Obama says financial sector to shrink

Now if the financial sector shrinks, so do the financial epicenters. New York, London, Hong Kong and Mumbai could be easily affected by the downturn. The process of creating money from thin air is now sub-primed. As the financial sector shrinks so will all other sectors which support this sector, be it Information technology, travel, real estate or offshoring.  Now who will buy or rent all the commercial real estate in BKC or Nariman point at 2007 prices. Mr Bhai argue with Obama on why these prices should not collapse. If I had properties with loans in these areas of Mumbai, I would exit immediately. If Mr Ratan Tata, a Mumbai icon, wanted he could've built the next TCS campus in horrendously expensive Bandra Kurla, but he didn't. He built it in OMR, on the outskirts of Chennai where he got land for cheap. The photo you see on this blog is of the TCS campus. 

The Tsunami is coming and sub Rs 10000 prices in prime areas is on the horizon. Lets continue the 24x7 debate.

The Yahoo article is here.

By Jeff Mason – Sat May 2, 6:28 pm ET

WASHINGTON (Reuters) – The financial sector will make up a smaller part of the U.S. economy in the future as new regulations clamp down on "massive risk-taking," President Barack Obama said in an interview published on Saturday.

Obama, whose young administration has spearheaded a raft of reforms in the banking sector as part of efforts to tackle the financial crisis, said the industry's role in the United States would look different at the end of the current recession.

"What I think will change, what I think was an aberration, was a situation where corporate profits in the financial sector were such a heavy part of our overall profitability over the last decade," he said told the New York Times Magazine.

"Part of that has to do with the effects of regulation that will inhibit some of the massive leveraging and the massive risk-taking that had become so common."

Obama said some of the job-seekers who may normally have gone to the financial sector would shift to other areas of the economy, such as engineering.

"Wall Street will remain a big, important part of our economy, just as it was in the '70s and the '80s. It just won't be half of our economy," he said.

"We don't want every single college grad with mathematical aptitude to become a derivatives trader."

Fair price for an apartment in Mumbai/Pune/Bangalore

Now that we have got all the bulls charged up to challenge the bears, it is time to discuss what the right price to pay for an apt in the suburbs of Mumbai, Pune, Bangalore. We can discuss Delhi, Chennai, Hyderbad later.

Lets say I'd like to buy a 3 bed 1500 sq-ft ready possession apt with amenities, not in a noisy place, close to schools and work places and away from the slums and garbage dumps. Lets say my salary is 8L per year, I can get a 11% loan and of at-most 25L sanctioned. How much should I be looking at ? Note I'm not looking at under construction apts as there is no guarantee how long my money will be locked in and I don't want to pay pre-emi interest. My current rent is 20k a month and my other expenses are another 20k. As you can see I'm an average middle class invidual and not born with a golden spoon, and I don't have the capital to gamble on the Indian stock market exchanges. Its another story that my parents were govt employees and didn't take fancy to earning money under the table.

Now Mr Bulls will I be able to buy anything at this price or I just have to rent my whole life ? Give me my choices if you think I should become a bull and buy an apt. I invite any bulls in either of these three cities to come by and plead their case. I'm willing to relocate to any of the cities which affords me the apt I desire.

Will garbage dumping grounds affect real estate prices ?

I'm surprised Mundwa is chosen as a garbage dumping site as it is close to the city and adjacent to Kalyani Nagar and Wanawori. i guess now you can be close to the IT parks, airports and the garbage dump as well.

Source: The Indian Express Finally, two new garbage dump options
Mundhwa And Digraswadi, Finally, Two New Garbage Dump Options
Municipal Corporation proposes to cap Urali Devachi site and move on.

Mundhwa and Digraswadi could be come the new garbage dumping sites for Pune city. The Pune Municipal Corporation (PMC) has shortlisted them as alternative sites to replace Urali Devachi, which it hopes to cap in a one year's time.

The upcoming area of Mundhwa, chosen for many future urban infrastructure projects, is around 6 km from the city while Digraswadi is in Shirur taluka, about 30 km away.

Following an agitation by villagers of Urali Devachi, Principal Secretary of Environment Valsa Nair had asked the PMC to cap the site and suggest, within 15 days, an alternative.

The PMC submitted the plan to the Maharashtra Pollution Control Board (MPCB) on Monday. "The MPCB will have to ensure that the plan is implemented in the timeframe," Nair said.

MPCB regional officer P K Mirashe said the old site of 43 hectares will be capped. However, the site at Phursungi adjacent to the old site will be in use.

"Besides the Mundhwa and Digraswadi sites, 13 more locations in the district are being assessed as garbage treatment sites," said Mirashe.

According to the plan submitted, the PMC will take precautionary measures while caping he site. The area will get a proper effluent treatment system and be sprayed with chemicals to ensure an insect-free environment. The plan also mentions tackling of frequent fires by parking two fire engines at the site. An RCC water tank and water tankers will be deployed daily, said Mirashe.

Rediff: Housing prices could fall 25% more

From http://business.rediff.com/report/2009/apr/29/perfin-housing-prices-could-fall-25-percent-more.htm

Property prices have been on a slow but steady decline over the past year-and- a-half. Experts predict that this trend will continue and one can expect a 20-25 per cent further drop in prices in the next year or so.

While interest rate cuts by banks have been comparatively faster in being implemented, largely through the consistent efforts of the Reserve Bank of India [Get Quote], the builder community has been reluctant to follow suit with ready price cuts, even when the uncomfortable truth remains that there is no choice in the matter.

Cutbacks and compromises

Though the initial interest rate cuts and a discounted interest rate for the initial year introduced by some banks resulted in a lot of loan transfers, new loans did not pick up pace on the expected lines.

Another fact that contributed to this factor is the prevalent grim mood of the job market. People are wary of taking on new debt liabilities while struggling to meet their existing commitments. Builders who had been concentrating on high income groups and premium housing needs are now stuck with incomplete projects and lack of funds.

The builders, sensing the buyer's mood, slowly started to relent and made attempts at slashing property prices. Prices have definitely started to slide in favour of the buyer. However, there have been several instances where there have been compromises over the square feet area of the house.

For example, balconies have disappeared from floor plan, 1,000 sq. ft homes are being converted to 850 or 900 sq. ft. in a bid to make space for more apartments in a block, 544 square feet, single bedroom apartments which had practically disappeared are making a come back!

So, there have been a lot of cutbacks from the offerings of several builders to enable slashing of prices and yet not make deep dents in their profit margins.

On the other hand, builders have also entered into tie-ups with banks to offer discounts in the former of special lower interest rates, waiving off the processing fee, slashing the down payment rates, et cetera apart from other discounts of 10-25 per cent on the actual property from their side.

Market reports are suggesting a slew of new launches announced have a price correction of nearly 30 per cent in and around Mumbai and Chennai.

What needs to be done?

As price cuts are now a visible reality for builders they need to make the most of the existing situation and identify new opportunities to counter the challenge of debt and losses they are currently facing due to the credit crunch in the present and the realty boom of the past.

A bit of innovation, some significant changes in outlook and proactive help from the government could pull them out of the current mess.

Innovation could be introduced in many ways. New building materials that are more cost effective could be used, for example use of prefabricated cement blocks can reduce cost by around 10-15 per cent.

A possible tie-up between CMDA (Chennai Metropolitan Development Authority) and private players is in the discussion stages and there is dire need for mass housing needs for lower and middle income groups, which can provide some relief for private players who are currently struggling to finish projects.

Recent statistics reports suggest that the urban population currently at 328 million is rapidly increasing and will touch 576 million in 2030.

This means there is going to be a significantly huge demand for housing. So builders can take heart in the volume of requirements and adapt their real estate strategy accordingly.

Builders are also expecting the government to pitch in and bring down stamp duty charges, taxes, etc to make price reductions more feasible.

A strategic approach to affordable housing

A methodical analysis of income profiles across sections should be matched with housing requirements. Depending on the percentage of population in a particular price segment, housing requirements need to be planned and accommodated. This can be possible only if the authorities and builder groups get together and formulate a plan of action based on surveys and recommendations.

As housing is a key subject during the current elections, things are being implemented at a faster pace. In fact, one such development in the right direction involves a task force set up by the housing ministry in Jan 2008, with HDFC [Get Quote] chairman Deepak Parekh in the lead.

The committee has come up with significant ideas like revamping of State housing boards, upward revision of FSI (Floor Space Index), making available land conducive for construction, etc. More such evaluations should be brought to the table for discussion and accordingly new plans should be devised and implemented to evolve from the current situation.

This is a time for review and change. The learning gathered from the past year-and-a-half should be the basis for a brand new start.

The stage is set for a complete change in the real estate scenario that is more 'real' and 'affordable' to enable everyone to own a home.

The author is Head of Content & Research at BankBazaar.com

H-1B Visa curbs impact on outsourcing and real estate

Bindas Bhai has asked a very relevant question on the impact of H-1b Visa curbs on outsourcing. here is my analysis on that question and I will assess the impact to real estate in India as well. Others can chime in and discuss further.

Question :

Will IT revenues/salaries be hit by the H-1B/L-1B visa clampdown ?

Short Answer : YES

Long Answer : The revenue earned by IT service providers will decrease since the wage arbitrage between the salary paid to the H-1B/L-1B employee versus the hourly rate billed to the client will decrease. Its a well known fact H-1B employees are paid up to 40% lower then local US citizens or green card holders. Many IT service providers charge a hybrid rate or a blended rate to account for onshore and offshore resources. As the number of local onsite employees reduces, the blended rate will tend to decrease. As the revenue earned by the IT companies reduce, so does their inclination to grow the workforce in India, invest in training and hire more employees. The focus is now on cost-cutting be it reduced transportation options, decreased food subsidy and elimination of fringe benefits. All IT companies have a variable pay component which will reduce to zero or almost zero as they face pricing pressure, project cancellation and reduction in onsite billing.

The net impact on the IT service employee is that he has less income when offshore and reduced options to go onshore. Most IT employees factor the onshore component into their salary. Now since that component will be zero for the foreseeable future due to the visa clampdown, their ability to take more liabilities in terms of housing loans and car loans will reduce.

Will H1 visa problem increase outsourcing jobs in India ?
Short Answer : NO

Long Answer: Conventional wisdom will dictate that as H1-B's visa reduce, most work done by the H-1B's will move offshore or to the home country of the H-1B workers. However this is not the case this time. There is huge unemployment within the IT workforce as companies in every corner have cut any surplus employees and are operating with minimum capacity. There is still room for more layoffs and more employees are coming to the market as the quarter revenues keep declining and layoffs mount. There is increased pressure on local salaries and it is no uncommon to see pay cuts up to 30% in many cases. In the case of startups, there are some cases where people are willing to work for free to gain experience with the hope that the employer will hire them when the market turns around. I've seen some billing rates of $10-15 in this market, something which the IT offshore companies cannot match even in India. Tech salaries will continue to decline into the next year and it will not be uncommon to find someone with experience working for $60k, a level we last saw in 1997. As the minimum salary to be paid to an H-1b worker is 60k, there is no wage arbitrage left for the IT service provider. The bigger issue is the clampdown on L-1 visa. L-1B visas have no quota and were used by every IT provider to bring in Indian employees to work in client locations.

The most interesting quote I saw today was from Mohandas Pai, the Infosys CFO. He said we are trying to understand the meaning of the word "employee" as it relates to the new H-1B bill. This sums up the conundrum Infosys is in. If they hire more local citizens and green card holders, they lose the wage arbitrage, they have to pay severances if they layoff locals, they cannot employ the performance appraisal sham to boot out employees by giving tests like they do in India. They now have to play by the US Dept of labor rules, something they have resisted till now. All things considered they will be forced to hire locals, reduce offshore resources to operate more efficiently.

As any experienced professional will tell you, there is a 10x productivity difference between a top IT employee and an inexperienced employee. IT companies operate on the premise that they can hire lower paid fresh graduates in bulk and replace the experienced bunch as the experienced bunch moves onshore. Now with the H-1B clampdown the option to move offshore been taken away, they will be faced with more experienced employees earning higher salaries on bench. As with the sub-prime the whole model worked beautifully as long as the employees kept moving onsite Now that the flow has reversed they have to adapt to the changed scenario. Will IT companies fire experienced staff and replace them with new graduates ? If some of them do, who will hire these experienced folks at their high salaries. Either these folks join new employers at lower salaries or they remain unemployed.

As we discuss IT companies, they are mostly concentrated outside Mumbai. Their real estate markets they affect are mostly non Mumbai. If you look at the R2Iclubforums.com polls, there are hardly any NRI's moving to Mumbai. Most end up in Pune, Bangalore, Chennai, Hyderabad and Gurgoan/Nodia. There is a trickle which makes Mumbai their homes after their return.

Now the question to ask is why will someone facing an uncertain future in India, with no hope of going onsite invest in a property of 1 crore ? This question is more pertinent to Mumbai more then any other place. All other cities you can get apts for under 50L, some even at 30L. Now if Mumbai is never considered an IT hub, apart from black money operators who has disposable income of 1cr or will get a loan of 80L in this market ? Now if still one believes Mumbai has headed for 50% jump in prices in the next few years, invest and check back in 2 years.

Nasscom in denial mode

Moneycontrol.com has an interview with the Nascomm chief to discuss the implications of the new Grassley/Durbin legislation on H-1B visa curbs. I find Nasscom defense to be absolutely weak and even a 10 year old will  have the IQ to understand why it holds no water. The bigger story here is the abuse of the L-1 visa by IT companies to shop Indian bodies to the US. Increased scrutiny of those applications will have bigger implications then the H-1b visa where according to Nasscom only 30% of the visa's are granted to Indian IT companies.

How this affect property prices in tech capitals is another story.

Don't see new H1B proposal turning into an Act: NASSCOM

Published on Fri, Apr 24, 2009 at 20:50 , Updated at Sat, Apr 25, 2009 at 17:32 

Source : CNBC-TV18

US lawmakers have introduced a new bill with additional restrictions on H1 B visas. Ganesh Natarajan, Chairman of the National Association of Software and Services Companies (NASSCOM), said if this proposal passes in the current format then it will have a fairly disastrous impact on the IT sector. “But I am hopeful that over the next three-months we will not see this really becoming an Act.” Meanwhile, Commerce Minister Kamal Nath said he is concerned by the contents of H1B visa bill by Senator Durbin and Senator Grassley. "The bill will restrict the ability of Indian IT companies to compete in the US market place. The bill is not in line with US President Barack Obama's stand against protectionism at the G20 meet and not in line with our desire to mainstream development in the Dohanegotiations." Also Read: US's new H1-B proposal anti-trade: NASSCOM  New H1-B bill wants Indian IT cos to hire more in US Here is a verbatim transcript of the exclusive interview with Ganesh Natarajan on CNBC-TV18. Also watch the accompanying video. Q: This is not law as yet and it is only presented for legislation but what kind of an impact does this likely to have? A: If it passes the way it is, obviously it is going to have fairly disastrous impact because this particular piece of legislation is very different from the last time they presented.  This proposal also includes a provision called 50/50, which means that if you employ more than 50% of your people who are visa dependent, then you cannot employ more people with visas. So that’s very problematic. We have spent a lot of time with Senator Grassley and Senator Durbin and we hope that they understand the implications. The implications being that this kind of fly in the face of free trade, it primarily will target Indian companies. So I am very hopeful that over the next three-months we will not see this really becoming an act. Q: If this does go through what does this do to cost structures because this gives on site off shore a completely new meaning especially given the 50-50 provision? A: If a company is employing 5,000 employees in the US on a normal basis, 70% of them could be H1 or L1 Visas, it could literally mean that you will have to find replacement of about 1500 people and its not just the difficulty of finding the replacement but training them the cost involved, there could be a lot of business discontinuity and I personally feel that people will realize it when they go for the debate in the house, it wont get passed atleast certainly the way its being filed. Q: A lot of people in the US might be viewing this as a restrictive trade practice what Indian IT companies are doing in terms of explaining the situation as far as our position is concerned? A: We have had 3-4 meetings we worked with Tech-America which is the local association there, we have had sit down meetings with various people and they understand this. We even mentioned that this will specifically be seen as against India which is not a good thing and they have heard us and I think atleast the indication that we got was okay let this get filed, we will discuss it whether the US legislation discusses it before during and after the event, so that’s why I am not particularly perturbed, it could be disastrous if its passed in the current format but I am pretty sure that it wont.

Builder body opposes hike in cement prices

The builder lobby wants the government to appoint a regulator to oversee the cement industry. This should get the award for the world's smallest violin. "The increase in prices of cement is directly affecting the affordable housing projects.” Now we know why housing is so expensive in Mumbai. Its the cement stupid!!!

The Builders' Association of India (BAI) has strongly opposed the continuing hike in cement prices that is hitting the construction industry hard. They have also demanded setting up of a strict regulatory authority on the lines of SEBI that will ensure that unfair trade practices are not permitted from the cement industry.
The association has called for a total ban on the exports of cement. According to the BAI, the existing Monopolies and Restrictive Trade Practices Commission (MRTPC) does not have penalising clauses to check the malpractices of cement companies. Anand Gupta, secretary, BAI, said that though the government has reduced the excise duty from 12% to 8%, exempted VAT, allowed free import, reduced rail fares, approved the use of fly ash, prices of cement have not reduced. And hence there is a need for a strict law to put a check on these.
While price reductions have been seen all around with a view to stimulate demand, cement manufacturers have resorted to a threefold increase in price (from Rs.15 to Rs. 30 per bag across the country) starting from February 2009. Sunil Mantri, president elect, MCHI, said, "The increase in prices of cement is directly affecting the affordable housing projects.”

Wall Street bankers in rage

NYMag has an excellent article on life after the crash for Wall St bankers. This is one of the best articles I've read on this topic and the comments are even better as they truly reflect the public's mood towards the wailing bankers.

>>

The Wail of the 1%
As the privileged class loses its privileges, a collective moan rises from the canyons of Wall Street.

CNN-IBN reporting on property declines

Reading the report it is still not clear why Pune prices are higher then prime areas of Bangalore. Sadashiv Nagar is Bangalore is one of the most sought out places to live in. How come this price is lower then Koregoan Park in Pune ? Most likely answer would be that the reporting of Pune prices is manipulated due to vested interests. Does anybody think otherwise ?

>>
If you have been unsure about the current state of property market, here are some definite pointers that suggest the rates are going down south. According to the latest reports released by Knight Frank India Pvt Ltd (March 2009), property rates across metro cities have dropped. The fall in rates are especially tangible in overheated pockets, which hitherto had witnessed phenomenal rise, such as Noida and Gurgaon in the National Capital Region; Goregaon, Borivili, Vashi and Mulund in Mumbai and Koramangala in Bangalore.
Here is a link to the pricing.

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