Monday, March 10, 2008

Is This for Real?

Mumbai Mirror, the tabloid of the Times of India newspaper, featured a front page story on how gelatin manufacturer, Sterling Biotech, is picking up a property in a suburb of Mumbai, called Kalina, paying Rs 403 crore for a large but low-quality apartment complex (see picture). The deal works out to Rs 46,800 per square feet for 159 flats ranging from 465 sq ft to 785 sq ft, totalling to about 86,000 sq ft.

This story in itself looks dodgy which is not very unexpected from the Times. There are no quotes from Sterling Biotech, which is a listed company, and would need shareholder approval to make invest in property since it is not aligned to its main business of gelatin manufacture,. Further, it would need to intimate the stock exchanges first about a deal of such magnitude.

This story, like many others that have been cropping up in the Times, appear to be fueling the real estate market in Mumbai, artifically jacking up prices.

However, an advertisement in the same newspaper, belies a slowdown that is in place. A builder has advertised a property of about 21,500 sq ft, opposite the Mithibai College and Bhaidas Hall. It invites leasing and buying interest for this property. You can write and ask for details from a company representative Mr Naik.

What makes this advertisement seem out of place is the supposed short supply of office space and residential apartments that this above story in the Mumbai Mirror talks about. My question then is, why is there a color advertisement asking for rentals and purchase interests, that too for a property in a swanky suburb like Juhu, where you would expect to rub noses with Amitabh Bachchan, Dharmendra and Hema Malini, when all over Mumbai, builders of homes are saying that their properties are all booked and sold?

Read the Mumbai Mirror story here.

Learn about Sterling Biotech here.

P.S: In case you are wondering, (see picture left) this is Kalina in the floods of July 2006. Wonder if Sterling Biotech was acquiring the property in this area, at such a steep price because it could disperse out drugs for leptosporisis.

Posted by Eclectic Investor at 7:35 PM  

1 Comment:

Mumbai Fan said...

The news of Sterling Biotech acquiring that property was true. Company had even paid a token amount. But after the news appeared in the papers, the local goons and govt officials started demanding a share from the society members. At this point, the company backed out of the deal. I think the stock market crash too made sterling rethink about this property. And yes during monsoon this area is always under water up to the first floor.

7:55 PM  

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IN PASSING

Consider how the crisis has unfolded over the past eighteen months. The proximate cause is to be found in the housing bubble or more exactly in the excesses of the subprime mortgage market. The longer a double-digit rise in house prices lasted, the more lax the lending practices became. In the end, people could borrow 100 percent of inflated house prices with no money down. Insiders referred to subprime loans as ninja loans—no income, no job, no questions asked. - George Soros in latest book


“When everything’s going up, there’s a feelgood factor and people tell each other how much their houses are going up at dinner parties,” says Professor Mark Stephens of York University’s Centre for Housing Policy. “Then the music stops, as it always does.”

“Last year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?” - a senior executive at an international financial services group, who did not wish to be named.

"Most people told us house prices never go down on a national level, and that there had never been a default of an investment-grade-rated mortgage bond, "Mortgage experts were too caught up." - John Paulson, trader, who bet against subprime market and made $15 billion.

The most puzzling are the real-estate projects of Parsvnath. Just have a look at the Pride Asia project near Chandigarh. They are asking almost US $300K-$350 K dollars for 2 bed room apartments. They have Villas in this project that costs more than US $1.5 million dollars. It is true that some people in India have that kind of money in India. However most of their wealth is black money and that can not be used to buy these properties. Obviously, these projects have been launched keeping NRIs in mind. - Sanjeev, comment from another site

Prachi Desai, aka Bani, the star of Balalji Telefilms's soap, Kasam Se, has been house hunting for over a year. She had almost closed a 2-BHK deal last year for Rs 1.5 crore in a Oberoi Constructions' building located at Andheri, Mumbai, but when she went back to confirm it, she was asked to cough up Rs 2.61 crore. Since then, she is still house hunting. - Mumbai Mirror

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