UPA govt impact on real estate.

Enough said. The sensex rocketed by 10% and is halted. Is the bear phase over ??

BBMP issues warning letters to DLF

If this is happening to DLF, it must be happening to other projects in Bangalore as well. I heard that another project, Mantri Magnolia has been cancelled as well and Mantri is asking buyers to apply for refunds. So much for projects pending approval. The good old days for the builders are over. Deccan Chronicle reports

The country’s biggest realty company, DLF, has been thrust into two unexpected battles. The income-tax authorities have slapped a demand of Rs 400 crore on it. And the Bangalore civic body has issued a public warning that a large DLF project in the city does not have its sanction.

The tax demand, which will be appealed against by the company, arose out of a special audit of DLF’s accounts for 2005-06. A special auditor, appointed by the income-tax department for the purpose, came to the conclusion that the company had earned about Rs 1,200 crore over and above what it had declared in its returns.

The company itself notified the Bombay Stock Exchange about the new tax demand. Ramesh Sanka, group CFO, in a signed statement to the exchange, said, “On May 6, 2009, the assessing officer, pursuant to the audit and assessment proceeding, has issued an assessment order adding…. most of the amount suggested by the special audit report.”

Sanka, speaking to Financial Chronicle, said the company would contest the claim within 90 days, as provided for in the law.

In the statement to BSE, later reiterated by Sanka to FC, DLF said that the root of the extra tax demand lay in the change in accounting method that the company made in 2005-06.

The new method, prescribed by the Institute of Chartered Accountants of India, requires real estate developers and construction companies to switch over from the “conveyancing method” to the “percentage of completion method” (PoCM) for computing revenues and profits.

Sanka said that the company had used the PoCM method in the following years also.

More bad news awaited the company in Bangalore. The Bruhat Bengaluru Mahanagara Palike (BBMP) took out advertisements in newspapers on Thursday, saying the DLF had not obtained its approval or sanction for the Westend Heights project in the city.
Asserting that it was the only competent authority to sanction building plans in the city, BBMP said, “Prospective buyers are advised against purchase of such illegal apartments which are liable for all lawful action that will be initiated, including demolition.”
The BBMP action was an obvious response to advertisements that DLF took out three weeks ago, announcing the sale of apartments in the project, on Bannerghatta Road, at Rs 1,850 per sq ft.
DLF’s homes head for Karnataka, Anantha Naarayanan, told FC that his company had already pre-sold 600 of the 1,000 apartments planned in the 27-acre project for which the outlay would be Rs 400 crore. Construction is yet to begin.
In the advertisement, DLF claimed to have obtained the approval of the Bangalore Development Authority (BDA) for four floors. BBMP officials said the DLF advertisement showed an elevation of 18 floors.
S Subramanya, BBMP commissioner, told FC “it’s clear that people are being taken for a ride”.
BBMP warned that the owners of Westend Heights apartments would not be given occupancy certificates.

Subramanya said he expected DLF to cover BBMP’s advertisement costs and apply for sanction in the proper route.

In a statement DLF claimed that it obtained approvals for the developmental plan of the project through its subsidiary, Annabel Builders & Developers, for S+4 level from BDA. “Construction on the project has not yet commenced and will begin only after obtaining detailed plan approvals from BBMP and other relevant clearances…. The allegations of illegality made in BBMP… are incorrect.”

One of DLF’s customers, Pradeep Jain, said, “I had booked a flat on the sixth floor in. DLF then clearly said that it would get the approval for four floors by May and that for the sixth floor by November. Today when I called the company, it said it had obtained clearance for four floors and would mail me the clearance certificate.”

Impact of Satyam layoffs on real estate

We all know that Satyam cooked books. They had over 47,000  employees in various locations, primarily in Hyderabad. There is news that maybe 10,000 would be let go. The question is where will they find the "high" paying jobs. Everyone knows that service companies don't pay as much as MNC's and Satyam is one of the worst paymasters in this lot. I know several satyam folks who quit in US well before the scam since they were underpaid and overworked to the point of no return. Hyderabad has seen a boom which will rival no other city since AP folks are heavily  invested in lands, plots and apartments. The common acres to plots conversion technique is heavily ingrained in the local population and I was surprised to see many IT people buying acres on outskirts of Hyderabad just on speculation of the new airport in Shamsabad. Now with the airport hype dying down, and the disappearing  act of a regular paycheck, where does it leave Hyderabad. Maytas is another story and I know several people who have booked and now stuck with no exit. These folks are bleeding pre-EMI interest and will do so for years. It goes to show the due-diligence done by banks on properties in nil.

Here is a DNA article on Satyam layoffs.

Layoffs at Satyam set to begin with BPO unit

Hyderabad: Tech Mahindra, after gaining control over the troubled IT major Satyam Computer Services, seems to be getting straight to business.

The company intends to downsize operations beginning with the business process outsourcing arm Satyam BPO (formerly called Nipuna).

Sources in the company saidthe layoffs will begin with the support department. "The billable staff is not going to be disturbed now. It is the support staff that is likely to exit," the source said.

Satyam BPO has over 3,000 associates and the ratio of billable staff and the support staff is about 35:1. "The target is to make it 80:1. This means a major shake-up in the BPO arm," the source said.

About 60% of the support staff face the axe.

Tech Mahindra has decided to use Satyam's existing marketing, HR and other support functionaries for the BPO too instead of having a separate set-up.

Sources among employees said that there are about 80 people in the HR department alone and about 60 of them are likely to go.

"Particularly the support functions in both Satyam BPO and Satyam are obscenely overstaffed. Any effort to resurrect Satyam would happen only by rationalising these functions," the source said.

After small car, now a low-cost home from Tatas

After the launch of the world's cheapest car ‑ the Nano, the Tata Group is embarking on yet another low-cost dream. Tata Housing, a subsidiary of Tata Sons, has launched its low-cost housing initiative, with homes costing anywhere between Rs 3.9 lakh to Rs 6.7 lakh. CNBC-TV18's Priyanka Ghosh reports.

Tata Housing, a subsidiary of Tata Sons, today launched the project that will have 1,200 apartments under the Shubh Griha brand. To be built on a 63-acre plot in Boisar — north of Mumbai — the price range for the apartments would be between Rs 3.9 lakh and Rs 6.7 lakh. The project, whose timeline is about two years, is expected to clock a turnover of about Rs 100 crore, the company said. It is also learnt that the township will also have higher-priced homes above the Rs 3.9–Rs 6.7 lakh bracket. These may be in the price bracket of Rs 10 lakh and Rs 15 lakh.

The Tata Housing group also plans to take its value-home product, Shubh Griha, to other cities like Delhi and Bangalore this year and the company is looking for land parcels on the periphery of these cities.

When asked how the company would be able to keep costs low, it said their designs were innovative and that it had ‘some trade secrets’. Also, the Tata Housing group does not entirely own the land that it is building the township on. Here’s the deal: the group has tied up with the land owner and will work on a revenue-sharing model.

The group has struck an alliance with the State Bank of India and the bookings for the first thousand apartments started on Saturday and closes in about two weeks. After that, there will be an allotment through a lottery system.

Kiyosaki and Mahindra World City

Here is a good article I found on yahoo on buying value investments. Its a perfect article to illustrate why Chennai represents good value over Mumbai to live and make a career without take undue risk with housing investments. If Tata and Mahindra can find value, so can the middle class individual.

The other day a friend of mine approached me excitedly, saying, "I found the house of my dreams. It's in foreclosure and the bank will sell it to me for a great price."
"How good is the price?" I asked.
"Just before the real estate market crashed, the seller was asking $780,000 for the property. Today, I can buy it from the bank for $215,000. What do you think?" she asked.
"How would I know?" I replied. "All you've given me is the price."
"Yes!" she squealed. "Now my husband and I can afford it."
"Only cheap people buy on price," I replied. "Just because something is cheap doesn't mean it's worth the cost."

I then explained to her one of my most basic money principles: I buy value. I will pay more for value. If I don't like the price, I simply pass. If the seller wants to sell, he will come back with a better price. I let him tell me what he will accept. I know some people love to haggle; personally, I don't. If a person wants to sell, they will sell. If I feel what I am buying is of value, I'll pay the price. Value rather than price has made me rich.

Here is the Mahindra presentation on MWC. Land near this area is between 350-700 Rs for plots. In the next five years, one can easily expect this area to boom. the neighboring area of Singerperumail Coil is booming with houses, and so is Marmalai Nagar.

Chennai Facts

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Sensex and real estate in India

With the sharp rally in the market, people have been questioning the impact of the recent uptrend to real estate prices in India. Some projections put the Sensex at 15000, some others say that this is a bear market rally and will fizzle out as the results get announced. There is another article I read which said almost more then half billion dollars of FII money went into the market in the past few weeks. This must have wiped out bunch of shorts, most local businessmen who shorted the sensex between 9k and 10.5k thinking the sensex will go back to 7.5k, the lowest level seen in the past 4 years. However the FII swooped upon the sensex in huge numbers and have wiped the bears out of the system. Goes to show the perils of investing in futures and options. 

If you read the first post in this blog it was made in Dec 2005, when the sensex was at 9057 and India was shining brightly. Now it is 3.5 years and the Sensex is 13,000 having visited 21,000 on the upside and 7500 on the downside. 

If one has to co-relate the market, even though any co-relation can be atmost be deemed co-incidental,  prices today are down 25-50% of the peak made in Jan 2008. Loan rates were lowest in 2003, when I remember Standard Chartered offering 8 % rates when I was in Bangalore. At that time, I could get a 3 bed for 30L the same today is at 80L. However in Bangalore one can easily find a 3 bed for 35-50L in some tech areas, same is case for Pune, Chennai, Hyderabad.

In Mumbai it is impossible to find any such deals except in far flung suburbs where one can break his back in the train commute. 

The question to ask is why should real estate be dependent on the stock market ? Real estate can be more co-related to the economic well being of a society, job security and availability of cheap loans. Expecting stock market profits to end up in real estate is at best fool hardy. I had several friends who bought 2nd houses on  loans in 2008 with the hope of paying them down with their stock market investments. With the wipeout in the markets, they are remorseful and regretting the whole episode of short term loss making trades. Now they live hand to mouth paying off their montly EMI's with their current salaries. With prices being down, they are in negative equity and bleeding every month. They are cut twice, once by the drop of their real estate values, 2nd by the interest they pay the banks and the biggest cut is the slicing of their portfolios by 70%. 

Please don't trade short term with the aim of investing in real estate. If you are investing in the market, it should be for a period of 4-5 years. If you buy real estate, buy the primary residence at minimum 30% discounts to the current price with a 40% downpayment. The cost of good night's sleep is priceless. Never compromise on this ever.

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.

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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 ?

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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."