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How your dreams of a new home go bust

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Despite 90,000 flats lying unsold in and around Mumbai, MiD DAY finds that Rs 50 lakh will not get you a home even in places like Kandivli, Ghatkopar & Deonar.

Armed with a budget of Rs 50 lakh, MiD DAY reporters went to areas like Kandivli, Malad, Ghatkopar and other suburbs distant from the island city, where one would expect to find a flat in this range, but came back empty handed in every case but one. The only flat we could find within our budget was a 1-BHK for Rs 46 lakh in the poorly connected Kurar Village in Malad, which would be ready for us to take possession of only in 2013.

You have to wonder, why Government is sleeping at Wheel. Indian policies were admired when RE and finance bubble burst in US. Indian media and government were all praise saying how smart they were compared to US. Now, if the prices below do not yell, BUBBLE...., then what does? What happens when this bubble bursts? Do Indian Banks have no exposure to these absurd prices? I think we are in for a big surprise when this bubble crashes....

RNA Royal Park, Charkop (Kandivli)
Price: Rs 1.64 cr

Nand Dham, MG Cross Road (Kandivli)
Price: Rs 70 lakh

Orchard Residency, LBS Marg (Ghatkopar West)
Price: Rs 1.25 crore*

LBS Marg (Ghatkopar West)
Price: Rs 2 crore

Vrindavan Terrace, Sion-Trombay Road (Deonar)
Price: Rs 8 crore

India's subprime builders stocks

Here is a brilliant article by R Jaganathan on the destruction of weath in the real estate stocks.  I had written a similar article few years ago when the parabolic real estate stocks had crashed to the earth and people were holding losses of upto 90%. 

>>> Article below. I have cut paste it, just in case some smart Alec decides that it is no longer new-worthy. 

A curious phenomenon exists in the real estate sector. In the last three-and-odd years, you know, I know, and the dog at the lamp-post knows, that land prices have only gone up, flats cost more, and our EMIs on housing loans have gone up. We are paying through our noses for the few square feet we want to call our home.

Who gains when this happens? One presumes that the real estate companies and builders must be raking in the moolah.

But here’s the paradox: between January 2008 and June 2011, stock market listed real estate companies have destroyed investor value. The Bombay Stock Exchange Real Estate Index has dropped vertically by 85%, yes, 85%, when the broader market has fallen less than a fifth. The BSE Sensex fell by 15% during this time.

In a sample list of 10 listed realty companies compiled by Firstpost, the investor value destruction adds up to a stupendous Rs 2,66,952 crore. AFP
Investors have cried all the way to their brokers. In a sample list of 10 listed realty companies compiled by Firstpost, the investor value destruction adds up to a stupendous Rs 2,66,952 crore. DLF leads the list of losers— or rather, loss-creators— with a drop in market value of over Rs 1,43,520 crore.


What gives? When house prices have either not fallen too much and, in fact, may have only risen, when the land on which these houses were built was probably bought when prices were lower, why have real estate companies left investors holding the sack?

Far from investors deserting in droves, companies like DLF have, in fact, drawn new and more powerful investors. One example is Robert Vadra, hubby of Priyanka Gandhi, daughter of Sonia Gandhi.

According to a report in The Economic Times a few months ago, Vadra has been quietly diversifying away from his jewellery and handicrafts business into real estate. The paper says:

“…the 42-year-old Vadra, known for his punishing fitness regime and love for fast bikes, has sought to scale up and diversify his business activities since 2008, acquiring tracts of land in Haryana and Rajasthan, a 50% stake in a leading business hotel in Delhi, and attempting an entry into the business of chartering aircraft. Regulatory filings available in the public domain and reviewed by ET reporters reveal the changing graph of Vadra’s business interests. These include wide-ranging transactions with the DLF Group.”

Someone married into the country’s first family presumably has lots of advice available to him on how profitable, or unprofitable, the real estate business is, as is evident from the fall in the market values of shares. But we are surely missing something here?

Sure, we are. When house prices are high, when the profits reported on balance-sheets are falling, and share values reflect the same thing, it can mean only one thing: poor corporate governance. And in the real estate business, poor corporate governance means the profits may be hidden somewhere else, and investors are left sucking their thumbs.

Anecdotal evidence tells us that land is the currency used by politicians for storing their ill-gotten wealth. In fact, almost all recent scams implicating, bureaucrats and even judges involve land.

Sharad Pawar, the Nationalist Congress Party president, is widely believed to be a pastmaster in this business (Read more on this here.) Karnataka Chief Minister BS Yeddyurappa is under fire for corruption due to alleged land-grabs by his family members. (Read and listen here.)

The Adarsh Society scam, which cost Ashok Chavan his job as Chief Minister in Maharashtra, is about real estate. It also implicates his predecessor, Vilasrao Deshmukh.

YS Jagan Mohan Reddy, son of late Andhra Chief Minister YS Rajasekhara Reddy, is accused of owning lots of real estate in Andhra and Bangalore, as a Firstpost expose last month showed.

The Satyam scandal, where Chairman B Ramalinga Raju confessed to overstating accounts and profits, is also related to property: money was siphoned off to Maytas, a real estate company. And Jagan Reddy’s father YSR was a key player in allocating land and infrastructure projects to Maytas (reverse of Satyam).

Several judges of the higher judiciary are also being accused on involvement in land deals. Among them are former Chief Justice of India KG Balakrishnan, and Paul J Dinakaran, former Chief Justice of the Karnataka High Court, who is now being probed by a Parliamentary committee for various unexplained dealings.

If we have established the close linkage between the powerful and real estate skullduggery with this indicative list, here’s a speculative pointer: a part of the steep fall in the market values of listed real estate companies represents money parked elsewhere on behalf of the powerful.

If the total drop in value is Rs 2,66,952 crore for just 10 companies, and assuming even a 40% value drop due to weak sentiment in real estate stocks (when the BSE Sensex has fallen 15%), we are still left with an unexplained loss of over Rs 1,60,000 crore.

It is more than likely that this loss represents value that lies outside the companies in the hands of speculators, politicians, bureaucrats and middlemen who are part of the realty corruption chain.

And remember, we have only talked about listed companies. The real, real estate sector, may be even bigger than this.

Hinjewadi calling

It appears that protests of every kind are fashionable these days.  Now Hinjewadi tech workers are demanding better infrastructure for their own backyard.

Some interesting statistics : 70k tech workers contributing to total of 300k jobs. Roughly $4B in revenue. Projected growth to double in the next five years one can only imagine the plight of workers who commute from far off places to Hinjewadi.  The next logical think which people do is to move closer to work. If this happens we will see prices closer to Hinjewadi jump as demand will begin outstripping supply. Right now Baner/Pashan/Kothrud/Balewadi/Bavdhan are poised for another jump in prices. Pune prices have stabilized and now rising slowly again. With 70k people in Hinjewadi, Magarpatta and eastern pune are way behind west pune. I've heard recently Cap Gemini has opened a big office in Hinjewadi and Accenture is moving to Hinjewadi in a big way and moving people there from their Magarpatta office. IBM, TCS, Infosys and Wipro are already big in terms of headcount. If the headcount reaches 140k in the next 3 years investors in these areas will be amply rewarded. However the million dollar question is which builder to trust even after being convinced that a location is ready for prime-time ?

PUNE: Information technology (IT) professionals of the Rajiv Gandhi Information Technology Park in Hinjewadi took to the streets of this prime IT hub of Pune on Friday afternoon to express their anguish over the poor infrastructure, sub-optimal traffic management and inadequate security arrangements.

The silent protest of these knowledge workers triggers 'Hinjewadi First', a three-month-long campaign aimed at attracting the attention of all stake holders - including the administration, law-and-order machinery and local residents, to the need for a better Hinjewadi.

These professionals, who are generally busy creating cutting edge software solutions for businesses spread all across the globe, were unperturbed by the monsoon showers as they stood holding umbrellas and banners in their hands asking for better infrastructure, better traffic management, enhanced power supply and security for Hinjewadi.

Over 70,000 professionals work in Hinjewadi generating IT exports of around $4 billion, to contribute nearly 40 per cent of Maharashtra's IT exports annually. Incidents in the last couple of years have raised concerns about security in the area and the physical infrastructure being inadequate.

Mritunjay Singh, president of the Hinjewadi Industries Association (HIA), told mediapersons earlier in the day that Hinjewadi First is an initiative that intends to gain the attention of the stake holders of the state and the city through a series of activities planned over the next three months. The intention is to highlight the need for improvement in the Hinjewadi area, making it a world class IT destination.

"We get adequate support from the government for specific problems raised, but the time has come to look at the growth potential of the area. We need to take a proactive approach in developing infrastructure, power, security and traffic on an urgent basis, looking at the growth potential of the area," he said.

Singh pointed out that there is only one arterial road in Hinjewadi and this is inadequate by any standards to handle the number of vehicles that carry the 70,000 plus professionals in and out every day. "If we allow things to go as they are, the road will choke very soon," he added.

According to Singh, the growth of Hinjewadi can be well-planned and structured if a dedicated and competent authority is created by the government to develop a holistic strategy for Hinjewadi and Pune as an IT hub. HIA is looking for completion of a fire station in Phase III, development of more connecting roads from Infotech Park to Balewadi and Baner to ease the traffic flow, improvement of public transport, increasing the water storage capacity by 5,000 cubic meters along with an alternate water line from Kasarsai dam, improvement in pumping facilities and changing the old water line to new.

Singh said HIA has planned many more activities involving a variety of stakeholders to find a comprehensive solution to Hinjewadi's issues. These will include round table meets, symposiums, traffic regulation drives, tree plantation week, opinion poll through different mediums and a big conclave to conclude the drive and the creation of a vision document for Hinjewadi, he added.  

Guess what is common between Ramdev, Anna Hazare and RSS ?

The last few days in India have been very hectic for the media as the anger against corruption has been taken to level not seen in recent times. In such stressful times it is best to find some comic relief to soothe the nerves and ready oneself for the battle next morning. Chidambaram , one of India's cabinet ministers have graciously offered to provide Indian citizens their daily dose of laughter. 

On Twitter citizens from every walk of life are now joining Chidambarm in slamming the RSS for being responsible for almost anything and everything which has happened in the Universe for over few billion years.  Link here