Tuesday, November 11, 2008

Bandra-Kurla Land Fetches Mere Rs 92 Crore

News that did not make it to the headlines: Land at Mumbai's Bandra-Kurla Complex was sold 50 percent lower than March 2008. Thus comes hardcore evidence of the Mumbai real estate market having slid in to a cold freeze, despite the bravado of developers. On thing is now certain: real estate companies are going to die a slow death over the next year.

The said plot of land was picked for Rs 92 core at Rs 1.55 lakh per square metre—half the price from the previous auction in March. Ahmedabad-based Talim Research Foundation, a venture of Subhash Chandra’s Essel Group of Industries, was the sole bidder, paid just Rs 2 crore over the minimum sale price. This in face of the deal five months ago, when Jet Airways (India) Ltd picked up a plot in the same area at Rs 3.52 lakh per sq metre.

Mumbai Metropolitan Region Development Authority, or MMRDA, had no choice but to award the 5,900 sq. m to the lone bidder in Talim. The plot would be used for an educational facility by the nine-year old foundation which does social science research with a focus on health, communication, micro-economics, social audit and poll studies.
In March, only three out of five plots were sold in a land auction by MMRDA when Jet Airways picked up a plot and Starlite Systems bought two residential plots at the same price. Land sales have been down since this year’s beginning compared to 2007, when city-based Wadhwa Group had bought a commercial plot in the complex at a staggering Rs 5.04 lakh per sq metre for a 16,500 sq metre plot.

Even Starlite and Jet Airways that bid for the plots in March have requested MMRDA to give them an extension of six months to pay the premium. “Developers are not willing to pay astronomical prices for a piece of land and are waiting and watching for some correction to happen,” he said. “Many developers are also under a liquidity crunch which is why they are staying away from land purchase.”

Developers are not interested in purchasing land according to Hemant Shah, chairman of city-based builder Akruti City. The general view is that those who have purchased land last year are unable to launch projects, due to the slowdown, but land owners are not willing to lower the rates, leading to a crunch.

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Posted by Eclectic Investor at 8:51 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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