Monday, November 17, 2008

Arun Nanda: Another Wishful Thinking CEO

Have you not witnessed time and again, the CEO of Parsvnath coming on CNBC and saying that there was no slowdown and there was no cash problem? Did you not see Sanjay Puri, CEO of Unitech say that analysts do not know how to value real estate companies?

Since then, all these companies have had their stock prices relentlessly banged to almost a 1oth of their 52-week highs. Now, here is another joker in the pack.

Arun Nanda, executive director of Mahindra and Mahindra said there is no slowdown in its real estate projects, even though there is slump in demand.

“We are not slowing down on any of our projects. Jaipur is rocking, Chennai is doing well, city-based projects such as Faridabad are also doing well,” he was quoted as saying on the sidelines of the India Economic Summit.

Nanda, an executive director of the company, was quoted dishing out more gems:

"Fundamentals of real estate have not changed," he said.

"We have actually got cash in the bank," he said, adding there is a huge demand in 30 to 40 lakh apartments segment. He, however, said the housing loan segment is facing problems, adding there were no funding issues for its projects and the company’s affordable housing projects are not going to disappear, but he did admit that investors are not coming forward.

“Demand has been put on back-burner and interest rates are hurting people,” Nanda said. He also informed those present that Sebi approval for the initial public offering of Mahindra Holidays and Resorts Ltd.

Sure you have heard of the proverbial deer freezing in the headlights. Or is this simple a case of self-denial?

Read the story here

Posted by Eclectic Investor at 5:21 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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