DLF Business Model Suspect

Here is the news 

•  - http://business-standard.com/india/news/veritas-says-dlf-accounting-biz-model-suspect/466477/
• http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/dlf-shares-fall-after-negative-research-report-from-veritas/articleshow/12097092.cms 
• http://www.firstpost.com/business/is-dlf-on-the-ropes-stock-is-worth-only-rs-100-says-report-230946.html

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

Source: Moneycontrol ticker

- Source Business Standard (link 1)

Stock price chart
http://www.google.com/finance?chdnp=1&chdd=1&chds=0&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1330634199048&chddm=391&chls=IntervalBasedLine&q=NSE:DLF&ntsp=0

Later Times of India trying to assuage market fears by claiming that DLF is crying foul
http://economictimes.indiatimes.com/markets/real-estate/news-/dlf-says-report-that-hit-its-shares-mischievous/articleshow/12100095.cms

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

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.

NOIDA mess - What to do about it

When we see such articles hitting the mainstream media, we know that the bubble is on its way to pop, sooner or later. Fast money never lasts and Mr Yadav will soon realize this. New York times link. Farmers owing land in outlying areas of all Indian metro's have experienced this windfall. Personally I have witnessed farmers become overnight millionaries in Pune, Bangalore and Nagpur. However as we all know that is just a fraction of the farming population in India.

On the other post of Persistent, that IPO has been oversubscribed 93 times. I would not be surprised if the stock doubles in a few days. Some people are going to be very rich, and others very poor.

NOIDA, India — Bhisham Singh Yadav, father of the groom, is stressed. His rented Lexus got stuck behind a bullock cart. He has hired a truck to blast Hindi pop, but it is too big to maneuver through his village. At least his grandest gesture, evidence of his upward mobility, is circling overhead. The helicopter has arrived.
Kuni Takahashi for The New York Times

At a wedding on Delhi’s outskirts, the groom, Kapil Yadav, and the helicopter his father hired.
Enlarge This Image
Kuni Takahashi for The New York Times

Girls protected their faces from the dust near Delhi as a helicopter carried the groom to his bride’s village less than two miles away.

Mr. Yadav, a wheat farmer, has never flown, nor has anyone else in the family. And this will only be a short trip: delivering his son less than two miles to the village of the bride. But like many families in this expanding suburb of New Delhi, the Yadavs have come into money, and they want everyone to know it.

“People will remember that his son went on a helicopter for his marriage,” a cousin, Vikas Yadav, shouted over the din. “People should know they are spending money. For us, things like this are the stuff of dreams.”

The Yadavs are members of a new economic caste in India: nouveau riche farmers. Land acquisition for expanding cities and industry is one of the most bitterly contentious issues in India, rife with corruption and violent protests. Yet in some areas it has created pockets of overnight wealth, especially in the outlying regions of the capital, New Delhi.

By Western standards, few of these farmers are truly rich. But in India, where the annual per capita income is about $1,000 and where roughly 800 million people live on less than $2 a day, some farmers have gotten windfalls of several million rupees by selling land. Over the years, farmers and others have sold more than 50,000 acres of farmland as Noida has evolved into a suburb of 300,000 people with shopping malls and office parks.

Dubai links with Indian real estate developers are closer then they appear

It appears that some Indian real estate developers are funded by black money from India which is illegally taken out of India through hawala channels and then subsequently bought back into the country thru legal FDI investments.

This process of whitewashing leaves no stains and by that virtue seems to be the model method of black money conversion. If Koda as the enforecment directorate claims funnelled 700 crores back, how many smaller transactions are waiting to be uncovered, only if the ED has time and funds to investigate. India is plagued by a gazillion scams and this one is just beginning to unfold. Its no surprise that Dubai which houses the infamous Don is at the epicenter of this investigation.

Pioneer reports

Koda routed loot through Emaar

Ex-CM diverted money for tribal welfare to Dubai real estate giant The money that was supposed to be used for the welfare of tribals of Jharkhand has been ‘diverted’ to the Commonwealth Games projects by former State Chief Minister Madhu Koda. The investigating agencies finally got a lead on the hawala transactions made by Koda, currently under arrest for scam of over Rs 4,000 crore.Koda aides are alleged to have siphoned huge money from the State coffers to Dubai, which has been channeled back ironically to propel a major Commonwealth Games project — the Games Village — through the Dubai-based real estate developer Emaar MGF, which started operations in India just about four years ago and has become one of the ‘leading’ real estate developers.Well-placed sources in the Enforcement Directorate told The Pioneer that the directorate has clues about monetary transactions between Koda and Emaar MGF, which is building projects for the 2010 Games also besides several other investments. Emaar MGF is developing the residential complex for the participants of the Games on the banks of Yamuna. After a protracted and not-free-from-controversy tendering process, the Delhi Development Authority (DDA) awarded the project of Games Villages behind the Akshardham Temple to the Emaar MGF last year. The ED on Thursday raided the offices of Emaar MGF and homes of several board members in and around Delhi in connection with the multi-crore money laundering scam involving the former Jharkhand Chief Minister.

CNN-IBN reporting on property declines

Reading the report it is still not clear why Pune prices are higher then prime areas of Bangalore. Sadashiv Nagar is Bangalore is one of the most sought out places to live in. How come this price is lower then Koregoan Park in Pune ? Most likely answer would be that the reporting of Pune prices is manipulated due to vested interests. Does anybody think otherwise ?

>>
If you have been unsure about the current state of property market, here are some definite pointers that suggest the rates are going down south. According to the latest reports released by Knight Frank India Pvt Ltd (March 2009), property rates across metro cities have dropped. The fall in rates are especially tangible in overheated pockets, which hitherto had witnessed phenomenal rise, such as Noida and Gurgaon in the National Capital Region; Goregaon, Borivili, Vashi and Mulund in Mumbai and Koramangala in Bangalore.
Here is a link to the pricing.

Buyers rights and consumer activism

It seems that apt buyers have woken up to the internet and are organizing and ganging up against builders in ways never seen before. In the old days, media was controlled by few select companies or the government. Consumers had to resort to telephones, type-writers and sit-in dharnas to have their voice heard. In this new age of instant connectivity, builders are facing the music by irate buyers who are getting increasingly impatient for their purchases. Most of these buyers on delayed projects are paying a high rate of pre-EMI in addition to the EMI they will end up paying once the loan tenure begins. They also have to account for the loss in rent they have to incur for their present accommodation. They are bleeding slowly and it is high time builders be held accountable for their losses. For too long have buyers been herded around like sheep.

Livemint.com reports. Kudos to the Wall Street Journal for voicing the problems of the masses. Most Indian newspapers write soft marketing articles how it is a great time to buy. Its time for the Times group of companies to take some journalism lessons from the WSJ. If only Vineet Jain can get some time from posting Holi pictures on his Indiantimes website.


After using a portion of his retirement money to buy an apartment in Gur gaon, on the outskirts of New Delhi, S.K. Bangia pursued the developer for almost a year to get the purchase agreement. He eventually got a letter cancelling the allotment of the flat, Bangia says.

The 62-year-old former bank manager booked the apartment in a Raheja Developers Pvt. Ltd project in December 2007, the month that he retired, in his and his son’s name. His son wanted to borrow a home loan to finance part of the cost.

“They did not give (me) a buyer’s agreement and an approved sanctioned plan of the project, without which no bank gives a loan,” says Bangia, who sent a legal notice to the company in November, demanding the sanctioned plan and buyer’s agreement. A sanctioned plan is a project layout approved by the local urban development authority.

Homebuyers are taking recourse to consumer forums and the courts and online activist groups to resolve grievances against real estate developers. As slowing economic growth and a property market downturn cause cash-strapped realtors to abort or delay projects, property buyers are increasingly being forced to turn consumer activists.

Bangia, who approached a consumer court last month, claims he was targeted because he was trying to involve other buyers in his fight. He wants double the 9% interest Raheja Developers paid him on the money it eventually refunded him. Raheja, which charges 18% interest for delayed payments, says it’s following the rules.

“As per the terms of agreement to sell, it is mentioned that the company will give 9% interest,” said a Raheja Developers official who didn’t want to be named. “I am not familiar with this particular case...” One reason for the increasing incidence of disputes is a decline in real estate valuations, which is prompting buyers who had booked property at high prices in the past to seek refunds and switch to cheaper developments, said Anuj Puri, chairman of Jones Lang LaSalle Meghraj.

“It is (also) true that many projects of developers have got delayed for genuine reasons—may be because of lack of finance or whatever—and at the same time the tolerance level of buyers has gone down,” he said.

Prices down 50% in Gurgaon

Livemint has an article on the crash of housing in the Delhi-NCR region. Not all builders are created equal and Unitech/DLF and Pasvanath seem to have taken the cake in the bad press they have seen over the past six months. This scenario will be repeated in every city where over money seem to have vanished for houses priced for over 50L. The sweet spot for now is between 25-45L. I think the rapid increases in salaries, combined with the low interest rates pumped up housing rates beyond affordability. People with soaring stock market portfolios leveraged loans for large houses. With everything unwinding, the highly priced properties are unwinding as well.
LiveMint reports
New Delhi / Bangalore: When he bought the four-bedroom apartment in Unitech Grande on the outskirts of New Delhi 22 months ago, the hefty price tag of Rs2.75 crore didn’t deter him. The economy was humming, the markets surging and nothing, it seemed, could go wrong.

Billed as India’s first ultra-luxury residential project, Unitech Grande promised a Greg Norman-designed golf course and luxury trappings, including a dozen theme gardens, an integrated sports complex and world-class health care, shopping and entertainment facilities.
The price of the apartment, promised for delivery in September 2010, has now dropped by about half to Rs3,500 per sq. ft, said the 37-year-old buyer, who didn’t want to be identified by his name or profession.
“I can’t even sell the property because of the erosion in value. I will lose money if I sell now,” he says, adding that he is fretful the project will be delayed because “not even a hole has been dug in the ground” at the site in Noida since he purchased the apartment.
His predicament illustrates the plight of homebuyers who bought apartments and houses at the peak of the property cycle after prices had surged 30% year-on-year during 2005-07. Those properties are worth half the price they paid after the economy and, with it, the real estate market, went into a tailspin last year.

Where to invest in 2009 in ITndia

The soothsayers are back with predictions. Not where prices will drop, but where prices will rise.
Jones Lang LaSalle Meghraj, the sophisticated marketing arm of the building industry are making new predictions. Here is the link for the pdf on LiveMint.com's site. The analysis seems pretty straightforward as it proximity to the IT/ITES industry as the main drivers and I've headlined this post to reflect that.

Mumbai
Mumbai has witnessed some of the highest selling prices in the residential market till the
beginning of this year. Clearly, those prices were not sustainable, since buyers for super
luxury homes are shrinking fast.

One of the focal areas was central Mumbai (specifically Lower Parel and Worli) that
witnessed the highest price escalations. These now faces the challenges of the slowdown.
The current slowdown has curtailed the investor segment in the residential property market.
The driver for what demand exists now are real end-users.
In Mumbai, there is no dearth of those desperate to find homes within an affordable range -
affordable housing is therefore now the silver lining on the dark cloud of today’s slowdown.
Mumbai has three different directions in which growth can still be observed. Appreciation is
not a factor currently, but these are the areas that will sustain their prices – while other areas
in Mumbai will correct.
The extended western suburbs; Vasai-Virar sub-region
Drivers:
1. Economic drivers such as the MP SEZ by DHL, BIO tech SEZ by Mahindra
and IT SEZ
2. Connectivity is going to increase by introduction of additional suburban trains
from next year
Prices are in the range of Rs2,500-3,500/sq.ft
Area adjoining Panvel
Drivers:
1. This region is benefiting significantly from trunk infrastructure enhancements
such as the upcoming new airport, the Trans-Harbor Link, a railway terminus,
mono rail etc.
2. Positive impact from the upcoming Mega SEZs by Reliance and others.
3. The expansion of JNPT.
Many developers have already initiated large township projects in this region. The price range
are Rs. 3000-3800/sq.ft.

Bandra-Khar area
Prime property hunters are still focused on this area.
Drivers:
1. It will witness increased connectivity by the Bandra-Worli sea-link, the
proposed Metro Line 2 and also the upcoming Santacruz-Chembur Link road.
2. This region is always a preferred destination for prime property seekers
because of its elite profile, and because of the high level of available
shopping, healthcare, education and recreation facilities. Developers there
are offering products in redevelopment schemes.
The prices range from Rs18,000–25,000/sq.ft.

DELHI
Currently, there is a definite slowdown in growth in the suburban residential market.
Construction has stopped on new projects, resulting in a stabilization of rates for readypossession
flats. This scenario also reflects in Delhi, where the rates for good properties rates
are now stable.
However, the areas around the 150-meter road that will eventually connect Gurgaon to
Dwarka – specifically, Sectors 103-111 – have significant growth potential.
Drivers:
1. Sufficient developments will come up in this area, and one can expect a year-on-year
appreciation of at least 5-7% even now.
2. The area is currently under-developed – however, when residential projects there
reach completion in 2-3 years, the appreciation will be between 30-35%.
3. A lot of this depends on the ability of developers to raise enough cash to complete
their projects. Those who do not have the requisite finances will miss out on an
extremely lucrative opportunity.
The current rates in this belt range between Rs. 2200-2300/sq.ft. In Dwarka, the rates are
between Rs. 4000-4500/sq.ft and in the further locations of Gurgaon between Rs. 3500-
4000/sq.ft.

CHENNAI
Chennai’s residential real estate scenario is considerably depressed at the current time.
Developers who have projects along the once booming IT corridor are all set to reduce their
rates by as much as 20%.
However, the Mogappair-Porur composite region continues to hold mid-to-long term
investment potential.
Drivers:
1. This overall location is very close to the prime residential catchment of Anand Nagar
and also to Chennai railway station and the bus terminus.
2. The fact that it is not near the IT corridor also increases its potential.
3. The rates there are competitive at Rs. 2800-3000/sq.ft.
The expected appreciation for residential properties here is between 20-30% long term).

BENGALURU
Bengaluru (erstwhile Bangalore) is surely feeling the brunt of the IT slowdown. However,
established suburban areas like Koramangala, Outer Ring Road and Bellari Road continue to
be good investment destinations.
As in the case of Mumbai, appreciation is not a focal point in the current scenario - these are
the areas that will sustain their prices, while other will correct.
Apart from these, Mysore Road –which encompasses the upcoming NICE corridor, has lots
of future promise thanks to good connectivity to Mysore and many commercial developments
being planned there.
Koramangala
Drivers:
1. No scope for fresh developments
2. Close to Electronics City
3. Residential demand is high
Rates are between Rs7,000-8,000/sq.ft.
Outer Ring Road and Bellari Road
Drivers:
1. Close to IT hub
2. Outer Ring Road is close to Whitefield and is a commercial area.
3. New developments are coming up on Bellari Road, which is also close to the
Devenhalli airport.
Rates – Rs3,500 – 5,500/sq.ft. Appreciation potential between 5-8% short term. Long term
10-15%.

PUNE
With Talegaon not picking up in the anticipated manner, Pune’s new growth corridor now
encompasses Kharadi and Nagar Road. This can be safely considered as the most lucrative
real estate investment zone for 2009-2010.
Drivers:
1) Eon IT Park – 4 million square feet of prime IT space in the last stages of completion
2) Other IT SEZs as well as commercial ventures also on the anvil
3) Proximity to revamped airport
4) Improved connectivity, largely via the opening of the VIP Road connecting Viman
Nagar to the airport
5) Imminent arrival of 5-star hotels such as JW Marriott, Grand Hyatt and Leela
6) Reasonably low entry costs:
Rates – Rs2,700-3,500/sq.ft

HYDERABAD
Hyderabad continues to hold its own in the current slowdown scenario, though significant
growth has now been restricted to certain specific areas.
Residential real estate investment growth potential in Hyderabad will center primarily around
Gachibowli and Tellapur.
Drivers:
1) Proximity to the financial district, which is where the highest growth of IT and other
commercial projects is happening
2) Could become another CBD over the next ten years
3) Outer Ring Road (Phase 1 in advanced stage, phase 2 scheduled after six months) in
the vicinity will reduce commuting time of residents to key workplace locations
Rs3,000-3,500/sq.ft.
Appreciation in these areas will be about 5% in 2009 and might increase in further years.

MOHALI
Residential rates at Chandigarh have gone through the roof, and there is little scope for
appreciation for now. Moreover, because Chandigarh is a planned city conceived on certain
density specifications, which give rise to limitations on development.
It is therefore not dynamic in real estate terms, which means it will not change much with time.
Chandigarh could not partake in the IT boom for these reasons. However, adjoining Mohali
presents a completely different picture. The area called Greater Mohali, which encompasses
the fast-developing Landra-Mohali Road area, is a very promising residential nexus.
Pan-India developers such as Unitech, Emaar-MGF, Ansals and DLF have snapped up land
there for development into mega, multi-sector residential hubs. These will be highly organized
cluster projects, and all the right drivers are in place:
Drivers:
1) International airport coming up
2) Indian Business School coming up
3) Multi-terminal bus stand soon to be commissioned
4) 120 acre township with IT SEZ coming up
The investment opportunity here is in land, which currently sells at between Rs12,000-
14,000/square yard. After 3-4 years, the land rates in these areas will surpass those in central
Mohali, which currently stand at Rs30,000-35,000/square yard.

KOCHI
Kochi has the fast growing residential market in Kerala. The NRI investments has caused
sudden spurt in residential demand in Kochi City.
Apartment units have the highest demand owing to affordable prices and availability. In
addition, high ranking of Kochi as IT/ITES destinations which resulted in demand generated
by the infrastructure initiatives like the Smart City Project, Cyber City project, Infopark,
International Transshipment Container Terminal Project, etc.
Waterfronts are the most sought out residential real estate destinations and usually get a
premium. The prime residential areas adjacent to M.G. Road and along Marine Drive still
command a premium with landmark projects asking for Rs7,500/sq.ft
Drivers:
1) Close to CBD
2) Attractive Water fronts
3) Huge demand for waterfront apartments
Peripheral areas of the city such as Kakkanad, Edapally and Kalamassery currently face a
short-term oversupply of mid-range flats that are selling in the Rs. 2,500-3,000/sq.ft range.
Drivers:
1) Close to the existing InfoPark
2) Positive impact from the upcoming Proposed Smart city and Cyber city in Kakkand
3) Good infrastructure has lead to a diverse and robust economy and job creation.
Commercial trade, a traditional sector of the economy, is being complemented by growing
sectors such as IT/ITES (due to large scale IT parks and SEZ), BFSI activity and tourism.
4) Excellent connectivity resulting from a combination of airport, sea port, road and rail,
has positioned the city for long term growth and competitive advantage.
5) A disproportionately large number of NRIs, or non-resident Keralites to be more
specific, are investing from abroad and have increased demand for residential space.
Appreciation in the peripheral areas of the city will be about 5% in 2009. We expect a 5-
10% increase over the long term.
Rates: Rs2,500-3500/sq.ft.

AHMEDABAD
Ahmedabad, which has recently started leveraging its real estate potential for ‘real’ now, has
some real residential hotspots coming up.
For instance, there will be considerable economic activity with the arrival of the Tata Nano
project, which will definitely boost the value of real estate in and around the corridor of
Sanand.
Drivers:
1) Located in an industrial region rich with SEZs
2) NANO plant coming up
3) Infrastructure upgradation in process
4) Good connectivity due to S G Highway and SP Ring Road
5) Good land availability
6) DMIC investment region
7) Low land prices (Rs. 650/sq.ft)
Some of the reputed developers active in this region include Pacifica Sahara, Savvy and
Safal. Residential units are primarily villas, selling at rates between Rs2,600-3,000/sq.ft.
Prahlad Nagar is another good area to consider. It is surrounded by premium areas, has a
high income population and the prices are still relatively low. It is also close to the new
business district on SG Highway and has good connectivity to the core city. Rates range
between Rs. 2300-3000/sq.ft
One should also mention the Sabarmati-Gandhinagar highway, which is close to the airport
and Gandhinagar as well as the upcoming GIFT city and Ecopolis, has good connectivity and
infrastructure and will soon see many institute campuses like NID, IIT and DAIICT coming up.

JAIPUR
Jaipur has witnessed some of the best-planned and balanced real estate developments in
commercial, retail and residential space.
While affected by the current slowdown, Jaipur still manages to sail through on account of its
growing population and sound purchasing power.
While residential projects within central locations of the city have witnessed high absorption,
the city seems to be expanding towards two new prime destinations for residential
development.
Two key destinations with the highest investment potential in residential real estate include
Ajmer Road and Jagatpura (both suburban locations).
Ajmer Road (NH-8)
Drivers
1) Availability of land parcels to support large expansive townships as against low land
availability within city limits
2) Low land prices
3) Proximity to Mahindra World City; Mahindra’s SEZ being developed close to Ajmer
Road having campus developments by Wipro, Infosys, Deutche Bank, among others;
this makes the region a potential business hub of the future
4) Rapid connectivity to neighboring towns of Rajasthan as well as the prime city of
Jaipur with NH-8
5) Presence of numerous townships being developed by established developers like
Vatika, Omaxe, Ansal among others provide multiple options for sound investment
Rates - Rs2,500-3,000/sq.ft.
Jagatpura
Drivers
1) Proximity to South Jaipur, the hub of upcoming institutional, commercial and retail
developments. The location is also close to the new airport coming up, which
provides good connectivity
2) Availability of land parcels to support large expansive townships as against low land
availability within city limits
3) Low land price points and entry costs attracting good investor interest
4) Rapid residential development accruing to large number of townships and group
housing projects and townships in and around the area
5) An upcoming destination as a residential hub, with a large concentration of
government housing projects as well; a new expansion zone for the city population
Rates - Rs 2,000-2,500/sq.ft.

Sobha, Unitech offload assets to pay debts

Cash-strapped realtors look to offload assets

Livemint.com reports

The developer has debt obligations worth Rs2,500 crore coming due by the end of March

Bangalore / New Delhi: India’s second largest developer by market value, Unitech Ltd, is selling parts of its 14,000-acre land bank, leading a trend among realty firms putting up parts of their properties for sale to tide over a financial crunch and repay debt.

About 30 plots of the company in the National Capital Region centred on New Delhi, that are part of Unitech’s mixed-use developments and were dedicated for building hospitals and schools, are now up for sale.
“We are selling some of the plots but not all of them,” a company spokesperson said. “We have already sold two such plots.” He declined to give further detail.
Unitech had earlier said it was looking at “monetization” of some of its completed properties to meet debt commitments. The company is trying to sell land parcels in Noida and Gurgaon, both on the outskirts of New Delhi, to meet its debt obligations, analysts say.
The developer has debt obligations worth Rs2,500 crore coming due by the end of March. Unitech is trying to raise funds to repay this debt through several measures such as selling some hotel, office and retail assets and by diluting equity at the company and at the project-specific levels.
Unitech, which is holding an extraordinary general meeting of its shareholders on Monday to seek approval for an enabling resolution to raise up to Rs5,000 crore through various means, has to repay Rs1,100 crore in the next two weeks and meet further debt obligations of Rs1,500 crore over the next three months, according to a 15 January report by BNP Paribas Securities.
“The management has hinted that it is in the process of raising Rs800 crore to tide over the near-term liquidity crisis,” Sandeep Mathew, an analyst with BNP Paribas, wrote in the report. “Failure to do so could lead to forced sale of underlying assets (primarily land).”
In the heart of Bangalore’s business district, a 1.5 acre plot has been put up for sale by Sobha Developers Ltd, a leading developer in south India.
The land, strategically located close to the city’s main shopping and business district of MG Road, at the junction of Church Street and Museum Road, is a fetching piece of real estate in an area that is one of the most expensive in the country’s technology hub.
The builders, analysts said, have been trying to sell off the plot for the last four months, where it had initially planned a shopping mall and a hotel. But the high asking price of Rs120 crore has kept away buyers. The money will be pumped into Sobha’s under-construction projects that are delayed and to repay expensive loans.

Realty firms are looking at other avenues to manage cash flows as debt has become more expensive, analysts at Credit Suisse India Research said in a 13 January note. The report states that Sobha, for example, borrowed funds at 24-30% for short-term periods in October-November and seems to have defaulted on some repayments during this period.
Unitech borrowed at 19% in the same period. “These borrowings are due for payment in January which could become a problem for both Sobha Developers and Unitech as volumes in the property sector are yet to pick up. With mutual funds having stopped lending to this sector and private banks reluctant to lend, Sobha is selling off its ‘excess’ landbank,” the report states.
Unitech and Sobha Developers are only two of many such cases of forced land sales in the past few months that have witnessed aborted land deals, low demand and few sales, pushing developers to defer launches, stall projects and scurry for cash to beat the financial slowdown.
Sobha Developers managing director J.C. Sharma declined to comment, citing a so-called silent period firms need to observe ahead of quarterly results announcements.

“The Church Street land was bought on a 60-year lease period and the developer is planning to re-lease it away. But the sale price is too high,” said a Bangalore-based real estate consultant close to the negotiations. The consultant didn’t want to be identified.

“These are land parcels that would have been bought in the last two-three years at steep prices and where construction hasn’t yet taken off. There are some buyers still—mostly high-net worth individuals—who can buy, but are hard bargainers. With demand being low, it is a buyer’s market now, putting developers in a tough situation,” he said.
Tables have turned for developers, who till the beginning of 2008 would scout for land and pay steep prices. Not any more. “Today, I am flooded with proposals from builders wanting to sell some land assets. But where are the buyers?” asked Praveen Kumar, chief executive officer of One Third Earth, a property and land advisory in Bangalore.
“Many developers are selling the licensed land or developed/under construction projects to get working capital,” said Manish Aggarwal, director, land and industrial agency, at consultancy Cushman and Wakefield India.

Developers are selling assets that will fetch the maximum price such as hotels, office or land licensed for residential group housing.

Land prices in the periphery of cities across India have on average fallen by 25-40% over the last few months, said Aggarwal. “Should the landlords or developers decide to price their products rationally, it is expected that there may be an interest for joint development, joint venture transactions for sellable projects starting from July-October quarter this year,” he said.

Builders under pressure as buyers press for refund

Economic Times reports

Real estate boom are now under pressure from buyers and investors who look to exit these projects.

Already in a spot due to unavailability of bank loans and a fall in sales, the developers are less inclined to oblige the buyers who are coming together to mount pressure for refunds in projects that are yet to take off.

Several buyers and investors, angered by the developers’ inability to start work on projects, have stopped payment of installments on their purchases, adding to the companies’ cash problems.

Investors in DLF’s commercial projects in Delhi and Kolkata have come together with the help of brokers to put pressure on DLF to start construction or refund initial deposits. “DLF is way behind schedule in their projects. It should either start work on the project immediately and deliver in time or return our investment with 15% interest,” says Amit Jain (name changed), a senior executive with an MNC who invested Rs 1 crore each in DLF’s projects in Okhla in Delhi and Kolkata.

Mr Jain says since DLF follows a time-linked payment plan, it has been demanding payments from buyers even without starting construction.

The broker, who facilitated Mr Jain’s purchase, says DLF has not even paid the government to convert the industrial plots at Shivaji Marg and Okhla in Delhi into commercial plots. However, a DLF spokesman denied this saying, “We go by the agreement with the buyers signed at the time of booking. The allegations over the status of our projects are not true. We will deliver as per schedule.”

Several projects of Omaxe, Unitech and Parsvnath are also facing similar problems. Akash Verma, a Noida-based garment exporter, had booked an apartment each in projects of Omaxe and Unitech in Noida. He booked an apartment at the ‘soft launch’ of Omaxe’s Noida project in May 2007. Omaxe had promised to launch the project formally a few months later at a higher rate. The formal launch never happened and investors like Mr Verma are stuck. Omaxe has turned down requests for a refund. An Omaxe spokesman, however, said the company has ‘considered and taken care’ of all such requests.

Mr Verma has also been unsuccessfully seeking a refund of his investment in Unitech’s Grande project. “I am paying Rs 4.5 lakh as EMI. Unitech executives say the project will be delivered on schedule, but there is no worker at the site,” he says. A Unitech spokesman said, “We generally discourage cancellations. But if the buyers insist, we refund the money after deducting 10-15% of the total value of the apartment.”

Most realty firms do not encourage refund requests. Till the end of 2007, investors could easily sell their property in open market as the prices were going up. But with buyers disappearing from the market, investors are forced to approach developers for refunds.

Some property buyers are seeking refunds due to their weakened financial positions, while several others do so as they are not sure of the developers’ ability to complete the project. There are a few others who seek refunds as they feel that they can strike a better deal now with prices undergoing a major correction.

Delhi flat owners re-sell in down mood

Gaurav Jha, Hindustan Times reports

With property values falling, frenzied property owners in Delhi NCR (National Capital Region) now seem to be in a selling wave, fearing further fall in the prices of their property.

Businessman Rahul Gupta is in a hurry to sell his three-bedroom flat in the Faridabad area for Rs 32 lakh, Rs. 50,000 below the amount he paid nearly a year ago. In Delhi, it is unsual for a property to be sold at a price less than the purchase price.

“I am in urgent need of money and the prices are crashing. I may not get this amount after a month. I don’t know when the market will revive,” Gupta told Hindustan Times.

“It is just a seller’s market, not buyer’s” said U.K.Bhardwaj, founder-president of the Delhi Property Deaders Association.

Sajoy Mittra, a retired bank employee, has been trying in vain to sell his three-bedroom Gaur Green apartments at Indirapuram across the Delhi border near Ghaziabad (Uttar Pradesh) for Rs. 72 lakh for the past two months.

Unlike Gupta, he is however hopeful. “I feel the laid off employees and NRIs (non-residential Indians) in the West will buy my home after coming back to India”

However, the brokers have a different take. They are not much optimistic of the market.

“There are only sellers in the market, no buyers”, said Pradeep Mishra, a broker who has operations across NCR. “For every single buyer, the market has at least five-six sellers” he added.

“The market has only 10 percent buyers, while 50 percent have disappeared because of the economic slowdown while remaining 40 percent are waiting for the prices to decline,” Mishra said.

“This is happening all over. RBI’s announcement of cuts in repo and reverse repo rate (signal interest rates) is a welcome move. But until we don’t get a rate of 7-8 percent on home loans, buyers will not have confidence in the market,” said Sanchin Sandhir, managing director at property consultancy firm RICS, told Hindustan Times.

Dark Diwali: Pink slips, pay cuts await realty staff

Observer,
Here is the post following up on your comment about the reality layoffs. Some of your other comments have some good advice which I will collate and post as a new article.
For Anil and other realty touts, this is the writing on the wall. Your jobs are no more secure then the IT/ITES folks, so better tighten your purse strings.
Also regarding the comment regarding the plot which Anil bought for Rs 150 in Pune and then later sold for Rs 5800 is pure BS. Baner-Pashan apts were at Rs 1800 3 years ago and now they are Rs 3300. So cut the crap and try selling the Taj Mahal to somebody else.
NEW DELHI: It’s not going to be a happy Diwali for people working in the real estate industry. Even as sales failed to pick up this festive season, most realty firms including DLF, Unitech, Omaxe, Parsvnath and BPTP, now plan to lay off staff in significant numbers soon after Diwali.
While spokespersons of all these companies denied there were plans to cut jobs or salaries, executives in these companies told ET that job cuts were in the offing and salaries have been delayed in some of these companies.

“All real estate players, including us, will have to reduce manpower cost significantly if we are to survive in the current hostile market conditions,” says a top executive at a Delhi-based listed mid-size realty firm, which plans to reduce manpower by almost 20%. The job cuts will start happening soon after Diwali.

Executives at many other real estate firms also confirmed companies plan to offload people and a list of staff was being prepared, who would be asked to leave soon after the festive season was over. Developers are waiting for Diwali as they didn’t want to dampen sentiments further.
“Job cuts at Jet Airways became a big issue also because it was done before Diwali. Developers are wary of raking up any political controversy,” explained a senior executive.
Also, realty firms needed large number of sales staff for the festive season. But now that their price discounts or other freebies have failed to stimulate the home market, developers feel they can cut back on staff. The developers have already started easing off some staff. Many developers, including DLF, had already asked around a few hundred employees to leave.
And sources say more job cuts are in the offing at DLF, as construction pace slows and expansion plans are put on hold. Unitech, Omaxe, Parsvnath and BPTP too prepare to issue pink slips.
Salaries have been delayed at many mid-size and small realty firms, even as management is asking employees to take salary cut. Even though he denies salaries are being delayed or cut at his company, Parsvnath chairman Pradeep Jain supports the idea of salary cut.
“Employees’ salaries have risen so much in the past few years that I see no harm in reducing it a bit,” says Mr Jain.
“Salaries at the top management level have already started to come down. A number of real estate players are already renegotiating salaries with staff so that overall wage bill comes down and not many jobs are lost. Companies are preferring to retain the jobs of those capable of multi-tasking,” said Executive Access MD Ronesh Puri.
Employees at most real estate firms are in a state of panic as job loss fears mount. Too many resumes have been floating around in the market. “Earlier it was extremely difficult for a smaller developer like us to hire talent. Now we are flooded with CVs. Surely, people are being fired somewhere else,” says Ambience group chairman Raj Singh Gehlot.

Nearly 80,000 forms sold on first day of Delhi housing scheme

Now this is a good way to make money by selling forms. 1L x 100 = 1crore. Not bad for a days work.

Times of India reports
NEW DELHI: Nearly 100,000 application forms were sold Wednesday for a Delhi Development Authority (DDA) housing scheme for the sale of 5,020 flats across the national capital.

The DDA Housing Scheme 2008 will provide over 5,000 flats way below the current market prices. The flats would be sold after a computerised lottery draw of the applicants.

“We sold about 80,000 forms today (Wednesday). Many of them were downloaded from our website,” DDA spokesperson Neemo Dhar told IANS. The application forms would be available till Sep 16.

“At least 10,000 forms were sold from the sales counter at Vikas Sadan (headquarters of DDA) and nearly 70,000 forms were sold from branches of various banks which are authorised to sell them,” a DDA official said.

“Nearly 15,000 forms were downloaded from our website,” the official added. The forms cost Rs.100 each.

The DDA is expecting more than 500,000 applications for the flats. “We have got nearly five lakh (500,000) forms printed but if they are sold out then we will get more printed,” Dhar said.

People thronged the sales counter to buy the application forms but many sensed that the odds were heavily against winning the draw.

“I was excited that I will be able to avail the opportunity to have a house in Delhi. But after hearing that five lakh (500,000) forms are being printed, the chances are very bleak,” said Ritu, a resident of Palam.

Ajit Dayal writes on EquityMaster.com.

In July 2006, at an Equitymaster conference, I made a prediction: Indian property prices will decline by 30% over the next 6 to 12 months.

Boy was I wrong! Property prices in most Indian cities increased by 50% or so between July 2006 and December 2007.
My "prediction" was a bust!
If property prices were 100 in July 2006, they had reached probably 150 in most cities. And my expectation was for a "70". Ouch!

But look around you today and the only place where Indian property is still booming is in the headlines of some newspapers and lead articles on some websites.

Developers and financiers of property projects are desperate to make us believe that property prices are still increasing. They want to hold the "price line". If potential buyers know that the supply of property is large - and sales of apartments are slow - they will wait. They will buy later - or ask for a better price now.
Any reduction in the selling price is a loss of expected profit for the developers and their financiers. Not a good thing.

News or Olds?
We get much of our information from newspapers.
Note the "new" in the word "newspapers".
And what we read shapes our opinions and, eventually, our actions.
But, sometimes, the "newspaper" may be carrying "oldspaper" information that, at one level, creates a false impression in our minds.
And could makes us act in an incorrect manner.

So, contrast these headlines.
Business Standard, in their online version, June 23rd, 2008: writes: "Booming Indian property mkt beckons UK investors".
In this article, there are a few statements of "fact".
Indian property prices, we read, are up some 70% in 2 years. "Merrill Lynch consultants", according to this article, "have predicted a 700 per cent increase in the Indian property market by 2015". Quite a clever statement - its vagueness leaves room for varied interpretation. The article does not say whether this 700 per cent increase is an increase in the amount of square feet being built, or in the prices of real estate. But something to do with real estate is increasing by 700%. The mind takes that "700%" and imagines a bull market in property.

"Realty promoters pledging shares to raise funds" warns an article in the print version of the Business Standard, dated June 19th, 2008. The article lists 10 listed real estate companies whose share prices had collapsed from their 52-week high by between and -58.2% and -78.1% as of June 18th, 2008.

SHAKY FOUNDATIONS
Company	June 18 price	52-wk high	52-wk high date	% change
Ansal Infras	102.85	469	13-Dec-07	-78.1
Parsvnath Dev	168.3	598	7-Jan-08	-71.9
Omaxe	176.95	613	13-Dec-07	-71.1
Jaiprakash Asso	182.1	510	4-Jan-08	-64.3
Unitech	200.25	546.8	2-Jan-08	-63.4
Brigade Enterp	168.5	428	1-Jan-08	-60.6
Gammon India	337.45	845	4-Jan-08	-60
DLF	492.35	1225	15-Jan-08	-59.8
HDIL	590.5	1432	10-Jan-08	-58.8
HCC	116.5	278.9	2-Jan-08	-58.2

The large shareholder-owners of some of these listed real estate developers have apparently been pledging shares they own to financiers in exchange for loans. With sales not as brisk as in the years 2006 and 2007, cash flows are not as per expectations. And, to add to the woes of the real estate industry, many developers had already committed to larger projects. They now need to pay for this new land and the initial cost of development to get the land into some sort of "build-able" shape.

And another screaming headline, "Cash Crunch" in the Economic Times, June 15th, 2008 states that property developers are borrowing money at interest rates ranging from 35% to 50% per annum. Their "normal" interest rates range from 18% to 24% per annum. The higher borrowing, says the article, is due to the slowdown in sales and larger commitments.

A boom is a bust.
So, what happened between the "old" news of June 18th (the date of the "Realty promoters pledging shares to raise funds" article) and the "new" news of June 23rd (the date of the Booming Indian property mkt beckons UK investors" article)?

The share prices of these realtors, I assume, have declined even further - for what that is worth. The fundamentals of the industry - slow sales and large commitments for new projects - could not have changed. As these share prices decline, the "promoters" of these companies that pledged some shares will need to give more of their shares as a pledge. Additionally, if any loan is not repaid, lenders will sell the pledged shares into the stock market - probably at any price. This could result in a decline in the share prices of the real estate companies - and create a potential downward spiral of wealth destruction for investors in shares of real estate companies.

From a "buying-power" perspective, the news on inflation is worse than expected, so interest rates are likely to increase. And, under that higher interest rate scenario, the cost of borrowing money for buying a home will only increase. Not good for demand. And if demand slows down still further, sales of property will get worse and prices will decline even more.
Uh, oh - does not sound like a "boom".
Sounds more like a "thud".

Demand stalls, supply surges.
For all the bravado of the "news" headline in the June 23rd article in Business Standard, it is more of a rear view mirror event: of what happened yesterday.

But, in a strange way, it gives a hint of what is likely to happen in the future.

In 2006 and 2007, real estate buyers were in a fix. Property they wished to buy was only available at high prices.
Supply was limited.
And demand for property increased due to higher incomes and the ability to borrow more from banks. The desire of many private banks and many government-owned banks to gain market share and build their retail, home loan portfolio saw this dramatic run-up in the borrowing capacity of buyers.
Sometimes these buyers were genuine buyers, and sometimes they were speculators - in for the "free" ride.
After all it was a guarantee that property prices would increase every day.
Just like the prices of shares increased every day when the stock markets opened.
There was no need to go on a "road show" to UK to sell all the property being built.

But that was in 2006 and 2007.
Today, supply of property is more. The demand for property is lower.
Demand has declined because property prices are no longer affordable. Salaries have increased - but not as much as in the recent past.
Demand has also been hit by the fact that banks are closing down their home loan lending departments. Or raising interest rates for these home loans.
The wealth effect from stock markets - which fuels the buying of second homes and dream homes - has evaporated.

But the supply juggernaut keeps on rolling. And building.
Whenever I ask my colleagues (who advise a real estate fund) their views on how much new construction is planned, they shake their head in disbelief. There are 50 to 70 million square feet of new construction coming up in Bangalore, Calcutta, Hyderabad, and Pune to name a few cities.

Developers who have built maybe a total of 5 million square feet in the past decade have plans to build 50 million square feet in the next 3 years.

India was rising. India was shining.
And a rising and shining India needed a place to live, a place to work, and a place to shop.
Real estate zindabad!
Stock price of real estate companies double zindabad!!

Yes, 700% correct!
All correct, and all true: India needs more property.
A lot of more property. Maybe more than the 700% increase referred to in the Merrill Lynch report.

But, at what price?
And at what profit margin to the developer and their financiers?
And will people buy any junk in any location at any price?

Our view on property has been wrong in timing.
We called the "sell" on property too early.
We did not take into account the stupidity of many banks in lending money so leniently and so cheaply. Or the complete mis-pricing of risk-return by so many come-and-join-the-party property funds.

But we knew the greed of the developers. We had seen them in action in 1993 to 1995. As property prices increased in 1994, they bought more land at higher prices and thought they would sell their end product at even higher profits. Discipline was out of the door. Greed was in.

That property cycle went bust in 1995 - and stayed in bust mode till 2003.
For 8 years it was a buyer’s market. Or a renter’s market.
Supply was far more than demand. No one speculated on property. The actual user’s actions determined the prices.
Not some bank’s desire to gain "market share". Nor the availability of money from international sources due to the desire of a foreign fund to invest in an exotic location for an erotic return.

But demand and supply determine the price of everything.
Though, they don’t tell you the value of anything.
And people confuse the two and use "price" and "value" as inter-changeable words.
They confuse the high price of real estate with the value of that real estate.
Prices have only one way to go, I reiterate: and that is down.
And if real estate declines, so should the share prices of many of the property companies that build, and build, and build. We may shake our heads at the housing bubble in USA. But we built one right here in our own back yard.

Land price correct all over the country

Now that the acreage cost seem to be dropping, the sq/ft price drop should follow.
Economic times reports...

Land prices in the national capital region (NCR), Mumbai suburbs, Bangalore and Hyderabad have corrected by up to 25% as property developers slow down their land purchases. Poor sales and lower availability of credit at higher cost have prompted property developers to end the mad rush to acquire land. Some of the developers have even backed out of land deals which were agreed upon as the slowdown hit the sector.

Prices have come down by up to 25% in Mumbai's distant suburbs, including Thane and Belapur, and pockets of Hyderabad and Bangalore, according to property consultancy firm Knight Frank India. Prices in the NCR, with an exception of Faridabad and Delhi, too have witnessed a correction of up to 25%, says a senior Unitech executive, adding that transaction volume has dried up. Land prices in Faridabad have risen 10-30% in the past 3-4 months.

However, Faridabad is just catching up with its neighbouring locations. The prices in Faridabad are still lower than in Gurgaon or Noida and the current price rise is more towards building a parity with them. Land prices in Delhi are said to be stable.

But a recent land deal struck in Delhi's prime commercial centre Connaught Place indicates that prices in the capital too are cooling off. Parsvnath Developers bought 1.18 acre, jointly owned by Mahajan Industries and Videocon Industries, for Rs 200 crore. The deal came at a discount of almost 17% at Rs 169 crore per acre, compared to what hotel major Leela Group paid for acquiring 3 acres in Chanakyapuri last year for Rs 611 crore.

"Real estate sector is facing a major cash crunch. That's why the companies are focusing on completing the project at hand, instead of adding to their landbanks," says Omaxe executive director Vipin Aggarwal.

Till recently, real estate players were in a land acquisition frenzy, with some players even pledging their equity shares to acquire land. A large landbank was showcased as the biggest asset for a company tapping the capital market. "Most real estate firms have formed big landbanks. So, there is hardly any need for them to go for further acquisition, especially in these times, when money is expensive," said Anshuman Magazine South Asia chairman CB Richard Ellis. Developers are also showing lower interest in agriculture land, once their prime target because of the substantial margins it offered.

At the same time, given the slowdown in the sector, some of the land deals which were earlier agreed upon have also fallen through. "The situation has completely changed since January. The developers are now exiting the deals because they do not think that the project can fetch them the profits they had originally expected," says Knight Frank India chairman Pranay Vakil. The correction is more pronounced in plots of less than 25 acre in size, since they are not FDI-compliant. "For a larger piece of land, there is FDI. But for smaller size projects, there are very few takers," he adds.

Sell or hold your realty investments?

Sell or hold your realty investments? - Outlook Money
Did you put money in real estate during the past year or so with the express objective of gaining through capital appreciation? If yes, depending on a number of factors, you might have a bit of a problem on your hands. For, over the past year, the gains have tapered off.

The decision

The extent of the problem depends partly on your investing horizon. If you had taken a long view and plan to hold it for a decade or so, there is nothing to worry about. While there may be a few ups and downs, returns from real estate have been next only to stocks in the long term.

If, however, you were looking to sell off your property within a year or two and earn some capital gains, that plan may need some tweaking. As mortgages and prices continued their upward journey, since around the middle of last year, end-use buyers started staying away in larger numbers. Merrill Lynch, for instance, estimates that sales volumes in the NCR are down 50-70 per cent from last year.

Whither prices? Prices, too, have softened in areas of high speculative interest as property got priced out of the market. Smart investors like Delhi NCR lawyer Dheeraj Seth, 31, sold his Gurgaon house when real estate was still hot and parked the proceeds in another property that is under development.

In January 2008, the stockmarket tanked, pulling down sentiments, and real estate in its wake. Experts say prices will climb 20-30 per cent off their peaks. Those who have held on to their investments, have clearly missed the top this time around.

Over the hill? "Short-term investors in markets where the values have peaked could explore exiting," says Sanjay Dutt, joint managing director, Cushman & Wakefield, a real estate consultancy firm.

Has the price of your property passed the summit? The following three checks will tell you. First, if prices in the area have gained 100-200 per cent in the past year, says Dutt, they are unlikely to rise substantially soon. Second, if the area has lots of speculators, then supply will continue coming into the market and keep price rise in check. Third, if a property with better location or amenities are coming up nearby, that will keep yours off the coveted list. If any of these is true, sell.

Once you take the sell decision, you have to find the best deal.

The process

The channels. Once you decide to sell, cast the net wide to reach as many prospective buyers as possible. For that, tap both conventional as well as online channels. Contact real estate agents and tell them your asking price and by when you would like to sell. If a project is not sold out, you can also approach the developer's office.

Insertions in newspaper property classifieds also help and can cost up to Rs 1,500. "If it's a ready project where people are living, promote the property within the building complex," says Dutt. There would be people who could pass the word to other interested parties. The same holds true for friends and relatives.

The six-fold path

Evaluate the property sale decision against goals. Factor in loss of tax breaks claimed on mortgage repayments if you sell within five years of buying.

Spread the word. Use both conventional as well as online channels to inform as many prospective buyers as possible.

Get a fix on asking price by benchmarking against the latest sale prices of similar property in the project or the area.

Time your sale. Avoid lean periods and low-interest seasons such as summer or the monsoons.

Be clear about payment terms. Fuzziness here could hit the buyer's plans and jeopardise the sale.

Sign an agreement for sale if you do not have the funds to pay off your loan. Help the buyer with the necessary paperwork.

Most property portals such as 99acres.com, indiaproperties.com and maakan.com allow a basic free listing. For example, Makaan.com allows 50 basic listings free, beyond which you will have to pay Rs 200 per listing. If you opt for the fast response listing then you will have to pay Rs 900 per listing.

If you contact a buyer directly, you can save on agent commission, which is usually about 1 per cent of the sale price.

The price. Be realistic and quote a fair price, or actual buyers might pass you over. "Fair value of the property would be the last sale done by the developer in that particular building complex," says Dutt. On that benchmark, put a discount (if rates have softened in the area) or premium (if rates have risen). If there has been no sale in the project in six months, identify projects within 5 km of yours and take the last sale price there as a benchmark.

The timing. Don't sell during lean times. There is no point trying to sell during vacations or during the monsoons, when sales are traditionally low.

The payment. Try and keep the payment norms clear and be upfront about it. This will give the buyer the much-needed confidence in dealing with you.

The mortgage. If you are trying to sell a house that still has an outstanding loan, a fair bit of paperwork will be necessary. The simplest way is to pay off the loan and then sell the house. But that may not be possible always. In that case, you have to sign an agreement for sale with the buyer laying out the payment terms. This document will be registered and stamp duty paid.

Next, you have to get an NOC from the society/builder (in case of an unregistered society). If the buyer wants to take a mortgage for the house, he has to submit fresh documents to the lender. Once that loan is approved, your outstanding, along with prepayment penalty if any, is set off and you are paid the rest. The property papers, if the new buyer has taken a loan, will have to be given to his lender.

The profits

If you make a capital gain on the sale (a tax consultant can tell you how to calculate that), you are liable to pay tax on it unless you deploy it in specific ways. If you use the money to 'construct' a house within three years from the date of sale, the tax is waived.

You also get a break if you use the money to pay for a ready house bought within a year before the sale or two years after. You can also avoid capital gains tax if you invest the gains in specified bonds under Section 54 EC which typically pay 5.5 per cent per annum and have a lock-in of three years.

If you want to invest in other asset classes, such as equities, mutual funds, gold or debt paper, then you will have to first pay 20 per cent tax on the capital gains (after indexation).

And, finally, keep tax implications in mind. If the holding period of a mortgaged property is less than five years, you may lose all the tax benefits you have claimed on loan repayments.

Despite these deterrents, if you are still getting a good deal, sell. But keep in mind all the variables before you sign on the dotted line.

'High interest rates, prices stunt real estate'

High interest rates and overheated asset prices have cooled the super-charged growth in real estate even as a demand-supply mismatch continues in the Indian property market.

DECLINE AND FALL

# Price movement over the last three to six months in the central business districts in key cities has been flat
# Prices are expected to be flat in the near future
# Speculators moving out, end-users buying cautiously
# Commercial real estate supply to increase in coming six to eight quarters
# Interest rate cut would have helped boost demand, but with inflation up, this is unlikely
# Input costs — steel, cement etc — have gone up, along with land price
A cross section of opinion in the real estate sector suggests that overall prices have stagnated or declined 10 to 15 per cent in the past six months in prime commercial areas and are expected to dip 10 per cent more in the coming months across key Indian cities. Stagnation and fall in NCR
“We have not seen any major movement in prices of office buildings over the last three months. In fact, prices in the central business district of Delhi have remained hard. Rentals in the suburbs have stagnated,” said Pradeep Jain, chairman, Parsvnath Developers.

Rentals of prime commercial buildings in the New Delhi central business district, which covers the area around Connaught Place, stand at their December prices of Rs 330 to Rs 375 per square foot (sq ft).

At Nehru Place, the capital’s secondary business district, commercial rentals have been constant at Rs 220 to 260 per sq ft during the same period, say property consultants.

In contrast, rentals grew 40 to 50 per cent in the National Capital Region in calendar 2007, according to a recent report by property consultancy Jones Lang LaSalle Meghraj (JLLM)

In the emerging boomtowns Gurgaon and Noida, which command rentals between Rs 50 and 200 per sq ft, have seen a 5 to 10 per cent dip in commercial rentals in the last three months, according to consultants.

Slowdown in Mumbai
Last week, Mumbai’s city planning agency — the Mumbai Metropolitan Region Development Authority (MMRDA) — failed to get bidders for two plots in the Bandra-Kurla Complex (BKC), the city’s new business district. Analysts say this is a clear indication of a slowdown.

“The days of super-high growth are over. Now developers are only going for those properties which are reasonable,” said Abhishek Kiran Gupta of JLLM.

A landmark office tower at Worli, which commanded rentals of Rs 550 per sq ft, has seen a decline to Rs 375 per sq ft, said a city-based property consultant. He added that rentals in BKC, which had gone up to around Rs 450 per sq ft, are likely to soften by Rs 75 to Rs 100 per sq ft.

The addition of new office space over the next six to eight quarters is expected to lead to a further decline in rentals. Nearly 15 million sq ft, the equivalent of the BKC, of office space will be added in Mumbai by end-2008, the NCR is expected to see an addition of 7 million sq ft of office space.

“Rentals will not grow by 30 to 40 per cent now as was the case till now. Rates in the prime city centre areas will not fluctuate much,” said Gupta, adding: “Rentals in the suburbs will not grow more than 8 to 15 per cent.”

Given that economic growth is expected to slow in 2008-09, experts say reduced demand could see more supplies coming into the market.

“Companies book and lease space keeping three- to five-year horizon. But given the slowdown in economy, they tend to scale down their demand projection of space. Reduction in demand means more supply hitting the market,” said Jai Mavani, executive director, KPMG.

Slump in housing
Residential demand, which is more sensitive to interest rate movement, has cooled in recent times, though developers are reluctant to admit this.

However, it is a fact that property transactions have dropped and the rate of new home loan disbursals has also fallen.

The State Bank of India (SBI), the country’s largest lender, saw a home loan portfolio growth rate of 16 per cent in 2007, slower than the 20 per cent growth witnessed in 2006.

SBI has cut home loan rates twice since January 2008, a bank executive said, adding that there was no visible growth as yet in the home loan portfolio. “Property prices are still high and people still cannot afford flats in big cities,” he added.

“Apartment sales have gone down by 20 to 30 per cent in Mumbai. Developers are doling out goodies like stamp duty relief, free parking and interiors to boost sales,” said Rajiv Sabharwal, head, retail assets, ICICI Bank.

Crucially, developers are not cutting prices.

“Developers can not cut prices because once you do that, it signals the start of a downward spiral. They are holding on to the prices to maintain the momentum,” said Rajesh Mehta, a leading property consultant in Mumbai, adding: “April and May are the key months as far as property deals go. If transactions do not pick up, prices of apartments will fall at least 10 to 15 per cent”.

Traditionally a stock market boom has a direct impact on real estate prices. However, the near 5000-points fall in Bombay Stock Exchange Sensex from its peak in January 2008 has wiped out much investor wealth.

This reversal of fortunes is expected to have an immediate impact on residential real estate prices. The last two or three years have seen prices escalate across the country.

Despite anecdotal evidence of prices falling marginally in recent times, the fact remains that supply of apartments and built up plots in the developed areas of Mumbai and Delhi is scarce.

“New residential projects have slowed down. Only big developers are launching new projects. Buyers are also waiting whether prices will come down,” adds ICICI’s Sabharwal.

Speculators have exited many areas like Greater Noida, Kundli and even some parts of Gurgaon. JLLM Chairman Anuj Puri believes that investors, who comprise nearly 20 per cent of property buyers, are staying out after the stock market crash. “The absence of speculator interest has led to a 15 to 20 per cent correction in areas like Gurgaon and Noida,” he said.

The scenario in Cyberabad
The southern city has seen a change in the nature of buyers. Where investors dominated before, more and more end-users are buying properties, says I Syam Prasad Reddy, managing director and chief executive officer, Indu Projects Ltd.

“Hitherto, demand was driven both by investors and end users. Currently there is a substantial drop in investor interest, but there isn’t any slow down and demand is only flat”, he adds.

All quiet in Silicon city
“No upward movement of prices has been evident in Bangalore’s commercial business district for the last four to five months. Residential realty prices have stagnated due to an increase in supply, much more than the demand,” said Samira Chandra Gupta, regional director, Colliers International.

Others concur with this view. “Prices have been generally flat. In many localities prices have fallen sharply. The reduction is greater in peripheral areas and to some extent in premium or super-luxury residential properties,” said Shivaram Malakala, executive director, Habitat Ventures.

On the outlook for Bangalore, Collier’s Gupta said demand from the IT sector may be impacted by the US slowdown, but sectors like pharma, R&D services and some manufacturing companies would continue to drive demand. Hardening interest rate over the past year have seen second and third home buys, which drove the markets, dry up.

Like elsewhere, prices are expected to remain bearish, with Malakala saying they could fall further by up to 10 to 15 per cent.

'High interest rates, prices stunt real estate'

High interest rates and overheated asset prices have cooled the super-charged growth in real estate even as a demand-supply mismatch continues in the Indian property market.

DECLINE AND FALL

# Price movement over the last three to six months in the central business districts in key cities has been flat
# Prices are expected to be flat in the near future
# Speculators moving out, end-users buying cautiously
# Commercial real estate supply to increase in coming six to eight quarters
# Interest rate cut would have helped boost demand, but with inflation up, this is unlikely
# Input costs — steel, cement etc — have gone up, along with land price
A cross section of opinion in the real estate sector suggests that overall prices have stagnated or declined 10 to 15 per cent in the past six months in prime commercial areas and are expected to dip 10 per cent more in the coming months across key Indian cities. Stagnation and fall in NCR
“We have not seen any major movement in prices of office buildings over the last three months. In fact, prices in the central business district of Delhi have remained hard. Rentals in the suburbs have stagnated,” said Pradeep Jain, chairman, Parsvnath Developers.

Rentals of prime commercial buildings in the New Delhi central business district, which covers the area around Connaught Place, stand at their December prices of Rs 330 to Rs 375 per square foot (sq ft).

At Nehru Place, the capital’s secondary business district, commercial rentals have been constant at Rs 220 to 260 per sq ft during the same period, say property consultants.

In contrast, rentals grew 40 to 50 per cent in the National Capital Region in calendar 2007, according to a recent report by property consultancy Jones Lang LaSalle Meghraj (JLLM)

In the emerging boomtowns Gurgaon and Noida, which command rentals between Rs 50 and 200 per sq ft, have seen a 5 to 10 per cent dip in commercial rentals in the last three months, according to consultants.

Slowdown in Mumbai
Last week, Mumbai’s city planning agency — the Mumbai Metropolitan Region Development Authority (MMRDA) — failed to get bidders for two plots in the Bandra-Kurla Complex (BKC), the city’s new business district. Analysts say this is a clear indication of a slowdown.

“The days of super-high growth are over. Now developers are only going for those properties which are reasonable,” said Abhishek Kiran Gupta of JLLM.

A landmark office tower at Worli, which commanded rentals of Rs 550 per sq ft, has seen a decline to Rs 375 per sq ft, said a city-based property consultant. He added that rentals in BKC, which had gone up to around Rs 450 per sq ft, are likely to soften by Rs 75 to Rs 100 per sq ft.

The addition of new office space over the next six to eight quarters is expected to lead to a further decline in rentals. Nearly 15 million sq ft, the equivalent of the BKC, of office space will be added in Mumbai by end-2008, the NCR is expected to see an addition of 7 million sq ft of office space.

“Rentals will not grow by 30 to 40 per cent now as was the case till now. Rates in the prime city centre areas will not fluctuate much,” said Gupta, adding: “Rentals in the suburbs will not grow more than 8 to 15 per cent.”

Given that economic growth is expected to slow in 2008-09, experts say reduced demand could see more supplies coming into the market.

“Companies book and lease space keeping three- to five-year horizon. But given the slowdown in economy, they tend to scale down their demand projection of space. Reduction in demand means more supply hitting the market,” said Jai Mavani, executive director, KPMG.

Slump in housing
Residential demand, which is more sensitive to interest rate movement, has cooled in recent times, though developers are reluctant to admit this.

However, it is a fact that property transactions have dropped and the rate of new home loan disbursals has also fallen.

The State Bank of India (SBI), the country’s largest lender, saw a home loan portfolio growth rate of 16 per cent in 2007, slower than the 20 per cent growth witnessed in 2006.

SBI has cut home loan rates twice since January 2008, a bank executive said, adding that there was no visible growth as yet in the home loan portfolio. “Property prices are still high and people still cannot afford flats in big cities,” he added.

“Apartment sales have gone down by 20 to 30 per cent in Mumbai. Developers are doling out goodies like stamp duty relief, free parking and interiors to boost sales,” said Rajiv Sabharwal, head, retail assets, ICICI Bank.

Crucially, developers are not cutting prices.

“Developers can not cut prices because once you do that, it signals the start of a downward spiral. They are holding on to the prices to maintain the momentum,” said Rajesh Mehta, a leading property consultant in Mumbai, adding: “April and May are the key months as far as property deals go. If transactions do not pick up, prices of apartments will fall at least 10 to 15 per cent”.

Traditionally a stock market boom has a direct impact on real estate prices. However, the near 5000-points fall in Bombay Stock Exchange Sensex from its peak in January 2008 has wiped out much investor wealth.

This reversal of fortunes is expected to have an immediate impact on residential real estate prices. The last two or three years have seen prices escalate across the country.

Despite anecdotal evidence of prices falling marginally in recent times, the fact remains that supply of apartments and built up plots in the developed areas of Mumbai and Delhi is scarce.

“New residential projects have slowed down. Only big developers are launching new projects. Buyers are also waiting whether prices will come down,” adds ICICI’s Sabharwal.

Speculators have exited many areas like Greater Noida, Kundli and even some parts of Gurgaon. JLLM Chairman Anuj Puri believes that investors, who comprise nearly 20 per cent of property buyers, are staying out after the stock market crash. “The absence of speculator interest has led to a 15 to 20 per cent correction in areas like Gurgaon and Noida,” he said.

The scenario in Cyberabad
The southern city has seen a change in the nature of buyers. Where investors dominated before, more and more end-users are buying properties, says I Syam Prasad Reddy, managing director and chief executive officer, Indu Projects Ltd.

“Hitherto, demand was driven both by investors and end users. Currently there is a substantial drop in investor interest, but there isn’t any slow down and demand is only flat”, he adds.

All quiet in Silicon city
“No upward movement of prices has been evident in Bangalore’s commercial business district for the last four to five months. Residential realty prices have stagnated due to an increase in supply, much more than the demand,” said Samira Chandra Gupta, regional director, Colliers International.

Others concur with this view. “Prices have been generally flat. In many localities prices have fallen sharply. The reduction is greater in peripheral areas and to some extent in premium or super-luxury residential properties,” said Shivaram Malakala, executive director, Habitat Ventures.

On the outlook for Bangalore, Collier’s Gupta said demand from the IT sector may be impacted by the US slowdown, but sectors like pharma, R&D services and some manufacturing companies would continue to drive demand. Hardening interest rate over the past year have seen second and third home buys, which drove the markets, dry up.

Like elsewhere, prices are expected to remain bearish, with Malakala saying they could fall further by up to 10 to 15 per cent.

Pune Property Market Is Steadily Witnessing A Slowdown: say brokers

By sachiv, Section Real Estate
Posted on Fri Mar 28, 2008 at 10:40:11 PM EST
Stock market crash, recession in the US, increase in loan rates, reversal of demand-supply, investors moving out, all this or perhaps the fact that what goes up must come down. It could be labelled any of these, but there is little denying the fact that the Pune property market is steadily witnessing a slowdown of the kind not seen in the recent past.

From galloping at an almost manic pace over the last couple of years to a state when there is a decisive lull in the market, the real estate scene-like it's happening in neighbouring Mumbai and also Gurgaon and Hyderabad- seems all geared for a reality check.

"Business has gone down for us by at least 20 per cent in the last two months. It's the same scenario in cities like Bangalore and Hyderabad according to colleagues and there seem no signs of it picking up very soon," said Kshama Ganguly, real estate agent.

"A year ago, a builder told the customer to take the rate being offered right then or pay more Rs 200-300 after 15 days. Last week I negotiated a deal for a client in Wakad where the rate was being cited as Rs 3,100 per sq ft and the developer came down to Rs 2,900 without much ado. A builder who's coming up with a premium apartment at Prabhat Road had launched at Rs 9,000 but has now sent word that he's willing to book at Rs 8,500," she added.

Col (retd) A K Ahuja, real estate agent and member of the managing committee of Estate Agents Association of Pune, agreed. Builders who had earlier eschewed brokers have of late started to send them messages on their properties and want them to get involved, he said.

"I don't know whether this amounts to a slowdown but yes, it's definitely not as easy for a builder to sell properties as it was some time back. It was the investor segment with surplus funds that fuelled the unprecedented rise in rates. Now, with builders asking for high transfer charges and the government stipulating that properties bought have to be registered within a year, the investors are wary. This may also be one of the reasons for the sluggish market," said Ahuja.

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Rohit Gera, executive director Gera Developers however said that historically February and March are slow months as far as property is concerned. "There is a slight slackening but certainly not a cause for alarm," he said. "Builders are finding it more difficult to sell today than say a year ago but the reason is competition - a huge number of projects that have come up and customers are spoilt for choice. In the last one year the number of projects in any upcoming area have been something like 16 to 18," said Gera.

On why such a scenario is not translating into lower rates Gera said builders today are in a position where they do not have to do panic selling. "The basic rule is that even if 45 per cent of your project is sold, your construction costs are covered. Also with the RBI ruling last year that there would be no institutional funding for land acquisition, banks wound up all their dealing with developers. As a result debt levels are very low as far as developers are concerned and this has strengthened their position. They only have project construction debts which are usually covered by the time half the project is booked," he said.

Even if a third of any of his project is unsold today, he'd rather take over those apartments and put them on rent than sell them at a much lower rate, he added.

According to Rajesh Choudhary, partner Prestige developers, builders are also unable to reduce rates due to the fact that the current projects are on land bought a year ago when the prices were at a peak.

"Agreed everyone made a killing for about four years when rates kept multiplying due to market forces, but that situation is over. If everyone is waiting to see a crash, that's unlikely to happen," he said. As to how rates in Mumbai and Gurgaon have decline, Choudhary said it was because both rates and margins were so much more than in Pune.

Gera, however, conceded that the symptoms shown by the real estate market over the past few years could well be compared to a bubble. But will that bubble burst and prices come crashing down? "Not sure of that," replied the developer.