Wednesday, March 26, 2008

BKC Rentals Fall 50% - Landlords Desperate

The realty crash is rearing more of its ugly face. A few weeks after the Times of India and DNA reported that there was no takers for plots in Mumbai's BKC, a sobering effect seems to have taken over city landlords.

The immediate fallout of the BKC realty crash is that rentals in Mumbai's famed business district have fallen 50%, as landlords become desperate to lock in tenants. Until last week, owners of office space were demanding Rs 500 per sq ft, but have now reduced their demand to Rs 250 per sq ft.

This is just the beginnning. Before 2004, BKC was available for as little as Rs 60-75 per sq ft but the subsequent bull run had created a shortage this spiking rates to Rs 500.

It appears that with this slump to Rs 250, rates could further drop to between Rs 175-125 per sq ft and then down further.

Posted by Eclectic Investor at 4:17 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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