India's housing bubble

Mumbai property: Will prices fall in 2012?

2012-01-29T14:48:00.000-08:00

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.

Sobha Signature, RIP

2012-01-18T06:00:00.000-08:00

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.

India's housing market stalls amid high interest rates

2012-01-15T17:21:00.000-08:00

Article Link on BBC website

Ignore warnings at own Peril

2012-01-06T00:16:00.000-08:00

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

Laughing Waters is no Laughing Matter

2012-01-01T04:46:00.000-08:00

http://www.bangaloremirror.com/index.aspx?page=article§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.”

As Rupee falls, NRIs 'home’ in on realty in Mumbai

2011-12-23T10:38:00.000-08:00

It appears that a 15% decline in the rupee has lead to surge in NRI interest in property. While the rest of Indian economy slows down the NRI can sustain micromarkets in IT cities like Bangalore, Pune and Chennai

DNA Article followed by one in Times of India. The builders are in overdrive mode courting the NRI.

The record decline in the value of the Indian rupee and the sluggish realty market have proved to be a double delight for overseas Indians investing in property here.

Sunil Sequira, a resident of Kuwait, has zeroed in on a property in Thane at a rate nearly 30% lower than usual. “This is the right time to buy property,” he said. “Many of my friends have also decided to buy property in India. We are expecting an annual 10% to 15% appreciation.”

Sandeep Reddy, co-founder of Groff.com, a real estate brokerage firm, said it has been getting a good response from overseas buyers. At the recent property exhibition in Dubai, many people booked flats on the spot, and several showed interest in flying to Mumbai to check out property and finalise their decisions.

“NRIs are mainly interested in Navi Mumbai and Bangalore properties. This time, there was a slightly lower demand for the Delhi market. Going by this response, we have decided to organise and participate in exhibitions in Singapore and other international places that have a large Indian population,” said Reddy.

Niranjan Hiranandani, managing director of the Hiranandani Group, said, “The decline in the rupee value against the dollar/dinar in the international market has helped to attract more and more NRI buyers. If the cost of the flat is Rs1 crore as per the Indian market, the NRI has to pay only Rs85 lakh— 15% less, thanks to the record decline in the rupee value.”

Commercial opportunities in the West are on a downturn. So, people are looking at the Indian market for investment and business purposes, he added. “Once the RBI brings down its high interest rate, the city property market will surge again. There is a huge demand for houses, but the high costs and interest rates have discouraged buyers temporarily. People are awaiting the low interest rate loan.”

Times of India article

Hot Indian property destinations for NRIs in 2012
The Non Resident Indian (NRI) might as well remember 2011 as the year of the 'lazy investor'. For NRIs have gained 18% since August 2011, simply by remitting money to India; no effort at all. But as we approach 2012, NRIs must take stock of how best to use their remittances. The traditional favorite has always been real estate. But in this volatile market, how great an investment is it? Is this a good time to buy property in India? What kind of property is a good bet? Let's try to find answers.

What are the key locations for residential property?

"Suburban locations of every metro are great investment options. So for instance, you have Gandhinagar near Ahmedabad, Nalasopara, Dahisar, Panvel, Pen and Kalamboli near Mumbai," says Dutt.

Mahtani places her bets on GST road, Porur and OMR in Chennai, North Bangalore largely Hibbal, Saha Shivnagar, Sarjapur Road and Whitefield in Bangalore, Dwarka Expressway in Gurgaon, Bandra East, Goregaon, Panvel in Mumbai and certain select developments in Lower parel, Mahalaxmi and Parel in Central Mumbai.

Discussions with a big builder's sales guy

2011-12-13T16:29:00.000-08:00

I was very ambivalent about posting this, but I am just pretty pissed how these big builders get away with semi-legal properties.

Me:

Do you still have any big 3 bedrooms on sale? What is the current price?

Is there katha for the land?

Sales VP:

S****a C*****c is completely sold out. I can offer you big 3bhk of 2100 sft.
in S*****a C******on. There are only two flats available in 3rd & 4th floor
facing the swimming pool. Total will be 1.1 cr. (app) all inclusive.

For every project there is a Khata.

Me:

OK.

Is this a "A" Khata or a "B" Khata? My lawyers forbid the "B" Khata saying that is illegal.

Sales VP:

Sir, to keep you updated S****a is not related to any illegal documentation. Our property documentation is done by Mr. Anup Shah's law firm, one of the biggest lawyer of the country. Moreover our all projects are approved by SBI, they have their own panel of lawyers without whose confirmation SBI don't approve any property. Also S****a C****n I is ready to move in & people has started shifting now.

I really don't know after staying in a S****a Flat also how come you are not confident of the builder. 99% of the S****a tenants end up buying in S****a only. We are the largest brand of South India and we are known for our transparency in clear legality of the documentation, doubting us is like doubting the engine quality of a Mercedes Benz car, for what they are famous in the world.
If you & your lawyer has still doubts, then you are most welcome to our office, there you can meet our legal team and clarify your doubts.

Me:

I saw apartments come up for sale in L******er and J*****ne and both have "B" Katha. The general consensus amongst lawyers (I talked to a SBI lawyer as well) is the "B" Katha is not correct.

Why is that other than Q*****z and one other property, no other S****a property in Bellandur area has a "A" Katha?

There is a lot of discussion and angst amongst S*****a J******ne owners in the internal mailing list about the lack of this "A" Katha. I am curious to know why Jasmine does not have appropriate Katha for the land.

I like living in a S*****a community, but I need to know why these properties only have a "B" Katha.

Sales VP:

As I told in the last mail you are most welcome to our office to have a detail discussion with our lawyers about all your legal clarifications.

Also to keep you updated majority of the. S*****a J*****ne residents have bought 2nd/3rd time in S*****a only. I have clients in J*****e block 1 who have bought three times in S*****a and also referred so many of their friend & relatives for S*****a only.

Me:

OK. Fair enough.

If I have to infer what you say, the land is all legal, but there are other things that have caused the "B" Katha. I will reach out to your legal department when I need help.

Do you have a pointer to your legal department?

For the record, I love S*****a J*****e.

Sales VP:

You can come to our office & meet Mr. Shivraj,from the legal time. But the main concern is C*****c is sold out , in C*****on only 2 flats are left. By the time you finish all your verifications there will be nothing to buy. Immediately block a flat first and then do all your queries.

Me:

Not really interested in C*****on. Don't like the location.

There are plenty of resale properties available in the existing S*****a properties, including C*****c. I am not in a hurry to rush and buy anything without proper legal checks.

Thanks for your help. I will take the help of Mr. Shivaraj as the need arises.

Sales VP:

We don't deal with resale as per our Company norms. Please let me know only if you are interested in new S*****a Property.
Mr. Shivaraj can only help you only if you are a buyer of our property directly from S****a.

And thus it goes. Unless the original buyer insists and gets clear documents and title from the developer, there is no chance in hell that you will get all the documents from the developer during subsequent years. And yet, people buy and sell properties worth many Crores.

Mumbai developers run for cover, cut property prices

2011-12-13T12:24:00.000-08:00

Article Link

The developer has blinked. Prospective buyers who were waiting for correction in realty prices should rejoice, as city developers have started bringing down property prices by 10% to 30%.

Manohar Shroff, general secretary of the Maharashtra Chambers of Housing Industry, Navi Mumbai, admitted that developers had started reducing property rates to survive in the sluggish market. Higher interest rates, rising inflation and increasing construction costs have not only dampened demand but also investor desire to book and own more flats.

==
Pankaj Kapoor, managing director of Liases and Foras, the real research firm said, the cash flow in the realty market has dried up in the last two years, and this has spread panic among developers.

"Earlier, the investors were helping developers by pumping enormous amounts of cash in the property market. Now, the investors themselves are in deep financial trouble, as they could not sell the properties they had bought earlier. So, the market is quite tight," he said.

The "B" Katha

2011-12-10T18:43:00.000-08:00

In my last blog post 'Third time unlucky', there was this comment which said most big name builders are trustworthy and if a bank approves such property, there is nothing to worry.

Let me provide you with the most obvious evidence to the contrary in this post.

Many new apartment complexes in the outskirts of Bangalore are sold with what's called the "B" Katha. This includes most of the Sobha apartments in the Bellandur belt (which is where I live). Only a couple of apartments in this belt have the "A" Katha.

Now these are apartments where a 3 Bedroom apartment sells for Rs. 1.1 Cr - 1.3 Cr and a 4 BR apartment sells for Rs.1.7 Cr to Rs.2 Cr. Most major banks provide loans for these properties.

I wanted to find out the difference between the two kathas and what it means.

A "katha" literally means an "extract". All it tells is, there's an entry for this land in the BBMP office and the katha is proof of that. The BBMP keeps two sets of registers - the "A" register for legal land (land legally approved by the Government for residential purposes) and the "B" register to keep track of all the "revenue land" (land not intended for residential purposes). It was created as a means to keep track of all buildings constructed on illegal land. Somewhere down the line, BBMP decided to issue an extract of this illegal register so that property taxes can be collected against these properties.

I have read all the comments to the blog posts, I am no fan of big Government myself, not to the extent of DhiMan :), but things like this prove his argument. It's clear that there is illegal construction done on un-approved land. There is no reason the Government should bless this in any which way. If anything, they should be levying heavy fines for providing civic amenities. Instead, they start issuing a "Katha", which confuses the lay-buyer.

The developers, of course, take this as a go-ahead to go berserk on constructing illegal multi crore properties on such illegal lands. What people believe is that the "B Katha" is some proof that this is a valid property. On the contrary, the "B Katha" is a Government issued proof that your property is built on illegal land. Look no further.

The BBMP commissioner Siddaiah recently created a major ruckus by declaring B Katha is a bogus. This kick started a whole range of discussion around the "B Katha" and puts the major builders in a spot. This ruckus led to "betterment charges to give permanent Katha"

"As the Bruhat Bangalore Mahanagara Palike (BBMP) gears up to implement betterment charges, citizens may heave a sigh of relief as ‘B’ khata owners can now get a permanent title deed, ‘A’ khata, by paying the same.

However, senior BBMP officials have placed a rider by stating that ‘A’ khata alone cannot be considered as regularising the property. “Even if they pay the betterment charges and get their ‘B’ khata converted into ‘A’ khata, property owners will still have to get their land regularised under Akrama-Sakrama,” informed a Palike official."

Say what?

You can now take an illegal "B Katha" and get it converted to an "A Katha" - but it's still illegal. i.e, the Government has now taken an obviously clear indicator that this property is illegal (B Katha) and have confused the legal document (A Katha). Earlier, if you owned a "A Katha", that was an indication that it was a clear property. Now, if you own a "A Katha", it "may be" clear.

Nice.

But then, isn't there an exit through the "Akrama-Sakrama"?

According to

"AS PER THE AMENDMENT TO THE KTCP ACT FOR REGULARISATION, 31-12-2008 WAS THE LAST DAY AND ALL THE CONSTRUCTIONS, ILLEGAL BUILDINGS, UNAUTHORISED LAYOUTS, REVENUE SITES ETC FORMED OR CONSTRUCTED BEFORE 31-12-2008 IS ELIGIBLE FOR REGULARISATION."

Ah, so it's time bound.

But has even this been implemented? Not quite. It was announced in 2007, but it still hasn't been made legal by the Government yet.

In the meantime, all builders use this legal mess to forge ahead in the construction of illegal property hoping that some day all of this mess would be regularized.

Till that happens, your Rs.1.5 Cr pent-house from the big name developer that has a "B" katha - remains illegal; and you even have a Government issued document to prove it.

Third time unlucky.

2011-12-07T06:18:00.000-08:00

Originally posted in R2IClubForums.

I am back to entertain you all with more amusing stories of Bangalore Real Estate.

After ReddyGate and CEOGate, one thing was very clear to me. It's very difficult to get the correct legal documents for a resale property. So I decided to narrow my attention to under construction brand new properties. I mean the builder must be eager to sell these, right? The project is progressing well and some blocks have been built and some others are coming up. The project is scheduled to end by Fall 2012, so give or take 6 months, by Summer 2013, the property should be ready. [Yeah, I know the risk of the project never being completed, but at this point I would buy it if the legal papers are clear and live with *that* risk.]

I went with this mid-tier builder who is building their first "villa" project. They have coined this new term called "villament", it's essentially an apartment, but with fewer floors. So instead of a 10 story behemoth, these things are 1x two story apartment built on top of another two story apartment. So there are totally 4 floors split between 2 apartments. I had seen this property way back in August and I couldn't agree on a price. We went back and forth on the price and we settled on a price, just in time as CEOGate was winding down.

The one thing you hear in Bangalore Real Estate - if a project is blessed by "State Bank of India", it's golden. SBI is the top tier bank of the lot and supposedly they have the most anal lawyers in town. If they clear a project, it's absolutely clear. There's nothing to worry.

This project was approved by SBI. Further to that, State Bank of Travancore approved it, so did Corporation Bank, HDFC Bank, Axis Bank, ICICI Bank and the lot. Hell, my bank loan got approved pronto since this was a pre-approved project.

Easy peasy I thought. Finally I can be done with the Real Estate mess in Bangalore. And then it started.

Since this is an apartment type deal, you own a small portion of the undivided share of the land. Since this property was 3 acres and 108 apartments, they divide the undivided land and you have the ownership of it. What this also means is that your lawyer is now going to check the land for all the 3 acres and make sure it's clean. If it is a "villa", typically they verify that one survey number where your property is located. [Typically, big projects are split across multiple survey numbers.]

I tried to find a lawyer who is aware of the intricacies of the project. One of the learnings I had from the past is when a lawyer starts digging up past history, often there are documents that are difficult to "trace". Giving the benefit of doubt to the developers, people quit, they misplace documents and it's a chore to find them. So I thought if I find someone who is aware of the legal issues, things would be easier.

I joined the Yahoo Group of the owners of the "villas" and asked them who used a lawyer to verify the land. Of the 30 odd people in the mailing list, not one had used an external lawyer. They all depended on the fact that the bank they borrowed money from clearing the land. Since the land was cleared by the bank, they assume the land and the project should be clean.

I had little choice but to go with the lawyer I have worked in the past.

This developer gave us a file containing of all the latest sale deeds and "katha" of the 3 different survey numbers. My lawyers went through this and came up with a list of documents that have to be investigated. Each of the survey numbers had 7-8 portions of land parcels and each land portion had multiple buyer and seller. The lawyer said this land is very "fragmented" so he needs to spend a lot of time.

Every land sale deed comes with what's called a "Mother Deed", which lists the history of the land. Typically any developer hands over the mother deeds along with the latest documents to a lawyer check. This developer refused to hand over these documents to my lawyer stating that the originals are mortgaged with SBI (since they pledged the land with SBI and borrowed money against it) and they only have one copy. They refused to make further copies of the documents.

So I beg my lawyer to send a person over to their office. Five such visits and nearly 20 hours of pouring over a few thousand pages of documents, my lawyer goes back in time for all the three survey numbers and investigates all the purchase and sales of the lands.

At the end of it, he lists about three dozen gotchas in the land. A few listed below for a sampling:

- Survey number "C", which forms nearly 50% of the apartment land was acquired by the Government in 1992 for "hitech" purposes. All the land was an agricultural land to start with and it was converted to "industrial" purposes when this happened. In 2007, apparently this document was converted to "residential". The developer had no documentation available for either the conversion to "hitech" land nor has documentation for conversion to "residential". When we asked about it, they said they have applied to the Tahsildar for this and they will get back to us. It's pretty bizarre that there isn't clear paperwork for a majority of the land, as late as 2007.

- There exists a middleman (John Doe) who has been the GPA owner for many pieces of the land in this lot since 1990. He has been the buyer and seller of this land many times over from 1990 to 2007. In 1995, on a single day, many sites were registered. All the sites were sold by John Doe. The GPA number mentioned in the sale deeds is different from the GPA provided to us. The original GPA, of course, is not traceable.

- When a piece of land is sold, the sale deed mentions the site number, and boundaries. The boundaries would say something like "bounded in the east by site x, in the west by site y, in the south by site z and north by 30 feet road". Now, when the sale happened in 1995, for ALL the sites, the boundaries are the SAME. The site numbers differ, but the boundaries remain the same. This is as if the same site was sold many times over on the same day.

The typical answer given by the developer for such cases is that this is a typographical error. While reasonable, the Government provides a solution to fix it. You can apply for a "rectification deed" and correct the errors in the sale deeds. This developer has not done it so far and refuses to do this since it's too late to do the changes.

- None of the original sale deeds for the 1995 sale is available. All that exists are certified copies of the sale deeds. The excuse given here is that the originals were lost. If that is the case, then the process is to file a police complaint, post an ad in the newspaper regarding this and save those as reasons to go with a certified copy. Of course, none of this is available.

Depending upon the lawyer you use, they either check 30 years of land documents or some go as back as 60 years. Here, I was getting stuck with improper documentation within the last 15 years.

The developer is unwilling to fix any of the errors in the sale deeds. I may get to see the RTC for the Government acquisition and release, but even that, we aren't sure.

But I wonder, how is this possible? These are obvious errors that SBI should have caught. So, what gives?

To cross verify, I find a lawyer who works often with SBI to approve these types of documents. He goes over the list of questions and confirms whatever my lawyer has raised are all valid questions and there's nothing out of the ordinary. When I ask him how SBI would approve such a project, all I get back is a smile and an answer that says "anything is possible in India".

I don't understand why the buyers in India don't go for an independent legal opinion when it comes to Real Estate. Shouldn't these things be caught up-front before 90% of the project is sold out? Isn't that the only way you can get a Real Estate developer to fix these wrongs before it's too late?

HDIL sells off prime plot at 42 crore loss

2011-12-01T06:40:00.000-08:00

Well, so much for real estate always goes up.... Even pros at HDIL could stump, how come novice investors can make money...

Article Link

MUMBAI: In the clearest sign of where the realty market is headed, leading developer Housing Development and Infrastructure (HDIL) has sold a 15.5-acre Eveready Industries plot at Turbhe-which it had bought for Rs 115 crore from the B M Khaitan group in 2008-for Rs 86 crore to Thyrocare Group, a medical diagnostic group. The hush-hush deal which is Rs 29 crore less than the purchase price has shocked realty experts.

Sources say HDIL has sold it at a much higher loss than Rs 29 crore. When it bought the land, HDIL paid MIDC Rs 4 crore towards differential premium, Rs 5.8 crore towards stamp duty and registration in addition to the land price of Rs 115 crore. Over Rs 2 crore was paid as consultancy fees. So, the total cost came to Rs 128 crore. The sale price included stamp duty, registration and differential premium pricing to MIDC. "So, the loss effectively works out to Rs 42 crore,'' a consultant said.

Retail opening cheers big firms

2011-11-25T10:32:00.000-08:00

Commercial space and shops in Tier-1 and Tier-2 cities will now see a jump in prices. In London Tesco Express is ubiquitous and found in every corner of the city. Tesco Express'es operate in 1000 sq ft of space. I forsee every suburb to have multiple mini big box express shops of every retailers as there is very little available retail space in most of these areas. I would not be surprised if prices of commercial shops rise another 25% from here.

(Reuters) - India's move to open its supermarket sector to foreign investors brought relief to its capital-starved local chains but failed to impress small-shop owners who dominate retail in the country, despite rules intended to safeguard small operators.

The government approved its biggest reform in years by allowing global supermarket giants such as Wal-Mart Stores Inc and Tesco to enter India with a 51 percent stake in the hope it would attract capital to build much-needed supply chains and improve efficiency to alleviate food-driven inflation.

"This is an extremely important step for domestic retailers as this will get in much-needed capital, apart from domain knowledge," said Thomas Varghese, chief executive of Aditya Birla Retail.

Chain stores account for just 6 percent of a $500 billion retail market dominated by street stalls and corner shops.

Many Indian chains are cash-strapped and loss-making, struggling to build scale given high costs, poor supply chains and scarce real estate and have been eyeing equity investments and joint venture partnerships with global firms to build scale.

Vijay Karwal, head of consumer, retail and healthcare for Asia at Royal Bank of Scotland based in Hong Kong expects more than $5 billion in foreign investment into the Indian retail sector over the next five to seven years.

Given the relative lack of modern retail infrastructure in India, and particularly in the enabling back-end infrastructure ... the vast majority of investment this change is expected to trigger would be greenfield investment into new retail sites and infrastructure," he said.

Shares in Indian retailers Pantaloon Retail, Shoppers Stop, Trent jumped -- bucking a fall in the wider stock market -- on expectations that they will form tie-ups with foreign players, and not just compete with them.

Debashish Mukherjee, partner and vice-president at consultancy firm AT Kearney, expects joint ventures and investments in local players from overseas operators over the next six months.

"The set of transactions which will happen fast is foreign players who are in existing joint ventures with Indian firms, the increase or decrease in stake, will happen quickly," he said. "The second are a set of deals that are waiting to happen and have been just waiting for the announcement."

SMALL SHOPS UNHAPPY

To appease opponents, the government said foreign stores will only be permitted in cities of more than 1 million -- of which India has more than 50 -- and individual states can decide whether to allow global players on to their patch.

It also insists that foreign retailers source almost a third of their produce from small industries, invest at least $100 million in India and spend half of that on infrastructure such as cold storage and warehouses.

Many small shop owners fear for their livelihoods.

"It will affect my business as families prefer going to air-conditioned stores with fancy packaged goods these days," said Vinod Jain, a 27-year-old small grocery shop owner in the Lower Parel neighborhood of central Mumbai.

A trade group representing so-called "kirana" shop owners is planning protests.

"The move to let the foreign retailers in will most certainly lead to job losses," said Praveen Khandelwal, general secretary of the Confederation of All India Traders.

"They should have worked on some kind of protectionist mechanism for smaller traders before coming out with this policy," he said.

Foreign retailers who welcomed the Indian government's move to open the sector also view the entry conditions with caution.

"Some of the conditions look quite stringent. The investment in particular -- it's all quite big money. We'd need to know the details, and how that would be accounted for," said an official with a major global retailer who did not wish to be identified.

India's property prices bite the dust - with a few exceptions

2011-11-23T10:03:00.000-08:00

Hindustan Times reports on NHB's index.

Residential property prices have dropped across most cities, with an exception of Delhi, Mumbai, Chennai and Pune, mirroring the trend that consumers are perhaps putting off planned house purchases due to rising interest rates and fall in disposable incomes. The movement in prices of

residential properties has shown a decreasing trend in nine cities covered by the National Housing Bank's (NHB) Residex during the July-September quarter of 2011 compared to the previous three months. ( see table)

NHB Residex tracks the housing prices in the select 15 cities. The classification has been designed so as to give the most representative index for each city based on the transactions in the market and data collected from various sources.

The data is put through a model that depicts the actual behaviour of the market and throws up the index.

Bank credit has slowed down in most sectors during the last six months prompted by deceleration in investment demand. Latest data mirror strong warnings on consumer spending slowdown.

Loans to real estate have also slowed down sharply to 2.3% during the first six of 2011-12 from 10.3% in the previous year.

The RBI has raised interest rates 13 times in the past 19 months to tame prices.

Credit growth to industry during April to September decelerated to 7.5% from 8.1% last year.

The coming NRI dilemma

2011-11-18T09:40:00.000-08:00

I was speaking to a friend the other day and he bought up the issue of buying an apartment in Bangalore. Now IT folks these days have a lot of choice in terms of cities however this guy had lived in Bangalore in the past and therefore the decision was pretty much obvious. The next thing which came up was within Bangalore which area's are nice, inexpensive but at the same time accessible to the IT corridor. Koramangala was mentioned but easily discounted as it was too pricey, so was Indra Nagar and Jaya Nagar as they didnt't meet the inexpensive criteria. Next came up the Marathahalli - Sarjapur road belt. While it didn't meet the nice criteria, it was easily the cheaper option given that they were on the IT corridor itself.

The topic of budget came up and a quick check of real estate websites puts the rate roughly at Rs 4,500-6000 per sq/ft all inclusive. A 3 bed flat should easily cost anything between 70L to 1 Crore. Now 70L is definitely not inexpensive however as compared to Koramangala this was definitely cheaper. Next the topic of the rupee came up. At Rs 51 a dollar the rupee has dipped 15% over that past 6 months. My friend was instantly salivating at the thought that he is suddenly 15% more richer then 6 months ago in terms of net-worth. Psychologically he felt more comfortable purchasing the home now then few months ago.

This led me to think on the impact NRI's have on Bangalore real estate. Come NRI season if 25% of NRI's interested in purchasing close deals at prevailing prices the builders have enough staying power in the game to close the the remaining 75% at higher prices. The biggest weapon which the builders have is that they can delay projects at will without fear of any litigation or judicial action. In such a scenario prices will always be held constant or increased with inflation. My NRI friend has the US dollar as his Indian inflation fighting weapon, however he must compete with other fellow NRI's to carve out his space in the Bangalore micro market.

At the end of the discussion my friend concluded that he will look at apartments in this belt, built up reputed builders with a gestation time of 3 years. He felt he had enough time then to get the apartment paid off without taking a loan from Indian banks. We talked about cheap financing available from US banks and he could easily get some 0-4% APR loans in the current market which can keep him liquid. One interesting thing coming out of the discussion was that we never discussed renting and briefly discussed buying plots as the discussion was focussed on the primary home at his destination city.

As we were wrapping up our discussion the only thing I asked him to do is to make sure he can sleep well at night, regardless of what happened to the rupee, interest rates, his job or the Bangalore real estate market. Anything which sacrifices sleep is not worth the trouble.

I would like for readers to point out if this sentiment is prevalent across cities among the NRI community. In my opinion builders who cater to NRI's will always have smooth sailing thru the ongoing tough times and will inflate the bubble as the supply of money is always increasing.

India 2011 - Moving to Better Ground

2011-11-16T15:58:00.000-08:00

Watch the builders in panel cringe on new Land Acquisition bill. I think minister Jairam Ramesh have them pinned down properly, now either they have to come down from ivory tower and compromise or live with anarchy ....

Lightning does strike twice

2011-11-10T17:56:00.000-08:00

After Reddygate, I thought I had seen everything Bangalore real estate had to offer. Little did I know that, I was barely getting started. A friend said the Reddygate experience felt like a Bollywood movie. It was barely a trailer.

Once I walked out of Reddygate (that property hasn't sold yet, looks like they haven't found another loser yet), we kept looking around. We witnessed the enormous greed of Bangalore's flippers. People who don't consider a 250% return of their investment in an one year period a satisfactory return, for instance.

We zeroed in on another townhouse property, this time again by the same big name builders (if you remember from Reddygate, a tier 1 builder in Bangalore). This is an older property (~8 years old) and "BDA Approved", so I thought once we negotiate and settle on the price, things should settle down rather quickly.

We haggled on the price with the seller. We went back and forth for a while and settled on a fair price. We liked dealing with the sellers as well. They were pretty straight forward, "educated", would deal with "100% white money". Ideal match. We gave a token deposit and got the legal documents to start the legal vetting process. That's where the fun started.

You don't appreciate the genius of a real estate developer like this one until you see what methods they use to penny pinch the Government out of stamp duty and registration costs. Agreed, it is moronical to charge ~9% of the sale value as tax and stamp duty per sale. But the developers take it to a different level to beat it.

1) For properties under 1500 sq ft of area, the stamp duty is less. Over 1500 sq ft, it is a "luxury" property, so the stamp duty is more. Since this property was about 2500 sq ft, the developer came up with an ingenious plan.

They sold the two level "row house" as two different units. The ground floor was sold as a different unit and the first floor was sold as a different unit. Two sale agreements, two sale deeds, the full shebang.

This property was about 2500 Sq Ft built on 2200 Sq Ft of land. As equal opportunity provider, they split this as two different "villas" of 1250 Sq Ft constructions built on 1100 Sq Ft of land :).

This physical impossibility of building a structure more than the land allows in one level is missed completely. Enough people were greased along the way that this property was registered successfully.

2) This might be a good time to introduce my seller. My seller is a PhD and MS from IIT Delhi. He has a MBA from IIMB to boot. He is also the CEO of a top tier company. As smart and savvy you can get.

Remember the two sale deeds? That implies, he should have two "kathas" [a Kannada document that says this is your property] and thereby he has to pay two different property tax each year. But the seller has one katha and he has been paying one property tax. Apparently, there is a way to "merge" the two properties into one by a process called "amalgamation", which my seller says he isn't "aware" of and is what he has probably done.

3) The address in the property tax he pays is about two kilometers away from the actual property. The "villa" is in Deverbesarahalli and the property tax is paid for an address in Marathahalli, which is about two kilometeres away and is a different village ;).

This is just the beginning of the legal paperwork mess. This goes on and on and on. The seller hasn't given the most basic set of documents needed to my lawyer to inspect. The seller points to the realtor, the realtor points to the developer, the developer points to the home owner's association and the home owner's association says they don't have all the documents needed.

Basically, the critical documents that have the appropriate approval from the authorities have gone "missing". No one knows where the documents are.

My "broker" suggested gently that I should be using "his" lawyer, the same lawyer he used to buy the neighboring row house for his "gelf" customer. The "gelf" customer trusted the broker to "do the needful" and "make sure all documents are correct legally". So the broker asked "his" lawyer to "verify" and of course, all documents checked out correctly there. So I must be doing this wrong.

Now, this is where things get a tad bit more interesting. I had hired a lawyer to help me through this. Turns out the seller is also a client to the lawyer at his corporate day job. The chief legal consul of the parent megacorp where the seller works for, makes a "friendly" call to my lawyer "enquiring" what's going on with the legal difficulties with the property.

Around the same time, my seller calls me and says that based on his professional experience with my lawyer, my lawyer is too conservative and I shouldn't consider her words completely. After all, when he bought the home, he didn't hire a lawyer, nor did he verify all the documents. He took a 90% loan from HSBC bank who verified everything, so everything must be hunky dory, you see.

That, to me, sums up India's real estate woes. Really smart people, really intelligent people who run companies buy real estate on a whim, without doing the basic document checks and sanity checks needed. They assume and trust the wrong people.

The real estate developers, even the supposedly very good ones, find out ways to scam people and they get away every single time. At the end, the careless one who buys this last ends up at the end of this Ponzi scheme, with a piling dump of crap. Sad.

There are a few learnings with regards to Bangalore real estate, both as a seller and as a buyer. I will add them in a bit. For now, I am still looking for a property with clean titles.

Reddygate

2011-11-10T07:48:00.000-08:00

This was originally posted in R2IClubForums.

I R2Ied 6 months ago. Immersed myself in the Bangalore Real Estate. Sold my land during the time period. Tried to invest it in a "villa" - twice so far. For good or for bad, both the villas were by the same builder, a tier 1 builder in Bangalore.

Here is my story, in 2 parts.

Price of Reddy 'Villa': Rs. 1.3 Crore
Advance paid to Reddy: Rs. 50,000
Legal documents in DVD: 1300 pages
Lawyer hours spent: 30+
Personal hours spent: 50+
Number of lawyers involved: 5
Sleepless nights: 12
Finding out how Reddy was going to screw you: Priceless

There were six Reddy sisters who owned the land who inherited it from their father Reddy who inherited it from his father Reddy who got it from some other Reddy who we don't know how he acquired the land. (Red flag 1).

The six Reddy sisters enter a joint development agreement with a big name builder to develop row houses. As part of the deal, the six Reddy sisters get 33% of the houses.

There are 58 villas in total. At 33%, those are 18 houses, so each Reddy sister gets 3 houses each.

Now, the eldest Reddy sister is selling one of her property. Her husband Seller Reddy is the one who is acting on her behalf. I interact with Seller Reddy.

The house I was supposed to be buy was #47 in the earlier plans. It was changed to #58 by swapping it with the other #58. There is no documentation or correction submitted to this regard to the Government. (Red flag 2).

The 33% sharing agreement lists what all houses each Reddy sister gets. My house #58 (old #47) is not in the list. The developer dodges the question as to how this happened. So I get all the people in a meeting, my lawyers, developer's lawyers and the Seller Reddy.

Turns out Seller Reddy got some more land after the fact and attached it to the community. As part of this he got 2200 Sq Ft of salable area assigned to him from the developer. When he did the contract, his wife Reddy and the developer unilaterally sign a document. That document is not counter signed by the other sister Reddys. (Red flag 3). The document just says 2200 sq ft of land and does not name the villa. (Red flag 4).

The house he is selling is 2700 Sq Ft + terrace and not 2200 Sq Ft (Red flag 5).

If you approach this as a con job, you will see that the renaming of the house was a slight of hand just to confuse the buyer. The house was in the original approval plan, so that should pass the checks. But the renumbering and making it house #58 of 58 provides them with an out. Even though this house was approved earlier, since the number changed, is it now approved or is it not approved? Why did you make the real last house you built as #47? (red flag 6).

Seller Reddy says he can do all supporting paperwork and get all sisters to sign off and so on. This just seems ripe for litigation. Not worth the fight.

tl;dr - Seller Reddy got cute. By-passed sister Reddys, got an extra house allocated for him, used slight of hand to confuse buyer.

Atleast one person can afford Mumbai real estate

2011-11-07T12:37:00.000-08:00

Full marks to Sushil Kumar on winning 5 crores on the Kaun Banega Crorepati show. The builders have atleast one person who can afford to buy the priciest real estate in Mumbai or Delhi. If only there were more winners Mumbai realtors would use the KBC story to drive up prices to even more ridiculous levels

Indian Realty in Trouble....

2011-10-29T21:55:00.001-07:00

Nice Article, Must Read.... House of Cards crumbling, Bring your own popcorn to the movie...

Article Link

The numbers are all moving in the wrong direction for developers in Asia's third-largest economy. Debt levels are rising as sales volumes and profits fall. Banks are shutting their doors to the industry just when it needs cash the most. Prices are stagnant and expected to fall.

"The marketplace is not foolish," said Lodha. "A price correction will happen naturally."

===
"Are there going to be months where companies might have to delay paying their interest? Yes," warned Lodha.

==
In early 2008, DLF, with a market capitalisation that peaked at over 2 trillion rupees ($40.6 billion), announced a fiscal year profit of over $1.5 billion - an annual increase of over 300 percent - thanks to an insatiable appetite for property.

But times have changed. With a market capitalisation that has shrivelled to $8 billion, the firm has turned to selling the family silver. Amanresorts, the luxury hotel chain it bought in 2007, is on the block as part of plans to sell $650 million of assets by March .

It is expected to announce the sale of the prime 17.5 acre plot adjacent to the World One site in December, two sources with knowledge of the matter told Reuters.

===
Real estate, which has garnered a growing slice of India's foreign direct investment (FDI) pie over the past few years, from 8.9 percent in 2007-08 to 11 percent in 2009-10, accounts for just 6 percent of the FDI this financial year, according to Ernst & Young.

India's realty index has fallen more than 36 percent since January, more than double the 17 percent slide in the benchmark Sensex , pouring cold water on the roughly $6 billion worth of planned initial public offering from developers.

Lodha's planned $570 million IPO has been stuck on the shelf for nearly two years.

More than $370 million in hoped-for IPO proceeds had been earmarked for construction costs, with another $61 million set to repay loans. That money has had to come from elsewhere.

Private-equity investors, which have poured $10.2 billion into developers since 2006, are set to withdraw around $5 billion in the next few years, forcing top developers including Lodha, Shriram Properties, DLF, Phoenix Mills and Unitech to buy back their investments, a Nomura report said in May.

===
But they may not be able to hold out much longer. "The current market sentiments and excess debt levels at high interest rates, against seriously impacted volumes, should bring about an immediate 10-20 percent price correction," said Sanjay Dutt, CEO, business , at property consultants Jones Lang LaSalle India.

"That means taking a cut in profit or accepting a loss on some projects ... We are likely to see some developers default on their debt," Dutt said.

Allotment of additional 33% FSI in Mumbai suburbs to correct realty prices

2011-10-20T12:59:00.000-07:00

Move to bring down TDR prices, curb cartelisation

Mumbai's realty sector has received a much needed boost as the Maharashtra government has announced a crucial decision to allot 33 per cent floor space index (FSI) in suburbs for premium. This is expected to substantially bring down the TDR (transfer of development right) prices, increase housing stock and reduce their prices.

Besides, the move would generate an annual revenue of up to Rs 5,000 crore from the recovery of premium to be shared by the state government and the Municipal Corporation of Greater Mumbai (MCGM). Initial estimates by the state government and the realty sector show that the allotment of 33 per cent FSI would increase in supply of TDR to the tune of 10 millionsq ft annually. Prices of residential properties are expected to fall by Rs 500-1000 per sq ft with the correction in TDR prices.

Chief minister Prithviraj Chavan told Business Standard, "The government had already completed the legislative part by amending the Maharashtra Regional Town Planning Act during the winter session of the legislature last year.

It was not implemented as the government thought it fit to seek a second opinion as there was a view that it may put pressure on existing infrastructure. However, the MCGM commissioner gave his view in favour of the allotment of 33 per cent FSI in suburbs for premium."

Chavan, who was speaking at the sidelines of investor after care conference organised by Maharashtra Economic Development Council, said this would help correct realty prices and also lead to increase in housing stock.

A government official recalled that the Bombay High Court had last year quashed the rule saying that it had no right to levy premium under the existing Act. After the High Court order in June last year, constructions with additional FSI had come to a standstill, forcing the government to issue an ordinance. With the amendment in the MRTP Act, the planning authority would be in position of levying premium against additional FSI of 33 % given to the builders executing projects in suburbs.

Realty industry has welcomed the government's move. Sunil Mantri, former president of Maharashtra Chamber of Housing Industry said "It was a long pending move. It comes at a time when the TDR market is highly volatile in Mumbai, Very few players control and decide the TDR price. About two years ago TDR prices had increased to a level of Rs 4,250 per sq ft which was resulted in the utilisation of TDR unviable. The current prices of Rs 2,700-3,000 per sq ft are also discouraging for may realty players." However, he informed that with the government's decision realty players are expected to pay a premium between Rs 1,200 and 2,000 per sq ft. Immediately after the premium payment the realty players would get TDR utilisation certificate.

Mantri said the government move would help create more TDR stock in middle segment which would reduce TDR prices. "In view of fall in TDR prices, realty players will be able to pass down benefit to consumers and the prices are expected to fall by Rs 500-1,000 per sq ft," he noted.

Yomesh Rao, director YMS Consultants Limited clarified that the 33% FSI was not above the cap of FSI 2 in suburbs, "It is just replacing the TDR at Rs 2,900 per sq ft by FSI premium at Rs 600 to 1,200 per sq ft from Andheri and Dahisar. The premium collection of well over Rs 2,000 crore annually can be used for the betterment of the city." He added that this would marginally affect the TDR cartel as TDR was still very much a required commodity.

Rao said the government's move is a win win for the Mumbaikars, the state government and the realty players.

Ashutosh Limaye, head for research at Real Estate Intelligence Services, said "There will be lesser dependence on TDR which will be reduced now to .67. The allotment of 33% FSI at premium is very transparent and the rate will be as per the ready recknor rate which are revised every year in January. It is transparent and fixed rate and not subject to demand supply situation. TDR rates will come down and the realty players in the present conditions are expected to pass down benefits to consumers."

Rajesh Raha, managing director Raha Realtors shared views of Rao and Limaye. He noted that "This will increase lot of development potential in suburbs. TDR price will reduce and we hope the realty players to pass down benefit to the actual users."

Quick look at the bubbles elsewhere

2011-10-10T01:15:00.000-07:00

As recommended by a commenter in the last article here is some news about property bubbles in emerging markets (also I want users to post new comments here) - most links from the last 2-3 weeks

Property
BRICS other than India

Non Brics

Other bubbles

Commodites http://www.economonitor.com/lrwray/2011/09/27/is-the-commodities-bubble-a-case-of-index-speculation-by-money-managers/
Chinese internet and Tech bubble http://www.forbes.com/sites/panosmourdoukoutas/2011/09/30/the-chinese-internet-bubble-is-busting/
Indian Internet bubble http://www.businessinsider.com/india-tech-reaches-near-bubble-stage-2011-10
US bubble #3 - Groupon, Facebook, Netflix. Google, Twitter, Zillow, Zynga, No comments on this http://www.theregister.co.uk/2011/09/20/bubbles_and_silicon_valley
http://www.nytimes.com/2011/10/10/business/global/households-pay-a-price-for-chinas-growth.html?ref=world

Developed world economy - Lost decade(s) looming

Back To Mesopotamia http://www.bcg.com/documents/file87307.pdf
http://www.zerohedge.com/news/muddle-through-has-failed-bcg-says-there-may-be-only-painful-ways-out-crisis
Merkozy and the Greek tragedy http://www.telegraph.co.uk/finance/financialcrisis/8782663/Debt-crisis-live.html

Fresh bout of gloom and doom. Remember the last time the world was in this rut was in 1937 and it took a world war to come out of it ...

Gold price over the decades

(courtesy Bullion Vault)

USD INR

http://www.google.com//finance?chdnp=1&chdd=1&chds=0&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1318234074792&chddm=365965&q=CURRENCY:USDINR&ntsp=0

Indian real estate faces cash crisis

2011-09-18T20:52:00.001-07:00

Financial times reports

http://www.ft.com/cms/s/0/8f5eda74-e064-11e0-ba12-00144feabdc0.html#ixzz1YMpFUNdU

Indian real estate faces cash crisis

By Neil Munshi and James Fontanella-Khan in Mumbai

The Indian real estate sector, once the realm of high-risk investments with astronomical returns, is facing a liquidity crisis in the face of escalating commodity prices, interest rates and inflation.
With the sector carrying a debt burden of about $24.6bn in the year to July 2011 – up almost seven times from $3.8bn in September 2005 – many small- and midsized Indian property groups face the risk of default. Major developers are delaying projects, discounting properties and looking to sell big assets.

On this story

“This is one of the worst liquidity crises the sector has ever faced,” says Dipesh Sohani, an analyst at MF Global. “Investors are staying away from the sector as the risk associated with it is too high.”
DLF, the biggest developer, has been trying to raise as much as Rs100bn ($2.2bn) by selling its non-core assets, such as hotels and land. Its debt burden rose to $4.4bn on the back of a tenfold increase in its interest costs since 2008, according to Bloomberg data. DLF paid Rs25.9bn in interest in the year ending in March 2011, compared with Rs2.78bn in 2008.
“We are living in a difficult environment,” says Saurabh Chawla, executive director of finance at DLF. “We see some moderation in demand. The cost of capital and cost of mortgages is high.”
Meanwhile, other major players are having trouble completing their projects and are seeking new buyers. Orbit Corp, which operates mainly in Mumbai, has been seeking potential buyers for its unfinished building in India’s financial capital since the start of August.

In the three months to June, an 8.7 per cent increase in annual industry revenues was accompanied by a nearly 20 per cent annual decline in profits, according to research compiled by Edelweiss Securities, a Mumbai-based brokerage firm.
In such dire times, the banks have almost stopped lending to the sector, and there are few companies willing to take a high-risk bet on high-priced development projects or buyers able to pay high mortgage rates.
“Basically, no one is lending to the sector right now because they see a risk attached to it,” says Sharan Lillaney, real estate analyst at Angel Broking. Total banking industry exposure to real estate was 3.1 per cent in July, down from 3.7 per cent in July 2009.
Meanwhile, residential demand in India’s financial capital dropped to a 30-month low in the second quarter and sales fell 11 per cent during the same period, according to real estate research company Liases Foras.
Between slumping demand and recalcitrant banks, developers find themselves in a catch 22 situation. “The builder can’t reduce prices because then they have to restructure the loan with the bank [at a higher rate],” says Mr Lillaney. “But they have to reduce prices because otherwise they can’t get any bookings.”
Many buyers are unable to secure a mortgage because record high interest rates, which India’s central bank raised to 8.25 per cent on Friday – the 12th hike in 19 months – are taking a big toll on the industry. The average loan rate to buy a house in India is 16.5 per cent, according to the Housing Development Finance Corp, India’s largest home lender by revenues, up from 10.25-11.25 per cent in December 2008.
The industry is facing strong headwinds, says Mr Sohani, including high commodity prices. “Steel and cement ... are up more than 20 per cent, [and] are hitting the companies’ margins,” he adds.
Ramesh Nair, a managing director for real estate consultancy Jones Lang LaSalle, adds that the government’s Rs3.14 per litre petrol rise would further hurt the industry.
Those higher costs, coupled with project delays, have caused private equity investment in real estate between April and August to drop by 20.2 per cent – at about $831m, down from $1.04bn during the same period last year – according to Venture Intelligence, a research firm. It all adds up to Indian property launches being down 42 per cent in June compared with the average number of launches in the past 12 months, according to Kotak Institutional Equities.

‘Residential property prices in Mumbai may correct by 33%’

2011-09-17T13:28:00.000-07:00

Article Link

"I can see a 33% correction coming in residential property prices in Mumbai, because the market is going to enter a consumer circle," Pankaj Kapoor, managing director, Liases Foras, a real estate rating and research agency, has said. Mr Kapoor was speaking at a workshop on real estate prices, hosted by Moneylife Foundation at the Moneylife Knowledge Centre today.
=
Mr Kapoor said that on the basis of current property offtake, Mumbai was in the worst position, while Pune was the best-placed. "Pune's stock can be cleared in 12 months. However, Mumbai will require 40 months," he said. He said that since many financers were shifting to Pune, more capital would be injected in that market and set off speculation. "After a year or so, may be Pune will also see irrational price hikes fuelled by speculation," he said.
=
"The problem with most valuations is that they go by the prices next door. So when a developer hears that the adjoining property has been priced at Rs2 crore, he will also hike his own prices. However, he doesn't consider whether sales are actually happening at those prices," Mr Kapoor said. "Even professional valuations are faulty on these accounts. So, inventory piles up, prices rise and the market becomes more lopsided."

Realtors fear Lokpal will expose nexus with govt

2011-08-31T09:23:00.000-07:00

Aricle Link

Among many other things, the implementation of a strong Lokpal Bill will expose the nexus between government officials and developers. It will also control the flow of unaccounted black money in the real estate sector, which has been used as a parallel source of funds and income for decades.

“Developers as a private player will not directly come under the ambit of the Lokpal, but their nexus with the BMC and especially income-tax officials will surely be exposed. The flow of black money is enormous in real estate sector. Buyers frequently become victims of developers who demand black money. Citizens need to be alert and file regular complaints if something amiss is happening,” said noted IPS officer turned activist YP Singh.

Another developer said, “If we stop accepting black money, then the majority of profits will go in paying huge government taxes. We are not the only ones involved in this wrong practice, Even buyers do so while selling their own flats. They do not mention the real transaction amount in the sale agreement to save on taxes.”

Bombay Dyeing moves into Real estate, Retail

2011-08-04T14:44:00.000-07:00

Parsee business and trusts like Bombay Dyeing, Godrej, Tata hold vast amounts of prime land in Mumbai. These guys are are now unlocking the land value by developing these land parcels and selling these outrageously priced apartments to black money holders. The airline GoAir which is run by Jeh Wadia is a flop airline. I wonder how CNBC TV18 touts it as a successful aviation business. In fact Jeh Wadia had made some disparaging remarks on the poor kids when he started the airline promotions at 500 Rs per seat to Goa. I wonder if he will say the same things about the rich luxury apartment owners who will still be living in 'below the poverty line' apartments as compared to a rich trust fund baby.

On the retail front with the imminent arrival of supermarket chains like Walmart, Tesco and CarreFour into the top 6 metro cities of India, I am expecting a big jump in prices for rentals/outright sales of shops in all major neighborhoods. Indian cities are just the right model for Tesco Express stores (1000-5000 sq ft) which stock Kirana style items while maintaining high quality standards of goods and customer service. A Tesco Express/Walmart express in every neighborhood is not unthinkable as these guys have the processes and knowhow defined to handle large scale operations smoothly

Project ‘ Bombay Dyeing Makeover’ has begun under the leadership of Jeh Wadia, the man behind Wadia group’s successful aviation business. CNBC-TV18’s Tanvi Shukla reports that the two key takeaways from the first annual general meeting (AGM) after Jeh Wadia took over as joint Managing Director of Bombay Dyeing is one, their focus on real estate and two, de-focusing from textiles and focusing more on retail part of the business.

To begin with, real estate is something that management has been talking about. Today they updated the shareholders that construction work has finally begun at the Dadar Spring Mill project. They are also going to be developing the Worli property.

In an interview Wadia says that high interest rates will put pressure on people buying apartments. “But fortunately for us we don’t have very high volumes, we have low volumes. Also, we are in the luxury end of the spectrum. So I don’t see much of a shortage as far as sales are concerned” he added.

Talking about the Group’s retail business, Wadia said that the company will now focus on opening more number of stores and introducing higher value added products. He aims at an entire revamp of the retail business, which would probably give them higher margin profitability, something that they haven’t really seen in the textile business for quite a while.

So Bombay Dyeing seems to be shifting from a textile giant to a company whose core focus will now be in real estate and in retail.

NOIDA mess - What to do about it

2011-07-20T11:22:00.000-07:00

India Real Estate Market About to Crash Or Consolidation?

2011-07-07T10:39:00.000-07:00

Article Link

It is not easy to find an analyst on the street who will be mildly bullish on the real estate market leave along someone who is irrationally bullish. In a scenario where the market seems to be short the real estate market, the laws of contrarian investing state that “when the whole market is long/short a trade, the trade may not fructify” which is what is happening to the real estate market in India. Fundamentally, the market is poised on a knife edge with multiple triggers slowing the market down. Some of the macro pointing to an imminent fall in real estate market are:

75 bps Rate hike by India central bank in 2011 has had debilitating effect on families who have been thinking of a new house purchase. Rising borrowing costs and inflation are reducing ability of Indian families to purchase a house.

With more interest rate hikes from RBI in the offing, macro environment is expected to continue to get tougher. Therefore, the risk of an accelerated downturn in sales still remains.

Lower Loan/Equity ratio: RBI has now instructed banks to accept nearly 20% of house value as equity portion from the buyer thus effectively reducing the ability Indian families leverage to buy a home.

Developers borrowing cost: Rising borrowing cost have also effected developers who now find it difficult to complete projects.

Aaj ka Mahabharat.

2011-06-26T04:17:00.000-07:00

Pure Genius

How your dreams of a new home go bust

2011-06-22T06:51:00.000-07:00

Article Link

Despite 90,000 flats lying unsold in and around Mumbai, MiD DAY finds that Rs 50 lakh will not get you a home even in places like Kandivli, Ghatkopar & Deonar.

Armed with a budget of Rs 50 lakh, MiD DAY reporters went to areas like Kandivli, Malad, Ghatkopar and other suburbs distant from the island city, where one would expect to find a flat in this range, but came back empty handed in every case but one. The only flat we could find within our budget was a 1-BHK for Rs 46 lakh in the poorly connected Kurar Village in Malad, which would be ready for us to take possession of only in 2013.

You have to wonder, why Government is sleeping at Wheel. Indian policies were admired when RE and finance bubble burst in US. Indian media and government were all praise saying how smart they were compared to US. Now, if the prices below do not yell, BUBBLE...., then what does? What happens when this bubble bursts? Do Indian Banks have no exposure to these absurd prices? I think we are in for a big surprise when this bubble crashes....

RNA Royal Park, Charkop (Kandivli)
Price: Rs 1.64 cr

Nand Dham, MG Cross Road (Kandivli)
Price: Rs 70 lakh

Orchard Residency, LBS Marg (Ghatkopar West)
Price: Rs 1.25 crore*

LBS Marg (Ghatkopar West)
Price: Rs 2 crore

Vrindavan Terrace, Sion-Trombay Road (Deonar)
Price: Rs 8 crore

India's subprime builders stocks

2011-06-14T00:21:00.000-07:00

Here is a brilliant article by R Jaganathan on the destruction of weath in the real estate stocks. I had written a similar article few years ago when the parabolic real estate stocks had crashed to the earth and people were holding losses of upto 90%.

>>> Article below. I have cut paste it, just in case some smart Alec decides that it is no longer new-worthy.

A curious phenomenon exists in the real estate sector. In the last three-and-odd years, you know, I know, and the dog at the lamp-post knows, that land prices have only gone up, flats cost more, and our EMIs on housing loans have gone up. We are paying through our noses for the few square feet we want to call our home.

Who gains when this happens? One presumes that the real estate companies and builders must be raking in the moolah.

But here’s the paradox: between January 2008 and June 2011, stock market listed real estate companies have destroyed investor value. The Bombay Stock Exchange Real Estate Index has dropped vertically by 85%, yes, 85%, when the broader market has fallen less than a fifth. The BSE Sensex fell by 15% during this time.

In a sample list of 10 listed realty companies compiled by Firstpost, the investor value destruction adds up to a stupendous Rs 2,66,952 crore. AFP
Investors have cried all the way to their brokers. In a sample list of 10 listed realty companies compiled by Firstpost, the investor value destruction adds up to a stupendous Rs 2,66,952 crore. DLF leads the list of losers— or rather, loss-creators— with a drop in market value of over Rs 1,43,520 crore.

What gives? When house prices have either not fallen too much and, in fact, may have only risen, when the land on which these houses were built was probably bought when prices were lower, why have real estate companies left investors holding the sack?

Far from investors deserting in droves, companies like DLF have, in fact, drawn new and more powerful investors. One example is Robert Vadra, hubby of Priyanka Gandhi, daughter of Sonia Gandhi.

According to a report in The Economic Times a few months ago, Vadra has been quietly diversifying away from his jewellery and handicrafts business into real estate. The paper says:

“…the 42-year-old Vadra, known for his punishing fitness regime and love for fast bikes, has sought to scale up and diversify his business activities since 2008, acquiring tracts of land in Haryana and Rajasthan, a 50% stake in a leading business hotel in Delhi, and attempting an entry into the business of chartering aircraft. Regulatory filings available in the public domain and reviewed by ET reporters reveal the changing graph of Vadra’s business interests. These include wide-ranging transactions with the DLF Group.”

Someone married into the country’s first family presumably has lots of advice available to him on how profitable, or unprofitable, the real estate business is, as is evident from the fall in the market values of shares. But we are surely missing something here?

Sure, we are. When house prices are high, when the profits reported on balance-sheets are falling, and share values reflect the same thing, it can mean only one thing: poor corporate governance. And in the real estate business, poor corporate governance means the profits may be hidden somewhere else, and investors are left sucking their thumbs.

Anecdotal evidence tells us that land is the currency used by politicians for storing their ill-gotten wealth. In fact, almost all recent scams implicating, bureaucrats and even judges involve land.

Sharad Pawar, the Nationalist Congress Party president, is widely believed to be a pastmaster in this business (Read more on this here.) Karnataka Chief Minister BS Yeddyurappa is under fire for corruption due to alleged land-grabs by his family members. (Read and listen here.)

The Adarsh Society scam, which cost Ashok Chavan his job as Chief Minister in Maharashtra, is about real estate. It also implicates his predecessor, Vilasrao Deshmukh.

YS Jagan Mohan Reddy, son of late Andhra Chief Minister YS Rajasekhara Reddy, is accused of owning lots of real estate in Andhra and Bangalore, as a Firstpost expose last month showed.

The Satyam scandal, where Chairman B Ramalinga Raju confessed to overstating accounts and profits, is also related to property: money was siphoned off to Maytas, a real estate company. And Jagan Reddy’s father YSR was a key player in allocating land and infrastructure projects to Maytas (reverse of Satyam).

Several judges of the higher judiciary are also being accused on involvement in land deals. Among them are former Chief Justice of India KG Balakrishnan, and Paul J Dinakaran, former Chief Justice of the Karnataka High Court, who is now being probed by a Parliamentary committee for various unexplained dealings.

If we have established the close linkage between the powerful and real estate skullduggery with this indicative list, here’s a speculative pointer: a part of the steep fall in the market values of listed real estate companies represents money parked elsewhere on behalf of the powerful.

If the total drop in value is Rs 2,66,952 crore for just 10 companies, and assuming even a 40% value drop due to weak sentiment in real estate stocks (when the BSE Sensex has fallen 15%), we are still left with an unexplained loss of over Rs 1,60,000 crore.

It is more than likely that this loss represents value that lies outside the companies in the hands of speculators, politicians, bureaucrats and middlemen who are part of the realty corruption chain.

And remember, we have only talked about listed companies. The real, real estate sector, may be even bigger than this.

Hinjewadi calling

2011-06-10T17:06:00.000-07:00

It appears that protests of every kind are fashionable these days. Now Hinjewadi tech workers are demanding better infrastructure for their own backyard.

Some interesting statistics : 70k tech workers contributing to total of 300k jobs. Roughly $4B in revenue. Projected growth to double in the next five years one can only imagine the plight of workers who commute from far off places to Hinjewadi. The next logical think which people do is to move closer to work. If this happens we will see prices closer to Hinjewadi jump as demand will begin outstripping supply. Right now Baner/Pashan/Kothrud/Balewadi/Bavdhan are poised for another jump in prices. Pune prices have stabilized and now rising slowly again. With 70k people in Hinjewadi, Magarpatta and eastern pune are way behind west pune. I've heard recently Cap Gemini has opened a big office in Hinjewadi and Accenture is moving to Hinjewadi in a big way and moving people there from their Magarpatta office. IBM, TCS, Infosys and Wipro are already big in terms of headcount. If the headcount reaches 140k in the next 3 years investors in these areas will be amply rewarded. However the million dollar question is which builder to trust even after being convinced that a location is ready for prime-time ?

PUNE: Information technology (IT) professionals of the Rajiv Gandhi Information Technology Park in Hinjewadi took to the streets of this prime IT hub of Pune on Friday afternoon to express their anguish over the poor infrastructure, sub-optimal traffic management and inadequate security arrangements.

The silent protest of these knowledge workers triggers 'Hinjewadi First', a three-month-long campaign aimed at attracting the attention of all stake holders - including the administration, law-and-order machinery and local residents, to the need for a better Hinjewadi.

These professionals, who are generally busy creating cutting edge software solutions for businesses spread all across the globe, were unperturbed by the monsoon showers as they stood holding umbrellas and banners in their hands asking for better infrastructure, better traffic management, enhanced power supply and security for Hinjewadi.

Over 70,000 professionals work in Hinjewadi generating IT exports of around $4 billion, to contribute nearly 40 per cent of Maharashtra's IT exports annually. Incidents in the last couple of years have raised concerns about security in the area and the physical infrastructure being inadequate.

Mritunjay Singh, president of the Hinjewadi Industries Association (HIA), told mediapersons earlier in the day that Hinjewadi First is an initiative that intends to gain the attention of the stake holders of the state and the city through a series of activities planned over the next three months. The intention is to highlight the need for improvement in the Hinjewadi area, making it a world class IT destination.

"We get adequate support from the government for specific problems raised, but the time has come to look at the growth potential of the area. We need to take a proactive approach in developing infrastructure, power, security and traffic on an urgent basis, looking at the growth potential of the area," he said.

Singh pointed out that there is only one arterial road in Hinjewadi and this is inadequate by any standards to handle the number of vehicles that carry the 70,000 plus professionals in and out every day. "If we allow things to go as they are, the road will choke very soon," he added.

According to Singh, the growth of Hinjewadi can be well-planned and structured if a dedicated and competent authority is created by the government to develop a holistic strategy for Hinjewadi and Pune as an IT hub. HIA is looking for completion of a fire station in Phase III, development of more connecting roads from Infotech Park to Balewadi and Baner to ease the traffic flow, improvement of public transport, increasing the water storage capacity by 5,000 cubic meters along with an alternate water line from Kasarsai dam, improvement in pumping facilities and changing the old water line to new.

Singh said HIA has planned many more activities involving a variety of stakeholders to find a comprehensive solution to Hinjewadi's issues. These will include round table meets, symposiums, traffic regulation drives, tree plantation week, opinion poll through different mediums and a big conclave to conclude the drive and the creation of a vision document for Hinjewadi, he added.

Guess what is common between Ramdev, Anna Hazare and RSS ?

2011-06-08T23:28:00.000-07:00

The last few days in India have been very hectic for the media as the anger against corruption has been taken to level not seen in recent times. In such stressful times it is best to find some comic relief to soothe the nerves and ready oneself for the battle next morning. Chidambaram , one of India's cabinet ministers have graciously offered to provide Indian citizens their daily dose of laughter.

On Twitter citizens from every walk of life are now joining Chidambarm in slamming the RSS for being responsible for almost anything and everything which has happened in the Universe for over few billion years. Link here

India's economic growth slows as rising prices hurt

2011-05-31T05:33:00.000-07:00

Article Link

India has reported weaker-than-expected growth numbers for the first three months of the year.

The country's economy grew by 7.8% in the first quarter compared with the same period last year, the latest government figures showed.

India's economy has posted robust growth since the global financial crisis.

However, the Reserve Bank of India's monetary tightening policies have seen a loss of momentum.

Analysts say that as the central bank continues its fight against rising prices, the pace of growth is likely to be slow for some time.

"I think this loss of growth momentum will continue for industry for a quarter or two because we are not yet done with interest rate hikes," said Shubhada Rao of YES Bank.

However, analysts warned that though a slowdown in growth had been broadly expected, continued loss of momentum would have an adverse effect on the economy.

"It is significant because it is the first quarter of sub-8% growth since the crisis," said Sonal Verma of Nomura.

"The last four quarters we have been growing above 8%, so this is really a slow starting point for the next financial year," she added.

Realtors grapple with huge unsold stock; rising prices & costlier loans hit buying plans

2011-05-19T12:09:00.000-07:00

7,100 seems to the sweet spot for Malad. Anything above is just not affordable in any tier-1/tier-2 city.

Economic times reports

Dentist couple Sushma and Vikrant Mohanty had been looking to buy an apartment in Delhi-NCR for almost a year. But after several rounds of unsuccessful discussions with builders and umpteen visits to property sites, they decided to wait till prices came down.

The 2009 real estate slump had created lots of buying opportunities, but prices have climbed since then to what some believe are unsustainable levels.

Last week, as home loan rates shot up after RBI hiked interest rates, the couple saw their dreams come crashing down. They have now dropped all plans of owning a house.

"This is like a double whammy. Now I don't know when we will be able to buy a house. We are already paying heavy rent in Delhi," says Mohanty.

Across the city from where they live, RK Arora, managing director of Noida-based real estate company Supertech , is a worried man. He has seen a 10-15% drop in sales in the past few months. His company launched six projects in the past one year and prices have already risen 15-20%. He fears a further drop in demand. "Rising interest rates have already impacted demand," he said.

Builders like Arora and prospective home buyers like the Mohantys are caught in a bind. Rising interest rates and soaring prices are forcing more and people to put off purchasing plans, affecting builders who desperately need money to pay off costly loans and start new projects. The unsold stock in major cities has been going up, forcing banks and equity investors to call for a price cut.

"It's not interest rates that have spoilt the party, it's home prices," says Renu Sud Karnad, managing director of HDFC Ltd , one of India's biggest housing finance companies.

"There has to be some rationalisation of prices-by at least 10-15%-in the next few months," she added. Unsold residential units in projects that are completed or are nearing completion within the next 6-12 months in Mumbai and Delhi-NCR are as high as 25% and 16%, respectively, of the total number of units.

In other top cities, including Bangalore, Chennai and Kolkata , the numbers range between 12% and 19%, consultant Jones Lang La-Salle found in its real estate intelligence service for the first quarter of 2011 (see chart on Page 1).

"A price correction is imminent. How long can developers hold back... I think prices will correct by a maximum 15%," says B Niyogi, chief general manager, real estate and housing, State Bank of India , India's largest lender. Real estate research firm Liases Foras says approximately 471.9 million sq ft of residential stock, one-fifth the size of Chandigarh, is lying un-sold in the country's top six markets.

For real estate firms, with bad memories of the 2008-09 slump, these numbers are scary. But they also illustrate what could go wrong in a highly price-sensitive industry hugely susceptible to the vagaries of consumer sentiment, interest rates and commodity price changes.

"Cost pressures are building up for developers. They will have to cut prices to retain volumes, failing which it will impact profitability and cash flow in the coming quarters and affect margins as well," says Aashiesh Agarwaal, real estate analyst at Mumbai-based Edelweiss Se-curities.

Companies such as Gurgaonbased Unitech, one of the country's top builders, are feeling the pinch too. "Today, selling efforts need to be put in unlike earlier when all projects were selling on their own," says R Nagaraju, vice-president, corporate planning and strategy, Unitech.

In the past one year, the industry managed to bounce back from the 2009 slump, though the recovery has been uneven. In 2010-11, the industry took full advantage of the positive sentiment, economic growth and softer rates to sell more. Prices rose, not just because of demand but also construction costs. Rising steel and cement prices fuelled a 60% jump in construction costs. Price of land is not coming down either.

"It is becoming almost unmanageable," says Snehal Mantri, director-marketing at Bangalore-based Mantri Developers. Companies coped with the scenario by increasing prices and hoping that consumers would be able to pay. For some time they did, but the party may be coming to an end now.

At the end of trading on May 18, 2011, the BSE realty index was at 2,120.45, down 47.5% from its 52-week high of 4,034.35 on October 7, 2010, and down 84.7% from its highest-ever level of 13,848.09 on January 8, 2008. Defaults, not unheard of in the real estate industry, are likely to re-turn. Bank lending is already down after a recent RBI directive and scams involving real estate companies. Private equity, the alternative to loans and IPO, is playing coy too. They want builders to cut prices and get rid off the inventory.

"All private equity funds are working on the basis that there would be a 15% correction. No one wants to lose money," says V Hari Krishna, director-investments, Kotak Realty Fund , a sector-specific private equity firm.

According to PropEquity, a real estate consultancy firm, in the last one year, prices of new and existing housing projects in some parts of the country have risen 10-40%. In the first quarter of 2011, Mumbai has seen a 17% drop in home sales, Bangalore 14% and Hyderabad 15%.

Some builders think they can manage by focusing on small cities. Jaxay Shah, a real estate developer in Ahmedabad and vicepresident of Credai, insists that Mumbai and Delhi should not be considered as the barometer. These cities contribute hardly 4% of the national mar-ket. Sales in tier-2 and tier-3 cities are steady, though there is some panic due to hike in interest rates, which have climbed to around 11% from 8.25% a year ago.

An executive at a large home loan lender gives the example of smaller cities where local developers understand the market demand and know how much people are willing to pay. So they price their projects according to the paying capacity. Markets like Lucknow, Indore, Ghaziabad, Faridabad and others are doing well because the ticket sizes are low.

"The actual ticket size of a property is what matters. Rs 20-40 lakh is really the segment that will attract mid-income Indians," adds Karnad of HDFC. All this is happening at a time luxury projects are languishing. "Developers have not been able to interpret the activity in the mar-ket," points out Shveta Jain at Cushman & Wakefield .

Mumbai-based Omkar Realtors and Developers recently launched apartments at Rs 7,100 a sq ft in Malad, a Mumbai suburb, where other builders are still selling at Rs 8,500-13,000 a sq ft. Within 20 days, Omkar was able to sell a tenth of its total inventory of 1,000 apartments. Similar price cuts have worked in projects in Chembur and Dadar as well.

"Genuine demand still exists in the market. If one decides to stick to high prices, demand may remain elusive," said Babulal Verma, manag-ing director of Omkar Realtors & Developers. Across the country, many builders and lenders will hope that he is right. But there is another fear-the bottom could be a long way off. As Jaxay Shah of Ahmedabad says, "When buyers don't buy, they don't buy at any price, because of the sentiment." The industry will hope that he doesn't turn out to be right.

No demand for houses, but prices hit an all-time high

2011-05-09T11:23:00.000-07:00

There cannot be a more telling article on the housing bubble in Mumbai then this one. The question is not whether houses have rises 4 times in 6 years. the isue is whether there are any buyers at current prices. There is absolute no traction in the market at current levels in Mumbai. In other cities, apart from Delhi, one can easily get an 2/3bed apartment for 50-70L. In the island city one cannot get a 1 bed in the suburbs for this price. The builders are just living in fantasyland.

The laws of demand and supply do not apply to your city's real estate scenario. With 93,000 under-construction and readyfor-possession homes still unsold, the 'weighted average' cost of a flat is at its peak, according to a finding put out by property research firm Liases Foras.

On an average, the cost of a flat in Greater Mumbai (area under BMC limits) is pegged at Rs 2.18 crore. That's a 436 per cent rise compared to 2005 prices. Since then, the graph has steadily moved northward but for a brief dip during the economic meltdown in 2008 (see info graphic).

Common man's woe

And this upward swing in cost has pushed the middle class to the fringes. A basic principle of lending institutions says that the cost of your house cannot exceed five times your annual salary. In 2005, to buy a home, your annual income should have been Rs 8 lakh. At today's prices, your annual income has to be Rs 43 lakh.

"Five years back, Rs 8 lakh per annum had a higher purchasing power than today. And it was not too difficult for one's family income to be in the range of Rs 5-10 lakh," said a market observer. "Today, even if individual incomes fall in that range, very few family incomes are in the Rs 40-lakh range," he said.

Managing Director of Liases Foras, Pankaj Kapoor, points out at a pricesale pattern, not particularly to Greater Mumbai but in the entire Mumbai Metropolitan Region that includes Greater Mumbai, Thane city and Navi Mumbai.

"When prices fell, sales picked up. Like, when the per-sq-foot weighted average price in the metro region fell from Rs 8,100 in 2008 to Rs 5,300 in 2009, sales improved from 9 million sq feet to 20 million sq feet," said Kapoor.

"The rate today is Rs 9,235 per sq ft. Even if you factor in inflationary costs, prices will have to be in the range of Rs 6,000 per sq ft to increase market efficiency."

Prices likely to drop?

With home sales already low, and if the current pace of sales continues, it will take 35 months for the current stock of unsold homes to find buyers, feel realty experts. And, they opine that this situation will only bring down the market further.

"While an overall correction of 35 per cent is required to improve sales, South and Central Mumbai will need a correction to the tune of 40 per cent," said Kapoor.

Though not all realty experts may agree on that, the general sense is that prices will correct by at least 15 per cent in the next six months.

Buyers in agony over delayed housing projects in Pune

2011-05-05T06:50:00.000-07:00

Article Link

However, many middle class buyers feel cheated and harassed, especially due to the problem of delayed possession. Alok Goswami, who bought an apartment in Kumar Kruti, Kumar Urban Ltd’s (KUL) project in upmarket Kalyaninagar in March 2006, has not received possession even today, five years later.

According to Ravi Karandeekar, real estate expert, some builders take bookings and invest the money in another project, thereby causing delays. “For many builders this has become a business policy,” he said, not naming any specific builder.

As a real estate watcher, Karandeekar warns buyers against falling in the trap of taking over the apartment even before the entire project is completed (as in the case of Periwinkle). “This is called false possession. People get carried away due to the losses they are facing, but without completion and occupancy certificates, the dwelling has no legal standing, especially in the event of a mishap like fire,” he added.

Wanting to caution buyers, Karandeekar said, “In most real estate projects, buyers book apartments that are showcased at conceptual level only. Even plans are not passed and the bookings begin. Buyers must understand this.” He cautioned buyers against allowing themselves to get exploited because they are not aware of their rights.

Rents hit the roof in Mumbai, up by 11%

2011-04-24T17:53:00.000-07:00

This was bound to happen sooner or later. Now Manmohan has to take notice of yet another piece of inflation hitting the common man. First you get priced out due to black money and next you get pushed to the outer suburbs as rents escalate. If prices don't fall soon, landlords will raise rents another 10% over the current 11% as demand for housing is ever increasing. Maintenance cost borne by owners has jumped as well. I know where a 3k monthly maintenance has jumped to 5k in just over 1 year. This phenomenon is across cities so renters will be forced to cough up more or leave their current residences. This is another way for the rental yield to catch up with sky high prices.

DNA India reports.

Rising realty rates may have resulted in a sharp decline in property sales, but it has led to a growth in rental value in Mumbai and other metropolitan cities in the country. Mumbai and the outskirts of the city has seen an 11% growth in rental value in the past year, according to a study conducted by private real estate portal, 99acres.com.

The figure for Bangalore, Pune and Delhi has shot up by 13%, 11% and 9% respectively.

Surprisingly, rental value in South Mumbai, one of the most preferred locations to stay in the city, has seen a dip. The Worli residential market saw a 21.31% dip last year, while the figure for Prabhadevi, Parel and Bandra (West) fell by 18%, 12% and 11.57%.

“The rent in South Mumbai had gone through the roof. It is still unaffordable. So, people are shifting towards the suburbs and outskirt of the city,” a real estate expert told DNA.

However, the rental value in the suburbs too has shot up drastically. Borivli (West) witnessed a record 42.25% growth, while the rates have shot up by 35.04% in Powai, 28.32% in Malad and 20.40% in Kandivli (East). The Mumbai metropolitan region too has seen a ruse in rental value.

The figure for Mira Road and Seawoods shot up by 39.28% and 36.36% respectively in the past year.

A real estate expert attributed the rise in rental value to exorbitant property rates in Mumbai.

“People prefer to stay in rented homes instead of buying a house. Also, there is a huge influx of people in the city. As a result, there is a huge demand for rented homes,” he said. Government data compiled by the stamp duty department also shows that there is a 35% rise in the number of lease agreements being signed in the city.

Business head at 99acres.com Vineet Singh said: “People are relocating or moving in better homes, which in turn, will affect the rental values of properties. Also, the state of real estate is not in trend with the moving economy because availability of fresh inventory is less in the Mumbai region. Therefore, rental values escalate on an annual basis.”

arshal Shelkar, who has been staying at Seawoods for the past three years, is finding it difficult to cope up with the rising rentals. He used to pay Rs7,000 as rent for a 3BHK house. The owner demanded Rs12,000 last year. “Now he is asking for Rs20,000. I am staying in Navi Mumbai, not South Mumbai. Each day, I have spend one hour on travel. If I continue to stay in houses with such high rents, my monthly budget will go haywire. I have other liabilities like EMIs and daily expenses. There should be control over the rise in rent rates,” he said.

LONDON (MarketWatch) — Is this the biggest bubble in the world?

2011-04-20T11:37:00.000-07:00

While we are looking at international markets like China and the US, the biggest pop in housing has been London and that too select areas. Middle-eastern money is flowing into London along with Indian and chinese money. If the Mumbai market is so desirable for investors as claimed by the brokers how come these investors are ploughing money in London. "They think money is “safer invested in an apartment in Sloane Street than in a bank account in Damascus.” Now I have lived on this Sloane street during my stay in London and I have lost track of the number of Ferraris and Maserati's on that road. That is pure inter-generational wealth which is driving markets. Next time a broker tells you that Dubai folks are investing in Mumbai, point him to this article.

http://www.marketwatch.com/story/the-worlds-hottest-real-estate-market-2011-04-19?pagenumber=2

LONDON (MarketWatch) — Is this the biggest bubble in the world?

I hesitate to use the overplayed word “bubble.” But in the case of London property, it’s hard to avoid.

What’s happening here is absolutely ridiculous.

Housing data

Markets are being impacted by housing-sales data along with fears over northern European economies and a stronger Japanese yen.

Look in the window of any real-estate agent here and you think people have gone crazy — and then you realize that the prices are in British pounds, and that to convert to dollars you have to add another 60%.

Half a million pounds ($800,000) for a one-bedroom condo with a small garden on the southern, unfashionable side of the river Thames? Really? And $2 million for a modest two-bedroom condo in Chelsea?

As John McEnroe used to say at Wimbledon, you cannot be serious.

China - the Paper Dragon - Ghost cities

2011-04-09T01:36:00.000-07:00

China's ghost malls, cities and office space - nearly 30 billion sq ft constructed mostly vacant.

This is a bubble worst than India's (At least India can manage to run some demand and lets common people use up space by renting for offices, shops, etc)
A must watch - in 4 to 12 months China is going to be Dubai x 1000

http://corporaterealestategroup.com/2011/03/11/china-housing-market-bubble-bust-dubai-x1000/

Updates -
http://www.dailymail.co.uk/news/article-1339536/Ghost-towns-China-Satellite-images-cities-lying-completely-deserted.html

Moodys downgrades Chinese RE
http://blogs.forbes.com/benzingainsights/2011/04/14/trading-moodys-downgrade-of-the-chinese-property-sector/

Force UPA govt to accept the Lok Pal Bill - Support Anna Hazare

2011-04-05T23:40:00.000-07:00

Ignoring Prime Minister Manmohan Singh's appeal, veteran social activist Anna Hazare began an indefinite fast on Tuesday pressing for a more stringent anti-corruption Lokpal bill.

The call has evoked a massive response across the country with even the high profile NAC led by Sonia Gandhi in broad agreement with civil society.

Responding to the call of Anna Hazare, hundreds turn into Satyagrahis and along with him, fast for a strong Lokpal bill to fight corruption in high places in cities across the country. For a nation that ranks at the bottom of the heap on corruption, this solidarity is not surprising.

“We do not want yet another advisory body,” said Kiran Bedi.

Must see movie : Inside Job free

2011-04-03T01:31:00.000-07:00

Everyone needs to watch this movie on near collapse of the US financial system which almost bankrupted the world. Film makers in India are busy making Salman and Shah Ruk dance and have no time in investigative documentaries. The journalists on the other hand are busy negotiating deals with politicians and businessmen.

“Housing Is Dead”: Bubble Still Bursting Here and Abroad, Says Harry Dent

2011-03-31T13:01:00.000-07:00

After initial US based review, he talks about China and India, particularly Mumbai.

Pop goes the bubble

2011-03-25T04:40:00.000-07:00

Article Link

Median house prices in the main cities are close to Rs1 crore, far beyond the reach of most urban families.

This newspaper reported on 14 February that a survey of 2,400 housing projects in the nation’s commercial capital, conducted by Liases Foras, a property research firm, showed there were around 88,000 unsold homes in the Mumbai metropolitan region.

The chief executive of the firm had told Mint that up to 22 months may be needed to clear the inventory in cities such as Mumbai, New Delhi-National Capital Region, Chennai and Hyderabad. This inventory could increase if buyers stay away while builders continue to finish projects in the hope of generating sales.

However, the sheer frequency of overheated real estate markets is a symptom of a deeper malaise—the lack of policy focus on urban issues that makes India one of the most expensive real estate markets in the world. India has far few big cities for a country of 1.2 billion people. The existing cities have deteriorated because they do not have empowered mayors to manage them, are often used by state-level rural politicians as machines to generate cash, have been unable to broaden their revenue base through higher property taxes, have no rental markets to speak of thanks to outdated rent control and tenancy protection laws, and have failed to invest in infrastructure. Urbanization is an inevitable and welcome trend for a country moving up the development ladder. Many states—especially in the west and the south—may already have larger urban populations compared with rural ones. High real estate prices only force people to stay in slums. It is time the popping of a real estate bubble becomes an occasion for a new approach to cities.

Will Mumbai real estate prices correct, or will this bubble get bigger?

2011-03-11T14:22:00.000-08:00

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Financers have also turned somewhat reluctant to fund realty projects after the arrest of DB Realty chief Shahid Balwa. Several foreign investors are also said to be shying away since the scandals surfaced, making it difficult for realty funds to raise money overseas. Besides, investors say, returns on investments have not been significant in India. Banks have also increased the rates for builders. "Builders will definitely try to keep prices up and avoid a crash," said the analyst of Elara Securities.

According to Liases Foras, a realty research firm, more than 88,000 flats remain unsold in the city. In fact, it has been reported that certain builders, who had earlier claimed that 90% of their flats have already been sold, are advertising these very same flats again. It has been reported that builders may offer a concession if payments are made in cash. This is prevalent especially in Kandivli, Borivli, Thane and Panvel areas.

Navi Mumbai, where the euphoria over the upcoming airport persists, has also not seen any correction yet. The per square feet rates of the Green Panvel project, one of the new, better-known projects, have shot up from Rs3,100 to Rs4,500 in three months, following the clearance of the airport project late 2010. "At the most, they will reduce some Rs200-Rs300 on that. It wouldn't make much of a difference anyway," an interested buyer wrote on the webpage of the India Real Estate Forum.

Pankaj Kapoor, managing director, Liases Foras said, "Price reductions should be more for affordability, and not just a minimal correction for the heck of it. Eighty per cent of the demand exists in the Rs20 lakh-Rs60 lakh space, and it is this demand which should be met."

Mumbai Home Prices May Decline 20 Percent, Merrill Lynch Says

2011-03-09T04:03:00.000-08:00

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Home registrations in Mumbai, India’s most expensive real estate market, fell to their lowest in 20 months in November, according to brokerage Prabhudas Lilladher Pvt. Property prices in some markets have surpassed their 2007 peaks, Mahesh Nandurkar, a real-estate analyst at CLSA Asia-Pacific Markets in Mumbai, said in November.

India’s central bank increased the benchmark interest rate to a two-year high in January and signaled further gains in borrowing costs as it raised the inflation forecast.

“With banks reluctant to lend to developers and rising mortgage rates, we expect some of the smaller developers will be forced to sell their inventory at lower prices to generate liquidity, forcing an all-round correction in Mumbai,” Agarwal said.

Rajat Gupta indicted of insider trading and his speech to the ISB

2011-03-01T10:47:00.000-08:00

Here are the two faces of Modern India.

Give speeches exhorting the youth on the values of Indian tradition and at the same time trade with the insiders throwing all values out of the window. Now that Nira Radia has exposed the ugly truth of corporate India, here is one more fall guy for the Goldman Sachs who is going to join Madoff and company

The insider trading charges against a Goldman Sachs board member filed today by the Securities and Exchange Commission have been a long time in coming.

The SEC’s Division of Enforcement said that Rajat K. Gupta, a Westport, Connecticut-based business consultant, provided Raj Rajaratnam with confidential information he learned while serving on the boards of Goldman and Procter & Gamble. Rajaratnam allegedly used to inside information to trade on behalf of hedge funds controlled by his company, Galleon.

and this is from the speech 5 years ago at the ISB Hyderabad

Another thing which I think Ratan said a little bit earlier. Lead through values, be true to yourself. It is easy to make short term compromises that push you ahead. That won’t give you happiness or peace of mind. Sometimes in the quest of making everybody around you happy or what you think they want, you may not do the right thing. Unfortunately or fortunately, you have to live with yourself longer than you have to live with anybody else. So be true to yourself, be value driven

Luxury Housing Boom Takes a Breather

2011-02-16T13:41:00.000-08:00

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Around 3,700 luxury apartments are currently under construction in Mumbai and its suburbs with a price tag of $1 million or more, according to Delhi-based research firm P.E. Analytics Pvt. Ltd. Of these, around 1,440 are unsold. In Delhi and its suburbs, one quarter of the 2,300 luxury apartments under construction are unsold, according to the firm. Residential apartments in India, including those in the luxury market, are typically sold before they are fully constructed. Analysts say that developers in India sometimes delay the construction of their project to ensure that they don't have a large number of unsold units in their ready buildings.

Some of the luxury apartments in Mumbai and Delhi have become 20% to 30% costlier than they were a year ago, thanks to growing wealth in India as well as general euphoria about the real estate market.

But now, "buyers are not happy with these high rates," says Sanjeet D. Narain, managing director of Mumbai real estate consulting firm Narains Corp.

At the same time, many buyers have a lot of money stuck in the Indian stock market which has fallen more than 10% so far this year. So, they want to "wait for some more time," says Aditya Juneja, a real estate broker in Gurgaon, a suburb of Delhi.

Mumbai home prices may drop significantly from record highs

2011-02-10T03:31:00.000-08:00

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Mumbai home prices may decrease by as much as 15 per cent over the next nine months as record high prices deter buyers, brokerage Edelweiss Securities Ltd said.

“The festival season of September-November, which typically accounts for a significant chunk of sales volumes in Mumbai, has been a dampener with tepid sales in new projects,” analysts Aashiesh Agarwaal and Adhidev Chattopadhyay wrote in a note reported on by Bloomberg.

Home registrations in Mumbai, India’s most expensive real estate market, fell to their lowest level in 20 months in November, according to brokerage Prabhudas Lilladher Pvt. Property prices jumped between 30 per cent and 70 per cent across India in 2010 with some markets surpassing 2007 record highs, Mahesh Nandurkar, a real-estate analyst at CLSA Asia-Pacific Markets in Mumbai, said in November.

Mumbai developers may be forced to cut prices to revive sales after banks cut down on credit to the sector and loans to builders became due, the memo from Edelweiss said. Development companies are facing rising borrowing costs and less access to credit after a corruption probe into loans to developers, according to Bank of America Corp.’s Merril Lynch unit and Ambit Capital Pvt.

Alibaug calling

2011-02-02T16:34:00.000-08:00

Now the term "Alibaug is aaya kya" is Bambaiya hindi will have a new ring to it. For the non-Mumbaikars Mumbaikars would use this pharse ('Are you from Alibaug') in a condescending way implying people who were naive, stupid or just downright clueless.

I guess now it means the rich and the super-rich. Bloomberg reports

India’s ‘Hamptons’ Lures Mumbai’s Rich, Economy Booms

The seaside town of Alibaug, founded about 300 years ago when India vied with China to be the world’s largest economy, is experiencing a rebirth as Mumbai’s growing number of rich people seek holiday retreats in the region.

About 18 miles south of bustling Mumbai by ferry, the area’s conversion into a playground for India’s rich and famous -- including billionaires Mukesh Ambani and Lakshmi Mittal, and cricketer Sachin Tendulkar -- reflects surging wealth in the world’s fastest-growing major economy behind China. India’s wealthy may almost double assets to $6.4 trillion over the next five years, Credit Suisse Group AG said in October.

Prices in the Alibaug region have doubled over the past three years, luring companies such as Peninsula Land Ltd. to build holiday retreats along pristine beaches and amid paddyfields, plantations and forests. Mumbai-based developer Orbit Corp. is among them, selling 20,000 square-foot seafront villas for 250 million rupees ($5.5 million) in a nation where the per capita income last year was 46,492 rupees.

The region is “like the Hamptons,” said Pujit Aggarwal, chairman of Orbit. “People who have spare change buy a house in the Hamptons, likewise people from Mumbai are buying weekend homes in Alibaug, which will become first homes when infrastructure improves.”

Alibaug, on the coast of the Arabian Sea in the western state of Maharashtra, was developed in the 17th century by an admiral of Shivaji Bhosle, a king who founded the Maratha Empire that encompassed most of south Asia. The town had a population of 19,491, according to a 2001 government survey.

The Hamptons is a group of upscale beachfront communities on the eastern end of Long Island, about 75 miles from Manhattan, known as a retreat for financiers and celebrities. Average home prices in the Hamptons jumped 20 percent to $1.9 million in the fourth quarter from a year earlier.

Coastal Damage

Concerns about coastal damage and disagreements between government agencies on setting up infrastructure may hamper development of the Alibaug region.

“The lack of better connectivity has already begun impacting sentiment in this market,” said Anuj Puri, chairman at the Indian unit of Chicago-based property broker Jones Lang LaSalle Inc. “Property prices have reached high levels on the power of speculation.”

A cluster of sea-front bungalows was demolished last year for breaching coastal regulations and building on agricultural land. Buyers of such land in the region must covert the land title before building homes, according to government rules.

Villagers in the region are protesting the destruction of mangroves along the coast and have filed complaints with the state government authorities.

Surging Growth

India’s gross domestic product expanded by 8 percent in the year ended March 31, 2010, from a year earlier, faster than the 7.4 percent growth pace that was forecast, the statistics office said on Jan. 31. The International Monetary Fund expects the south Asian economy to grow 8.75 percent in the fiscal year ending March 31, 2011, and 8 percent the following year.

Mumbai, occupying an area of 440 square kilometers (167 square miles), is bursting at its seams with half of its 18 million residents living in slums. Moving across the shores to Alibaug might make financial sense: a 4,000 square foot villa in the coastal town costs about 40 million rupees, a fifth the price of a similar sized apartment in south Mumbai.

“Mumbai city has hardly got any space, so we need to identify new growth nodes,” says Orbit’s Aggarwal. “Alibaug is one such growth node because of its proximity to Mumbai. It’s a good investment; once it becomes a first home, the value will jump by three-and-a-half times.”

Mumbai Boom

Home prices in Mumbai, India’s most expensive property market, have surpassed their 2007 peaks, climbing as much as 25 percent since April, according to a December report by IIFL Ltd. London-based property consultant Knight Frank LLP says the Alibaug region could well become a first home option for Mumbai residents and an extended suburb of South Mumbai in seven to 10 years if the infrastructure is improved by adding all-weather ferries and multiple jetty points.

Land prices in Alibaug vary across the region. A property with a sea view can cost as much as 60 million rupees an acre, while agricultural land in the hinterland would be priced lower at 4 million rupees an acre, according to Jones Lang LaSalle.

Peninsula Land, an Indian developer backed by Franklin Templeton Investments, and Samira Habitats plan to develop a 2 million square foot township. Three-fourths of the project will consist of luxury residential villas and condominiums, the companies said in October. Orbit is constructing villas starting at 40 million rupees and plans to develop 11 million square feet in a 200-acre gated community, while Mumbai-based Disha Direct Marketing Services Pvt. is building apartments and row houses.

Government Plans

Squabbling between government agencies on implementing infrastructure projects in the region has led to delays and curtailed development. A six-lane sea bridge that will connect the island city to the mainland has been delayed for the past few years because of a feud between two government agencies over rights to build it.

The Mandwa area in Alibaug is accessible by a 15-minute speedboat ride from Mumbai. That route isn’t available during the three-month monsoon rain season, which runs from June to September, forcing visitors to the town to take a three-hour car ride along 120 kilometers (75 miles) of road from Mumbai.

Alibaug needs to build a barrier that protects the harbor from the full impact of waves, which will make it accessible by boats throughout the year, said Sameer Nerurkar, founder and managing director of Samira Habitats, the real estate company developing 560 acres of the 2,200 acres it plans to develop in the coastal region.

The government aims to upgrade the infrastructure. The Mumbai Metropolitan Region Development Authority plans to invite tenders for the eastern waterways project, which will include a roll-on, roll-off service to ferry people and vehicles between Mumbai’s dockland and the jetty near Alibaug. The government is also planning to build a marina at Mandwa, a railroad, and a sea-link, which will cut travel time by road to an hour and fifteen minutes from three hours, said Orbit’s Agarwal.

“The Alibaug property market is quite illiquid,” said Mumbai-based Anand Narayanan, India director at Knight Frank. “I would say Alibaug isn’t a great investment destination, but a lifestyle choice, and lifestyle choices are never cheap.”

Owed Rs6,000 crore, banks cut off funds to Mumbai builders

2011-01-29T02:52:00.000-08:00

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MUMBAI: Money has suddenly stopped flowing into Mumbai's real estate sector with banks and financial institutions tightening the screws on builders. In the past two months, cash-strapped developers have flocked to private money lenders who provide short-term loans at exorbitant interest rates of between 24% and 30% a year. Banks charge builders between 13% and 15% interest a year.

Market sources said leading banks now lend to only credible builders for select projects, but have turned off the tap for most others in the construction sector. "They are busy mopping up what is due to them. By March 2011, Mumbai builders alone are scheduled to return roughly Rs 6,000 crore to banks," said the CEO of a leading property fund. Market sources said some leading developers in Mumbai have loan exposures of Rs 3,000-4,000 crore each.

Mumbai-based developer Wadhwa Group's Vijay Wadhwa said banks have stopped disbursement to second-rung builders.

"Banks are flush with funds, but they want to give it to the right people. They are now more concerned about whom they give it to,'' he said. Wadhwa added that financial institutions became cautious following the LIC Housing scam.

Can we call it a peak now?

2011-01-24T08:18:00.001-08:00

As we read about Spain's woes (this is Spain we are talking about, not Ireland or Greece), one realizes it was primarily caused the foreign investment that poured into Spanish real estate boom through the Cajas (local co-operative banks). The Government is actively "announcing" cleanups and merging Cajas. Yes, a once mighty economy can be brought to its knees by such foolishness.

The story in India is eerily similar.

Indian real estate attracted $2.8b in FDI last year.

As per industry experts, overseas property sales account for 30 per cent of Indian real estate sector’s total global sales, of which, 40 per cent are accounted by the UAE-based Indians.

Ooh - is that because Indian real estate will never go down? Unlike the Dubai real estate? :) /s.

Of course FDI will fee as quickly as it comes in as well. In January, in 12 trading sessions, foreign investors have pulled a massive 1 billion dollars out of the Indian market.

There's been a significant selloff since the start of 2011, as investors flee over inflation fears.

With food inflation at more than 18%, it is just a matter of time before the Reserve Bank does the one thing it does which is to push the interest rates high - very high.

So it is safe to call peak now?

Black money debate on CNN-IBN.

2011-01-20T21:16:00.000-08:00

Here is another rant on the state of black money. The Government is useless, absolutely useless. Manmohan is an absolute incompetent, ignorant and timid PM, worse then any other PM India has ever had

Indian Army hit by another land scam

2011-01-13T14:54:00.001-08:00

Cracks In Prices Begin To Show

2011-01-01T16:52:00.000-08:00

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Most builders concede consumer resistance is building up. “Demand has dried up in recent months,” says Subodh Runwal, director of Runwal Group. Consumers believe prices have peaked and are likely to come down. A survey among potential home buyers by real estate website Makaan.com showed that 55 per cent expected residential property prices to fall by 20 per cent or more in 2011. This perception, coupled with an increase in home loan interest rates, has led to buyers postponing buying decisions.

“Pre-sales and underwriting trends are contributing substantially to the existing sales volumes. If we exclude such projects, the market looks extremely risky now,” says Pankaj Kapoor, chief executive officer of Liases Foras.

So far, builders had been clinging on to the price line, despite the build-up of unsold stock. Speculation in the industry is that the steady cash flow from private equity investors and earlier advance sales helped cushion the pressure on builders to reduce prices. These sources seem to have dried up now and we are seeing the high price points finally cracking.

Builders often plead that they have little margin for reducing prices since the cost of land is abominably high. With land costs beginning to decline as the PAL-Peugeot sale indicates, builders hopefully will see reason and offer more affordable prices to home buyers.

Christmas is coming but realty market’s not yet fat Read more: Christmas is coming but realty market’s not yet fat - The Times of India http://times

2010-12-16T13:59:00.000-08:00

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A source in a leading property fund said that while the suburbs have witnessed an average slowdown of 30%, south and central Mumbai have seen a drop in sales by 45%. "There is a fatigue factor. How long can prices keep increasing?" said a developer from south Mumbai.

For instance, in Borivli, property prices in new residential constructions have shot up from Rs 8,000 per sq ft to Rs 12,000 per sq ft a year ago. In Andheri (west), rates have jumped from Rs 12,000 to Rs 18,000 per sq ft in upcoming projects.

Property developer Nayan Shah said the rates had shot up by 30% to 40% in the past year, but developers were still holding on to prices. "The cost of transfer of development rights (TDR) and construction material like sand had shot up substantially," he said, adding that the government had been slow in reforming the housing sector.

Another developer said sales had slowed down in the last two months. "What is worse is that liquidity in the market has dried up. Public sector unit banks have tightened the screws after the LIC housing scam," he said.

Repayment blues to hit realty prices

2010-11-29T08:14:00.000-08:00

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Real estate companies, which are already under severe financial strain, have to make a bullet repayment of over Rs 14,000 crore in the next two months to banks. This will force builders to cut prices of real estate stock, especially residential units, to boost cash flows to help them repay dues.

The huge repayment burden in December and January was created when many banks restructured real estate loans for one and a half years in June 2009 under the Reserve Bank of India’s (RBI) special dispensation. “This is falling due in the next two months,” said a senior executive of a bank, who did not want to be named.

But a senior banker from a public sector bank said, “Real estate companies will have to drop prices and sell properties so that there is a regular cash flow into their books.”

The problem started when developers began to jack up prices, stifling sales at lower rates. This hit cash flows of developers. Banks aggravated the situation by helping developers to roll over debt by recording repayment on the due date and granting a fresh loan to the same company the next day.

This helped the bank to continue the account as a standard asset while the developer got funds with no pressure to lower property rates and generate cash flows. Now, banks are watching their real estate exposure and implementing strong checks.

US warns India about possible WikiLeaks release

2010-11-27T10:07:00.000-08:00

Another embarrasment is about to hit the Indian politicians and government officials.
This might help the 2G scam accused as the Wikileaks.org disclosures will dominate the news headlines on Sunday and the coming week. Any guesses what US diplomats think about Indian politicians and Babu's.

DNA India reports.

The US has warned India and other key governments across the world about a new potentially embarrassing release of classified documents by the whistle-blowing website WikiLeaks which may harm the American interests and create tension in its ties with its "friends".

"We have reached out to India to warn them about a possible release of documents," state department spokesperson PJ Crowley told Press Trust of India.

"We do not know precisely what WikiLeaks has or what it plans to do. We have made our position clear. These documents should not be released," Crowley said, ahead of the expected release by the website of millions of sensitive diplomatic cables.

Property prices could crash due to loan scam

2010-11-26T04:51:00.001-08:00

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Finance Minister Pranab Mukherjee directed state-run lenders to avert the reappearance of the loans-for-bribes scandal and recommended banks to go for a critical appraisal of all real estate loans above Rs 50 crore. This, however, may curb projects and drive developers to private funds, according to industry experts. On Wednesday, Central Bureau of Investigation (CBI) arrested 8 finance executives on charges of taking bribes to pass loans.

Liquidity for the sector could dry up since bankers look cautious to sanction fresh loans which in turn will force builders to reduce prices to enhance cash output. But for prospective buyers, this is good news as many have been holding on due to high prices.

DB Realty dipped to 10%, Indiabulls Real Estate lost 5.2%, DLF fell 3.8%, and Unitech declined 6%. Shortage of funds is now threatening to act as a major hitch for project execution. This is an important cause for concern as the sector is only recovering now after the economic hiatus of 2008.

Mukherjee said, “Banks and financial institutions should strengthen the NPA (non-performing assets) monitoring and management in their institutions to ensure that advance action is taken to identify incipient sickness and take appropriate action on it”

A Bank of India official said, “All big-tickets loans, particularly to builders, will come under the scanner now. Recall of loans can happen if there is a fear that the quality of loans may suffer. But as of now, there is no such worry and hence it would not prompt us to recall loans.”

2G scam, corrupt nexus between policiticans, business and the media

2010-11-22T15:40:00.000-08:00

Full transcript of calls between politicians/lobbyists and journalists including the Ambani Gas deal, Air-India ripoff by Praful Patel and more. It appears that Prabhu Chawla had advance information of the judgement and Nira Radia is fishing for information. More juicy details by Outlook

By roping in the media the politicians and businessmen have nothing to fear. The 4th estate is as corrupt as the other three and these tapes provide damming evidence to that effect. When I said that the Indian media will never report the truth on the state of real estate because of vested interests like builders placing advertisements into the same publications I didn't realize the extent of the rot which had seeped into the system.

Forget real estate one can replace 2G scam with any other scam and the same nexus will operate with high efficiency.

There are also news articles which now put the stock market boom in recent months into question as the recycled corrupt money enters India thru Marutius and other tax havens.

Open Magazine has provided links to Barkha Dutt's conversation with Nira Radia. The media in India is the wolf in the lamb's clothing. Who will trust the messenger ?

Here are Magazine's links

Mumbai realty gives affordability the go-by

2010-11-13T14:11:00.000-08:00

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Mr Pankaj Kapoor, Managing Director of property consultant firm Liases Foras, said the prices are so high that “no one can buy”. Of course, if one limits his options, he can move that much further into the suburbs looking for properties that match his budget, he added.

Mr Kapoor said that while the average cost of an apartment in Greater Mumbai (municipal limits) was Rs 27 lakh in January 2004, it skyrocketed to Rs 1.47 crore in November 2008, slipped marginally to Rs 1.28 crore in June 2009 (when a correction set in) only to spiral to Rs 2.03 crore in September 2010.

Now, the preferred route for PE is akin to that of home buyers.

They move in at the project conceptualisation stage and book a definite number of flats or units for about 25 per cent down-payment at a pre-agreed price.

Property registration data for Mumbai indicate that after hitting a peak in property sales in December 2009, the subsequent monthly sales continued to decline till June 2010. While about 9,000 registrations were recorded in December 2009, only about 6,000 were recorded in February 2010. Preliminary field data show that there were only 4,500 registrations in May 2010, he said.

RBI tightes home loan norms

2010-11-08T12:12:00.001-08:00

How can you beat this real-estate bubble?

2010-11-02T05:30:00.000-07:00

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As property prices are showing only a few signs of abating, analysts predict that a potential real-estate bubble is looming large. So how can you achieve your long-awaited dream of owning a house? Moneylife went into a huddle with some industry analysts to give you the answers

Solution No. 1: Work hard, jump jobs, do anything to reach an annual Rs40-lakh salary.

Solution No. 2: Forget Mumbai or Delhi, there are a lot of other urban conglomerates in this vast country.

Solution No. 3: There is strength in numbers.

Vikhyat Srivastava, former analyst with the Kotak Mahindra Group and co-founder of GrOffr.com, a real-estate site for group-buying, told Moneylife, "As a group, you can get a discount for any service. If a developer is selling 100 houses, and a group comes to buy 20 or 30 houses together, he would lower the prices for them as he would be able to do away with one lot. As a group, one can get a discount of about 20%-30% in real estate purchases."

If statistics bore you to death, consider this. Until now, buyers trading on GrOffr.com have been able to garner bulk discounts of Rs19.85 crore on a piece of real-estate which had a market tag of Rs93.5 crore for 88 flats. Do the math. That's a lot of money saved.

Solution No. 4: The pre-launch phase is the best time to buy. But there is a caveat, though.

Solution No. 5: Rent, don't buy.

Solution No. 6: Be patient, very patient.

"I expect a price correction but the focus has to come back to consumers. If the property price does not increase in the next three years, it in itself is a correction. There are chances that property prices may undergo correction by 10%. If it doesn't appreciate in the next three years, it's overall a 30 % correction."

Must see video and article on the Kargil Adarsh society scam

2010-10-31T09:49:00.000-07:00

Mid-day has an excellent article on this topic. Simpreet Singh deserves full credit for this RTI expose. Click here for the full article.

Parade ground, Transit camp for SRA, security issues all thrown to the wind by Congress-NCP

Prices go north as space ‘shrinks’ in Mumbai

2010-10-27T23:54:00.000-07:00

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Developers across Mumbaihave hiked project prices by 7-43%, leaving genuine home buyers in a fix. Worse, despite the price hike, the carpet area, or the actual space the buyer receives for his use in the property, is nowhere near the usual proportion of saleable area the developers used to offer. Earlier, developers used to give as much as 70-75% as carpet area, which has now shrunk to 55-60%.

Among the bigger realty brands, Lodha Developers has hiked prices 11-30%, Ackruti City by 10-42%, Dosti group and Godrej Properties 10-18%, Kalpataru Constructions 9-24% and Runwal Group by 10-25%, to name a few. All the developers have increased prices for properties in Thane and nearby regions substantially.

“Across all the major micro-markets, prices have risen by 10-30% since April 2010. This is after the 20-40% increases between October 2009 and April 2010. For example, prices in Borivli, are quoting Rs8,000-11,000 per sq ft, up from last year’s Rs6,000-8,000p sq ft.”

An analyst from a domestic brokerage, who spent the whole day trying to gauge sale conversions, said, “We waited the whole day, but hardly saw any inquiry translating into a sale.” An analyst from an international brokerage had this reaction to offer, “if you don’t work in the financial services sector, you can’t buy these properties; they are unreasonable.”

Will this Analyst Firm give their honest opinion to Media, I guess not....

Pay 10% of the flat value now and remaining 90% on possession

2010-10-18T06:52:00.000-07:00

Unreal estate…Manic buying before a likely panic collapse

The 10:90 schemes have got such a good response. Buyers of such real estate projects have now become investors or rather traders. They are paying 10% upfront and buying a call option. If prices collapse, they will have to simply write-off the 10% they invested. We have heard enough that derivatives are weapons of mass destruction. These weapons appear to have entered the real estate now. Is it a prelude to a crash?

From the builder’s perspective, the scheme works because he gets potential buyers into the system. The supply which is coming in central Mumbai is huge, just look around the Parel landscape and you will get an idea of the number of buildings that will come up in the coming years. Kamala Mills, where our office is located, is in the epicenter; the world’s tallest tower is coming up on one side and world’s greenest tower launched by DLF is on the other. There will be about 13,000 apartments which could cost anything upwards of Rs4 crore each coming up in the central Mumbai area. To put it in perspective, in the last five years less than 6,000 apartments of somewhat similar quality have been sold. So we are talking about 21 pricey flats being sold a week over the next four years, which I think is too ambitious. Informed people tracking the real estate market say property prices overall will have to cool from these levels.

If at all prices remain high it would be due to failure by some builders to deliver their projects on time, which would reduce the supply in these areas. If all the supply materializes, then some builders will be forced to cut down their amenities and luxuries and make the prices more affordable to sell their flats.

Real estate prices hit the fast track in New Delhi, Mumbai

2010-10-12T00:57:00.000-07:00

Is real estate becoming an asset bubble?

DNA invited some leading real-estate players to help readers understand the trends in the industry in Mumbai.

Prakash Shah: Mid-town means areas like Lower Parel. I don't see a price correction happening in distant suburbs like Thane where the price is about Rs8,000. That is affordable middle-class housing. That’s a place where land availability is still possible. Enquires and business are going on. There is reasonable demand and supply. Not at the same levels as in 2008, buta reasonable demand-supply position is there. And Rs7,000-8,000 is an affordable rate in Mumbai. Maybe in other cities I understand Rs3,000-4,000 is an affordable rate, but Mumbai has a peculiar way of thinking. Compare the prices of Central suburbs, which are around Rs8,000 a sq ft, with those of Western suburbs like Borivli-Kandivli where prices are around Rs10,000-11,000 sq ft. These differences will remain.

Anand Narayanan: In Delhi, you can just keep expanding. Manesar or Gurgaon. The Delhi model is to give the first investor all flats, who then sells them to a second investor and then to the third. In Mumbai, because land is scarce, the builder (except for the small part he has sold to original investors) normally wants to sell to the real user. It also ensures that the market does not get too speculative, and prices don’t fall. The flats may sell very slowly, but the builder can afford to wait because he does not have a million square feet to sell, with the knowledge that he can develop another million square feet tomorrow. That is why, in Mumbai, when I go and buy a product in Hiranandani or any of the good developers. there is a lock-in period. If I put in money today I may not be able to sell for a period of time which is a reasonable period of time. It could be as high as one year to three years. Then there is a high exit cost.There is a transfer charge which is designed to stop investors from flipping it and which can go as high as 15% of your sale value. These exit costs could be in the region of Rs50-100 per sq ft.

Article Link

when we talk of the possibility of a bubble, we’re actually only talking of property in Mumbai and Delhi right now.

The real estate market in Delhi led the correction, and Mumbai fell in line next. Both bounced back after the introduction of stimulus packages and the government’s actions in restructuring debt. During the revival phase, a large amount of capital sitting on the fences immediately saw an opportunity. This was first seen in the equity markets, and then later in the real estate and gold commodity markets - all three classes bounced back convincingly.

There is, therefore, a concern that these two markets have demonstrated higher-than- expected enthusiasm, especially in the central parts in the case of Mumbai, and Gurgaon and Noida for Delhi. A lot of investors have plugged in considerable amounts of capital in these regions, and the values, on an average, have now gone 30% higher than the last peak. Some of the residential developments in central Mumbai in 2008 had peaked at `30,000/sq ft. Today, they stand at 38,000/sq ft.

The kind of volumes that we have witnessed in the first half of 2010 has come down dramatically but the liquidity situation in the market has not dropped, and neither has the appetite for investment. In fact, the same enthusiasm, which had been previously contracted by the central parts of Mumbai, is now spreading towards the other parts of the city.

Mumbai property rises above slums

2010-10-07T01:28:00.000-07:00

Article on FT.com

A real estate boom in Mumbai is fuelling the building of elite high-rise apartment blocks, such as the 117-storey World One.

Their high-priced exclusiveness as they tower over the city’s slums, which house two-thirds of its population, highlight the growing gap between haves and have-nots in what is already one of the world’s most unequal societies.

“With the new buildings, there is much more segregation than in the Bombay I grew up in [during the 70s],” says Suketu Mehta, the author of Maximum City, the novel about Mumbai whose title has become a synonym for India’s financial capital.

Mumbai’s property market, Asia’s third most expensive, has staged a dramatic recovery from the global financial crisis in line with the country’s economy – expected to grow 8.5 per cent in the current fiscal year.

But the difference between this and previous real estate booms is the size and increasingly elite nature of the new buildings.

With no hope in sight of an increase in mass housing for lower income earners, the new buildings will only serve to underline social inequality in Mumbai, known as India’s “City of Dreams” for its Bollywood movie industry and powerful tycoons.

“Most of the people I know in Bombay ‘high’ have no interaction with Bombay ‘low’, except that they look down upon them from a great height, like barons in medieval fortresses,” says Maximum City’s Mr Mehta.

ET interview with Pranab Mukerjee

2010-10-04T04:09:00.001-07:00

Essentially the Finance Minister says that they will not curb FII investment in the near term, RBI will intervene whenever the rupee tries to rise quickly and higher prices are here to stay forever. To quote him "Prices do not go down. In fact they never go down". I foresee the following happening over the period of the next year.

1. Sensex hits an all time high however retail investor participation remains very weak. The common man has not forgotten what has happened in 2008-2009 and is going to stay on sidelines for atleast few more years before his memory begins to fail.

2. RBI raises interest rates as stock markets hit record highs. Interest rates begin to pinch the common man who has taken loans for his own house, education, home improvement, credit cards etc. Buyers keep buying houses in all cities except Mumbai where without 1crore of black money nothing moves

3. Prices of goods keep going up as speculators hoard commodities and producers reduce supply to maximize margins.

4. Companies try to be efficient to keep up with rising costs. Wages remain stagnant. No Pink slips yet.

Net effect

Stagnant wages, Higher loan payments, higher monthly expenses , lower savings, say bye bye to financial independence.

Welcome to the Matrix. If you take the blue pill, you get to see how deep the rabbit hole goes

Here is the finance ministers interview

In an interview with ET Now, Finance Minister Pranab Mukherjee says it’s not a time to put any restriction on the inflow of FII and that the regulators are closely watching the market. Excerpts:

What do you think are the primary reasons for the market rally we are experiencing currently?

Always the fear of having some sort of bubble would remain. I do not think this is a time to put any restriction on the inflow of FII. Certain market sentiments are there. Prospective investors are looking into the market, and naturally, India as an emerging economy, along with China and some other Asian economies, is considered a safe destination for investment. One of this upswing is that robust recovery which was expected in North America and Europe has not yet taken place and the IMF forecast has also been revised. We shall have to watch the situation. We reached more than 20,000 in January 2008. So, the stock market fluctuation always takes place, but we shall have to see that it does not have that adverse impact just like a bubble effect.

Is it safe to presume here that you are in touch with the market regular and keeping a close eye on how the market has really moved today?

At Rs 1.91 cr, average cost of flat in Mumbai now at all-time high

2010-09-29T21:25:00.000-07:00

Even if prices drop 50% they are not affordable to 95% of the Mumbaikars. Other cities like Chennai, Bangalore,Pune, Hyderabad are still affordable to most of their residents. If only I could move I would do so in a heartbeat. Unless someone has pots of money, white or black it makes no sense to buy in Mumbai. However if someone has to sell, this couldn't be a better time.

Indian Express reports

In Mumbai, the average cost of a roof over one’s head is now at an all-time high of Rs 1.91 cr.

Raghav N. Bhatnagar

With property prices soaring to dizzying heights in the country's financial capital, aspiring home-buyers have to be much more than a crorepati to buy a flat in Mumbai, where the average cost of a roof over one’s head is now at an all-time high of Rs 1.91 crore.

According to figures put together by the real estate research agency Liases Foras, the weighted average cost of a flat in Mumbai at 1.91 crore has leapt by 49 percent over the last one year. The weighted average cost is the total capital value of all flats divided by the total inventory in each city. In comparison, five other cities like Bangalore, Hyderabad, Chennai, Pune and the National Capital Region (NCR) have witnessed either a drop in rates or a negligible increase. An average flat in these places is relatively affordable at Rs 35 to Rs 50 lakh.

India Just Broke Its Record For Most Foreign Investment In A Single Year

2010-09-27T20:46:00.000-07:00

I'm predicting a short term correction followed by a gigantic rally and then a big thud. All this short term mania has to end up in the dumpsters. The greater fool theory is in the works now. Its a matter of time before the chickens come home to roost. Be very careful for we all know Bulls make money, bears make money, Pigs gets slaughtered. Somebody has to lose in this game, just make sure you are not the last man standing. Comparing the S&P 500 with the Sensex is really poor journalism. The Sensex is only 30 stocks compared to the blue chip 500 in the S&P. The current sensex rally is driven by few chosen stocks. Even bellweather Reliance has not participated in the rally. State Bank of India is up 50%. Anytime a big gorilla like SBI rallys 50% there is a clear indication of the greater fool theory. Only here the FII's are playing the game hoping the Indian retail investor will participate thru the Mutual funds who they can then dump on. Last time this ended badly the Japanese investors were the last ones to enter and they must have been left holding the bag. Not to mention other Sovereign wealth funds which must have been beaten down to the core.

Business Insider reports

India just broke its single year record for foreign investment and it's only the end of September.

The mark, set today, is $17.89 billion, according to the Business Standard. That beats 2009's total of $17.86 billion. The specific class of investment is foreign institutional investment, which includes equity funds.

The pace appears to be picking up too, with $300 million invested in the country for the week ending September 22.

The question then is whether or not the Indian economy, and its Sensex exchange, is in a bubble.

Currently, the P/E ratio of the Sensex is 19.1, which doesn't seem ridiculous. The U.S. S&P 500 is trading just above that right now.

Forget Mumbai, the real bubble is in Ahmedabad

2010-09-23T11:49:00.000-07:00

It looks like Gujju investors are returning to their homeland and sparking a buying frenzy in Ahmedabad. Ahmedabad is now resembling Mumbai when you compare prices. Ahmedabad has no known industry which draws thousands of job seekers like Mumbai, Pune or Bangalore.

Ahmedabad can be a good city to live in if one has good job prospects or if one is running a good business. Same goes to Nagpur, Coimbatore and Mysore. However as of now I know noone in my current set of friends who would like to relocate to these cities. Maybe times will be different in a few years

DNA reports

About a year and a half ago, recession in the city realty market had builders and buyers alike, worried. However, about a year since the first signs of recovery in June 2009, realty in Ahmedabad is back and booming. In fact, property prices in the city have inched up by nearly 35%.

The high economic growth and rate of urbanisation, along with the improvement in infrastructure in the state, have been catalysts in the growth of the real estate market. And the boom is not restricted to the western side of the city alone - properties across the city, irrespective of location, have witnessed a steep rise in prices.

However, Ahmedabad had been anything but spared by the global meltdown. The property market in the city had been considerably hit by the recent economic slowdown. But property prices started moving northwards in June 2009.

"If you compare the pre-slowdown prices with the present ones, there has been an increase of about 22-25%. However, if you consider the cumulative rise in prices since the worst phase of the downturn, the increase has been almost 35%," said Suresh Patel, GIHED president.

He said that the property prices in the city went down by around 12-15% due to the recession, and it took around four-five months for the prices to get back to the pre-slowdown level. "After that, they have increased by around 22-25%," said Patel.

Online real estate service provider company Makan.com's property index shows that realty prices in Ahmedabad have grown by 36.8%, compared to the national average of around 18.6%, between June 2009 and June 2010.

Jaxay Shah, president of the Confederation of Real Estate Developers Association of India (CREDAI) - Gujarat, also acknowledged the same and said that the higher GDP rate in the state and the infrastructure available have lent a boost to the market. There still remains a lot of scope for the real estate industry in Ahmedabad, he said.

Realtors believe that better living conditions could be making Ahmedabad a viable alternative to Mumbai.

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

2010-09-22T06:38:00.001-07:00

Article Link

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.

RBI hikes interest rates to tame inflation

2010-09-16T01:24:00.000-07:00

Article Link

MUMBAI: The Reserve Bank today raised its key short-term lending rate by 25 basis points and borrowing rate by 50 basis points to check rising prices.

" Inflation remains the dominant concern in macroeconomic management", RBI said while raising the repo (lending) and reverse repo (borrowing) rates to 6 per cent and 5 per cent, respectively.

The new rates, which comes into effect immediately, were announced as part of the first scheduled mid-quarterly review of the monetary policy.

The hike in rates will lead to a rise in cost of funds for the banks and eventually makes loans expensive, which will reduce consumption.

Builders resorting to distress sale?

2010-09-10T14:45:00.000-07:00

Article Link

Hiral Shah, who has been scouting new residential projects in Kandivali to buy a house, got two rude shocks. “No one is quoting less than Rs 1.2 crore for a 1,000 sq ft house in Kandivali! And surprisingly, I also discovered that almost half the flats I saw in the two new projects were vacant,” said Shah.

Even as developers maintain that sales are brisk, crevices are beginning to show up, and one indication of this is that some developers are resorting to distress sales – disposing of homes by offering as much as 40-50 per cent discount. Zen Towers in Tardeo is a case study. Set to complete in December this year, you can buy space for Rs 15,000 per sq feet as opposed to the market rate of Rs 25,000.

But here’s the catch: you must make a bulk buy of at least 10,000 square feet.

“The market is over-heated, and with a price correction being anticipated, investments are drying up. Though big builders can hold on, it is the small players who have started to feel the pinch, and are creating distressed assets even as market sentiment is positive,” said Atul Khekade, partner, Netz Realty, a property consultancy firm that has sensed opportunity here.

A builder, who is selling bulk stock at 40 per cent discount, said on condition of anonymity, “As big builders go on increasing rates for their projects, the average market rate is pushed up. They get funding through FDIs or big private equity firms. But when rates reach a brink, even investors who fund small projects like mine become wary. One Gujarati investor group that had promised to pump some money into my project backed out. Now I am desperate.”

Real estate analysts speculate the cracks could widen. Pankaj Kapoor, Managing Director, Liases Foras said, “Creation of distressed assets is an indication that the residential market will undergo a correction, which could be to the tune of 25 per cent in the short term. This is not just because property prices are unrealistic, but also because a chunk of flats are being traded by investors instead of being bought by actual users.”

If you have to buy, buy from an investor

2010-08-31T20:57:00.000-07:00

We've seen some excellent articles posted by fellow bloggers in the comments section along with some great arguments for the rise/fall in prices. I wish to thank everyone for that.

Here is my anecdotal evidence based on my interactions with brokers in Mumbai and other parts of the country.

Market has gone up rapidly in the past 7 months. They do not expect prices to rise much more beyond this. Investors are selling their properties however they are asking for almost 50% black. Some investors cannot exit with a high white component. Such properties are 20% lower the other all white deals sold by the builders. Like they say cash is king. In this case if you have cash you can negotiate any price. One of my friends put his house on the market. An offer was made within a day for 10% lower then the quoted price. For sellers the best thing is to decide the lowest price you are willing to take and then mark it up by 20%. People always like discounts so a 10% discount on a 120% marked price is better then a 5% on the 100% price. For buyers it makes sense to cut prices by atleast 20%. Give reasons like loan is not available for that amount. Funds are available but deployed elsewhere. This gives a sense of relief to the seller that even though you may not buy the flat, atleast you are capable of making funds available at some point in time and he is not dealing with a someone with an empty wallet.

Another person I met put his house on the market and got a quote right away, again at 10% below. This made me smart and I tried to do the same. I put my parents house and priced it 25% up and told this to the broker. The broker is like 'bahut jyaada quote kar rahe ho'. I know then that the rate I've quoted is what I should not be paying to buy the apartment from the broker.

In today's market in Mumbai it makes no sense to buy directly from the builder. The builder has already sold many properties to investors who keep rolling their money with him so the price is already higher then when the first flat got sold. In fact by buying the property you are decreasing the already reduced inventory and causing the price rise for the next buyer.

Secondly there are a plethora of taxes imposed by the government, BMC and other departments. This is true for all cities where I've looked. Pune, Chennai, Bangalore, Mumbai are all the same when it comes to government fees, all these fees are up some even by 40-50%.

There is Service tax due which can be almost be 3% of the total agreement value. There is VAT, impact fee, premium housing fee all which add to the underlying house price. The government sees this as a quick way to make money since they expect most of these prices to get passed down to the housing loans of the buyers

Its best for somebody else like the investor to pick up the taxes and you get what you pay for. The investor is happy to exit at the agreeable price so even though he makes money, he saves you money since the newer fees from the builders are much higher. Investors are also happy to negotiate a discount to the builder so your final price is also lower then what a builder will charge you.

In Chennai the first sale is registered at the UDS (undivided share of land) value, a fraction close to 10-15% of the full apartment value. If you buy an apartment from an investor before registration you can easily save the 9% registration cost of the full price plus you get an almost ready apartment if you buy an apartment nearing construction

Everywhere I've seen investor flats seem to be the best bet for any underlying house purchase.

No one’s buying a house in and around Mumbai

2010-08-11T02:47:00.000-07:00

Article Link

A staggering 96.3 million square feet of residential space — or about 80,000 homes — is lying unsold in the Mumbai Metropolitan Region (MMR), the highest-ever inventory pile-up for the area. Sales are down 38% over last year.

Data compiled by real estate research firm Liases Foras show that at the end of June 2010, the unsold residential space in Mumbai, Navi Mumbai, Mira-Bhayander and Thane was nearly twice the 58.9 million sq ft that was available in the MMR in June 2008. Liases Foras CEO Pankaj Kapoor said if flats that are currently lying with investors, which will eventually return to the market are taken into account, another 50 million sq ft will be added to the unsold space.

Analysts see in the glut a throwback to the circumstances that led to the realty slowdown of 2008-09. Builders are again looking to raise money through IPOs, and the pricing of flats is valuation- rather than sales-driven.

The average price of residential property in the MMR works out to Rs 7,747 per sq ft; in Mumbai itself it is an eye-popping Rs 13,798 per sq ft. A 1,000-sq ft carpet area flat in Kandivli, which cost Rs 70 lakh 15 months ago today costs Rs 1.6 crore, Kapoor said.

Observations On China's Bubble, Or The "Lose-Lose" Reality Of A Financial Cocaine Addiction

2010-08-09T05:32:00.000-07:00

Not from India, but we are not very far behind in speculation....

Jim Quinn's has penned a good post on the "mother of all bubbles" in which he analyzes the impact of cheap credit and surging money supply on Chinese real estate, hot on the heels of recent Zero Hedge disclosure that nearly 65 million homes in China lie vacant. Using data from The Casey Report depicting the explosion in monetary aggregates, it is rather easy to see just where all the "excess" credit and easy money has gone. In many, if not all ways, the experience China is about to undergo with respect to its real estate bubble is comparable to that of the US, and simply the lack of an overlap of bubble peaks in 2007/8 is what helped China experience an all out economic rout, which due to how its socio-political structure is intertwined, may have well led to a domestic revolution and/or civil war. Yet the longer China avoids looking in the mirror, and continues to "feed the monkey" the worse off it will be when no amount of incremental cheap money can forestall the collapse. Which in itself is a very comparable predicament faced by our own administration and central bank. But before we present the Quinn article, we will take a brief detour into Michael Pettis' recent observations on the pitfalls association with a monetary heroin addiction.

Article Link

In Mumbai, flat sales drop 30-50% in 4 mths due to inflated rates

2010-08-02T00:27:00.000-07:00

Times of India has this article. Looks like they have to tell the truth after all. Buyers have to be wary of the high builtup area which seems to be heading to 50% from the usual 25-30%. Also now a days there is no water supply graned to new buildings until end of 2011. I think by the time 2011 comes, they will move it another few years. Best to buy something ready construction with no water issues.

MUMBAI: Mumbai’s builders seem to have priced themselves out of the market. Sales of apartments, on an average, have dropped between 30% to 50% over the past four months as end-users, discouraged by the high rates, are staying away or postponing their decision to buy their dream house.

But developers are not perturbed. Except in 2008, at the height of the global economic meltdown, they have been riding high on the real estate boom that started seven years ago.

According to sources, most builders have a good staying capacity and can afford to hold on to their prices despite the drop in sales.

A property expert said sales in the suburbs had fallen by more than 40%. "Investors from certain financially rich communities have formed a cartel and are driving up prices. They are trading in real estate by buying flats in bulk and selling in retail. On the other hand, the genuine purchasers are not buying flats at these inflated rates."

It is learned that many developers artificially jack up their rates by, say, more than Rs 1,000 a sq ft, and then play out the charade of giving a discount of Rs 1,000 a sq ft to a potential buyer. Moreover, in many residential projects, the difference between the built-up area and the carpet area is now almost 50%.

More here

India Lands in a Mess

2010-07-26T05:52:00.001-07:00

Article Link

A proposed property-rights bill could have far-reaching, positive implications for the economy.

Today, the labyrinth of bureaucracy makes it hard to realize property values, condemning landowners to poverty and making land artificially scarce. According to a national survey in 2006, about 40% of Indian farmers would like to sell their land and move out to more lucrative occupations, but can't find buyers because of archaic laws. A survey this year found that about 40% of people in urban areas live in slums, also because of restricted land supply.

Another law has recently been proposed by the government to help give the people clearly defined land titles. The Ministry of Rural Development has recently drafted the "Land Titling Bill 2010" to encourage states to adapt similar legislation at the provincial level. The draft is open for public comment until August 31, and it is well worth reading.

The deliberations over the coming months could determine whether this legislation will transform India or merely remain a piece of paper that scores high on intention, but fails in practice.

The draft Land Titling Bill 2010

Comments/opinions/suggestions on the draft Bill from all stakeholders are invited and may kindly be sent to e-mail ID da-dolr@nic.in

After the engineered price boom, it’s raining discounts in real-estate

2010-07-23T06:56:00.000-07:00

Article Link

"Property prices have started showing correction as sales are not happening. After the first quarter of the current fiscal, property sales are down by around 15% in Mumbai. End-users have disappeared from the market," said Pankaj Kapoor, founder, Liases Foras, a real-estate research agency.

Mumbai is expected to report lesser volume of real-estate transactions over the next six months, according to industry experts. "We are going to see lower volumes of transactions in the next six months compared to the past six months, if prices do not come down," said Pranay Vakil, chairman, Knight Frank (India) Pvt Ltd.

If the current trend of discounts by developers is any sign of things to come, a much-belated correction in property prices in Mumbai might finally happen. Prices of various real-estate properties - both residential and commercial - had shot up by 30% in a few pockets of Mumbai over the past six months.

Skywalks/Malls threaten commercial shops values on busy streets

2010-07-22T08:11:00.000-07:00

Mumbaikar's have seen skywalks mushroom all over the city and as with every other thing some have been a success whereas others have not.

I regularly pass thru the Bandra (e) skywalk and notice that there are very few people on it, however I recently made a trip to Santacruz(w) and lo behold the skywalk was packed with people going in both directions. I looked at the stores below and not surprisingly they were empty. More and more people are shopping in malls and skipping small niche shopping locations like Santacruz(w) and now with these skywalks any foot traffic which could venture into these shops is now eliminated.

I was real surprised to see most shopkeepers whiling their time looking at the traffic and wonder how they must feel about this contraption over their heads which is eating into their livelihood and property values.

In fact I think the only thing keeping these commercial prices high is the redevelopment syndrome which seems to be prevalent in all older neighboorhoods. I believe builders will have an upper hand when they negotiate as the shop keepers would rather cash out then endure the rapid decay in their profits.

Yelahanka is the new Gurgaon

2010-07-17T22:00:00.000-07:00

Back in 2001 I visited a farmhouse of on the outskirts of Bangalore in a god-forsake place called Yelahanka. The ORR was new laid out and devoid of traffic and any construction on either side of the road. Rewind forward to 2010 and a completely new Bangalore has taken shape. Already land prices in Devanhalli have reached meteoric proportions and Yelahanka has zoomed along with it.

The real estate hype masters tout Infosys and Wipro everywhere they want land prices to jump. Infosys is touted in Hyderabad, Chennai, Pune, Mohali, Sarjapur road (bangalore) and now Devanhalli. I guess we will see an Infy campus before 2020 however by then Infosys would be 500k strong so the 12000 people would make no sense :)

Another point of note which the author failed to notice is that Infosys is proposing to spend 710 crores to house 12,000 people however Wipro will spend 477 crores for 15,000 people. It looks as if Infosys comes out to be dumber then Wipro specially when it comes to calculating ratios, or it appears that the writer is a complete moron, and this time from Indian Express.

>> Indian Express reports

Where the six-lane highway from Bangalore city to the international airport in Devanahalli branches off to the left into Doddaballapur Road, a hoarding proclaims: “Yelahanka is the new Gurgaon”.

Put up by a residential builder, it is a defining marker in the growth curve of Yelahanka, a suburb 15 km north of the city that was envisaged as a satellite town but is now under the Bruhat Bengaluru Mahanagara Palike (BBMP). Proximity to the new airport — 20 km away — has given wings to aspirations in the once sleepy town that has seen a property boom in the last five-six years.

With the Karnataka Assembly passing a Bill last Thursday to set up a 10,000-acre Information Technology Investment Region (ITIR) north of Devanahalli, analysts say real estate in Yelahanka is all set to rain returns in a few years.

V Madhu, Principal Secretary, Infrastructure Development Department of Karnataka, says the entire Hebbal-Yelahanka-Devanahalli stretch will see “substantial development” in the coming years, fuelled by a mega project around the airport encompassing an aerospace park, a financial district and the IT park, where, among others, Infosys has proposed to invest Rs 710 crore in a 12,000-seat software development centre and Wipro is set to develop a Rs 477-crore centre employing 15,000.

Property price surge across metros

2010-07-13T15:10:00.000-07:00

Article Link

Property prices across the metros are soaring. In key markets, residential property prices are well past the 2007 peaks. Even land deal valuations have skyrocketed, report CNBC-TV18’s Vivek Law and Shubhro Sen.

Prices here have soared more than 40% since 2009. The national capital region is not far behind, with the price increase well over 30%. Bangalore too has seen a price rise of 10-15% in the first half of FY11.

That's not all, land prices have spooked analysts who have begun indicating that a property bubble is gradually building in cities like Mumbai and NCR. In what is being touted as the largest auction, Mumbai based Lodha Developers bagged a Rs 5700 crore deal recently. Several auctions by national textile corporation are being rescheduled as the company is re-considering an increase in reserve prices

Pranay Vakil, Chairman, Knight Frank India said, “People are buying land for the price of finished product, which surprises all of us and no amount of calculation can justify the price that some of them are paying.”

South Mumbai bungalow to go for Rs500 cr

2010-07-12T03:58:00.000-07:00

The party is on. Keep playing the music as everyone is in a drunken stupor.

Just by the numbers.

Mumbai's population : 2,00,000,00 people

Next year ** projections ** of sale of luxury apartments : 7,000 flats

Ratio 7000/2,00,000,00 = 0.035%

Looks like someone has a vested interest in reporting local news affecting 0.035% of the population.

DNA India reports

Orbit, which owns 50% stake in the property — 25% purchased on its own and 25% through Om Builders — is negotiating for the balance 50% stake with the other family members (about 70-80 signatories) of the well-known philanthropic Kilachand family. Spread across 9,000 sq mt, the spacious bungalow is expected to cost Orbit roughly Rs500 crore.

The Mumbai developer, known for its upscale residential projects, is in the final lap of raising Rs350 crore from a private equity fund for the project. Acknowledging the move, Pujit Aggarwal, managing director of Orbit Corporation, said the bungalow is strategically located on Napeansea Road where flat prices are over Rs40,000-Rs50,000 a sq ft.

According to Aggarwal, his company is also in talks to purchase three other plots on Napean Sea Road for its first block redevelopment project in the tony neighbourhood. The three sea-facing plots will be consolidated for a luxury housing project, generating 300,000 sq ft of saleable area.

Acquiring dilapidated properties and redeveloping them is the only way to build new projects in areas such as south and central Mumbai, due to a paucity of open land there.

According to Knight Frank, a global property advisory, while there is a potential problem of supply overhang of luxury projects in central Mumbai areas such as Lower Parel, there is huge demand for such high-end residential developments in south Mumbai because supply is restricted. Incidentally, consultants have estimated that around 7,000 luxury apartments will be sold within a year in Mumbai, with each unit priced at more than Rs4.7 crore.

Bharat Bandh, super high inflation and housing prices

2010-07-05T07:35:00.000-07:00

It must have become apparent to everyone by now including the Congress government that the Bharat Bandh, called by the opposition has been a stupendous success. The majority of the common people who have meagre earnings have seen essential commodities skyrocket beyond their own mean. Citizens employed by certain private sectors and government sectors which were affected by the sixth pay commission could still manage to buy dal at 120 rs a kg. However the vast majority of the country have rebelled against the policies of the government.

Sonia Gandhi and Mehangai Manmohan Singh have completely lost track of the common man and see the country thru eyes of the G-20 and the IMF , courtesy Montek and Mani Iyer. However off late I see that Mani Shankar Iyer has been distancing himself from the view of the congress government.

If an election were to be held today, there is no doubt that Congress would've been voted out of power just one year after their second term.

Corruption levels are highest in this regime and personally I have been asked to pay exorbiant amounts for measly government procedures regarding my own parent's property.

Over 2004-2010 India has definitely witnessed growth however the price rise and inflation has eaten into the purchasing power of everyone. When I made my first post on this blog I had warned of this where rapid growth will lead to uncontrolled inflation thereby making majority of the people more poor then they were before the growth commenced.

The only people to benefit from this high GDP growth of 2004-2010 is the rich upper class, bureaucrats and politicians all enjoying gains thru corrupt means. Everyone else is just a loser.

Few flats under Rs 50 lakh...

2010-06-30T03:03:00.000-07:00

Skyrocketing property prices over the last few months have taken housing beyond the reach of the salaried class, with barely six per cent of the total new housing stock in Mumbai priced under Rs 50 lakh. On the other hand, a staggering 46 per cent of these flats cost over Rs 1 crore.

Figures compiled by real estate research agency Liases Foras show that of the 8,000-odd flats that make up the unsold housing stock, hardly 500 are priced below Rs 50 lakh.

Article Link

Analysts say these rates are the result not only of increasing prices and sizes of new flats but also of the heavy loading by developers. Most new flats come with frills such as flowerbeds, viewing decks and amenities like clubhouses and swimming pools that are included while calculating the super-built-up area on which flats are sold. This notional loading is as high as 50 to 80 per cent of actual carpet area.

“In case of one-bedroom flats, builders can’t justify a loading of 80 per cent on a flat with a carpet area of 300 sq ft to a buyer who is already hard-pressed for money. It is easier to cover up the discrepancy between actual size and loading in larger flats which is the reason why most developers today are constructing only two to four bedroom flats,” said Sandeep Sadh, CEO of Mumbai Property Exchange.com. The trend is catching on outside Mumbai, too, with developers like Lodha launching Rs 1-crore-plus flats in Dombivli.

1 bed room flat - 4 crores in Khar(w) Mumbai

2010-06-21T20:31:00.000-07:00

Crazy days are here again. Thumbs up :). Good for the residents of this building who can make merry at the expense of the black money of the builders and politicians. However these folks have no other choice but to buy another apt in Mumbai from another building at an exorbitant price. These folks will now drive prices of the neighboring buildings assuming they like to stay in the same area. The music is playing on so keep on dancing :)

MUMBAI: In a bonanza for residents of a Khar housing society, a builder has been buying off their mid-sized flats, paying each family between Rs 4 crore and Rs 5.5 crore.

Mumbai-based Parinee Developers claims to have shelled out between Rs 4 crore to Rs 4.5 crore for a one-BHK flat and Rs 5 crore to Rs 5.5 crore for a twoand-a-half-BHK in the three-decade-old Bharatiya Bhavan Cooperative Housing Society, which is located at the corner of 17th Road in Khar (west). Parinee plans to demolish the buildings and set up a high-end residential tower.

However, there is a word of caution from real estate experts. They warn these huge amounts may send wrong signals in the redevelopment market, unnecessarily create hype and raise expectations of other housing societies in the area. However, Parinee said it is paying this astronomical price only because the society has utilised barely 40% of its floor space index (FSI).

The developer has already bought out 20 of the 37 flats in the society and said it is negotiating with the remaining flat owners. “We are finalising the purchase of the remaining 17 flats. Our acquisition cost for all the flats is around Rs 200 crore,’’ said a spokesperson for the developer.

The society comprising six buildings, each ground plus two floors, is spread over an area of 5,570 square yards (over an acre) with ample open spaces and car parking. The one-BHKs have a carpet area of between 580 to 625 sq ft while the two BHKs are between 800 to 900 sq ft in size.

Tip from expert: Don’t be greedy

The Bharatiya Bhavan CGHS in Khar (West) has been on the block for the past four years. In 2007, TOI was the first to report that the society had invited sealed bids from various developers and that a Navi Mumbai-based builder, APA, had offered Rs 180 crore to the society. There were several other leading builders in the fray, including Tata Housing, Wadhwa Group, Naman Developers and Acme.

However, the builder subsequently withdrew the offer due to recession and also because of infighting between two groups of flat owners. Some residents thought that APA’s offer was not enough. The fight culminated in a legal battle — Parinee Developer now claims it has helped resolve the issue between the two groups.

In 2006-07 , a slew of housing societies in the suburbs had received phenomenal offers from developers if they agreed to redevelop their properties. While some builders wanted flat owners to move out permanently by paying them off handsomely, others agreed to rehouse them in new and larger flats in the redeveloped property.

However, many of these deals failed to take off because either residents became too greedy and kept on demanding more from the developers or the builders themselves backtracked when the property market slowed down two years ago. Sprawling housing colonies like Nutan Nagar near the Bandra (W) station and Khira Nagar in Santa Cruz got stuck after getting offers running into hundreds of crores. In 2007, Khira Nagar housing society entered into agreement with the Pune-based Kumar Developers for a reported Rs 900 crore for the 640 flats in 16 buildings. But the project never took off.

Where the rich live ?

2010-06-18T23:07:00.000-07:00

Soft marketing article by the WSJ to pump up real estate in India. Mostly sponsored by the builders. The question to ask is where do the rich get the money , and how much tax do they pay and have paid over the past few years. I dare WSJ to carry out an article on this topic.

Super-luxury apartments are back in vogue and they are bigger and better than ever before.

As India's economy has gained momentum over the past several months, super-wealthy corporate professionals and businessmen are once again ready to pay $1 million or more for their dream homes. That can buy apartments with five bedrooms or more spread over 5,000 to 10,000 square feet and with amenities like personal lap pools and jogging parks in the sky.

From gold tiled bathtubs to sky-high verandas, luxury living is back. Following a market lull in 2008, India's wealthy class is again dishing out top dollar for luxury apartments. WSJ's Shefali Anand reports.

Home builders are rushing to meet this demand. At least a dozen super-luxury apartment complexes are being built across India right now, mostly in the major metro cities of Mumbai, Delhi and Bangalore.

The recent flurry of activity is a sharp reversal from early 2009, when the luxury housing segment was all but abandoned as the Indian economy's growth slowed. Developers had to slash apartment prices by 30% to 40% in February and March 2009, in order to find buyers, says Sanjay Dutt, chief executive officer for business at Jones Lang LaSalle Meghraj, a real-estate services firm. Developers are trying to outdo each other in breaking fresh ground in luxury.

Some market experts are now getting worried about prices, which they say have reached near peak-2007 levels. Given that, and the huge upcoming supply, there could be downward price pressure on these apartments over the next few months, says Poonam Mahtani, national director of Colliers International (India) Property Services Pvt. Ltd., a real-estate-services firm.

In south Mumbai's Lower Parel neighborhood, for instance, around 10 million square feet of area is likely to be freed up for building high-end apartment buildings, according to an estimate by Religare Capital Markets Ltd. To create enough demand for these apartments, prices need to drop by 20% to 25%, says Suhas Harinarayan, managing director and co-head of research at Religare Capital Markets.

View Slideshow

S.D. Corporation Pvt. Ltd.

While real-estate prices are tough to predict, buyers might benefit by waiting for a few more months. When many of these apartments come to market at the same time, they can get better prices, say consultants.

Buyers who don't want to wait are still getting a better deal than they were before the downturn, because developers are providing more value for the same price.

"Up till now, we didn't have properties which were fully fitted out in terms of closets and woodwork," says Shveta Jain, director, residential services, Cushman & Wakefield India Pvt. Now, however, these fittings are commonplace.

Pune : More registrations, less permissions

2010-06-13T20:43:00.001-07:00

Pune mirror has an article which is bullish on Pune real estate. 21,000 registrations in 2010. It appears the the trend is strong and barring an unforeseen event of great magnitude, volumes will continue to be healthy. Once inventory vanishes I think prices will start rising. I was just checking with some builders and they are not negotiating. In the past they used to say get the checkbook and they will discount the price, now it appears they are not in a mood to bring their price down. Other buyers, end-users or sellers can post their experiences in this thread.

In the past I have always show my bullish stance for Pune vis-a-vis Mumbai and I think in terms of volume we will see more growth. The other number we need from banks is the NPA (non-performing assets) or loans in default. That could pressurize the market if the trend in that number is rising.

Flat sales show good healt- Link

Here is a win-win situation for the government and builders. After the recession-related slump in property deals, figures at the government registration office here show that, compared to last year, more people are purchasing flats in the city. In fact, the registration department has doubled its revenue as compared to the first quarter of 2009.

In Q1 of 2009, the registration office collected Rs 113.9 crore against registration of 13,033 flats in the city, whereas in 2010, revenue shot up to Rs 294.04 crore - more than double. March is the one of busiest months in the registration office.

This year, 8,900 flats were registered in March. Last year, in the same month, the number was 3,553, which translates into a 2.5 per cent increase. When we spoke to V D Dhansheety, joint district registration officer, he said, “In March, there are a lot of festivals.

On the auspicious day of festivals as well as towards the end of the financial year, people are more eager to buy flats. Therefore, in this month, more registrations happened. In mid-2008, the recession started. After that, the number of flats registered came down considerably.”

Dhansheety added that though banks reduced their home loan interest rates, no one came forward to invest in flats. “In 2009, due to improvement in the market, people started purchasing flats. The number is not a satisfactory one. But, in Q1 of 2010, there was an increase in registration of flats.”

High court quashes FSI increase in Mumbai

2010-06-10T21:30:00.000-07:00

Buillders are anguished at this order since now they will have no other option but to raise rates by 10-15%.

The best thing is to move out of Mumbai into Pune, Bangalore, Hyderbad or Chennai .There is absolutely no point in paying 1.5 crores to live in 2 bed apt when your salary is a fraction of the loan.

The only people who can buy are those with black money or those whose Mumbai projects are going into redevelopment. Every building over 30 years in age is going for redevelopment and all these residents are getting a good package from the builders.

From what I hear the builders offer

18 months of rent
A lumpsum amount
20-25% extra carpet in the new building.

Many times some owners sell the flat to the builder and move into a different location.

I've seen some projects in my area getting sold out in no time and those flats are sold to mostly investors with deep pockets. End users rarely get a chance to participate in this process.

so the best thing for anyone who can, is to move out and get out of this mess. Ive also noticed a tendency of some of the owners to move to Pune. Today's Times of India - Mumbai edition has a 4 page supplement on Pune real estate. That should speak volumes that Pune builders are courting the Mumbai population with the terms 'affordable' in every other sentence. 3000-5000 per sq/ft seems to be a steal when compared to 10,000 per sq ft in the Mumbai suburbs.

Hindustan times article is below.

Buying a flat in the suburbs will now get even more expensive, after the Bombay High Court on Thursday struck down the state’s decision to increase the Floor Space Index (FSI) for suburban constructions to 1.33 from 1.

The FSI determines the maximum amount of construction that’s allowed on a plot of land. An FSI of 1 means that on a 1,000 sq ft plot, construction cannot be more than 1,000 sq ft.

All new projects have to adhere to the ruling, which came after the April 2008 Government Resolution (GR) was challenged by resident Amit Maru.

This means builders will now have to buy more FSI through Transfer of Developmental Rights (TDR) from the open market. The maximum permissible FSI for suburbs is 2 of which 1 is permitted by default, and builders can acquire the additional 1 through TDR.

In the 2008-09 Budget, the state had decided to offer an additional 0.33 FSI on payment of premium, which reduced the amount of FSI builders had to acquire from private parties. This had, to some extent, reined in TDR prices.

Under the GR, the premium to be paid for the additional FSI ranged from Rs 7,000 per sq ft in areas such as Manori to Rs 23,000 in Bandra.

“We have to pay extra money to buy TDR from the open market and will pass this burden to consumers,” said Sunil Mantri, president of Maharashtra Chamber of Housing Industry and owner of a construction firm.

The court struck down the GR saying it’s against the Maharashtra Regional and Town Planning Act, 1966, as it does not have a provision for levying a premium.

Mumbai setup for redevelopment.

2010-06-07T21:00:00.000-07:00

Its about time the old run-down structures are torn down and replaced with new developments. Needless to say here the big winners are the troika of builders, politicians and state government babus. Its hard to fathom the amount of black money which will be generated by 20,000 projects.

With the IPL scandal it has been apparent to everyone that Pawar had a big stake in the development of Amanora Town in Hadapsar, Pune and also he was involved in the Blue Ridge Hinjewadi project.. Every project has the backing of a big politician so now it remains to be seen if those projects are affected if he has to step down.

With DC rules clarified, Mumbai is set for a flurry of redevelopment

Mumbai: Greater clarity in rules and the pressing need for more houses in land-starved cities like Mumbai have builders eyeing opportunities for redevelopment after a two-year market slump and recession.

"Now we have the opportunity to do large redevelopment projects, as the policy on redevelopment has been clarified," Godrej group chairman Adi Godrej said last Friday. "We are hopeful that within the next six months, we will announce a few large redevelopment projects.

"Another reason [for redevelopment] is the scarcity of land for development in Mumbai," Godrej said, adding that some of the buildings in the island city are "very old, built during the British era".

Besides Godrej's realty unit, Godrej Properties, Housing Development and Infrastructure, DB Realty, Ackruti City and the unlisted Shapoorji Pallonji & Co and Kumar Urban Developers are among the big builders chasingre development contracts.

More here

Will Property Prices Fall

2010-06-05T02:23:00.000-07:00

Moneylife article

Housing prices are again reaching for the skies; demand is stagnating. How much should prices fall for the market to be reasonably valued? When can that come about? Moneylife reporters and analysts offer some answers.

If the current trend continues, it is likely that Mumbai will soon see stagnation in property sales; so will Bengaluru, Delhi-NCR and other metros. Teaser home-loan rates notwithstanding, buyers are showing no eagerness towards committing to their cherished new homes. If prices continue to spiral northwards, will buyers be eventually priced out of the market? Will we witness the bursting of yet another bubble or would that be just a temporary phenomenon?

Pankaj Kapoor believes that the government is actively fuelling a property price bubble in Mumbai. “The Mumbai Metropolitan Region Development Authority (MMRDA), in its own plans, says that increasing the valuation of the land sold is one of the key objectives. It is the government which is creating the bubble,” he asserts.

This is where the problem lies. Inflation is now touching almost 10%, prompting the government to gradually roll back the earlier monetary stimulus measures. Interest rates are expected to go up further. It is worth noting that every 0.5% increase in interest rate reduces home loan eligibility by approximately 7% (by making home loans costlier and also by reducing the eligibility of the lower-income segment).

In this scenario, what should home-seekers be doing? Many of you would be looking out for that cherished new home that you have wanted for so long. Does it make sense to take a plunge at these prices? Not if you are smart. Many buyers have postponed their home purchase decisions in view of the steep appreciation in property rates. Wait a bit for prices to cool down and then make a move for that dream house.

Decoupling, local demand driven economy, green shoots

2010-06-01T15:57:00.000-07:00

Here we have the Sensex down another 300 points and it gets blamed on the Euro Zone problems.

Indian stock market brokers have taken the Indian investor for a long ride and articles like this in the Economic Times only vindicate my position that the media in India is very biased and will not report the full truth. They will hype up the good news and play down the bad stories.

There is no independent reporting anymore and everyone including the TV channels are biased. The media knows that if the market sentiment is not propped up, they will lose viewers/readers and hence their sources of advertising revenue.

Investors have to tread very treacherous waters in India so they better be very skeptical of these bozo's in the media.

Every article is written with the intent of enticing investors into the market. This is the Ekam-Sat (Ultimate Truth) of Indian markets. Be very careful with your hard earned money and if you have to invest go with diversified low cost mutual funds with minimal expense ratios. I hate to see people lose sleep and their life's savings and hand them over to these sharks

Economic times reports

MUMBAI: The Indian markets fell on Tuesday, halting its four-day rally as concerns about the European economies turned investors jittery again. During the day, the BSE sensex fell 373 points, or 2.2%, to close at 16,572 while on the NSE, nifty closed at 4,970, down 116 points or 2.3%.

The day's selling was again led by foreign funds while buying by domestic funds cushioned the fall to some extent. BSE data showed FIIs were net sellers at Rs 527 crore while DIIs were net buyers at Rs 211 crore. Dealers said other than global concerns, speculation that the RBI could soon hike interest rates to stem inflation also prompted Dalal Street investors to book profit. The day's slide left investors poorer by Rs 90,000 crore with BSE's market capitalisation now at Rs 59.7 lakh crore.

During the day, most global markets also ended in the red as euro slipped to a four-year low level against the US dollar. Reports on slow growth of Chinese manufacturing sector, and its after effects on the eurozone and the global economy in general, also made the investors jittery.

In the the Asian region, Shanghai fell by nearly 1%, while Nikkei in Japan was down 0.6% and Hang Seng in Hong-Kong closed 0.4% off. In Europe, FTSE in London recovered much of its earlier losses and ended 0.6% down, while in Germany, DAX ended marginally higher and CAC in France ended marginally lower. In early trade, Dow Jones was flat, having recovered most of its earlier losses of nearly 1%.

New Chennai beckons buyers

2010-05-31T09:46:00.000-07:00

Maraimalai Nagar on GST is finally realizing its true potential is providing a higher quality of living for Chennai residents. Land is cheap for now in this area which extends upto Mahindra World City and should provide early bird buyers a good entry point for the foreseeable future. Connectivity is good via the GST road and Southern Railways. If I were to place a bet on any semi-urban suburb in India, this would be it. All the development in this area reminds of me Aundh in Pune in the late 90's, or some areas of Bannerghatta road in Bangalore in the early 2000's. A 2400 sq ft plot can be bought for under 15L. Adding another 10L for construction one can construct a very good quality independent house. Just as the development by big bulilders in Bangalore propped up the infrastructure in semi-developed areas, one can easily expect the same to happen in Chennai.

Hindu has an article on Maraimalai Nagar and when the media starts picking up stories like this, it appears that the time has come for this area to become one of the most talked up places in Chennai. Investors and end-users should closely evaluate this destination if they have a time horizon of 3-5 years and beyond. In my opinion plot prices could easily double in the next 5 years.

Here is the Hindu article

India’s Economy Grows 8.6%, Adding Pressure on Rates

2010-05-30T23:42:00.000-07:00

As the economy grew by 8.6%, can the FM please mention the growth of black money, a primary cause of the housing bubble. It should be apparent to everybody that growth of the economy should translate to higher profits for all stakeholders including those in the government who are involved in the approval process. All this underhand money props the value of land and apartments thereby pricing out the common man. India is entering an era which the Japanese became very familiar with in the 90's. India is prosperous but Indian's are not. India has 8.6% growth but Maoists are blowing up trains and killing their own countrymen. It just appears that the Maoists don't think they belong to an country called India, and why would they. They have been neglected all thru the 60 years of independence and now the mining mafia is out uproot them of their own land. There couldn't be a better movie then Avatar to illustrate the plight of the Maoists indigenous people and most probably the Maoists wouldn't even know that someone made a few billion dollars of their cause.

Interestingly we now have Jones Meghraj and others from the real estate business who are saying that the Lodha's deal in Wadala is unsustainable. A case of the pot calling the kettle black. Nobody likes their territory infringed upon and it appears that Lodha's have entered Wadala causing grief to the existing projects., some of which could belong to their clients.

May 31 (Bloomberg) -- India’s economic growth accelerated, adding pressure on the central bank to raise interest rates even as Europe’s sovereign-debt crunch threatens the global recovery.

Gross domestic product rose 8.6 percent in the three months ended March 31 from a year earlier after a revised 6.5 percent gain in the previous quarter, the statistics office said in a statement in New Delhi today. That matched the median estimate in a Bloomberg News survey of 22 economists.

India and China, the world’s fastest-growing major economies, are weighing the risk of Europe’s debt crisis reducing demand in the market that accounts for a fifth of their exports. For India, the room to pause on monetary tightening is limited because its benchmark inflation rate is more than three times that in China.

“The biggest threat in India is from inflation and the risk that the economy overheats,” Kevin Grice, an economist at Capital Economics Ltd. in London, said before the report. “This, in the end, would force the Reserve Bank of India to aggressively hike policy rates, which would inevitably bring far lower growth later on.”

India’s central bank said May 19 that it will raise rates only cautiously even though they are “out of line” with the key wholesale-price inflation rate, running at 9.59 percent. In comparison, China’s $4.3 trillion economy expanded 11.9 percent in the first quarter and consumer prices rose 2.8 percent in April from a year earlier

More here

Investors end up holding the bag in high-end apartments

2010-05-20T16:38:00.000-07:00

Mint has an article on how the builders get their initial funding from select investors who are given apartments at a discount to the market price. The investors then sell off the flats to the end-users at the going market rate once the project nears completion.

While this seems to be a legitimate way for businesses to raise funds, these investors who buying the highly priced apartments will stuck with these prohibitively expensive properties as the only buyers who could afford these apartments would the investors themselves. US/UK based NRI's cannot afford buying anything in Mumbai. The Dubai investor is reeling under the crisis in the Gulf leaving nobody but the investors themselves as the only folks with black money and the affordability. Bank's these days are very careful doling out loans and any loan over 50L attracts a lot of scrutiny.

Now imagine the investment decision made by a smart businessman in Mumbai with 2 crores of discretionary investment cash. Will he directly contact the builder and buy in it as a investor or will he be so stupid enough to buy from another investor by paying an extra 30% ?

Property prices heading north on pre-sales to investors

Investors have bought at least 80% of the project, fetching Unitech around Rs315 crore that it can use for construction and other needs

Bangalore: Unitech Ltd’s intense pre-sales pitch in October to investors for a part of its residential project in upscale Worli, Mumbai, is paying off in more ways than one—the company has been able to collect a tidy sum while the price benchmark has been pushed higher.

Investors have bought at least 80% of the project, fetching Unitech around Rs315 crore that it can use for construction and other needs. Around one-fifth of them have already resold their purchases at a profit, pushing up prices from Rs12,000-12,500 a sq. ft during the pre-sales to Rs19,000-20,000 a sq ft., the likely price tag for actual home buyers when Unitech opens the rest of the project for them later this year.

A similarly brisk rally is pushing up prices in several other projects in Mumbai and Delhi—a trend last seen in 2005-07, just before the bubble burst as liquidity dried up amid the financial crisis.

More here

Mumbai, Delhi realty rates on way down

2010-05-16T02:57:00.000-07:00

Real estate prices for new bookings in Mumbai and NCR Delhi are expected to be 10 to 20 per cent lower than prevailing market rates feel analysts as developers are still bogged down by unsold inventory in projects in these areas.

In Virar prices for new launches are likely to come down to Rs 2,200 from the existing Rs 2,800, in Panvel from Rs 5,000 a sq ft to Rs 4,000 for new launches and Andheri West to Rs 7,500 per sq ft from Rs 11,000 in existing project — perhaps the sharpest cut — according to the Religare report.

Developers say that there is nothing unusual about price cuts for new projects.

“As a company policy we sell the first 20 per cent of the apartments at cheaper rates and as we go on constructing prices go up,” said Hemant Shah, CMD, Akruti City, a Mumbai-based realty company. “Otherwise we may have to pay out heavy interests to banks for borrowed funds.”

Article Link

Beijing resident throws shoe at a property developer

2010-05-12T11:25:00.001-07:00

Beijing resident throws a shoe at a property developer in his protest against unrealistic housing prices in China. It won't be too long before many Indian's start doing this at property exhibitions. The Iraqi jouranlist who threw the first shoe on George Bush was followed by another journalist who threw a shoe at the finance minister P. Chidambaram. The Chinese protestor received applause from the crowd so the common pain point is felt by a lot of people in the audience

Nariman point soon to be deserted

2010-05-08T15:55:00.000-07:00

As financial institutions head for the exits South Mumbai is fast losing its allure as the premier business district of Mumbai. Ofcourse we won't see such articles in the various editions of the toilet paper of India. We get this news thru Bloomberg. Just as we hear this news there is other news that Edielwess securities moving into the BKC area. J.P Morgan moved to the Malad(w) area. Why overpay for realestate in Nariman point when employees commute from far flung suburbs.

JPMorgan Quit India’s Manhattan as Buildings Rot (Update2)

May 6 (Bloomberg) -- UBS AG and JPMorgan Chase & Co. are leading an exodus of finance companies from Mumbai’s Nariman Point financial district as they balk at paying double midtown- Manhattan rents for crumbling four-decade-old buildings.

UBS, Switzerland’s biggest bank, moved to a new complex on the site of a drive-in cinema about nine miles north. JPMorgan, the second-biggest U.S. lender, shifted to an adjacent suburb, while private-equity firm KKR & Co. went about three miles north of Nariman Point. Local lender Axis Bank Ltd. and broker Motilal Oswal Financial Services Ltd. are moving in the next year.

They are departing a district reclaimed from the Arabian Sea in 1940 that is marred by traffic jams and poor sanitation, and constrained by a 46-year-old law that limits building height. The city’s shortcomings and fragmentation may hinder Mumbai, with the fourth-most-expensive office space in the world, from establishing a financial center to rival Shanghai and Dubai.

“Transforming Mumbai into a world class financial center is very distant,” said Sunil Saberwal, chief executive officer of Bombay First, an organization modeled on London First to work towards the regeneration of Mumbai. “We are at least 15 to 20 years away from something like that. Even then, Mumbai will not be as beautiful as Dubai, but it will be functional.”

If Mumbai doesn’t get its act together by 2030 by improving transportation, housing and water systems, and reducing costs, the city may lose out to places such as Dubai as Western companies seek a base in the time zone, Saberwal said.

More here

The foul play in super-built up constructions

2010-05-07T14:42:00.000-07:00

Article Link

Developers have drastically raised the super built-up area of the new properties. From 50% super built-up area, it has almost reached 100%,” said Pankaj Kapoor, founder, Liases Foras.

However, with the increase in super-built up area, the cost of properties has also doubled over a period of time. Consumers are getting lesser space at a higher cost. For example, if an apartment of 1,000 sq ft carpet area had a saleable area of 1,400 sq ft in Kandivali (a Mumbai suburb) in 2005, at that time, the apartment was priced at Rs2,500 per sq ft. The total cost came to Rs25 lakh. But now, an apartment of 1,000 sq ft is quoted as 2,000 sq ft saleable area. Taking the current cost into consideration, it is priced around Rs8,000 per sq ft. The total cost of the apartment has jumped to Rs1.60 crore.