Bharat Bandh, super high inflation and housing prices

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

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

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

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

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

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

Few flats under Rs 50 lakh...

Skyrocketing property prices over the last few months have taken housing beyond the reach of the salaried class, with barely six per cent of the total new housing stock in Mumbai priced under Rs 50 lakh. On the other hand, a staggering 46 per cent of these flats cost over Rs 1 crore.

Figures compiled by real estate research agency Liases Foras show that of the 8,000-odd flats that make up the unsold housing stock, hardly 500 are priced below Rs 50 lakh.

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Analysts say these rates are the result not only of increasing prices and sizes of new flats but also of the heavy loading by developers. Most new flats come with frills such as flowerbeds, viewing decks and amenities like clubhouses and swimming pools that are included while calculating the super-built-up area on which flats are sold. This notional loading is as high as 50 to 80 per cent of actual carpet area.

“In case of one-bedroom flats, builders can’t justify a loading of 80 per cent on a flat with a carpet area of 300 sq ft to a buyer who is already hard-pressed for money. It is easier to cover up the discrepancy between actual size and loading in larger flats which is the reason why most developers today are constructing only two to four bedroom flats,” said Sandeep Sadh, CEO of Mumbai Property Exchange.com. The trend is catching on outside Mumbai, too, with developers like Lodha launching Rs 1-crore-plus flats in Dombivli.

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

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

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

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

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

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

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

Tip from expert: Don’t be greedy

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

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

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

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

Where the rich live ?

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

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

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

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

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

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

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

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

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S.D. Corporation Pvt. Ltd.

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

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

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

Pune : More registrations, less permissions

Pune mirror has an article which is bullish on Pune real estate. 21,000 registrations in 2010. It appears the the trend is strong and barring an unforeseen event of great magnitude, volumes will continue to be healthy. Once inventory vanishes I think prices will start rising. I was just checking with some builders and they are not negotiating. In the past they used to say get the checkbook and they will discount the price, now it appears they are not in a mood to bring their price down. Other buyers, end-users or sellers can post their experiences in this thread.

In the past I have always show my bullish stance for Pune vis-a-vis Mumbai and I think in terms of volume we will see more growth. The other number we need from banks is the NPA (non-performing assets) or loans in default. That could pressurize the market if the trend in that number is rising.


Flat sales show good healt- Link

Here is a win-win situation for the government and builders. After the recession-related slump in property deals, figures at the government registration office here show that, compared to last year, more people are purchasing flats in the city. In fact, the registration department has doubled its revenue as compared to the first quarter of 2009.

In Q1 of 2009, the registration office collected Rs 113.9 crore against registration of 13,033 flats in the city, whereas in 2010, revenue shot up to Rs 294.04 crore - more than double. March is the one of busiest months in the registration office.

This year, 8,900 flats were registered in March. Last year, in the same month, the number was 3,553, which translates into a 2.5 per cent increase. When we spoke to V D Dhansheety, joint district registration officer, he said, “In March, there are a lot of festivals.

On the auspicious day of festivals as well as towards the end of the financial year, people are more eager to buy flats. Therefore, in this month, more registrations happened. In mid-2008, the recession started. After that, the number of flats registered came down considerably.”

Dhansheety added that though banks reduced their home loan interest rates, no one came forward to invest in flats. “In 2009, due to improvement in the market, people started purchasing flats. The number is not a satisfactory one. But, in Q1 of 2010, there was an increase in registration of flats.”

High court quashes FSI increase in Mumbai

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

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

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

From what I hear the builders offer

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

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

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

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

Hindustan times article is below.

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

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

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

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

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

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

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

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

Mumbai setup for redevelopment.

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

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

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

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

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

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

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

More here

Will Property Prices Fall

Moneylife article

Housing prices are again reaching for the skies; demand is stagnating. How much should prices fall for the market to be reasonably valued? When can that come about? Moneylife reporters and analysts offer some answers.

If the current trend continues, it is likely that Mumbai will soon see stagnation in property sales; so will Bengaluru, Delhi-NCR and other metros. Teaser home-loan rates notwithstanding, buyers are showing no eagerness towards committing to their cherished new homes. If prices continue to spiral northwards, will buyers be eventually priced out of the market? Will we witness the bursting of yet another bubble or would that be just a temporary phenomenon?

Pankaj Kapoor believes that the government is actively fuelling a property price bubble in Mumbai. “The Mumbai Metropolitan Region Development Authority (MMRDA), in its own plans, says that increasing the valuation of the land sold is one of the key objectives. It is the government which is creating the bubble,” he asserts.

This is where the problem lies. Inflation is now touching almost 10%, prompting the government to gradually roll back the earlier monetary stimulus measures. Interest rates are expected to go up further. It is worth noting that every 0.5% increase in interest rate reduces home loan eligibility by approximately 7% (by making home loans costlier and also by reducing the eligibility of the lower-income segment).

In this scenario, what should home-seekers be doing? Many of you would be looking out for that cherished new home that you have wanted for so long. Does it make sense to take a plunge at these prices? Not if you are smart. Many buyers have postponed their home purchase decisions in view of the steep appreciation in property rates. Wait a bit for prices to cool down and then make a move for that dream house.

Decoupling, local demand driven economy, green shoots

Here we have the Sensex down another 300 points and it gets blamed on the Euro Zone problems.

Indian stock market brokers have taken the Indian investor for a long ride and articles like this in the Economic Times only vindicate my position that the media in India is very biased and will not report the full truth. They will hype up the good news and play down the bad stories.

There is no independent reporting anymore and everyone including the TV channels are biased. The media knows that if the market sentiment is not propped up, they will lose viewers/readers and hence their sources of advertising revenue.

Investors have to tread very treacherous waters in India so they better be very skeptical of these bozo's in the media.

Every article is written with the intent of enticing investors into the market. This is the Ekam-Sat (Ultimate Truth) of Indian markets. Be very careful with your hard earned money and if you have to invest go with diversified low cost mutual funds with minimal expense ratios. I hate to see people lose sleep and their life's savings and hand them over to these sharks

Economic times reports

MUMBAI: The Indian markets fell on Tuesday, halting its four-day rally as concerns about the European economies turned investors jittery again. During the day, the BSE sensex fell 373 points, or 2.2%, to close at 16,572 while on the NSE, nifty closed at 4,970, down 116 points or 2.3%.

The day's selling was again led by foreign funds while buying by domestic funds cushioned the fall to some extent. BSE data showed FIIs were net sellers at Rs 527 crore while DIIs were net buyers at Rs 211 crore. Dealers said other than global concerns, speculation that the RBI could soon hike interest rates to stem inflation also prompted Dalal Street investors to book profit. The day's slide left investors poorer by Rs 90,000 crore with BSE's market capitalisation now at Rs 59.7 lakh crore.

During the day, most global markets also ended in the red as euro slipped to a four-year low level against the US dollar. Reports on slow growth of Chinese manufacturing sector, and its after effects on the eurozone and the global economy in general, also made the investors jittery.

In the the Asian region, Shanghai fell by nearly 1%, while Nikkei in Japan was down 0.6% and Hang Seng in Hong-Kong closed 0.4% off. In Europe, FTSE in London recovered much of its earlier losses and ended 0.6% down, while in Germany, DAX ended marginally higher and CAC in France ended marginally lower. In early trade, Dow Jones was flat, having recovered most of its earlier losses of nearly 1%.

New Chennai beckons buyers

Maraimalai Nagar on GST is finally realizing its true potential is providing a higher quality of living for Chennai residents. Land is cheap for now in this area which extends upto Mahindra World City and should provide early bird buyers a good entry point for the foreseeable future. Connectivity is good via the GST road and Southern Railways. If I were to place a bet on any semi-urban suburb in India, this would be it. All the development in this area reminds of me Aundh in Pune in the late 90's, or some areas of Bannerghatta road in Bangalore in the early 2000's. A 2400 sq ft plot can be bought for under 15L. Adding another 10L for construction one can construct a very good quality independent house. Just as the development by big bulilders in Bangalore propped up the infrastructure in semi-developed areas, one can easily expect the same to happen in Chennai.

Hindu has an article on Maraimalai Nagar and when the media starts picking up stories like this, it appears that the time has come for this area to become one of the most talked up places in Chennai. Investors and end-users should closely evaluate this destination if they have a time horizon of 3-5 years and beyond. In my opinion plot prices could easily double in the next 5 years.

Here is the Hindu article

India’s Economy Grows 8.6%, Adding Pressure on Rates

As the economy grew by 8.6%, can the FM please mention the growth of black money, a primary cause of the housing bubble. It should be apparent to everybody that growth of the economy should translate to higher profits for all stakeholders including those in the government who are involved in the approval process. All this underhand money props the value of land and apartments thereby pricing out the common man. India is entering an era which the Japanese became very familiar with in the 90's. India is prosperous but Indian's are not. India has 8.6% growth but Maoists are blowing up trains and killing their own countrymen. It just appears that the Maoists don't think they belong to an country called India, and why would they. They have been neglected all thru the 60 years of independence and now the mining mafia is out uproot them of their own land. There couldn't be a better movie then Avatar to illustrate the plight of the Maoists indigenous people and most probably the Maoists wouldn't even know that someone made a few billion dollars of their cause.

Interestingly we now have Jones Meghraj and others from the real estate business who are saying that the Lodha's deal in Wadala is unsustainable. A case of the pot calling the kettle black. Nobody likes their territory infringed upon and it appears that Lodha's have entered Wadala causing grief to the existing projects., some of which could belong to their clients.

May 31 (Bloomberg) -- India’s economic growth accelerated, adding pressure on the central bank to raise interest rates even as Europe’s sovereign-debt crunch threatens the global recovery.

Gross domestic product rose 8.6 percent in the three months ended March 31 from a year earlier after a revised 6.5 percent gain in the previous quarter, the statistics office said in a statement in New Delhi today. That matched the median estimate in a Bloomberg News survey of 22 economists.

India and China, the world’s fastest-growing major economies, are weighing the risk of Europe’s debt crisis reducing demand in the market that accounts for a fifth of their exports. For India, the room to pause on monetary tightening is limited because its benchmark inflation rate is more than three times that in China.

“The biggest threat in India is from inflation and the risk that the economy overheats,” Kevin Grice, an economist at Capital Economics Ltd. in London, said before the report. “This, in the end, would force the Reserve Bank of India to aggressively hike policy rates, which would inevitably bring far lower growth later on.”

India’s central bank said May 19 that it will raise rates only cautiously even though they are “out of line” with the key wholesale-price inflation rate, running at 9.59 percent. In comparison, China’s $4.3 trillion economy expanded 11.9 percent in the first quarter and consumer prices rose 2.8 percent in April from a year earlier

More here

Investors end up holding the bag in high-end apartments

Mint has an article on how the builders get their initial funding from select investors who are given apartments at a discount to the market price. The investors then sell off the flats to the end-users at the going market rate once the project nears completion.

While this seems to be a legitimate way for businesses to raise funds, these investors who buying the highly priced apartments will stuck with these prohibitively expensive properties as the only buyers who could afford these apartments would the investors themselves. US/UK based NRI's cannot afford buying anything in Mumbai. The Dubai investor is reeling under the crisis in the Gulf leaving nobody but the investors themselves as the only folks with black money and the affordability. Bank's these days are very careful doling out loans and any loan over 50L attracts a lot of scrutiny.

Now imagine the investment decision made by a smart businessman in Mumbai with 2 crores of discretionary investment cash. Will he directly contact the builder and buy in it as a investor or will he be so stupid enough to buy from another investor by paying an extra 30% ?

Property prices heading north on pre-sales to investors

Investors have bought at least 80% of the project, fetching Unitech around Rs315 crore that it can use for construction and other needs

Bangalore: Unitech Ltd’s intense pre-sales pitch in October to investors for a part of its residential project in upscale Worli, Mumbai, is paying off in more ways than one—the company has been able to collect a tidy sum while the price benchmark has been pushed higher.

Investors have bought at least 80% of the project, fetching Unitech around Rs315 crore that it can use for construction and other needs. Around one-fifth of them have already resold their purchases at a profit, pushing up prices from Rs12,000-12,500 a sq. ft during the pre-sales to Rs19,000-20,000 a sq ft., the likely price tag for actual home buyers when Unitech opens the rest of the project for them later this year.

A similarly brisk rally is pushing up prices in several other projects in Mumbai and Delhi—a trend last seen in 2005-07, just before the bubble burst as liquidity dried up amid the financial crisis.

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Mumbai, Delhi realty rates on way down

Real estate prices for new bookings in Mumbai and NCR Delhi are expected to be 10 to 20 per cent lower than prevailing market rates feel analysts as developers are still bogged down by unsold inventory in projects in these areas.

In Virar prices for new launches are likely to come down to Rs 2,200 from the existing Rs 2,800, in Panvel from Rs 5,000 a sq ft to Rs 4,000 for new launches and Andheri West to Rs 7,500 per sq ft from Rs 11,000 in existing project — perhaps the sharpest cut — according to the Religare report.

Developers say that there is nothing unusual about price cuts for new projects.

“As a company policy we sell the first 20 per cent of the apartments at cheaper rates and as we go on constructing prices go up,” said Hemant Shah, CMD, Akruti City, a Mumbai-based realty company. “Otherwise we may have to pay out heavy interests to banks for borrowed funds.”

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Beijing resident throws shoe at a property developer

Beijing resident throws a shoe at a property developer in his protest against unrealistic housing prices in China. It won't be too long before many Indian's start doing this at property exhibitions. The Iraqi jouranlist who threw the first shoe on George Bush was followed by another journalist who threw a shoe at the finance minister P. Chidambaram. The Chinese protestor received applause from the crowd so the common pain point is felt by a lot of people in the audience

Nariman point soon to be deserted

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

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

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

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

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

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

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

More here

The foul play in super-built up constructions

Article Link

Developers have drastically raised the super built-up area of the new properties. From 50% super built-up area, it has almost reached 100%,” said Pankaj Kapoor, founder, Liases Foras.

However, with the increase in super-built up area, the cost of properties has also doubled over a period of time. Consumers are getting lesser space at a higher cost. For example, if an apartment of 1,000 sq ft carpet area had a saleable area of 1,400 sq ft in Kandivali (a Mumbai suburb) in 2005, at that time, the apartment was priced at Rs2,500 per sq ft. The total cost came to Rs25 lakh. But now, an apartment of 1,000 sq ft is quoted as 2,000 sq ft saleable area. Taking the current cost into consideration, it is priced around Rs8,000 per sq ft. The total cost of the apartment has jumped to Rs1.60 crore.

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

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

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

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

India weighs capital controls with rupee on rise

Economic times reports on the RBI's efforts to curb the inflow of hot money into India. Instead of adding a tax to the inflow, the RBI should tax outflows so short term speculators think twice before speculating the currency. The govt. is pandering to the exports led IT lobby which will see rupee based earnings shrink as the rupee appreciates. RBI is trying to generate some fear among the investment community however given its inept record in overseeing the IPL Cayman islands/Marutius mess its credibility is doubtful when it is given the task of policing inflows into capital markets.

If foreign money from Caymans ended up in IPL, it would not be surprising if thousands of crores found its way in real estate deals. Anyone from Goa can tell you how much Russian money has influenced the rise of real estate there. Showing fake teeth to the public is what govt officials can do. The general population has to deal with the ineptness of its own elected and selected officials. Just quoting fancy Yale professors to solve India's problems is like applying balm for treating coronary heat disease. Sigh..

India's government is weighing capital controls with the rupee on the rise amid fears of "hot money" flowing into the country as investors pile back into Indian assets.

Unlike fellow emerging market giant China, India allows its currency to float freely and the central bank has warned of the dangers of "sharp and volatile" exchange rate movements that could hurt India's economy.

With the rupee riding at 18-month highs against the dollar, one idea Reserve Bank of India Governor Duvvuri Subbarao is airing to curb sudden big movements in the currency's value is a tax on foreign exchange transactions, known as a Tobin tax, similar to one Brazil introduced last year.

"Depending on what flows come in, we would employ measures, including if necessary something like the Tobin tax," Subbarao said last week, referring to a proposal first aired in the 1970s by Yale economics professor James Tobin.

Sales drop 50% as realty prices get unreal again in Mumbai

DNA Report here

Mumbai: City developers, who witnessed a revival of sales at hefty prices in the past six months, are now up against buyer resistance. With demand dropping like a stone, the sale of residential flats across segments has nosedived, property experts said. The drop is as high as 50% in some segments.

Sandeep Sadh of Mumbai Property Exchange says it is a weird situation. “In South Mumbai, where there are no new constructions, people are deferring buying due to high prices even in resale flats. In contrast, despite having a large number of flats available in the suburbs, buyers are unable to buy due to unrealistically high prices.’’ Sadh says his clients are sitting on the fence and have deferred buying till after August when prices may just become a bit realistic.

Venkatesh Iyer of Siddhivinayak Real Estate Consultants says the number of inquiries he gets seldom translates into actual sales. “People’s budgets have become constrained, as prices have increased exorbitantly. In Chembur, prices have jumped from Rs8,000 per sq ft to Rs10,000 per sq ft, to almost Rs14,000 in six months. High prices have affected the resale market the most, as owners find the next new flat to be more expensive,’’ said Iyer.

A negative fallout of recent trends is that developers have increased the carpet area-to-built-up area difference to almost 50%. “This is a dangerous trend. There is no clarity on what rate developers have calculated the balcony area, terrace or storage room. Baring a few places, there is no mention of it in agreement papers. It is time the government brings clarity to the issue,’’ said Vakil.

JLLM touting growth in IT industry