Well, so much for real estate always goes up.... Even pros at HDIL could stump, how come novice investors can make money...
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MUMBAI: In the clearest sign of where the realty market is headed, leading developer Housing Development and Infrastructure (HDIL) has sold a 15.5-acre Eveready Industries plot at Turbhe-which it had bought for Rs 115 crore from the B M Khaitan group in 2008-for Rs 86 crore to Thyrocare Group, a medical diagnostic group. The hush-hush deal which is Rs 29 crore less than the purchase price has shocked realty experts.
Sources say HDIL has sold it at a much higher loss than Rs 29 crore. When it bought the land, HDIL paid MIDC Rs 4 crore towards differential premium, Rs 5.8 crore towards stamp duty and registration in addition to the land price of Rs 115 crore. Over Rs 2 crore was paid as consultancy fees. So, the total cost came to Rs 128 crore. The sale price included stamp duty, registration and differential premium pricing to MIDC. "So, the loss effectively works out to Rs 42 crore,'' a consultant said.
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What we don't know is "in the dark" transaction. Half story I guess.
Thyrocare Group is headed by Salunkhe family, a very powerful politically connected in Maharashtra. If they want something, they just take it. As Anonymous said above 'we don't know is "in the dark" transaction'
To get favors, sometime one needs to do something in return. Therefoe, this news item is worth what it is
hmmm... what do we mean "in the dark"? Any under the hood transactions?
These are my guesses
1. Is this land close to new vashi airport ? If so, shortly it may fetch 300 crores and will be acquired for new airport cargo complex
2. Pharmaceutical products are mainly transported by air carriers.
3. The difference is paid to the ruling political party
4. Nice place to build a 5 star hotel and a supermall.
4. Walmart may acquire this place in future for their ware house for 400 cr, as goods from chinese cargo planes require a storage place
I can think umpteen reasons, but none of them may turn out to be true
One thing is cettain that lot of money has chaned hands and will not be shown in either company s books
Jai Maharashtra
Indians don't sell anything for a penny less especially in loss... we are talking of crores and crores here.
Any journalist or auditors challenge to dig further?
@Dhiman,
I agree with what you say adding my own percentages to various asset classes.
However, you say that if one makes money in one asset class, one should switch the profits to gold. But that works other way round too. If gold has gone up very high in a short span, as it is now, may be this is not the time to enter it? Of course if the time horizon is multi-generational, this should not matter.
Is anybody reading this? Now the frontline media is openly saying that politicians are acting in a corrupt manner to keep RE afloat. Didn't we know that always?
http://www.firstpost.com/business/sez-rules-tweaked-to-allow-real-estate-stakes-for-foreigners-146248.html
http://www.firstpost.com/business/why-cong-went-for-retail-fdi-its-about-realty-not-reform-145495.html
I think that there are two distinct objectives - one is to consume and enjoy today: buy the latest iPad, the hottest car, the classiest home and so on; and the other is to build up wealth for the long run, so our progeny may also do the same.
Also one must keep in the background the knowledge of history - that fiat currencies have in the end, without exception, met their doom; that markets move in cycles; that a permanent state of prosperity is very difficult if not impossible, and there are always calamitous events that lurk at every turn, and that for the known history of man, gold has been the store of value par excellence.
But you don't have to agree with that - choose your own long term, multi-generational asset.
If you put it all together, you see that you should allocate some of your savings and income to building long term, inter-generational wealth, and spend some doing whatever builds your net worth in the short run. And don't forget to enjoy - take that vacation. That way you achieve both objectives.
I'm not giving out investment advice - this is simply the humble strategy that made the Sindhis and Jews (both persecuted and poor at some point) into more or less the richest people in the world.
Marwaris and Gujaratis follow this too - they may live in humble houses, and wear dirty white pajamas, but they have crores of inter-generational wealth.
You won't see them running out to snap up the latest flats though. They may buy flats, but they buy and sell, make their money and get out.
But you should see the crores of gold they give their daughters in weddings.
Again, I'm not giving out investment advice - I'm simply stating what other people have done to get rich, and offer what I think is a reasonably sound strategy to emulate them. Use it or not, your choices, your risks either way.
I will not surprise if Thyrocare Group sells this land to DLF (I dont have to name but big politically connected people have investment in DLF) and then to Walmart to setup Ratail store at this location.
Foreign Retail companies will not buy realty at the exorbitant market price but 'coerce' others to sell at less rate.
FDI retail will jump the commercial realty prices in Thane/New Mumbai/Alibaug in near future.
Interesting post.I like it very much.
It is interesting that all the people who seem to know inside story or have idea about insider stuff, post as Anonymous. They don't even want to put Open ID.
Is price correction inevitable?
The slowdown and other adverse market conditions clearly point towards price correction. However, residential prices have largely remained steady implying that other factors are having a greater influence on price; for example, the holding capacity of developers. Financial analysis of some leading developers reveals that over the last four years revenues and profits have dropped sharply despite property prices witnessing an increasing trend. Debt and interest outgo have also increased substantially. The ability of companies to service the enhanced debt has deteriorated and is reflected in the debt service coverage ratio (DSCR) declining over the last four years. Lower the interest coverage and the DSCR, the greater is the possibility of default. When declining sales makes it difficult to raise fresh funds to play out the holding strategy, developers may need to alter their mindset to deal with the resultant difficult situation. There is merit in reviving buyer interest and orchestrating demand pull than to invite the domino effect from a price crash, which can occur if some companies break ranks to wriggle out of the squeeze. It must be remembered that prices dropped dramatically during the last cyclical downturn of the 1990s and took several years to revive.
Pranab Datta is vice-chairman and managing director, Knight Frank India.
US Fed's Fischer says there would be social unrest and riots in US if debt not controlled.
What is OWS?
Where does India stand with debt? It will be catastrophic for India the day it gets downgraded. And the downgrade is coming sooner than ever. The whole thing is a Joke.
@Anonymous
S&P downgrading wont be catastrophic to India. FDI in India is mostly from Indians and this is unlikely to change. Even it changes, the effects will be minimal.
Foreign trade has made India more corrupt and large section of the people poorer.
profit loss ki mayajal or dollar rupee ki mayajal se nikalo ab ye desh bikane ja raha he,,,dollar paper can buy everything this is phsycology please save our country,,
one thing is economy is all about to fool,,,,,,,thats it,,
Just a quick poll -- how many of you have some percentage of your entire portfolio held in "ultra-traditional" assets? What are these?
1. Agricultural land that yields food grains.
2. Cows, goats and buffaloes.
3. Land to raise chicken
4. Own water source ( well, stream on land etc.)
5. Own electricity (solar, wind etc.)
In other words, when the golbal economy ENDS on Decemebr 21, 2012 (As predicted by the ancients), what are you going to do?
All real estate companies already understand this, which is why they are selling land now, and moving assets to GOAT (not GOLD DhlMan, but GOAT).
@Shailesh - "It is interesting that all the people who seem to know inside story or have idea about insider stuff, post as Anonymous. "
That has generally been the case with the RE bulls on this blog.
All the big guys (DLF, Unitech, etc) are reducing land holdings to reduce their debt. It would be interesting to know how much they made or lost on such transactions.
"In other words, when the golbal economy ENDS on Decemebr 21, 2012 (As predicted by the ancients), what are you going to do?"
If the ancients predictions are right re: 2012, whether your investments are in Gold or Goats will be the least of your problems.
The assets of the DLF group’s SEZ in Pune are going to be soon owned by the US-based investment advisory group Blackstone, while control over the Aachvis SEZ in Noida near Delhi is expected to move from the Delhi-based upmarket real estate developer, The 3C Company, to a foreign firm.
http://www.firstpost.com/blogs/sez-rules-tweaked-to-allow-real-estate-stakes-for-foreigners-146248.html/2
This should now solve the mystery of the 42crore loss for us now!
I now see a bright shining light at the end of the tunnel, the real estate bubble gone wild. Hope we will see the prices touching the ground soon.
how the builder going bankrupt ???
the fii and fdi giving lot of dollar to builder just think once its a big fraud by foreigners to enslave our salaried and kirana shop keeper by direct investment,,,last three years its clear that its a big game by dollar lord...now we cant afford 1bhk flat soon we will not afford meal by fdi...builders want their price..fdi in retail want their price soon rupee will surrender dollar,,,now its time to wake up deshwasio,,who will check foreigners balance sheet,,they just print and buy every corner of our country..make all ""gulam"" of them by dollar game,,mera bharat mahan,,
Anon above, buy gold, hyper inflate the dollar.
above samix,,gold ka nasha chadha he kya ? eat it,,i think you understand..
FDI in retail introduced in caliberated and sensitive manner: Pranab
Will deploy every tool to defend rupee: RBI
Politicians are making us suckers.
Rahul Gandhi who is behind all these moves is planning to take us to pre 1947 days. He will soon be viceroy and will crush the Indian Fakirs who dare to question him
Real Estate is for rich and mighty. You and me will have to be content with desi jopdas. Yours and my future will depend on how we please our Ghora/Semi Ghora masters who soon will establish their presence
Jai Hind.
above samix,,gold ka nasha chadha he kya ? eat it,,i think you understand..
This is an oft quoted sentence to drive people away from gold, but if you think hard on it you will realize that stocks, bonds, options, paper money do not make a tasty broth either!
Well replied Samix. Be greedy... greedier you are better off your in this century.
I think Jindal has finally found this blog...
320-cr deal for Jindal bungalow falls through
Real estate sources told TOI that the transaction for the 1,623 sq-m property was cancelled after Mittal reportedly had second thoughts about the price, which he apparently thought was higher than the current market value.
Can't wait to see how this turns out in next year. I guess "Pie in the Sky" can pretty soon become "Pie in the Face"...
Rs4,000 crore land for Rs400 crore
Terming it as a ‘deferred payment plan’, MMRDA has given the land worth Rs4,000 crore for only Rs400 crore, allowing the developer to pay the balance amount over the next five years.
“While the builder insists on 100% payment in advance much before giving the possession to the home buyer, it is strange that he should be allowed to use public land for private gains,” said the head of a leading MNC consultancy, hinting that the arrangement may have been made to eke out a better rate for the land, but it could eventually end up in a big mess if the developer over leverages the situation.
Given the tight market conditions and the liquidity crunch in the realty sector, it already seems that Lodha Group may have bitten off more than it can chew. Even when Lodha bagged the Rs4,053-crore project by bidding at a whopping Rs81,818 per square metre in May 2010, it was widely perceived in realty circles that the developer may have gone overboard.
“As per the agreement, the next installment of Rs600 crore, plus interest payments, is due in three months — in February 2012 - and if the builder does not pay the amount on time, we have the option of cancelling the agreement and forfeiting the payment,” said a senior MMRDA official, adding that the deferred payment plan has past precedents, but of much lesser scale.
Yehi hein Mumbai meri Jaan...
Mumbai policeman cops a cool Dh17m in assets
Well, I guess reality seems to be coming out...
‘Investors’ take genuine buyers for a price ride
The burgeoning investor presence in the country’s realty market has for long fuelled unrealistic speculation in residential prices. Latest figures now show that 52 per cent of the new realty stock in India is held by investors, a steep leap from 22 per cent investor presence in 2009.
This continuing flow of capital from of investors and private equity is the reason why despite an absolute slackening of sales volumes, property prices in highly speculative markets such as Mumbai are still on the rise. A report released by property consultants Knight Frank last week showed that sales have dropped a massive 70 per cent from its 2007 peak levels and yet prices have risen by 20 per cent since the same period. In NCR, another market with a heavy investor presence, flats are sold to investors on power of attorney basis in order to evade registration charges and other taxes.
Commenting on the high investor activity in the residential market, a November 2011 note by Credit Suisse states, “Our analysis of RBI data suggests mortgage additions in key metros across India have been stagnant since March 2007. The proportion of loans taken to total absorption suggests high investor participation in the key target market (Rs 25 lakh plus) for listed developers. While it is important to note that not all investor activity is speculative and could be viewed as a sign of the emergence of real estate as an asset class in India, high investor-driven demand increases amplitude of the local property cycles and affects cash flow cycles of developers during low liquidity.”
“As per the agreement, the next installment of Rs600 crore, plus interest payments, is due in three months — in February 2012 - and if the builder does not pay the amount on time, we have the option of cancelling the agreement and forfeiting the payment,” said a senior MMRDA official,"
adn what happen to people ho have bought in this property in that time. WHAT A WAY OUR POLITICIAN OPENLY PALY WITH AAM ADMI.
@shailesh,
Excellent link and finally some truth in reporting RE stories.
As I said previously, its the foreign investors who are propping up the investment demand and the article proves it - a jump from 22% to 52% in stock held by investors in just 2-3 years. It is a sure shot recipe for crash.
It is similar to 2007 in stock markets when foreigners were falling over each other to get into India and the boom was in full force with Sensex having given a stunning CAGR of more than 40% in returns from 2003 trough to 2008 peak. What followed was expected - the next 4 years, Jan 2008 to today, we got -20% and this is without adjusting for inflation.
Reversion to mean will hit RE with full force. We have seen the peak RE price of the next 5 years already. The worrying aspect is that the popped bubble will lead to sharp slowdown in GDP, massive urban unemployment and a bleak political scenario with a weak coalition govt. coming to power. India will be set back by a few years for sure.
@Pawan,
Agree with the mean reversion. But if these investors have paid in cash (i.e. not taken loans elsewhere to invest here), then we probably will not see a quick fall. More likely prices will trickle down slowly till inflation/rents catch up. Plus RE compared to stocks is illiquid, this too might add to the relative inertia of price declines.
@Polt,
I never said there will be a crash. I always said prices will drop 20% in one year (seems like its already happening though not advertised) and then the follow-on bust will continue maybe for the next 10 years.
As a corollary, a lot of projects will be suspended/abandoned, people will lose money, there will be lots of litigation (noida extention and 600 Cr. penalty on DLF are early indicators) and finally we will see a much needed real estate regulator.
If one can wait that long, that will be the time to buy.
dude you know how much money DLF king k p singh had spent in birthday celebration 200 cr and you speaking bla bla cic penalty ...its not 600 cr its "(just)"600 cr only,,
"But if these investors have paid in cash (i.e. not taken loans elsewhere to invest here), then we probably will not see a quick fall. "
Why does this (loans v. cash) make any difference?
It looks like that DDA has not learned anything from it's past lottery based allotments. In previous cases, the allots sold their flats immediately to the highest bidders. If DDA does not have the organization for such a resale happening again, why not auction the flats. If the intent is to truly help the low income families, then get a no resale contract with the buyer for, say, five years. All this allotment should be on the web for transparency.
@Anon - "Why does this (loans v. cash) make any difference?"
If the investor is rich enough it should not make any difference. But if you have taken a short term loan with the intent of making a quick buck by flipping the property (in say 9-12 months or lesser), then you will have to pay off the loan, in which case you will be forced to sell even if at a loss.
This is true for corporates as well, which is why the big firms are selling their land holdings.
The Chinese bust continues -
http://www.bloomberg.com/news/2011-12-02/real-estate-prices-fall-in-china-inciting-anger-and-applause-adam-minter.html?source=patrick.net
Of course, this will not happen here. We have large population, urbanization, unaccounted wealth, gold holdings, strict controls on where we can invest.
These factors are also present in China, but WE are different. RE will not fall here :)
Mumbai realty prices unlikely to fall: Pirojsha Godrej
"Mumbai realty prices unlikely to fall: Pirojsha Godrej"
Wow. A real estate company executive is of the view that "Real estate prices can only go up".
I am shocked! I mean SHOCKED I say!
Oxygen! Someone get me some oxygen. PLEASE!!!
@Anon above
Is truth is so bitter to swallow. When demand is much higher than the supply, what do you expect.
when Rupee takes a nose dive, the days of which are not far off, the real estate is going to more expensive. Why, the answer is obvious
Reserve Bank holds 300 billion $ as a forex reserve. Guess, how much of the same curreny is held by our 420 traders.
@Anon Above:
Lets repeat -
Wow. A real estate company executive is of the view that "Real estate prices can only go up".
I am shocked! I mean SHOCKED I say!!!
Oxygen! Someone get me some oxygen. PLEASE!
Oxygen! Someone get me some oxygen. PLEASE!
Would you like that oxygen in the form of nitrous oxide?
Hahahaha.
I lived through the US real estate crisis -- sold a house three months before the "crash" began, and almost bought a house a few months after the crash.
I heard hundreds of real estate peddlers like this Godrej guy, during the crash, who tried to convince people that rising real estate is for ever.
I think we should send a paper tulip to all such peddlers, each time they dole out such BS on real estate. I hope they have enough brains to understand the symbolism..
Un-f'ing-likely. Many trained economists don't even know about the tulip mania, much less these peddlers of rumor and misinformation disguised as investment "advisors".
Dear Vik and others: I have greatly enjoyed the posts here on corruption and real estate. Perhaps, you will like this slightly humorous take on corruption in India: Release the Kraken!
Peace!
Desi Babu, good post on your blog. I like your writing style and insight. Congratulations.
About corruption.
I'm on record on this blog as viewing black money as not-so-evil.
Now, I probably will invite much more ire by taking up a stand that says that corruption, at least they way it is practiced in India is not-so-evil.
I have several well reasoned arguments about my stand; but these will obviously be off topic here. Of course, if everyone is interested, we can go there.
Until then, dear Desi Babu, please keep the kraken in its cage.
Dear DhImAn,
Thanks for your kind words. I have also greatly enjoyed your comments here. I hope you will visit the Peanut Express more often.
Also, if you would like to enlighten us with your take on corruption, I would love to see a guest post by you on my blog. If you would like to write one, please email me at : desibabu1947@gmail.com
Peace!
@Dhiman - "Many trained economists don't even know about the tulip mania"
I think they know about it and about the other bubbles as well (South Sea, Mississippi company, etc upto the the dotcom bubble). But people tend to get caught up and always find reasons to justify the current one. The "This time is different" phenomenon.
"I have found this article very interesting. It’s a beautifully written article. The write has gathered and arranged information in a brilliant fashion. The beauty of this article is in its language and verbosity. The subject of this article is also very capturing."
Did you copy and paste your kid's elementary school writing exercise
by mistake?
A fellow BRIC joins us in the slow lane, though we seem to be somewhat better off.
FT - Brazil’s rapid growth shudders to a halt -
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCQQqQIwAA&url=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F90f9876a-200d-11e1-8462-00144feabdc0.html%3Fftcamp%3Drss&ei=OkXeTrSlHNGJrAe3_9jYCA&usg=AFQjCNH835QKvcg3KXvX05zNMBdJUGxsVw
It would be interesting to read your opinion on Mumbai real estate. Is kandivali a good area to settle down. If so, what is the current rate
@Desibaba
If you are expanding your business into India, I suggest Grant Road area or Juhu. Though more expensive, your investment will start paying great dividends
Good Luck
"If you are expanding your business into India, I suggest Grant Road area or Juhu. Though more expensive, your investment will start paying great dividends"
I hope you are being sarcastic. Either that or you're an ignorant shill.
he was being sarcastic. u have to google "desibaba" to understand why.
@Anon above,
I guess that blogger 'desibaba' is mistaken for a gujarati NRI businessman who owns a website in US and peddles porn. The suggestion given to him, may probably is right. I wouldn't call the person a shill.
Very good post. I agree with all of these items.
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good job done.
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