Tuesday, April 08, 2008

Citi, AIG Pull out Rs 1500 cr from Akruti

Citi and AIG which were to invest Rs 1500 crore for a 16% stake in Akruti City (previously called Akruti Nirman) have now dumped the developer and pulled out. The main argument was the high valuations that Akruti was demanding, which -- given the current scenario -- they two PE firms were reluctant to agree with.

In January, Citi and AIG had proposed to pick up equity in Akruti through a preferential allotment, where Akruti would place up to 10.7 million shares. But the BSE Realty index has crashed 46% from its peak of 13,647 recorded on January 14.

After the deal was announced on January 23, shares of the company had touched a record high of Rs 1,399 during intra-day. Since then, there has been a sharp decline, which touched a low of Rs 682 on March 24, or down 50% in two months.

Read the ET story here

Posted by Eclectic Investor at 11:18 AM  

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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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