Wednesday, March 26, 2008

High Court Puts Builders in a Bind

Have the booming real estate markets enthralled you? Have you invested your money in places like Mulund, Thane, Ghatkopar, Kandivali and Borivali. You have reason to worry.

Mumbai builders have been told by the High Court that all constructions on forest lands are encroachments and have to be demolished.

Market tops throw up the most unusual of circumstances. Some times the prick that bursts the bubble comes out of the blue, ambushing even the most astute of investors. So, a poor average home buyer like you almost never stands a chance.

The order can significantly prick Mumbai's crazed real estate bubble, where every train traveler worth his season's pass had become a paper millionaire due to the rising value of apartments.

Many reputed builders, driven by the desire to reap profits from the booming property markets, went ahead to construct towering residential apartments in areas near the sprawling Sanjay Gandhi National Park, a full-fledged forest in the middle of the city of Mumbai, often throwing caution and care to the winds.

What is rather perverse of this justice is that innocent and legitimate buyers of their apartments are on the verge of losing their homes and investments.

Over 1 lakh home owners in Mumbai, and the 75,000 more who have invested in current constructions, could lose their homes completely, even if they have been paid for legitimately or even if they have occupation certificates. The High Court says that builders have clearly violated the Act, and hence all construction is encroachment.

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KM

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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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