DLF customers gang up, pressurise developer to commit refund

Latest developments in the DLF's chennai project from ET.

DLF customers gang up, pressurise developer to commit refund
29 Mar 2009, 0633 hrs IST, ET Bureau

CHENNAI: Customer pressure seemed to have got the better of India’s realty giant DLF. Nearly 300 such buyers, who have backed out of the company’s prestigious ‘Garden City’ project in Chennai, refused to leave its premises till they got a written assurance that their money would be paid back in full.
Consequently, DLF has assured them that the formal refund letter addressed individually to the exiters would be given by April first. In its communication dated March 28, 2009, DLF Southern Homes, the special purpose vehicle executing the project on Old Mahabalipuram Road, said "the process of full refund will commence from 1st April, 2009, and will be completed before 30 September, 2009. The priority of disbursement shall be based on the order of first exit letters received and will be intimated by 10th April 2009."
For over a year and more, problems for the country’s largest listed developer have only been mounting. It has been facing the ire of customers, who made bookings in the 3,493 apartment Garden City project on 53 acres, which marked the Gurgaon-based realty biggie’s maiden entry in the city.
Apparently, the total number of exiters from the project was pegged at 580 out of its existing base of 1,800 customers. DLF Southern Homes was to have given a letter outlining the timeline of refund for all the exiters. But that did not happen, provoking angry reactions from the exiters, who refused to leave DLF premises until they got one.
The buyers, who advanced payments, have organised themselves into a Google Group, constantly monitoring the builder’s progress. Last month, as part of the attempts to appease its customers, wanting to exit from the project, DLF had brought down the prices from Rs 2500 to Rs 2600 per sq ft against Rs 2800 to Rs 3200 per sq ft for its existing customers. For new customers, the basic price was fixed at Rs 2750 per sq ft.
But this too seems to have not made any headway. For, on Saturday evening, nearly 300 buyers converged at the DLF office, seeking a written assurance from the developer to refund their money paid as advance for the project.
Earlier this month, the realty major had expressed its commitment to complete the project on schedule. This was in the wake of reports about consumers shooting exit letters.
If delayed approvals triggered anxiety and panic among existing customers, DLF Southern Homes MD K K Raman allayed the fears stating that "the construction activity is in full swing and we are well on schedule. We are committed to hand over the homes by April to June 2011, as originally committed."
"We do not foresee any problem in adhering to the timelines as we are adequately capitalised," DLF ED J Subrahmanian further said.

Happy new year and hurrah for 2008

Tis the time of the year to reflect on the year gone by and to plan ahead. As most people will agree 2008 was the year to bury leverage for good. Borrowers with good credit saw rates go up regardless and there were no prizes to be won for being a good kid and being frugual in your livestyle. Everyone got hit pretty bad. The difference being that the prudent investor still can rebound whenever the market turns, however the speculator is bankrupt and will have to restart his life from scratch to recoup the money back lost in the de-leveraging process.

2008 also put an end to the lot of myths about real estate
1. Real estate never goes down. Oops it just did.

2. Black money will support the market. Oops Black money speculators lost heavily in the market.

3. NRI's will come in droves. Oops NRI's lost jobs and returned back with empty pockets thanks to the decline in their 401k's and stock investments

4. Outsourcing will increase inspite of US downturn. Another big OOPS. With the collapse of Wall St. institutions, the need for systems engineering has collapsed as well. Add to that except for the top 4 outsourcing vendors, none can differentiate themsevles in any way and are competing by lowering prices. We all know what happens when prices go down!!

5. Sensex was supposed to hit 25000. Oops it closed at 9600 for 2008. If one takes the closing Sensex of Dec 31st 2005 of 9300, we had a massive gain of 3% over 3 years, annualized at 1% per year. Fantastic achivement by any standards, Dalal Street Einstiens.

As we move into 2009 I'm expecting the following for Indian real estate.

1. RBI will cut PLR to get loan rates to 2004 levels.

2. It is best to buy property nearing completion from investors. There is no point in buying directly from the builder when there are thousands of flats which are held by bleeding speculators.

3. We will see investors dumping flats as their jobs situation worsens. US is going thru major layoffs and that will have an effect on the Indian market was well. Some work will get outsourced but that gain will be compensated by the loss of Wall St business, some of which have closed for good. We will see layoffs and paycuts in the Indian industry in general, IT or otherwise.

4. NRI's who plan to live abroad will dump their holdings in India. It is cheaper to buy primary or investment property in the US with a better rental yield and lower mortgage then to keep their holdings in India. 2009 will bring out all these rats out of their holes.

5. Media will keep proping prices by issuing advertorials. The more research the buyer does the better. If it sounds too good, stay away. If they promise you the moon, you will get to live on it.

6. All the Abdullah's and Bindas Bhai's of India, cannot prevent humpty dumpty from having a big fall yet again in 2009. 2008 was the year of denial. 2009 is the year of acceptance.

To all the readers, commentators, bulls, bears or otherwise Have a Happy, Safe and Prudent 2009. We all learn from the collective knowledge, information and opinions we share. Happy posting.

Builders ask govt to buy unsold flats

Yet another dumb, foolish, stupid, retarded, moronic, idiotic, asinine, (your favorite adjective) idea to prop the realty market. Trust nitwits like realtors to come up with these pearls of wisdom.

Indian express reports
New Delhi: In the first of its kind bailout demand, real-estate companies are planning to ask the Government to buy out their unsold flats at current market prices and sell these at a later date. The proposal floated by one of the big Delhi-headquartered and listed real-estate companies is one of the many ideas to be hard sold at the Planning Commission tomorrow.

A real estate company’s chairman and managing director who did not wish to be quoted told The

Indian Express, “We will discuss this tomorrow with Planning Commission Deputy Chairman Montek Singh Ahluwalia.” He, however, did not disclose the inventory position of the large firms in India.

According to Jaskirat Singh, owner of Delhi-based real estate broking firm Grand Real Estates, about 30-45 per cent of properties worth Rs 50 lakh and above launched over the last six months remain unsold for DLF and Unitech. In the case of Omaxe, it is 25-30 per cent, he said. These companies do not disclose their ready but unsold assets.

When contacted, a promoter of another leading Delhi-based and listed developer said this was not the only proposal on the table to bail out the sector. “We want states to enter into joint ventures with big real-estate players by offering land as equity. State-owned banks must also be directed to start disbursing home loans now that they do not have a problem of funds,” he said.

To boost consumer demand and give a fresh stimulus to the sector, the companies are also seeking a further cut in interest rates on home loans. “It should be slashed to 6 per cent for loans up to Rs 5 lakh and to 7-7.5 per cent for loans up to Rs 30 lakh. What the public sector banks have done is grossly inadequate,” a developer said. Tax incentives to home buyers must be enhanced and rental income be made tax-free to incentivise purchases, he added.

Stung by the liquidity crisis, real estate companies also want the Reserve Bank of India to refinance the cash gap in existing projects. Most companies are borrowing at rates over 20-22 per cent to complete ongoing projects. “But, now, loans from banks have virtually dried up,” a promoter said.