Friday, June 13, 2008

Kotak Realty Pulls Out of Rs 600 cr Deal for Hafeez Contractor House

The much-touted purchase of Hafeez Contractor House has fallen through, with Kotak Realty Fund withdrawing its Rs 600 crore offer.

The 2.5-lakh sq ft commercial property, being developed by Orbit Corp, has been on the pre-sale block for some time now, but slackening conditions are making investors back out. The result is that rates have fallen Rs 5000, from Rs 28,000 per sq ft.

The Kotak deal has been called off," said Orbit's chief financial officer Ramashriya Yadav confirming the development to a newspaper. Located in Lower Parel, Mumbai, the property was first offered to JSW Steel and JSW Power Trading for Rs 360 crore. However, Orbit wanted more and hence the deal was called off. Later, in September 2007, JSW Steel, JSW Power Trading and JSW Investments bought Orbit's commercial office space in Kalina, in suburban Mumbai, for Rs 807 crore.

Earlier, Kotak Realty Fund was in talks with Orbit to buy the property for Rs 600 crore but talks have fallen through.

The Hafeez Contractor House, with the capacity to house 500 offices, is now under construction and will be completed in two years.

According to a Lehman Brothers report, Lower Parel is expected to get as much as 5 million sq ft of office space in the next two years. This could cause prices to soften in this region. Till January, Lower Parel was commanding Rs 28,000 to Rs 31,000 per sq ft for prime office space. However, after the slowdown, the rate has fallen by about Rs 5,000 per sq ft, said an analyst from a brokerage firm.

Orbit was keen on pre-selling the Hafeez Contractor House to ensure smooth cash flows for its current projects, and it had expected that in two years several other projects would be competing with it.

Read the DNA story here

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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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