Real Estate Prices Slump Toward 2003 Levels

Remember the time when an upmarket property in Malabar Hill Mumbai cost Rs 12,000-17,000 per sq ft. The same situation is likely to come back within a few months according to real estate agents in Mumbai. Prices here had touched between Rs 25,000 to Rs 45,000 per square feet.

New Delhi too is seeing a clear reversal in times. Builders who purchased properties in early 2008 are now wriggling out of deals. In early 2008, a builder had negotiated a Rs 18-crore deal for a 2,925 sq ft house in New Delhi’s upscale Defence Colony area. His objective was to demolish the house sitting on the land and develop apartments, hoping for a return of about 30 percent. However, today he has opted out of the deal losing even the Rs 50 lakh paid he had paid as token money. The same property is now being valued at Rs 9-10 crore.

Developers are dropping prices but the buyers are simply not coming. It is likely that once the panic button is hit, prices could touch rock bottom within months. There are no financiers in the market, and in Delhi, volumes are down 95 percent from peak. New projects launched are 40 percent cheaper than before. NCR regions are also hit. A 11,250 sq ft home in Golf Links, which was purchased for Rs 70 crore, is now available for Rs 50 crore, but there are few takers.

Mumbai's troubled times continue. Sometime ago a deal was made in Usha Kiran Apartments, on Altamount Road, by an executive of a financial broker. Within days of almost finalizing the deal, the executive backed out. Ten months ago, actor Vinod Khanna offered to pay Rs 1.25 lakh per sq ft for a 2,500 sq ft apartment for the ultra-luxury apartments, El Palazzo, located in the Hanging Gardens area of Malabar Hill. Subsequently Khanna backed out, but it was a wise decision.

Current prices in Il Palazzo are around Rs 70,000 to Rs 75,000 per sq ft. Near here, in Pedder Road, rates are around Rs 45,000 per sq ft. A few kilometers away, in Mumbai's CBD, Nariman Point, a London-based Indian national acquired a 3,475 sq ft property at NCPA Apartments, at Rs 97,842 per sq ft, nearly six months ago, but rates there are almost half that now.

In the central Mumbai’s Worli and Lower Parel areas, rates are down to Rs 12,000-18,000 per sq ft, while in Bandra they have fallen by more than a fifth to Rs 15,000-25,000.

Where price drops have been of the order of 50 percent, buyers appear to be showing interest. Orbit Corporation is now asking Rs 16,000 per sq ft for its new project in Lower Parel down from Rs 35,000 per sq ft.

In India’s technology capital Bangalore, prices have fallen by up to 25 percent in some area, says a Morgan Stanley report, and DLF, India’s biggest real estate company, cut rates by about 30 percent at its upcoming project.

Brigade Group's The Gateway project, one of the oldest localities in town, is quoting at Rs 5,090 per sq ft against Rs 5,790 per sq ft last year. Second sales are going at Rs 4,700-Rs 4,800 per square ft.

Kolkata too is cooling down on the real estate front. Prices are off their mid-2008 peaks. In areas such as Ballygunge Circular Road, Sunny Park and Queens Park rates, which were Rs 8,500-10,000 per sq ft in January 2008 jumped to Rs 13,000-14,000 in June-July before dropping to Rs 9,000-11,000. Residential properties sold at Rs 12,000-15,000 per sq ft last year, are averaging Rs 9,000-10,000 per sq ft now.

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Blame the Government for Real Estate Mania

The best way to dampen real estate spiral is to make capital gains on real estate compulsory and not provide any kind of exit routes. After all why should reinvestment back in to property save you capital gains tax.

When you purchase shares of Tata Steel, and sell it for a profit, you pay capital gains tax on that transaction, whether or not you reinvest the money in to Infosys or not. So, why should a person selling his apartment in Mumbai be allowed to save tax, but only if he reinvests the proceeds in to an apartment in Bangalore?

The Indian government is guilty of keeping an excessive real estate spiral in place. It has kept the real estate boom going, by providing an exit route for real estate investors, via reinvestment in property.

In order to save capital gains tax on property the government says that you can reinvest the money within one year in to real estate and avoid payment of capital gains tax. Alternatively, you lock this money in to a capital gains bonds, which pays you 5 percent each year, for the next five years. At the end of the tenure the capital and the interest becomes tax-free. The capital gains on real estate is taxed at 20 percent for long-term capital gains and 30 percent for short-term capital gains.

Who picks property at Rs 2 per square feet and sells it at Rs 2000 per square feet. It is none but politicians, especially those who are in power. The Indian government has perpetuated a constant stream of investment in real estate by introducing this exit on capital gains.

As Sam Zell said, there is no shortage of land in India, but there is shortage of zoned land, which means land freed for real estate development. This land is controlled by the government. Zoned land is never made available to individual home buyers.

Why is it, that people who can pay Rs 30,000 per square feet for an apartment are not allowed to pay Rs 17,000 per square feet for land, on which they can build their own homes.

The government's job is to focus on creating new cities, by providing infrastructure (excuse this buzzword) - in simple term, water, electricity and roads. Instead, politicians focus on acquiring cheap land, doubling FSI, and selling them at profits that even the stock market cannot provide. This is why real estate is such a darling of the chosen few in India.

Thus, it makes sense, that when one votes, it is always in the best interest of the people to ensure that one single party never remains in power for more than one term. If it is a choice between theivves, the best thing a voter can do is to divide the spoils and exercise at least one wee bit of control over the overall process.

Always vote out the incumbent government, and bring in a new one. This is the sanest thing to do. Irrespective of what the party stands for, just make sure they do not rule for more than one year.

Do not Bail Out Real Estate Companies - Avinash MKB

After yesterday's stimulus package announcement for the Real Esate companies , I read an articke in the Economic Times about real estate companies claiming that the stimulus package was not enough and that they need more.

CEO # 1 says : "They could have done more …. should have cut the steel prices mores …..."

CEO # 2 says: "Package should be annouced for loans of upto 30 lakhs and not 20 lakhs , this is not enough."

This is really juvenile behavior on the part of real estate companies. They are crying hoarse about the inadequate sops from the government, while they have done little to stimulate the uptake in real estate via a price reduction.

I am unable to understand the reason why developers are not willing to cut prices (at least by 15-20 percent). While car companies and every other company is offering discounts to sell their stocks, real estate companies are sitting pretty on their profit margins.

As per my own experience of building a house in Bangalore and also as per the contractor (who also builds many apartments on contract basis) the average cost of constructing a quality apartment is around Rs 1000 to Rs 1200 per sq ft. If you include the cost of land then it would come up to Rs 1500-1700 per sq ft.

But what's the retail price of an apartment in Bangalore? It ranges between Rs 2300 (at the lower end ) to Rs 3200 (medium) to Rs 4000 (higher end). These real estate guys are making dream margins on each project (even IT companies don't make so much).

However, on the balance sheets of real estate companies the profit margins are shown lower simply because all profits made during the bull run were invested in creating more and more land banks.

Given all these I don't see a reason why one should give bailout packages, in terms of cheaper loans to the real estate companies. I believe that the real estate companies should now pay the price for their reckless expansion.

My humble request to the PM and FM is not to give any more sops to real estate companies until they cut prices by 20-30 percent.

Write to Avinash at avinashmkb@smellthecheeseblog.com

Hiranandani Exploited Middle Class for Super Rich

Mumbai builder, Niranjan Hiranandani, exploited a middle class housing scheme in Powai to construct luxury apartments catering to the superrich. This comes across from a High Court order passed Thursday preventing the builder from selling more than two flats to one person.

In 1986, builder Niranjan Hiranandani was allowed to construct over 230 acres of land under the Powai Area Development Scheme, (PADS), in which 50 percent of the flats constructed had to be less than 40 square meters (430 square feet) and no flat could exceed 80 sq meters (861 sq ft). The objective was to allow the burgeoning middle class to benefit from the scheme.

However, in 1989, Hiranandani was provided an exemption allowing it to merge flats but the amalgamated flats could not exceed 15 percent of the total development.

However, the greedy developer built flats of area 1870 sq ft and 4925 sq ft which are currently priced at Rs 4 crore and Rs 8 crore respectively. In March 2008, a report submitted by the MMRDA confirmed the violations. However, the state government allowed the company to get away with just Rs 3 crore as a penalty.

Today's judgment came as a victory for petitioners, Kamlakar Satve and Rajendra Thacker. The judges said that the developer could carry out further construction at its own risk. The next hearing is December 18 when all parties have to file their replies.

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MHCI Chief Seeks Greater Fools in Gulf NRIs

Trust desperate real estate developers to act even more foolishly. Zubin Mehta, CEO of the Maharashtra Chamber of Housing Industry (MCHI), is seeking greater fools for his real estate industry a little too late in the day, when even the fools have lost their money.

Mehta said MCHI is targeting UAE NRIs to purchase real estate projects in India, his argument being NRIs could stand to gain up to 20 percent if they purchase now, since the Indian rupee has fallen by this value against the US dollar.

Why UAE NRIs? He said that these folks work to buy a home in India, unlike those in UK and US, who are given residential status and further citizenship in those countries. Good deals are now available, said Mehta, pointing to a depreciating rupee, discounts from builders, facilities like free parking and a stamp duty write-off.

However, Mehta would have a tough task convincing Gulf NRIs, who have already burned their money investing in the Dubai real estate market. Real estate in the Burj Tower area of Dubai is reported to have fallen 50 percent in last three weeks.

Mehta also added that he expects the Indian real estate market to perk up January. Now this is really desperation.

Times Benchmark Reflects Residential Property Slump

Times Property, the property supplement of the Times of India, Mumbai, has changed its Benchmark column to reflect the slump in residential property rates in Mumbai. Benchmark features on the front page of the Times Property Supplement of the newspaper that appears every Saturday. Data for this section is supplied by Mumbai broker Narain's Corp,

Benchmark is widely read and referred to by home buyers in Mumbai.

Despite the massive price correction, Times Property has reacted slightly slower, mainly because the data supplier Narain's Corp was reluctant to do so.

While Benchmark shows corrections in the suburbs, its South Mumbai rates are shown has untouched. However, it may take a little more time before the data supplier accepts the new reality.

The reductions in Times Property's Benchmark will bring cheer to new home buyers.

Rottenization

It has been at least four years since I read articles talking about good values and the right reasons for business success. During the last quartet of years it appears as if the belief in doing good seemed to have been lost, having got replaced by gung-hoism. Thankfully, with this global downturn, the good things should be back and good things lead to great things.

Take the example of Bangalore. I lived in Bangalore in the late 80's and early 90's. The city was a brilliant mix of values and great weather, heritage, history and nostalgia. Then they discovered it to be the Silicon Valley of India. All of a sudden, there was a wave of thinking about how similar Bangalore was to the Bay Area.

Indians from the US suddenly descended in to the city and set up home here, promoting the idea that one could earn salaries in the US but live offshore, in inexpensive Bangalore. The number of NRIs suddenly 'finding' Bangalore was surprisingly higher than during the tech boom of 1998-2001.

In no time, real estate became the most favored investment and locals who owned ancestral property - and those who purchased it as farmland - began to sell it at a premium to greedy but gullible NRIs. The very people who moaned about Bangalore losing its old world charm were now selling land like fresh cakes at the local Iyengar Bakery. No thought was given to infrastructure and preservation of culture or heritage, or nature.

The city, which was renowned for its flora - huge gigantic trees over hundreds of years old - was fast being replaced by the visions of the financiers, and ideas of those living in deserts and arid lands. All of this laid out in neat slices, compressed and packaged as progress. So, what has all this progress done to Bangalore?

Clogged roads, 3-hour drives to the airport and vague debates on the timings for local pubs, sponsored by the local corporate brewer. The beer capital of India did not give a thought on what laws should be put in place against those drinking, driving and running someone over in one night. This is called a mad culture of "investing in real estate", which never allows for thought on how the city should develop.

Internet, and information technology, and consequently digitalization were supposed to make life cleaner and better, for rich and poor, but what has it done. Bangalore, instead, has become another Mumbai - with its hyper real estate prices, fast deteriorating infrastructure, congested roads, pollution and crime. Good folks with good money were replaced by home loan-loaded ecstatic rodeos, riding some new wave of software jobs, airline jobs or financial services jobs, and what have you, thinking that they were writing the story for the next decade. Suddenly debt was cool, and "this is how it is in the US" was a statement for every financial misstep possible.

Flipping homes became as easy as flipping burgers. Just put down 10 percent, book a property, sell it for 20 percent profit next quarter. Another variation was: Buy an inflated property on mortgage, calculate the monthly EMI, and expect the rent to pay off the EMI. Real estate trading became the new casino, in which all could participate, without understanding it. Ever heard of options in commodities and stock? What we were seeing between 2005-2007 was real-estate option trading, without any kind regulation - a perfect resume for disaster if you do not know what options can do.

Having seen first-hand the Tech boom and bust - I know enthusiasm is great for start-ups but it does not pay in the long run. Most people confuse enthusiasm with happiness. In the Tech boom of 2000, the Internet was supposed to be the great leveler, so anyone with an Internet account and a url was a company. Venture capitalists became the new kids in town, peddling the deadly shot in to the veins of start-ups - cheap capital. Meetings were held where puffed-up child-CEOs (not very different mentally from the child soldiers of Africa) were asked business plans with specific targets for burning money. There were meetings where one was given a dressing down for not spending enough. If it was burning money in 1998 then, it was taking on debt in 2004 that was the new mantra.

Frankly, the impending rout of real estate - it has not even started, mind you - will provide a great pause for all, unless of course we are overloaded with debt, having purchased property with the idea of flipping them over in 3 months and worse still, hoping to rent it for more than the EMI. Clearly, worldwide, this party is now over!

Many ask me why I am delighted with this rout of real estate stocks. I think it comes from deep within. I despise this rottenization of livable spaces, invading, decimating and converting organic material in to concrete. It's a contradiction, that we first burn down forests, fill the space up with processed rubble and then put out ads that say: "Come live in the lush greenery". Ask those who purchased apartments in Powai (Mumbai) in 1995. How lush is their environment today?

What makes real estate dangerous is that you have the most enthusiastic and emotional fools with the least ability buying in to this. The mass participation in speculation thus causes an almost uncontrolled spiraling of prices.

The repercussions of a never-ending boom in land would have been disastrous. Where would this have led us? The commercialization of water? We almost thought of this. How about air?

Fortunately, booms and busts are self-correcting bootstrapping mechanisms. Thankfully, Nature finds its own corrective path, and as this real estate mania grinds to a halt over the next 2 to 5 years, it will allow us to find our real selves and values. By the time the next bull run starts, we would have spent years "at the grinding mill" and done our time.

However, future generations would perhaps not learn from this financial turmoil, as we have not from the earlier ones, because, as is the nature of emotional beings, we will always get mired in our own ecstasies.

Dubai Developers Invoke 'Seize Property' Clause

A new trend is emerging in Dubai, which has many developers invoking a default clause in the sale agreements, which state that if a purchaser defaults on payment of installments, the developer can keep the earlier payments as well as the property.

This is causing speculators a lot of grief, since many had paid the first deposit as a means of booking the property and had hoped to exit before the next installment.

However, Dubai lawyer Kavita Panicker, says she receives "two or three calls each day" from US-based investors regarding property purchased in Dubai. Most cannot pay the installments and are facing problems paying installments. She said these investors are happy to exit at a loss.

However, developers are reluctant to take the properties back and are invoking the seize property clause in the sale agreements.

The Mullahs Have Landed - in Dubai

Dubai is soon headed for a crisis of such huge proportions that its expatriate population has never seen ever.

A double whammy of weak crude prices - down from $150 to $50 a barrel - and a weaker US currency - petrodollars - will make its ruling Executive council scour high and low for ideas on how to fund the highly leveraged property market balloon it has created and what to make of asset depreciation. In many ways, the government has got caught in a whirlpool of its own making.

For expatriates, especially those who made laughable investments believing that Las Vegas could be created around the fringes of Islamic fundamentalism, this could be the wake-up call for a long dreary nuclear winter.

With the pain starting to ride down the nerve to common people, Dubai's success and any impending failure would get straightaway tied to the non-Islamic indulgences of the place. Financial pain gives rise to conservatism and religious extremism. With Dubai sandwiched between Shia Iran and Sunni Saudi Arabia, it could get caught in any crossfire.

The role of Dubai has never been understood; why is Dubai so powerful within the Emirates - even though it has no oil, no manufacturing base, nor has it been able to achieve Singapore's status as a port of repute. Yet, it has been able to hold up to Abu Dhabi, which owns 90 percent of the UAE's oil, and whose rulers, although more powerful, are far more low profile.

One reason that comes to mind is that Dubai is a refiner for Iran's oil, and a lot of refining margins are tied to the price of oil, which means the last four years were a bonanza for Dubai. This perhaps explains its clout. With clout, comes ambition, and with ambition a penchant for breaking rules, and Dubai has had all of it. In fact its direction toward becoming a tourism hub for Middle East revelers has always been watched closely by the Islamic right.

Dubai has no choice, because tourism in desert cannot takeoff without prostitution, alcohol or gambling. There is always talk about how activities in Dubai are frowned upon by the conservative Islamic countries. Some time in 2005 there was a rumor of some threats by Islamic extremists to bomb City Center, a shopping mall in Dubai, all of which was well-handled and overcome without alarm. Clearly, it had become evident even then that Dubai's success was getting increasingly uncomfortable for some, and sooner or later there was bound to be trouble.

However, before Islamic conservatism could get it, the credit crisis from the West got its goat. As much as charging interest is haram (sin) in Islam, this did not stop the mortgage on construction from becoming the fuel for Dubai's real estate bubble, as it goaded the desire of millions of expats of owning castles in the sand.

With bright ideas and some really grandiose schemes indeed being delivered, it was western money, and speculation drove up the market in Dubai. There was a time in 2007, when financial executives from New York, speculated on villas in Jumeirah, booking a villa one week, and selling it out the next for a profit. It was this false sense of a bullish market that encouraged lesser mortals among the expatriates to participate in the orgy. Until of course, it all blew up last week in their faces.

Finally, as the sand settles, people will begin to see Dubai what it it really is - a city of imagination but very little lastability: without natural resources, like water and fertile soul, and no oil, it looks like this time the devil has come to stay.

Without the sins of the West - alcohol, prostitution, gambling - Dubai would have certainly found it a challenge to sustain its tourism story. Now, as the hype of the glamor and glitz, gets replaced by caution and conservatism, the Mullahs are now going to have all the time to take a hard look at what Dubai represents, and see how it fits in to the general laws of Shariah. With Dubai now having to increasingly depend on Abu Dhabi and Saudi money, the Mullahs have surely landed.

Dubailand Property Available for Half Price

Dubai-based Elysian Real Estate sent a text message to up to 40,000 mobile phones advertising distressed property sales. The text offered a luxury six-bedroom, six-bathroom villa in Dubailand, a multibillion-dollar luxury theme park on the outskirts of the city-state, at an advertised cost of about £3.86 million – about half its original price.

Dubai's Burj Tower Prices Crash 50 Percent in 3 Weeks

Speculators in Dubai's Burj Tower - the tallest tower in the world - are in for a rude shock. They have woken up to find that their property values have plummeted up to 50 percent, that too in just 3 weeks. According to brokers, most properties in the Burj Tower district have slumped by at least 22 percent. These were same apartments and commercial establishments that had risen 88-200 percent in the year until September 2008.

Zero premium and even discount sales have become rampant as investors rush out of sand castles and in to cash. Prices outside the tower fell from an average of AED 3,500 ($952) per square foot to AED 2,700, and on 8 Boulevard Walk, for instance, dropped from AED 3,300 per sq ft to AED 2,500 per sq ft in three weeks – a 24 percent decrease. Old Town quarter of the development had fallen 30 per cent in the past month, along with nearly 20 per cent at the South Ridges and Residences areas.

Price fluctuations in the Burj Dubai tower had been far more volatile because of the high percentage of speculators owning these properties, according to brokers. Some had since been sold at significant losses to generate cash. However, they said, the most expensive floors, such as those branded by Armani, sold at about AED 14,000 per sq ft and were holding much of their value.

Abu Dhabi’s high-end developments have also been affected. Many of the buyers appeared to have no intention of holding on to the property long enough to make the first required payments to keep possession of it. Like Al Reem Island, which had 95 percent speculators with no intention to make any payment after the deposit. Residential properties in some cases [are now put into the market] at minus 15 per cent premium.

A floor of offices that was offered in Al Shams Abu Dhabi at AED 2,500 per sq ft three weeks ago is now being offered at Dh2,100. Reem Island's properties purchased at up to AED 2,700 per sq ft are now available at AED 1,800.

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The Denial of Reality - Arvind Singhal

There is no sign of let-up in the economic turbulence all around us. While there is, finally, some realization within the prime minister's office and the key economic ministries that India is not insulated from the global economy and that serious measures have to be undertaken to prevent the Indian economy from melting down too, it is surprising to observe the response of corporate India to this situation.

As if on cue from the USA, where there is an increasing clamour for more government bailouts, many in the Indian private sector have started to make similar noises. Of all those who have been the most vocal in seeking government support, subsidy and protectionism, the case being put up by the realty sector is the most disturbing. When the recent economic boom started in 2003, land prices in posh Delhi localities ranged from Rs 40,000 to Rs 60,000 per square yard. Builders’ flats in Gurgaon for middle-income customers were being offered for booking at Rs 2,200-2,500 per square foot, while premium residential developments in South Mumbai came to market at Rs 4,000 per square foot. Office rentals in Gurgaon were at Rs 30-35 per square foot per month while in Mumbai, they hovered around Rs 100 or so. In April 2008, the same prices respectively had shot up to Rs 400,000 per square yard, Rs 6,000 and Rs 28,000 per square foot, and Rs 120 and Rs 400 per square foot per month.

While this increase, ranging from 300 per cent to 1,000 per cent, put many Indian developers on the Forbes list of billionaires, it also resulted in the destruction of the primary demand for residential and commercial property from actual users since it became unaffordable and nonviable, and brought only speculators to the market. In this situation, the noise from the real estate sector exhorting the government to facilitate reduction in the home loan rates is nothing but a denial of the reality that unless the property prices are scaled back to 2003 (or even 2005) levels — making them affordable/commercially viable for actual users once again — the realty sector will not see a boom again irrespective of the lending rates.

Contact Abhinav at abhinav@technopak.com

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Bahrain's Property Bubble Has Officially Burst

A senior professor at City University's Cass Business School, London, has said that Bahrain's property bubble has officially burst.

According to Prof Stephen Lee, the sector was grossly "inflated" sector and would would now fall in line with prices and growth rates in the rest of the world. He said it would take at least 2 years to recover.

He added that the credit crunch has already hit Dubai where if you work for a property developer you will not get a loan to buy a car. Supply will far outstrip demand, according to Lee.

He said that although the Palm Island in Dubai and Bahrain Bay, for example, will be completed, the wealthy will not invest in them, unless confidence comes back.

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Dubai Ambitious Palm Project Falls 40 Percent

The ultimate reclamation from the sea project, the Dubai Palm Jumeirah project, has seen its value erode over 40 percent since September, according to real estate brokers.

A four-bedroom villa on the man-made island developed by government-owned Nakheel, is now selling for AED 10 million (Rs 13 crore), down from 15 million dirhams.

Rehab Gouda, senior sales agent at Al Jabal Real Estate, said that prices had fallen 40 percent during the same period.

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DLF Cuts Price 21 Percent in Bangalore Project

The real estate slump is now beginning to grind harder on developers.

India's largest real estate developer, DLF, has slashed prices for apartments in its 80-acre gated community project at BTM Layout in Bangalore. Prices are down 21 percent to Rs 2775 per, from Rs 3500 per sq ft.

This means that a 1,310 sq. ft two-bedroom-hall-kitchen (BHK) flat in the project would now cost Rs 36.35 lakh, or about Rs 9.5 lakh cheaper than its initial price. The project, however, is yet to receive mandatory approval from the Bangalore Development Authority.

The project was launched to a closed set of invitees where the price was discussed. An analyst who did not want to be named said that prices could go even lower.

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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?

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Stanchart Pays Rs 720 Crore in Bombastic BKC Deal

In a deal that seems to be one-off, albeit bright spark, in an industry gasping for cash, Standard Chartered paid Rs 720 crore for 2.2 lakh sq ft in an under-construction building called Crescendo. The sellers were Parinee Developers.

The rate works out to Rs 32,000 per sq ft, which is between 30-40 percent lower than the Rs 45,000 shelled out in 2007 by Wadhwa Builders.

The deal is being shouted down a one-off by brokers, many of whom say that Standard Chartered paid more than it should have. A Stanchart spokesperson said they were planning to set up their corporate headquarters at the new premises which will also have the wholesale and retail banking operations.

Commercial lease in suburban Mumbai is also slumping. Grade-A properties are now leasing at Rs 325 per sq ft as opposed to Rs 400-450 a few months ago. Office space has also fallen to Rs 300-350 as compared to a few months ago. However, even at these rates, there are no lessees available, said industry sources.

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Unitech Forced to Sell New Delhi Head Office

The morass that Indian real estate companies have sunk in to is now becoming glaringly evident. The nation's second-largest property company, Unitech, is now forced to sell its New Delhi office of over 2 lakh sq ft, to raise cash and meet demands from lenders.

Unitech had borrowed an undisclosed sum from HDFC, using the Saket head office as collateral, while HDFC sources claim this number to be Rs 30 crore.

Unitech sources said that HDFC has agreed to purchase this property for Rs 450-500 crore, and that formal agreement is expected to be signed end of this month. Unitech had itself purchased this land for over Rs 127 crore.

HDFC clearly refused to comment on this.

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Realty Cos Likely to Default on Payments

Citigroup, in a note to clients, has warned that Indian real estate companies face a higher risk of payment default as access to cash becomes restricted.

The same note states that DLF, the nation's biggest property developer, Parsvnath Developers and Omaxe have shown a decline in Q2 income, as a slowing economy and tighter lending norms by banks cut out the oxygen supply.

Citigroup analysts categorically stated that they do not expect a recovery in the near term.

In another development, Goldman Sachs too said, in a separate note, that the earnings of realty companies reflect a slowdown.

New Delhi-based DLF Q2 profit fell 4 percent, while Unitech's Q2 declined 12 percent respectively.

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SBI Chairman Sees 50 Percent Correction

OP Bhatt, chairman of State Bank of India (SBI), the country’s largest bank, expects 50 a percent correction in the housing sector prices in the country.

“In India we may witness up to 50 percent correction in pricing in the mortgage markets. If that happens, it’s good news for the Indian banking system as NPAs would reduce and new business would fall-in,’’ he said at the concluding session of Ficci-IBA Conference on Global Banking: Paradigm Shift, in Mumbai on Saturday.