in the real estate sector, which is by far the largest and most valuable asset class in India. It is not the marketplace that decides the fortunes of real estate companies, but the builder-politician nexus that picks out the winners in this sector.

Realty sector shouldn’t be listed as the companies don’t need shareholder funds, nor will they ever make any money for investors. 

This is because:

(a)   The sector depends a lot on black money.

(b)   There is little transparency in land values or construction costs.

(c)    Politicians and bureaucrats have lot of discretionary power in deciding winners and losers.

(d)   Companies need to pay speed money to get all approvals for all stages of project development.

Tuesday, October 09, 2012

Robert Vadra mass-booked and traded DLF flats, but all above board, say DLF sources

Amazing round-trip trades made by Vadra to make record profits.  It is an absolute travesty of all laws where public companies give loans to individuals who then use the loans to buy flats from the same company and then after some time sell the flats to same company at records profits. Now we can see how the housing bubble has been inflated on profits which have been generated out of thin air

Balance Sheet of Vadra

Paidup capital = Rs 0

DLF unsecured interest free loan to Vadra, call this X
Vadra buys flats from DLF with the loan X
Vadra sells the flats back to DLF for amount Y
Profit = Y-X
% profit = Y-X/Input cost = Y-X/0 = Infinity.

A record profit which can only be generated in a banana republic

NDTV has an explosive article here

Bloomberg has an article which lists him having acquired 31 flats in DLF. Now the modus operandi of politicians and builders is very clear. Builders use connections to high profile politicians to avoid income tax scrutiny for their dubious deals. Politicians or their family members rake astronomical profits by capital appreciation from acquiring undervalued properties from the builder and disposing them back to the same builder at market rates. In the meantime the mango people have to borrow at record high interest rates thinking they will be priced out if they don't buy their dream home. As influential columnists are calling this a tip of the iceberg, I wonder how many skeletons are stacked in  the closets of all the 31 flats of Mr Vadra and thousands of others who are in the process of being exposed.

Friday, October 05, 2012

Robert Vadra's alleged flat in DLF Aralias

I did some googling go locate DLF Aralias where Arvind Kejriwal has alleged that Robert Vadra owns several flats. has one 5500 sq ft apartment for sale for 19.5 crores. If he own's 7 flats here, Vadra just has a paltry investment of 140 crores. It is also alleged now that several Congress , BJP and JD(U) MP's own super sized penthouses in this building. It is also no surprise that DLF has given these flats to these individuals at huge discounts to the existing prices. Apart from the middle-class in Delhi who can afford these flats is anybody's guess. Here is the link to the advertisement, probably owned by some politically connected individual.

In a very charitable move DLF loans crores of rupees, interest free to Mr Vadra who then buys DLF's properties at throwaway discounted prices. I wish DLF is charitable to every Indian. Every Indian will be indebted to them for the rest of their lives. In fact the Income Tax and company affairs board should make it legal for builders to make unsecured interest free loans to the Indian citizens so they can buy their properties. This will boost their bottomline and they can recognize revenue for the flats which are sold and thereby boost their stock prices. In all seriousness SEBI would need to question the auditor of DLF to explain the fudging of the books. The "Too Big to Fail" individuals are now facing their moment of reckoning.

Thursday, September 20, 2012

Those 80,000 unsold flats

Those 80,000 unsold flats

The onset of rains, and the end of a hot summer, means no more alphonso mangoes. During peak season those mangoes fetch Rs 1,000 for a dozen. But at first sign of rain, their market value drops to less than Rs 200.

The same is true of onions. When there is onion shortage, prices shoot up to maybe Rs 100 a kilo, and post harvest, typically in January when there’s a glut, prices crash to less than 5 rupees.

In the wholesale market yard of Lasalgaon, Asia’s biggest onion market, there have been farmers’ riots due to onion glut.

Onions and mangoes signify the extremes of price variations, but those price movements also illustrate the law of supply and demand. When there is excess supply prices have to drop.

Sounds almost like a tautology. Why does this law not apply to housing? A simple answer is that fruits and vegetables are perishables, hence their value declines rapidly.

Even a toothpaste or a mobile phone has finite shelf life. If there is a glut, prices will fall sooner or later. A glut in houses however seems to defy the law of demand.

A report by real estate consultant Knight Frank revealed this week that Mumbai has more than 80,000 flats lying unsold. This is in addition to maybe another 50 to 100 thousand flats which are vacant, but not available for sale.

The value of the unsold inventory is a staggering 1 trillion rupees. (This figure is also roughly equal to the entire annual income of all Mumbaikars).

The average price of those 80,000 flats is Rs 1.2 crore. That’s hundred times the income of an average Mumbaikar. A flat is affordable to those, whose annual income is at least 20 to 25% of its price.

How many Mumbaikars earn more than Rs 30 lakh annually? This is a tiny number, and most of them already own flats. So then who will buy those 80,000 unsold flats? Speculators from Hong Kong, Dubai or Singapore? If speculators bought, would they rent those flats? Not really, because there is already a glut of flats available for rents of about Rs 40,000 to Rs 50,000 a month.

Rentals are falling. So speculators prefer to simply buy and wait, till prices zoom up again, so that they can sell and encash a profit.

Article Link

Wednesday, August 22, 2012

Chidambaram wants builders to lower prices

With the Finance minister officially calling the top in housing prices is there any investor willing to stick in their neck out and buy at the peak

Economic times reports 

 FM wants builders to lower prices of unsold houses 

MUMBAI: P Chidambaram, the newly-appointed finance minister, has asked chiefs of government-owned banks to put pressure on real estate developers to lower property prices in order to get the economy moving. In a meeting held last Saturday with bank chiefs, the finance minister told bankers to impress upon builders the need to complete projects according to schedule and lower the prices of apartments that are ready for possession but not getting sold. 

"Builders are sitting on huge inventories (unsold apartments) which they are neither able to sell at the prevailing prices nor are they allowing others to buy by lowering the prices," a banker present at the meeting quoted Chidambaram as saying.

Full article here

Sunday, July 29, 2012

More evidence of a bubble - Navi Mumbai has 23% flats vacant

23% of flats in Navi Mumbai lying vacant The newest destination for property investors in the Mumbai Metropolitan Region is the Navi Mumbai-Panvel-Raigad zone. Experts have concluded this based on Census 2011 findings , according to which 23% of houses here are lying vacant. They say that while investors are buying most vacant homes expecting rate appreciations ; genuine buyers are deferring purchase in the hope of a correction in prices. But some experts feel that low occupancy of houses does not necessarily imply a flourishing investor presence. Now a days Times of India too has been reporting on the sorry state of Mumbai real estate. The ads by the builders are down significantly from the huge booklets to just a few pages.

Thursday, July 05, 2012

Mumbai home sales growth stagnates in June

Article Link

A situation of plenty continues to plague the Mumbai real estate market with unsold inventory amounting to 80,000 units which forms 37 per cent of the total residential supply under construction.
The market stagnated in June due to high prices and most buyers having stayed away expecting an imminent drop in prices in the near future. 

The report indicates prices have been moving in a narrow range in the past four quarters as a virtual stoppage of new launches over the past year has constrained supply and cushioned prices from dropping in spite of absorption levels steadily trending downward.
Absorption numbers in FY2012 are estimated to have dropped more than 60 per cent from its 2007 heydays and 35 per cent from FY2011, to an estimated 45,000 units. This steep drop in absorption levels should have resulted in a similar correction in prices.

Sunday, July 01, 2012

FSI for slum schemes hiked to 4 from 2.5

Times of India has the scoop on all this. More good news for builders as they get to build more floors. Bad news for prices as supply increases. Anybody care to comment on the fact that increasing FSI will cause prices to increase ?

MUMBAI: The state government has formally increased the floor space index (FSI) for slum rehabilitation projects from 2.5 to a maximum of 4.

The state urban development department issued a notification on Friday after it got an approval from chief minister Prithviraj Chavan, who also heads the department.

As per the notification, projects involving all high-density slums-those having over 650 tenements per hectare-are entitled to an FSI of 4, whereas those with lower tenement density are entitled to 3.

Senior officials from the urban development department said that the notification highlights that all procedural formalities concerning the higher FSI move are now complete.

After the move to increase size of each rehabilitation tenement for slum dwellers from 225 sq ft to 269 sq ft in 2009, slum redevelopment projects were allowed higher FSI.

A notification under section 154 of the Maharashtra Regional and Town Planning Act ( MRTP), 1966, was issued at that time to allow it to implement the provision pending completion of procedural formalities, including invitation of suggestions and objections from citizens.

These procedural formalities have now been completed and a formal notification issued, a senior state official said.

FSI is a development tool that determines the extent of construction permitted on a plot. It is a ratio of permissible built-up to the total area of the plot. A higher FSI would allow developers additional construction on slum land.

Sunday, June 24, 2012

Lux is up: realtors confident that housing prices will not dip

Another feeble attempt by the paid news media to sucker buyers into their trap 

If the Indian economy is booming Mumbai property goes up. 

If the Indian economy is slowing Mumbai property goes up. 

These morons think that Mumbaikars are lemmings. What is constant in Mumbai is the generation of black money. This could be responsible for the rise in property till now during boom times. However when everything is slow, black money generation too has to be slow. 

If existing investors have their black money stuck with builders, how can they take profits and invest in the next venture. I spoke to a broker who said, "Investor ka paisa atka hain, he is ready to discount the price" however the project is delayed so which person in the right mind will buy from the investor when the builder is running out of money. This is in Vile Parle.

I forsee this situation all over Mumbai. Its best to buy I keep repeating ready to move in or resales. This market is stuck in the muck for many years to come. Demand for housing will remain, the smart investor will bring cash to the table and take a discount. Anyone going for too good to be true deals will be slaughtered mercilessly by the brokers 

 Hindustan Times report 

 As the Indian economy slows down, the real estate sector, with its back to the wall, remain gung-ho that prices will not dip any time soon. 

 In a recent realty event in Mumbai organised by CII, top property developers aired confidence that prices in residential realty would remain high. “There is pressure on developers, but that is because of the delays by the state government,” said Sandeep Runwal, director, Runwal Group, a Mumbai-based developer. “The delays are affecting the prices as it would only increase the cost for developers.” And the costs are likely to be passed on to customers. 

 According to data compiled by international real estate consultants, about 60% of projects launched in metros fall in the luxury category. However, private investors seem to be taking a cautious approach, and are only going in for smaller projects with smaller tenure of investment. “We are treading cautiously and want that the project we invest in is priced conservatively,” said Ramesh Jogani, managing director, Indiareit, a private equity arm of the Piramal Group. 

“We are giving preference to smaller projects over bigger ones.” Commercial realty, however, is a different story, with rentals under pressure. “The situation has improved (recently) as the demand and supply currently match, but if supply increases, there would be a pressure on rentals in commercial real estate,” said Cherag Ramakrishnan, CEO, Equinox Realty, the real estate arm of Essar Group.

Sunday, June 17, 2012

Home sales slump by more than 50% in Delhi, Mumbai areas

Article Link

While MMR reported the sharpest drop of around 58%, NCR slumped 57% from the year earlier. Bangalore witnessed a drop of 18% in sales, the report added.

Sales in NCR dropped to 15,104 units from 35,420 units and it fell to 11,473 units from 27,676 units in MMR.

The two regions saw a residential supply of 107,731 and 89,461, respectively, in the first quarter.

Samir Jasuja, founder and chief executive officer, PropEquity Analytics, said, “In the coming quarters, there would be strong pressure on many micro markets and we expect inventory overhang to increase and absorption could continue to slow down. Mumbai in MMR and Gurgaon in NCR have seen the sharpest falls in absorption.”

“If this trend continues, there could be a price correction of 5-20%, especially in the micro markets of NCR, MMR and Hyderabad,” he added.

Bangalore hasn’t been as badly hit because of demand from genuine homebuyers and end-users, apart from the fewer unsold properties.

Sales in the southern city fell 18% to 7,704 units from 9,410 units.

The other two markets are largely investor driven.
“Generally, investor-driven markets would see downward risks than end-user driven markets,” added Jasuja.

Thursday, June 14, 2012

Jokers are appalled at the S&P downgrade threat

The jokers at the planning commission install 35L toilets while projecting a 50 cents a day as survival metric for Indian. Scum of the earth can be better then these guys

Minister of State for Planning Ashwani Kumar defended India on Thursday, saying its expected growth rates and projects to boost internal trade and development do not warrant a junk status credit rating. On Monday, Standard & Poor's warned that India could become the first so-called BRIC economy to lose its investment-grade credit rating citing slowing economic growth and policy inaction for instituting economic reforms. 

 The rating agency cut India's BBB-minus rating outlook to negative in April, meaning it expects to make a decision within a 6-24 month time frame. 

The news knocked the rupee and stocks lower. "People are entitled to ask what are you going to do about delayed decisions, what are you going to do about second generation reforms," said Kumar. "But 

I am appalled by the suggestion of S&P that India is compared with junk status," Kumar told Reuters. India reported its worst economic growth rate in nine years for the first quarter of 2012, marking a dramatic slide in world's second fastest growing economy.

Gross domestic product growth slowed to 5.3 percent, from 9.2 percent in the same period a year ago. "I recognize that our last-quarter GDP growth figures at 5.3 percent have not given us any comfort," Kumar said during a visit to the United States. 

 He reiterated a government growth forecast of 7 percent in 2012, and said that despite the difficulties of the global economic situation, India expected an average annual growth rate of 8.5 percent between 2012 and 2017.

Thursday, June 07, 2012

Salman Khan 'overpays' for flat, lands in trouble

I've seen some flats which have a parking lot on each floors. Most brokers say the buyers will convert it to the living space in the future. Salman's case will cause immense grief to these buyers as BMC will slap big fines on these flats. 

 By Sudhir Suryavanshi | Agency: DNA 

Bollywood actor Salman Khan has once again landed in trouble for paying a higher amount than the actual market value of a house in ‘The Address’ building at Bandstand in Bandra (West). Khan has bought a 1,079-square metre carpet area on the 11th floor of the 28-storey building. The building is being developed by Samudra Developers Pvt Ltd of the Dheeraj Group. Besides paying Rs1. 64 crore towards stamp duty, Khan has paid almost Rs20 crore for the said area. “It comes to almost Rs1.80 lakh per square feet, against the market rate of Rs25,000 to Rs30,000. The amount is six times more when compared to the existing market rate. It is quite high. It must be a case of money laundering,” said YP Singh, an activist who played a major role in exposing the controversial Adarsh Housing scam. 

Wednesday, May 23, 2012

Cell phone towers increase cancer risk in residential buildings

Recently I thought of looking for a rental apartment in Mumbai and asked few brokers to show me some apartments. One of the apartments I liked was on the 6th floor of a 7 storey building which had a cell phone tower installed on the terrace. I had heard about the ill-effects of cell-phone radiation in the past but never thought much about it as it didn't  affect me. I did a quick google search and a very recent study done by an IIT professor Dr Girish Kumar came up in the results. 

The results of his study are alarming. In one case  he has listed the occurrence of cancer in residents living in consecutive floors of a building(5,6,7,8,9) which faces a cell phone tower. This particular instance was enough for me to abandon that particular apartment and finding the choice apartment has now become increasingly hard as there are cell phone towers everywhere. Given that one can easily step-up the power of these RF amplifiers I would not be surprised if a majority of cell-phone towers are  on steroids. I urge all home-seekers ownership or rentals to consider this very important factor  in their home search.

Staying 400 meters from a cell phone tower is possible only in the IIT Mumbai campus :). 

The study is below. Mobile Tower Radiation Danger and Solutions Proposed to Government - Prof. Girish Kumar - May 2012

Sunday, May 06, 2012

Power of Attorney deals cause market slowdown

NEW DELHI: The ban imposed by the Delhi government on general power of attorney as a mode of property transfer, following a Supreme Court order, is expected to impact the entire property market. Property dealers say that while the ban was required to regularize property transactions, in the absence of a simple and clear procedure for converting leasehold property or property held under GPA into freehold, transactions may fall sharply, at least for a while. 

"The move is right - that's how it should be. Property should not be transferred through power of attorney. However, along with this, the government should improve the process, the system of transfer so that people don't suffer. A majority of owners go for GPA because they don't have a choice. I think residential property will be hit the most," says Anshuman Magazine, chairman and MD, CBRE South Asia Pvt. Ltd. 

More from the Economic Times

Wednesday, April 11, 2012

Mumbai is the world's least affordable home market

Article Link

Bloomberg research shows a 100-square-metre luxury residence in Mumbai costs about $US1.14 million, or 308 times the average annual income in India, based on calculations from a housing index compiled using 63 markets by Knight Frank LLP and income estimates of the US Central Intelligence Agency for purchasing-power parity in 2011.

“There are big differences in wealth levels in emerging markets compared to the developed world, which is part of the course for economic development,” Bailey said in an e-mailed response to questions. “In the first phase of growth some people make big fortunes, it takes time for this to trickle down as the middle class develop and generate their own wealth.”

This guys have no clue on why prices are so high in Slumbai. It is politician, builder, mafia nexus which does not let prices down and does not create infrastructure to increase land supply.

Sunday, April 01, 2012

Chennai - GST road land value rises rapidly

Chennai, the laggard in the property bubble has finally caught up with Bangalore and other IT cities like Pune and Noida. Guideline values of agricultural land on the fringes of the city have been revised on an average of upto 270%. Hindu has more on this. 32L documents have been registered in FY2011. By this comparison the number or registrations stands at 4,000 per month. This just shows the scale of affordability in Mumbai as compared to Chennai. 

Jumping on this trend Artha property, an arm of the Times Group has launched villa's off GST road, in close proximity to Mahindra World City. Gives the reach of Times of India full page advertisements coupled with Artha's marketing savvy, I am expecting huge positive response to this property.  Added to this the Times Group can post surreptitious  marketing articles likes this which promote their own self interest it won't be too long that these 230 villa's will be sold in no time.

I expect that the area around Artha meadows sees rapid development in the next few years, as investors and end users join in herds in anticipation of double digit returns. Areas like Adyar are over priced and OMR is flooded with investors which have pushed land prices way to high for anyone to make money in this high interest rate environment. GST road appears to solve the problem of affordability at the expense of a longer commute. For those working around GST this cannot come at a much better time.

Disclaimer : 
I have been a fan of this area for some time due to its low prices and high potential and some of the investments made by me few years ago might see some fruit in the years to come.

Friday, March 16, 2012

Budget 2012 implications on Indian real estate, Gold , Stock markets and black money

Lets discuss how this impacts investments and taxability for Indian residents and NRI's.

1. IT exemption limit raised marginally so more income in every tax payers pocket.
2. Gold bars tax limit increased, making gold more expensive. The process of laundering black to white using gold also becomes more expensive.
3. Service Tax increase of 2% passed down to end users
4. Cars become expensive due to increase in excise duty
5. Electronics less expensive as the import duty is cut marginally
6. TDS for real estate transactions. This is a big one.
7. I don't understand how real estate capital gains become tax free after one year.
8. The first step for Indian government to tax all global income is proposed by the FM where NRI's/Indian residents are mandated to report foreign ownership of assets held abroad. Hell if the US government can do it, so can the Indian FM
9. Rail budget has increased Freight rates which directly inflates the cost of everything including steel, cement, coal
10. Coal prices are expected to increase in April which causes electricity prices to be hiked.
11. Petrol/Diesel will soon rise now that UP elections are behind us.

Instead of presenting the budget the FM should just increase the cost of everything by 10% every year. It will save us the trouble of analyzing

Please add comments and I will roll all salient points into the main post

Sunday, March 04, 2012

Investors in Mumbai flats want money back Investors in Mumbai flats want money back Investors in Mumbai flats want money back

Times Of India reports. Of all the papers this is TOI reporting.. Again.. Times of India reports :)

Underconstruction investors are screwed big time. Brokers are returning calls as prices are dropping in Mumbai. With good cash one can easily snatch a good deal.  Unfortunately this cannot be said of Bangalore/Chennai or Pune as yet.

MUMBAI: Property speculators and investorswho book flats even before the project is launched are in trouble. Builders who used to take money from them upfront and promised them large areas by manipulating certain spaces in the building, can no longer do so after BMC's stringent building laws kicked in in January. 

Across the city, most builders sell up to 30% of their stock at a discounted rate to investors if they pay a major chunk of the amount upfront. These deals are struck when builders do not even have the basic construction approvals in place. 

Earlier, when building rules could be manipulated to the hilt, developers misused and sold areas which were not part of the apartment. These areas were then surreptitiously and illegally amalgamated into the flat to make it bigger. New rules have upset the calculations of such builders who had promised larger houses to their investors. 

Thursday, March 01, 2012

DLF Business Model Suspect

Here is the news 

"Canadian research firm Veritas has slammed realty major DLF Ltd, calling its accounting practices “conflicting” and pointing at gaps in its business model — charges the company termed “mischievous and presumptive”. Earlier, Veritas Investment Research had come out with damaging reports on other Indian firms, including Reliance Industries, Reliance Communications and Kingfisher Airlines.
Veritas has said DLF’s stock is at best worth Rs 100, and the company may have to recast its loan. DLF said “the company adhered to the highest standards of corporate governance and financial integrity”. “We do not generally comment on individual research reports. However, this report in question is presumptive and mischievous as the analysts have never contacted the company to seek any information or clarification,” a DLF spokesperson said . “The audited financials of the company are always in the public domain,” he added. Following the report, the DLF stock price dropped 5.5 per cent on Thursday, becoming the biggest loser on the Bombay Stock Exchange, closing at Rs 214 after an opening of Rs 224."
Source: Moneycontrol ticker

- Source Business Standard (link 1)

Stock price chart

Later Times of India trying to assuage market fears by claiming that DLF is crying foul

Thursday, February 16, 2012

Smart money is moving out of realty; so why should you buy?

Article Link

If you are a home buyer waiting for property prices to fall before buying, here’s a counter-thought: the big investors are actually moving out of real estate.

One signal came last week when Deutsche Bank asked the Mumbai-based Lodha Group to return its money with a clean profit. The group forked out Rs 2,542 crore to the bank to enable it to exit its investment.

According to a Business Standard report, apart from Deutsche Bank, there are at least six other private equity and property funds that have exited. Among them: HDFC Property Ventures (two investments of Rs 715 crore), Kotak India Real Estate Fund I (Rs 575 crore), Indiareit Fund (Rs 500 crore), India Advantage Fund Series I (Rs 305 crore) and Trinity Capital plc (Rs 120 crore).

That’s a cool Rs 4,700 crore-and-odd opting out of real estate . The problem is fly-by-night “investors” are realty’s big mafia – keeping prices unreasonably high and preventing actual users from buying. This is also one reason why the Deutsche Bank’s are running away.

Thursday, February 09, 2012

Mumbai placed at 199 in list of 200 cities by per capita income

Read a report from Brookings Insitute.
Article Link

Top 3 Cities
1 Hartford North America 75,086
2 Oslo Western Europe 74,057
3 San Jose North America 68,141

Bottom 3 cities
198 Alexandria Middle East and Africa 2,248
199 Mumbai Developing Asia-Pacific 1,990
200 Cairo Middle East and Africa 1,989

So the question is: We have lowest per capita income, but highest real estate prices? All RE Bulls are immediate to compare Mumbai with New York, London, Tokyo, Singapore and Sanghai. While our income is just $1990 per capita. Are these BULLS cracking something???

Wednesday, February 08, 2012

Real estate BUY/SELL classifieds thread

Let use this thread to post classifieds for sale of apartments/houses/plots in India. I will pin this thread to the top so it can be accessed directly. Sellers please saleable Square Feet area, price and contact information. Buyers please do your due diligence before making the final purchase. Brokers can use this thread if they mention their commission percentage.  Please flag any trolls or undesirable postings.

Real estate BUY/SELL classifieds thread

Let use this thread to post classifieds for sale of apartments in India. I will pin this thread to the top so it can be accessed directly. Sellers please saleable Square Feet area, price and contact information. Buyers please do your due diligence before making the final purchase. Brokers can use this thread if they mention their commission percentage.  Please flag any trolls or undesirable postings.

Sunday, February 05, 2012

Ajit Dayal on real estate prices in India

I think someone with some real guts pointed out why Real Estate prices in India are artificially kept high by Politician / Builder nexus.... The unfortunate thing is there is no outrage. All PSU banks have large amount of money to Builders, and not to needy folks who want to start business, generate employment, etc... GOI has given tacit support to such an act. This situation needs to come out, unfortunately Main Stream Media has not reported this in detail.

Video Link

Friday, February 03, 2012

Mumbai Home Sales Drop to 3-Year Low as Prices Climb to Record

Article Link

Mumbai’s residential home sales dropped to a three-year low in the quarter ended December as record home prices and higher interest rates crimped demand, according to Liases Foras Real Estate Rating & Research Pvt.

Sales in Mumbai, India’s most expensive property market, fell 17 percent from the previous quarter to 7.59 million square feet, said Pankaj Kapoor, founder of Liases Foras. The city’s unsold inventory, or the number of months needed to clear stock at the existing absorption rate, climbed to 44 months. A “healthy market” normally maintains about eight months of inventory, according to Kapoor.

“The likely scenario looks like we will see a dip in prices seeing the dismal sales and as liquidity remains tight,” Kapoor said in a phone interview from Mumbai yesterday.

Sunday, January 29, 2012

Mumbai property: Will prices fall in 2012?

Article Link

To be sure, record home prices and higher interest rates have hit demand badly: Mumbai’s residential home sales dropped to a three-year low in the quarter ended December, according to a Bloomberg report.

According to data provided by Liases Foras Real Estate Rating and Research, sales fell 17 percent from the previous quarter to 7.59 million square feet, the report added.

Unsold inventory, or the number of months needed to clear stock at the existing absorption rate, also climbed to 44 months.

The figures elicited a rather predictable response from the founder of Liases Foras, Pankaj Kapoor: “The likely scenario looks like we will see a dip in prices seeing the dismal sales and as liquidity remains tight,” he told Bloomberg.

Unfortunately, we believe there is no guarantee that property prices will fall, no matter what the experts say.

Wednesday, January 18, 2012

Sobha Signature, RIP

Sobha developers were supposed to build their super expensive highly "exclusive" penthouses for "high net worth individuals". Rs. 5 Crores to Rs.10 Crores for 6800 Sq ft to 8000 Sq ft exclusive apartments. This project called, Sobha Signature, located along the congested Harlur Road, was supposed to be their best thingamagic ever.

"Our CEO is going to live here". "Think about it". "O U R CEO. He is the person who will live here" - peddled a salesman.

Turns out, there aren't enough suckers to pay Rs.5 Crores to Rs.10 Crores in Bangalore. Sobha Signature project has been shelved and will be replaced by Sobha Classic Phase II, which is a "poor man's" luxury apartments. Sobha Classic 3 BRs run between 90 lakhs and 1.15 Crores today.

May be this is the start, the super high end is bursting in Bangalore.

Friday, January 06, 2012

Ignore warnings at own Peril

Article link, Emerging Markets

The collapse of the emerging markets, especially China, India, and Brazil, will have a huge ripple effect on the rest of the world’s economies, and will plunge most countries back into a global recession.

It is our view that emerging market growth has reached an unsustainable level and that a slowdown is taking place. A slowdown is generally not such a calamitous situation, but with expectations for China, and emerging markets at such extremes, the failure to meet or beat these lofty forecasts could mean big shocks to global economies and stocks.

Emerging Market Warning Signs

  • Surging inflation that threatens sustainable growth
  • Soaring money supply that fuels bubbles in stocks and real estate
  • Credit bubbles
  • Massive and understated loan exposure
  • Tightening monetary policy that could “put the brakes” on the economy
  • Inverted yield curves that usually appear before recessions
  • Real estate bubbles evident in ghost towns and empty malls
  • Overconfidence buying at auctions
  • The infamous “skyscraper indicator”
  • Fraudulent companies that have attracted investment from around the world when they are nothing but “shell” companies with unproven financials
  • Most importantly: The stock markets of China, Brazil, and others have been deep into bear-market territory in 2011 – down between 20 percent and 30 percent from their peaks
  • Sunday, January 01, 2012

    Laughing Waters is no Laughing Matter§id=1&contentid=2011020420110204081607853b53eeb38

    An IT czar, two top-notch cricketers and a leading fashion designer have one more thing in common besides being super-achievers in their respective fields: All four, along with some 400 affluent Bangaloreans, seem to have been taken for a royal ride while attempting to purchase posh villas.

    Another major issue is the ambiguity over who the developer-cum-owner of the land really is. The name that has repeatedly cropped up is that of Prestige. According to Balasubramanian, the property was jointly developed by O G Ragulu’s son, Shrivatsa Rajulu, P S Developers (Prestige) and Laughing Waters. The permission for the layout from the administrator of Ramagondanahalli was obtained by Irfan Razack, chairman and managing director, Prestige Group. Razack held the power of attorney for O G Rajulu, the original owner of the land. Razack’s address mentioned in the documents is Copper Arch, Infantry Road — the official address of Prestige before it moved to the current office on Guard Cross Road.

    However, Prestige maintained that P S Developers was never a part of it. In a letter to the Laughing Waters Owners and Residents Association on November 9, 2010, Prestige Group’s senior vice president, T Arvind Pai, clarified: “We maintain that P S Developers is not part of the Prestige Group and to our knowledge is no longer in existence.” Pai stated that as per the grant khata issued by the thasildar’s office on March 13, 1967, “There is a kharab land of 4.36 acres which has to be reserved for road and drains. It is very clearly established that Laughing Waters is not a Gomala land or government land, and it is therefore incorrect to state that this is a Gomala land.”