Repayment blues to hit realty prices

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Real estate companies, which are already under severe financial strain, have to make a bullet repayment of over Rs 14,000 crore in the next two months to banks. This will force builders to cut prices of real estate stock, especially residential units, to boost cash flows to help them repay dues.

The huge repayment burden in December and January was created when many banks restructured real estate loans for one and a half years in June 2009 under the Reserve Bank of India’s (RBI) special dispensation. “This is falling due in the next two months,” said a senior executive of a bank, who did not want to be named.

But a senior banker from a public sector bank said, “Real estate companies will have to drop prices and sell properties so that there is a regular cash flow into their books.”

The problem started when developers began to jack up prices, stifling sales at lower rates. This hit cash flows of developers. Banks aggravated the situation by helping developers to roll over debt by recording repayment on the due date and granting a fresh loan to the same company the next day.

This helped the bank to continue the account as a standard asset while the developer got funds with no pressure to lower property rates and generate cash flows. Now, banks are watching their real estate exposure and implementing strong checks.

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US warns India about possible WikiLeaks release

Another embarrasment is about to hit the Indian politicians and government officials.
This might help the 2G scam accused as the Wikileaks.org disclosures will dominate the news headlines on Sunday and the coming week. Any guesses what US diplomats think about Indian politicians and Babu's.

DNA India reports.

The US has warned India and other key governments across the world about a new potentially embarrassing release of classified documents by the whistle-blowing website WikiLeaks which may harm the American interests and create tension in its ties with its "friends".

"We have reached out to India to warn them about a possible release of documents," state department spokesperson PJ Crowley told Press Trust of India.

"We do not know precisely what WikiLeaks has or what it plans to do. We have made our position clear. These documents should not be released," Crowley said, ahead of the expected release by the website of millions of sensitive diplomatic cables.

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Property prices could crash due to loan scam

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Finance Minister Pranab Mukherjee directed state-run lenders to avert the reappearance of the loans-for-bribes scandal and recommended banks to go for a critical appraisal of all real estate loans above Rs 50 crore. This, however, may curb projects and drive developers to private funds, according to industry experts. On Wednesday, Central Bureau of Investigation (CBI) arrested 8 finance executives on charges of taking bribes to pass loans.

Liquidity for the sector could dry up since bankers look cautious to sanction fresh loans which in turn will force builders to reduce prices to enhance cash output. But for prospective buyers, this is good news as many have been holding on due to high prices.

DB Realty dipped to 10%, Indiabulls Real Estate lost 5.2%, DLF fell 3.8%, and Unitech declined 6%. Shortage of funds is now threatening to act as a major hitch for project execution. This is an important cause for concern as the sector is only recovering now after the economic hiatus of 2008.

Mukherjee said, “Banks and financial institutions should strengthen the NPA (non-performing assets) monitoring and management in their institutions to ensure that advance action is taken to identify incipient sickness and take appropriate action on it”

A Bank of India official said, “All big-tickets loans, particularly to builders, will come under the scanner now. Recall of loans can happen if there is a fear that the quality of loans may suffer. But as of now, there is no such worry and hence it would not prompt us to recall loans.”

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2G scam, corrupt nexus between policiticans, business and the media

Full transcript of calls between politicians/lobbyists and journalists including the Ambani Gas deal, Air-India ripoff by Praful Patel and more. It appears that Prabhu Chawla had advance information of the judgement and Nira Radia is fishing for information. More juicy details by Outlook

By roping in the media the politicians and businessmen have nothing to fear. The 4th estate is as corrupt as the other three and these tapes provide damming evidence to that effect. When I said that the Indian media will never report the truth on the state of real estate because of vested interests like builders placing advertisements into the same publications I didn't realize the extent of the rot which had seeped into the system.

Forget real estate one can replace 2G scam with any other scam and the same nexus will operate with high efficiency.

There are also news articles which now put the stock market boom in recent months into question as the recycled corrupt money enters India thru Marutius and other tax havens.

Open Magazine has provided links to Barkha Dutt's conversation with Nira Radia. The media in India is the wolf in the lamb's clothing. Who will trust the messenger ?

Here are Magazine's links

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Mumbai realty gives affordability the go-by

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Mr Pankaj Kapoor, Managing Director of property consultant firm Liases Foras, said the prices are so high that “no one can buy”. Of course, if one limits his options, he can move that much further into the suburbs looking for properties that match his budget, he added.

Mr Kapoor said that while the average cost of an apartment in Greater Mumbai (municipal limits) was Rs 27 lakh in January 2004, it skyrocketed to Rs 1.47 crore in November 2008, slipped marginally to Rs 1.28 crore in June 2009 (when a correction set in) only to spiral to Rs 2.03 crore in September 2010.

Now, the preferred route for PE is akin to that of home buyers.

They move in at the project conceptualisation stage and book a definite number of flats or units for about 25 per cent down-payment at a pre-agreed price.

Property registration data for Mumbai indicate that after hitting a peak in property sales in December 2009, the subsequent monthly sales continued to decline till June 2010. While about 9,000 registrations were recorded in December 2009, only about 6,000 were recorded in February 2010. Preliminary field data show that there were only 4,500 registrations in May 2010, he said.

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RBI tightes home loan norms

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How can you beat this real-estate bubble?

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As property prices are showing only a few signs of abating, analysts predict that a potential real-estate bubble is looming large. So how can you achieve your long-awaited dream of owning a house? Moneylife went into a huddle with some industry analysts to give you the answers

Solution No. 1: Work hard, jump jobs, do anything to reach an annual Rs40-lakh salary.

Solution No. 2: Forget Mumbai or Delhi, there are a lot of other urban conglomerates in this vast country.

Solution No. 3: There is strength in numbers.

Vikhyat Srivastava, former analyst with the Kotak Mahindra Group and co-founder of GrOffr.com, a real-estate site for group-buying, told Moneylife, "As a group, you can get a discount for any service. If a developer is selling 100 houses, and a group comes to buy 20 or 30 houses together, he would lower the prices for them as he would be able to do away with one lot. As a group, one can get a discount of about 20%-30% in real estate purchases."

If statistics bore you to death, consider this. Until now, buyers trading on GrOffr.com have been able to garner bulk discounts of Rs19.85 crore on a piece of real-estate which had a market tag of Rs93.5 crore for 88 flats. Do the math. That's a lot of money saved.

Solution No. 4: The pre-launch phase is the best time to buy. But there is a caveat, though.

Solution No. 5: Rent, don't buy.

Solution No. 6: Be patient, very patient.

"I expect a price correction but the focus has to come back to consumers. If the property price does not increase in the next three years, it in itself is a correction. There are chances that property prices may undergo correction by 10%. If it doesn't appreciate in the next three years, it's overall a 30 % correction."

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