Real estate crunch forces IIM-B to experiment with off-campus housing

Interesting to see that the builder has opted to rent out apts instead of selling them off at discounted prices . Is it a sign of the times ? If we go by the yield calculation, the builder is getting a paltry amount in rent as opposed to selling it off and getting 10% in fixed deposits.

Real estate crunch forces IIM-B to experiment with off-campus housing
Archana M Prasanna / Bangalore October 31, 2008, 0:22 IST

Faced with the prospect of escalating real estate costs and the lack of adequate finances, the Indian Institute of Management-Bangalore (IIM-B) is experimenting with “off-campus housing” to accommodate additional students from the next academic year. If the experiment works, it may set a precedent for other IIMs.

With its campus in Bannerghatta already brimming, the institute has decided to take 50 apartments (150 rooms) on lease in a nearby residential building called Ajmera Complex. The plan is to lodge students from the one-year full time Executive Post Graduate Programme in Management (EPGP) — to be launched in April 2009 — in the leased apartments.

“Unless we experiment, we wouldn’t know if this is the way ahead,” reasoned Pankaj Chandra, Director of IIM-B, on the initiative.

IIM-B may also accommodate some students from the Post Graduate Programme (PGP) and doctoral programme at off-campus locations. The institute is planning a bus service from its premises to the off-campus housing to make it convenient for students to travel.

In its recent report, the IIM Review Committee — led by Maruti Suzuki India Chairman RC Bhargava — suggested that IIM faculty and administrative staff residences could be moved to off-campus sites, and accommodation bought/rented there so that “the existing infrastructure could be more intensively used”.

Chandra said the institute had received Rs 29 crore from the human resources development (HRD) ministry for the OBC quota expansion, but the overall expenses of accommodating new faculty and students is expected to be much higher than that. Subsequently, the institute is keenly looking at financial support from corporate houses and alumni.

Unlike IIM-Ahmedabad and IIM-Lucknow, which have two campuses, IIM-B hasn’t had any major construction activity in the last 10 years. Chandra added that the institute has taken up the off-campus option despite plans to commission some construction from this December. The institute has hired an architect for a new hostel facility, 10 classrooms and 24 faculty homes.

The institute has over 950 students from various programmes on its campus at present. From the academic year of 2009-10, the number of students in the PGP and doctoral programme is expected to go up from 640 to 690, the Post Graduate Programme in Public Policy and Management (PGPPM) will have an increased intake of 63 from 33, and the one-year EPGP is expected to have 75 seats, making it an intake of 150 new seats at the campus.

Read More

Mumbai's super bubble

Here is an advt for an apt in Mumbai which sent my head spinning. At 55000 Rs a sq/ft it is the highest I've seen advertised. A 4 crore price tag will buy you 875 sq/ft of super builtup area. The seller is kind enough to remind you that newer apts in the locality come in larger sizes at 1500 sq/ft which would make it unaffordable to a normal resident. Also maintainence is higher in other apts, so the buyer better worry about paying Rs 10k extra a month. Once the buyer buys this 4crore apt, he has the option to commute using the conveniece of the local train and rub shoulder, noses and oily hair with thousands of other local residents by paying 10 Rs for a ticket. This is the peak of a massive bubble in Mumbai which is destined to collapse under its own weight.

NR39500000 Racecourse View From All Rooms-2BHK. (Mahalaxmi)
Centrally located 2 BHK, 875 sq feet(a size which is not available nowadays in 2bhk,since most new constructions are over 1500 sq feet and above charging about 55000 per sq feet in the same area, making the flat not affordable for many buyers), one bedroom with attached bathroom, and one with a bathroom outside,large living room with dining area,ready with high quality flooring as well as well painted walls and with 24 hours water supply,electricity backup,children's garden,and a garden to walk in as well,with 1 parking space which will be sold separately. The flat is located on the 9th floor in the B wing,Flat no 902, Is Vastu Compliant and has sea view from all rooms and also a full race course view,It is located in such a way that no construction will ever be coming up in front of it to obstruct the view. The flat is a 2 min walk from Mahalaxmi Station,15 min drive to Vt station via J.J Flyover,15 mins to churchgate by train,10 min drive to phoenix mills,10 min drive to worli seaface which will be helpful to travel to the suburbs in the next year via the sea link.Besides all of this the property is in an area which is suitable to any sort of occupants even the ones who travel to thane and lonavala and pune since it is a 2 min drive to dadar from where the western express highway begins. Also it is 5 mins away from the newly built five star Four Seasons, and also 10 mins away from ITC GRAND MARATHA Sheraton at dadar. Basically its an all gain flat which has to be sold due to the occupants moving to another country and there are no other properties up for sale in the same building or in the neighbouring buildings except for in Planet Godrej which has high maintainance as well as larger flats which are sold at prices which dont lie in anyones budget.

Read More

Real estate presses panic button in Mysore

MYSORE: When Bangalore sneezes, Mysore catches a cold, says a veteran developer borrowing a popular cliché.

He is referring to the sudden fall in property demand in Mysore. After Bangalore, Mysore has been the most attractive real estate investment venue for the moneyed Mumbaikars and Bangaloreans.

Despite claims to the contrary, Mysore realtors suddenly find themselves in an unenviable situation. The value of the sites and apartments, according to reliable sources within the industry, has come down by 15 - 20 per cent in just about three weeks.

Mysore has, in the recent past, been drawing investors in droves from within and outside the states after property prices of Bangalore had hit the roof. Even the "neo-rich" IT personnel found Bangalore property scalding. There then took place a race for prime plots in the nearest "Heritage City." In terms of 'quality of life' such as greenery, good roads and less crowd, Mysore beat Bangalore and the big players like Sobha Developers, Brigade Group and Leo Builders made Mysore their home.

Sources with Mysore Chapter of Builders' Association of India (BAI) told DNA the enquiries for apartments and luxury villas have gone down by 30 per cent since October second week. This has left them wondering what was happening. Have they made a miscalculation or is it a temporary slump, nobody really know.

Pradeep, a real estate dealer who has been in the business for the last two decades says, "Mysore never saw the kind of demand it witnessed in the last few years. Sites were sold before they hit the advertising board, just five years ago.
Plot after plot, even in suburbs, was blocked by potential builders who wanted to cash in on the growth. But the fall in demand taking place in the past few weeks is alarming."

Sub-registrar's office which otherwise used to be doing brisk business with 8 to10 registrations a day, now has just one or two," he said. This, he points out is despite this being a festive season when people planned major investments.

"Last year this time, registrations touched an all time high with an average 30 a day." said a lady clerk working at sub-registrar's office.

According to BAI sources, the situation was aggravated by many factors, besides the psychological slump. Nagesh, who has been working closely with BAI says, "When land was earmarked for SEZ near Mysore, industries rejoiced. But, the power scarcity proved a big blow. Slow progress of infrastructure development and political instability added to the woes. It was thought, Mysore, which had earned a major chunk of funds up to Rs 1,800 Cr under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) would wean away many big real estate players from metros. An airport was also thrown in to woo investments. But, nothing seems working.

Now, Mysore has turned into an investor's nightmare with sharp decline in prices at the peak of the season. Apartments or luxury villas find no takers," Nagesh adds.

The nearby Hassan district, which too witnessed a similar growth as Mysore in the recent years has also witnessed a fall in demand and consequent prices.

Developers seem indeed perplexed at the situation. Apart from announcing lollipops and hoping that situation would improve, they are devoid of any fresh ideas.

"We have announced attractive plans and packages with great returns. We just hope the markets will get better," Nagesh says.

The upshot of it all is that realtors are unwilling to climb down, and investors are equally vehement. The result is stalemate.

Read More

Experts speak : All is not lost

A 90% drop in real estate stock market values is now a reality. Moneycontrol.com has list of current stock price and its annual performance. All we need now is a price reduction in selling prices, not gimmcks like free car, free flat or free plots. We are not stupid guys. How long will it take for you to realize this ?
Expertspeak: All's not lost
27 Oct, 2008, 0000 hrs IST, ET Bureau
Every cloud has a silver lining if seen from the perspective of equity analysts. Forget the fact that the Sensex has dropped 70% and many stocks dropped 90%, the experts are trying to reason and assure the investors that all is not lost. Ofcourse all is not lost. A 10L portfolio is still worth 2L even today, but as the Unitech chariman said on CNBC, they have not reduced housing prices, inspite of borrowing at 2.5 per month from legal sources. Many builders are borrowing at 3-5% per month. How can they recoup their losses when the buyers have vanished from their 1cr+ properties. The end is near as far as the housing bubble is concerned. Stock prices are a leading indicator of the days ahead. The housing companies used absurd metrics to value their property and investors lapped onto their lofty projections, some due to greed others due to ignorance.

MUMBAI: Chin up when the chips are down. The climbing fear index (43 during the 1929 Great Depression and 75 in October 2008), is more disturbing
than the slipping Sensitive Index. It took a good two-and-a-half hours and four of the country’s best stock market analysts to reassure an 800-strong audience of Mumbai investors on Thursday that all’s not lost. Every dip brings in a new buying opportunity was the message.

The Economic Times, Gujarati, last week kicked off its latest initiative “Managing Financial Turbulence” by bringing the fourth edition of “Sensex Ni Sangathe” (In Tune With Sensex), a popular series of investor camps, to Mumbai. Eminent stock market experts Nilesh Shah, joint MD, ICICI Prudential Mutual Fund, Nipun Mehta, ED of Society General India Private Banking, CS Nanda, CCM, financial market investors protection committee, ICAI and Madhusudan Kela, head of equity investments, Reliance Capital Asset Management, reaffirmed their faith in the India growth story. The meet was jointly organised by ET (Gujarati) and ICAI, Western India Regional Council, at Bhaidas Hall in Vile Parle on October 23.

What they said...

Forced liquidation is happening in the market. Fear (among investors) is at the highest level. This is the worst situation in the past 100 years and so an overnight recovery is not on the cards. While the Indian economy is growing at 6.5-7.5%, the world is already talking of a negative growth rate of 0.5% and 1.5%.

Madhusudan Kela
Head of equity investments, Reliance Capital Asset Management

There are some good developments which the market has ignored. This year, we had an average monsoon, Indo-US nuclear deal is now a reality, we received FDI worth $10 billion during the past two quarters, crude oil prices have fallen and inflation is expected to ease out in the coming days. It is just a matter of time when FIIs will be forced to back the winning horse (India).

Nilesh Shah
Joint MD, ICICI Prudential Mutual Fund

Prices are indeed attractive. It’s like the latest McDonald ad campaign ‘Aap ke Jamaane mein, baap ke jamaane ke daam’. Lot of Indian global acquisitions happened at peak prices, and now fund raising has become difficult for these companies. Still, impact on the Indian economy will be limited. Investors need to have a longer time-horizon and take a fresh look at their portfolio holdings.

Read More

Realty funds bear the brunt of the ball

New Delhi: Shares of real estate firms were the worst hit on Friday after concerns of a liquidity crunch in the business drove the sectoral index, the Bombay Stock Exchange’s (BSE) realty index, down nearly one-fourth.

Shares of Unitech Ltd, India’s second largest developer by market value, fell by a record 51.29% to close at Rs30.10 each after intra-day trading took it down to an all-time low of Rs26.60.
Bangalore-based real estate developer Puravankara Projects Ltd, which saw its shares closing 44.32% lower, also touched a record low of Rs42.20 in day trade.

“People are concerned about cash provisions and where will real estate companies get money from,” said Sandeep Mathew, an analyst at BNP Paribas Securities in Mumbai.
An analyst with a domestic brokerage firm, who did not want his or his employer’s name to be used, said, “...people are exiting at any price because there are no buyers for realty stocks”.
There is an aversion towards real estate stocks among “investors (who) are now shifting from net asset value-based valuation to cash flows of the company”, he added.

Shares of DLF Ltd, the largest developer in the country, shed 23.96% to close at Rs203.90. Parsvnath Developers Ltd fell by 20.70% to close at Rs45.20.
BSE’s benchmark index, the Sensex, shrank 10.96% while BSE’s realty index, which consists of 14 real estate stocks, fell by 562.31 points or, 24.4%.

“Real estate stocks have been correcting mainly because developers have not reduced home prices despite a slowdown in sales,” said another analyst with a domestic brokerage firm. “In Unitech’s case, the stock has corrected because the company is heavily leveraged.”

mint reports on 30-50% drop in prices if you are willing to pay cash instead of staggered payments.

New Delhi: As the Indian economy faces a liquidity crisis, banks remain wary of lending money to the real estate sector. The developers, facing deadline pressures for delivery of projects, are forced to tap private money lending sources. Consequently, they have been forced to borrow money at steep rates.

According to Sanjay Khanna, managing director of Kailash Nath Associates, this rate could be as high as 5% per month. A rate of 5% interest per month translates to a whopping 60% per annum. It means that a developer will have to pay Rs6000 for every Rs10,000 it raises. Builders do not have the money to construct and have approaching delivery deadlines. Real estate experts fear that some builders may even default.

Santhosh Kumar, deputy CEO of property consultants and brokers Jones LaSalle Meghraj agrees with Khanna but says that players with better fundamentals may still find money at 15-20% rate of interest. “But others may have to pay upwards of 30% as well,” he says.

As demand slows, the price of residential and commercial real estate in the country has been sliding. It has fallen by 15-20% across metros over the past nine to twelve months and is expected to fall by another 30-40% over the next few months. In such a scenario, developers who went aggressive on land acquisitions, based on the presumption that prices will continue to rise, find themselves in a tight spot. They are now forced to borrow money from the market at unsustainable rates.

Ashish Mathur, Head-Business development and marketing for Mahindra World City says, that some small developers may have to exit the business all together if the market does not pick up soon.

The problem is worsened by a slowing economy and over supply of office space and it’s slow off take as reported by real estate consultants Cushman & Wakefield and CB Richard Ellis among others. Expensive home loans have turned away the residential buyers as well. Almost 90% buyers use bank finance for home purchases. Santhosh Kumar says that developers are expected to cut prices by 30-50% or more to boost offtake in the coming months. He warns, there may even be distress sales by developers.

The bad news for realtors extends to the stock markets as well. The BSE realty index fell 24% on Friday on worries that the real estate sector is heavily leveraged. As the economy slows down and money gets dearer, the pain is only expected to get worse for real estate developers.

Read More

Happy Diwali from the Finance Minister Mr Chidambaram

Dear Fellow Citizens,

On behalf of the Congress party, Manmohan Singh, Sonia Gandhiji and Mr Rahul Gandhi I would like to extend my warm wishes to the citizens of India on the eve of Diwali 2008. It has been a tumultuous year for the markets and as we have seen things have been going as per plan. We had a plan for 9% growth, however we came close to it at 8% and got a bonus 12% in inflation. We also managed to bankrupt a lot of the speculators and investors, some of who were senior citizens who lost their retirement saving in the market .

When the congress came to power in May 2004, the Sensex was 5000, now after 41/2 years it is at 8500, A stellar gain of 70% over a 4.5 year period as opposed to a 40% compounded gain if you had invested in safe fixed deposits. However if you had invested exactly a year ago, the return would be a -70%, a warning to speculators that India will not tolerate short term investors.

We are also happy to report that the rupee has breached Rs 50, so now your NRI brothers and sisters are given a welcome bonus this Diwali. The Foreign investors who have dumped the rupee and fled like rats will now have a greater incentive to return back, now that they have gained 20% over a period of 1 year. As you can see we are trying hard to please all sections of society and we look forward to continue this good work in the year five years under the astute leadership of Shri Manmohan Singh and Smt Sonia Gandhi.

Having seen the turmoil with the Italian Lira, we have superb leadership at the top which understands the economic consequences of pandering to the common people. I have instructed the SEBI and the RBI to take strict action against market manipulators who have been trying to create a illusion of wealth in the Indian stock market. Thanks to their efforts the Sensex has been brought down from 21000 to 8500, a level which will hold for a few more days, before we bring it down further to 6000 so that it is affordable to the common man.

It has also been an very happy Diwali for some of our Foreign short sellers who were allowed to participate in the merry making outside the borders of the country, thanks to a recent directive by SEBI, a brilliant move by the SEBI chairman.

With reference to housing we have managed to create a spectacular bubble where land prices have soared to the heavens. Some of the property where I live is now worth Rs 50000 per sq/ft. Even developed countries like the US and UK don't have the prices we have. We have asked our banks to make sure that the citizens are working hard to pay off the EMI's on the house/car loans for their highly prized properties. These banks are creating thousands of recovery agent jobs each month to make sure borrowers don't default on their loans.

As a consequence of the soaring housing prices, the congress party and other political parties have had great success in raising funds for the upcoming elections. Unlike the US which has a lobby system, the Indian political system depends on builders to finance their political activities. We prefer black money to avoid scrutiny of the Income Tax bureaucracy and thereby reduce corruption in the system.

Some of the builders have defaulted on their payments to government authorities and banks, and as a penalty, we will be confiscating their assets and then auctioning them over to our brothers in the Gulf, some of who have nefarious designs against our great nation. By doing so we will establish an ownership society where all the prime land is owned by our enemies, so they will have no vested interest in creating turmoil, riots or exploding bombs in our cities and towns.

In closing, I wish all citizens a very happy Diwali and hope that the next five years are even more prosperous then ever before.

Sd

Mr P.C Chidambaram

Finance Minister

Government of India

New Delhi

Samvat 2050

Read More

Prestige Shantiniketan - Roof collapse.

Four injured as Prestige group’s 15-storeyed structure collapses
S. Rajendran and M.T. Shivakumar
The cement slab of the top floor collapsed first and then the rest crumbled

— Photo: Bhagya Prakash K

CASCADING EFFECT: One of the structures at Shantiniketan, Whitefield, which collapsed in Bangalore on Thursday.

BANGALORE: Four persons were injured and another 100 construction workers had a providential escape when a part of a 15-storeyed concrete structure under construction of the Prestige group crashed at Whitefield here on Thursday.

The block which collapsed is part of the 20 blocks under construction by Prestige in a joint venture with Shantiniketan. The top floor slab which collapsed first was laid only a few days ago.

The police told The Hindu that the accident occurred around 5 p.m. when a small portion of the top floor collapsed resulting in the slab of the floor below it collapsing in a short while. Owing to sheer weight, the slabs of the lower floors collapsed subsequently, all in a span of 50 minutes, although the embedded steel rods prevented the slabs from falling in a heap.

The injured were identified as Srinivas (20), Dasharat (25), Mahendra Prasad (25) and Dadudar (30). Dadudar is said to be a native of Bihar and the other three residents of Kadugodi and surrounding areas in Bangalore. They sustained minor injuries when they were running out of the building, and were initially taken to Vydehi Hospital and after first aid were reportedly taken away by the site engineers for further medical attention. The workers were evacuated from the site. Complete information relating to the building collapse is yet to be made available to the police. The Prestige Shantiniketan complex comprises several towers, each of them of several storeys and located in the vicinity of the International Technology Park. There is no information on the strength of the work force at the construction site. A Malaysian construction company (IJM) was building the superstructure for the Prestige Group, which has undertaken the joint venture project with Shantiniketan (Chaitanya Properties) of D.K. Audikesavalu.

Nayeem Noor, vice-president (public relations) of the Prestige group said the collapse occurred after the top floor slab was cast. “The super structure is intact and there are no casualties.” A head count at the construction site has been conducted and it is confirmed that there is no casualty including injury suffered by any person, he added.
Enough time to escape

N.M. Nachappa, security guard at the site, told The Hindu that “the entire building crashed in 50 minutes. There was enough time for all the workers to escape.”

According to an eyewitness, around 4.50 p.m., the slabs of the building started to collapse. Then there were around 120 people, including women and children. “Immediately after the incident, the workers at the construction site had left. Very soon they were sent to isolated places in a few trucks.”

“A Few officers, perhaps from the contractors side, had shifted all the workers to some other location immediately. They instructed the security guard and other workers at the construction site not to answer the media or the police,” he said.

The Bruhat Bangalore Mahanagara Palike has taken a serious note of the accident. Directions have been issued to stop construction pending an inquiry.

Several superstructures are under construction in the vicinity of the ITPL.

Read More