Nariman point soon to be deserted

As financial institutions head for the exits South Mumbai is fast losing its allure as the premier business district of Mumbai. Ofcourse we won't see such articles in the various editions of the toilet paper of India. We get this news thru Bloomberg. Just as we hear this news there is other news that Edielwess securities moving into the BKC area. J.P Morgan moved to the Malad(w) area. Why overpay for realestate in Nariman point when employees commute from far flung suburbs.

JPMorgan Quit India’s Manhattan as Buildings Rot (Update2)

May 6 (Bloomberg) -- UBS AG and JPMorgan Chase & Co. are leading an exodus of finance companies from Mumbai’s Nariman Point financial district as they balk at paying double midtown- Manhattan rents for crumbling four-decade-old buildings.

UBS, Switzerland’s biggest bank, moved to a new complex on the site of a drive-in cinema about nine miles north. JPMorgan, the second-biggest U.S. lender, shifted to an adjacent suburb, while private-equity firm KKR & Co. went about three miles north of Nariman Point. Local lender Axis Bank Ltd. and broker Motilal Oswal Financial Services Ltd. are moving in the next year.

They are departing a district reclaimed from the Arabian Sea in 1940 that is marred by traffic jams and poor sanitation, and constrained by a 46-year-old law that limits building height. The city’s shortcomings and fragmentation may hinder Mumbai, with the fourth-most-expensive office space in the world, from establishing a financial center to rival Shanghai and Dubai.

“Transforming Mumbai into a world class financial center is very distant,” said Sunil Saberwal, chief executive officer of Bombay First, an organization modeled on London First to work towards the regeneration of Mumbai. “We are at least 15 to 20 years away from something like that. Even then, Mumbai will not be as beautiful as Dubai, but it will be functional.”

If Mumbai doesn’t get its act together by 2030 by improving transportation, housing and water systems, and reducing costs, the city may lose out to places such as Dubai as Western companies seek a base in the time zone, Saberwal said.

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The foul play in super-built up constructions

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Developers have drastically raised the super built-up area of the new properties. From 50% super built-up area, it has almost reached 100%,” said Pankaj Kapoor, founder, Liases Foras.

However, with the increase in super-built up area, the cost of properties has also doubled over a period of time. Consumers are getting lesser space at a higher cost. For example, if an apartment of 1,000 sq ft carpet area had a saleable area of 1,400 sq ft in Kandivali (a Mumbai suburb) in 2005, at that time, the apartment was priced at Rs2,500 per sq ft. The total cost came to Rs25 lakh. But now, an apartment of 1,000 sq ft is quoted as 2,000 sq ft saleable area. Taking the current cost into consideration, it is priced around Rs8,000 per sq ft. The total cost of the apartment has jumped to Rs1.60 crore.

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Mint asks a very pertinent question. Have Mumbai prices risen to fast ?

Far flung suburbs are quoting at 10,000 per sq ft. I'm not taking about Andheri but Kandivili and Borivili. 95% of Mumbaikars cannot afford these prices. What is the point of living in such a city ? Ofcourse we won't see such questions asked in the Toilet paper of India which is keep spreading all bogus news about real estate developments which have no consequence on the Mumbaikar. The city has gone to the dogs but nobody is willing to bell the cat. All these meaningless statistical analysis by the RBI economists ignores the biggest factor of black money in Mumbai real estate. Builders quote 50% in black money. The RBI is like the Roman emperor Nero who played the fiddle when Rome burned. All these bogus facts about the island city are meaningless when we have sprawls all the way upto Panvel and Virar. I believe the builders are keeping apartment prices high to keep their stock prices high. They can then sell the stock to gullible investors by planting stories in the news media. Also they can sell their apts to gullible NRIs just like what happened in Dubai.

The stock response to a question on housing prices in Mumbai is that they have become unaffordable. The general feeling is that they have risen too far, too fast. Fingers are pointed to the vast number of unsold apartments and everybody wonders how builders can afford to keep these flats vacant for months. But have real estate prices in Mumbai really gone up so dramatically? Mint reports

The Reserve Bank of India’s (RBI) report on macroeconomic and monetary developments has, in its chapter on financial markets, a chart on the house price index in Mumbai. The chart gives the index weighted by the value of transactions and the number of transactions. It shows that the Mumbai house price index reached a peak of around 230 or so in the second quarter of 2008 before starting to plunge. The index then fell to a low of slightly above 150 in the fourth quarter of 2008 before starting to climb again. By the second quarter of 2009, it had exceeded its pre-crisis highs and by the fourth quarter of 2009, it had gone a bit higher than 250. The chart has data from the second quarter of 2003, when the value of the index was 100. Putting it another way, if RBI’s index for Mumbai is right, then it means property prices in the city have, on average, gone up by a bit more than 2.5 times between 2003 and the end of 2009. But the gross domestic product (GDP) at factor cost at current prices has, between 2003-04 and 2009-10, gone up 2.3 times. And if India’s GDP has gone up by 2.3 times over the period, GDP of Mumbai city must have increased by a far larger factor. Add to that Mumbai’s island location, which makes expansion difficult and the rise in real estate prices does not seem too steep.

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India weighs capital controls with rupee on rise

Economic times reports on the RBI's efforts to curb the inflow of hot money into India. Instead of adding a tax to the inflow, the RBI should tax outflows so short term speculators think twice before speculating the currency. The govt. is pandering to the exports led IT lobby which will see rupee based earnings shrink as the rupee appreciates. RBI is trying to generate some fear among the investment community however given its inept record in overseeing the IPL Cayman islands/Marutius mess its credibility is doubtful when it is given the task of policing inflows into capital markets.

If foreign money from Caymans ended up in IPL, it would not be surprising if thousands of crores found its way in real estate deals. Anyone from Goa can tell you how much Russian money has influenced the rise of real estate there. Showing fake teeth to the public is what govt officials can do. The general population has to deal with the ineptness of its own elected and selected officials. Just quoting fancy Yale professors to solve India's problems is like applying balm for treating coronary heat disease. Sigh..

India's government is weighing capital controls with the rupee on the rise amid fears of "hot money" flowing into the country as investors pile back into Indian assets.

Unlike fellow emerging market giant China, India allows its currency to float freely and the central bank has warned of the dangers of "sharp and volatile" exchange rate movements that could hurt India's economy.

With the rupee riding at 18-month highs against the dollar, one idea Reserve Bank of India Governor Duvvuri Subbarao is airing to curb sudden big movements in the currency's value is a tax on foreign exchange transactions, known as a Tobin tax, similar to one Brazil introduced last year.

"Depending on what flows come in, we would employ measures, including if necessary something like the Tobin tax," Subbarao said last week, referring to a proposal first aired in the 1970s by Yale economics professor James Tobin.

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Sales drop 50% as realty prices get unreal again in Mumbai

DNA Report here

Mumbai: City developers, who witnessed a revival of sales at hefty prices in the past six months, are now up against buyer resistance. With demand dropping like a stone, the sale of residential flats across segments has nosedived, property experts said. The drop is as high as 50% in some segments.

Sandeep Sadh of Mumbai Property Exchange says it is a weird situation. “In South Mumbai, where there are no new constructions, people are deferring buying due to high prices even in resale flats. In contrast, despite having a large number of flats available in the suburbs, buyers are unable to buy due to unrealistically high prices.’’ Sadh says his clients are sitting on the fence and have deferred buying till after August when prices may just become a bit realistic.

Venkatesh Iyer of Siddhivinayak Real Estate Consultants says the number of inquiries he gets seldom translates into actual sales. “People’s budgets have become constrained, as prices have increased exorbitantly. In Chembur, prices have jumped from Rs8,000 per sq ft to Rs10,000 per sq ft, to almost Rs14,000 in six months. High prices have affected the resale market the most, as owners find the next new flat to be more expensive,’’ said Iyer.

A negative fallout of recent trends is that developers have increased the carpet area-to-built-up area difference to almost 50%. “This is a dangerous trend. There is no clarity on what rate developers have calculated the balcony area, terrace or storage room. Baring a few places, there is no mention of it in agreement papers. It is time the government brings clarity to the issue,’’ said Vakil.

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JLLM touting growth in IT industry

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Realty firms under scanner for slush funds

Just what the doctor ordered. An anema of of the entire money laundering system. Ironically DLF and others will have Modi to blame for all the attention. If the heat turns on, new funds will be very afraid to enter the market. Expect the bubble to pop in the foreseeable future.

Economic times reports

NEW DELHI: Major realty firms of the country are under the probe of enforcement agencies for alleged violation of FDI terms and use of slush funds worth several thousand crore brought in from certain tax havens.

While the Enforcement Directorate has carried out raids at premises of realty firm Emaar MGF for alleged violations of Foreign Exchange Management Act in the recent past, the latest to feel the ED heat was realty fund and developer IREO.

Sources said more number of firms are under the scanner and a detailed probe is underway. The Income Tax department has also conducted its operations and is now planning to delve deep into the tax statement of the realty firms.

When contacted, IREO had said "Some officials from the department of revenue have approached IREO for certain information and clarifications, which are being duly responded to. IREO remains committed to fully cooperate with the authorities, like always."

Incidentally, the moves come following a report prepared by an arm of the Revenue Department late last year, which identified the real estate market as the sector having the highest percentage of black money.

The most common violation that the investigating agencies have found in the realty sector is the alleged breach of Foreign Direct Investment terms.

They said many firms are believed to have diverted investments meant for the real estate sector to purchase agricultural land.

Under various agreements with the Foreign investment Promotion Board (FIPB), agricultural land is a sector barred for investment.

The searches that have been initiated now by the ED are the culmination of months of discreet probe into the real estate sector by various arms of the Revenue Department.

They said many of the funds are being brought in from tax havens like the Caymen Islands, Mauritius among others.

In some cases, the Directorate has learnt that certain realty firms had opened up multiple companies to acquire more land than the prescribed ceiling and had even made their low level employees as its Directors without their knowledge.

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