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

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"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.
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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.
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"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

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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

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

India Real Estate Market About to Crash Or Consolidation?

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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.

Pure Genius

How your dreams of a new home go bust

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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

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

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 ?

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

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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

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

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

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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%

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?

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

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

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.

More from CNN-IBN

Must see movie : Inside Job free

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

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

Pop goes the bubble

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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?

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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

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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

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

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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

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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

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

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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?

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.

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

Cracks In Prices Begin To Show

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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

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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

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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

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

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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

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

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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

How can you beat this real-estate bubble?

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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

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

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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

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

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.

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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.