Shah Rukh glamor doomed in the Gulf

Shah Rukh Khan or SRK needs to start reading this blog :). Sabbal Seshu and Ashish will get him black money rich clients for his high end gulf properties. Alas Mr SRK you might be a good businessman with Knight Riders and IPL, however this one is destined to end up 'deserted'.

Bollywood Star Hopes Glamour Will Rub Off on Gulf Properties

By Ayesha Daya
Enlarge Image/Details

Oct. 7 (Bloomberg) -- Shah Rukh Khan, the star of Bollywood hits such as ``Om Shanti Om'' and ``Chak De India,'' hopes his glamour will rub off on the real-estate fortunes of a little-known Gulf emirate.

Khan will help Ras Al Khaimah, a rocky outcrop of 168 square kilometers (65 square miles) and 250,000 people, to sell an 8 billion-dirham ($2.2 billion) beachfront development that will include an underwater disco and lounge. He presented the project, called Shah Rukh Khan Boulevard, in Dubai on Oct 5.

``I'm a believer in a place where things grow fast,'' Khan, who has visited Ras Al Khaimah only once, said in an interview after the briefing. Khan, 42, has endorsed products ranging from PepsiCo Inc. soft drinks to Hyundai Motor Co. cars.

Ras Al Khaimah, the most northerly of the seven sheikhdoms in the United Arab Emirates, aims to emulate Dubai, whose booming property market has attracted endorsements from celebrities including Brad Pitt and Boris Becker. The developer, TSA Group, is trying to lure foreign investors including Khan's fans from the Indian diaspora.

As oil and gas reserves dwindle, the emirate hopes tourism will generate independent sources of income and supplement contributions from hydrocarbon-rich Abu Dhabi that provide basic infrastructure, power and public services.

The Shah Rukh Khan Boulevard will be built on the man-made Dana Island that is being developed by the government's real estate unit Rakeen. The Boulevard will comprise townhouses and ten towers spread across an area of 600,000 square feet and is due to be completed in 2012.

Design Ideas

Khan has offered design ideas for the project, such as a glass gate at the entrance and big screens on the beach where people can watch movies, besides the underwater attractions.

``For me, this is the first step to have the freedom to express myself in stone,'' said Khan, who isn't planning any other developments. The Mumbai-based actor will start filming ``My Name is Khan'' on Dec. 15.

Khan said the project won't be hampered by a slump in the local real estate market brought on by the global financial crisis and the prospect of a worldwide recession. ``This is not the first time I'm experiencing recessions,'' the actor said, adding that the project won't be ready for another five years.

In Dubai, Brad Pitt is helping to design an 800-room hotel and resort with Zabeel Properties, while towers have been named after former Wimbledon tennis champion Boris Becker and ex-Formula One driver Michael Schumacher.

Dubai's other projects include a 1-kilometer-tall tower and surrounding developments that will cost about $40 billion, a 300- island project in the shape of continents called The World, and the world's biggest mall.

Dubai Real Estate

Home prices in Dubai, the second-biggest of the country's emirates after Abu Dhabi, are likely to remain little-changed until 2010 after five years of gains, Colliers CRE Plc said in a report Oct. 5. Emaar Properties PJSC, the Middle East's biggest publicly traded real-estate company, lost the most since 2000 on Oct. 5 on concern that the U.S. bank bailout won't prevent the global credit crisis from reaching Dubai.

``There is very little to go on with regards to the fundamentals behind the Ras Al Khaimah market,'' said Robert McKinnon, managing director of equity research at Al Mal Capital PSC. ``But I do expect it would correct along with the rest of the U.A.E.'' if this happens.

Buy your house - next year!!!

Since when did we start seeing these headlines. Now the original prophecy laid out in my original postings of the collapse of WAMU, Wachovia has come true, what do we expect next.
Based on today's 777 point drop in the DOW, I would expect the Sensex to hit 8000 fairly soon. We are at 12500 and the journey to 8000 should be swift and painless. Mumbai as a property market is dead. I think prices can easily drop 50% and rentals down 60-70%. Any apt which is quoting over 5k per sq/ft is not viable. If the developers have paid over 5k as their acquisition cost, they are the sub-prime of India. They have borrowed funds to acquire sub-prime assets and they will have to pay the price. Nobody in the right mind has 1cr to buy an apt in Mumbai, let alone other cities. I think the paradigm "Real estate never goes down in Mumbai" is now dead. Real estate has collapsed under the weight of the Sub-prime and the flow of cheap money, funded by unscruplous bankers. All the I-Bankers buying properties of 4-12 crores better find ways to find their purchases. The party is over, and the drunks are straggeling to get home. The Rahejas and the Hirnandani's now have to go back to the common people who were priced out of the purchase and if they don't drop prices, they can keep their apartments for themselves and their relatives or friends. With the implosion of the US banks, credit is weak. Amercians with retirement plans funded over the past 20 years are now bailing out to the safety of money market funds. How does Mumbai survive this huge gigantic iceberg. The real estate buildings spring up all over Mumbai will collapse like the Titantic and will remain unfinished if they are not sold at below market rates. Witht he media also harping on the slowdown, expect everyone except the diehard optimist, like Realtly rider and Ashish to keep buying properties and these folks deserve to have their money parted for a fool and his money will soon be parted. For the rest, lets keep watching the party unwind. It was a great run and an even greater drop. Gravity rules.
The time for buying in projects breaking ground or just starting has ended. With the collapse of credit, there is no way to know if projects will be completed and bills paid. This happened in the 80's where there were many unfinished buildings since the developer ran out of money. Whenever the time comes to buy, sometime next year and prices have fallen steeply, it is best to buy an property which is ready or almost ready. Project execution risk has too be taken out of the equation. With so many developers folding only the biggest and ones with deep pockets will survive. Everyone else will be road kill. As of now in terms of banks, there are only 4 major banks left in the US, Bank of Amercia, Wells Fargo, JP Morgan Chase and Citigroup. Citigroup had to be bailed out by the Arabs, so what is the guarantee that a company like ABC Constructions will survive in a fastly deteriorating market

DNA India reports.
A survey of brokers shows that enquiries to buy homes have fallen, with Mumbai registering a 90% drop. Brokers expect prices to drop soon.

The word is out on the streets. About 60 per cent of brokers expect prices in the Mumbai island city and up to Borivili to come down in the next year. Pranay Vakil, chairman of Knight Frank, global property, says he is also concerned about the volumes, which currently are 10 per cent of the sales recorded last year in Mumbai alone. “Prices are a function of demand and supply. But if volumes do not sustain, the problem will be greater and will bring the industry to a halt. Currently, only long term investors who have seen the ups and downs in the market are holding on.”

According to a pan-India survey of local brokers on the residential property market carried out by Edelweiss, global research analysts, almost 80 per cent of brokers across India have witnessed a reduction in enquiries over the past month and about 90 per cent of brokers in Mumbai have seen a drop in transactions over the past one month.

Hundred brokers in 20 micro-markets like Bandra-Borivili, Mulund-Thane, Gurgaon, Noida, Whitefield-Marathalli, Annanagar in the cities of Mumbai, Delhi, Bangalore and Chennai were polled.

According to Vakil, in order to increase volumes, developers will now cut down on quality in big projects. “In a total of 10 buildings, two will maintain high quality at a high rate, but in two he might offer low quality tiling in bathrooms and use it as an excuse to reduce his prices,” he says.

According to property experts, volume is driven by sentiment. If a buyer is sure of his ability to retain a job — essential to maintain a bank loan — he will go ahead and borrow money to buy a flat. “The situation is rather flexible. Apart from high property prices, high interest rates have cast a big question on the affordability of a flat purchaser these days,” said an equity analyst.

That the lack of demand and growing liquidity crises has developers worried was obvious at an informal meeting of 35-odd developers at a suburban five-star in Mumbai recently. With banks like Bank of Baroda, Bank of India recently announcing that they will not lend money against property, developers are worried about how to source funds for their projects. “The tightening money market has made IPOs redundant.

Venture capital funds have stopped lending and developers do not want to go to money lenders because of high interest rates of about 25 to 30 per cent. So, the only option is to either start selling faster by reducing rates (something they do not want to do) or curtail production which many of them have already started doing,” said a property consultant with a global real estate major.
According to Anuj Puri, managing director of Jones Lang Lasalle Meghraj, a global real estate firm, “Developers will have to reduce their prices if they have to beef up their quantum. I believe there is still a lot of depth in the market but at the right price. The faster the developers understand it, the better it will be for all concerned.”

Lehman bankruptcy hits Indian developers

DNA reports
Unitech’ll miss crucial cash
MUMBAI: The collapse of Lehman Brothers, the world’s fourth-largest investment bank, has left some Indian real estate developers gasping.

Unitech Ltd, India’s second-largest developer by market capitalisation, had received Rs 740 crore from Lehman Brothers Real Estate Partners (REP) for its mixed use development project at Santacruz in Mumbai just two months ago on July 17.
That day, Unitech said Lehman will invest about $175 million (Rs 740 crore) and will acquire a 50% stake in the initial phase of a project on the Western Express Highway in Mumbai.
This initial phase entails development of 1 million sq ft of office space out of a total developable area of 18 million sq ft.
“Lehman and the Western Express JV will each contribute 50% of the construction costs,” Unitech said.
The Western Express JV meant Unitech and its local partner Rohan Developers.
A Unitech spokesperson said the company “has already received the $175 million in July, so there is no problem”.
The construction cost for the first phase of the project is pegged at Rs 300 crore.
As per their stake equation, Lehman has to invest Rs 150 crore but hasn’t to date, according to sources familiar with the development.
Also Unitech was expecting further investments from Lehman Bros for the same project and its Worli project also.
Unitech was expecting an additional Rs 500 crore from Lehman including for the Worli project.

The Ashok Piramal-backed Mumbai-based realty major, Peninsula Land Ltd, had signed a memorandum of understanding (MoU) with Lehman whereby the US-based company was to invest $125 million or Rs 576 crore in its projects for minority stakes.
The first tranche had to come for the Hyderabad project where Peninsula is developing an integrated township and IT Park on a 31-acre plot bought from Rallis India.
To a query by DNA Money on the investment status, Peninsula said: “The investment for Hyderabad would come once we start the construction … which would begin in the third quarter this year.”
The company said it would not be affected because most of the money was raised from non-Lehman sources.
Peninsula Land has earmarked Rs 2,500-3,000 crore for land acquisition in the next three to five years.
The investment was to come from Lehman and some of Peninsula’s domestic and offshore funds. But DLF, India’s largest developer, may be thanking its stars.
That’s because Lehman has already paid $200 million or Rs 921 crore to DLF Assets Ltd, a subsidiary.
“We have already received the payments so we are not facing any trouble,” a DLF spokesperson told DNA Money.

Lehman fall may deepen Indian realtors' credit woes

Enuff said

NEW DELHI/MUMBAI: Lehman Brothers’ bankruptcy is likely to cost Indian real estate dear. It may impact the financial major’s existing investments worth $500 million in realty firms, including DLF and Unitech, besides drying up another $500-million worth of potential investment which was expected to flow into Unitech’s Mumbai projects.

The news of Lehman’s collapse brought the BSE realty index down by 7.65% on Monday, while the benchmark Sensex declined 3.35%. Both DLF and Unitech fell 7.5%.

Lehman’s fall signals a deepening of credit crisis for Indian developers, who have lately been battling falling sales, rising cost of construction and tightening credit. It is expected that the US-based firm is likely to go for a fire sale of its assets.

The financial services major was very bullish on India and was among the active investors in Indian real estate. Early this year, it had leased out an office space in Mumbai paying Rs 1 crore per month as rental. This would divert a part of fresh funds seeking to invest in Indian realty.


This is because global fund houses have country-allocations. And as they buyout Lehman’s stake in some of the Indian assets, they will end up diverting some of the fresh funds-in-hand to existing assets rather than investing in new projects.

“Lehman’s departure will impact future cash flows of real estate companies. In a market situation like today’s, it will be all the more difficult for the firms to raise funds,” says Karvy Stock Broking vice-president Ambareesh Baliga.

Lehman invested $200 million in DLF promoter group company DLF Assets last year and bought 50% stake in Unitech’s Mumbai project for $175 million a few months ago. It had also invested $80 million in Bangalore-based SEZ Gandhi City and was likely to hike its share to $300 million.

Lehman’s other investments include a 40% stake in an IT park project of Peninsula Land in Hyderabad for an initial investment of Rs 50 crore. It had also teamed up with Mumbai-based developer HDIL to bid for the redevelopment of Asia’s largest slum Dharavi.

Wherever the developers had received fund, they are safe. But where the funds are yet to come, the developers could get stuck. Some analysts say a distress sale by Lehman will impact the valuation of existing projects.

DLF CFO Ramesh Sanka had earlier told ET that Lehman’s sale of investments in DAL would not impact DAL’s valuation. Unitech MD Sanjay Chandra said that his company had already received funds. So, the company won’t get impacted by Lehman’s bankruptcy.

Some industry executives say that FDI norms of a three-year lock-in period may prevent Lehman from making an immediate sale. But analysts argue that the lock-in period in case of bankruptcy may not hold.

Real estate developers caught in downturn

DNA has a article on the pithfalls of the use of leverage in the real estate business. Expect rapid unwinding in Mumbai and land prices in developing areas of all cities in Mumbai. The wind below the PE wings have been taken out. With the collapse of Lehman, Fannie, Freedie and impending doom of Washington Mutual and Wachovia, we are in a very deep downturn. I think Mumbai prices will collapse 50% under these circumstances. Antything over 5-6k per sq/ft is not capable of being repaid using a loan based on Indian salaries. so prices have to drop to these levels whether funded by black, white or yellow money. If prices don't drop there will be zero buyers for all expensive properties owned by builders. They can keep it and rent it out for 20-30k a month. If the PE guy comes callingthey better have a good way to repay their debt, maybe by raising money on the black market at 4% a month

Increase in interest rates, private equity players’ demand for assured returns hit realtors, delay project launch
MUMBAI: Increase in interest rates and demand from private equity firms for assured returns have landed a double whammy on realtors: a severe liquidity crunch that’s delaying projects and launches; and, two, narrowed fund-raising avenues.

Till some time back, developers preferred to invest money in one project at a time. So, if a realtor injected Rs 1,000 crore into a project, he would wait for free cash flows to come in before announcing the next project.

But the realty boom of the last two years saw many developers aggressively announcing multiple projects.

As a result, over 1,000 million sq ft was earmarked for development with a fund requirement of Rs 205,400 crore over five years.

Spurring their aggression was the entry of private equity investors, who invested heavily discounting the risks.

When the market slumped this year, PEs turned chary of investing so started demanding assured returns.

For realtors, this meant funds wouldn’t come as easily as they used to.
Pankaj Jaju, head of the real estate practice at Enam Securities, said deferred cash flows are affecting the rate of return on projects.
“And there is more pain in store as capital values are expected to correct across markets and input costs have increased, which would lead to contracted margins of the developers,” Jaju said.
Another action that lead to funds crunch is that developers who had easy access to liquidity started jumping the gun when it came to projects.
In a recent report, Enam elucidated how this happened and who is paying for the sins.

Earlier, if a realtor had two projects in hand —- say A and B —- worth Rs 1,000 crore under development, he would invest the entire amount in the first project, complete it and after getting returns on A, and then invest in B.

With PEs coming in, builders began splitting the Rs 1,000 crore into two equal chunks, investing in both A and B at the same time and expecting PEs to contribute 50% of the net asset value (NAV) of the project (or half of Rs 1,500 crore).
The real estate company having Projects A and B first starts executing Project A by investing Rs 500 crore in a special purpose vehicle (SPV).
The PE investor brings in 50% of the project NAV - Rs 750 crore, into the company, taking the total equity capital to Rs 1,250 crore.
A debt to equity ratio of 1:1 meant the builder is able to raise debt worth Rs 1,250 crore. Thus the total investment in the project becomes Rs 2,500 crore.
With the project cost at Rs 2,000 crore, the company’s estimated free cash flow stands at Rs 500 crore at the end of the first project.
This Rs 500 crore is invested in Project B, which is a bigger project with a bigger project NAV. The same procedure of bringing in a PE investor etc is again followed with Project B. The real estate company thus ends up with an estimated free cash flow of Rs 1,000 crore.

But trouble came when the estimated free cash flow didn’t arrive because construction work started getting delayed, land acquisition became a problem and costs shot up by more than 50% of estimates.
The crunch is affecting realtors who have stretched their balance sheets thus, and did not achieve financial closure for projects.
The exit of investors, who were one of the biggest sources of working capital for realtors, landed another blow.

Realtors therefore sought quicker rotation of capital by putting money into high-earning activities of land banking, which left many a developer in the lurch.
Things have come to such a pass, says the Enam presentation, that developers are pitching projects against each other at lower costs to gain sales volumes and earn much-required cash to resolve working capital issues.
“No heed was paid to real estate cyclicality, slowing demand or aggressive execution,” the report said.

Battle for Mumbai's skies set to begin

Times of India reports

Mumbai: The skyline of congested areas in Mumbai like Girgaum, Grant Road, Bhuleshwar Nagpada and Parel could soon be filled with thousands of skyscrapers sprouting from every nook and corner, thanks to Thursday’s supreme court ruling.
The order comes as a major bonanza for builders because it once again allows them virtually unlimited floor space index (FSI) for redeveloping old, mainly pre-1940 cessed buildings in the island city. In 2005, the Bombay high court, which had admitted a PIL filed by some prominent Mumbaikars, had restricted this use of unlimited FSI on the grounds that it was leading to haphazard and unabated construction activity. The high court had observed that this rule had led to ‘subversion of urban planning’.
“Although the supreme court ruling will facilitate redevelopment of old and dilapidated cessed buildings, it will put pressure on civic infrastructure,” said a worried municipal commissioner Jairaj Phatak. However, he was confident that the island city will be able to cope up with this construction spree if the redevelopment is carried out in a proper manner.
When old buildings are torn down and rebuilt into towers, the space between two skyscrapers could be as little as five feet or even less. Mumbai’s development control rule 33 (7), which pertains to the redevelopment of cessed properties, gives sweeping powers to the municipal commissioner to relax the mandatory open spaces surrounding a building to five feet.
In congested Girgaum, opposite the Harkisondas hospital, a 38-storey tower is virtually kissing another 22-storey high rise next to it. In Nana Chowk, a pencil thin skyscraper has cropped up almost touching the adjacent building.
Over the past decade, many such residential towers as high as 30-40 floors have started springing up in areas like Girgaum, Nana Chowk and Grant Road where the civic infrastructure is already in poor shape. In fact, Mumbai’s tallest residential building, the 45-storey Shreepati Arcade at Nana Chowk, was redeveloped under rule 33 (7).
On Thursday, property redeveloper Pujit Agarwal of Orbit Corporation was ecstatic as several hundred redevelopment projects were in a limbo ever since the PIL was filed in 2004. “The Supreme court judgment has come as a relief for the entire island city, especially the two million tenants living in such buildings. Over the past eight years, we have all undergone a learning curve,” he said.
Rajesh Vardhan of Vardhaman Developers said the judgment has come at a time when several dilapidated buildings were crumbling, leading to loss of life. “Hopefully, today’s ruling will lead to systematic development,” he said.
Agarwal said that henceforth the BMC should ensure it does not condone the compulsory open spaces and in only exceptional cases, should it relax it to five feet. “The state housing authority, MHADA, should carry out due diligence to ensure that the list of tenants is not inflated by any builder in order to get more FSI. Thirdly, developers must be encouraged to go in for cluster redevelopment,” he added.
The Property Redevelopers Association said more than 500 proposals for redevelopment of cessed properties are pending with Mhada and BMC. “The pace of rehabilitation will now increase,” it said.
Four years ago, in a PIL filed by the late J B D’souza, urban planner Shirish Patel and civic activist Cyrus Guzder against the “misuse” of 33 (7), they pointed out how some builders inflated the number of tenants to avail extra FSI.

The new Zamindars of India - TheRussian mafia

Livemint.com reports on apathy of the Goa government to look into illegal land dealings in Goa.

Mumbai: The Enforcement Directorate, or ED, the agency responsible for investigating economic crime in India, has sought information from the Goa government on all companies that bought properties in the state between 2000 and 2007, as it investigates the role of a suspected Russian land mafia.
The agency suspects that some Indian companies that bought large plots in the state could have acted as fronts for Russian owners acquiring land in violation of the Foreign Exchange Management Act, or Fema, said a top enforcement official, who spoke on the condition of anonymity.
The directorate, which has been probing suspicious land transactions, has had little success in tracking such deals.
“Most of these cases are unreported due to the reluctance of state authorities to cooperate with our investigations,” the same official said. “We have asked the Goa government to find out the names of big companies that have bought land for promotion of tourism in Goa.”
Goa chief minister Digambar Kamat declined to comment on the issue in a telephone conversation. He also said a comment through email or fax would take time, citing the state assembly session that’s under way.
Goa, famous for its beaches, tropical biodiversity and a strong Portuguese influence on its culture and architecture, attracts a large number of foreign tourists every year who find it easier to blend in with the diverse local population than in any other Indian state. But parts of Goa have also acquired a reputation as a haven for drug dealers and land mafia.
Last year, CNN-IBN television news channel reported that the Russian land mafia had been throwing out small landholders and farmers, and grabbing prime land in fraudulent deals. Following reports of foreigners buying land in Goa in violation of Fema, the state government handed over details on 21 companies owned by Russian nationals to the directorate and the Reserve Bank of India, or RBI.
According to Ashutosh Limaye, associate director at the property consultant Jones Lang LaSalle Meghraj, increased vigilance over land deals by the police, forest laws and rules relating to coastal regulation zones have stalled land transactions in Goa now.
“The deal makers want to play it safe and are waiting for resolution of the ongoing issues,” he said.”The number of land transactions in Goa has definitely come down as a fallout of the land scam. Many deals, that were at the negotiation stage, have been stalled.”
Still, the “significant decline” in the number of land deals hasn’t led to a sharp fall in prices, which have remained stable, he said.
In May, the directorate issued notices under Fema to the promoters and directors of two companies—True Axis Resorts Pvt. Ltd and Artlibori Resorts Pvt. Ltd, owned by Russian citizens Leonid Beyzer and Valiulin Rashida, respectively, asking them why they should not be penalized. The other directors in True Axis are Pramod B. Walke and Fransico D’Souza, both from Goa.
Beyzer, who still lives in Goa had, in 2005, bought 25,000 sq. m of land, including 19,906 sq. m of prime agricultural land in Morjim, North Goa, for constructing a resort. He was in India on a tourist visa, according to the directorate.
Mint was unable to contact True Axis and Artlibori Resorts because their addresses weren’t readily available.
The directorate also sent notices to directors of another resort firm, Oriental Ambers Pvt. Ltd, only to find later that there was no office at the registered address. It has not been able to trace the local owners of Oriental Ambers either.
According to the enforcement official, under Fema, foreigners can buy land in India if they hold a business visa and have lived in the country for 182 days at a stretch in the previous financial year. Such individuals should also possess documentary evidence of either long-term employment or business or vocational pursuits in India.
Foreigners with business visas can purchase properties in the name of Indian entities registered with the registrar of companies and the local branch of RBI. They can buy land for personal use if they can prove their intention to stay in India for an indefinite period of time. Even then, they are not allowed to buy agricultural and plantation land.
According to the directorate’s investigations, Beyzer founded True Axis and infused capital in the firm as foreign direct investment, or FDI, under the automatic route of RBI available for non-resident Indians. The Indian central bank raised objections later on the source of money.
Under the automatic FDI route, RBI’s prior approval is not required. However, the firm should notify RBI about the transaction within 30 days of inward remittances for clearance.
“We found that True Axis was not using the money for construction of the proposed resort. Now, we have attached the commercial property of True Axis in Morjim and are waiting to hear from the promoters on the show-cause notice,” the same official said.
“We fear that a number of big companies owned by Russians have followed the same route to grab land in Goa,” he added. “The modus operandi of such individuals is to float a company with an Indian partner, who acts as a front to register the firm in Goa. The company then pumps in foreign investment for real estate deals. Once the firm buys the land, it splits from the Indian partner.”
The directorate is investigating more than 400 cases where foreigners from the UK, France and Russia have bought land in Goa under tourist visas.
“Many of them are retired foreigners who are peacefully living in Goa and are harmless, but the real threat is from Russian companies who are illegally acquiring land,” the enforcement official said.
The agency recorded statements of individuals in 100 cases and issued 15 so-called show-cause notices to some of them under Fema last month. According to the directorate, the number of cases of misuse of property laws in Goa can go up to 2,000.

What is a bubble ?

There are many definitions of the term bubble and bubbling prices of real estate are known to everyone in India. We need to define what is considered a good price for buying property in India. There is the obvious "sour grapes" syndrome which people succumb to when they discuss property prices so an objective analysis is needed on what constitutes fair price for a given property. The guidance value is of some relevance but in Mumbai and other urban cities it has lost its meaning due to the high component of black money. Given the growth of money supply by rising incomes and accessibility of loans we have seen the steep rise in property prices. Some 15 years ago when I joined an IT company in Bangalore I used to get 5,500 rupees a month. That was considered a princely amount and it was more then 2,000 rupees then what my mother earned a school teacher after spending 25+ years. At about the same time in 1993 someone I knew bought a 4000 sq ft plot in Jayanagar for 4 Lakhs which is 100 rs sq/ft. In 2008, Infosys should be paying 25000 to a fresher, A teacher of the same experience will probably at 10k (my guess) but the plot in Jayanagar is now 8000 rs per sq/ft. The point of the story is that land appreciation is something which cannot be predicted, however apartments have a finite value and will not show the same stellar returns.
If an investment is to be made it has to done at a low entry point for maximum return. For those who had the money to buy land in 1993, they can safely plan for their grand kids retirement. For those like me who didn't we can debate.

Realty slowdown delivers late punch to buyers

Economic times reports on the hard times facing the builders. Speculate and pass the buck to the consumer seems to the mantra of the builders.

Economic times reports
NEW DELHI: Realty slowdown is delaying delivery of homes. Several developers have postponed execution of their housing projects as funds become scarce, demand softens and raw material prices rise. While some others are deliberately delaying projects in order to reduce supply as demand weakens.
Several projects across the country are getting delayed as developers aren’t able to generate enough cash to continue construction work. Projects are delayed by as much as 6 months to over a year. “Funding is largely unavailable. Those developers who can access funds are also shying away from it since it has become very expensive. In addition, income from sales of housing units has declined with the softening of demand ,” says Cushman & Wakefield executive MD Sanjay Verma.

All developers are facing the heat on account of high interest rates, which the country’s central bank has been hiking in order to tame inflation . Mid and small developers are faring worse as banks have almost shut their door on them.

“It is a tough time for real estate firms. A weak demand is affecting cash flow. Moreover, the cost of debt and construction has risen. How can one continue construction with the same pace in this environment,” says a senior executive at Omaxe.

Some developers cite usual reasons such as delayed government sanction and unavailability of men and material for the current unusual delays. “Till the last month, steel was difficult to procure even at a very high rate delaying execution of projects ,” says Gaursons joint MD Manoj Gaur.
Not all delays are forced by just funding or material constraint. Says Sanjay Verma of Cushman & Wakefield, “Some developers are not minding delaying projects as they feel a reduced supply of homes will help them sustain prices in the face of slowing demand.”
In such cases, early buyers in the project are surely going to suffer as they will have to wait for a much longer time for delivery of their dream homes. Verma feels the scenario in real estate is unlikely to improve for at least one year as interest rates are expected to remain high.

Chennai : OMR plot goes for 10.5 crore an acre

Economic Times reports

CHENNAI: The Bangalore-based Mantri Developers has successfully bid for a 4.9 acre plot of land at Siruseri IT Park on the IT Highway for developing an amenities centre. The price — Rs 10.5 crore per acre for a 75-year lease — is considered a new benchmark in Chennai’s real estate market.

The plot of land, located at the entrance of the IT Park and adjoining the IT Highway, was originally acquired by the State Industries Promotion Corporation of Tamil Nadu Ltd (SIPCOT). It was handed over to the Tamil Nadu Road Development Company (TNRDC) — which develops the IT Highway also known as Old Mahabalipuram Road (OMR) or Rajiv Gandhi Salai — on a 99-year lease for developing world-class facilities for the IT and ITES sector as well as the road users.

The TNRDC’s earlier efforts to identify a business partner for the project failed because all were far below the upset price of Rs 10 crore fixed by the company.

When the TNRDC floated a revised bid recently, Mantri offered to pay Rs 10.5 crore per acre and emerged successful. The TNRDC will hand over the land on a 75-year lease to Mantri for setting up a hotel — four star or five star — and an amenities centre with shopping mall and club house measuring roughly 6.5 lakh sq ft. The developer will be at liberty to identify a viable business proposition.

While sources in the TNRDC and Mantri refused to comment, it is learnt that the two firms are working towards the conclusion of the bid process. Mantri will have to make a one-time payment of Rs 51.45 crore for the plot of land. Mantri’s offer is more than double of what many IT companies have paid for acquiring land from SIPCOT in the Sirusseri park.

However, the commercial value of private properties along the IT Highway between Sholinganallur and Sirusseri range from Rs 15 crore to Rs 20 crore per acre. Mantri is also developing a residential project — Mantri Synergy — at Padur on the IT Highway.

The builder is already promoting luxury and business hotels in Bangalore and Hyderabad and IT space in Bangalore and Pune. The group started by Sushil Mantri with a low capital of Rs 10 lakh in 1999 in Bangalore, has so far completed more than a dozen residential projects in Bangalore.

Home loan borrowers look panic-stricken now

Life comes full circle. 3 years ago people will buying flats like bread and cake. Now the same people are panicking and paying off debt by their bonuses and whichever means they can. The wide-grin of leverage is now bleeding them every month. Singh is King Manmmomhan anmd Montek should be congratulated for allowing the transfer of wealth from the consumers to the builders and banks.

Home loan borrowers look panic-stricken now
ET Bureau[ Aman Dhall & Raja Awasthi ]

NEW DELHI: The fear is palpable. Indian home loan borrowers, who till recently were fuelling a growth story across banking, real estate and other allied sectors, look panic-stricken now. In fact, just two weeks after the Reserve Bank of India hiked the cash reserve ratio (CRR) from 8.75% to 9%, there has been a quantum jump in the number of home loan borrowers approaching banks for foreclosures and partial repayments.

According to industry estimates, the number of home loan borrowers making foreclosures and partial repayments has almost shot up by 20-25% during the past few weeks.

In the last two months since the home loan rates started their northbound journey, all home loan financing companies’ repayments and foreclosures teams have been actively engaged in counselling their customers, making them understand the pros and cons of the decision to forego or go for partial repayment of loans. It may be mentioned that the Central bank’s latest CRR hike has sucked out about Rs 8,500 crore from the banking system.

Uday Sareen, country head, retail banking, ING Vysya Bank, told SundayET that the bank has seen a considerable increase in the number of queries for foreclosures and partial repayments. “In fact, the foreclosures have seen an increase of almost 10% over the previous quarter.



One, however, needs to understand that it’s not a simple black and white decision. Over the last 60 days, our teams have been continuously engaged with customers to explain them the merits and demerits of their decision. We are educating them how it can hurt their liquidity in the short to medium term, if they decide to foreclose their home loan accounts or make partial repayments,” he said.

Deepak Parekh, chairman of HDFC, the country’s largest housing finance company agrees. According to Mr Parekh, they too have witnessed a rush by home loan borrowers to make partial repayments.

“They are trying to reduce the term of their loans, which have increased due to recent interest rate hikes. These borrowers are typically the ones who have taken floating loans in the last 12-18 months and are now trying to make balloon payments through their salary bonuses,” he said. Floating rates account for 90 % of the bank’s home loan portfolio.

Developers across the board too confirmed to SundayET that there has been a spurt in home buyers returning or off-loading some of their home loan. With interest rates on home loans rising in the last one year, consumers are now looking at other options to acquire funds for their investments. Many also feel this will deter speculators from the real estate market.

Says Rohtas Goel, CMD, Omaxe Group: “The hike in repo and CRR rate hasn’t been a good news for the real estate sector and the home loan market. It is certainly a matter of concern for consumers, as even small upward changes in the monthly EMIs can play havoc with their personal finances.

The interest rate trend over the next few months is expected to be northwards, across industry. On the flip side, this may actually prove beneficial for actual users as it will deter speculators from over leveraging themselves and cornering and hoarding housing flats for speculative gains.”

Pune property loses sheen, many buyers forfeiting booking amount

Source: The Indian Express, Aug-09-2008
By Sumit Kumar, Section Real Estate
Posted on Sat Aug 09, 2008 at 04:30:53 AM EST
15-20 per cent slowdown, rampant cancellations by investors; 2009 to witness oversupply of residential, commercial space: KPMG

The real estate boom in Pune may well be all but over as the market has started witnessing a lot of cancellations, with people even opting to forfeit the money given as booking amounts, rather than going ahead with purchase of the property. This was revealed by Jai Mavani and Prafull Jain, executive directors of leading market surveyors, KPMG India Pvt Ltd at a press conference here on Friday. They further added that by 2009 Pune will witness an oversupply of residential and commercial spaces vis-a-vis demand.

Mavani said, "Pune's real estate market has seen a pretty hectic business in the last few years. However, as seen in other cities in India, Pune too, has started witnessing a slowdown of about 15 to 20 per cent in the real estate sector. Though the top-tier developers may not be feeling the pinch as yet, the small developers have certainly started to."

Attributing this drop in the real estate to factors like reduction in the investors, Jain said, "One-third of buyers in the Pune market are investors who buy properties in anticipation of the assets appreciating. But this appreciation is not happening anymore."

Mavani advised developers to release their stock rather than get into trouble later on since operating cash-flows are more important than land-bank. ``It is better to take a prudent view of the land prices, rather than holding on to them," he said.

As per the projections provided by KPMG, Pune witnessed a supply of two million sq ft of commercial space in the first half of 2008, while approximately 3.5 million sq ft of supply is expected over the next six months.

As far as residential space is concerned, Koregaon Park and Kalyani Nagar continue to remain the most expensive residential markets with Wanavdi emerging as a new mid-ranged residential location. As for the retail properties, Aundh is emerging as a preferred choice because of the presence of a large number of residential properties available for rent. "Cautious approach adopted by retailers will help rentals stabilize in the short term," said Mavani.

He added that the IT sector, that has been the major growth driver for real estate in Pune, has started slowing down. A shift to SEZs will further lead to oversupply in IT parks.

Commenting on the rise of malls across the country, Mavani said, "Malls have been built indiscriminately without any applications of how malls operate internationally. At one point, we will see these malls convert into commercial spaces. Some of these malls will fail entirely. Therefore they will have to strategize themselves."

Sabeer Bhatia's Nano dream

Looks like this one is turning out to be a nightmare for him. I particularly like the line where he says "Each acre is more expensive then the previous". Welcome to capitalism Mr Bhatia. The San Francisco chronicle has a more detailed report then all the stupid Indian tabloids which masquerade as news-papers.

S.F. tech mogul wants to build city in India How to build a city sustainably

Sabeer Bhatia plans a 17.6-square-mile city of world-clas... Nano City, as shown in this architectural rendering, is e...

(08-10) 19:14 PDT --

A few days after his 29th birthday, Sabeer Bhatia sold Hotmail, the company he co-founded, to Microsoft for $400 million. Selling the Web-based e-mail service bought him a swank Pacific Heights condo with a panoramic view, buzz as the next hot Silicon Valley player, boldfaced name recognition in the Indian press - and eventually, one incredibly unchallenging year off playing golf and jet-set partying.

He became haunted by the question common to those who find wild success at a preternaturally young age: Now what?

Granted, over the past decade, Bhatia has had his hand in several technology startups and post-startups both here and in India, some mildly successful, some not. But his latest project is one that comes from the heart: He is trying to develop an Indian version of Silicon Valley, a sustainable city spread over 11,000 acres in northern India that he envisions will be home to 1 million residents employed largely by world-class universities and A-list companies that act as the country's idea generators. He calls it Nano City.

One problem: Until recently, Bhatia knew nothing about developing cities. The 39-year-old San Francisco resident is an electrical engineer by training and profession. And with a ton of cash in the bank, the last challenge he thought he would face is the hassle of navigating India's cash-under-the-table democracy, while preaching sustainable development. India, with a population of 1.12 billion, is beset with energy and infrastructure problems; most citizens don't have access to safe drinking water.
Major developer

But now - after spending $4 million of his own money and learning some hard lessons about international development - Bhatia's project could be on the brink of starting. This summer, he partnered with a major Indian developer that pledged funds to help purchase the land needed in the northern Indian state of Haryana to break ground on Nano City.

But major hurdles remain, and the project could easily fail.

Bhatia wasn't thinking about urban development when the idea for Nano City first surfaced in March 2006. He was watching a cricket match in India with a government official from Punjab, pitching a plan to bring premier U.S. educational departments in science and technology to Indian universities.

"The education over there, until the undergrad level, is pretty good," said Bhatia, who attended Indian schools before receiving an undergraduate scholarship to the California Institute of Technology and earning a master's degree in electrical engineering from Stanford University. "But when it comes to grad school, it just falls off the cliff in terms of quality."

The official asked what he needed to get the project done. Bhatia casually told the official that he could lure A-list U.S. universities to the area if the government provided land and financial incentives.

A few days later, Bhatia returned to the United States, having agreed to write a proposal. But he considered the conversation the kind of casual banter one has at a sporting event, something not to be taken too seriously - until Naval Bhatia, Sabeer's cousin and an attorney, mentioned the conversation to a friend, an official in nearby Haryana.

The Haryana official told Naval Bhatia, "Why should Punjab get him? We want to offer him even more."

"It's a common occurrence, especially in developing countries," said Seshan Rammohan, executive director of the Silicon Valley chapter of the Indus Entrepreneurs, an international organization of Indian and other South Asian entrepreneurs. "When someone gets some notoriety, as Sabeer did after selling Hotmail, they get bombarded with offers.

"If someone like Sabeer is attached to a project, then the thinking is: Other people will want to invest," Rammohan said.

Within days, Bhatia returned to India to speak with the Haryana officials. They discussed an 11,000-acre spot about 15 miles east of Chandigarh, Bhatia's birthplace and one of the few planned cities in India.
Not another Bangalore

The idea of an Indian Silicon Valley began to resonate with Bhatia. He didn't want to create another Bangalore, the traffic-tangled, booming thicket of a city where he had grown up, best known for its outsourcing operations for American companies. He wanted a place where Indian-germinated ideas could flourish and where young Indian students could receive a first-rate education.

In pursuing the Nano City project, Bhatia found the answer to the question, "Now what?" If it succeeded, he could make millions of dollars more. "But my reason for doing this is to leave behind a legacy," Bhatia said.

"How many times in our lives do we get a chance to build a city?" he said. "How many times do we get an opportunity to fix some of the problems that affect 1.1 billion people - that's one-sixth of humanity."

Bhatia is aware that planned cities often fail. To avoid pitfalls, he intends to involve "the right partners, do proper design, provide basic things that you and I take for granted here."
Atypical entrepreneur

Before calling in the bulldozers and cranes, Bhatia boned up on development. He ordered dozens of books on Amazon.com and picked the brains of Stanford professors, real estate developers, even the guy who renovated his apartment.

"Why not?" Bhatia said. "He was a guy in the construction business."

That summer, his assistant set up a meeting with several UC Berkeley professors. The professors had met Bhatia's type before.

"A lot of these rich entrepreneurs come to us, thinking they have all the answers," said Nezar AlSayyad, a professor of architecture, city planning and urban design at UC Berkeley who has been involved in projects around the world. "I expected him to be like that."

AlSayyad grilled Bhatia during their first meeting, asking for specifics and trying to ferret out his motivations. The professor silently shuddered when Bhatia mentioned he liked Santana Row, the San Jose development that is one of the few spots in Silicon Valley that tries to create a public square with a mix of retail and housing. AlSayyad thinks it is part of suburban sprawl.

Nonetheless, AlSayyad came away impressed with Bhatia, and for one simple reason. "He listened. And he asked questions."
Social, financial impact

In early 2007, Bhatia flew nearly two dozen students and faculty to the proposed site in India, where for nine days they met with local officials and residents, and studied the topography of the site. Over the summer, the group explored green ideas, such as ensuring that a public park was within a five-minute walk of any point in the city and how best to create efficient mass transit.

"Sabeer really pushed these ideas of sustainability," said Stefan Al, lead designer of the project. "A lot of these ideas have been tried before, but not all together in one place."

In addition to contributing design ideas, the students challenged Bhatia with questions about Nano City's social and financial impact. They posed one particularly challenging question in the developing world: What will happen to the people who live in the roughly two dozen villages where Nano City would be built?

Many belong to families who have lived on small plots for more than 100 years. In May, 71-year-old Karam Singh, a farmer who owns 25 acres near the proposed project site, told the Indian Express, "Even my great grandfather was born here. How can I sell this land?"

Land prices in the area have quadrupled since the project was announced, and currently stand at about $50,000 an acre. Rafiq Dossani, senior research scholar at the Shorenstein Asia-Pacific Research Center at Stanford University, believes land acquisition from villagers will pose the biggest problem.

"The state leaves it to the businessperson to negotiate his way through the thicket of corruption and lack of information that typically surrounds land records in rural areas," Dossani said. "A piece of agricultural land will often have multiple claimants, indebtedness and prior claims over the generations."
Mt. Everest challenges

Last fall, Bhatia began purchasing the land, a few acres at a time. After acquiring about 50 acres, he found that "every subsequent acre of land we were buying was more expensive than the previous one," he said. In November, he stopped the process and hired four attorneys to research who owns every plot.

Meanwhile, he was having trouble raising money. Nobody wanted to invest. The name "Sabeer Bhatia" opened some doors, but he was repeatedly told he lacked sufficient real estate development experience.

Last month, Parsvnath Developers Ltd., an Indian development firm with experience in land acquisition, agreed to pick up a 38 percent equity stake in the project. The move, Bhatia said, will enable him to break ground on Nano City early next year and develop its first 1,000 acres.

Bhatia plans to offer free university education to the children of landowners. "We think that over 95 percent of all the farmers actually want to sell," he said. "We think this will put pressure on that remaining 5 percent of people who are maybe greedy for more money."

If they don't sell, Bhatia said, "We are ready to walk away. ... You can't build a city around a farm."

If he does succeed, then the hard part comes: developing Nano City in an environmentally sustainable way in a rapidly growing country. "This is not Sabeer climbing Mount Everest," said entrepreneur group leader Rammohan. "It's Sabeer climbing Mount Everest with the city of San Francisco on his back."
India facts

Although India occupies only 2.4 percent of the world's land area, it supports over 15 percent of the world's population. India's median age is 25, one of the youngest among large economies. About 70 percent of the population lives in more than 550,000 villages, and the remainder in more than 200 towns and cities.

Population: 1.12 billion, 27.8 percent living in cities; annual growth rate: 1.3 percent.

Workforce: 450 million; agriculture - 60 percent; service and government - 22 percent; industry and commerce - 18 percent.

Literacy: 61 percent.

Gross Domestic Product (2007): $1 trillion.

Real growth rate (2006-2007): 9.4 percent.

Per-capita GDP (2006-2007): $909.

Trade: Exports (2006-2007): $127 billion, $22 billion of which are software exports.

Major trade partners: United States, China, EU, Russia, Japan.

Source: U.S. Dept. of State, Bureau of South and Central Asian Affairs (June 2008)
Nano City's green features

Sabeer Bhatia intends to incorporate green and sustainable building practices into Nano City's design - a rarity in India, where availability of power and water is inconsistent. Stefan Al, the Berkeley-based lead designer of the first phase of the Nano City, is planning the following features:

-- Fifty percent park and open green space, with only local, self-sustainable vegetation planted in landscaped areas. A park will be less than a five-minute walk from any starting point in the city.

-- Shaded walkways, arcades and tree-lined boulevards to encourage walking.

-- A rapid bus-transport system, where buses will travel in dedicated lanes.

-- Living machines, such as surface-water treatment plants that convert wastewater into chemical and odor-free drinking water by using algae, plants, bacteria and micro-organisms.

-- Power generated by windmills and photovoltaic technologies.

-- Green roofs that capture rainwater.

Stupid reporting from Business standard

Here is another inane article on the decline of housing prices in Mumbai. Enquires are down, thats a ridiculous measure of volume of sales. What we need is hard data on the registrations. A quick visit to the registrars office and we should get this information. If they don't oblige one can get an RTI for it. Its good to see how much the black money component is of the sales in Mumbai. The decline is slow and steady and is going to bleed the high interest loan takers to a slow agonizing end.

Property developers, consultants and brokers have seen a 40 per cent decline in enquiries from home buyers over the last three months.

With home-buyers postponing their purchases owing to higher interest rates and increase in equated monthly installments, the slowdown in the real estate market is getting deeper.

The Mumbai-based Oberoi Constructions, which used to sell around 50-60 apartments in the June-July period, a traditionally lean period for property sales, has seen a sharp fall in sales during the same period this year.

Neelkanth Group, another Mumbai-based developer that builds homes in the central Mumbai suburbs, has also seen its sales dropping by over a third in the same period.

Property consultancy Knight Frank's chairman Pranay Vakil believes the situation is getting worse. "This is just the tip of an iceberg. The worse is yet to come,'' he said.

The 30 per cent year-on-year sales fall in June and July follows the 20 per cent decline in the previous six months. And no one sees any silver lining on the horizon.

The Reserve Bank of India [Get Quote] has raised the repo rate, the rate at which it lends to banks, by 125 basis points. Commercial banks have in turn raised their consumer loan rates by 50-100 basis points. Thus, on an average, the monthly installment on a Rs 10-lakh loan for 20 years has risen over 50 per cent to Rs 12,740 on a 14.25 per cent interest rate from Rs 8,060 (7.5 per cent interest rate) five years ago.

"Home buyers are adopting a wait-and-watch approach. While ready apartments are being sold, those under construction are not finding enough buyers,'' said Vikas Oberoi, managing director, Oberoi Constructions.

A cross section of property developers, consultants and brokers said enquiries from home buyers have gone down by 40 per cent over the last three months, compared to the same period last year.

While developers are not advertising any price cuts, most are willing to reduce the prices once the negotiations begin, according to investors.

For instance, in Gurgaon, where the prices are Rs 6,000 per square feet, developers are settling deals at Rs 5,500-Rs 5,400/sqft due to a sharp reduction in demand. This is apart from freebies such as free parking, waiver of stamp duty and equated monthly installments.

Property brokers point out that some pockets in Mumbai such as Andheri and Santacruz have seen the prices soften a bit in the last few months. In Andheri, for instance, prices declined to Rs 9,000 per sqft from Rs 10,000/sqft six months ago.

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

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

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

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

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

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

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

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

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

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

What goes up comes down doubly fast

This is not a time to gloat about being right which we are but its time to reflect on how to asses the pitfalls which could encounter if we ever were to step into buying a house at some point in our lives. As the story will unfold we will see small builders being wiped out, projects delayed indefinitely, legal problems between landowners and developers magnified, large mega projects by tier-2 builders getting stalled due to cancellation in bookings, outskirt prices dropping like a rock. redevelopment deals shelved and many more black swan events out of scope of the human mind. The key to a good property is location so the good ones as always the case will suffer the least damage. The sun has stopped shining and most of the bulls have gone to the cow-sheds or tabela's they are called in Hinglish. The occasional bull who is still roaming the fields is going to be dinner for some big bad bear out there.

By CNBC-TV18s research analyst, Niraj Shah

Well, the biggie said it on Friday and it may well set the tone for what could be a full-blown cyclical downturn for the real-estate space.

DLF, in a press conference, mentioned about a possibility of volumes getting impacted due to a hike in interest costs (No wonder Dr Y V Reddy's actions have seemed like a sharp wedge in the hearts of Indian realtors). At the time of its IPO, DLF has mentioned that while residential prices may start to stagnate, the commercial customers will be strong and keep the company in good stead. The company has stated today that it believes that the upside in the rentals is capped and they, at DLF, do not expect rental incomes to go up here on.

Secondly - in an interview earlier, V Hari Krishna, CIO of Kotak Realty Fund came up with an interesting observation. He said that since January 2007, most of the consumers have withdrawn from the market and this is reflected in the fact that when one looks at home loan disbursements, they have declined by 22% on a YoY basis from 2006-07 to 2007-08.

The drop, in fact, would have been more had HDFC and ICICI Bank not increased their disbursement rate in this period. Ex-HDFC and ICICI Bank, the disbursements would have fallen by 50%, which is obviously a worrying factor as it indicates that end users have withdrawn from the real estate market.

Thus, one would be inclined to believe that the meteoric rise that one saw in property prices in regions such as NCR and some Tier-II and tier-III areas was more of investor and/or speculator demand rather than end-user demand. And thus, these prices tapering off have lead to a switching-off in that trade and thus a moderation in demand and prices.

Sure - in select pockets such as Mumbai, Delhi CBD, etc, you would still see the odd expensive land deal, rental increase, etc. But make no mistake about it-the property market is looking south. And the biggest property developer, both in terms of size and repute, coming out and sort of affirming it does speak a lot.

CNBC TV 18's MF team did some digging and figured out that while the number of PE deals, both outbound and inbound, have declined by 60% for Q1 on a YoY basis, there is increased traction in the PE deals in the real-estate space. With the Primary market route closed and the debt becoming expensive, it would either lead to a PE deal at a much lower valuation - or a faster tick of sales leading to increasing cash-flows, which would sustain the highly geared realty companies.

For the faster tick in sales to happen - which essentially means wooing the buyer in a high interest-rate scenario - the prices will have to drop significantly - and that is the way the real-estate space is poised to go, never mind the odd-exception here and there. How soon we get there? Anybody's guess - but from the looks of it, sooner rather than later.

Secret and lies about housing interest loans

DNA has a good article on how interest payments can exceed capital by a factor of three, thanks to the compounding effect of interest. For those who understand the details, this is a very good reason why high loans don't make sense any more. For those who are caught in this nightmare, not even Bernake or the 'Singh is Kingg' can save them. The effects of leverage and compounding work is reverse the same way as they on the way up.

Borrow Rs25 lakh home loan, repay Rs1 crore

MUMBAI: If the current interest rates stay, you might end up shelling out more than Rs1 crore to pay off a Rs25 lakh home loan. How? Read on.

Six months is a long time, especially if you happened to take a home loan back then.
Banks were charging a floating interest rate of 11% on their home loans. The equated monthly instalment (EMI) on a 20-year loan (or 240 months) of Rs25 lakh would have worked out to Rs25,805 a month.

Around one-month back, banks raised the interest rate on floating rate home loans to 11.5% and have now raised it by another 0.75% to 12.25%.

Last time, hike in interest rates were not accompanied by an increase in EMI. Banks did the smarter thing and increased the tenure of the loan. The remaining tenure of the loan went up from 240 to 269 months.

If banks were to follow the same strategy now and increase the tenure of the loan, instead of increasing the EMI, the remaining tenure of the loan would go up to 394 months. Add to this the six months of EMI you have already paid, and you are looking at a total tenure of 400 months. If you keep paying an EMI of Rs25,805 for a period of 400 months, you would have paid Rs1.03 crore (Rs25,805 x 400 months) by the end of it.

However, the bigger question is will banks allow tenures to shoot up to 400 months?

How it will hurt you
Principal Rs 25 lakh
Initial rate 11%
Tenure 240 months
Initial EMI Rs 25,804
Principal repaid Rs 14,707
in first 5 months
Principal left Rs 24.85 lakh
Rate after 5 months 11.5%
Remaining tenure if 269 months
EMI remains same
Increase in tenure 35 months
at the same EMI
Principal repaid in Rs 4,027
the 6th month
Principal repaid in Rs 1,8734
first six months
Principal left Rs 24.81 lakh
Rate after 6 months 12.25%
Remaining tenure if 393.5 months
EMI remains same
Increase in tenure 159 months
Extra money paid to Rs41 lakh
service the loan (Rs 25,804 x 159)
Total EMI to Rs1.01

Keep HAL airport open: AAI

Can BIAL oppose the hand which feeds it. ? Just as BIAL used legal recourse to close the HAL airport AAI is now paying back BIAL in the same coin. Legally AAI or the government cannot open HAL unless BIAL is made to offer concessions . Using this newly found data they can turn on the screws on BIAL and Alfred Bruneer who is acting like the most incompetent Swiss national ever to set foot in India. Its about time the Devanhalli speculators exit. If they wait for HAL to open thats the end of all their paper profits and they would be stuck with illquid assets for years to come.

Keep HAL airport open: AAI
Recommends Move Till BIA Builds Additional Terminal
Anshul Dhamija & Sujit John | TNN

Bangalore: The new Bengaluru International Airport (BIA) has landed in a turbulent whirlwind with the Airports Authority of India (AAI).
The AAI has prepared a report that says that BIA’s capacity is less than what its promoters have stated, that the airport is already saturated, and that the promoters have violated a key clause in the concession agreement signed with the government. It has gone on to recommend that the old HAL airport be kept open till BIA builds an additional terminal.
The AAI report, a copy of which is with The Times of India, follows a directive by the civil aviation minister to study the capacity issues at BIA. The AAI had designated a 4-member team to conduct the study in June.
The report says that the Bangalore International Airport Ltd (BIAL) must take “immediate action...to create an additional capacity of 10 million passengers per annum to avoid further congestion and to handle the projected growth.” The report goes on to say, “In view of the saturation of the passenger terminal, import cargo, apron and runway, it is recommended that, in the meantime, the existing HAL Airport may be permitted to operate until the time of commissioning of proposed additional capacity at the new Bengaluru International Airport.”
As per AAI’s calculations, the terminal capacity at BIA can only handle 9.78 million passengers annually as against the city’s passenger traffic of 10.12 million passengers in 2007-08. This means that since the day BIA opened on May 24, the airport has been under capacity. BIAL, on the contrary, has claimed that the airport’s capacity is 11.4 million passengers, which could even go up to handle 14 million passengers annually.
As per recommendations of the International Air Transport Association (IATA), an airport which has to handle passenger traffic of 10 million passengers should have a terminal size of 1,50,000 sqm in area. BIA, according to the AAI report, has a terminal size of barely half that at 71,310 sqm.
The report goes on to state: “BIAL revised its forecast to 11.4 million in November, 2006, for the year 2015 which deviates from the actual traffic drastically. In fact the traffic was growing as high as 43.9% when the revised forecast was made in November 2006.
As per the concession agreement para 14.2 (page-61) BIAL was supposed to provide facilities as per IATA/ICAO standards and was to provide 27.3 sqm of space per peak hour passenger (PHP), whereas the actual area provided is 19.8 sqm per PHP, which is in deviation with the concession agreement.”
As per norms followed by IATA, the capacity of an airport terminal is calculated on the ratio between the total area of an airport terminal to the number of peak hour passengers, which for any airport should be a minimum of 25 sqm/PHP.
In fact the figure of 19.8 sqm/PHP at BIA is way below that of older airports in Chennai and Kolkata which have figures of 23.15 sqm/PHP and 24.15 sqm/PHP respectively. In the new Hyderabad airport terminal, it is estimated to be 35.21 sqm/PHP.
Further,taking the terminal building in its totality,the report states that the “basement area of 18,665 sqm is not used for passenger facilitation, it is used for storage, services and utilities. Therefore, basement area should be excluded from the total terminal area which will reduce area/PHP to 14.6 sqm.”
What AAI report also said
BIA’s peak hour runway capacity is 32 movements as against current peak hour demand of 25. With anticipated annual growth rate of 25%, runway is likely to saturate during 2010-11. Immediate action should be taken for construction of second runway
Existing number of parking bays are 42 as against peak hour demand of 41 bays (26 passenger aircraft, 5 freighter, 10 buffer for contingency). Addition of 30 more bays recommended
There is imbalance between import and export cargo area which needs adjustment, that is import cargo is saturated whereas export cargo and domestic cargo have adequate capacity. It is therefore recommended that an additional import cargo capacity may be created immediately.

Consumer court ruling : Builders must fulfil promises mentioned in brochures

‘Builders must fulfil promises’
Consumer Forum Directs Them To Deliver What Is Shown In Brochures
TIMES NEWS NETWORK

Pune: Providing relief to flat owners deprived of amenities by builders, the consumer disputes redressal forum, Pune, in a landmark ruling, has held that a builder will have to provide all the required facilities to a purchaser which he had promised in the brochure.

Even if an agreement between the two parties was silent on providing the amenities, it will be binding on a builder to give facilities which he had promised in the brochure, observed forum president Pradip Gaikwad and member Sulabha Joshi on July 16.
The order was passed on a complaint filed by senior citizen Parshuram Redij of Vijaya Rashmi Residency at Warje Malwadi.
Redij had filed a complaint against M/s Vijaya Rashmi Developers and its partners comprising Marathi actor Ravindra Mahajani of Paud road, Arun Nikam and Harishchandra Nikam, both from Kothrud, for deficiency in service. The firm had published an advertisement in a Marathi daily for undertaking a project at S.No. 43/5 at Warje Malwadi, where it had assured several facilities. Lured by the promises, Redij booked flat no. 4 in the A wing of the building for Rs 6,14,250.
After Redij took possession of the flat on October 30, 1999, he discovered that the promises made by the builder in the brochure that he would construct an internal road, garden, club house, swimming pool and security cabin after the completion of the project were not fulfilled. On various occasions, the senior citizen took up the issue with the firm and its partners. He appealed to them in vain that the needful should be done. Moreover, the flat owners suo moto registered the society by shelling out Rs 75,000.
Arguing in person during the final hearing, Redij alleged that the firm had transferred the development rights to M/s Vaishnavi Shraddha Constructions. He said he had filed a criminal case against the partners, which is pending before the magistrate court here.
Redij appealed to the forum to direct the firm and its partners to execute the sale deed in his favour, provide basic facilities and repay Rs 35,000 as expenditure incurred on registering the society with 18 per cent interest with effect from the date of taking possession of the flat.
On the contrary, the firm had argued that the complaint was barred by the law of limitation and that it had transferred all its rights and liabilities to M/s Vaishnavi Shraddha Constructions. The firm contended that the amenities mentioned in the brochure were not part of the agreement. The forum held that the firm could not be allowed to absolve its liability merely by saying that it had executed a deed of assignment in favour of a third party. The forum further observed that the firm and its partners had induced Redij to purchase the flat on pretext of providing facilities.
The forum directed the firm and the partners to jointly pay Rs 35,000 to Redij with nine per cent interest from October 30, 1999. They were further directed to provide all the facilities mentioned in the brochure and register the conveyance deed and sale deed in his favour as per the provisions of the Maharashtra Ownership Flats Act, 1963. The firm partners have being directed to comply with the order within 3 months.

Sabeer Bhatia's new flop investment

Its been 10 years since Mr Bhatia sold his company to Microsoft but ever since that he's been trying valiantly to build the next sucess story. Unfortunately this new venture like few of his others is a dud from day one. Trying to create a semiconductor fabrication enviroment is easier said then done. Skilled manpower, water, electricty and partnerships with bechtel or similar likes are needed before the groundbreaking crememony. Unfortunately in India lured by the hype of the Sensex and PE firms these morons think they can sucker local Indians into buying apartments in an SEZ mirage. As with other mega deals I expect this one to fail in times to come. Pasvanath has nothing to claim in expetise apart from oiling policiticans and babu's. If this was a sunrise industry Ratan Tata, Premji or the Ambani's would be right at the forefront with solid business plans, not with real estate development hype companies. The ecconomic times press release as usual with no analysis is below


Parsvnath Developers on Wednesday joined hands with Sabeer Bhatia, co-founder of Hotmail, to develop a 11,138 acres knowledge city near Chandigarh, where the company will initially invest Rs 400 crore.

The project, Parsvnath Nano City, valued at Rs 50,000 crore (12 billion dollars), is promoted by the former Hotmail innovator Sabeer Bhatia, whose company holds the majority stake of 52 per cent. The Haryana government holds 10 per cent stake.

"We have already made an investment of Rs 41.5 crore for acquiring 38 per cent stake and the remaining will be invested as debt in future," Parsvnath Developers Chairman Pradeep Jain told reporters here.

To be developed in Panchkula, the project would be completed in two phases over the next 10 years, where the company would develop 5,000 acres in the first phase.

"We have already acquired about 1,500 acres and we are talking to various land owners for acquiring the rest," Jain said.

The realty firm would invest Rs 400 crore initially in the form of equity and debt in the project, he said.

All the stake holders of the project has formed a new entity, Nano City Haryana Ltd, which would raise funds from the capital market within 18-24 month for completing the project.

"We plan to take the company public in 18-24 months, but we have not finalised how much stake will be diluted or how much money we are going to raise," Jain said, adding the company would also dilute some stake to private equity investors.

Pune builders touting townships.

CNN -IBN has become a builders mouthpiece for touting the Pune builders. All project costs seem to be bogus running into thousands of crores of rupees. Where is the money going to come from for all these mega projects. One success in magarpatta city and all these marketing fellows are trying to ape it.Even in Magarpatta the apt building quality is average whereas the commercial buildings are above par. The reason for the difference is simple. The commercial buildings were constructed by reputed construction firms like JMC/Vascon whereas the apt buildings were constructed by builders who had proximity to the politicians. Lalit Kumar says "how long will be buyer wait ?" Mr Kumar he will wait till the cows come home and he is not going to get carried away by projects built in the boonies. Pune is not a metro city like Mumbai/Chennai therefore it lacks funds for development. Already has a load shedding problem which is getting acute.

Unitech receives Rs 740 cr from Lehman

Lehman has stuck a sweet deal for themselves with this low valuation for development on 97 acres. Unitech has/will pay off the slum dwellers under the SRA scheme with all their black money and will get an FSI of 2.5 . Lehman will bring in the brand name and the bear half the construction cost and receive a 50% stake. With 18 million sq/ft under development with an average price of 15000 per sq/ft ($350 per sq/ft roughly) that translates to a sale price of $6B dollars with $3B for Lehman. With Lehman's cost price being $170M , the profits can be staggering. I wouldn't be suprised if they setup their HQ in this complex and so do other Wall Street and European/Asian firms. This could be the Wall St of Dalal Street.

Fantastic deal here for Lehman. Here is the wikimapia location of the SRA(Look for Dawri Nagar), Right on the intersection of Nehru road and the Western Express highway. Excellent location for business as Bandra Kurla complex (BKC) is 10 mins away southbound, and the domestic airport 10 mins driving north. If my guess is right, major slums on the opposite side of the freeway too will become prime property.


DNA link here .
MUMBAI: Unitech Ltd on Thursday said it has received Rs 740 crore from global investment bank Lehman Brothers Real Estate Partners for a 50 per cent stake in the country's second largest realty firm's project here.

"On satisfactory completion of all the conditions under the transaction documents, Unitech Ltd on Thursday received subscription amount of Rs 740 crore," the realty major said in a filing to the Bombay Stock Exchange.

Lehman Brothers Real Estate Partners have been allotted 50 per cent stake in the initial phase of a master-planned project on the Western Expressway of Mumbai.

The construction cost for the initial phase would be borne by Lehman Brothers Real Estate and the Western Expressway JV, a joint venture of Unitech Ltd and its local partners, the filing added.

The initial phase entails development of one million square feet of office space out of the total developable area of around 18 million square feet.

Lehman Brothers' Real Estate group is a capital and advisory services provider to the real estate firms.

The group has presence in all of the major international markets, with investment bankers in New York, Los Angeles, London, Milan, Tokyo and Hong Kong.

Redevelopment deals fall through in Mumbai

Several deals to rebuild old housing complexes have fallen through. DNA reports

MUMBAI: With the property market showing bearish tendencies and liquidity crisis plaguing developers, redevelopment projects in the city are being dropped like hot potatoes.

The once headline-grabbing deals, including Vivek society, the Kalina complex where 550 sq ft flat owners were offered upwards of Rs2 crore per flat, have fallen through with developers backing out of MoUs with housing complexes.

The schemes involved pulling down old housing complexes and rebuilding them, with the enhanced FSI, so that the existing flat owners get bigger houses and the builder benefits by selling the excess houses. A seemingly win-win situation till a few months back, there are no takers for it now.

Wadhwa Builders is learnt to have cancelled plans to redevelop Vishal Nagar in Borivili (east). A MoU signed by Pune-based Kumar Builders to redevelop Khira Nagar on SV road at Santa Cruz (west) has fallen apart. Revoking his earlier offer of Rs300 crore, a developer is now willing to pay barely Rs220 crore to a cooperative housing society on a 7,000-sq yard plot at Vile Parle (east).

A well-known developer is learnt to be now renegotiating the redevelopment deal with two societies: Flying Carpet and Tirupati located near Khar Gymkhana. Turn to p12

Instead of his earlier offer of providing an additional space of 35% to every flat owner, the developer now does not want to part with anything over 25%. Similar is the case with Navyug Nagar Cooperative Housing Society on SV Road at Dahisar. Five reputed builders have now offered to provide additional 25% space to the 200-odd residents occupying flats admeasuring a little over 500 sq ft.

“Developers do not have the money power,’’ said a Santa Cruz-based broker-turned-developer, adding, ``With the result, they are unable to pay the exorbitant rate they offered earlier.’’

There is another reason, says Harendra Pandya, vice-president of Real Estate Agents Association of India. ``Redevelopment of societies has not taken off as developers are finding it unfeasible to pay the current stamp duty rate to convey (transfer) ownership of land from a society constructed in the 1980s to its name,’’ Pandya said.

“The already dipping sales are affecting their cash flow and if they have to pay high stamp duty for redevelopment, it would make a big dent in the developers’ calculations. No wonder redevelopment deals are going slow,’’ he said.

On 11th Road, Khar, a society of 14 members have grudgingly accepted a developer’s bid to give only 20% additional space to its existing 1,000 sq ft flats. ``Negotiations had broken down between us as a well-known developer had offered to give them a huge corpus. Six months later, they came back to me as the developer had started making excuses,’’ said a suburban developer.

Said Kalina-based estate broker Umesh Lad, “Redevelopment deals of societies like New Vinay, Shanti Niketan are learnt to have not materialised as a developer backed out from his earlier promise of purchasing the flats at an outright rate of around Rs35,000 a sq ft. The societies had earlier got an offer from reputed developers including Kalapatru.’’

Other redevelopment deals that fell through include Vivek Society near Mumbai Unversity, Kalina, with Sterling Biotech backing out from its offer of over Rs40,000 a sq ft, Parkbay Society and Kirti Society where residents have been offered roughly Rs35,000 a sq ft.

Though Boman Irani of Keystone Developers was unavailable for comment, brokers say there are problems in the redevelopment scheme at DN Nagar police station, Andheri (west). Keystone is developing nine ground-plus-four buildings jointly with Vaidehi Akash, a small-time builder, who reportedly raised funds by pre-booking at rates that were roughly 35% less than the market rate

Vijay Mallay's skyscraper to rival Ambani's

The ego battles seem to soar with each billionaire trying to outdo the other. Having a rich dad does seems to help when building empires and castles. 25000 per sq/ft on Vittal Mallya road. Now this is some price to pay to be in the league of the rich and famous

Econonmic times reports
BANGALORE: Is Vijay Mallya doing a Mukesh Ambani in Bangalore? The word is that the ‘King of Good Times’ is set to build a massive multi-storeyed complex for himself in Bangalore on his ancestral property on Vittal Mallya Road, adjacent to UB City.
Sources say the plan is to have a designer skyscraper apartment with possibly even a helipad on the fouracre property.
Real estate sources said that the UB Group chief has roped in global consultancy firm DTZ to do the ground survey and planning. DTZ’s professional advisory services include the management of real estate portfolios, building consultancy and valuation.

Mallya’s plan sounds similar to what Mukesh Ambani is doing: building a $1 billion 60-storey place in Mumbai that sports a helipad, health club and six floors of car parking.

Named Antilla, after a mythical island , the complex will be Ambani’s new home.

For Mallya’s project, several leading Indian developers are said to have approached the UB Group chief to be part of his home-development plan. However , sources said Mallya is keen to hire an overseas developer. It is believed that a Singapore-based developer will undertake the construction.
However, it’s not clear what the height of the apartment would be. While one source said it would be 16 floors, another said it could be closer to 30, while yet another said Mallya was thinking of a 37-storey building. When TOI contacted Mallya on the matter through the UB Group’s media relations officer, the response was that Mallya wasn’t planning to build a 37-storey apartment.
But he didn’t deny or confirm the plans for a makeover of his ancestral home. Real estate developers say that with the FSI (floor space index) in the area having increased in the recent past, Mallya could go well beyond 30 floors. At present one can get anywhere between 2.5 and 3.25 FSI on Vittal Mallya Road. In terms of value, the land prices on Vittal Mallya Road range between Rs 20,000 and Rs 25,000 per sqft.

Indian Real Estate May Witness Weeding Out, Fitch Ratings Says

Bloomberg.com article on slowdown. Now the SBI chariman and the HDFC Vice-chairman are calling for lower prices. Will the dodo bulls go extinct ??

By Sumit Sharma

July 10 (Bloomberg) -- India's real estate industry may witness the exit of weaker developers as a rise in interest rates and property prices deter buyers and crimp sales, Fitch Ratings said in a report.

Mumbai recorded a 16 percent drop in registrations in the year to March 31, and sales may fall further across India's major markets if developers hold on to prices, Fitch said. Fitch has rated its short-term outlook on the industry as negative.

``The slowdown will also aid the process of weeding out some of the weaker entities within the sector, and increasing the relative strength of some of the larger, more established developers,'' Sandeep Mulik and Roopa Raman, analysts at Fitch Ratings, said in the report in Mumbai today.

Some developers face fund shortages and may tap buyout firms as investors sell real estate stocks on falling sales. Still, a prolonged slowdown may damp the appetite of private equity funds, forcing smaller developers to either borrow at higher rates or default on their obligations, Fitch said.

The central bank on June 24 raised interest rates to the highest in six years to contain inflation that accelerated to 11.63 percent in the week ended June 21, the fastest in 13 years.

Bankers including Om Prakash Bhatt, chairman of State Bank of India, the nation's biggest, and Keki Mistry, vice-chairman of Housing Development Finance Corp., predict an end to the five-year rise in property prices.

Shares Drop

Real estate shares have led a drop in Indian stocks this year. The 14-stock Realty Index has fallen 62 percent since Jan. 1, compared with a 31 percent drop in the benchmark Sensitive Index. A dozen of the 14 property index stocks including DLF Ltd., Unitech Ltd. and Indiabulls Real Estate Ltd. have more than halved this year.

A decline in demand prompted DLF and Unitech, the largest developers, to delay selling shares in investment trusts in Singapore. Indiabulls Properties Investment Trust, which raised $258 million in Singapore last month, traded 22 percent lower at S$0.82 a share.

``The sharp increase in construction costs, driven by increased steel and cement costs, could also impact margins and hence liquidity,'' the Fitch analysts said. ``The risk would be higher for real estate companies with a limited track record and limited cushion for debt financing.''

Fitch also expressed concern at the high prices paid by some developers for acquiring land.

Prices correcting in Hyderabad - Maytas

Here is something I received in the mail.The slowdown is coming. The combined offer translates to over 15% drop in the cost of the house. Not bad for a start. Last year this property was quoted at 3200 which means there is no appreciation over the past year, Actually people who have bought have lost 10% of the down payment. Also such big projects get delayed by atleast 1 year.

For the long term resident, 2800 seems a good entry price. still 15% lower then what is quoted.

Fabulous offer for top tier corporates employeesMaytas Properties has developed 400 acres of land at Bachupally, which is located just 10 km from Hi-tech city. The name of the venture is Maytas Hill County. In this spectacular venture we have a world-class township spread over 85 acres which has a decent mix of Villas, Independent Bungalows & Semi-furnished Apartments. Government has approved to develop an IT Special Economic Zone in 75 acres adjacent to the Residential Township, this helps the residents can ‘Walk to Work’ in the IT SEZ. As the bookings are going berserk we have come up with a COMBO offer for top tier corporates.

Here is COMBO offer which comes in with:
PRE-EMI offer & Corporate offer

PRE-EMIis a fantastic mode of payment where the EMI need not be paid till the property possession is taken ovev, the Interest to the banker during this period will be borne by Maytas. Infact the interest component will be paid on behalf of the customer. (This is applicable for applicants who avail Bank Loan for purchasing the property with us).

Corporate offercomes with Rs.200/- less than the regular price (per square feet). This is offered to the Employees of Corporate companies which have been listed by us.

Regular Price : Rs. 3699 per sft

Corporate offer : Rs. 3499 per sft

Springfields apt owners face eviction

the builder in collusion with Corrupt BDA officials along has violated all building norms. Now BDA officials are expressing surprise. They should be sacked for their incompetence. Seven towers don't spring up overnight. I hope the residents bring the builder to book. Add IDEB builders to the list of builders to be avoided. Deccan Chronicle article here. As per the latest news the builder has to pay 25 rs sq/ft to BDA as a penalty to get the commencement certificate and then apply for the occupancy certificate. With 697 apts in the complex and 7 wings illegal (A,B.C are legal and D-J are illegal) the builder needs to cough up roughly 697 * 7/10 * 1500 (avg flat size) * 25 which is 18,296, 250 (1.8 crores)

1,300 residents left in lurch

BENGALURU

More than 1,300 residents including software engineers, bank officials, doctors and expats who have invested crores of rupees for a flat in Springfields Apartments will soon be homeless if the builder does not sort out the issue of occupancy certificates within seven days.

Springfields Apartments on Sarjapur Road which is said to be one of the few residential projects in the city with 82 percent lung space and just 18 percent of built up areas has built seven wings which includes nearly 50 flats in each wing without the commencement and occupancy certificates.

The residents who went to BDA authorities with complaints of the discrepancies are now facing a tough time running after the builders, advocates and the BDA authorities.

“The officers at BDA who promised to deliver justice to us have now sent an order asking us to vacate immediately. The builder in turn has been given seven days time but what about our woes? Who will listen to us,” said a techie on condition of anonymity.

Meanwhile, the residents told Deccan Chronicle that everyone had relied upon the BDA’s sanction plan and had together paid several crores of rupees to the developers towards acquisition of their respective apartments.

The directors Mr H.S.

Bedi, Mrs Avneet Bedi, Mr Pradeep Kumar Tewani and Mr P K Gajra have not only violated the statutory provisions but have also conducted criminal breach of trust, the residents of the apartment allege.

“The builder also said that BDA had issued occupancy certificates to all these buildings and only then hundreds of families occupied these apartments. Now, we learn that BDA has not issued occupancy certificates to many of these blocks,” said another resident, an expat.

The residents who actually started this protest to show a violation have now been rendered homeless.

“Where do we go? And why should we go? It was not our mistake. Why are we being targeted for no mistake of ours,” cried a doctor, who is residing in one of the wings and has been asked to vacate. The residents have now planned to approach advocates to make sure there is some way out of this situation.

Who is to blame?

It is surprising to know that IDEB and Parkway Venture could manage to construct seven wings, each consisting of about 13 floors without even obtaining the commencement certificate.

The BDA officials, interestingly have not even inspected the area to find out the discrepancies of the builders.

The builders who have been constructing the building from the past three years, as per the orders, have not only violated the BDA rules but have also separated about 1,710 sq m of area on the North West Corner from the main premises by constructing a compound wall.

The order also states that the entry to the premises from the north west side is blocked and the Set Back Line of 13 m is not maintained on the western side by changing the orientation and location of the basket ball court/tennis court. This modification has resulted in reduction of surface parking.

This is not all, while BDA had claimed ignorance all this while, even some of the major nationalised and private banks have sanctioned loans to almost 80 percent of the owners who have bought the flats.

“The banks have given loans to all of us without even checking? It’s ridiculous. For all these days we were only fighting for that land which has been taken to construct a hotel but now we have to fight for our own homes,” said a resident.