Friday, March 28, 2008

50 Thane Buildings Could be Razed!

The Forest Department of Thane has said that more than 27 buildings in Thane are under investigation since 2005, for violating the Forest Conservation Act. This number could rise to 50 and individuals residing in apartments built on this land are likely to lose their homes.

Ask Bhaskar Walimbe, the deputy conservator of forest, Thane, and he will tell you all of this is true, although he does not blame flat buyers. "It's solely the fault of the builders," he said.

The common man has very little idea about private forest land. The word forest has an exclusive definition as per law. And private forest land is any forest which is not a government property, but includes section 34, 35 and 35 (3) of Maharashtra Private Forest Acquisition Act 1975.

Read the DNA story here

Inflation - How it Eats Your Money

Inflation is an economic concept. Its causes are many, but what is important to us is the effect of inflation!.

The effect of inflation is the prices of everything going up over the years. A movie ticket was for a few paise in my dad’s time. Now it is worth Rs 50. My dad's first salary for the month was Rs 400 and over the years it has now become Rs. 75,000. This is what inflation is, the price of everything goes up. Because the price goes up, the salaries go up.

If you really think about it, inflation makes the worth of money reduce. What you could buy in my dad’s time for Rs 10, nowadays you will not be able to buy for Rs 400 also. The worth of money has reduced! If this is still not clear consider this, when my father was a kid, he used to get 50 paise pocket money. He used to use this money to go and watch a movie (At that time you could watch a movie for 50 paise!)

Now, just for the sake of understanding assume that my dad decided in his childhood to save 50 paise thinking, that one day when he grows to be a man, he would go for a movie. Many years pass. The year now is 2006. My dad goes to the theater and asks for a ticket. He offers the ticket booth guy at the theater 50 paise and asks for a ticket. The ticket booth guy says, “I am sorry sir, the ticket is worth Rs 50. You will not be able to even buy a vada pau with the 50 paise!!”

The moral of the story is that, the worth of the 50 paise reduced dramatically. Fifty paise could buy a whole lot when my dad was a kid. Now 50 paise can buy nothing. This is inflation.

So what does inflation tell us?

It tells us that you must never keep your money stagnant. If you just save money by putting it your safe, it will lose value over time. If you have Rs 1000 in your safe today and you keep it there for 10 years or so, it will be worth a lot less after 10 years. If you can buy something for Rs 1000 today, you will probably require Rs 1500 to buy it 10 years from now. So do not keep money locked up in your safe. Always invest money. Always make your money grow.

Whatever you do, do not just lock your money up in your safe and keep it stagnant. If you do this, you will be loosing money without even knowing it. The more money you keep stagnant the more money you will be losing.


Pune Real Estate To Crack Soon

Sources in the Pune real estate market say, that retrenchments in the IT industry is causing a decline in the serviced apartments sector.

A few years ago, Maharashtra government was promoting Pune as the answer to Bangalore, and was meeting with good success. Once Pune started getting recognized as an IT hub, hordes of North Indian programmers were pouring in to Pune, picking up and renting apartments.

The real estate market also rose to the ocassion catering to the needs of IT companies which preferred holing their staff in serviced apartments instead of expensive hotels.

This trend is about to change for the worse. With the falling dollar and expensive real estate, BPO companies are retrenching staff. Thus the demand for serviced apartments is falling.

Pune is about to crack in the way Bangalore has. Expect at least a 40% drop from here.

Wednesday, March 26, 2008

High Court Puts Builders in a Bind

Have the booming real estate markets enthralled you? Have you invested your money in places like Mulund, Thane, Ghatkopar, Kandivali and Borivali. You have reason to worry.

Mumbai builders have been told by the High Court that all constructions on forest lands are encroachments and have to be demolished.

Market tops throw up the most unusual of circumstances. Some times the prick that bursts the bubble comes out of the blue, ambushing even the most astute of investors. So, a poor average home buyer like you almost never stands a chance.

The order can significantly prick Mumbai's crazed real estate bubble, where every train traveler worth his season's pass had become a paper millionaire due to the rising value of apartments.

Many reputed builders, driven by the desire to reap profits from the booming property markets, went ahead to construct towering residential apartments in areas near the sprawling Sanjay Gandhi National Park, a full-fledged forest in the middle of the city of Mumbai, often throwing caution and care to the winds.

What is rather perverse of this justice is that innocent and legitimate buyers of their apartments are on the verge of losing their homes and investments.

Over 1 lakh home owners in Mumbai, and the 75,000 more who have invested in current constructions, could lose their homes completely, even if they have been paid for legitimately or even if they have occupation certificates. The High Court says that builders have clearly violated the Act, and hence all construction is encroachment.

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.

Monday, March 24, 2008

Realty Stocks Crash 70% from Highs

Further tracking from the paanwala top in Mumbai's realty markets, and subsequently highlighting the 30% correction in Mumbai's realty market, most investors in real estate are refusing to read the writing on the wall.

We may have done a full 10-year cycle in real estate bull tops from 1998 and 2008, and now the next 5 years should see a retracement of these prices by at least 30 to 50%.

Is there a correlation between real estate prices and real estate stocks? No one is sure, but even if there exists a vaguely direct connection, then with most real estate stocks crashing 50 to 70% from their 52-week highs (see box), it points to the fact that markets have discounted a slump in real estate business, and consequently real estate prices in India are slated for a steady decline.

Even if these drops be attributed to panic in the overall markets, either realty stocks show some quick bounce to old heights or we are on the threshold of some serious slide, as these companies become desperate to show profits by issuing a fire sale of apartments, or that those ubiquitous real estate speculators start running to cover their capital.




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

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.”

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.

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.

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

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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