DLF Business Model Suspect

Here is the news 

•  - http://business-standard.com/india/news/veritas-says-dlf-accounting-biz-model-suspect/466477/
• http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/dlf-shares-fall-after-negative-research-report-from-veritas/articleshow/12097092.cms 
• http://www.firstpost.com/business/is-dlf-on-the-ropes-stock-is-worth-only-rs-100-says-report-230946.html

Verbatim
"Canadian research firm Veritas has slammed realty major DLF Ltd, calling its accounting practices “conflicting” and pointing at gaps in its business model — charges the company termed “mischievous and presumptive”. Earlier, Veritas Investment Research had come out with damaging reports on other Indian firms, including Reliance Industries, Reliance Communications and Kingfisher Airlines.
Veritas has said DLF’s stock is at best worth Rs 100, and the company may have to recast its loan. DLF said “the company adhered to the highest standards of corporate governance and financial integrity”. “We do not generally comment on individual research reports. However, this report in question is presumptive and mischievous as the analysts have never contacted the company to seek any information or clarification,” a DLF spokesperson said . “The audited financials of the company are always in the public domain,” he added. Following the report, the DLF stock price dropped 5.5 per cent on Thursday, becoming the biggest loser on the Bombay Stock Exchange, closing at Rs 214 after an opening of Rs 224."

Source: Moneycontrol ticker

- Source Business Standard (link 1)

Stock price chart
http://www.google.com/finance?chdnp=1&chdd=1&chds=0&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1330634199048&chddm=391&chls=IntervalBasedLine&q=NSE:DLF&ntsp=0

Later Times of India trying to assuage market fears by claiming that DLF is crying foul
http://economictimes.indiatimes.com/markets/real-estate/news-/dlf-says-report-that-hit-its-shares-mischievous/articleshow/12100095.cms

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Rotten apples on the blog

Readers and folks who comment on the blog like Priti, Shyna, Vandana, Abeer , the good BB, Retired old man, Bharat, Shriniwas, Shubh Chintak  have  noticed some several off-topic, irrelevant and offensive comments on the blog. I can turn on the moderator mode, however the feedback loop of posting a comment and seeing it visible on the blog immediately is lost. At the end of the day I can clean up the posts and comments.  BB or whoever is masquerading as BB will eventually tire out by entering the CAPTCHA characters, but  if his only goal in life is to troll this blog 24x7 and keep slandering, I will be forced to turn the moderator mode on and then reject all his comments. 

What do you guys think ? I think we have a good discussion going on prices, areas, builders and the collective wisdom of people is helping everyone including myself. I had no idea about the price rise in the DDA cluster of Mayur Vihar, so keep up the good work and let us all keep posting. Even the casual reader has something to contribute so don't be shy. We all are looking for insights from the real world, not bogus planted articles by TOI , Jones Meghraj and others. 

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Searching the blog and other things

Someone asked me on how to search the blog effectively to find out articles related to duping of buyers by the builders. I've tried to tag all such articles with various tags like fraud etc. Look at the bottom of this posting and you will see those tags. Click on those tags and you will find the relevant articles.
On another note, due to some personal commitments I am unable to follow the market and post articles on a regular basis. I would urge some other folks to take up this mantle for the benefit for all concerned parties. I had given some folks posting rights in the past and I can give some more folks who would like to take up the cudgels from me. We have a good audience and the bull bear story will continue for a long time before everyone is exhausted.

As I see the market in Mumbai, speaking to friends everyone tells me the money has dried up. Some businessmen friends have drops of upto 40-50% in their sales. Rents have dropped. I was shocked to see some rentals going for 32k, which were quoting 50-60k last year.

We are in a deep protracted downturn, specially Mumbai. As I have said repeatedly, be it Mumbai, Pune, Chennai, Bangalore, affordability for Indians or NRI's is upto 4,000 per sq/ft. Anything above is for the politicians and black money operators. Anyone who pays more then that is going to suffer for a long time.

Lastly I spoke to a loan banker who said that most builders have reduced rates but still some are holding on. He does not see any hope for anything more then 7k. He is bit more bullish them I am :)

the areas I was referring to in this and previous posts is in Santa Cruz and Vile Parle.

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Impact of Satyam layoffs on real estate

We all know that Satyam cooked books. They had over 47,000  employees in various locations, primarily in Hyderabad. There is news that maybe 10,000 would be let go. The question is where will they find the "high" paying jobs. Everyone knows that service companies don't pay as much as MNC's and Satyam is one of the worst paymasters in this lot. I know several satyam folks who quit in US well before the scam since they were underpaid and overworked to the point of no return. Hyderabad has seen a boom which will rival no other city since AP folks are heavily  invested in lands, plots and apartments. The common acres to plots conversion technique is heavily ingrained in the local population and I was surprised to see many IT people buying acres on outskirts of Hyderabad just on speculation of the new airport in Shamsabad. Now with the airport hype dying down, and the disappearing  act of a regular paycheck, where does it leave Hyderabad. Maytas is another story and I know several people who have booked and now stuck with no exit. These folks are bleeding pre-EMI interest and will do so for years. It goes to show the due-diligence done by banks on properties in nil.

Here is a DNA article on Satyam layoffs.

Layoffs at Satyam set to begin with BPO unit

Hyderabad: Tech Mahindra, after gaining control over the troubled IT major Satyam Computer Services, seems to be getting straight to business.

The company intends to downsize operations beginning with the business process outsourcing arm Satyam BPO (formerly called Nipuna).

Sources in the company saidthe layoffs will begin with the support department. "The billable staff is not going to be disturbed now. It is the support staff that is likely to exit," the source said.

Satyam BPO has over 3,000 associates and the ratio of billable staff and the support staff is about 35:1. "The target is to make it 80:1. This means a major shake-up in the BPO arm," the source said.

About 60% of the support staff face the axe.

Tech Mahindra has decided to use Satyam's existing marketing, HR and other support functionaries for the BPO too instead of having a separate set-up.

Sources among employees said that there are about 80 people in the HR department alone and about 60 of them are likely to go.

"Particularly the support functions in both Satyam BPO and Satyam are obscenely overstaffed. Any effort to resurrect Satyam would happen only by rationalising these functions," the source said.

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Nasscom in denial mode

Moneycontrol.com has an interview with the Nascomm chief to discuss the implications of the new Grassley/Durbin legislation on H-1B visa curbs. I find Nasscom defense to be absolutely weak and even a 10 year old will  have the IQ to understand why it holds no water. The bigger story here is the abuse of the L-1 visa by IT companies to shop Indian bodies to the US. Increased scrutiny of those applications will have bigger implications then the H-1b visa where according to Nasscom only 30% of the visa's are granted to Indian IT companies.

How this affect property prices in tech capitals is another story.

Don't see new H1B proposal turning into an Act: NASSCOM

Published on Fri, Apr 24, 2009 at 20:50 , Updated at Sat, Apr 25, 2009 at 17:32 

Source : CNBC-TV18

US lawmakers have introduced a new bill with additional restrictions on H1 B visas. Ganesh Natarajan, Chairman of the National Association of Software and Services Companies (NASSCOM), said if this proposal passes in the current format then it will have a fairly disastrous impact on the IT sector. “But I am hopeful that over the next three-months we will not see this really becoming an Act.” Meanwhile, Commerce Minister Kamal Nath said he is concerned by the contents of H1B visa bill by Senator Durbin and Senator Grassley. "The bill will restrict the ability of Indian IT companies to compete in the US market place. The bill is not in line with US President Barack Obama's stand against protectionism at the G20 meet and not in line with our desire to mainstream development in the Dohanegotiations." Also Read: US's new H1-B proposal anti-trade: NASSCOM  New H1-B bill wants Indian IT cos to hire more in US Here is a verbatim transcript of the exclusive interview with Ganesh Natarajan on CNBC-TV18. Also watch the accompanying video. Q: This is not law as yet and it is only presented for legislation but what kind of an impact does this likely to have? A: If it passes the way it is, obviously it is going to have fairly disastrous impact because this particular piece of legislation is very different from the last time they presented.  This proposal also includes a provision called 50/50, which means that if you employ more than 50% of your people who are visa dependent, then you cannot employ more people with visas. So that’s very problematic. We have spent a lot of time with Senator Grassley and Senator Durbin and we hope that they understand the implications. The implications being that this kind of fly in the face of free trade, it primarily will target Indian companies. So I am very hopeful that over the next three-months we will not see this really becoming an act. Q: If this does go through what does this do to cost structures because this gives on site off shore a completely new meaning especially given the 50-50 provision? A: If a company is employing 5,000 employees in the US on a normal basis, 70% of them could be H1 or L1 Visas, it could literally mean that you will have to find replacement of about 1500 people and its not just the difficulty of finding the replacement but training them the cost involved, there could be a lot of business discontinuity and I personally feel that people will realize it when they go for the debate in the house, it wont get passed atleast certainly the way its being filed. Q: A lot of people in the US might be viewing this as a restrictive trade practice what Indian IT companies are doing in terms of explaining the situation as far as our position is concerned? A: We have had 3-4 meetings we worked with Tech-America which is the local association there, we have had sit down meetings with various people and they understand this. We even mentioned that this will specifically be seen as against India which is not a good thing and they have heard us and I think atleast the indication that we got was okay let this get filed, we will discuss it whether the US legislation discusses it before during and after the event, so that’s why I am not particularly perturbed, it could be disastrous if its passed in the current format but I am pretty sure that it wont.

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Wall Street bankers in rage

NYMag has an excellent article on life after the crash for Wall St bankers. This is one of the best articles I've read on this topic and the comments are even better as they truly reflect the public's mood towards the wailing bankers.

>>

The Wail of the 1%
As the privileged class loses its privileges, a collective moan rises from the canyons of Wall Street.

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Financial media responsibility

Here is a good article on how the incestuous relationship between the financial institutions and financial media can be terminal on your financial health. We see this in India all the time and we need to keep our eyes open  to financial spin and soft marketing articles planted in the TV and news media every day.

Where's the accountability?

By Aravind Srinivasan 

A well publicized conversation between Jon Stewart and Jim Cramer last month opened a lot of eyes. Jon Stewart is the incredibly funny and intelligent host of Comedy Central's "Daily Show" and Jim Cramer is the loud-mouthed, hyperactive host of CNBC's "Mad Money". Stewart had Cramer on his show and conducted a serious interview especially by Daily Show standards. This three part interview is a must-see for everyone interested in the stock market. Its message is very relevant to Indians living in the US and in India since a lot of us are involved in stock markets to varying degrees and the dynamics behind these markets and media in both countries are very similar. This interview was all about accountability or the lack of it in the financial media. You could tell Stewart was disturbed by the whole financial crisis and what was going on in Wall Street for years. Stewart went after Kramer and CNBC and just stopped short of calling them liars. His basic

question to Kramer and CNBC was, "Who are you working for?" Are you on the side of the viewers or are you siding with big corporations and financial firms? These questions blind-sided Kramer who didn't have coherent answers. The reality is, in bull market, these questions don't matter as everybody makes money and it appears like the interests of all parties involved are aligned. But when things go south like it has over the past months, then somebody is losing money and somebody is taking their money. Now you wonder what role channels like CNBC play here? 

Stewart accused CNBC of hiding the truth and not exposing what they knew about these corporations to average investors so that the latter could make more informed decisions. After all, these guys call themselves the financial experts and know lot more about stock market than us. They spend all day researching these companies because it's a part of their job and this puts them in touch with numerous CEOs, federal regulators and economic experts. The question is, how they didn't know about or predict or understand the credit crisis, over-leveraging and toxic assets? Or did they know but preferred to hide it from you and me because it could harm their business? Stewart was spot-on with these insinuations and the average Joe is definitely happy with his line of questioning in this interview. The answer to me is obvious. 

These channels had access to a lot more interesting information than they revealed and should be held accountable. Financial media betrayed the average investor, not only did they not tell you what was going on in Lehman brothers or AIG they sometimes asked you to buy Lehman or AIG stocks. Channels like CNBC are guilty of omission and commission. They didn’t cause the meltdown, but failed in educating people about it. Experts on these channels understand economic theories, subtleties and market nuances but they don't look at their job as one of educating and protecting average investors. Their knowledge is used to produce quality programs, hold intelligent discussions and improve their ratings. The lesson the average viewer learnt is; you are on your own when it comes to your money. Don't look up to these guys on TV for help and direction. They have enough problems holding on to their jobs, dealing with competition and ratings, your welfare’s the

last thing on their mind. An investor with some money in the market is usually an interested viewer of these channels. Many stop watching these channels when they get their money out. So like any good business, these channels and newspapers try their best to hold on to their customer base meaning they want to keep you interested and invested in the markets. It’s important for us to understand this especially today when financial channels are doing good business in India as well. It's our job to learn how to handle this flood of information and noise drowning us from all sides. This discussion on media accountability can and should be extended beyond the financial media. For instance, do we really believe that mainstream news channels do a great job in telling us all they know about politics, executive, judiciary and legislature? Definitely not! They pick and choose what works for them and we need to make them accountable for what they say and what

they don't. While it's obvious to see the impact of bad financial media on our wallets, what happens in mainstream media affects our lives far more comprehensively including causing these financial meltdowns in the first place? Afamous football coach once said - "you think you know, but you don't and you never will". This is the predicament of the average citizen of this world and the media in democracies can help fix it. Let’s hope this Stewart-Cramer conversation nudges them in that direction. 

Aravind Srinivasan is a Software Engineer at Yahoo! Incorporated in the Silicon Valley. Born and raised in Chennai, India he has lived in the US for 14 years and is involved in socio-political work. He can be reached at his blog 

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The end of Secret Swiss banking

Bloomberg reports on the collapse of secrecy in the Swiss Banking industry. From what I hear, Singapore is the new offshore destination for secret banking since their laws are tighter then Switzerland.

If India did something similar to the US, how many skeletons would tumble out of the closet ?

Switzerland’s unprecedented decision to let UBS AG hand U.S. tax authorities clients’ details risks damaging a banking industry that relies on a pledge of confidentiality to win business, legal scholars said.

“This could open the floodgates,” Peter V. Kunz, head of the business law department at the University of Berne, said in a telephone interview today. “Giving in to the U.S. sends a signal to other countries and the European Union. I don’t see what would stop them from acting in the same way.”

The Swiss Financial Market Supervisory Authority said yesterday it would allow UBS to pass on some client data to save the country’s biggest bank from criminal charges in the U.S. that it said could have “put its existence at risk.”

Switzerland is being increasingly pressed by countries such as neighboring Germany to amend banking secrecy laws, first introduced in 1934, which they say promote tax evasion. German Finance Minister Peer Steinbrueck said last year the Swiss should be put on a “blacklist” of uncooperative tax havens. The European Commission proposed this month to end anonymity for bank account holders within the 27-nation area, and may seek to expand the measure to cover Switzerland and Liechtenstein.

“Swiss banking secrecy will not exist in today’s form in two or three years,” said Dirk Nitzsche, a senior finance lecturer at Cass Business School in London. “Switzerland has already done a lot over the past couple of years. But the international community wants more.”

Offshore Center

Client confidentiality is a cornerstone of Switzerland’s banking industry, which has attracted some 27 percent of all privately held offshore assets, according to the Swiss Banking Association. U.S. law views tax evasion as a crime. Swiss law doesn’t. The Swiss view tax fraud as a more serious offense.

The U.S.’s success “is likely to encourage other tax authorities to pursue claims against the Swiss more vigorously,” Dirk Hoffmann-Becking, an analyst at Sanford Bernstein & Co., said in a note to clients today.

The U.S. is likely to continue to put pressure on both UBS and the Swiss government to make it harder for individuals to move money offshore as President Barack Obama’s administration attempts to finance its economic stimulus plan, he added.

The European Commission, the European Union’s executive arm, today said it welcomed any effort to improve governance.

“We expect a similar request from EU member states to Switzerland would not receive different treatment,” Maria Assimakopoulou, spokeswoman on tax issues for the agency, told reporters in Brussels today.

Justice Department

Swiss Finance Minister Hans-Rudolf Merz described the settlement as an “isolated case” after the U.S. authorities set a Feb. 18 deadline for UBS to reach a deal or face indictment. While it’s “problematic” that the official procedure wasn’t followed, an indictment and possible failure of UBS would have had consequences for the whole Swiss economy, he stressed.

The U.S. Justice Department accused UBS of conspiring to defraud the country by helping 17,000 Americans hide accounts from the Internal Revenue Service. The U.S. will drop the charge in 18 months if the bank reforms its practices, aids prosecutors and pays $780 million. UBS will immediately turn over names of about 250 clients, according to people familiar with the matter.

“The U.S. authorities didn’t want to wait, as a constitutional state is supposed to do, but pressured for an exceptional allowance,” Kunz said. “The legal basis for such actions is very thin.”

‘Problematic’

The government should have followed the information-exchange agreement it has with the U.S. and waited for a Swiss court to rule on the matter, legal professors say. Clients have to be notified before their data is released under Swiss law. The federal administrative court received objections in November.

“What concerns me the most is that evidently legal protection for these clients is being impeded,” said Rainer Schweizer, a law professor at the University of St. Gallen. “Clients have to complain about this to the federal court.”

UBS agreed only to the immediate disclosure of account holders involved in fraudulent or sham offshore account structures, according to people familiar with the matter. The Swiss finance ministry has had some 40 people working on the case, trying to determine whether any of the clients whose information was requested committed tax fraud.

Merz said that data on some 200 to 300 clients that is transferred to the U.S. “clearly” relates to tax fraud rather than tax evasion. UBS Chairman Peter Kurer told Swiss television in an interview that the clients had made “false statements in writing” to the U.S. tax authorities.

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Satyam land grab scandal

How many people feel that Hyderabad real estate is headed for the steepest drop among IT cities ??

Prosecution opens Raju can of worms
G.S. RADHAKRISHNA

Hyderabad, Jan. 22: Government agencies today portrayed a hydra-headed Satyam scandal involving bogus employees, systematic skimming of money, countless land deals as well as a cover-up and laid the blame at former chairman Ramalinga Raju’s door.

The disclosures, made in court and outside, were rebutted by Ramalinga’s lawyer who termed them “concocted”.

Public prosecutor Ajay Kumar opened the floodgates in a metropolitan court, changing the complexion of the revelations that have so far been confined to “leaks” by unnamed sources.

“Investigations reveal that he (Raju) had created false employee accounts for over 10,000 bogus employees and siphoned off almost Rs 20 crore per month in their name,” Ajay Kumar told the court today. The prosecutor also claimed that Raju had “stashed almost Rs 7,000 crore in the accounts of his mother and brothers”.

Later, officers of the Andhra criminal investigation department (CID), which is handling the case, said the erstwhile Satyam promoters had been crediting the money each month for four years to as many as 13,000 non-existent employees.

The officers gave the break-up as 10,000 bogus employees and 3,000 retired ones. “The then Satyam management has given hikes, promotions, bonus and LTA to these invisible employees all these years,” a sleuth said. If true, the amount on this count alone adds up to Rs 960 crore.

In the evening, the CID went on record to say it had found documents suggesting 400 benami companies were used to acquire vast tracts of land.

“The documents reveal a mind-boggling land acquisition spree by the Satyam promoters across the country,” said V.S.K. Kaumudi, the inspector-general heading the CID investigation.

The payments for the land deals were made from domestic and overseas accounts of the promoters, the CID said.

The benami companies have been floated by SRSR Advisory Services, a company through which the promoters used to control Satyam, the CID said.

Ramalinga’s younger brother Suryanarayana, apparently a key figure managing the SRSR cash, has not been seen in public since Tuesday night. The police have impounded the passports and frozen the bank accounts of 18 relatives of Ramalinga.

Late tonight, the CID raided six apartments across Hyderabad allegedly used by the promoters to “dump” papers and documents. The sleuths are examining their authenticity.

Prosecutor Ajay Kumar told the court where Ramalinga was produced this afternoon that the promoters had generated false documents for around 2,000 acres in and around Hyderabad so that Maytas Properties, the family’s realty venture, could raise bank loans. Nearly Rs 3,300 crore in loans were allegedly raised using the land documents.

The prosecutor claimed that fake fixed deposit certificates worth Rs 4,000 crore had been found. Some had been mortgaged to raise loans.

Ramalinga’s lawyer, Bharat Kumar, said the CID had never asked his client anything about the alleged non-existent staff, bogus land papers and fake FD receipts.

Bharat Kumar pointed out that the public prosecutor was making verbal allegations without mentioning them in the petitions filed this morning. Government sources later said the chargesheet would mention the specific points.

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MLAs are eyeing 300 plush Mhada flats

Why blame only Raju and Maytas for the land grab ? Here is an example of a legal land scam, where members of all parties will collude to gift each other this precious commodity. Corruption and greed of Indian politicians is at its peak. It is not even two months for the Mumbai attacks where hundreds of Mumbaikars died for no cause of theirs and brave policemen and commandos battled terrorists with obsolete weapons. Instead of compensating the family members of the slain citizens with a place to live these uber corrupt politicians want to rape and pillage any asset which comes their way.

These guys are no better then Ghazni or Genghis Khan and deserve to be taught a stern lesson. I appeal to everyone to forward this message to as many people, blogs, newspapers and TV channels and stop these looters at their doorstep

DNA reports.
Mumbai: In a move likely to anger hundreds of prospective flat buyers wanting affordable housing, the state government is considering a proposal to allot 300 newly constructed flats in a posh area at Lokhandwala complex in Andheri (West) to housing societies of past and current legislators.

Keeping this proposal in mind, the Maharashtra Housing and Area Development Authority (Mhada) kept aside 300 flats and did not bracket these with the 686 flats released for sale this week.

Mhada has constructed 1,088 flats of two and three BHK admeasuring over 800 sq ft carpet area in the sole high income group residential complex at Lokhandwala costing Rs44 lakh and Rs57 lakh respectively -- a steal as the Mhada prices are about one-third the prevailing rate quoted by private developers in the area at Rs12,000 a sq ft.
Sitaram Kunthe, state housing secretary, refused to comment.

However, HK Jawale, chief officer of Mhada's Mumbai board claimed that construction is still on at the HIG colony.

The legislators' demand is reportedly being spearheaded by two cabinet ministers. The ministers claimed that the government had earlier allotted land in survey number 161 at Versova to housing societies of legislators. But since the land fell under coastal regulation zone, buildings could not be constructed.

In lieu of the flats at Lokhandwala, the government has initiated the process to change the reservation of land near Bhakti Park at Wadala from no development zone to a residential use, said an official.

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Slumdog Billionaire - Truth be told

"The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones," Raju said in his letter. "I am now prepared to subject myself to the laws of the land and face consequences thereof."

If there is someone who knows to tell a dramatic story, it is B. Raju. Thanks to Anon for the post where the Satyam CEO announced in painless detail the Satya(m) of the balance sheet. Satyam as most employees will attest is a sweat shop. Employees in the US work ridiculous hours and get peanuts for all their efforts. I'm not sure how employees in India are treated. It goes without saying that Satyams's customers will switch to other outsourcing companies and I wont be surprised with US based companies get the right to choose customers as opposed to the India big three. It also looks like we can easily see a layoff of 50% of the workforce in Satyam. What happens to all the mortgages which have been sunk into Hyderabad real estate ? As we saw the stock market took a beating down 750 points, Satyam investors have been wiped out. This is just beginning to get ugly. Maytas and Satyam will be remembered as Worldcom and Enron. The last straw which broke the market's back. Wonder how many more books are cooked by Indian management. The auditors are a joke. God save outsourcing.

Here is good analysis on how the books were cooked.

Here is Raju's candid letter to the SEC. Without regret or remorse, the criminal has bankrupted the company he has founded and will bring Hyderabad to its knees.

Satyam Chairman Fraud Confession

View SlideShare document or Upload your own.

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Funny Reliance email

Found this funny email doing the rounds on the internet. It truly refects the state of the Bombay shock market.

Dear Shareholders,

Through self RELIANCE, you will have the POWER & ENERGY to bear all your losses. This COMMUNICATION is directly from our boss who is making CAPITAL on your behalf. Remember, you foolish investors are our NATURAL RESOURCES.

Yours Truly,

Aadhi Duniya Apna Group (ADAG)

Roz India Looto (RIL)

"The broker is not your friend. He is more like a doctor who charges patients on how frequently they change their medicine."

Forthcoming IPO from Reliance Group

RELIANCE NURSING HOME

RELIANCE SCHOOL

RELIANCE COLLEGE

RELIANCE JOB PLACEMENT

RELIANCE MALL

RELIANCE BANK

JEENA RELIANCE MARNA RELIANCE

THE HOT FAVOURITE STOCKS:

RPL (Raha Paisa to Lenge)

RNRL (Rona Nahi Fir Bhi Ro Lenge)

RIL (Risk in Life)

REL (Roz Ek Lafda)

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Don't buy unfinished homes

The news is coming thick and fast. DNAIndia is finally doing some realistic reporting. The game is simple. Its a buyers market and the buyer can demand a 40% reduction of a completed property. A deal will only happen if both parties agree and today there are no deals since there is a disconnect. Greed is good but only for a limited time. Now it is the buyers time to get greedy. As the article rightly points out, going for an under construction property is a disaster waiting to happen. There are thousands of new projects which are launched in 2008 and most of them will be delayed by 2-3 years beyond their projected dates. Already Raj Thackrey's campaign is having an effect on mumbai's and Pune's construction market where builders are attributing him to delays. They are also invoking the Force majeure clause which allows them to disown responsibility for building delays. 99acres.com and magicbrics.com have thousands of properties for sale and half of them are ready to occupy. It is a buyers market like never before. So if you have cash, you are king.

Liquidity crunch delaying projects, only 30% price cut can help: Experts

MUMBAI: Want to buy a home this festive season? Then don’t go for a one that is still under construction, warn experts in the realty sector. The global slowdown and crash of financial markets has left builders with little money and they are struggling to wrap up even the half-finished projects, let alone going for new ones, according to industry analysts. Experts warn that the financial strain on realtors is causing indefinite delays in the completion of many projects.

“Those who intend to buy property should go for only completed flats. It’ll be too risky to buy properties under construction,” said an analyst with a foreign brokerage who did not wish to be named.

Real estate is an end-user sector where the money mainly comes from home buyers and development happens in phases.

“But developers across the board raked in money from initial public offerings and invested them in buying land parcels paying huge premiums. Now, banks have stopped lending, money from private equity is very costly and unorganised lenders are charging interest rates as high as 30%. So how can developers complete projects profitably,” asked the analyst.

He cited the example of a Mumbai-based realtor whose high-end residential project in Lower Parel, one of the city’s commercial hubs, was to be completed in 2006 but has now been delayed till 2009. Uncertainty looms large over whether even this deadline will be met, he said.

An official of the realtor in question had earlier told DNA that the project would be rolled out before Diwali this year. An email sent seeking clarification on the new deadline remains unanswered.

This isn’t an isolated case. Analysts say delays of three to four years are likely in under-construction projects.

Despite the headwinds, developers have stubbornly stuck to their pricing. This could be one of the reasons why sales have failed to pick up, even though builders are offering freebies such as free stamp duty registration and parking space, modular kitchens and interiors, and interest-free EMIs till the buyer gets possession of the flat.

“A price correction of a minimum of 30% is required for sales to pick up. If this correction does not come in six months then some listed developers will end up being negative cash companies. Even if buyers are desperately looking for houses, they should wait for a minimum of three months before taking the plunge. Also, they should look only for properties that are ready and available for possession,” said an analyst of a domestic brokerage.

Vikas Oberoi, managing director of Mumbai-based developer Oberoi Constructions, agrees. “Buyers should be wary of under-construction projects because developers who are overleveraged will not be able to complete their projects. So a buyer should look at a developer’s past projects. At these times, it’s all the more important for people to be careful about where they invest,” he said.

And though the slump is pinching, consolidation in the industry is not seen coming. An analyst said, “Even if a developer gets land at a discount of 35-45%, he will not buy it to save money for construction. Those who haven’t seen free cash flows in the last 6-8 months will halt their launches and sit tight till the tides turn in next 18-24 months.”

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Run on FMP's causing panic

This could be India's subprime and credit crisis which will affect the realty industry the most.

Sucheta Dalal & Debashis Basu say that withdrawals from Fixed Maturity Plans can turn into a huge problem

A full blown panic in the real estate and financial services sectors has led to the withdrawal of nearly Rs 30,000 crore from Fixed Maturity Plans of Mutual Funds in the past week alone. These funds are meeting all redemption demands by borrowing money at high rates of 20% to 24%. This may end up destroying parts of their corpus and may lead to losses for retail investors. Retail investors have (as usual) foolishly remained invested in FMPs lured by their pitch which touted them ‘safer than fixed deposits and offering higher returns and lower taxes’, on the assurance of ‘indicative’ returns, although MoneyLIFE magazine (FMPs Lose Shine) had repeatedly pointed out that the risks of FDs and FMPs are so vastly different that comparing them are like comparing oranges and apples. FMPs may end up being like the unregulated Overseas Corporate Bodies of the previous market decline. Someone needs to urgently look at what is going on inside them. Unfortunately, SEBI does not even gather data about the FMPs issued by mutual funds or the quality of securities in them.

The other problem today is super-liquid schemes that invest in the call money market. There was no regulatory oversight on these schemes and they have been allowed not to mark their investment to market and could claim to hold them to maturity even when it was a one-year paper. This has created a very dangerous situation today.

Finance and realty companies are the weakest link in the chain. Many FMPs have subscribed to short term AAA rated paper of finance and realty companies. The credit rating of these papers now looks doubtful. One finance company (belonging to the bluest of the blue chip business house whose previous finance arm was deeply involved in the 2001 scam), has also renewed its paper at an exorbitant rate of 32%.

The smarter, corporate investors are taking no chances and pulling out funds and exacerbating the salutation leading to panic. No regulator has bothered to collect data on the investment pattern of FMPs and liquid schemes and keep tabs on it. As result, the systemic risk posed by the redemption runs on these schemes and the shaky underlying debt securities in their portfolio is suddenly upon us and nobody knows whether the RBI should look into it or SEBI or both. Mutual funds that are borrowing to meet redemption are refusing to utilise their bank credit for this emergency, because they feel that it will only put information in the public domain and cause a run on the fund.

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Buy your house - next year!!!

Since when did we start seeing these headlines. Now the original prophecy laid out in my original postings of the collapse of WAMU, Wachovia has come true, what do we expect next.
Based on today's 777 point drop in the DOW, I would expect the Sensex to hit 8000 fairly soon. We are at 12500 and the journey to 8000 should be swift and painless. Mumbai as a property market is dead. I think prices can easily drop 50% and rentals down 60-70%. Any apt which is quoting over 5k per sq/ft is not viable. If the developers have paid over 5k as their acquisition cost, they are the sub-prime of India. They have borrowed funds to acquire sub-prime assets and they will have to pay the price. Nobody in the right mind has 1cr to buy an apt in Mumbai, let alone other cities. I think the paradigm "Real estate never goes down in Mumbai" is now dead. Real estate has collapsed under the weight of the Sub-prime and the flow of cheap money, funded by unscruplous bankers. All the I-Bankers buying properties of 4-12 crores better find ways to find their purchases. The party is over, and the drunks are straggeling to get home. The Rahejas and the Hirnandani's now have to go back to the common people who were priced out of the purchase and if they don't drop prices, they can keep their apartments for themselves and their relatives or friends. With the implosion of the US banks, credit is weak. Amercians with retirement plans funded over the past 20 years are now bailing out to the safety of money market funds. How does Mumbai survive this huge gigantic iceberg. The real estate buildings spring up all over Mumbai will collapse like the Titantic and will remain unfinished if they are not sold at below market rates. Witht he media also harping on the slowdown, expect everyone except the diehard optimist, like Realtly rider and Ashish to keep buying properties and these folks deserve to have their money parted for a fool and his money will soon be parted. For the rest, lets keep watching the party unwind. It was a great run and an even greater drop. Gravity rules.
The time for buying in projects breaking ground or just starting has ended. With the collapse of credit, there is no way to know if projects will be completed and bills paid. This happened in the 80's where there were many unfinished buildings since the developer ran out of money. Whenever the time comes to buy, sometime next year and prices have fallen steeply, it is best to buy an property which is ready or almost ready. Project execution risk has too be taken out of the equation. With so many developers folding only the biggest and ones with deep pockets will survive. Everyone else will be road kill. As of now in terms of banks, there are only 4 major banks left in the US, Bank of Amercia, Wells Fargo, JP Morgan Chase and Citigroup. Citigroup had to be bailed out by the Arabs, so what is the guarantee that a company like ABC Constructions will survive in a fastly deteriorating market

DNA India reports.
A survey of brokers shows that enquiries to buy homes have fallen, with Mumbai registering a 90% drop. Brokers expect prices to drop soon.

The word is out on the streets. About 60 per cent of brokers expect prices in the Mumbai island city and up to Borivili to come down in the next year. Pranay Vakil, chairman of Knight Frank, global property, says he is also concerned about the volumes, which currently are 10 per cent of the sales recorded last year in Mumbai alone. “Prices are a function of demand and supply. But if volumes do not sustain, the problem will be greater and will bring the industry to a halt. Currently, only long term investors who have seen the ups and downs in the market are holding on.”

According to a pan-India survey of local brokers on the residential property market carried out by Edelweiss, global research analysts, almost 80 per cent of brokers across India have witnessed a reduction in enquiries over the past month and about 90 per cent of brokers in Mumbai have seen a drop in transactions over the past one month.

Hundred brokers in 20 micro-markets like Bandra-Borivili, Mulund-Thane, Gurgaon, Noida, Whitefield-Marathalli, Annanagar in the cities of Mumbai, Delhi, Bangalore and Chennai were polled.

According to Vakil, in order to increase volumes, developers will now cut down on quality in big projects. “In a total of 10 buildings, two will maintain high quality at a high rate, but in two he might offer low quality tiling in bathrooms and use it as an excuse to reduce his prices,” he says.

According to property experts, volume is driven by sentiment. If a buyer is sure of his ability to retain a job — essential to maintain a bank loan — he will go ahead and borrow money to buy a flat. “The situation is rather flexible. Apart from high property prices, high interest rates have cast a big question on the affordability of a flat purchaser these days,” said an equity analyst.

That the lack of demand and growing liquidity crises has developers worried was obvious at an informal meeting of 35-odd developers at a suburban five-star in Mumbai recently. With banks like Bank of Baroda, Bank of India recently announcing that they will not lend money against property, developers are worried about how to source funds for their projects. “The tightening money market has made IPOs redundant.

Venture capital funds have stopped lending and developers do not want to go to money lenders because of high interest rates of about 25 to 30 per cent. So, the only option is to either start selling faster by reducing rates (something they do not want to do) or curtail production which many of them have already started doing,” said a property consultant with a global real estate major.
According to Anuj Puri, managing director of Jones Lang Lasalle Meghraj, a global real estate firm, “Developers will have to reduce their prices if they have to beef up their quantum. I believe there is still a lot of depth in the market but at the right price. The faster the developers understand it, the better it will be for all concerned.”

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Lehman fall may deepen Indian realtors' credit woes

Enuff said

NEW DELHI/MUMBAI: Lehman Brothers’ bankruptcy is likely to cost Indian real estate dear. It may impact the financial major’s existing investments worth $500 million in realty firms, including DLF and Unitech, besides drying up another $500-million worth of potential investment which was expected to flow into Unitech’s Mumbai projects.

The news of Lehman’s collapse brought the BSE realty index down by 7.65% on Monday, while the benchmark Sensex declined 3.35%. Both DLF and Unitech fell 7.5%.

Lehman’s fall signals a deepening of credit crisis for Indian developers, who have lately been battling falling sales, rising cost of construction and tightening credit. It is expected that the US-based firm is likely to go for a fire sale of its assets.

The financial services major was very bullish on India and was among the active investors in Indian real estate. Early this year, it had leased out an office space in Mumbai paying Rs 1 crore per month as rental. This would divert a part of fresh funds seeking to invest in Indian realty.


This is because global fund houses have country-allocations. And as they buyout Lehman’s stake in some of the Indian assets, they will end up diverting some of the fresh funds-in-hand to existing assets rather than investing in new projects.

“Lehman’s departure will impact future cash flows of real estate companies. In a market situation like today’s, it will be all the more difficult for the firms to raise funds,” says Karvy Stock Broking vice-president Ambareesh Baliga.

Lehman invested $200 million in DLF promoter group company DLF Assets last year and bought 50% stake in Unitech’s Mumbai project for $175 million a few months ago. It had also invested $80 million in Bangalore-based SEZ Gandhi City and was likely to hike its share to $300 million.

Lehman’s other investments include a 40% stake in an IT park project of Peninsula Land in Hyderabad for an initial investment of Rs 50 crore. It had also teamed up with Mumbai-based developer HDIL to bid for the redevelopment of Asia’s largest slum Dharavi.

Wherever the developers had received fund, they are safe. But where the funds are yet to come, the developers could get stuck. Some analysts say a distress sale by Lehman will impact the valuation of existing projects.

DLF CFO Ramesh Sanka had earlier told ET that Lehman’s sale of investments in DAL would not impact DAL’s valuation. Unitech MD Sanjay Chandra said that his company had already received funds. So, the company won’t get impacted by Lehman’s bankruptcy.

Some industry executives say that FDI norms of a three-year lock-in period may prevent Lehman from making an immediate sale. But analysts argue that the lock-in period in case of bankruptcy may not hold.

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The new Zamindars of India - TheRussian mafia

Livemint.com reports on apathy of the Goa government to look into illegal land dealings in Goa.

Mumbai: The Enforcement Directorate, or ED, the agency responsible for investigating economic crime in India, has sought information from the Goa government on all companies that bought properties in the state between 2000 and 2007, as it investigates the role of a suspected Russian land mafia.
The agency suspects that some Indian companies that bought large plots in the state could have acted as fronts for Russian owners acquiring land in violation of the Foreign Exchange Management Act, or Fema, said a top enforcement official, who spoke on the condition of anonymity.
The directorate, which has been probing suspicious land transactions, has had little success in tracking such deals.
“Most of these cases are unreported due to the reluctance of state authorities to cooperate with our investigations,” the same official said. “We have asked the Goa government to find out the names of big companies that have bought land for promotion of tourism in Goa.”
Goa chief minister Digambar Kamat declined to comment on the issue in a telephone conversation. He also said a comment through email or fax would take time, citing the state assembly session that’s under way.
Goa, famous for its beaches, tropical biodiversity and a strong Portuguese influence on its culture and architecture, attracts a large number of foreign tourists every year who find it easier to blend in with the diverse local population than in any other Indian state. But parts of Goa have also acquired a reputation as a haven for drug dealers and land mafia.
Last year, CNN-IBN television news channel reported that the Russian land mafia had been throwing out small landholders and farmers, and grabbing prime land in fraudulent deals. Following reports of foreigners buying land in Goa in violation of Fema, the state government handed over details on 21 companies owned by Russian nationals to the directorate and the Reserve Bank of India, or RBI.
According to Ashutosh Limaye, associate director at the property consultant Jones Lang LaSalle Meghraj, increased vigilance over land deals by the police, forest laws and rules relating to coastal regulation zones have stalled land transactions in Goa now.
“The deal makers want to play it safe and are waiting for resolution of the ongoing issues,” he said.”The number of land transactions in Goa has definitely come down as a fallout of the land scam. Many deals, that were at the negotiation stage, have been stalled.”
Still, the “significant decline” in the number of land deals hasn’t led to a sharp fall in prices, which have remained stable, he said.
In May, the directorate issued notices under Fema to the promoters and directors of two companies—True Axis Resorts Pvt. Ltd and Artlibori Resorts Pvt. Ltd, owned by Russian citizens Leonid Beyzer and Valiulin Rashida, respectively, asking them why they should not be penalized. The other directors in True Axis are Pramod B. Walke and Fransico D’Souza, both from Goa.
Beyzer, who still lives in Goa had, in 2005, bought 25,000 sq. m of land, including 19,906 sq. m of prime agricultural land in Morjim, North Goa, for constructing a resort. He was in India on a tourist visa, according to the directorate.
Mint was unable to contact True Axis and Artlibori Resorts because their addresses weren’t readily available.
The directorate also sent notices to directors of another resort firm, Oriental Ambers Pvt. Ltd, only to find later that there was no office at the registered address. It has not been able to trace the local owners of Oriental Ambers either.
According to the enforcement official, under Fema, foreigners can buy land in India if they hold a business visa and have lived in the country for 182 days at a stretch in the previous financial year. Such individuals should also possess documentary evidence of either long-term employment or business or vocational pursuits in India.
Foreigners with business visas can purchase properties in the name of Indian entities registered with the registrar of companies and the local branch of RBI. They can buy land for personal use if they can prove their intention to stay in India for an indefinite period of time. Even then, they are not allowed to buy agricultural and plantation land.
According to the directorate’s investigations, Beyzer founded True Axis and infused capital in the firm as foreign direct investment, or FDI, under the automatic route of RBI available for non-resident Indians. The Indian central bank raised objections later on the source of money.
Under the automatic FDI route, RBI’s prior approval is not required. However, the firm should notify RBI about the transaction within 30 days of inward remittances for clearance.
“We found that True Axis was not using the money for construction of the proposed resort. Now, we have attached the commercial property of True Axis in Morjim and are waiting to hear from the promoters on the show-cause notice,” the same official said.
“We fear that a number of big companies owned by Russians have followed the same route to grab land in Goa,” he added. “The modus operandi of such individuals is to float a company with an Indian partner, who acts as a front to register the firm in Goa. The company then pumps in foreign investment for real estate deals. Once the firm buys the land, it splits from the Indian partner.”
The directorate is investigating more than 400 cases where foreigners from the UK, France and Russia have bought land in Goa under tourist visas.
“Many of them are retired foreigners who are peacefully living in Goa and are harmless, but the real threat is from Russian companies who are illegally acquiring land,” the enforcement official said.
The agency recorded statements of individuals in 100 cases and issued 15 so-called show-cause notices to some of them under Fema last month. According to the directorate, the number of cases of misuse of property laws in Goa can go up to 2,000.

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Springfields apt owners face eviction

the builder in collusion with Corrupt BDA officials along has violated all building norms. Now BDA officials are expressing surprise. They should be sacked for their incompetence. Seven towers don't spring up overnight. I hope the residents bring the builder to book. Add IDEB builders to the list of builders to be avoided. Deccan Chronicle article here. As per the latest news the builder has to pay 25 rs sq/ft to BDA as a penalty to get the commencement certificate and then apply for the occupancy certificate. With 697 apts in the complex and 7 wings illegal (A,B.C are legal and D-J are illegal) the builder needs to cough up roughly 697 * 7/10 * 1500 (avg flat size) * 25 which is 18,296, 250 (1.8 crores)

1,300 residents left in lurch

BENGALURU

More than 1,300 residents including software engineers, bank officials, doctors and expats who have invested crores of rupees for a flat in Springfields Apartments will soon be homeless if the builder does not sort out the issue of occupancy certificates within seven days.

Springfields Apartments on Sarjapur Road which is said to be one of the few residential projects in the city with 82 percent lung space and just 18 percent of built up areas has built seven wings which includes nearly 50 flats in each wing without the commencement and occupancy certificates.

The residents who went to BDA authorities with complaints of the discrepancies are now facing a tough time running after the builders, advocates and the BDA authorities.

“The officers at BDA who promised to deliver justice to us have now sent an order asking us to vacate immediately. The builder in turn has been given seven days time but what about our woes? Who will listen to us,” said a techie on condition of anonymity.

Meanwhile, the residents told Deccan Chronicle that everyone had relied upon the BDA’s sanction plan and had together paid several crores of rupees to the developers towards acquisition of their respective apartments.

The directors Mr H.S.

Bedi, Mrs Avneet Bedi, Mr Pradeep Kumar Tewani and Mr P K Gajra have not only violated the statutory provisions but have also conducted criminal breach of trust, the residents of the apartment allege.

“The builder also said that BDA had issued occupancy certificates to all these buildings and only then hundreds of families occupied these apartments. Now, we learn that BDA has not issued occupancy certificates to many of these blocks,” said another resident, an expat.

The residents who actually started this protest to show a violation have now been rendered homeless.

“Where do we go? And why should we go? It was not our mistake. Why are we being targeted for no mistake of ours,” cried a doctor, who is residing in one of the wings and has been asked to vacate. The residents have now planned to approach advocates to make sure there is some way out of this situation.

Who is to blame?

It is surprising to know that IDEB and Parkway Venture could manage to construct seven wings, each consisting of about 13 floors without even obtaining the commencement certificate.

The BDA officials, interestingly have not even inspected the area to find out the discrepancies of the builders.

The builders who have been constructing the building from the past three years, as per the orders, have not only violated the BDA rules but have also separated about 1,710 sq m of area on the North West Corner from the main premises by constructing a compound wall.

The order also states that the entry to the premises from the north west side is blocked and the Set Back Line of 13 m is not maintained on the western side by changing the orientation and location of the basket ball court/tennis court. This modification has resulted in reduction of surface parking.

This is not all, while BDA had claimed ignorance all this while, even some of the major nationalised and private banks have sanctioned loans to almost 80 percent of the owners who have bought the flats.

“The banks have given loans to all of us without even checking? It’s ridiculous. For all these days we were only fighting for that land which has been taken to construct a hotel but now we have to fight for our own homes,” said a resident.

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Bangalore's New Airport Is a Dream Going Sour

My gut feeling is that the new BJP government will come down harshly on BIAL and open the HAL airport for domestic flights. I don't see Y'Appa, Advani and Narayan Murthy making 3 journeys to the airport every week. With the decline of Deve Gowda's influence in Bengaluru Devanhalli will lose its lustre as the next hot investment destination inspite of all the rosy news being planted by the land lobby in various news papers, the Times of India being the most prominent of the lot.

Commentary by Andy Mukherjee

June 2 (Bloomberg) -- What should have been a moment of fulfillment for India, after 17 years of false starts, delays and disappointments, is rapidly turning into a farce.

It has been less than a week since a brand-new airport opened in Bangalore, India's computer-software capital, and already there is a big question mark over whether the Indian government will be able to keep a key promise it made to private investors to get them to build the airfield.

The $618 million project, partly owned by Siemens Project Ventures GmbH and Unique Zurich Airport, is embroiled in a law suit initiated by Bangalore City Connect.

The citizens advocacy group is contesting the government's 2004 commitment to Bangalore International Airport Ltd. -- which owns and operates the new facility -- to close down the city's rickety, old, state-managed airbase, which was built in 1964 to test military planes and was later pushed into civilian service.

In granting monopoly rights to the new company, public interest has been neglected, City Connect says in its petition.

One objection is that the new airport is too small because planners underestimated demand.

As a result, it will be operating at full capacity in its very first year with traffic growing 30 percent annually. To close down the existing airfield, situated inside the city, and direct all travelers to a new one at Devanahalli, 40 kilometers (25 miles) from the city center, is madness, the critics say.

``All over the world wherever a private monopoly is created, public interest predominates,'' says T.V. Mohandas Pai, a member of the citizens group and a director of Infosys Technologies Ltd., India's second-largest computer-software developer.

Monopoly Rights

``Government has given a monopoly and it was done in circumstances that existed five years ago,'' says Pai. ``Things were totally different, there wasn't much traffic and growth was slow. Bangalore wanted an international airport.''

Albert Brunner, chief executive officer of the new airport, disputes that assessment. The existing runway can handle 20 million passengers a year, he says, compared with the 12.5 million expected in the first year of operations.

Besides, there's a plan to build a second runway, he says. But what he can't do anything about -- and what I suspect is the real issue here -- is ground transportation.

It has been eight years since the location of the new airport has been known; in all that time the state government of Karnataka state -- of which Bangalore is the capital -- didn't bother to build an expressway.

$488 Billion

The net result is this: A software engineer working in Electronic City on Bangalore's outskirts may end up spending three hours on the road to catch a one-hour flight to another destination within India.

That, more than anything else, is why frequent fliers of Bangalore are feeling cheated with an airport they have eagerly awaited for so many years.

The new airport is spread over 4,000 acres, has eight aerobridges, nine remote bays, 53 check-in counters and parking space for 2,000 cars. The old airport didn't even have a lounge for international business-class passengers.

India can't allow the Bangalore airport to become a public- relations disaster.

At stake is $488 billion in capital that the government estimates it would need to ease shortages in infrastructure: roads, ports, airports and power stations.

Independent Regulator

In the future, the national government has to view every project in its totality by making an inventory of amenities that a state or a municipal authority is expected to provide. The fees, tolls and levies accruing to sub-national governments from any project must be linked to these milestones.

And when the rules of the game have to be tweaked midway -- as at times they must be -- it helps to have these judgments come from independent regulators who have the expertise to make nuanced, data-based decisions that may be acceptable to all stakeholders.

Finally, demand estimation is too important to be left entirely to experts.

Companies such as Google Inc. are harnessing the power of prediction markets -- which gather information from a large number of participants -- to generate useful forecasts.

There's no reason why governments can't do the same.

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Nusli Wadia sues Gopal Raheja for ‘breaching deal’

Something has seriously gone wrong with this deal now that Mr Wadia is sueing the Rahejas. The Raheja's on their part have encroached on mangrove plantations and conducted massive landfills on the swamp adjoining to Mr Wadia's trust. Some of the complexes there were supposed to be sold to middle and low income groups as per the government statutes. 1 bed-room flats were constructed but these flats were never sold individually but they were sold as jodi-flats to different members of the family. The builders gained IT sops due to the nature of the scheme. Mr Wadia is now asking for his pound of flesh since prices have quintupled over the last 5 years.

MUMBAI: Industrialist Nusli Wadia has dragged builder baron Gopal Raheja to court for alleged fraud and breach of agreement regarding the development of over 400 acres of prime land belonging to the estate of late Eduljee Framroze Dinshaw at Malad (west).

Wadia terminated the agreements with Raheja and his 49 companies on May 12. The development agreements were entered into on January 2, 1995, and April 12, 1995 between Wadia, as the sole administrator of the Dinshaw estate, and Raheja.

Wadia has withdrawn all authority given to Raheja including the powers of attorney given Raheja’s children, Sandeep and Sonali, to deal with the various units, flats and other premises built on the contract land.

In a suit filed in the Bombay high court, Wadia has called upon the Rahejas to raze all construction on the 400 acres of prime land at Malad including three buildings at Palm Springs Centre and four at Unique Commercial Centre.

In the interim, Wadia has sought the appointment of a receiver and that the Rahejas be restrained from carrying out further construction and creation of third party rights on the contract land.

In February, Wadia had filed a suit against Gopal Raheja’s brothers Chandru L Raheja and Suresh L Raheja and their sons. He asked the court to stop the Rahejas from carrying on construction on 200 acres of prime land in Malad (west) belonging to the EFD estate and sought demolition of eight of their commercial towers including the Inorbit Mall, Hypercity Mall, Infinity Towers, IV Dimension, Spectrum Towers, Magnum Tower, Intelnet, Prism Paradigm and Athena, all located off Malad Link Road.

Wadia alleged that Chandru and others had “fraudulently” sold or leased properties constructed on the contract land to their “own sister concerns and shell companies created for the purpose” instead of genuine third parties. Wadia demanded damages worth Rs 350 crore from the Raheja brothers.

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