NRIs, Foreign Investors dumping Indian RE, but Relators won't cut rates

Disclaimer: This Series of articles from FirstPost , remaining resources are copyrighted by their respective owner = posted here only for information to collate it in one place.

The global real estate fund of Morgan Stanley, which was in talks with the Wadhwa Group to invest about Rs 900-1,000 crore ($186 Million) in an office development project in Mumbai, has now shelved its investment plans as the rupee’s plunge has made the hedging cost for the entire deal too huge, The Economic Times reported today. The investment by Morgan Stanley Real Estate Investing (MSREI) was proposed to be deployed in jointly developing 1.6 million square feet office space in Mumbai’s financial hub Bandra Kurla Complex. Mumbai-based Wadhwa Group had already begun construction of the project, ONE BKC, which would consist of two office towers and is due to be completed by 2014. Are foreign investors shying from Indian realty? Are foreign investors shying from Indian realty? MSREI has invested about $850 million in Indian real estate, mainly in residential projects, including $100 million to $125 million in a housing project by Mumbai-based Sheth Developers, Reuters reported in December 2011, and the ONE BKC project would have been its first investment in commercial real estate. “Returns that were arrived at in earlier negotiations between Morgan Stanley and Wadhwa were shrinking even before concluding the deal,” one of the people familiar with the deal told ET as the rupee has slipped 46 percent in the last two years, wiping out returns of several PE funds. The pull out comes even as Wadhwa has been marketing ONE BKC as offering office spaces designed to suit occupiers of all sizes. The company has been using this as its USP by offering office spaces of as small as 1,000 square feet as it targets professionals like chartered accountants and law firms. “This deal is already very costly and there is high vacancy in BKC. Not just the Wadhwa Group but even Godrej Properties has a huge office complex there where absorption rates are very low. Add to the economic gloom and a horrible hiring outlook… Post Lehman Brothers, commercial real estate has been going South and BKC is largely a finance and banking sector, which is under maximum pressure right now,” said Pankaj Kapoor, MD at real estate research firm Liases Foras. Data from property consultant CBRE shows Mumbai’s BKC is the eleventh most expensive office market in the world. Clearly when there is a slowdown and corporates are looking to cut costs, MNCs wouldn’t want to shell out more as rent, which is why several corporates move out of expensive offices in BKC to relocate at low-cost locations such as Andheri East, Goregaon and even Parel. In Mumbai, Johnson & Johnson took up 150,000 sq ft in Andheri East moving from more expensive Worli while Franklin Templeton India moved out of Wockhardt Towers in BKC and shifted to Indiabulls in Lower Parel, where rentals are as low as Rs 125 a sq foot, and Volkswagen moved out from Maker Maxcity where it was paying Rs 500 a square foot to Andheri-Kurla road where rental is Rs 130 a square foot a month. Knight Frank data also showed that bulk of office space transactions during the fourth quarter of financial year 2013, took place in the suburban business districts of Andheri and Goregaon. “Andheri East and Goregaon East accounted for a massive 92% of the transactions in Mumbai,” the report said. A report by a Cushman & Wakefield says office relocations and consolidation of space have more than doubled in the first half of 2013 against last year and companies have managed to reduce their rents by 25-30 percent. In fact, property consulting firm Knight Frank points out that while the rental value ranges between Rs 200 and Rs 350 in BKC, it is any where between Rs 125 and Rs 190 a square feet in Central Mumbai (Lower Parel, Dadar, Prabhadevi) and between Rs 50-Rs 100 in Andheri, Josgehwari, Gorgaon and Malad. Moreover, sluggish leasing in business districts and new supply led to vacancy levels rising in office spaces. Mumbai saw a 10 percent decline in office demand in the first half of the year due to subdued economic conditions at domestic as well as international levels, the Cushman report said.

Read more at: http://www.firstpost.com/business/foreigners-dumping-realty-morgan-stanley-pulls-out-of-rs-1000-cr-mumbai-investment-1137019.html?utm_source=ref_article

http://www.firstpost.com/business/realtors-bank-on-freebies-festival-sales-but-rule-out-price-cuts-1141771.html

via

Foreigners dumping realty? Morgan Stanley pulls out of major Mumbai project

Sep 27, 2013

The global real estate fund of Morgan Stanley, which was in talks with the Wadhwa Group to invest about Rs 900-1,000 crore ($186 Million) in an office development project in Mumbai, has now shelved its investment plans as the rupee's plunge has made the hedging cost for the entire deal too huge, The Economic Times reported today.

The investment by Morgan Stanley Real Estate Investing (MSREI) was proposed to be deployed in jointly developing 1.6 million square feet office space in Mumbai's financial hub Bandra Kurla Complex.

Mumbai-based Wadhwa Group had already begun construction of the project, ONE BKC, which would  consist of two office towers and is due to be completed by 2014.

] 

Are foreign investors shying from Indian realty?

MSREI has invested about $850 million in Indian real estate, mainly in residential projects, including $100 million to $125 million in a housing project by Mumbai-based Sheth Developers, Reuters reported in December 2011, and the ONE BKC project would have been its first investment in commercial real estate.

"Returns that were arrived at in earlier negotiations between Morgan Stanley and Wadhwa were shrinking even before concluding the deal," one of the people familiar with the deal told ET as the rupee has slipped 46 percent in the last two years, wiping out returns of several PE funds.

 

 

RBI move for construction progress based loans | Mainstream media hoping for correction?

Reserve Bank of India Letter 

http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=8366

RBI/2013-14/217
DBOD.BP.BC.No. 51/08.12.015/2013-14

September 3, 2013

All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir,

Housing Sector: Innovative Housing Loan Products – Upfront disbursal of housing loans

It has been observed that some banks have introduced certain innovative Housing Loan Schemes in association with developers/builders, e.g. upfront disbursal of sanctioned individual housing loans to the builders without linking the disbursals to various stages of construction of housing project, interest/EMI on the housing loan availed of by the individual borrower being serviced by the builders during the construction period/specified period, etc. This might include signing of tripartite agreements between the bank, the builder and the buyer of the housing unit. These loan products are popularly known by various names like 80:20, 75:25 Schemes.
2. Such housing loan products are likely to expose the banks as well as their home loan borrowers to additional risks e.g. in case of disputes between individual borrowers and developers/builders, default/delayed payment of interest/EMI by the developer/builder during the agreed period on behalf of the borrower, non-completion of the project on time, etc. Further, any delayed payments by developers/builders on behalf of individual borrowers to banks may lead to lower credit rating/scoring of such borrowers by credit information companies (CICs) as information about servicing of loans gets passed on to the CICs on a regular basis. In cases where bank loans are also disbursed upfront on behalf of their individual borrowers in a lump-sum to builders/developers without any linkage to stages of construction, banks run disproportionately higher exposures with concomitant risks of diversion of funds.
3. In view of the higher risks associated with such lump-sum disbursal of sanctioned housing loans and customer suitability issues, banks are advised that disbursal of housing loans sanctioned to individuals should be closely linked to the stages of construction of the housing project/houses and upfront disbursal should not be made in cases of incomplete/under-construction/green field housing projects.
4. It is emphasized that banks while introducing any kind of product should take into account the customer suitability and appropriateness issues and also ensure that the borrowers/customers are made fully aware of the risks and liabilities under such products.


Yours faithfully
(Rajesh Verma)
Chief General Manager

 -----------------------------------------------------------------------------------------------------------------------

http://www.thehindubusinessline.com/industry-and-economy/banking/stakeholders-divided-over-rbi-curbs-on-innovative-home-loan-schemes/article5097436.ece

Banks have been advised not to give loans upfront for financing under-construction projects


Copyright @ The Hindu (business line)

---------------------------------------------------------------------------------------------------------------------------

http://timesofindia.indiatimes.com/business/india-business/Realty-feels-slowdown-pinch/articleshow/22500365.cms

http://economictimes.indiatimes.com/markets/real-estate/realty-trends/economic-slowdown-inflation-and-steep-interest-rates-pinches-realty/articleshow/22508453.cms

 

 

image copyrights with Bennett & Coleman + times of india group internet limited + economic times etc

Rupee in Doldrums USDINR -> Updates 62 then 64 then 66 then 68

USD INR in the last year v/s USDCNY (Chinese Renmimbi Yuan)

 From the International press

http://money.cnn.com/2013/08/19/news/economy/india-rupee/  

"HONG KONG (CNNMoney)

The rupee is trading at record lows and stocks have lost 10% in a month, even as the Indian government insists the country's faltering economy is not in crisis.

The slide that has rocked Indian markets accelerated Monday, with the rupee hitting a new record low against the dollar. The Mumbai Sensex, the country's benchmark index, dropped 1.6% on Monday and has now lost 10% of its value in the past month.
Investors are worried about India's large current account deficit, which reflects the nation's tendency to import many more goods than it exports and leaves it heavily reliant on foreign capital.

Talk of tighter U.S. monetary policy has seen some investors pull out of emerging markets in recent months.
Prime Minister Manmohan Singh has tried to calm nerves, saying the government has enough foreign reserves to defend the rupee for months.

"There is no question of going back to the 1991 [balance of payment crisis]," Singh told the Press Times of India, referring to an episode that nearly resulted in India defaulting on its debt payments.
But with elevated inflation, a sky-high government deficit and the economy slowing, some are worried that recent government attempts to shore up confidence may have had the opposite effect."

- Source: CNN Money


http://www.businessweek.com/news/2013-08-18/india-markets-plunge-pressures-singh-as-economic-crisis-deepens

"India’s biggest two-day stock market slide since 2009, surging bond yields and a plunge in the rupee to a record low are pressuring officials for fresh steps to stem capital outflows and support the economy.

The S&P BSE Sensex (SENSEX) Index sank 1.6 percent at the close in Mumbai, extending the 4 percent loss on Aug. 16. The rupee tumbled 2.3 percent against the dollar, touching an all-time low of 63.23. The yield on the government bond due May 2023 rose 34 basis points to 9.24 percent, the highest on a 10-year note since 2008.

The market rout underscores the failure of months of measures to contain outflows, from higher interest rates to gold import curbs. Foreigners sold a net $3 billion of Indian stocks and bonds in July as the slowest growth in a decade made Asia’s third-largest economy vulnerable to a pullout of funds from emerging markets, spurred by speculation the U.S. Federal Reserve will cool stimulus"

- Bloomberg BusinessWeek



---------------------------------------------------------------------------------------------------------------------------

Now in $ terms any crore rupee property is back to being 80 lakh property and so on.
continue discussion below

One More tax on Properties > 50 lakh?

http://economictimes.indiatimes.com/markets/real-estate/realty-trends/buying-a-property-just-got-a-bit-more-cumbersome/articleshow/20756700.cms

Verbatim from Economic Times.
Copyrights with ET (Bennett Coleman) & TOI

This might help reduce the speculative 10% investor purchases if implemented correctly?
Alternately all properties below 50 lakh will heat up and prices will rise even in low end of market.
Thoughts ?

---------------------------------------------------START----------------------------------------------------------

Buying a property just got a bit more cumbersome

25 Jun, 2013, 11.30AM IST

By Aditya Bajoria

A common saying goes, to know "stress", organize a person's marriage or endeavor to build a house. Consider the various factors which affect the decision on the purchase or building of a house, they range from vastu, legal documentation, anticipated appreciation in value and maybe even the whims and fancies of the relatives. Clearly, factors which may cost a common man, seeking to obtain a roof over his head, many a nights sleep. Well, thanks to the Finance Act, 2013, the stress has been compounded.

Effective from 1 June 2013, taxes are to be deducted at source ('TDS') on payments for the purchase of immovable property (including any land other than agricultural land, or any building or part of a building) @ 1 per cent. Taxes would be required to be deducted @ 20 per cent should the seller not hold a PAN. Such requirement to deduct taxes is triggered should the purchased property's cost exceed Rs. 5,000,000.

Many hoped that the representations of the Confederations of Real Estate Developers of India, requesting for a rollback of the section would be accepted. Non notification of rules to govern such new amendments, hinted at a possible rollback similar to the one performed last year, when similar TDS requirements were proposed in the Finance Bill 2012, but not enacted into the Finance Act 2012.

However, the Government, vide a notification released on 31 May-2013, has notified the relevant rules for deducting such taxes at source. As per the rules, the purchaser is to deposit TDS, vide Form 26QB, which is a challan cum statement, within 7 days from the end of the month in which tax is to be deducted (tax to be deducted at the time of payment or credit whichever is earlier). Further the purchaser is also required to download a TDS certificate, Form 16B, from a yet to be specified web portal and issue the same to the seller within 22 days from the end of the month in which tax is to be deducted.

 ---------------------------------------END------------------------------------

This might help reduce the speculative 10% investor purchases if implemented correctly?
Alternately all properties below 50 lakh will heat up and prices will rise even in low end of market.
Thoughts ?

 

Continue discussion here

Real Estate Regulator - Friend or Enemy

Sugata Ghosh  from Economic Times Writes -

 Verbatim copy from ET
http://economictimes.indiatimes.com/opinion/comments-analysis/real-estate-regulator-harsh-rules-soft-banks-will-keep-realty-unclean/articleshow/20468159.cms

Real estate regulator: Harsh rules & soft banks will keep realty unclean

After politicians, builders are the most despised lot. Everyone has a story of someone who got a raw deal. The keys were handed over three years after the promised date; buyers had to cough up more midway, thanks to a clause that initially appeared insignificant; the redeveloped apartment had two-and-a-half bedrooms instead of three; and a year later, another 20-storied tower sprung up on the "open space", blocking the view of the racecourse or the sea — for which the owner, taken in by pictures on glossy brochures, had paid a premium. The list is endless.

Some angry buyers move the consumer court while others grudgingly accept what they get. A few years down the line, they stop cribbing as properties in the neighbourhood change hands for double the price they had paid. By then, they could be browsing another brochure that has found its way into the inbox, planning a second home that comes across as the only sensible, even if a little sticky, investment.

The housing market is about spiralling rates that have priced out most buyers, ambitious developers who are answerable to no one, emergence of property as an asset class and mortgage instalments becoming the dominant outgo in household budgets.

Like politicians, developers require no qualification: anyone with a claim on a slice of land can put out an advertisement to attract buyers. It's a business that employs millions and flourishes without a watchdog. Thus, any hint of a new law that assures fair deals and exemplary punishments that would be handed out by a new regulator is irresistible.

But it won't be a cakewalk. Advocates of such legislation should be prepared for the tortuous road towards a well-regulated and cleaner property market.

First, home prices could go up in the medium term. Once the new Real Estate (Regulation and Development) Bill, 2013, becomes law, builders would be barred from selling a project till all approvals — as many as 70 of them — are in place. This would delay launch of new projects and push up prices of those that are cleared.

Second, corruption may rise as multiple agencies drag their feet on clearances. Developers may strike convoluted deals giving buyers the option to purchase later. Third, disqualifying a shoddy builder could stall construction in all half-done projects and hurt genuine buyers. And, lastly, the validity of many regulatory actions could be challenged in higher courts.

There would be hurdles on the way and unless there is a quick and effective mechanism to throw out unscrupulous developers and hand over unfinished projects to others for completion, harsh measures would backfire on home buyers. This could defeat the purpose behind an otherwise strong law.

The proposed regulator must play a meaningful role so that approvals are not held back without a valid reason. Besides listing out approved projects, its website should also spell out reasons why clearances are yet to come for pre-launch projects. This would make agencies responsible for vetting projects little more accountable.

It will be a tedious job but a real estate regulator, unlike most regulators, will have to play a far more proactive role that goes beyond giving the final green signal to a project when all approvals have been obtained by a builder. This will ensure that supply doesn't dry up in the short run.

But throwing the rule book would be ahalfway measure if men who bankroll developers are unwilling to pull the plug. More than any rule, this alone can make the biggest difference to the Indian property mart. So far, it hasn't happened. Banks could have brought about the change in 2008-09 when one of India's largest builders was on the brink of collapse.

Instead, lenders threw a lifeline to keep it afloat. While realty stocks plunged 90%, generous bankers thwarted a natural correction in property prices. India was among the few countries where real estate prices did not fall — in fact, even rose in cities like Mumbai — post Lehman. It was a reminder of the clout the trade wields. Having survived the worst crunch, its influence could have only grown since then. Pushing a righteous Bill a year before the polls may be a brilliant idea by the government. But make no mistake. It's aimed to restrain a formidable lobby.  


---------------------------------------------------------------------------------------------------------------------------

The question now becomes - will this regulator be actually beneficial to end users  - Will India make a law like China - where they are discouraging or banning buying properties for investment -
Will our builders which are in full nexus with the politicos comply ? Will the corrupt bureaucracy of India actually change and not let this regulator be yet another bribe to pay to get a home?

Top 10 countries slammed by the crash of gold

1. USA Holding > 8500 tons of gold

10. India                 550 tons of gold held by the government

The appetite of individual investors in India is negligible compared to the holdings in the soverign  countries. Per capita a US citizen holds Gold more then any India citizen.

The crash is gold is a reminder to everyone that the middle class gets crushed whenever bubbles are created and gold is no exception. Full article here

The US government controls everything, Gold, the fiat currency, crude oil prices, interest rates, nuclear arms, defence technology, everything in short which is of any significant importance. Everythign else they are happy to outsource to countries down the totem-pole

Around 1.20 lakh flats lying locked in Goa: Manohar Parrikar

PANAJI: Almost 23 per cent of houses inGoa are lying locked as buyers are not staying there, Chief Minister Manohar Parrikar told the Legislative Assemblytoday. 

"Out of the five lakh flats constructed in the state, around 1.20 lakh are locked; either it is a second home or buyer is not living there," Parrikar said. 

The chief minister said this trend is putting a strain on infrastructure as "only 8 per cent of the total land amounting to 30,000-40,000 hectares is available for development. We need to ensure that some land should be preserved for posterity". 

Parrikar said Goa can not be a destination for alternate houses. 

Expect the BJP govt to take away the houses from the Russian mafia sooner or later. 

Everyone is waiting for a change in the central government before implementing their own personal agenda.  Economic Times article here

China's housing bubble

Truth is stranger then fiction. India's housing bubble pales in contrast to the bubble in China. China cannot afford to slow down as it has a massive population to feed. If the bubble burst's the investors go down with the working class.

Just absurd.

What a China slowdown means to the world economy is  something nobody wants to talk about. Ask any analyst on CNBC and they would just brush it aside.

 The latest CBS 60 minutes video is here. 

Italy's votes Monday to oust sleazy politics and cronyistic society

The guardian has a interesting article on the surging sentiment for the Five Star Movement (M5S). The voters are sick and tired of the current parties and are rallying behind Beppe Grillo, the leader of the M5S. The sentiment here in the Italy is no different then the one in India with the AAP, the party of the Mango people lead by Arvind Kejriwal. When the BJP protests the origin's of the Sonia Gandhi, they were protesting against themselves. The Italian voters are no different then the voters in India and so are the Italian politcians who are no different then Indian sleazy politcians.  Berlosconi is a example high handed leadership which has cost the country dear which parallels the Gandhi family and Mr Vadra who appear to have suberverted the system to their advantage to no end.

Will this change in leadership in Italy go after the AgustaWestland bribery scandal and bring down all the middlemen in Italy, UK and India to justice ? If Italians want it, they could do it. After all Rome was never built in a day. For bloggers Beppe Grillo will be liked instantly as he is on of them. 

>>>>

All the evidence suggests that, when the result of Italy's general election is known later on Monday, it will be a deafening – and sensational –Basta! (That's enough!). The publication of polls in the last two weeks of the campaign is banned in Italy. But results circulating on the internet showed an abrupt surge in support for the Five Star Movement (M5S), which wants to force a reboot, not just of Italy's sleazy politics but of its cronyistic society too.

For the first time in 20 years, we have seen an election that has not been hijacked by the sayings and doings of Silvio Berlusconi. Instead, it has been seized by another, equally controversial figure – the M5S's barnstorming frontman, Beppe Grillo. http://www.guardian.co.uk/world/2013/feb/24/italy-elections-end-to-sleaze-cronyism

Builders blink, first price cuts are here

Article Link

After stubbornly holding on to high prices for four years in the face of sluggish sales, a crippling liquidity crunch and rising cost of capital, Mumbai’s real estate industry has just blinked.

At least three of Mumbai top builders have either cut prices by as much as Rs 2250 to Rs 5,000 or introduced flexible pricing within a single project, or launched innovative schemes where buyers stump up large sums to book properties even before the project enters construction stage.

All this means only one thing - the longdue correction in real estate prices is here. And while many builders may not be announcing price cuts up front yet, it is no secret that they all are now willing to negotiate with buyers.


--
A survey conducted by Knight Frank, areal estate consultancy firm, in June last year had revealed that Mumbai real estate market had an unsold inventory of 80,000 units worth approximately Rs 1,050 billion.

The report had also stated that the global economic crisis of 2008 affected the market adversely as prices dipped in some micro-markets at the premium end of the market and rebounded, scaling to their 2007 highs in the subsequent two years.

But in 2012, the Mumbai market stagnated as buyers largely kept away expecting a drop in prices in the near future. The buyers’ patience has paid. The Mumbai market is now opening for good bargains.

Lalit Kumar Jain, president of Confederation of Real Estate Developers Association of India, said the liquidity crunch is forcing builders to reduce prices and clear inventory. He expects more builders to follow Naman, RNA and Lodha’s example.

Watch Out Asia, Inflation Is on Its Way

Article Link

Inflation in Asia may be under control now, but prices across the region could soon start to creep higher, with India and Southeast Asia the most vulnerable, warns independent economist Andy Xie.

"At the end of the day, you have all this money out there. It's rational to expect inflation," Xie, a former chief Asia-Pacific economist with Morgan Stanley, said. "India is the most vulnerable. It cannot solve supply bottlenecks. Southeast Asian economies like Indonesia and Thailand too."

Inflation in India could rise to 10 percent and above 5 percent in Southeast Asia, according to Xie. He expects inflation in China to rise to 4 percent - doubling from where it is now.

High inflation in India meanwhile dogged the country's central bank last year and prevented it from cutting interest rates aggressively to boost a flagging economy. India's wholesale price index, the main measure of inflation, rose 7.24 percent in November from a year earlier.

--
"In Hong Kong and Singapore, the issue is very much about interest rates. So it's going to be similar to 1998," he added, referring to the property bubble that burst at the peak of the Asian financial crisis.
House prices in the two cities could plunge by half if interest rates go up, he added.

--
What will this do to Home Prices in India ????