Builders scandal highlighted by CNN-IBN

Financial media responsibility

Here is a good article on how the incestuous relationship between the financial institutions and financial media can be terminal on your financial health. We see this in India all the time and we need to keep our eyes open  to financial spin and soft marketing articles planted in the TV and news media every day.

Where's the accountability?

By Aravind Srinivasan 

A well publicized conversation between Jon Stewart and Jim Cramer last month opened a lot of eyes. Jon Stewart is the incredibly funny and intelligent host of Comedy Central's "Daily Show" and Jim Cramer is the loud-mouthed, hyperactive host of CNBC's "Mad Money". Stewart had Cramer on his show and conducted a serious interview especially by Daily Show standards. This three part interview is a must-see for everyone interested in the stock market. Its message is very relevant to Indians living in the US and in India since a lot of us are involved in stock markets to varying degrees and the dynamics behind these markets and media in both countries are very similar. This interview was all about accountability or the lack of it in the financial media. You could tell Stewart was disturbed by the whole financial crisis and what was going on in Wall Street for years. Stewart went after Kramer and CNBC and just stopped short of calling them liars. His basic

question to Kramer and CNBC was, "Who are you working for?" Are you on the side of the viewers or are you siding with big corporations and financial firms? These questions blind-sided Kramer who didn't have coherent answers. The reality is, in bull market, these questions don't matter as everybody makes money and it appears like the interests of all parties involved are aligned. But when things go south like it has over the past months, then somebody is losing money and somebody is taking their money. Now you wonder what role channels like CNBC play here? 

Stewart accused CNBC of hiding the truth and not exposing what they knew about these corporations to average investors so that the latter could make more informed decisions. After all, these guys call themselves the financial experts and know lot more about stock market than us. They spend all day researching these companies because it's a part of their job and this puts them in touch with numerous CEOs, federal regulators and economic experts. The question is, how they didn't know about or predict or understand the credit crisis, over-leveraging and toxic assets? Or did they know but preferred to hide it from you and me because it could harm their business? Stewart was spot-on with these insinuations and the average Joe is definitely happy with his line of questioning in this interview. The answer to me is obvious. 

These channels had access to a lot more interesting information than they revealed and should be held accountable. Financial media betrayed the average investor, not only did they not tell you what was going on in Lehman brothers or AIG they sometimes asked you to buy Lehman or AIG stocks. Channels like CNBC are guilty of omission and commission. They didn’t cause the meltdown, but failed in educating people about it. Experts on these channels understand economic theories, subtleties and market nuances but they don't look at their job as one of educating and protecting average investors. Their knowledge is used to produce quality programs, hold intelligent discussions and improve their ratings. The lesson the average viewer learnt is; you are on your own when it comes to your money. Don't look up to these guys on TV for help and direction. They have enough problems holding on to their jobs, dealing with competition and ratings, your welfare’s the

last thing on their mind. An investor with some money in the market is usually an interested viewer of these channels. Many stop watching these channels when they get their money out. So like any good business, these channels and newspapers try their best to hold on to their customer base meaning they want to keep you interested and invested in the markets. It’s important for us to understand this especially today when financial channels are doing good business in India as well. It's our job to learn how to handle this flood of information and noise drowning us from all sides. This discussion on media accountability can and should be extended beyond the financial media. For instance, do we really believe that mainstream news channels do a great job in telling us all they know about politics, executive, judiciary and legislature? Definitely not! They pick and choose what works for them and we need to make them accountable for what they say and what

they don't. While it's obvious to see the impact of bad financial media on our wallets, what happens in mainstream media affects our lives far more comprehensively including causing these financial meltdowns in the first place? Afamous football coach once said - "you think you know, but you don't and you never will". This is the predicament of the average citizen of this world and the media in democracies can help fix it. Let’s hope this Stewart-Cramer conversation nudges them in that direction. 

Aravind Srinivasan is a Software Engineer at Yahoo! Incorporated in the Silicon Valley. Born and raised in Chennai, India he has lived in the US for 14 years and is involved in socio-political work. He can be reached at his blog 

Satyam - A real estate company

Here is an interview snippet with the board members of of Satyam Computer.

Q. What is the current headcount and assets of Satyam?
Manoharan: When the government-appointed board took over, the headcount at Satyam was 51,000. At the end of the fourth quarter, it has come down to 48,000.

Satyam has 450 acres of land -- 50 per cent of which is freehold and the remaining is leasehold. Of the 50 per cent that is owned, they have 125 acres in Hyderabad, encompassing two campuses. Both these campuses are valued at Rs 1,700 crore (Rs 17 billion).

There is no mention of the work Satyam does, the technology competency, domain expertise or project execution.

Now imagine the same question posed to Bill Gates

Q. What is the current headcount and assets of Microsoft ?

Bill Gates: We have currently 92,000 employees and 1000 acres of land in Redmond , another 400 acres in Hyderabad with 10 acres in Silicon Valley.

Goes to show, how real estate prices are influencing market valuations. Morons don't realise without projects or customers, the real estate is nothing more then rocks and sand.

The real estate cookie crumbles

From today's Rediff.com article.

The story of Sashwat Brahma is an interesting one. His story, unverified by me, appears as a post on www.consumercomplaints.in and goes like this.

He applied for a 4 BHK apartment in DLF's New Town Heights in Gurgaon and put money down. A year has passed; but there is no sign of the project, launched in February 2008.

He then says that DLF delayed in sending the agreement, thanks to which there was a delay in payment of loan instalments from his bank. DLF, according to him, charged him interest for the delay, saying had the disbursal come in time, then he would have paid the finance company interest and hence he should pay DLF interest even though the delay was at their end!

I am only hoping I am not getting something here.

Sashwat says he has a signed agreement with several unsigned pages and the witness page unsigned. He wants to exit, as do a few other potential apartment mates. DLF's response: 'Feel free to take us to court.'

'DLF has charged customers when they have not even started work. Why should I pay them if the project has not taken off?' he asks.

If you think I am being led down the garden (pun not intended) path by one biased property speculator, well, you can visit an entire Yahoo group(http://in.groups.yahoo.com/group/Newtownheights/) which has apparently rallied 300 prospective owners saying, 'This (group) is to bring all future residents of DLF New Town Heights and DLF Express Greens residents together. We all need to need to be together to make it happen,' they say. The web page says there are 672 new messages.

Unitech, the other Delhi-based giant, is facing similar ire for delays over its World Spa project, delivery date for which was mid-2006, and is still not done.

There are similar tales in Mumbai where scores of home buyers hold ownership papers, without the keys to their homes. And the wait has been pretty tough, particularly for those whose EMI clock has begun ticking. Though there are very few of those and more of the speculative variety.

From a layman's perspective, it was, just to recount a fantasy all over again, an amazing run. The big builders who already owned land at close to throwaway prices were getting funded both ways, by the banks, private equity players and hungry small investors on one end and the other, well, you and me, funded in turn by the banks.

It's a miracle that the banks, at least some of them, have not blown holes in their balance sheets. Or have they?

All the money, believe it or not, was being collected upfront, to fund other grandiose projects, of four and five bedrooms, with extensive landscaping, water bodies and modern security systems. And of course, most home buyers were also diving in, thinking prices would appreciate 400 per cent all over again. And most of them have first-owned homes already.

So the law of the unregulated market says buyers must pay the price for trusting the DLFs and Unitechs and scores of builders across the country. Yes and no. Because rising real estate prices have created a level of arrogance in the developer community unseen or unheard of in any other business.

Keep paying up, buddy, or go to court. Because the fine print in our contract says you have no choice.

Now this is not about disgruntled second and third home owners banding together on the internet or wherever they are. This is about how India's real estate industry lacks any body or regulator that can haul up realtors who take buyers for a ride.

And let's be fair -- DLF and Unitech are soft targets because they are visible. There are hundreds of cases in Mumbai which never make it to Yahoo Groups, or anywhere, for that matter. Except in some corner of a consumer court where they can grind on unnoticed for years.

Let's assume a regulator will not come about in a hurry because the real estate industry --which wants a return to the golden era of 7 per cent interest rates so that they can make you pay for their delays -- will howl in protest.

Don't be surprised if the protests hit home because most politicians are inextricably linked to real estate, at least in the city of Mumbai where I often find it difficult to separate one from the other.

What are we doing in the meanwhile, is the question. Let's face it. Assume the grand gong signalling the downturn went off in October 2008. But many of the projects in question, including in Mumbai, were supposed to be completed even before that. There was no real funding problem as I see it. So where were the glitches?

Well, this is where the arrogance of the builders (and the stupidity of the buyers) sets new benchmarks. Turns out the delays were more to do with land clearances, lack of occupation certificates and the like.

Puneet, writing on indianconsumercomplaints, says DLF told him they have no environmental clearances. When he said he wanted to back off, they asked for a Rs 5 lakh (Rs 500,000) penalty!

Now, DLF is apparently willing to renegotiate with buyers. Which it should have done in the first place, without the media shindig.

So this is how the real estate cookie is crumbling. But let's assume, as we always optimistically do, we can't do anything about anything, legal or otherwise. Surely we should not be listening to the real estate sector's demands on interest rates. Clearly we know where the problem is.

The writer is editor of UTVi Business. He is not chasing any half-constructed properties, for himself or anyone known to him.

Economic Times calls for the bottom in the market

Another useless article from Economic Times on the property market in Pune. There is no mention of per sq ft prices per area, transactions, re-sales, property tax collections from the registrars office. All they have are quotes from builders and realtors. It is in ET's vested interest to get the market going. After all the builders will bring out full page ads once they start getting some buyers suckered in. The whole ploy seems to create an illusion that people are buying, thereby forcing fence sitters to commit to the market. This is how marketing and the herd mentality work. Lack of accurate data forces people to make decisions without analysis.

The good news is that the builders have concluded that prices have dropped and that buyers will not buy beyond a certain price point. It goes to show that buyers have become cautious and educated, know the implications of pre-EMI and resetting rates so they can make purchases they can afford. The mad scramble to book apts like hot vada-pav's has been replaced by suspicion, caution and careful analysis of their own personal finances.

Modi was right, just as Congress has become budiya, as has the Times group. The grand old lady of Bori Bunder has become senile

THE RIGHT PULL
The recent interest rate cuts and attractive real estate prices have made perfect combinations to bring buyers back into the market, says Archana Sinha

There has been considerable activity in the property market in the last two months, thanks to proactive measures of the government and the developers in Pune, who started corrective measures, by reducing the home loan rates and the prices of homes. A number of new projects have been launched in the last few months and are reported to have been sold out, almost completely within the first week of launch. Although more concrete measures will be welcomed, the developers and the home seekers are not holding back their decisions any more.
Confirming the reports Rohit Gera, director, Gera Developments says, "Yes, most projects launched during the last 10 days have seen robust sales with a spill-over of a good number of wait-listed buyers. The negative sentiments that were sweeping the market are now ebbing out and people are putting the events behind them; in the true spirit, life must go on. The buyers have now concluded that prices have bottomed out and there is no point in waiting further, hence business is picking up."
Explaining the phenomenon further, he says, "If you look at the story of Satyam, people were worried on the account of 50,000 people losing jobs. Pundits predicted that the worst time is yet to come and that the company will close down, but today there are five companies that are ready to buy the company. In general, the mood is swinging back towards positive feelings and all that is translating into business."
In a similar tone, Manish Kaneria, MD, Mont Vert Homes, says, "Traffic has been coming from across the sectors and we are seeing quality enquiries for the past two months for homes between Rs 25 lakh to 50 lakh. Couples with an income of Rs. 50,000 to 60,000 per month are returning to the market as the feeling has begun to sink in that the correction has happened and the loan interest rates have come down considerably. So those who are comfortable in their jobs and have the capacity to pay are returning. I saw eight to nine closures last month and am expecting a good result this month too. The RBI is continuously taking steps to stimulate the market and results are showing up."
Kaneria pointed out that the NRIs who had retreated a few months ago have also started returning to the market as they find better investment opportunities now with the rupee weakening and the prices correcting.

Aniruddha Deshpande, MD, City Corporation Ltd, the makers of Amanora Park Town, echoes similar views. "I think the moves are good and they are showing their impact now. People have finished with their year-ending activities and children's exams, and are now concentrating on buying their homes. These are the months when they take their decisions to purchase and move into their new homes. In Pune, prices are very reasonable now and with friendly home loans they are finalising their deals."

Anand Jog, MD, Darode Jog Properties, informs that they have sold out all the 456 flats of their new project Greenland County at Narhe-Ambegaon on Sinhagad Road, within the first week of its launch.

Atul Goel, MD, Goel Ganga Group, is happy about the market now. "The rate of interest deeply impacts the buying behaviour of the customer. The buying motivation had lowered in the past, but since January-February, as the government started focusing on lowering home loan rates, the lower property prices become attractive. Although an interest rate between 7 to 7.5% would be ideal, we have received a good amount of inquiries and our sale figures have also improved in the past two months."

Of course, the slow speed of implementation of interest rates and the cautious approach of the banks in sanctioning loans are concerning people. Mohammed Aslam, regional head, Jones Lang LaSalle Meghraj says, "In a scenario like this speedy action is important. Also, SBI's rate reduction for one year is not enough; they should come up with a comprehensive policy for at least four years, to boost confidence among buyers. Moreover banks are rather apathetic towards loans below Rs 25 lakh and this is the segment that comprises government employees, who are stable in their jobs. They are less likely to default and will be the most genuine customers."

Another group of experts feel that in a scenario like this banks do become cautious, especially now with the elections approaching. But these factors are temporary and do not deter those who are in a stable job with good companies or government departments.
A senior banker from a private bank says, "The growth in home loan portfolio of banks during the last three to four years is a testimony to Indian banking policies. Expecting them to jumpstart lending is too much for the asking at this time of uncertainty. It depends on many factors. There is room to cut interest rates further given the latest cut in policy rate by RBI, but that will depend on how the cost of funds for each bank pans out in the coming months. The result of election will direct further policies which have been good and have protected us from the downslides and turmoil that have occurred in other developed economies. They are studying the situations and will come out with policies suitable to the domestic requirements."

Geo-political situations like the terror attacks and elections could create uncertainty, but only temporarily, feel developers. The salaried class is aware of these facts and does not defer its decisions. Moreover in the recent years governments have continued on the path of progress.
On a retrospective, says Kaneria, "These have been times for the market and buyers to take stock of the situation and emerge mature with realistic pricing and realistic selection of homes. Those who have the genuine need and are in a comfortable position regarding their jobs are beginning to seriously scout for homes within their budget."

Sure enough they are, as Suman Maheshwari a lawyer who is considering buying her own flat says, "If the banks lower their interest rates further, they will include the old buyers too. Prices look attractive and within reach."

Buyers rights and consumer activism

It seems that apt buyers have woken up to the internet and are organizing and ganging up against builders in ways never seen before. In the old days, media was controlled by few select companies or the government. Consumers had to resort to telephones, type-writers and sit-in dharnas to have their voice heard. In this new age of instant connectivity, builders are facing the music by irate buyers who are getting increasingly impatient for their purchases. Most of these buyers on delayed projects are paying a high rate of pre-EMI in addition to the EMI they will end up paying once the loan tenure begins. They also have to account for the loss in rent they have to incur for their present accommodation. They are bleeding slowly and it is high time builders be held accountable for their losses. For too long have buyers been herded around like sheep.

Livemint.com reports. Kudos to the Wall Street Journal for voicing the problems of the masses. Most Indian newspapers write soft marketing articles how it is a great time to buy. Its time for the Times group of companies to take some journalism lessons from the WSJ. If only Vineet Jain can get some time from posting Holi pictures on his Indiantimes website.


After using a portion of his retirement money to buy an apartment in Gur gaon, on the outskirts of New Delhi, S.K. Bangia pursued the developer for almost a year to get the purchase agreement. He eventually got a letter cancelling the allotment of the flat, Bangia says.

The 62-year-old former bank manager booked the apartment in a Raheja Developers Pvt. Ltd project in December 2007, the month that he retired, in his and his son’s name. His son wanted to borrow a home loan to finance part of the cost.

“They did not give (me) a buyer’s agreement and an approved sanctioned plan of the project, without which no bank gives a loan,” says Bangia, who sent a legal notice to the company in November, demanding the sanctioned plan and buyer’s agreement. A sanctioned plan is a project layout approved by the local urban development authority.

Homebuyers are taking recourse to consumer forums and the courts and online activist groups to resolve grievances against real estate developers. As slowing economic growth and a property market downturn cause cash-strapped realtors to abort or delay projects, property buyers are increasingly being forced to turn consumer activists.

Bangia, who approached a consumer court last month, claims he was targeted because he was trying to involve other buyers in his fight. He wants double the 9% interest Raheja Developers paid him on the money it eventually refunded him. Raheja, which charges 18% interest for delayed payments, says it’s following the rules.

“As per the terms of agreement to sell, it is mentioned that the company will give 9% interest,” said a Raheja Developers official who didn’t want to be named. “I am not familiar with this particular case...” One reason for the increasing incidence of disputes is a decline in real estate valuations, which is prompting buyers who had booked property at high prices in the past to seek refunds and switch to cheaper developments, said Anuj Puri, chairman of Jones Lang LaSalle Meghraj.

“It is (also) true that many projects of developers have got delayed for genuine reasons—may be because of lack of finance or whatever—and at the same time the tolerance level of buyers has gone down,” he said.

High Net Investors become High Loss Investors

Newspapers and moronic channels like CNBC TV18 have always led the common people to believe that High Net Investors (HNI) know what they are doing since they have access to the best and the brightest financial advisors. The more apt term for these HNI folks should be speculators and short term traders who run in the direction where the wind is blowing. With one rash decision after these others, these folks are losing their shirts in every investment they make. First they crashed with the stock market, their property investments are going bust and now their supposed safe investments in Gilts are losing sheen as well. Soon these folks will join the ranks of the middle class, a casualty of the following the pied pipers of Dalal Street.

Economic times reports

HNIs stuck with gilt funds as yields rise
MUMBAI: 'Out of the frying pan, into the fire' — that best describes the plight of high net worth investors (HNIs), who shifted their investments
from shares to gilt schemes at the start of 2009. Yields on government bonds have risen sharply in the past couple of months and are expected to stay that way for some time. Consequently, investors in these schemes are staring at sizeable losses, should they decide to redeem their investments anytime soon. Yields and bond prices move in opposite direction. So higher bond yields means lower bond prices, and vice-versa. As yields rise and prices fall, the value of government securities declines. As gilt schemes trade in government bonds to benefit from the price appreciation, a decline in bond prices impacts their performance. Gilt schemes of domestic mutual funds attracted money worth Rs 39,000 crore and Rs 20,000 crore in January and February, respectively. From roughly 9.55% in July last year, the yield on government bonds fell to around 5.5% in December, and slipped further to a historic low of 4.86% early January. Many HNIs flocked to gilt schemes, expecting that interest rates would fall further and settle between 4% and 4.5%, thanks to the downward bias in inflation and policy rates. But that assumption turned out to be a costly mistake. Contrary to expectations, 10-year bond yields have risen sharply to over 7% last week from lows in January, partly triggered by news of the government's huge borrowing programme. Fund managers and money market participants do not see the yields falling soon, as higher government borrowing increases the supply of bonds, which negatively impacts prices and pushes up yields. Even though RBI has consistently maintained its stance to reduce policy rates, some of its responses in the bond buybacks have left market participants confused. It announced that it would buy back bonds from traders to pump in liquidity into the system. But market participants feel that the move has been largely half hearted, with the central bank only buying back illiquid papers. This affected its "signalling" ability, they suggested. Now with RBI once again announcing details of its borrowing and buyback plan for the next fiscal, opinion is split on whether it will succeed in reigning in yields. Ritesh Jain, head of fixed income at Canara Robeco AMC, said bonds could do well in the next two quarters. "But the real skill would be to exit when the situation changes again towards worse. With government pumping in money the way it is, inflationary pressures are sure to resurface by the end of the year," he added.

DLF customers gang up, pressurise developer to commit refund

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

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

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

RIP, MBA

Another bubble pops. CNBC, of all the channels is running this story. Its hard to imagine that someone would slander the MBA degree to such an extent. time for a new phrase. Wonder when we see these articles about Indian MBA schools like IIM's and ISB. All Economic times does is to print articles about their average salaries in rupees, skewed every time due to dollar salaries earned by some folks who got placed in the US/UK. Morons don't understand the meaning of medians and standard deviations.

Those who can, do it,
Those who cannot, teach,
and those who cannot teach, do an MBA.

however I would not say that the MBA is useless. It has its value but a 1 year program post graduation program is better then two. Again the 100k loans for US MBA's are bad financial decisions, specially when high paying jobs are scarce. If you would know a thing about finance, this could be something to consider

Put your ear to the ground near any business school campus, and you will hear the sound of another bubble about to pop. The MBA will soon be joining equities and house titles in the museum of formerly overvalued pieces of paper.

The problem in the short term begins, like so many other fine things these days, in the financial sector. Over the past two decades, about one-third of graduates from top business schools took jobs in finance. But banking will never be what it once was (we can only hope), and consulting—the other major consumer of MBAs—is reeling, too. Couple declining demand with the fact that at the onset of a recession, the supply of students actually rises as the prospectively unemployed look for ways to fill in gaps in their CVs, and "shorting" the MBA looks like a compelling near-term trading strategy.

The really grim news for the MBA, however, is about more than short-term trends. Isn't it just a little suspicious, after all, that the sector that showed the greatest appetite for MBAs was the most grotesquely mismanaged? In fact, the economic crisis has exposed long-standing flaws not just in the modern approach to business education but in the very idea of business education.

The truth is that the relevance of the technical training allegedly offered by the MBA was always overblown. The idea that there is some body of knowledge pertaining to business management that can be packaged up and distributed to the business universe in two-year course-lets—well, it sounded good about a century ago, when it was first conceived. Maybe it still had merit when the schools were turning out only a few thousand graduates per year. But it certainly stopped making sense well before the schools achieved their current level of production of a whopping 140,000 or so graduates per year. The empirical evidence on the contribution of the MBA to individual career performance seems to bear this out—mainly because it doesn't exist. In fact, if the relevance of an M.D. to the performance of doctors were even half as unsubstantiated, we'd probably be fantasizing about tossing a few physicians in jail, too.

The other truth helpfully revealed in the throes of the crisis is that ethics and integrity and social responsibility aren't just optional extras for good business management—unless by "management," you mean "looting." Managers don't need to be trained; they need to be educated—in the sense of "civilized." Unfortunately, a business degree isn't just irrelevant to that purpose; it's positively detrimental.

Now, to be fair, people don't behave like jerks just because they spend two years in business school. After all, as many of my business school friends have pointed out, most of the first year goes into heavy partying, and the second year is really a marathon job fair. No, for the most part, people behave like jerks because nobody stops them from doing so. The charmers at AIG walked away with multimillion-dollar second homes as a reward for exposing their institution and the entire financial system to outrageous risks because it was (so far as we know) a perfectly legal way to make money. The whizzes at Goldman Sachs hedged their supersize profits with underpriced, implicitly publicly backed insurance from AIG for the same reason.

If we ask why no one stopped these people, however, we come right back to business school. It was the market fundamentalism that dominates business school thinking that assured us that markets are self-regulating. It was the management myth—the idea that there is some specialized, teachable body of expertise that constitutes management—that confirmed the strange notion that these people were capable of regulating themselves. And it was the shareholder-value model from Business 101 that said all you need to do is load up managers with tons of stock options and they'll be sure to do the right thing. These aren't just ideas that happen to be taught at business school; these are the ideas that provide the rationale for the existence of the schools. The only semblance of a theory behind modern business education is that it purportedly produces "experts" in shareholder-value maximization who are capable of forming an ideal, self-regulating market.

It's a neat theory, of course, and pretty radical, too. But not since the fall of the Soviet Union has a system of belief woken up with so many parking tickets on its windshield.

The reality is that business school is now chiefly a community of intention. It brings together people who share certain career aspirations—for the most part, to make big bucks—and occupies their time teaching them a few technical things that they don't need to know, along with a code of conduct that says, in essence, whatever is legal is ethical; and if it makes money, it's a positive duty. It's now clear that we would have all been much better off if, instead of cloistering these people on fancy campuses with world-class golf courses, we'd have sent them off to do two years of national service.

For the benefit of beleaguered business school academics, it's worth pointing out that a world with fewer MBAs is not necessarily a world without business studies. On the contrary, once researchers dispense with the idea that they have to package their material for the purported benefit of junior managers everywhere, they could actually study business. Maybe they could even learn to criticize it. Maybe they and their students could even learn to report on it, the way that journalists used to do.


In the meantime, since the national-service idea probably isn't going to gain much traction, I suggest that it's time to go long on the humanities. Now that we've tried business with savages, perhaps it's time to give the educated a shot.

35% - 50% drop - The new normal

So It looks like Mumbai is no different then the rest of the country. All the arguments of island city, no area to develop , constant demand, no supply, blah, blah seem to have failed. Credit and affordability drives markets. For too long we have been subjected to the builder and realtor rhetoric and many have been suckered into buying properties at outrageous prices.

From what I see 3000 per sq/ft seems to be the floor for housing in suburbs. Now depending on the builder you can get suckered into the super-built up area and end up paying 40% more but atleast
the base price is down.

Source : CNBC-TV18

Home buyers should gear up for good news. Home sale volumes seem to be bouncing back but at steep discounts. Mumbai developers have started bringing down prices, and in some cases the dip is as high as 50%.

CNBC-TV18’s Priyanka Ghosh reports.

For those who are waiting to buy a house, this could be a good time. New project launches in the market is witnessing a steep correction, with apartment prices in suburban Mumbai recording a dip by a whopping 50% in some cases, a clear indication of how hard pressed developers are for sale. Not surprising, as many of them have had single digit transactions last quarter.

Sandeep Runwal, Managing Director of the Runwal Group said, “In Thane, if you were selling at Rs 5,000 per sq ft (earlier), prices are down to Rs 3,100 and 3,300 per sq ft (now). So, you have seen a realistic correction of 45-50%... but it has brought the consumers back into the market.”

Sanjay Dutt, Managing Director of Jones Lang LaSalle Meghraj added, “I am talking about developers like Akruti, Lodha and Rustamjee, who have launched projects in the region of Rs 2,500 and Rs 3,000 a sq ft and from whatever I have learnt, they are selling.”

The Runwal Group sold 600-700 apartments in the past three months at a discount of 40-45%. Whereas, HDIL sold 70% of its Kurla project in five days, in March 2009 after launching it at a 35% discount.

CNBC-TV18 learns that Thane alone had 6,000 transactions in the past three months. Companies like Orbit Corporation and Nirmal Lifestyle too have revised pricing to the tune of about 35%.

That, according to experts, is in tandem with the average price correction Mumbai has seen this quarter.

But there is another rationale to this rampant price reduction. We understand that developers have come under tremendous pressure from both banks and private equity players to sell and churn inventories if they want funding and disbursal of loans. And, of course, in a cash strapped environment, developers have little choice to accept these terms and bring down prices to sell.

Mumbai project prices

I'm trying to consolidate some of the information posted in the comemnts. Lets keep updating this list.

Chembur

Everything was 7.5k and above. Now uniform 7000 (except Diamond Garden - about 10k)

Raheja Acropolis - Aphrodite building - Two months ago - 8600. Now 7200.

Remaining buildings in Deonar - havent checked, but have to trade down compared to Raheja.

came across this fantastic construction in Deonar, problem was all apts were 2200 sq. ft. Normal times, would have been a 9-10k building, was quoting 7.5-8.5. Not much available though, apparently.

Central Mumbai

Have only started research here.

Ashoka tower, Parel - Peninsula Project, Quoting 20k, Investor at 18k

Ashoka Garden, parel - Another Peninsula Project - Was 14000, now magicbricks has a seller at 11500.

Dosti Flamingoes - 10k, down from 12-14.

6:56 AM
Anonymous Cool Head said...

Common Man,
Here's to add to your database. A colleague was shown a new complex coming up at Thakur Village Kandivli, in the "luxurious" category. Builder says 5999 discounted from 7500 a few months ago. Broker signalled that if serious can be had for even 5500, my colleague is angling for about 4000.

7:02 AM

Tarot card readers and Fortune tellers make hay

It is boom time for clarivoyants as Indian's turn to fortune tellers to know their future.

Phenomenal fall in real estate prices

From here

Real estate market in India is trapped in a vicious cycle of plunging prices. With the bottom nowhere in sight, potential buyers do not want to try and catch a falling knife, says Pranay Vakil, chairman, Knight Frank India, a property consultancy firm. "They are expecting a further cut in prices, while developers themselves have been dropping prices, anticipating an increase in sales volumes." Rajneesh Chhabra, a property broker based in south Delhi, says asking rates are down 30% from their peak, but it's still almost impossible to find a buyer. "Financiers have disappeared from the market and those dependent on bank loans do not buy property in south Delhi," he says, adding that deal volumes have shrunk by more than 95% from their peaks about a year ago.

With the financial year drawing to a close this month, cash-strapped real estate developers have already cut prices by an average 40% in all their upcoming projects. "I expect prices will soon come back to the 2003-04 levels, when rates were hovering between Rs 12,000 and Rs 17,000 in upmarket areas like Malabar Hill," says Mumbai Estate Agents Association president Yashwant Dalal. In Malabar Hill, the most expensive home address in India, prices have fallen by a fourth to Rs 25,000-45,000 per sq ft, depending on the age of the building and amenities. Ten months ago, actor Vinod Khanna offered to pay Rs 1.25 lakh per sq ft for a 2,500 sq ft apartment in the ultra-luxury El Plazo housing society in the Hanging Gardens area of Malabar Hill. "Now the rates are in that area (Hanging Gardens) are around Rs 70,000 to Rs 75,000 per sq ft. Similarly, in Pedder Road, rates are around Rs 45,000 per sq ft," Mr Dalal says.

A London-based Indian national acquired a 3,475 sq ft property at NCPA Apartments in the Nariman Point area at Rs 97,842 per sq ft nearly six months ago, but rates there are almost half that now, says a south Mumbai property dealer. In central Mumbai's Worli and Lower Parel areas, rates are down to Rs 12,000-18,000 per sq ft, while in Bandra they have fallen by more than a fifth to Rs 15,000-25,000. Where price drops have been of the order of 50%, buyers appear to be showing interest. "We are quoting Rs 16,000 per sq ft for our new project in Lower Parel and the initial response has been positive," says Orbit Corporation finance director Ram Yadav. A year ago, property prices in this area were over Rs 35,000 per sq ft.

Properties in the heart of the national capital on Prithviraj Road, Aurangzeb Road, Amrita Shergill Marg, Jor Bagh and Golf Links, which have seen deals involving industrialists such as LN Mittal, Naveen Jindal and GM Rao as well as film star Shah Rukh Khan, are now struggling to find buyers. A 11,250 sq ft home in Golf Links, which was purchased for Rs 70 crore, is now available for Rs 50 crore, but there are few takers. "Earlier, financiers used to buy homes. Now, they neither have money nor the hope that they will be able to sell it at a higher rate and so have just withdrawn from the market. End-users are rare and they only negotiate, but don't buy in the expectation that prices will fall further," says Neeraj Chopra, a Dwarka-based property broker.

In India's technology capital Bangalore, prices have fallen by up to 25% in some areas, a recent Morgan Stanley report says. DLF, India's biggest real estate company, cut rates by about 30% at its upcoming project and the company sees prices falling further. Irshad Ahmed, president of Irshads Property Matters, says that in suburbs such as Whitefield, Outer Ring Road and Sarjapur Road hard bargaining can result in final prices, which are 30% lower than card rates. Property dealers and builders are also lining up an array of discounts and freebies to try and clinch deals. The Gateway project by developer Brigade in Malleshwaram, one of the oldest localities in town, is quoting at Rs 5,090 per sq ft against Rs 5,790 per sq ft last year.

But there is scope for negotiations, depending on which flat is chosen and the mode of payment, says an official of the marketing team. Second-sale rates at Gateway are Rs 4,700-4,800 per sq ft, according to a property dealer.

In Bangalore's downtown area, the Mantri group's upmarket Altius complex, which has only one apartment to a floor with a current market price of around Rs 14 crore, there aren't many units available for a second sale. A city broker says that since there are no other projects that open up to views of the city's lung space, Cubbon Park, the price will hold. But the number of people showing interest in buying has dropped, he adds. However, in the upmarket areas of Chennai there have been no considerable price drops. In Chennai's Arcot Road, Purasawakkam, Thiruvanmiyur and Valasaravakkam areas, rates still hover between Rs 4,700 and Rs 6,600, about the same a year ago, a dealer says, but prices have fallen by 20-30% in the suburbs.

In Kolkata, prices have fallen from their peaks touched in mid-2008 and hover around levels seen at the beginning of the year. In areas such as Ballygunge Circular Road, Sunny Park and Queens Park rates, which were Rs 8,500-10,000 per sq ft in January 2008 jumped to Rs 13,000-14,000 in June-July before dropping to Rs 9,000-11,000.

"Prices in the city's posh areas, including Ballygunge Circular Road and Queens Park, had surged because of limited supply, but they have been hit now. Areas like Prince Anwar Shah Road, Behala and Lake Town remain unaffected, as real estate prices in these areas never reached unrealistic levels," says Jitendra Khaitan, CEO of real estate consultancy Pioneer Property Management. Sumit Dabriwala, managing director of property developer Hiland Group, says high-end residential properties, which were being sold at Rs 12,000-15,000 per sq ft last year, are averaging Rs 9,000-10,000 per sq ft now. "On an average, properties in upmarket areas have seen a 10-15 % price reduction in the premium category," he says. A few banks have cut home loan rates in recent weeks, sparking hope that sales will pick up in the quarter beginning April, rescuing the property market from its downward spiral. This could be a crucial period, as the impact of the ongoing financial crunch is expected to peak by then.

Hardships hit Singapore expats

Time.com reports on the downsizing of expatriate lifestyles in Singapore.

As the expat ranks swelled and foreigners put down roots, the city's tonier districts filled up. Prices for apartments in Western enclaves like Tanglin and Orchard doubled in value from 2004 to 2008 as buyers snapped them up. Waiting lists for coveted spots at international schools like the Singapore American School or United World College of South East Asia were so long that expats were encouraged to register their children at birth in order to gain admission four or five years later. The cost of joining the Singapore Island Country Club and the American Club soared as transferable memberships were bought and sold on the open market like hot stocks. (See 10 things to do in Singapore.)

Today, as beleaguered investment banks shutter offices and commodity prices and trade flows plunge, Credit Suisse estimates that hundreds of thousands of expat jobs are disappearing from Singapore. Property prices, particularly of high-end homes, are expected to fall some 50% as the recession gathers force.

But in a departure from previous downturns, some expats are electing not to return to banking centers such as New York City and London. This recession is global, and the implosion of the financial-services industry means job prospects back home are even bleaker. American Marc Rudajev, a 37-year-old ex–hedge fund manager whose $350 million fund dissolved in the middle of 2008 as global stock markets swooned, is one of the Singapore expats not hurrying home. "This economic crisis is affecting every country," he says wearily. "But if there is a glimmer of hope anywhere, it's here rather than in the U.S. or U.K."

A Canadian sales executive for a global media company, who requested anonymity because he is negotiating a severance package with his former employer, is another expat who has been living parsimoniously since being laid off. In the boom years, he occupied a spacious sea-view apartment near downtown Singapore that rented for $5,000 a month. Today he occupies more modest digs, paying about $700 a month for an apartment he shares with a friend. "I'm interested in creature comforts like hot water, but I can do without joining a country club or driving a Lamborghini," he says.

RBI verifying solvency of 10 realty firms

Click on the image for a better view of the crash in housing construction companies stock prices. Once the RBI report is out, we will get a better picture of the construction industry.

Business Standard reports
Anindita Dey / Mumbai March 14, 2009, 0:25 IST

Internal assessment follows banks’ worries over systemic risks.

The Reserve Bank of India (RBI) is examining the books of ten real estate companies to verify their solvency and assess the systemic risks arising from possible defaults by these companies on various loans and public deposits.

Sources close to the development said the exercise followed concerns expressed by bankers over possible large-scale defaults in loans and deposits, which may have implications for the entire system.

The companies identified for assessment are DLF, Indiabulls Real Estate, Unitech, HDIL, Mahindra Lifespace, Peninsular Land, Ansal Properties, Phoenix Mills, Anantraj Industries and Akruti Citi Ltd.

The exercise is currently an internal assessment based on available information in the public domain. RBI has also sourced data on loans, cash deposits and other fixed deposits held by these companies from all banks and mutual funds. Most of these companies have also borrowed through non banking financial companies (NBFCs) that they have floated, and the central bank is verifying the books of these related NBFCs independently.

The exercise, said these sources, aims at a comprehensive analysis of the data relating to these companies for determining the correct debt-equity ratio, solvency, state of liquidity to avert defaults, cash flows and profit margin in the current operations.

After the review, the companies or their NBFC arms may be advised to check exposure in line with cash flows, and banks may also be asked to cut exposure.

Sources said these real estate companies had raised long-term loans from banks and had placed commercial paper amounting to thousand of crores to raise short-term financing from the mutual funds.

The mutual funds, in turn, got a major part of the subscription to their schemes from the banks who held public deposits. This means a default on even a single commercial paper will impact the mutual funds, the banks and ultimately public deposits.

Large-scale borrowing has distorted the normal debt equity ratio for most of the companies and made them highly leveraged. RBI is of the view that the debt is being camouflaged in cases where the ratio meets standard norms.

Realty prices show major decline

Bless Yashwant Dalal's soul for his frank opinion. Malabar Hill at 12,000-17,000. Now that is some bubble popping. I hope he doesn't deny his statment later. Its been 3 years since I first started blogging about outrageous prices in Mumbai. Finally this blog is vindicated. Its time to shut it down :). A crore of rupees finally has some real value.
Economic times reporting.
MUMBAI DELHI: Some two weeks ago, Mumbai-based stock broker Ashok Samani won an auction to buy eight apartments owned by the late Harshad Mehta

and his family in the posh Worli locality. Mr Samani, who put in a winning bid of Rs 32.60 crore, or Rs 26,080 per sq ft, for the apartments in the upmarket housing society, Madhuli, is pleased with the bargain.

“I feel it’s a reasonable price. Compared to prices a year ago, it’s a decent buy,” he says. Apartments in buildings of Madhuli’s class were selling for Rs 38,000-40,000 per sq ft around the same time last year, about a third higher than the rate at which Mr Samani struck his deal.

Mr Samani may be satisfied with his bargain, but a number of other potential buyers don’t seem to think that the time is ripe yet for the best deals. In early 2008, a Rs 18-crore deal was negotiated for a 2,925 sq ft house in Delhi’s upscale Defence Colony area by a builder who planned to demolish the house sitting on the land and develop apartments, hoping for a return of about 30%.

But after the downturn in the real estate market, he is trying hard to wriggle out of the deal, even at the cost of losing the Rs 50 lakh he had paid as ‘token money’ indicating his intention to purchase the property. “A few buyers have approached me with a price of Rs 9-10 crore, but exited mid-way,” said a broker who is negotiating on behalf of the property’s owner.


As in the rest of the world, the real estate market in India is trapped in a vicious cycle of plunging prices. With the bottom nowhere in sight, potential buyers do not want to try and catch a falling knife, says Pranay Vakil, chairman, Knight Frank India, a property consultancy firm. “They are expecting a further cut in prices, while developers themselves have been dropping prices, anticipating an increase in sales volumes.”

Rajneesh Chhabra, a property broker based in south Delhi, says asking rates are down 30% from their peak, but it’s still almost impossible to find a buyer. “Financiers have disappeared from the market and those dependent on bank loans do not buy property in south Delhi,” he says, adding that deal volumes have shrunk by more than 95% from their peaks about a year ago.

With the financial year drawing to a close this month, cash-strapped real estate developers have already cut prices by an average 40% in all their upcoming projects.

“I expect prices will soon come back to the 2003-04 levels, when rates were hovering between Rs 12,000 and Rs 17,000 in upmarket areas like Malabar Hill,” says Mumbai Estate Agents Association president Yashwant Dalal.
In Malabar Hill, the most expensive home address in India, prices have fallen by a fourth to Rs 25,000-45,000 per sq ft, depending on the age of the building and amenities.

Ten months ago, actor Vinod Khanna offered to pay Rs 1.25 lakh per sq ft for a 2,500 sq ft apartment in the ultra-luxury El Plazo housing society in the Hanging Gardens area of Malabar Hill. “Now the rates are in that area (Hanging Gardens) are around Rs 70,000 to Rs 75,000 per sq ft. Similarly, in Pedder Road, rates are around Rs 45,000 per sq ft,” Mr Dalal says.

A London-based Indian national acquired a 3,475 sq ft property at NCPA Apartments in the Nariman Point area at Rs 97,842 per sq ft nearly six months ago, but rates there are almost half that now, says a south Mumbai property dealer.

Prices down 50% in Gurgaon

Livemint has an article on the crash of housing in the Delhi-NCR region. Not all builders are created equal and Unitech/DLF and Pasvanath seem to have taken the cake in the bad press they have seen over the past six months. This scenario will be repeated in every city where over money seem to have vanished for houses priced for over 50L. The sweet spot for now is between 25-45L. I think the rapid increases in salaries, combined with the low interest rates pumped up housing rates beyond affordability. People with soaring stock market portfolios leveraged loans for large houses. With everything unwinding, the highly priced properties are unwinding as well.
LiveMint reports
New Delhi / Bangalore: When he bought the four-bedroom apartment in Unitech Grande on the outskirts of New Delhi 22 months ago, the hefty price tag of Rs2.75 crore didn’t deter him. The economy was humming, the markets surging and nothing, it seemed, could go wrong.

Billed as India’s first ultra-luxury residential project, Unitech Grande promised a Greg Norman-designed golf course and luxury trappings, including a dozen theme gardens, an integrated sports complex and world-class health care, shopping and entertainment facilities.
The price of the apartment, promised for delivery in September 2010, has now dropped by about half to Rs3,500 per sq. ft, said the 37-year-old buyer, who didn’t want to be identified by his name or profession.
“I can’t even sell the property because of the erosion in value. I will lose money if I sell now,” he says, adding that he is fretful the project will be delayed because “not even a hole has been dug in the ground” at the site in Noida since he purchased the apartment.
His predicament illustrates the plight of homebuyers who bought apartments and houses at the peak of the property cycle after prices had surged 30% year-on-year during 2005-07. Those properties are worth half the price they paid after the economy and, with it, the real estate market, went into a tailspin last year.

Buyers want lower prices in Pune

I'm not sure why the builders are complaining. had no symphathy for the buyers when they were increasing prices week. The market will find its footing. Based on this cursory analysis, Pune prices seem to still be above 2004 prices. More so the prices seem to an average of 2004 and 2008. If Pune buyers are hesitating to buy at 3000, what about their cousin's in Mumbai. There the builders saying they will not drop prices below 8k in far flung suburbs. For the Mumbaikar its best to sell his overpriced property to some sucker and retire in Pune at Rs 2500. For a 1000 sq ft apt worth 80L, he can buy one at half price and retire on the interest.

25% Divides Buyer & Seller
IndianExpress reports
By akansha, Section Real Estate
Posted on Mon Mar 09, 2009 at 04:09:02 AM EST
If there is a consensus among buyers, it is that the property rates need to come down further. On the other hand, most sellers insist that rates have bottomed out. In the concluding part of this series on the disconnect between buyers and sellers, both sides spell out their differences

Indeed, buyers are quoting rates that are 25 per cent lower than the offer prices. They are quick to point out that rates had grown absurdly in the last couple of years (see rate chart).

Buyers are treading cautiously and not taking hasty decisions given the economic slowdown, job insecurity and the likelihood of interest rates falling further. Sellers rue that of every 10 potential buyers, only a couple get back with an offer the rest are just buying time.

"My daughter is a serious buyer, as her friend is. Why would we run around the city, investing time and energy away from our jobs if we were not serious about buying an apartment?" said Renu Walia, whose attempts to find an apartment for her daughter has drawn a blank as she found most advertisements promising affordable/reduced rates to be incorrect.

"We liked a 2BHK apartment in Sopanbaug and the developer quoted Rs 42 lakh. How is the price any different from what it was during boom time? I have offered Rs 30 lakh," she said.

"That is precisely the trouble. You reduce the price on what was the earlier rate, and then the buyer wants to bargain on that reduced amount too. People are now quoting almost absurd figures," said city developer Rohit Gera, spokesman for the Promoters and Builders Association of Pune (PBAP).

Buyers rights in Maharashtra

ExpressIndia has some good information.


Pune * Agreement of sale should only mention the carpet area and not saleable or built-up area
* Builders have to provide one car park for tenements having carpet area of more than 80 sq m (861 sq ft) without any extra charges to the buyer
* Common terrace cannot be sold to an individual
* Terrace garden should be charged only one-third the rate fixed for the flat

These are some of the areas that lawyers and activists point out to potential buyers, saying they should be vigilant and not blindly sign on the dotted line like before. Even as property buyers in Pune are waking up to a new reality — that they may have been getting the short shrift from the builders for long.

Most builders mention only the built-up area in agreements; they make all customers cough up an extra Rs 1.5-2 lakh for stilt parking; many of them charge half the rate fixed for the flat for terrace garden and at least a few even charge 50 per cent for loft space; advance payment should be only 20 per cent of the sale price and that too has to be made only after a written agreement of sale and not on the basis of allotment letters.

“One area where the buyer is at the receiving end is the improper measurement of the flat he buys. Unlike in any other product, an apartment is one purchasable commodity where the buyer has to blindly believe what the builder says and has no recourse to validating it,” said a city realtor, not wishing to be quoted by name. This is over and above the fact that a 1,000-sq ft flat mentioned as saleable or built-up has only 700-750 sq ft as carpet area, he said.

“All these are in complete violation of the Maharashtra Ownership Flats Act 1963 (MOFA) and development control rules of the Pune Municipal Corporation,” said High Court advocate Yogesh Mehta. “Any violation is a penal offence where conviction can be imprisonment for a term extending up to one year.”

The MOFA Act 1963 also helps purchasers in cancelling an agreement if they do not get possession of the property in time. According to Section 8 of the Act, if the purchaser is not given possession as per the agreement, the purchaser can cancel the agreement and claim the money back at a nine per cent interest. “Most buyers do not know this clause and are made to wait,” Mehta said.

Promoters and Builders Association of Poona chairman Lalit Kumar Jain said all builders have to abide by the MOFA Act. “We have control on the 260 members of our association. If there is any violation we are willing to take it up. We have no control on the others,” he said.

RTI activist Vivek Velankar said most buyers are not aware of these rules and those who feel bold enough to point them out to builders are not entertained.

Roubini in India

Nouriel Roubini was in India. The video of his talk is here.

Quotes from his speech.

And if the policy responses are not coordinated and cohesive, the recession could well be L-shaped in nature and the pain could be protracted. The slowdown in emerging economies like China, Korea and India has conclusively proved that the decoupling theory is humbug. The world today is connected by trade, capital and financial channels. This is evident from the slowdown of both the capital and trade flows in these emerging economies. No wonder, their growth has declined from 7 per cent to 3 per cent; these countries have hard-landed already.