Friday, 29 February 2008
Realty prices in suburban Pune on a downslide
DNA reports
Bargain hard to save up to 10 per cent, say brokers
After witnessing an exponential rise over the last two years, real estate prices in Pune have come down by 8-10 per cent — Rs 200-400 per square feet — with prospective buyers prepared to wait because of high interest rates, if property agents are to
be believed.
Most real estate agents admit that there is a shortage of demand. “Even second sales are not getting the expected price and owners and builders have been found negotiating hard,” says Anil Kamble, a property dealer in Camp.
According to brokers, the decline is particularly seen in the fringe areas and suburbs, which have seen an increase in construction activity in recent years. Property prices in the main city are, however, still high, they say.
“In areas like Kharadi, the property prices vary from Rs3,500 to Rs5 000 per square feet and can be brought down by another Rs300-400 per square feet by bargaining hard,” says a member of the Pune real estate association. “Similarly, in areas like Pimple Nilakh, where the rates are Rs3,000 and upwards, bargaining can save prospective buyers up to Rs250 per square feet,” he said.
Senior IT professional Anuj Pradhan, who has been trying to sell his 3BHK flat at Wanowrie, was shocked to see a reduced price tag put on his property by his real
estate agent.
“Four months ago, the broker could have fetched me Rs60 lakh, but now he says buyers are not willing to pay more than Rs54 lakh,” Pradhan says.
“The buyer response,” according to Rajesh Vaswani, a property agent in Camp, “is now less than enthusiastic.” Builders, however, are hesitant to admit the fall, he says.
Sachin Kadam, a member of the Real Estate Agents’ Association of Pune, says property rates went up by more than 60-70% in the last two years in the heart of the city.
“But of late, the prices have started to stabilise. Buyers can now bargain with builders and pay a lower price,” he says.
Because of high interest rates on home loans, prospective buyers, mostly from the middle class, have decided to wait and watch, he says.
Ranjit Tiwari, another real estate agent, however, believes that the dip in prices
is temporary and will not last more than a couple of months.
“With the kind of growth the city is witnessing, real estate can’t lag behind,” he adds.
Bargain hard to save up to 10 per cent, say brokers
After witnessing an exponential rise over the last two years, real estate prices in Pune have come down by 8-10 per cent — Rs 200-400 per square feet — with prospective buyers prepared to wait because of high interest rates, if property agents are to
be believed.
Most real estate agents admit that there is a shortage of demand. “Even second sales are not getting the expected price and owners and builders have been found negotiating hard,” says Anil Kamble, a property dealer in Camp.
According to brokers, the decline is particularly seen in the fringe areas and suburbs, which have seen an increase in construction activity in recent years. Property prices in the main city are, however, still high, they say.
“In areas like Kharadi, the property prices vary from Rs3,500 to Rs5 000 per square feet and can be brought down by another Rs300-400 per square feet by bargaining hard,” says a member of the Pune real estate association. “Similarly, in areas like Pimple Nilakh, where the rates are Rs3,000 and upwards, bargaining can save prospective buyers up to Rs250 per square feet,” he said.
Senior IT professional Anuj Pradhan, who has been trying to sell his 3BHK flat at Wanowrie, was shocked to see a reduced price tag put on his property by his real
estate agent.
“Four months ago, the broker could have fetched me Rs60 lakh, but now he says buyers are not willing to pay more than Rs54 lakh,” Pradhan says.
“The buyer response,” according to Rajesh Vaswani, a property agent in Camp, “is now less than enthusiastic.” Builders, however, are hesitant to admit the fall, he says.
Sachin Kadam, a member of the Real Estate Agents’ Association of Pune, says property rates went up by more than 60-70% in the last two years in the heart of the city.
“But of late, the prices have started to stabilise. Buyers can now bargain with builders and pay a lower price,” he says.
Because of high interest rates on home loans, prospective buyers, mostly from the middle class, have decided to wait and watch, he says.
Ranjit Tiwari, another real estate agent, however, believes that the dip in prices
is temporary and will not last more than a couple of months.
“With the kind of growth the city is witnessing, real estate can’t lag behind,” he adds.
Wednesday, 27 February 2008
FSI increase on cards in Mumbai
As per the latest news articles it looks like the state government will be increasing FSI uniformly to 2 across the board. As per current rules, Mumbai city has an FSI of 1.33 and suburbs 1. SRA schemes have an FSI of 2.25 and Dharavi redevelopment 4. Most high rises are built in the suburbs using the TDR (transfer of development rights) certificates. The price quoted for them thru legal channels is 4500 per sq/ft. If one has to factor in the cash component, the price would shoot up to 7k-8k. With FSI being normalized at 2, it is possible to construct twice as much on the same land as before. Prices can drop here if this is implemented.
I found this excellent document on FSI by Alain Bertaud. He makes no bones of the fact that the BMC uses the TDR certificates in a monopolist manner thereby corrupting the system to a level where mumbai citizens have to live on 2.9 meters of land. Its an eyeopening document and it worth a second read. Quoting from the document.
Which factors are responsible for this situation? What is so exceptional about Mumbai?
The very low consumption of floor space coupled with very high real estate prices would suggest that a number of supply bottlenecks might be responsible. By comparing Mumbai to other metropolis in Asia it appears that indeed 4 factors are exceptional and contribute to the very low supply of floor space:
1. An exceptional topography that reduces the amount of developable land
2. A draconian and ill-conceived land use policy restricting the area of floor space which can be built on the little land available;
3. Muddled property rights preventing households and firms to freely trade land and floor space as a commodity;
4. A failure to develop major primary infrastructure networks, which prevents the city to overcome its topographical constraint. In turn, the weakness of the infrastructure network is used to justify the restrictive land use policy
To give an order of magnitude to these figures consider the following: Shanghai in 1984, recovering from more than 10 years of Cultural Revolution, had a floor area per person of 3.65 m2. Shanghai’ Municipality, at the time, considered that rapidly increasing floor consumption was to be the city’s first priority. In 2003, the average floor space consumption in Shanghai was 13.1 m2/person. This was achieved in part by drastically increasing the FSI to allowredevelopment of obsolete buildings with relocation largely in situ.
http://alain-bertaud.com/AB_Files/AB_Mumbai_FSI_conundrum.pdf
Another article on Time discusses Dharavi.
http://www.time.com/time/business/article/0,8599,1711330-2,00.html
I found this excellent document on FSI by Alain Bertaud. He makes no bones of the fact that the BMC uses the TDR certificates in a monopolist manner thereby corrupting the system to a level where mumbai citizens have to live on 2.9 meters of land. Its an eyeopening document and it worth a second read. Quoting from the document.
Which factors are responsible for this situation? What is so exceptional about Mumbai?
The very low consumption of floor space coupled with very high real estate prices would suggest that a number of supply bottlenecks might be responsible. By comparing Mumbai to other metropolis in Asia it appears that indeed 4 factors are exceptional and contribute to the very low supply of floor space:
1. An exceptional topography that reduces the amount of developable land
2. A draconian and ill-conceived land use policy restricting the area of floor space which can be built on the little land available;
3. Muddled property rights preventing households and firms to freely trade land and floor space as a commodity;
4. A failure to develop major primary infrastructure networks, which prevents the city to overcome its topographical constraint. In turn, the weakness of the infrastructure network is used to justify the restrictive land use policy
To give an order of magnitude to these figures consider the following: Shanghai in 1984, recovering from more than 10 years of Cultural Revolution, had a floor area per person of 3.65 m2. Shanghai’ Municipality, at the time, considered that rapidly increasing floor consumption was to be the city’s first priority. In 2003, the average floor space consumption in Shanghai was 13.1 m2/person. This was achieved in part by drastically increasing the FSI to allowredevelopment of obsolete buildings with relocation largely in situ.
http://alain-bertaud.com/AB_Files/AB_Mumbai_FSI_conundrum.pdf
Another article on Time discusses Dharavi.
http://www.time.com/time/business/article/0,8599,1711330-2,00.html
Tuesday, 26 February 2008
End of the dream for Devenhalli real estate
Without water, electricity and roads all dreams can turn into nightmares. It will be interesting to see what the farmers do with the crores they have raked in from the sale of their "hot property". I know a friends domestic help who owned 1 acre of barren farmland in Devanhalli and they sold out in mid 2007, only to buy a site in RT nagar. Talk about jackpot.
TROUBLE AHEAD: Without guaranteed water and electricity supply, builders and developers in Devanahalli are in a fix
Builders have bought acres and acres around the new airport, but aren’t building.
Gated communities, integrated townships, villas and high-end-apartments are all on the cards, but are unlikely to see the light of day in the near future.
Developers bought agricultural land paying fancy prices up to Rs 1,300 a square foot hoping to cash in on the demand once the airport came up. But the harsh reality is that their hands are tied by many factors.
No clearances
The government has yet to release a development plan for the Devanahalli area. Without such a plan, approvals are impossible to come by.
Government agencies such as the pollution control, water and electricity boards are not ready to clear projects as they are in no position to provide service. Farmers no longer own land in the neighbourhood, and housing layouts can’t come up because of a lack of basic amenities.
Water woes
“Water is a major problem,” said Capt Raja Rao, former chief engineer and water resources expert. “The water board can’t supply much, and ground water in the region is already overexploited.”
A developer said the situation had pushed him to pessimism. “Even if the government allows us to dig borewells, where is the water? We have dug up to 900 feet, but it’s no use. We are in a real crisis.”
Premium builders like Shobha, Mantri, and Prestige have lined up mega projects, but nothing is moving. Only GMR has made a leap of faith and built its corporate office in Devanahalli.
Re-cycling of drainage water is one remedy, according to the BWSSB. But experts such as Raja Rao and A N Yellappa Reddy say it is contaminated beyond permissible limits.
Pay up for power
The power situation isn’t much better. A Bescom source said, “It is not as critical as the water problem, but we can’t assure uninterrupted power supply as the IT and BT industries demand. We can try to provide power at high rates, but industrial and domestic consumers may not be able to afford it.”
No IT hub
The software industry is reluctant to go to Devanahalli. No IT company is building an office in the region. Some plan townships for their employees but are demanding a satellite town ring road (STRR) that connects Dodballapur, Devanahalli, Hoskote, Ramanagar, and Magadi. But that is a costly wish.
“STRR calls for massive investment,” said Sudhir Krishna, BMRDA commissioner. “It is estimated to cost a whopping Rs 3,000 crore, or Rs 10 crore a km.”
Though the project has been planned as a public-private venture, no investor has come forward with the money. “With no IT company in the vicinity, our hope for real estate growth is receding. I am afraid we are heading for big trouble,” a developer said.
Some hope
However, the larger developer community is not so despairing. “With older airports running out of space, Bangalore is going to be a major aviation hub. And that will kick-start growth,” said K Sriram, chairman, Builders Association of India, Karnataka chapter.
TROUBLE AHEAD: Without guaranteed water and electricity supply, builders and developers in Devanahalli are in a fix
Builders have bought acres and acres around the new airport, but aren’t building.
Gated communities, integrated townships, villas and high-end-apartments are all on the cards, but are unlikely to see the light of day in the near future.
Developers bought agricultural land paying fancy prices up to Rs 1,300 a square foot hoping to cash in on the demand once the airport came up. But the harsh reality is that their hands are tied by many factors.
No clearances
The government has yet to release a development plan for the Devanahalli area. Without such a plan, approvals are impossible to come by.
Government agencies such as the pollution control, water and electricity boards are not ready to clear projects as they are in no position to provide service. Farmers no longer own land in the neighbourhood, and housing layouts can’t come up because of a lack of basic amenities.
Water woes
“Water is a major problem,” said Capt Raja Rao, former chief engineer and water resources expert. “The water board can’t supply much, and ground water in the region is already overexploited.”
A developer said the situation had pushed him to pessimism. “Even if the government allows us to dig borewells, where is the water? We have dug up to 900 feet, but it’s no use. We are in a real crisis.”
Premium builders like Shobha, Mantri, and Prestige have lined up mega projects, but nothing is moving. Only GMR has made a leap of faith and built its corporate office in Devanahalli.
Re-cycling of drainage water is one remedy, according to the BWSSB. But experts such as Raja Rao and A N Yellappa Reddy say it is contaminated beyond permissible limits.
Pay up for power
The power situation isn’t much better. A Bescom source said, “It is not as critical as the water problem, but we can’t assure uninterrupted power supply as the IT and BT industries demand. We can try to provide power at high rates, but industrial and domestic consumers may not be able to afford it.”
No IT hub
The software industry is reluctant to go to Devanahalli. No IT company is building an office in the region. Some plan townships for their employees but are demanding a satellite town ring road (STRR) that connects Dodballapur, Devanahalli, Hoskote, Ramanagar, and Magadi. But that is a costly wish.
“STRR calls for massive investment,” said Sudhir Krishna, BMRDA commissioner. “It is estimated to cost a whopping Rs 3,000 crore, or Rs 10 crore a km.”
Though the project has been planned as a public-private venture, no investor has come forward with the money. “With no IT company in the vicinity, our hope for real estate growth is receding. I am afraid we are heading for big trouble,” a developer said.
Some hope
However, the larger developer community is not so despairing. “With older airports running out of space, Bangalore is going to be a major aviation hub. And that will kick-start growth,” said K Sriram, chairman, Builders Association of India, Karnataka chapter.
Saturday, 23 February 2008
Roubini , Peter Schiff , Marc Faber, are calling for financial meltdowns.
Roubini is calling for a severe meltdown, Faber see's India's sensex at 12k and Peter Schiff sees the dollar tanking below 1.5 to the Euro. I remember Faber's advice in nov 2005 where he said property investment is a better option then investing in Indian stocks due to high volatility exhibited by stocks. I actually took his advice and liquidated my MF's and bought few properties. Needless to say the decision was pretty good one since I didnt have to suffer the heartburn on May 2006 and then the recent whipsaw market of late 2007 and early 2008 and generated excess returns of MF"s since I had leveraged the credit market. I was primarily interested in Mumbai initially and I feel the prices then and now are still over priced relative to other cities, bar delhi. I think we will see pronounced correction in Mumbai since a lot of the stock money has evaporated and still more to come if Dr Faber's prediction comes true. To someone going short on the Indian Stock market, I think this coudn't be a more opportune time
Anatomy of a financial meltdown
By Nouriel Roubini
NEW YORK: A vicious circle is currently underway in the United States, and its reach could broaden to the global economy. America’s financial crisis has triggered a severe credit crunch that is making the US recession worse, while the deepening recession is leading to larger losses in financial markets, thus undermining the wider economy. There is now a serious risk of a systemic meltdown in US financial markets as huge credit and asset bubbles collapse.
The problem is no longer merely sub-prime mortgages, but rather a “sub-prime” financial system. The housing recession – the worst in US history and worsening every day – will eventually see house prices fall by more than 20 percent, with millions of Americans losing their homes. Delinquencies, defaults, and foreclosures are now spreading from sub-prime to near-prime and prime mortgages. Thus, total losses on mortgage-related instruments – include exotic credit derivatives such as collateralized debt obligations (CDOs) – will add up to more than $400 billion.
Moreover, commercial real estate is beginning to follow the downward trend in residential real estate. After all, who wants to build offices, stores, and shopping centers in the empty ghost towns that litter the American West?
In addition to the downturn in real estate, a broader bubble in consumer credit is now collapsing: as the US economy slips into recession, defaults on credit cards, auto loans, and student loans will increase sharply. US consumers are shopped-out, savings-less, and debt-burdened. With private consumption representing more than 70 percent of aggregate US demand, cutbacks in household spending will deepen the recession.
We can also add to these financial risks the massive problems of bond insurers that guaranteed many of the risky securitization products such as CDOs. A very likely downgrade of these insurers’ credit ratings will force banks and financial institutions that hold these risky assets to write them down, adding another $150 billion to the financial system’s mounting losses.
Then there is the exposure of banks and other financial institutions to rising losses on loans that financed reckless leveraged buy-outs (LBOs). With a worsening recession, many LBOs that were loaded with too much debt and not enough equity will fail as firms with lower profits or higher losses become unable to service their loans.
Given all this, the recession will lead to a sharp increase in corporate defaults, which had been very low over the last two years, averaging 0.6 percent per year, compared to an historic average of 3.8 percent. During a typical recession, the default rate among corporations may rise to 10-15 percent, threatening massive losses for those holding risky corporate bonds.
As a result, the market for credit default swaps (CDS) – where protection against corporate defaults is bought and sold – may also experience massive losses. In that case, there will also be a serious risk that some firms that sold protection will go bankrupt, triggering further losses for buyers of protection when their counterparties cannot pay.
On top of all this, there is a shadow financial system of non-bank financial institutions that, like banks, borrow short and liquid and lend to or invest in longer-term and illiquid assets. This shadow system includes structured investment vehicles (SIVs), conduits, money market funds, hedge funds, and investment banks.
Like banks, all these financial institutions are subject to liquidity or rollover risk – the risk of going belly up if their creditors do not rollover their short-term credit lines. But, unlike banks, they do not have the safety net implied by central banks’ role as lender of last resort.
Now that a recession is underway, US and global stock markets are beginning to fall: in a typical US recession, the S&P 500 index falls by an average of 28 percent as corporate revenues and profits sink. Losses in stock markets have a double effect: they reduce households’ wealth and lead them to spend less; and they cause massive losses to investors who borrowed to invest in stock, thus triggering margin calls and asset fire sales.
There is thus a broader risk that many leveraged investors in both equity and credit markets will be forced to sell illiquid assets in illiquid markets, leading to a cascading fall in asset prices to below their fundamental values. The ensuing losses will aggravate the financial turmoil and economic contraction.
Indeed, adding up all these losses in financial markets, the sum will hit a staggering $1 trillion. Tighter credit rationing will then further hamper the ability of households and firms to borrow, spend, invest, and sustain economic growth. The risk that a systemic financial crisis will drive a more pronounced US and global recession has quickly gone from being a theoretical possibility to becoming an increasingly plausible scenario.
Anatomy of a financial meltdown
By Nouriel Roubini
NEW YORK: A vicious circle is currently underway in the United States, and its reach could broaden to the global economy. America’s financial crisis has triggered a severe credit crunch that is making the US recession worse, while the deepening recession is leading to larger losses in financial markets, thus undermining the wider economy. There is now a serious risk of a systemic meltdown in US financial markets as huge credit and asset bubbles collapse.
The problem is no longer merely sub-prime mortgages, but rather a “sub-prime” financial system. The housing recession – the worst in US history and worsening every day – will eventually see house prices fall by more than 20 percent, with millions of Americans losing their homes. Delinquencies, defaults, and foreclosures are now spreading from sub-prime to near-prime and prime mortgages. Thus, total losses on mortgage-related instruments – include exotic credit derivatives such as collateralized debt obligations (CDOs) – will add up to more than $400 billion.
Moreover, commercial real estate is beginning to follow the downward trend in residential real estate. After all, who wants to build offices, stores, and shopping centers in the empty ghost towns that litter the American West?
In addition to the downturn in real estate, a broader bubble in consumer credit is now collapsing: as the US economy slips into recession, defaults on credit cards, auto loans, and student loans will increase sharply. US consumers are shopped-out, savings-less, and debt-burdened. With private consumption representing more than 70 percent of aggregate US demand, cutbacks in household spending will deepen the recession.
We can also add to these financial risks the massive problems of bond insurers that guaranteed many of the risky securitization products such as CDOs. A very likely downgrade of these insurers’ credit ratings will force banks and financial institutions that hold these risky assets to write them down, adding another $150 billion to the financial system’s mounting losses.
Then there is the exposure of banks and other financial institutions to rising losses on loans that financed reckless leveraged buy-outs (LBOs). With a worsening recession, many LBOs that were loaded with too much debt and not enough equity will fail as firms with lower profits or higher losses become unable to service their loans.
Given all this, the recession will lead to a sharp increase in corporate defaults, which had been very low over the last two years, averaging 0.6 percent per year, compared to an historic average of 3.8 percent. During a typical recession, the default rate among corporations may rise to 10-15 percent, threatening massive losses for those holding risky corporate bonds.
As a result, the market for credit default swaps (CDS) – where protection against corporate defaults is bought and sold – may also experience massive losses. In that case, there will also be a serious risk that some firms that sold protection will go bankrupt, triggering further losses for buyers of protection when their counterparties cannot pay.
On top of all this, there is a shadow financial system of non-bank financial institutions that, like banks, borrow short and liquid and lend to or invest in longer-term and illiquid assets. This shadow system includes structured investment vehicles (SIVs), conduits, money market funds, hedge funds, and investment banks.
Like banks, all these financial institutions are subject to liquidity or rollover risk – the risk of going belly up if their creditors do not rollover their short-term credit lines. But, unlike banks, they do not have the safety net implied by central banks’ role as lender of last resort.
Now that a recession is underway, US and global stock markets are beginning to fall: in a typical US recession, the S&P 500 index falls by an average of 28 percent as corporate revenues and profits sink. Losses in stock markets have a double effect: they reduce households’ wealth and lead them to spend less; and they cause massive losses to investors who borrowed to invest in stock, thus triggering margin calls and asset fire sales.
There is thus a broader risk that many leveraged investors in both equity and credit markets will be forced to sell illiquid assets in illiquid markets, leading to a cascading fall in asset prices to below their fundamental values. The ensuing losses will aggravate the financial turmoil and economic contraction.
Indeed, adding up all these losses in financial markets, the sum will hit a staggering $1 trillion. Tighter credit rationing will then further hamper the ability of households and firms to borrow, spend, invest, and sustain economic growth. The risk that a systemic financial crisis will drive a more pronounced US and global recession has quickly gone from being a theoretical possibility to becoming an increasingly plausible scenario.
Migrant worker exdous hampering construction in Pune
It comes as no surprise that the Pune builders have started blaming the migrants for late delivery of projects. Most construction contracts have a Force Majeure clause which absolves builders from their liabilities in case of delays. Expect all builders to delay projects and sit on the customers money for more months then planned.
The whole argument of quality workers is bogus since the migrants coming from impoverished regions of UP/Bihar have no skills bar raw genetic strength. What the builders mean is that they are unable to find hard working , strong people who are willing to work long hours at low wages. Its high time the construction industry upped its wages of the workers. On an emotional level I'm not sure how it feels to be building all the houses and apartments and not having a chance to live in half decent place along with your family. For all the investors in real estate I believe its time to reward the faceless worker since if it wasn't for him you woud'nt be looking so smart
The anti migrant violence in triggered off by Raj Thackeray's hate campaign has hit the booming real estate sector in Pune.
A large chunk of the workforce comes from states like Uttar Pradesh, Bihar and Jharkhand. But after the anti-migrant violence by Raj Thackeray's Maharashtra Navnirman Sena, these workers have gone back to their home states.
Seriously hampering work on construction projects.
Satish Magar, MD Magarpatta Township said, ''I would normally need about 14,000 to 15,000 workers daily on different locations for our projects, but I have to suffice with just 8000 to 10,000 workers and it's not just quantity but the question is also of good quality workers which we don't get here.''
Satish magar is not the only builder feeling the pinch. There is a huge demand-supply gap in Pune, which is witnessing a boom in the real estate sector.
Lalitkumar Jain, President of Pune Promoters and Builders Association said, ''We are facing a huge crises and we fear that because of the workers going back, we will not be able to meet our delivery commitments almost all the projects will be delayed.''
According to rough estimates, about 80 per cent of the construction workforce in Pune comes from other states and out of this, nearly 60 per cent are labourers from north. Many of them masons, plumbers, carpenters and electricians.
The situation in Pune with regards to the exodus of migrants is not as bad as in other cities like Nashik, but with the boom in the construction industry builders are facing the heat.
The whole argument of quality workers is bogus since the migrants coming from impoverished regions of UP/Bihar have no skills bar raw genetic strength. What the builders mean is that they are unable to find hard working , strong people who are willing to work long hours at low wages. Its high time the construction industry upped its wages of the workers. On an emotional level I'm not sure how it feels to be building all the houses and apartments and not having a chance to live in half decent place along with your family. For all the investors in real estate I believe its time to reward the faceless worker since if it wasn't for him you woud'nt be looking so smart
The anti migrant violence in triggered off by Raj Thackeray's hate campaign has hit the booming real estate sector in Pune.
A large chunk of the workforce comes from states like Uttar Pradesh, Bihar and Jharkhand. But after the anti-migrant violence by Raj Thackeray's Maharashtra Navnirman Sena, these workers have gone back to their home states.
Seriously hampering work on construction projects.
Satish Magar, MD Magarpatta Township said, ''I would normally need about 14,000 to 15,000 workers daily on different locations for our projects, but I have to suffice with just 8000 to 10,000 workers and it's not just quantity but the question is also of good quality workers which we don't get here.''
Satish magar is not the only builder feeling the pinch. There is a huge demand-supply gap in Pune, which is witnessing a boom in the real estate sector.
Lalitkumar Jain, President of Pune Promoters and Builders Association said, ''We are facing a huge crises and we fear that because of the workers going back, we will not be able to meet our delivery commitments almost all the projects will be delayed.''
According to rough estimates, about 80 per cent of the construction workforce in Pune comes from other states and out of this, nearly 60 per cent are labourers from north. Many of them masons, plumbers, carpenters and electricians.
The situation in Pune with regards to the exodus of migrants is not as bad as in other cities like Nashik, but with the boom in the construction industry builders are facing the heat.
Wednesday, 20 February 2008
Hotel plans near BIAL grounded due to lack of water
If water is not available below 800 ft, how can residential complexes come up here. The bubble is Devenhalli real estate is so ready to burst.
Hotel plans near BIAL grounded
With the Karnataka State Pollution Control Board (KSPCB) categorically stating that it will not unlock the green-belt around the new Bangalore International Airport near Devanahalli, several hotel projects proposed in the area are likely to be grounded.
Non-availability of water around the airport is being cited as the reason by the KPSCB to reject scores of applications from various firms seeking clearance certificate.
Speaking to the Business Standard, KSPCB Chairman H C Sharat Chandra said surface water sources around the airport are few while the ground water table in the area is depleting.
“Water is now available only below 600-800 feet from the surface. If star hotels are permitted, the water level will further dip. So we have taken a decision against giving permission,” said Chandra.
It is estimated that 4.5 lakh litres of water is consumed everyday by hotels if they are allowed to operate. That eventually will only dry water sources in the rural areas, Chandra added.
Even the Bangalore International Airport Area Planning Authority (BIAAPA) had announced that it will not approve projects that will destroy natural river valley network in the three towns of Devanahalli, Doddaballapur and Vijayapura and the 347 villages that are in the airport area.
With the airport all set to be inaugurated this March-end, pressure is being mounted by hospitality lobby to allow five star hotels in the vicinity of the airport.
But Chandra maintained: “We will give permission provided the Bangalore Water Supply and Sewerage Board (BWSSB)supplies to these hotels. We will not allow anyone to exploit the ground water table.”
At present, BWSSB has installed a dedicated pipeline to the airport.Hotel plans near BIAL grounded
BS Reporter / Chennai/ Bangalore February 21, 2008
With the Karnataka State Pollution Control Board (KSPCB) categorically stating that it will not unlock the green-belt around the new Bangalore International Airport near Devanahalli, several hotel projects proposed in the area are likely to be grounded.
Non-availability of water around the airport is being cited as the reason by the KPSCB to reject scores of applications from various firms seeking clearance certificate.
Speaking to the Business Standard, KSPCB Chairman H C Sharat Chandra said surface water sources around the airport are few while the ground water table in the area is depleting.
“Water is now available only below 600-800 feet from the surface. If star hotels are permitted, the water level will further dip. So we have taken a decision against giving permission,” said Chandra.
It is estimated that 4.5 lakh litres of water is consumed everyday by hotels if they are allowed to operate. That eventually will only dry water sources in the rural areas, Chandra added.
Even the Bangalore International Airport Area Planning Authority (BIAAPA) had announced that it will not approve projects that will destroy natural river valley network in the three towns of Devanahalli, Doddaballapur and Vijayapura and the 347 villages that are in the airport area.
With the airport all set to be inaugurated this March-end, pressure is being mounted by hospitality lobby to allow five star hotels in the vicinity of the airport.
But Chandra maintained: “We will give permission provided the Bangalore Water Supply and Sewerage Board (BWSSB)supplies to these hotels. We will not allow anyone to exploit the ground water table.”
At present, BWSSB has installed a dedicated pipeline to the airport.
Hotel plans near BIAL grounded
With the Karnataka State Pollution Control Board (KSPCB) categorically stating that it will not unlock the green-belt around the new Bangalore International Airport near Devanahalli, several hotel projects proposed in the area are likely to be grounded.
Non-availability of water around the airport is being cited as the reason by the KPSCB to reject scores of applications from various firms seeking clearance certificate.
Speaking to the Business Standard, KSPCB Chairman H C Sharat Chandra said surface water sources around the airport are few while the ground water table in the area is depleting.
“Water is now available only below 600-800 feet from the surface. If star hotels are permitted, the water level will further dip. So we have taken a decision against giving permission,” said Chandra.
It is estimated that 4.5 lakh litres of water is consumed everyday by hotels if they are allowed to operate. That eventually will only dry water sources in the rural areas, Chandra added.
Even the Bangalore International Airport Area Planning Authority (BIAAPA) had announced that it will not approve projects that will destroy natural river valley network in the three towns of Devanahalli, Doddaballapur and Vijayapura and the 347 villages that are in the airport area.
With the airport all set to be inaugurated this March-end, pressure is being mounted by hospitality lobby to allow five star hotels in the vicinity of the airport.
But Chandra maintained: “We will give permission provided the Bangalore Water Supply and Sewerage Board (BWSSB)supplies to these hotels. We will not allow anyone to exploit the ground water table.”
At present, BWSSB has installed a dedicated pipeline to the airport.Hotel plans near BIAL grounded
BS Reporter / Chennai/ Bangalore February 21, 2008
With the Karnataka State Pollution Control Board (KSPCB) categorically stating that it will not unlock the green-belt around the new Bangalore International Airport near Devanahalli, several hotel projects proposed in the area are likely to be grounded.
Non-availability of water around the airport is being cited as the reason by the KPSCB to reject scores of applications from various firms seeking clearance certificate.
Speaking to the Business Standard, KSPCB Chairman H C Sharat Chandra said surface water sources around the airport are few while the ground water table in the area is depleting.
“Water is now available only below 600-800 feet from the surface. If star hotels are permitted, the water level will further dip. So we have taken a decision against giving permission,” said Chandra.
It is estimated that 4.5 lakh litres of water is consumed everyday by hotels if they are allowed to operate. That eventually will only dry water sources in the rural areas, Chandra added.
Even the Bangalore International Airport Area Planning Authority (BIAAPA) had announced that it will not approve projects that will destroy natural river valley network in the three towns of Devanahalli, Doddaballapur and Vijayapura and the 347 villages that are in the airport area.
With the airport all set to be inaugurated this March-end, pressure is being mounted by hospitality lobby to allow five star hotels in the vicinity of the airport.
But Chandra maintained: “We will give permission provided the Bangalore Water Supply and Sewerage Board (BWSSB)supplies to these hotels. We will not allow anyone to exploit the ground water table.”
At present, BWSSB has installed a dedicated pipeline to the airport.
Tuesday, 19 February 2008
One lakh apartments may remain vacant in Bangalore by April
BANGALORE: Is Bangalore’s real estate market heading for a slump? Such is the impact of the real estate slowdown in Bangalore that the number of unoccupied apartments in and around the city is expected to touch nearly one lakh by April.
Citing the outcome of an “informal survey,” Inspector-General of Registration and Commissioner of Stamps H. Shashidhar told a workshop organised here on Tuesday by the Building and Other Construction Workers’ Welfare Board that these indeed were the current market trends.
Later, speaking to The Hindu, he said that the figure included both old and new apartments, i.e., those that had not been sold, those that had not been rented out and those now under construction. Mr. Shashidhar said that registrations of property in the State had reduced by 45 to 50 per cent, partially due to the ban on registration of revenue sites.
Infrastructure
Lack of infrastructure such as proper roads, drinking water supply and availability of schools had also contributed to the slowdown in property transactions. Moreover, people had become cautious while buying property and choosing only those which had clear titles.
It appears that only genuine users were buying the properties now while speculative investors were keeping themselves away from property transactions, he said.
Feroze Abdullah, realtor and proprietor of Feroze Estates, confirmed the slump in the sales of apartments, particularly on the outskirts of Bangalore in areas such as Whitefield and Marathahalli, over the last three months. He said his own business had seen a 50 per cent drop during this period. “There is more supply than demand. Prices in the last three years have risen unnaturally and the market is now seeing a levelling. But in the central districts, the prices are still high.”
Unrealistic prices, poor infrastructure and traffic problems had also contributed to the slump in sales of apartments, Mr. Feroz said. However, the builders have not reduced the prices of apartments hoping that they may pick up once the new airport commences its operations.
President of Karnataka Ownership Promoters Association A. Balakrishna Hegde maintained that the industry was expected to grow at a rate of 15 per cent this year and refuted any suggestion of a slump.
The upward revision of guidance value for property in Bangalore has deterred a number of apartment buyers from registering their property as the revision has increased the stamp duty burden. Over 50,000 housing units would be added this year in Bangalore, he said.
C.J. Roy, general secretary of Karnataka Township Developers Association, said that the real estate market had not gone down overall, though there was a small slump in prized locations
Citing the outcome of an “informal survey,” Inspector-General of Registration and Commissioner of Stamps H. Shashidhar told a workshop organised here on Tuesday by the Building and Other Construction Workers’ Welfare Board that these indeed were the current market trends.
Later, speaking to The Hindu, he said that the figure included both old and new apartments, i.e., those that had not been sold, those that had not been rented out and those now under construction. Mr. Shashidhar said that registrations of property in the State had reduced by 45 to 50 per cent, partially due to the ban on registration of revenue sites.
Infrastructure
Lack of infrastructure such as proper roads, drinking water supply and availability of schools had also contributed to the slowdown in property transactions. Moreover, people had become cautious while buying property and choosing only those which had clear titles.
It appears that only genuine users were buying the properties now while speculative investors were keeping themselves away from property transactions, he said.
Feroze Abdullah, realtor and proprietor of Feroze Estates, confirmed the slump in the sales of apartments, particularly on the outskirts of Bangalore in areas such as Whitefield and Marathahalli, over the last three months. He said his own business had seen a 50 per cent drop during this period. “There is more supply than demand. Prices in the last three years have risen unnaturally and the market is now seeing a levelling. But in the central districts, the prices are still high.”
Unrealistic prices, poor infrastructure and traffic problems had also contributed to the slump in sales of apartments, Mr. Feroz said. However, the builders have not reduced the prices of apartments hoping that they may pick up once the new airport commences its operations.
President of Karnataka Ownership Promoters Association A. Balakrishna Hegde maintained that the industry was expected to grow at a rate of 15 per cent this year and refuted any suggestion of a slump.
The upward revision of guidance value for property in Bangalore has deterred a number of apartment buyers from registering their property as the revision has increased the stamp duty burden. Over 50,000 housing units would be added this year in Bangalore, he said.
C.J. Roy, general secretary of Karnataka Township Developers Association, said that the real estate market had not gone down overall, though there was a small slump in prized locations
Monday, 18 February 2008
Pune's high-end realty market gets red hot
PUNE: “It’s plain economics,” says Pradeep Kataria, a Pune-based chartered accountant who owns a flat in the upscale Modi Baug area of the city. “There is a shortage of flats in this area, so what I and some of my neighbours bought four years ago for about Rs 45 lakh is now being quoted at more than Rs 4 crore.” Mr Kataria is talking about the price for premium flats in Pune, a city once famous as a destination for pensioners with limited incomes.
Pune’s real estate market is growing sharply. There is a shortage of flats at the higher end of the price spectrum and, yes, price is not a barrier any more. A couple of years ago, when a developer breached the Rs 1-crore mark, it was regarded as a one-off event. Now, these premium flats get sold as soon as a project is announced. In fact, even Rs 4 crore is passe in the segment; prices being quoted now are around Rs 11 crore.
This trend is in line with that seen in the premium segment in other fast-growing cities, such as Delhi, Mumbai, Hyderabad and Bangalore. “There is an under supply of really high-end properties in Pune, which is why we sell the moment we announce a project, before any work begins,” said Vishwajeet Jhavar of Marvel Developers.
These high-end flats come with their own swimming pools, jaccuzis, etc. The target buyer is the 25-35-year-old professional, either returning from abroad or someone who has cashed in on the stock exchange boom. “Rs 1 crore is not a big amount anymore as earning capacities have gone up and lifestyles have changed,” said R Vasudevan, managing director, Vascon Engineers.
Pune’s real estate market is growing sharply. There is a shortage of flats at the higher end of the price spectrum and, yes, price is not a barrier any more. A couple of years ago, when a developer breached the Rs 1-crore mark, it was regarded as a one-off event. Now, these premium flats get sold as soon as a project is announced. In fact, even Rs 4 crore is passe in the segment; prices being quoted now are around Rs 11 crore.
This trend is in line with that seen in the premium segment in other fast-growing cities, such as Delhi, Mumbai, Hyderabad and Bangalore. “There is an under supply of really high-end properties in Pune, which is why we sell the moment we announce a project, before any work begins,” said Vishwajeet Jhavar of Marvel Developers.
These high-end flats come with their own swimming pools, jaccuzis, etc. The target buyer is the 25-35-year-old professional, either returning from abroad or someone who has cashed in on the stock exchange boom. “Rs 1 crore is not a big amount anymore as earning capacities have gone up and lifestyles have changed,” said R Vasudevan, managing director, Vascon Engineers.
Thursday, 14 February 2008
Jilted real estate sector looks forward to RBI rate cut
The real estate sector that has been rocking in recent times, is now in news for the wrong sentiment. The Reserve Bank of India’s decision, not to cut interest rates has shattered the dreams of real estate companies that are already facing the brunt of a housing industry slowdown. The high cost of mortgage financing is stifling the sector.
RBI decision to keep interest rates unchanged in its third-quarter monetary policy review has left some developers and investors alarmed. A larger chunk of real estate companies was expecting a cut, especially in the backdrop of slowing home sales in major cities in the past few months.
Developers, however, differ regarding the depth and reach of RBI’s move. “The slowdown in transactions in residential sector is seen majorly in metros where the prices had gone fairly high. The small cities i.e. Tier II & Tier III cities, are not seriously affected by the bank rates, as the demand in the cities is much higher than the metros,” says Sanjay Mathur, Head Marketing of Pearls Infrastructure Projects Ltd
Interestingly, Avnesh Sood, Director, Eros Intercontinental, has a completely different take on this. “Slowdown is far from the metro cities. This is being seen more in non-metro cities. Speculation is minimal in metros as there are genuine end-users. In smaller towns, small and medium developers have already resorted to price correction but they cannot go any further on corrections due to their scale of operations”.
There is no doubt that the residential segment is seeing a fall in sales and a price correction. But large developers with good cash reserves, will not resort to price correction. It is the suburban & non-metro locations that are facing a slowdown. Unchanged rates will trigger another round of correction and developers will have to come up with innovative schemes like “Book now & pay later on possession” etc.
But opinions differ. “A severe price correction is still far off and may not happen at all. Demand is not exactly non-existent. As developers, we are quite optimistic that rate changes in the future will trigger increased sales activity and there will be decent growth between 2008-2010, as endusers continue to pickup property,” adds Sood.
The way forwards would probably be to focus on the affordable quality housing segment for the lower middle class, in the next 2 years. Developers and government bodies should join hands to focus on devising ways to increase the supply of middle income group housing.
RBI decision to keep interest rates unchanged in its third-quarter monetary policy review has left some developers and investors alarmed. A larger chunk of real estate companies was expecting a cut, especially in the backdrop of slowing home sales in major cities in the past few months.
Developers, however, differ regarding the depth and reach of RBI’s move. “The slowdown in transactions in residential sector is seen majorly in metros where the prices had gone fairly high. The small cities i.e. Tier II & Tier III cities, are not seriously affected by the bank rates, as the demand in the cities is much higher than the metros,” says Sanjay Mathur, Head Marketing of Pearls Infrastructure Projects Ltd
Interestingly, Avnesh Sood, Director, Eros Intercontinental, has a completely different take on this. “Slowdown is far from the metro cities. This is being seen more in non-metro cities. Speculation is minimal in metros as there are genuine end-users. In smaller towns, small and medium developers have already resorted to price correction but they cannot go any further on corrections due to their scale of operations”.
There is no doubt that the residential segment is seeing a fall in sales and a price correction. But large developers with good cash reserves, will not resort to price correction. It is the suburban & non-metro locations that are facing a slowdown. Unchanged rates will trigger another round of correction and developers will have to come up with innovative schemes like “Book now & pay later on possession” etc.
But opinions differ. “A severe price correction is still far off and may not happen at all. Demand is not exactly non-existent. As developers, we are quite optimistic that rate changes in the future will trigger increased sales activity and there will be decent growth between 2008-2010, as endusers continue to pickup property,” adds Sood.
The way forwards would probably be to focus on the affordable quality housing segment for the lower middle class, in the next 2 years. Developers and government bodies should join hands to focus on devising ways to increase the supply of middle income group housing.
Realty companies dole out sops to woo buyers
Economic times reports
NEW DELHI: Call it a silver lining in the bearish market. Your dream home may become cheaper than it appeared earlier. With buying activity at a low in the residential market, realty developers are introducing scheme like EMI holidays (between booking and possession of property) to spur demand. Players such as BPTP, Era Landmarks, Parsvnath Developers, Pearls Infrastructure and Vipul have declared incentives to woo buyers.
Recently, a slowdown in property transactions and a correction in prices have been witnessed due to high interest rates and escalating land costs. “It’s time to be more realistic after having enjoyed all the optimism in the past. Incentives to attract buyers in this segment is definitely needed now,” Eros Group director, Avneesh Sood said.
Vipul’s vice president (sales & marketing), Brijesh Bhanote supports the argument. “The schemes are definitely a result of the negative market sentiment,” he said. The company will soon come up with a subvention scheme in which it will bear part of the cost of interest on customers’ loan.
Parsvnath Developers is offering a scheme at Parsvnath City in Sonepat where a buyer can just pay 15% of the amount and relax till the residential apartment is completed. No EMI will be sought till possession. A similar scheme has also been initiated by realty player BPTP — the customer needs to pay only 15% of the basic sale price and no EMI for the next two years. The company will pay interest to the bank during this period. Says managing director of BPTP, Kabul Chawla, “Such offers are in demand now. These schemes have met with an encouraging response from our buyers.”
Points out Omaxe vice president (marketing), Vineet Nanda: “It’s not exactly slowdown; most of the real estate developers are offering subvention schemes as the focus is shifting from investorbased customer to the end user.” Omaxe does not have any such scheme at present but might offer a subvention scheme in the near future.
There are other offers as well. Era Landmarks is offering a combination of schemes such as assured returns on investments, fully furnished homes, priority location for second booking and discount in other Era group projects. On the other hand, Pearls Infrastructure is offering a marginal discount to buyers and also special rates in bulk booking to its corporate clients. Pearls Infrastructure’s marketing head, Sanjay Mathur admits that the low market sentiments has been one of the reasons to introduce such schemes.
Going forward, one can expect more schemes and incentives from the realty groups due to the emergence of newer players in the market. Anshuman Magazine, chairman and managing director of global real estate consultancy CB Richard Ellis, aptly sums it up: “There will be adjustments in the times to come. Growing competition in the sector will ensure price correction as buyers will have more options.”
NEW DELHI: Call it a silver lining in the bearish market. Your dream home may become cheaper than it appeared earlier. With buying activity at a low in the residential market, realty developers are introducing scheme like EMI holidays (between booking and possession of property) to spur demand. Players such as BPTP, Era Landmarks, Parsvnath Developers, Pearls Infrastructure and Vipul have declared incentives to woo buyers.
Recently, a slowdown in property transactions and a correction in prices have been witnessed due to high interest rates and escalating land costs. “It’s time to be more realistic after having enjoyed all the optimism in the past. Incentives to attract buyers in this segment is definitely needed now,” Eros Group director, Avneesh Sood said.
Vipul’s vice president (sales & marketing), Brijesh Bhanote supports the argument. “The schemes are definitely a result of the negative market sentiment,” he said. The company will soon come up with a subvention scheme in which it will bear part of the cost of interest on customers’ loan.
Parsvnath Developers is offering a scheme at Parsvnath City in Sonepat where a buyer can just pay 15% of the amount and relax till the residential apartment is completed. No EMI will be sought till possession. A similar scheme has also been initiated by realty player BPTP — the customer needs to pay only 15% of the basic sale price and no EMI for the next two years. The company will pay interest to the bank during this period. Says managing director of BPTP, Kabul Chawla, “Such offers are in demand now. These schemes have met with an encouraging response from our buyers.”
Points out Omaxe vice president (marketing), Vineet Nanda: “It’s not exactly slowdown; most of the real estate developers are offering subvention schemes as the focus is shifting from investorbased customer to the end user.” Omaxe does not have any such scheme at present but might offer a subvention scheme in the near future.
There are other offers as well. Era Landmarks is offering a combination of schemes such as assured returns on investments, fully furnished homes, priority location for second booking and discount in other Era group projects. On the other hand, Pearls Infrastructure is offering a marginal discount to buyers and also special rates in bulk booking to its corporate clients. Pearls Infrastructure’s marketing head, Sanjay Mathur admits that the low market sentiments has been one of the reasons to introduce such schemes.
Going forward, one can expect more schemes and incentives from the realty groups due to the emergence of newer players in the market. Anshuman Magazine, chairman and managing director of global real estate consultancy CB Richard Ellis, aptly sums it up: “There will be adjustments in the times to come. Growing competition in the sector will ensure price correction as buyers will have more options.”
Friday, 8 February 2008
IPO market deflates as 2 major IPO's withdraw
New Delhi: Real estate major Emaar MGF on Friday decided to withdraw its initial public offering as the issue could not get fully subscribed.
“The decision has been taken due to prevailing adverse market condition...although the QIB and HNI portions of the IPO were fully subscribed and the overall book was closed to 90%,” the company said in a statement.
Emaar MGF, the joint venture between Dubai-based Emaar and India’s MGF Development, has said that it would consider IPO at an appropriate time.
“Given the prevailing sentiments in the capital markets, it was unclear how well the stock would trade post-listing. It has been considered wiser to revisit the market only when the demand and sentiment are stable and better providing greater value to investors”, it said.
Delhi-based Emaar MGF said that the company remains committed to executing its projects on hand and is well funded to ensure that the delay in IPO would not hamper its growth plans.
The company expects to return to the market at a later date when sentiment and liquidity conditions are better.
Emaar MGF entered the capital market on February one with an IPO of 10.25 crore equity shares of Rs10 each to be determined through a 100% book building.
The issue was scheduled to close on February six. The company had initially fixed the price band at Rs610-690, which later on was brought down to Rs540-630.
The company further slashed its lower band to Rs530 per share and extended the period of public offer till 11 February. The issue was originally scheduled to close on 6 February.
Emaar MGF is present in 26 cities in India and has 13,000 acre of land bank. The company plans to develop 566 million sq ft during the next nine years, of which 455 million sq ft is residential, 90 million sq ft commercial and 18 million sq ft for retail.
“The decision has been taken due to prevailing adverse market condition...although the QIB and HNI portions of the IPO were fully subscribed and the overall book was closed to 90%,” the company said in a statement.
Emaar MGF, the joint venture between Dubai-based Emaar and India’s MGF Development, has said that it would consider IPO at an appropriate time.
“Given the prevailing sentiments in the capital markets, it was unclear how well the stock would trade post-listing. It has been considered wiser to revisit the market only when the demand and sentiment are stable and better providing greater value to investors”, it said.
Delhi-based Emaar MGF said that the company remains committed to executing its projects on hand and is well funded to ensure that the delay in IPO would not hamper its growth plans.
The company expects to return to the market at a later date when sentiment and liquidity conditions are better.
Emaar MGF entered the capital market on February one with an IPO of 10.25 crore equity shares of Rs10 each to be determined through a 100% book building.
The issue was scheduled to close on February six. The company had initially fixed the price band at Rs610-690, which later on was brought down to Rs540-630.
The company further slashed its lower band to Rs530 per share and extended the period of public offer till 11 February. The issue was originally scheduled to close on 6 February.
Emaar MGF is present in 26 cities in India and has 13,000 acre of land bank. The company plans to develop 566 million sq ft during the next nine years, of which 455 million sq ft is residential, 90 million sq ft commercial and 18 million sq ft for retail.
Sunday, 3 February 2008
Stock market correction triggers property downturn
Pune, February 2 The recent stock market meltdown has fuelled speculation of a slowdown in the city real estate because of a perceived liquidity crunch. Real estate consultants say cancellations, if they happen, would occur in the investor and speculator segment of the real estate market that comprise 20 per cent of buyers in the city.
“Some cancellations have already begun. After the stock market fell, a private developer reported five cancellations on NIBM road from clients who had lost money in the market,” said Ravi Varma, president of the Estate agents association of Pune (EAAP).
“Typically, profits booked in the markets are invested in real estate. However, builders are least likely to own up to cancellations, as it will further affect their stocks, if they are listed. Developers think that they can talk up the market,” he said. Varma added, however, that cancellations due to stock crash are very small and not likely to exceed two to three per cent of the real estate market.
Last week’s crash from around 22,000 points to around 18, 000 on Friday was responsible for wiping out nearly Rs 2 lakh crore, Rs 1.5 lakh crore of which was lost on the first day.
Deepak Kunjeer was one real estate consultant who admitted that the land market was headed towards a slump. “In the past two to three months, the sales have come down by half. This is especially true of areas like Kharadi, Wagholi, Kondhwa and Hadapsar. The same plots have been on sale for the last few months. Properties have not been moving or changing hands,” he said.
Kunjeer said the pre-budget months were normally slow and coupled with a global slowdown in the offing, a cascading effect is likely in six months’ time. “There is a 99 per cent chance of a correction happening unless there is something miraculous in store in the budget with major policy decisions in infrastructure and power sectors or in the case of allowing FDI funds,” he said.
However, most city developers dismissed the notion of mass real estate cancellations due to the stock market drop saying that they dealt only with “genuine buyers” and did not deal with the speculator community.
Some others said it was too early to say if the stock market effect would spiral down to real estate stagnation. “The effect, if any, will take at least three months to be visible in the market. Even if investors have lost money, their first reaction is rarely to cancel their real estate purchase,” said Manish Jain, Kumar Properties.
This trend is likely only in the high-end segment and not the middle class, or the working class who do not have a “risk taking appetite”. Irrespective of the sensex, the last three months have been slow and real estate consultants agree that prices have been on the upswing without any perceived value addition. This coupled with the pre-budget jitters and the law of averages makes a slump inevitable, they said.
The last real estate stagnation took place in 1996, which lasted for almost five years. In the ensuing boom, the last three years has seen real estate prices more than triple. The complementing growth in the economy, especially the IT players and now recently the manufacturing sector, encouraged developers to cater more to the high end segment.
“But now developers are resorting to raising prices arbitrarily. In the last two months, projects across the city have seen prices rise by Rs 500 per sq ft for no reason. Effectively, this puts a lot of property out of reach for the middle class segment,” said Mukesh Charbhe, real estate agent working in NIBM are Sopan Baug areas.
“Compared to December, January has been a slow month. There is definitely a 25 per cent reduction in sales. But there should be a correction as prices have been increasing randomly without justifying a rise,” he said.
“Some cancellations have already begun. After the stock market fell, a private developer reported five cancellations on NIBM road from clients who had lost money in the market,” said Ravi Varma, president of the Estate agents association of Pune (EAAP).
“Typically, profits booked in the markets are invested in real estate. However, builders are least likely to own up to cancellations, as it will further affect their stocks, if they are listed. Developers think that they can talk up the market,” he said. Varma added, however, that cancellations due to stock crash are very small and not likely to exceed two to three per cent of the real estate market.
Last week’s crash from around 22,000 points to around 18, 000 on Friday was responsible for wiping out nearly Rs 2 lakh crore, Rs 1.5 lakh crore of which was lost on the first day.
Deepak Kunjeer was one real estate consultant who admitted that the land market was headed towards a slump. “In the past two to three months, the sales have come down by half. This is especially true of areas like Kharadi, Wagholi, Kondhwa and Hadapsar. The same plots have been on sale for the last few months. Properties have not been moving or changing hands,” he said.
Kunjeer said the pre-budget months were normally slow and coupled with a global slowdown in the offing, a cascading effect is likely in six months’ time. “There is a 99 per cent chance of a correction happening unless there is something miraculous in store in the budget with major policy decisions in infrastructure and power sectors or in the case of allowing FDI funds,” he said.
However, most city developers dismissed the notion of mass real estate cancellations due to the stock market drop saying that they dealt only with “genuine buyers” and did not deal with the speculator community.
Some others said it was too early to say if the stock market effect would spiral down to real estate stagnation. “The effect, if any, will take at least three months to be visible in the market. Even if investors have lost money, their first reaction is rarely to cancel their real estate purchase,” said Manish Jain, Kumar Properties.
This trend is likely only in the high-end segment and not the middle class, or the working class who do not have a “risk taking appetite”. Irrespective of the sensex, the last three months have been slow and real estate consultants agree that prices have been on the upswing without any perceived value addition. This coupled with the pre-budget jitters and the law of averages makes a slump inevitable, they said.
The last real estate stagnation took place in 1996, which lasted for almost five years. In the ensuing boom, the last three years has seen real estate prices more than triple. The complementing growth in the economy, especially the IT players and now recently the manufacturing sector, encouraged developers to cater more to the high end segment.
“But now developers are resorting to raising prices arbitrarily. In the last two months, projects across the city have seen prices rise by Rs 500 per sq ft for no reason. Effectively, this puts a lot of property out of reach for the middle class segment,” said Mukesh Charbhe, real estate agent working in NIBM are Sopan Baug areas.
“Compared to December, January has been a slow month. There is definitely a 25 per cent reduction in sales. But there should be a correction as prices have been increasing randomly without justifying a rise,” he said.
Friday, 1 February 2008
Another hypester on CNBC
It seems like this gentleman has a vested interest in some Mumbai real estate companies. If you look around Mumbai there are hundreds of towers under construction with most of them not being sold. These hired guns are responsible for hyping the market without any fundamentals. As for Chennai and other cities prices are still around 3-5k per sq/ft. In Mumbai we are taking of 8k+ on average. If other cities dont have purchasing power, how come Mumbai is different. Apart from the business community Mumbai is full of lower income neighborhoods. All you need to do is take the train and look at the mass number of people 10-15% of whom can afford the high prices. For the rest its life as usual in lower quality homes and shanties. Its high time these hype creating analysts are bought down to earth
Speaking to CNBC-TV18, Nalin Kumar of JM Financial said that markets like Mumbai will continue to see an upward bias in pricing. He added that tier III cities and Chennai will see price correction.
Excerpts from the exclusive interview with Nalin Kumar:
Q: We been speaking to the industry majors at large over the last couple of days and the overall sense is that with interest rates peaking off, prices could actually remain stable to slightly see a negative buys? Is that something that you concur with?
A: I largely concur with that it is more a function of the markets; some markets will see a negative in price and there are some markets, which will actually stay stable and certain markets like Bombay actually may continue to witness upward buyers.
Q: The more important in shadow on the Bombay realistic market could come from the Bombay Stock Exchange markets, the fact that they have sagged a bit and at least about 15-20% of their highs and it is not improbable that they could go down again. In such a scenario do you think that there could repercussions even in hot markets like Bombay?
A: I think Bombay is largely driven by the fact that there isn’t adequate supply at each level in the market. So Bombay will still do well. Having said that, if the stock market continues to remain weak or stagnating, people may use profits from one market to offset losses from another markets and that could have an impact on the real estate prices. But it really requires a sustained two-three month downtrend for this to happen. It won’t happen if markets are down and are weak and then come right backup.
Q: Could you give us some of the cities that you see a price correction in and consequently even a price appreciation in metros or in B or C cities?
A: In my opinion, Tier III cities will see the fastest decline in prices once real estate starts correcting. In terms of other cities, which have run-up fairly and rapidly, we have Chennai which is run-up fairly, quickly and that could see a correction. In north, NCR region has a lot of supply coming on and that could see a correction, of course the Tier II, Tier III cities like Chandigarh etc. have equal levels of pressure coming on them.
Q: What are the reasons that you expect corrections? Is it an oversupply issue? Why do you think the real estate market is headed for a correction in certain quarters?
A: There are multiple factors again which would bring the real estate markets to the correct levels. First of all and the most important in my mind is what the pricing is for the end user and many of these properties are now getting out of reach of the end user that it was designed for. So if we leave out the extremely premium end of properties, I think many of them which may have earlier being priced at a Rs 50 lakh price range are now worth a crore and so the end user kind of moves away and he can’t buy.
The second thing is there is too much investment into land, there is a lot of construction that is proposed to come up and once the supply eventually hits the market, you will see a significant stabilization in prices.
Q: One last word on this spate of IPOs that are starting to reemerge in the real estate segments specifically with regard to Emaar that they have to revise its price band to a little lower. Do you think some of these companies may be coming out of aggressive valuations at this point of time given the kind of momentum that the stocks have actually seen?
A: My sense is that eventually the market will find the right price point for capital raising exercises. Now the fact that a lot of real estate companies are looking to raise capital is reflective of the fact that they need to have cash on their balancesheets because hard times maybe ahead. They may have looked at aggressive valuations and the market has not been happy with those valuations and therefore they are coming back with valuations, which are slightly lower than what they had ideally been hoping for achieving.
Q: Do you think real estate prices in Bombay will stabilize or inch up?
A: I think the supply in Bombay is low and visible supply for the next 12-months continues to remain low and I feel that prices will stay static to rise upwards. I think it’s difficult for Bombay to drop dramatically.
Speaking to CNBC-TV18, Nalin Kumar of JM Financial said that markets like Mumbai will continue to see an upward bias in pricing. He added that tier III cities and Chennai will see price correction.
Excerpts from the exclusive interview with Nalin Kumar:
Q: We been speaking to the industry majors at large over the last couple of days and the overall sense is that with interest rates peaking off, prices could actually remain stable to slightly see a negative buys? Is that something that you concur with?
A: I largely concur with that it is more a function of the markets; some markets will see a negative in price and there are some markets, which will actually stay stable and certain markets like Bombay actually may continue to witness upward buyers.
Q: The more important in shadow on the Bombay realistic market could come from the Bombay Stock Exchange markets, the fact that they have sagged a bit and at least about 15-20% of their highs and it is not improbable that they could go down again. In such a scenario do you think that there could repercussions even in hot markets like Bombay?
A: I think Bombay is largely driven by the fact that there isn’t adequate supply at each level in the market. So Bombay will still do well. Having said that, if the stock market continues to remain weak or stagnating, people may use profits from one market to offset losses from another markets and that could have an impact on the real estate prices. But it really requires a sustained two-three month downtrend for this to happen. It won’t happen if markets are down and are weak and then come right backup.
Q: Could you give us some of the cities that you see a price correction in and consequently even a price appreciation in metros or in B or C cities?
A: In my opinion, Tier III cities will see the fastest decline in prices once real estate starts correcting. In terms of other cities, which have run-up fairly and rapidly, we have Chennai which is run-up fairly, quickly and that could see a correction. In north, NCR region has a lot of supply coming on and that could see a correction, of course the Tier II, Tier III cities like Chandigarh etc. have equal levels of pressure coming on them.
Q: What are the reasons that you expect corrections? Is it an oversupply issue? Why do you think the real estate market is headed for a correction in certain quarters?
A: There are multiple factors again which would bring the real estate markets to the correct levels. First of all and the most important in my mind is what the pricing is for the end user and many of these properties are now getting out of reach of the end user that it was designed for. So if we leave out the extremely premium end of properties, I think many of them which may have earlier being priced at a Rs 50 lakh price range are now worth a crore and so the end user kind of moves away and he can’t buy.
The second thing is there is too much investment into land, there is a lot of construction that is proposed to come up and once the supply eventually hits the market, you will see a significant stabilization in prices.
Q: One last word on this spate of IPOs that are starting to reemerge in the real estate segments specifically with regard to Emaar that they have to revise its price band to a little lower. Do you think some of these companies may be coming out of aggressive valuations at this point of time given the kind of momentum that the stocks have actually seen?
A: My sense is that eventually the market will find the right price point for capital raising exercises. Now the fact that a lot of real estate companies are looking to raise capital is reflective of the fact that they need to have cash on their balancesheets because hard times maybe ahead. They may have looked at aggressive valuations and the market has not been happy with those valuations and therefore they are coming back with valuations, which are slightly lower than what they had ideally been hoping for achieving.
Q: Do you think real estate prices in Bombay will stabilize or inch up?
A: I think the supply in Bombay is low and visible supply for the next 12-months continues to remain low and I feel that prices will stay static to rise upwards. I think it’s difficult for Bombay to drop dramatically.