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

Hindustan Times reports on NHB's index.

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

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

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

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

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

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

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

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

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

Move to bring down TDR prices, curb cartelisation

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

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

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

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

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

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

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

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

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

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

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

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

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.

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.

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.”

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

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

Indian Express reports

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

Raghav N. Bhatnagar

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

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

Forget Mumbai, the real bubble is in Ahmedabad

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

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

DNA reports

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

More here

Skywalks/Malls threaten commercial shops values on busy streets

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

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

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

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

South Mumbai bungalow to go for Rs500 cr

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

Just by the numbers.

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

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

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

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

DNA India reports

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

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

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

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

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

Bharat Bandh, super high inflation and housing prices

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

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

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

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

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

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

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

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

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

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

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

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

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

Tip from expert: Don’t be greedy

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

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

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

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

Where the rich live ?

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

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

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

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

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

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

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

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

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S.D. Corporation Pvt. Ltd.

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

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

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

High court quashes FSI increase in Mumbai

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

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

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

From what I hear the builders offer

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

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

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

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

Hindustan times article is below.

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

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

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

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

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

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

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

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

Mumbai setup for redevelopment.

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

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

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

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

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

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

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

More here

Nariman point soon to be deserted

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

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

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

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

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

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

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

More here

Mint asks a very pertinent question. Have Mumbai prices risen to fast ?

Far flung suburbs are quoting at 10,000 per sq ft. I'm not taking about Andheri but Kandivili and Borivili. 95% of Mumbaikars cannot afford these prices. What is the point of living in such a city ? Ofcourse we won't see such questions asked in the Toilet paper of India which is keep spreading all bogus news about real estate developments which have no consequence on the Mumbaikar. The city has gone to the dogs but nobody is willing to bell the cat. All these meaningless statistical analysis by the RBI economists ignores the biggest factor of black money in Mumbai real estate. Builders quote 50% in black money. The RBI is like the Roman emperor Nero who played the fiddle when Rome burned. All these bogus facts about the island city are meaningless when we have sprawls all the way upto Panvel and Virar. I believe the builders are keeping apartment prices high to keep their stock prices high. They can then sell the stock to gullible investors by planting stories in the news media. Also they can sell their apts to gullible NRIs just like what happened in Dubai.

The stock response to a question on housing prices in Mumbai is that they have become unaffordable. The general feeling is that they have risen too far, too fast. Fingers are pointed to the vast number of unsold apartments and everybody wonders how builders can afford to keep these flats vacant for months. But have real estate prices in Mumbai really gone up so dramatically? Mint reports

The Reserve Bank of India’s (RBI) report on macroeconomic and monetary developments has, in its chapter on financial markets, a chart on the house price index in Mumbai. The chart gives the index weighted by the value of transactions and the number of transactions. It shows that the Mumbai house price index reached a peak of around 230 or so in the second quarter of 2008 before starting to plunge. The index then fell to a low of slightly above 150 in the fourth quarter of 2008 before starting to climb again. By the second quarter of 2009, it had exceeded its pre-crisis highs and by the fourth quarter of 2009, it had gone a bit higher than 250. The chart has data from the second quarter of 2003, when the value of the index was 100. Putting it another way, if RBI’s index for Mumbai is right, then it means property prices in the city have, on average, gone up by a bit more than 2.5 times between 2003 and the end of 2009. But the gross domestic product (GDP) at factor cost at current prices has, between 2003-04 and 2009-10, gone up 2.3 times. And if India’s GDP has gone up by 2.3 times over the period, GDP of Mumbai city must have increased by a far larger factor. Add to that Mumbai’s island location, which makes expansion difficult and the rise in real estate prices does not seem too steep.

Land sharks grab land in Alibaug

One of the most picturesque places in Konkan is now getting destroyed by the land mafia. At this rate there will be nothing left but concrete structures all over the coast. As usual the government does nothing. One more sad tale in a one of the most corrupt states in the country.

Times of India now calls the bubble in Mumbai

Fools rush in where angels fear to tread. If I had bought in Mumbai in before 2006, I would just sell it and sit on the money. The profits are just too good to be true.

Beneteau yacht for a crore, but not a flat

Anil Singh | TNN

Mumbai: A brand new fourseater Cessna 172 aircraft,a new Beneteau 35-footer coastal cruiser yacht that can comfortably carry a family of six to Goa, three Mercedes ‘C’ class saloons; each of these can be had for one crore rupees. But raised eyebrows and blank stares is all you will get at the ongoing property expo at Bandra-Kurla Complex if you ask what you can get for this sum. “Please pick up the rate charts from that corner,’’ sales executives at several counters told this correspondent disinterestedly on learning that the budget was a mere Rs 1 crore. It was as if a slum dweller had strayed into a mall.

Nonetheless, if one is willing to visit every stall in the 14,000 sq ft air-conditioned hall put up by the Maharashtra Chamber of Housing Industry (MCHI), one can find apartments costing less than one crore in the municipal limits of Mumbai. Only that they may be in under-construction,standalone buildings on the outskirts of the city or in rundown localities. For instance, a 2BHK flat at Bhandup by Neptune builders measuring 1,000 sq ft (carpet area 700 sq ft) comes for Rs 67 lakhs. The 30-storey building, Flying Kite towers, behind Metro mall, is still under construction.

The more affordable options include a 2BHK flat at Mantri Park, Goregaon (E), off Film City road for Rs 70 lakh. A 1,160 sq ft 2BHK flat at Gundecha Altura, Kanjurmarg (W), LBS Marg, is going for Rs 76.5 lakhs. HDIL is selling 1BHK and 2 BHK flats at Galaxy Apts at Kurla East at 5,251 per sq ft. A 1,035 sq ft, 2BHK flat at ‘US Open’ by Nirmal Lifestyle at Mulund (W) will cost you Rs 85 lakh at Rs 6,552 per sq ft if you are willing to wait four years for possession.

According to builders specialising in SRA projects, it is possible to get an 800-sq ft carpet area flat for Rs 80 lakhs in Andheri. MHADA recently sold 2BHK flats with a carpet area of 700 sq ft at Versova for Rs 42.5 lakhs. However, at the MCHI expo, most of the 2BHK flats are tantalising out of reach if your budget is Rs 1 crore. For instance, a 2BHK at Ackruti Shikhar at Parsi Panchayat Road, Andheri (E), will cost you Rs 1.3 cr at Rs 12,500 per sq ft. A 2BHK flat with a carpet area of 775 sq ft at Kohinoor City, which has replaced the Premier auto works at Kurla, comes at Rs 1.18 cr. A 2BHK at Kalpataru Aura at LBS Marg, Ghatkopar, comes for 1.1 cr. Flats at HDIL’s Metropolitan at Andheri are being sold at Rs 11,500 per sq ft and a 2BHK with a carpet area of 765 sq ft costs Rs 1.31 cr. At Ajmera Pristine, Yogi Nagar, Eksar Road, Borivli (W), a 3BHK with an area of 1,595 sq ft can be had for Rs 1.43 cr.

Of course, all these flats come with amenities such as a swimming pool, a gym, a clubhouse, multi-level car parking and the like. But then, it would be much cheaper to live in a trailer, or for that matter in a Beneteau cruiser yacht bobbing on the waves.