Indian Real Estate Sector

amardeep_s · Post by **amardeep_s** » 20 Apr 2010 12:27

At this rate only i-vity types can afford to buy

Beneteau yacht for a crore, but not a flat

Mumbai: A brand new fourseater Cessna 172 aircraft,a new Beneteau 35-footer coastal cruiser yacht that can comfortably carry a family of six to Goa,three Mercedes C class saloons;each of these can be had for one crore rupees.But raised eyebrows and blank stares is all you will get at the ongoing property expo at Bandra-Kurla Complex if you ask what you can get for this sum.Please pick up the rate charts from that corner, sales executives at several counters told this correspondent disinterestedly on learning that the budget was a mere Rs 1 crore.It was as if a slum dweller had strayed into a mall.

Nonetheless, if one is willing to visit every stall in the 14,000 sq ft air-conditioned hall put up by the Maharashtra Chamber of Housing Industry (MCHI),one can find apartments costing less than one crore in the municipal limits of Mumbai.Only that they may be in under-construction,stand-alone buildings on the outskirts of the city or in rundown localities.

For instance,a 2BHK flat at Bhandup by Neptune builders measuring 1,000 sq ft (carpet area 700 sq ft) comes for Rs 67 lakhs.The 30-storey building,Flying Kite towers,behind Metro mall,is still under construction.

The more affordable options include a 2BHK flat at Mantri Park,Goregaon (E),off Film City road for Rs 70 lakh.A 1,160 sq ft 2BHK flat at Gundecha Altura,Kanjurmarg (W),LBS Marg,is going for Rs 76.5 lakhs.HDIL is selling 1BHK and 2 BHK flats at Galaxy Apts at Kurla East at 5,251 per sq ft.A 1,035 sq ft,2BHK flat at US Open by Nirmal Lifestyle at Mulund (W) will cost you Rs 85 lakh at Rs 6,552 per sq ft if you are willing to wait four years for possession.

According to builders specialising in SRA projects,it is possible to get an 800-sq ft carpet area flat for Rs 80 lakhs in Andheri.MHADA recently sold 2BHK flats with a carpet area of 700 sq ft at Versova for Rs 42.5 lakhs.

However,at the MCHI expo,most of the 2BHK flats are tantalising out of reach if your budget is Rs 1 crore.For instance,a 2BHK at Ackruti Shikhar at Parsi Panchayat Road,Andheri (E),will cost you Rs 1.3 cr at Rs 12,500 per sq ft.A 2BHK flat with a carpet area of 775 sq ft at Kohinoor City,which has replaced the Premier auto works at Kurla,comes at Rs 1.18 cr.

A 2BHK at Kalpataru Aura at LBS Marg,Ghatkopar,comes for 1.1 cr.Flats at HDILs Metropolitan at Andheri are being sold at Rs 11,500 per sq ft and a 2BHK with a carpet area of 765 sq ft costs Rs 1.31 cr.At Ajmera Pristine,Yogi Nagar,Eksar Road,Borivli (W),a 3BHK with an area of 1,595 sq ft can be had for Rs 1.43 cr.

Of course,all these flats come with amenities such as a swimming pool,a gym,a clubhouse,multi-level car parking and the like.But then,it would be much cheaper to live in a trailer,or for that matter in a Beneteau cruiser yacht bobbing on the waves.

derkonig · Post by **derkonig** » 20 Apr 2010 13:26

I remember, back during the boom a few years back it was way cheaper to buy a TFTA Condo in massa than buy some SDRE flat in some wild outback of Blr/Hyd.

shyamd · Post by **shyamd** » 28 Apr 2010 20:59

Whats happening in the RE market in rural TN, near Sathyamangalam , someone paid 1.24cr for 5 cents of prime land. Crazy! I mean prices are just ridiculous and are comparable to the UK high street prices. Prices are just rising and rising to unrealistic levels for commercial areas of small towns in TN, I am sure the shops etc don't even provide a rental yield of 3% if I paid 1.24cr for 5 cent plot.

I know RE has cooled in main cities like Chennai, BLR, DEL, BOM, and even tier III cities like Coimbatore. But I dont think there has been much affect in rural areas/small towns of TN.

rohitvats · Post by **rohitvats** » 29 Apr 2010 00:27

shyamd wrote:...<SNIP> I mean prices are just ridiculous and are comparable to the UK high street prices. Prices are just rising and rising to unrealistic levels for commercial areas of small towns in TN, I am sure the shops etc don't even provide a rental yield of 3% if I paid 1.24cr for 5 cent plot.

I know RE has cooled in main cities like Chennai, BLR, DEL, BOM, and even tier III cities like Coimbatore. But I dont think there has been much affect in rural areas/small towns of TN.

Why the proclivity to compare RE in India with videsh? Our demand, and sustained demand, is far far higher than those countries...the pressure on land is enormous.

As for the RE cooling off, they stagnated but never cooled off. Always remember - their is no holding cost of land for most of the developers and hence, no desire to bring down the price of developments. Same goes for land price as well.Unless, someone is sitting on huge inventory and bought land at high prices during the peak.

Cosmo_R · Post by **Cosmo_R** » 29 Apr 2010 01:52

Anyone have an idea of what land prices might be in the Nandidurg Rd/Bensontown/ITI Layout area of BLR ? Someone mentioned Rs 5000/sf to me I thought that was pretty shocking! That is more than in Massaland even before GS-inspired meltdown.

Bade · Post by **Bade** » 29 Apr 2010 05:37

Stay away from any shady land deals in Indian cities but more so in rural areas. A lot of black-ka-white is going on in the name of tax avoidance. Despite what the real estate experts say, there is plenty of land available even in places as densely populated as Kerala if one is willing to avoid the usual hangouts.

amol.p · Post by **amol.p** » 19 May 2010 12:39

Builders in trouble! Rs 25,000-crore debt payment looms

Real estate developers, who need to pay around Rs 25,000 crore (Rs 250 billion) on debt installments in the current financial year, could face an uphill task. For, equity issuance remain uncertain and cash flows have dwindled.

According to Reserve Bank of India estimates, developers have piled up debt of Rs 75,000 crore (Rs 750 billion). Public sector banks restructured debt worth Rs 10,000 crore (Rs 100 billion) in 2009 and allowed them a roll over.

http://business.rediff.com/slide-show/2 ... -looms.htm

Singha · Post by **Singha** » 19 May 2010 13:15

banks have to other options but to allow them to defer payment. else banks will go down. these loans are too big in total to be allowed to fail. taking possession of low priced land banks gets the banks hardly any saleable asset.

chetak · Post by **chetak** » 21 May 2010 10:03

About time too.

Hope that this will open the floodgates of litigation and teach the shady builders a lesson

http://timesofindia.indiatimes.com/city ... 955892.cms

Carpet area: In a first, FIR against 'cheating' builder
Nauzer K Bharucha, TNN, May 21, 2010, 01.13am IST

MUMBAI: In perhaps the first case of its kind, the police have registered an FIR against a builder for allegedly cheating flat owners on the carpet area of their homes.

Last week, the MHB police station in Borivli (W) finally lodged the FIR after persistent efforts on the part of residents of Rose-Mar Apartment Cooperative Housing Society, IC Colony, who complained that their builder, Da Vincy Constructions, had shortchanged them by giving them less carpet area than promised

manish · Post by **manish** » 24 May 2010 13:18

amol.p wrote:Builders in trouble! Rs 25,000-crore debt payment looms

Real estate developers, who need to pay around Rs 25,000 crore (Rs 250 billion) on debt installments in the current financial year, could face an uphill task. For, equity issuance remain uncertain and cash flows have dwindled.

According to Reserve Bank of India estimates, developers have piled up debt of Rs 75,000 crore (Rs 750 billion). Public sector banks restructured debt worth Rs 10,000 crore (Rs 100 billion) in 2009 and allowed them a roll over.

http://business.rediff.com/slide-show/2 ... -looms.htm

IIRC vina had predicted this a long time ago when he wrote about the high valuations that these guys were enjoying thanks to their so called 'land banks'.

Things seem to have come a full circle for them.

rohitvats · Post by **rohitvats** » 24 May 2010 13:53

^^^This has got nothing to do with high land valuations. Loan from the banks is made available for construction purpose only and not for purchasing land. Land purchase and sticthing together of land parcels is a shady business. High Land Valuations impact the IPO price of new developers and is one of the main reasons the lot of Real Estate PE Funds are now closed or have very bad investments.

As far as bank debt is concerend, the problem is the capital values of the residential projects - bulk of the development is in residential segments. Lot of projects are lying unsold due to wrong location or pricing and combination of both. On top of it, the developer would have shiphoned off funds from a particular project and invested somewhere else. So, projects are stuck due to low or negligible demand, and banks have no way in recovering their money.

In addition, the loan amount for a project may be far higher than required - money goes somewhere else. Just check the debt on the books of some of these worthies - they have not created corresponding assets.

abhischekcc · Post by **abhischekcc** » 24 May 2010 14:22

amol.p wrote:Builders in trouble! Rs 25,000-crore debt payment looms

Real estate developers, who need to pay around Rs 25,000 crore (Rs 250 billion) on debt installments in the current financial year, could face an uphill task. For, equity issuance remain uncertain and cash flows have dwindled.

According to Reserve Bank of India estimates, developers have piled up debt of Rs 75,000 crore (Rs 750 billion). Public sector banks restructured debt worth Rs 10,000 crore (Rs 100 billion) in 2009 and allowed them a roll over.

http://business.rediff.com/slide-show/2 ... -looms.htm

If the developers are forced into a fire sale of their assets, then there could be a RE crash in India.

rohitvats · Post by **rohitvats** » 24 May 2010 14:42

abhischekcc wrote: If the developers are forced into a fire sale of their assets, then there could be a RE crash in India.

Why and how?

Singha · Post by **Singha** » 24 May 2010 18:36

to sell there must be a buyer. who will buy huge land banks in the middle of nowhere or half-finished projects or projects launched but no work commenced. only someone with super-deep pockets (POTUS printing $$ notes) and a 10 year time horizon to recover his investment.

there are probably other ways to make money faster that such people know of.

abhischekcc · Post by **abhischekcc** » 25 May 2010 09:38

First of all, I am not saying that there WILL BE a RE crash in India, just that there is a poosibility, however small.

As the rediff article says:

RE developers will need to cough up Rs 25k Cr this year. The obvious sources are - equity, debt, sales, and cash reserves.

Banks had allowed developers to roll over Rs 10k Cr in 2009, but RBI has already ruled out fresh restructuring. So no roll overs this year. Omaxe could not riase equity. Parsvnath and Sobha had to cut their offerings due to poor investor response. The situation is expected to worsen over the last year.

These leave the options of sales and cash reserves on the table. Businessmen are generally not prone to put up their money - they prefer to play with other people's money. I do not know whether it holds true in this case or not.

That leaves the final piece of the puzzle - sales. The article says that builders might be forced to cut prices but also that sales are rising in key metros. So, the observation is ambivalent.

"As recent attempts by some developers to raise more cash have failed, they may be forced to sell assets, clear inventory at discount or raise new debt to fund cash flow shortfalls,'' says the report from King Eng Securities.

A Credit Suisse report says monthly home purchases in key metros have risen by two and a half times from the bottom (December 2008) and new launches have not kept pace with purchases, especially in the March quarter of this year.

Inventory levels, too, are down about 28 per cent from the peak recorded in July 2007. Inventory levels had come down last year as developers dropped prices and launched affordable homes. Aided by an improving economy and rising affordability, it helped absorb the supply.

The market depends on what the weakest player would do and how other firms react.

Vipul · Post by **Vipul** » 25 May 2010 22:35

Cash Crunch or not a lot of high-end projects being planned in Mumbai.

DLF eyes Rs 15,000 crore from multiple 90-storey skyscraper homes.

Lodha Group wins Mumbai's 101-storey tower for Rs 4,050cr.

rohitvats · Post by **rohitvats** » 25 May 2010 23:32

abhischekcc wrote: First of all, I am not saying that there WILL BE a RE crash in India, just that there is a poosibility, however small.

As the rediff article says:

RE developers will need to cough up Rs 25k Cr this year. The obvious sources are - equity, debt, sales, and cash reserves.

Banks had allowed developers to roll over Rs 10k Cr in 2009, but RBI has already ruled out fresh restructuring. So no roll overs this year. Omaxe could not riase equity. Parsvnath and Sobha had to cut their offerings due to poor investor response. The situation is expected to worsen over the last year.

These leave the options of sales and cash reserves on the table. Businessmen are generally not prone to put up their money - they prefer to play with other people's money. I do not know whether it holds true in this case or not.

That leaves the final piece of the puzzle - sales. The article says that builders might be forced to cut prices but also that sales are rising in key metros. So, the observation is ambivalent.

"As recent attempts by some developers to raise more cash have failed, they may be forced to sell assets, clear inventory at discount or raise new debt to fund cash flow shortfalls,'' says the report from King Eng Securities.

A Credit Suisse report says monthly home purchases in key metros have risen by two and a half times from the bottom (December 2008) and new launches have not kept pace with purchases, especially in the March quarter of this year.

Inventory levels, too, are down about 28 per cent from the peak recorded in July 2007. Inventory levels had come down last year as developers dropped prices and launched affordable homes. Aided by an improving economy and rising affordability, it helped absorb the supply.
The market depends on what the weakest player would do and how other firms react.

For a crash to occur, there has to be downward spiral in the prices and supply exceeding demand.

The problem with Indian Real Estate Sector (Residential Segment) is not that there is lack of demand - it is one of products being priced in a band which automatically cuts-off a very large section of population/buyers. Combine this with the black hole that 2009 was and job uncertainty - you have developers in deep sh*t.

In a scenario where the developers are forced to cut prices, these prices will reach a level where the affordability of end user meets the price(s) - classic case of willingness to buy backed with ability. The way products are priced today, they are beyond the "ability" of Mango-Abduls. Willingness is and will always be there.

Let me give you an example - DLF launched a project in South Bangalore some time back. Their initial plan was to price the product at INR 3,200 per sft. Inspite of advise to the contrary, they launched the project at this price. Result - No great enthusiasm in the mango people. And then came the ugly phase of 2009 (Q2 and Q3). The price was brought down to 3,000-->2,900--->2,700 and yet no demand. It was during this time (Q1 2009) that KP Singh was shouting from roof-top that demand has dried up due to high Home Loan interest rates. What he and other like him did not want to admit that their products were way expensive. But we digress.

It was during this time that DLF found itself in deep doo doo... Result - Price of project: INR 1,800/sft-->50% sold out. Price gradualy increased to 2,200 and then 2,400 and 2,600. Bulk of project sold out during this time. Many people bought soley because, "itna price phir nahin milega".

So, I really hope that banks crack the whip and get these idiots to clear their inventory....at least people will get resonably priced products.

As for theMumbai market, the same was back with a bang by Q3 2009. It was as if there was no crisis at all.

As for the sales rising in the various metros, this phenomenon is restricted to certain pockets in most metros and large cities - Mumbai is exception to this rule. The sales are happening in areas which are considered 'good residential' areas and closer to suburban regions - ORR in Bangalore is an example.

And don't go by whatever these I-Banks and Real Estate PE funds say - the data has to be taken in context and one needs to run a fine comb through it. Indian RE Sector is highly fragmented and residential information is extremely difficult to come by.

That point about "affordable housing" is the highest quality BS - just the fact he mentions the same as reason for "lower inventory" shows that he (analyst) does not know jack-shit about residential segment. Affordable Housing was nothing but a fad that developers picked up in 2009 as nothing else was selling..just check the prices of so called affordable housing projects (not the base price but all overheads) and you'll realize that affordable is not affordable at all. Only exception is TATA Housing - they are the only ones who seem to have got the concpet right.

Another point - where and how did he know the inventory in residential segment? I know there are certain companies selling such database and I also know that their accuracy is anything but great. Is it a surprise that most of Real Estate PE Funds in India entered into deals at ridiculous valuations and rental/capital value expectations and have now shut shop?

SwamyG · Post by **SwamyG** » 25 May 2010 23:57

RE developers will need to cough up Rs 25k Cr this year. The obvious sources are - equity, debt, sales, and cash reserves.

Maybe I am nitpicking here, or you forgot some zeros there; Rs 25 crore is nothing, really it is peanuts.

paramu · Post by **paramu** » 26 May 2010 00:00

Swamy... read carefully. it is 25K and not 25.

SwamyG · Post by **SwamyG** » 28 May 2010 23:00

Oops.

Vipul · Post by **Vipul** » 05 Jun 2010 06:01

Tall is beautiful for realty players in Mumbai.

For Mumbai Developers 80 Floor's and above is fast becoming the norm.I only hope they come up with good design's rather then the garish square and rectangular cement block's being put up now.

putnanja · Post by **putnanja** » 05 Jun 2010 09:54

Vipul wrote:Tall is beautiful for realty players in Mumbai.

For Mumbai Developers 80 Floor's and above is fast becoming the norm.I only hope they come up with good design's rather then the garish square and rectangular cement block's being put up now.

I hope the city planners make sure that the roads around these high-rise buildings can handle the traffic, and that the buildings have sufficient underground parking. Also make sure that the fire department has enough tools to reach the top floor in case of fire. The Bangalore fire dept didn't have sufficient ladders to reach even till 12-13 floors.

80 floors of office space and the visitors to those buildings will cause unimaginable traffic and parking scenario. One only hope due diligence has been done

Vipul · Post by **Vipul** » 05 Jun 2010 10:21

The roads around these new developments are going to be inadequate no doubt about that.
For the occupants though all provisions are being made and its not through Underground parking, rather BMC is providing extra FSI for more vertical floors if there is parking space commitment given by the developer especially for commercial bldgs.

Gaurav_S · Post by **Gaurav_S** » 07 Jun 2010 15:12

Ahmedabad among 11 cities on RBI’s realty indices list

AHMEDABAD: The city happens to be among 11 in the country for which Reserve Bank of India (RBI) would prepare two realty indices — one each for commercial and residential properties. This is to curtail speculations and another realty bubble burst in the years to come. Two months back an RBI report on asset price monitoring system (ASMS) advised formulating of the indices at the earliest.

Countries like the US, France, Singapore and Canada, have such indices to refer to realty prices.

According to the report, RBI should start compiling a realty index and update it every quarter. To begin with, the report has proposed Delhi and Mumbai where property prises have skyrocketed to record levels. After these cities RBI would add 10 other cities which include Greater Chandigarh, Pune, Chennai, Bhubaneswar, Hyderabad, Jaipur, Kolkata, Lucknow, Bhopal and Bangalore.

The real estate price index once formulated would become the primary index that can be perused by investors to gauge the performance of companies listed in the real estate sector. The index would also help the investor analyse how real estate performed in comparison to stocks and bonds. It can also provide information on the risk involved in a particular investment and returns from it.

The ASMS report clearly notes the lack of transparency in rates —especially in the residential segment, the absence of a centralised regulator and the limited number of agencies that can provide timely information on realty price dynamics and can study the relationship with the financial stability and monetary policies of the government. Banks offering housing loans and funding realty projects would also provide the information on prices resale and fresh projects.

Good. Would be easier to track growth/returns in reality. Will surely bring more transparency in dealings with builders.

Sachin · Post by **Sachin** » 08 Jun 2010 13:49

putnanja wrote:Also make sure that the fire department has enough tools to reach the top floor in case of fire. The Bangalore fire dept didn't have sufficient ladders to reach even till 12-13 floors.

. Not nit-pick on the bolded part. I am yet to find any major fire brigade unit in India, which has really good equipment (and training) to tackle fires in high rise buildings. As it is fire fighting/fire safety is not considered a very big deal in India (especially when compared to other countries like US and the ones in Europe). The fire engines we have are some times very basic machines (a tank to hold water, a pump to throw it out at pressure, some area to store the hoses, and then a ladder which can go upto 2 floors placed on the top). Infact we still have a brass bell on top of every fire engine, which in many cases still have to be operated by hand

.

Bangalore for example has the Utility building which is 21 floors high. And this building was built atleast 10-15 years back. And this was at the time when Bangalore Fire Brigade was even in a sadder situation. The building rules are also such that periodic certification from Fire Brigade is not a must.

Infact if we do an audit on the fire fighting devices on all high rises in Bengaluru (including the much hyped up ones by major apartment builders) we would be in for a rude surprise. And then we can also check up with the people who use the building or stay there. There sense of fire safety would be even worse.

Ameet · Post by **Ameet** » 10 Jun 2010 02:57

Mumbai, Dubai in Race to Build the Tallest Residential Tower

http://www.businessweek.com/news/2010-0 ... tower.html

Singha · Post by **Singha** » 10 Jun 2010 19:11

how tall can the ladders in delhi and mumbai go? what is the strategy for fire fighting in building like WTC/burj/skyrises which are way taller than any ladder can ever reach plus they are sealed glass buildings with no external fire escapes.

Sachin · Post by **Sachin** » 10 Jun 2010 20:29

Singha wrote:how tall can the ladders in delhi and mumbai go? what is the strategy for fire fighting in building like WTC/burj/skyrises which are way taller than any ladder can ever reach plus they are sealed glass buildings with no external fire escapes.

Singha, my gut feeling is that these buildings (Burj Al Dubai et.al) would have fire safety devices placed in strategic positions. Yes, no turn table or ladder can reach the top of Burj Al Dubai, but they can have fire fighting mechanism all over. And I also feel that there would be a dedictated fire fighting team and also regular drill and test of equipments. Most the fire brigades (in Metro) use the Bronto "Sky Lifts".

Check the Express India Report which reads... "For a rescue operation of such gigantic proportions, Mumbai Fire Brigade then had only six Ariel Ladder Platforms (ALP) and just two bullet-proof jackets, but loads of courage," Tatkare said. .

Tanaji · Post by **Tanaji** » 10 Jun 2010 21:12

Mumbai fire brigade has at least 1 Bronto sky lift, if not two.

Prasad · Post by **Prasad** » 10 Jun 2010 22:10

Speaking of fire safety, here is an article today about Fire Safety in a few places in madras link

Gaurav_S · Post by **Gaurav_S** » 11 Jun 2010 03:22

Singha wrote:how tall can the ladders in delhi and mumbai go? what is the strategy for fire fighting in building like WTC/burj/skyrises which are way taller than any ladder can ever reach plus they are sealed glass buildings with no external fire escapes.

Sprinklers, fire stairs must be very common here..apart from strict advise of not using lifts in case of fire. Cant think of anything else.

Tanaji · Post by **Tanaji** » 11 Jun 2010 03:51

^^ Also, isnt there a rule in Mumbai that for buildings > 8 floors ("towers"), at least part of one floor below the 8th floor has to be kept empty, so that in case of fire people can aggregate there?

Vipul · Post by **Vipul** » 11 Jun 2010 09:33

Of course the builders must be meticulously following this rule till they get the necassary completion/occupancy certificate and the clearances from the fire safety department.,and once they secure it the "empty space" is reclaimed into residential unit/s.Its like what apartment owners do (especially in the extended Mumbai suburbs) where Stilt(Parking Space) is after some months covered by walls into ground floor flats and even commercial space(Shops).

Sachin · Post by **Sachin** » 11 Jun 2010 10:39

Vipul wrote:Of course the builders must be meticulously following this rule till they get the necassary completion/occupancy certificate and the clearances from the fire safety department.

I feel India as a whole generally considers threats caused by fire is very minimal when compared to threats from other sources. If you notice all most all states in India spend really a good amount on police modernisation. Looks like at every level people want to feel more secured from theft, crime etc. And Fire Brigades in all the places are generally considered very low in the hierarchy when it comes to fund allotments.

The same apathy can be seen by people (educated, IT-Vity et.al) who lives in high rises. Nobody really cares about the fire fighting equipment installed. And yes, when a fire actually happens it is all panic and then you have the usual people to blame. The government and the ill-equipped fire brigades.

In other nations (US and European ones) I noticed a high level of importance given to fire & safety. The Fire departments too are given their due funds. Mainly I feel it is because in olden days many of the houses in these countries were made of quick burning materials, and they know how much harm a fire can cause.

Singha · Post by **Singha** » 11 Jun 2010 13:10

exactly even today most US homes being made of wood and stuffed with false ceilings, carpets, curtains, wooden furniture and sofas is a lot more flamable. and they sometimes have a nice big propane tank in the back to add to the mayhem.
indian homes being made of cement and concrete are more spartan, seldom have false ceilings or carpets . neither is there fireplace in most parts. even doors and windows are made of aluminium nowdays.

I remember as kids seeing once or two shops burn but never houses. at worst a curtain or two would burn before neighbours notice the smoke and come to swat it out.

Gaurav_S · Post by **Gaurav_S** » 11 Jun 2010 17:19

Sachin wrote:Mainly I feel it is because in olden days many of the houses in these countries were made of quick burning materials, and they know how much harm a fire can cause.

Bushfires is also very common in massa and aussie land. Even equipped with fire fighting helos..which can be hardly imagined in India.

Satya_anveshi · Post by **Satya_anveshi** » 02 Aug 2010 09:05

geeth · Post by **geeth** » 02 Aug 2010 10:16

X posting from the economy thread...

>>>And I just don't understand the madarssa math of desi real estate, I have to attribute it all to dowry and baksheesh and black money and IT evasion. Plus loans at ridiculous terms that no one ever pays back.

The reason for real estate boom in Kerala is pure speculation...every Tom, Di*k & Harry there is a Real Estate broker now...even if the owner wants, he can't sell the land. The broker decides the price, deal etc... There was a funny case in Cochin couple of years back, where in a property changed hands nine times within a span of a single day! (each time for a higher price) - ie., the initiator of the deal in the morning sold it verbally to the second 'buyer' and he to the third one etc...till the final deal was signed in the evening for a price much higher than that in the morning.

I frequently visit my native place and whenever I am there, at least 2-3 brokers enquire with me about "investible seed capital" - they promise I don't have to buy the property - just to give the advance money, and before the agreement period is over, they would sell it to third party for a higher price and give me the profit, after deducting their commission(This way they save on Registration fee). Most of the deals are like this and of course, there are rumours of counterfeit currency / black money into the real estate.

>>>How the heck do you justify an "investment property" that costs Rs. 50 lakhs to build, that you then rent out at Rs. 10K per month, and afford to pay back the loan at 9 percent interest, and pay the annual property tax?

Govt of Kerala had recently notified that the Govt valuation for one cent (0.01 Acre) in Trichur round is 2-5 ~ 3 crores. I understand the actual price to be paid is higher than this. The land unit, which used to be acres has become cents, and soon they would start quoting in Sq.Ft...similar to that in Manhattan.

Sachin · Post by **Sachin** » 02 Aug 2010 13:00

geeth wrote: Most of the deals are like this and of course, there are rumours of counterfeit currency / black money into the real estate.

To deal with this I think GoK introduced some new rules. If I am not mistaken the idea was to make every changing of hands mandatorily endorsed at the registrar office. And there was also some rule regarding making payments in cheque, Demand drafts etc. Dont know how effective these moves are, but I know two chaps (friends of mine) who stopped doing this broker business, stating that it was not all that profitable.

enqyoob · Post by **enqyoob** » 04 Aug 2010 09:05

A 10% gain in a year sounds great, but not when the percentages eaten up by guvrmand ishtamp kagaj, broker commishun etc. etc are taken into account, plus the cost of maintenance. And fact is that the gain is rarely more than 10% in a year. The thing is that the sampling intervals, esp. for expats, is more like 2 to 5 years, so that saying:

AoA! Prices are 50% higher than the last time I looked!

still implies maybe less than 10% per year, compounded.
Of course there are the legendary "multiplied my money 1,700,000 times" stories, but these may be as rare in reality as kids turning into Shahrukh Khans.

Also, the risk is pretty enormous, and when all that is taken into account, the 3% gain of a massa mutual fund does not look all that bad.

Of course things (used to) go better with black money.

I hear that GoK is backpedalling on the rates of taxation and stamp paper after they hiked the assessment valuations by some hajaar percent, and the revenue stopped coming.