High Net Investors become High Loss Investors

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

Economic times reports

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

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DLF customers gang up, pressurise developer to commit refund

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

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

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

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RIP, MBA

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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35% - 50% drop - The new normal

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

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

Source : CNBC-TV18

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

CNBC-TV18’s Priyanka Ghosh reports.

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

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

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

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

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

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

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

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Mumbai project prices

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

Chembur

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

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

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

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

Central Mumbai

Have only started research here.

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

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

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

6:56 AM
Anonymous Cool Head said...

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

7:02 AM

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Tarot card readers and Fortune tellers make hay

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

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Phenomenal fall in real estate prices

From here

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

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

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

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

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

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

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

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

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

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Hardships hit Singapore expats

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

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

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

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

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

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RBI verifying solvency of 10 realty firms

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

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

Internal assessment follows banks’ worries over systemic risks.

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

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

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

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

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

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

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

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

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

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Realty prices show major decline

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

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

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

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

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


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

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

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

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

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

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

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Prices down 50% in Gurgaon

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

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

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Buyers want lower prices in Pune

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

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

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

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

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

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

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

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Buyers rights in Maharashtra

ExpressIndia has some good information.


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

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

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

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

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

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

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

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

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Roubini in India

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

Quotes from his speech.

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

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CNBC gives financial advice

I wish someone in India can compile coverage of the moronic analysts on CNBC India.

The Daily Show With Jon StewartM - Th 11p / 10c

CNBC Gives Financial Advice

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Joke of the Day

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Detailed Analysis on Indian Real Estate - From Edelweis & CreditSuisse

Key points from the report are ;

* Volumes are closely linked with GDP growth and real returns on properties
but share a weak relation with interest rates

*Down cycles in real estate cycles tend to give up their entire gains (in real terms) of the
preceding up move.

*Implications for Indian real estate – an additional correction of 35%

* Impact on Indian developers:
-Negative real returns on property are likely to drive property investors to exit holdings,
keeping prices under pressure, keeping large project launches by developers at bay
- Developer volumes and sales are likely to remain highly subdued over an extended period
of time and debt servicing will get increasingly onerous for developers

* Capitulation, though delayed, is likely to return to haunt the sector

* Volume recovery is likely after GDP recovery with a 1-2 year lag

http://0301.netclime.net/1_5/285/2f0/21c/Real%20Estate%20-%20sector%20update-Feb-09-EDEL.pdf

I am not saying the market is going to behave as exactly stated in the report; good to know the trend across many geographies. People should understand that real estate (particularly in India where no professional cos., data, regulation) can not be treated(speculated) like securities.Its just a redistribution of capital from one hand to another; essentially zero sum game.

If anyone who worked in the IT/Finance for the last 5 years and saved money conservatively like the old generation; they need not worry about any recession/lay off and would be able to survive for more than 10 years in any medium size town. Because of the delusion and madness; all the capital flowed from US/UK/Europe finally ended up on the hands of politicians.

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Builders default and some offer Rent to buy + Swiss Banks

Pune apartments developer offers sale plan to tenants

Livemint reports
The campaign, branded ‘Rent Today and Own Tomorrow’, invites potential buyers to rent apartments of their choice on 11-month contracts, with the option of buying the apartment anytime during this time
Sudha Menon

Pune: A Pune-based developer may have a solution—at least temporary—for the hundreds of realty firms faced with dwindling demand for homes: Rent out apartments and hard-sell a purchase option to the tenants.
Mont Vert Homes has kicked off a ‘Rent Today and Own Tomorrow’ campaign, inviting potential buyers to rent apartments of their choice on 11-month contracts, with the option of buying the flat anytime in the interim.
“Paying rent hurts and is often considered a waste of money, so what we are telling our customer is that once he decides to buy the apartment, we adjust the rent paid towards the down payment for the house. That way, he has not lost the rent amount,” said Manish Kaneria, director of Mont Vert Homes.


Buyers under pressure as builders begin to default
Some small developers are yet to start on their projects; buyers are asking these firms to return booking amount
Shabana Hussain

New Delhi: It is more than two years since Kamal Sachdeva and brother Harish booked villas in Faridabad, an industrial area south of New Delhi that is fast becoming a housing destination, with Pal Infrastructure and Developers Pvt. Ltd.
Sachadeva made a down payment of Rs3.5 lakh and was promised possession of a 1,200 sq. ft house built on a 1,350 sq. ft plot by the end of 2007. He says not only has he not yet received possession of the property, construction has not started since he made his booking in February 2007.
Some four months ago, Sachdeva, a finance professional with a New Delhi automobile company, asked Pal about the progress at the project. Pal informed him, he says, that it did not have the land for the project proposed to come up at Sector 78 of Faridabad.
“I want my investment back but the company says it will only give me a six-month post-dated cheque at an 8% rate of interest. Earlier, they had said they will give a 12% rate of interest,” says he. “I don’t want post-dated cheques because I have heard the company’s cheques are bouncing.

Swiss Banks reports on DNAIndia.com

Kudos to the author for raising the important issue. As everyone knows,Indian politicians are the ones to lose the most, if their names are made public. Who will bell the cat ??

Under pressure from federal authorities, Swiss bank UBS is closing the hidden offshore accounts of its well-heeled American clients, potentially allowing their secrets to spill into the open.

In a step that would have once been unthinkable in the rarefied world of Swiss banking, UBS will shut about 19,000 accounts that prosecutors suspect have gone undeclared to the Internal Revenue Service. UBS will transfer the assets to other banks or other divisions within UBS, or will mail checks directly to the account holders, creating paper trails for federal prosecutors who are examining whether UBS clients used such accounts to evade taxes.

The clients now face stark choices: They can cash their checks, and thereby alert the authorities to any potential wrongdoing, or not cash them, effectively losing their money. Or they can transfer the money to new banks, a procedure which, in the case of foreign banks, requires depositors of more than $10,000 to report the new account to the Treasury Department.

UBS, the largest banking institution from Switzerland, has also committed to provide names of the top 250 persons who have kept money in offshore accounts, out of 19,000, to US authorities. UBS has also committed to pay a fine of $780 million to settle claims that it has defrauded US Internal Revenue Service.

The original charges are that the UBS offshore accounts have helped Americans hide $18 billion in 19,000 accounts. But now, the US state department is compelling it to disclose about 52,000 American accounts kept with UBS.

Swiss authorities used to argue that if there is no criminality under Swiss laws (which do not recognise currency violations and tax evasion as offences) the information on offshore accounts could not be divulged.

The same position was taken in Bofors case also. Now that wall has been breached by this US agreement with Swiss authorities.
UBS, the world's largest private bank, also said that it would stop offering to American clients offshore private banking services that are not declared to the IRS.

In all these discussions, one critical aspect is not to be missed -- the wealth hoarded by Indian leaders in commerce/ politics/ military/ arts, etc in the foreign banks for the last five to six decades.

A recent development makes us alert to our own wealth stored abroad.

Liechtenstein is a country as well as a convenient "letter box" for moneyed people all over the world to hide their ill gotten wealth. Its crown prince, Alois von und Zu Liechtenstein, is angry with Germany for launching a massive tax-evasion investigation involving funds hidden away in his countries vaults. Germany's intelligence agency seems to have paid an unnamed informer more than USD 6 million for confidential and secret data about clients of LTG group a bank owned by the Prince's family. The revelations have already led to the resignation of the head of Deutsche Post - the former German mail service -the world's largest logistics company in the world.

The German foreign intelligent agency BND seem to have got more than 700 clients of the LTG bank and the German prosecutors are using this information to target hundreds of suspected tax evaders in the last few days. In the meantime LTG claims that the "stolen data' contain information about 1400 clients and only 600 of them are Germans.

The German government has announced that it would share information on accounts held in the tax haven with any government that wants it, for free.

Intriguingly, Indian government was silent on this issue and did not approach the German government for a long time for a look into that data. Later, it wrote a cursory letter under pressure from Opposition but has not disclosed the response of the German government.

It is common knowledge that trillions of dollars of Indian money is in various tax heavens like Antigua, Switzerland, Bahamas, Liechtenstein, Isle of Man, and St Kitts, etc.

Throughout the Nehruvian socialistic period, under-invoicing of exports and over-invoicing of imports was very common. Along with that, substantial portion of external earnings were siphoned off to these tax heavens. In a socialistic way, all leaders, be they from business, politics, film, sports or bureaucracy, participated in creating what we may call secular wealth cutting across caste and creed. Also, good portion of the defence commissions were settled abroad. Plus some of our bureaucrats and entertainers and artists have also accumulated wealth abroad. This lobby is well-entrenched and one of the main losers in the appreciation of the rupee.

Worst part of the story is the loss of these deposits to Swiss banks themselves up on the death of some of these depositors who have not passed on the relevant account information to their progeny.
The Swiss banks appropriate such sums after some years (seven to ten) after the death of the beneficiary if there are no claimants.

These are operated using codes but most of them require passport and its number as a proof. That is the reason one finds some persons travelling to Switzerland with all expired passports. Zurich is the only European town which has Hindi slogans written on the side of its trams. Of course it is supposedly linked to Bollywood, but the India traffic to Zurich has to be seen to be believed.

It is estimated that between $500 billion and $1,400 billion is hoarded in Swiss banks and add with that the money stashed in territories like Virgin islands and Bahamas and other assorted tax havens. We need to take steps to bring it back to India. The mechanics can be worked out in terms of amnesty and Swiss bonds issued against these dollars. It can tremendously boost our foreign exchange reserves and facilitate infrastructure investment.

To start with, we can add one column in our election affidavits regarding wealth accumulated abroad. Of course, the politicians are not going to declare the ill-gotten wealth. But, it may be useful for future regarding provision of false affidavits. The entire tax efforts of countries like India are subverted by these deposits.

The second and most important issue pertains to financing of terrorism. These secretive and non-transparent tax heavens can be a serious threat to India since the sources and uses of funds are not clear. The lesser the transparency, the greater the threat for civil societies. From that point also, it is imperative for us to get these vaults open.

The third point is that this should become a major issue in World trade and financial negotiations since what belongs to us cannot be denied to us for long. The entire issue of global financial flows and cross-country free flows become meaningless due to the presence of these tax heavens. Indian lead will shake the world and help large number of African and Latino countries.

Already, the Polit Bureau of CPI [M] has asked for government action in the light of the UBS developments.

Baba Ramdev, too, has demanded that politicians take steps to bring back the money.

It may be difficult to expect the major parties to take it up since the hands of many of its leaders are stained with rust and dust of Swiss bank vaults.

In the case of Bofors, it was the government of the day versus the opposition parties, and now it has to be a mass movement against all these tainted leaders. The citizens of India should fight to uphold the values of our republic which is not just a market or museum piece but a living civilisation wounded by colonialists and looted by current thanedars ruling the roost in the corridors of power. If the leaders keep quiet on this burning issue, we can conclude the elite of the country has failed us. Of course, the DDM (Desi Dork Media) - both electronic and print - will be campaigning to "fill up pubs' in the name of freedom- rather than any serious issue. Our media has become just entertainers and not interested in any important issue.

Let us remember that past history suggests that the elite of India failed India and not the ordinary farmers or workers. The elite helped in the plunder and devastation caused to this country.

The thunderous silence of our elite in politics/ media/ business/ bureaucracy and arts speaks volumes about our collective guilt.

"No criminals" in politics is a good campaign. But can we have leaders with funds stashed abroad? The black money abroad is the Gangotri of all crimes. It shows our distrust about our mother land and contempt for Dharma. Let us deal with that first.

The writer is professor of finance and control, Indian Institute of Management - Bangalore, and can be reached at vaidya@iimb.ernet.in. Views are personal.

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Bringing down the house

DLF Chennai buyers have shown how group activism can cause builders to buckle to their knees. Developers have been milking the buyer for too long with overnight double digit price increases. It is time they get paid back in their own coin. I particularly like the line
"It is an unfortunate situation in which buyers are going back on a signed contract,” a senior representative of the developers’ association said. If customers take unfair advantage of the market situation then they would have to face the consequences of the breach of contract"

If the market was still in the bullish phase, developers would care less and cancel lower priced bookings and resell at a higher price. We need a lawyer to clarify what is a breach of contract ? What happens if someone cannot make payments due to job loss ? The Hindu has to be commended for its quality reporting.

Bring down prices or else….’

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A worrisome trend developers are facing is of buyers wanting to pull out of a contract after construction has started.

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Breach of contract fears.

R. Balaji

“During two decades of our doing business in Chennai never have buyers wanted to cancel after a contract was finalised and construction started,” says Mr R.V. Shekar, Managing Director, Lancor Holdings.

A leading developer in Chennai , Lancor Holdings is among those feeling the heat of a slow market in the form of buyers trying to back out of a deal midway.

Breach of contract

Earlier, the company has accommodated buyers who wanted to back out because of personal or professional problems. But now Mr Shekar says it is the ease with which customers are considering a `breach of contract.’ Their demand is: Bring down prices or else… they threaten to walk out and take others. And these are people who have signed on the dotted line and made more than one initial payment.

As of now it is not a major issue for Lancor but is certainly worrisome. Developers and buyers may end up spending time and money on litigation, says Mr Shekar.

For instance, at a Lancor project on NH 45 where over 230 of the 640 apartments planned have been sold, all the approvals are in place and work has started. Over 150 buyers have signed the agreement and the property has been registered for 58 more customers. But about 30 buyers want to back out even after making a firm commitment, he says.

The reason: if one developer cuts down on prices why cannot another?

Mr Shekar has explained to the customers the rationale behind the pricing — basic price of Rs 2,100 and an all-inclusive (covered car park, registration, club membership, taxes) price of Rs 2,640 but some are in no mood to listen.

When there is a proper contract in place and the company is keeping to its commitment, the law will have to take its course, he feels.

Lancor is among the victims of the fallout of DLF Homes’ controversy where a large group of buyers have come together to enforce a price cut. An unprecedented event in Chennai that has grabbed wide attention. Leading builders dismiss the DLF issue as an aberration. But if it sets off a trend then they would have to depend on the judicial system to come to their aid, they say.

According to representatives of the Confederation of Real Estate Developers Association of India-Tamil Nadu, developers are now keen on having an arbitrator in place. Next week the association hopes to empanel an independent body headed by a senior advocate to look into buyer-seller disputes. “It is an unfortunate situation in which buyers are going back on a signed contract,” a senior representative of the developers’ association said. If customers take unfair advantage of the market situation then they would have to face the consequences of the breach of contract.

‘Time delay’

According to Mr Chitty Babu, Chairman and Managing Director, Akshya Homes, a developer who has delivered over 600 apartments on the OMR , the problem is partly due to the delay in statutory approvals and due to builders and buyers transacting unapproved projects.

A major factor is the time delay when the customer makes the initial payment in an unapproved project. When there is a long wait customers develop cold feet. If approvals come on time, the banks clear the loan and start sanctioning funds and the customers will be fully committed. Fast approvals will save nearly a fifth of the project cost for the customer, he says.

A Bill Maher video on the how badly F**** the US economy is

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