News & Views on Indian Real Estate

Tuesday, September 30, 2008

After The Lehman Crash, Realtors Eye PE Funds

Developers such as Unitech, Peninsula Land, HDIL and Future Capital, the financial services arm of the Future Group, are in talks with investors including some leading private equity funds for raising investments for their projects, after the collapse of Lehman Brothers, whose third party fund, Lehman Brothers Real Estate Partners had committed an investment of over $ 1 billion to these companies. Even the private equity players are equally upbeat about property investments. Mr. Bharath Banka, Chief Executive of Aditya Birla group's private equity division, "The current credit crisis, which is expected to continue for a few more months, opens up avenue for private equity firms to make large investments in the real estate sector. Long term returns will be higher in real estate for investments made during this point of economic cycle."

New Property Channel To Come Up Soon

Property TV covering real estate projects in the UAE, the Middle East, India and the Far East, will be unveiled at a launch event in Dubai in mid-October. The channel, to be designed on the 'infotainment' format of Singapore-based Property TV, will have Gulf-specific programming aimed at Dubai daily prime time, said Mr. Prince Goyal, director and CEO, Property TV. Property TV has set up a production and editorial unit in Dubai to do Gulf-specific programming. According to Mr. Goyal, the channel will be available to over five million subscribed households through cable and satellite and direct-to-home players across the region and millions more across Europe and other parts of the globe.

Realtors Offer Cash Discounts To Buyers

The current scenario of the Indian real estate market has made buyers hesitant with regard to the purchase of residential property. This has forced developers to go out of the way to sell their properties. Just three months ago, no developer was willing to go on record that they were offering cash discounts to home buyers. Reason being, they did not want to give it away that property prices were under pressure. However, falling sales and rising inventory over the last 18 months have forced them to offer cash discounts, besides other measures in this buying season.

Kochi To Become A Hi-Tech City Soon

With the coming of a Rs 5,000-crore hi-tech city project, Kochi will soon attain a global city status. Bangalore-based Sobha Developers have signed an MoU with the state government for developing this hi-tech city. Sobha Hi-Tech City will be an integrated city with focus on research and development, knowledge dissemination, information technology and pure and applied sciences. The city is located close to the National Highway 47 bypass near Maradu in Kochi. It will have seven million sq. ft. of knowledge park, commercial space to provide business-friendly ambience, hospitality and leisure projects, entertainment and amusement facilities, a marina and residential complexes. The project will be completed in eight years and would generate 75,000 direct jobs.

Dream Homes Taking Shape For Many

The realty slump that has hit the market could be a blessing in disguise for those who have been struggling to buy a home. With a view to mint maximum profit in Mumbai where land comes at a premium and there is a booming realty market to boot, over the last four years several developers had redefined their company profile to cater largely to the higher end of the price spectrum. However, builders who had built sprawling duplexes with lavish interiors, motion sensor lighting, home theaters and walk-in wardrobes for an exclusive clientele are finding that what they managed to sell were more glossy brochures than actual flats. And now, there is rethinking. Mr. Anuj Puri, Chairman of Jones Lang LaSalle Meghraj said that most realty majors are now focusing on the neglected sector of affordable housing after realizing that they have the fastest absorption rates. This trend is now evident on a pan-India basis. Major real estate players including DLF, Parsvnath, Omaxe and Unitech whose forte until now was luxury homes are now planning to venture into the affordable housing sector in Punjab. Some time back, Purvankara Projects announced the launch of its affordable housing arm which would build homes priced at Rs 10-20 lakh in Bangalore, Chennai, Hyderabad, Coimbatore and Mysore and later in Delhi, Pune, Nagpur and other places.

DLF New Town Heights Kochi

DLF New Town Heights Kochi to come up in Kakkanad

The bookings have just started and the property is available at attractive prelaunch offer price of Rs 2350 per sqft. This attractive price quoted is valid only for 3 days, it till Sunday, 30th September.

The most happening location
The project is located ideally at the city's most promising suburb, Kakkanad, a short distance from Kochi city and the district headquarters of Ernakulum. It houses important government buildings, Info Park and the Cochin SEZ. Several important projects like the Smart City and Fashion City are coming up in Kakkanad. Veega Land, one the largest water theme parks in the state, is close by.

A lifestyle to envy
The proposed project features 2 BHK to 3 BHK apartments ranging between 1100 and 1800 sq ft with premium amenities. Each tower will have 4 apartments on every floor. As may be expected from a DLF project, the development comprises a 70,000 sq ft clubhouse with gym, ayurvedic spa, crèche, banquet, guest suites and a host of other indoor amenities. Sports facilities include swimming pool, tennis, badminton and squash courts. The residents shall also enjoy the privilege of a 90,000 sq ft convenience-shopping plaza, healthcare units, a play school for kids. Nearly 75% of the total land will be left for landscaping.

Pre-launch price advantage!
The project has just been announced for private clients and not yet officially launched. For the next few days, apartments are available at the pre launch price of Rs 2350/- per sq ft. The price will not only appreciate in value over time, but also in the short term.

DLF- Building India one estate at a time
With over six decades of experience, 231 million sq. feet of development and 751 million sq. feet under development across 32 cities, DLF today has earned the trust of thousands of investors, businessmen and over 20,000 families. So, you can rest assured that when you buy a DLF home, you're buying into a heritage of trust.

Dharavi Residents To Get Bigger Flats

The demand for bigger houses by 60, 000 Dharavi residents has been answered. The state government has decided to give the dwellers 300 sq ft houses instead of the proposed 269 sq ft after the redevelopment. According to the new provision, each dweller would get an additional 10 per cent of the total built-up area as a balcony. Earlier, the balcony was included in the total carpet area. Also, they would be given an additional Rs 20, 000, which would be paid by the Slum Rehabilitation Authority for the mainstream premises. The developer building the project is also supposed to provide Rs 20, 000 in an escrow account to finance the building's upkeep. "This means the dwellers will get Rs 40, 000 for the project’s upkeep. We will pay our part through the premium that we get from the redevelopment project," Dharavi Development Authority CEO, Mr. Gautam Chatterjee, said.

Right To Property Is Now A Human Right

The Supreme Court has taken a view that the right to property is now a human right. Referring to several landmark decisions passed on the law of adverse possession of property, the Bench comprising Justices, Mr. Dalveer Bhandari and Mr. H S Bedi noted, "The right of property is now considered to be not only a constitutional or statutory right but also a human right." The bench said the Central Government should consider a change in law to prevent squatters from dishonestly enjoying property.

Monday, September 29, 2008

Fallout from US financial crisis hitting rental sector in India

As the US moves towards securing its bailout plan for Wall Street financial institutions the fall out is hitting hard in India.

In Mumbai commercial rentals are beginning to crack and deals for office space have slowed over 30% in the last three months, according to analysts.

Leading property brokers and consultants say things will be worse with prospective tenants asking for a 50% cut in rates and they put the blame firmly on the US financial crisis.

This is because companies, mainly IT and BPO service providers and finance firms, with significant US businesses are cutting back expansion plans and, therefore, the need for prime commercial real estate.

Meanwhile, tighter liquidity in the Asian markets is encouraging companies to defer their property bookings.

'Companies are not signing at the rates asked by developers like they did earlier and transactions are not taking place. We have seen prices correcting sharply in the last month,' said Suketu Mody, president and chief operating officer of Coldwell Banker Goodwill Consultants, a US-based consultancy firm that advises many Indian companies on their property deals.

Battery Ventures, a venture capital firm that has been looking for 3,000 sq ft of space in central Mumbai for the last couple of months, is still waiting in the hope of a further fall in rentals.

'We have seen a 5% correction in rentals in the last three months and expect a 10 to 15% further correction in the coming months. We will certainly wait and see,' said Gautam Patel, partner, Battery Ventures.

Oversupply could also start to have an effect. By early next year, Mumbai and its suburbs will add 15.4 million sq ft of office space, more than the commercial space now available at the Bandra-Kurla Complex or seven times the office space at Nariman Point.

Rentals are expected to fall another 15 to 20% in the next six to nine months. 'Demand will slow from IT, BPO and finance companies that have enough choice in cities like Bangalore and Hyderabad. Rentals will drop to levels from two years ago,'' said Pranay Vakil, chairman of Knight Frank.

However, developers believe demand will come from newer sectors of the economy and at different levels of the property market. 'Though some companies have reduced space requirement I am not worried even if prices correct 10 to 15% because it is good for both buyers and sellers,' said Hemant Shah, chairman of Akruti City, which builds offices and homes in Mumbai.

Diwali unlikely to light up real estate market

Analysts say prices may stagnate or decline in the next three months.

Home prices may decline in the next three months, according to a national poll conducted among top property brokers by Edelweiss Securities, a Mumbai-based brokerage.

Almost 70 per cent of the brokers who participated in the poll believe prices will be flat or negative in the period and even Diwali is unlikely to lift the mood in the property market.

About 60 per cent of them believe that prices have stagnated over the past three months. The Reserve Bank of India’s move to raise repo rates by 125 basis points in the last six months has resulted in commercial banks increasing their lending rates by similar margins. In turn, home buyers have to pay a much bigger amount as monthly pay-out on home loans.

On an average, the monthly instalment on a 20-year, Rs 10-lakh loan has gone up over 50 per cent to Rs 12,740 on a 14.25 per cent rate from Rs 8,060 (7.5 per cent interest rate) five years ago.

Due to high demand from end-users and investors alike, home prices in main markets such as Mumbai and Delhi have trebled in the last two years, making homes unaffordable for middle class buyers. According to the poll, 90 per cent of brokers have seen a drop in transactions in the last one month and almost 80 per cent of them witnessed a reduction in enquiries over the same period.

But, property brokers feel that price movements will differ in different markets. According to the poll, about 60 per cent of brokers expect prices in the Mumbai island city to come down in the next one year. But they feel prices in Gurgaon in the NCR region, Whitefield in Bangalore have stagnated over the past three months against the perception of a price fall.

Meanwhile, brokers say they have seen an increase in enquiries in Chennai in the last one month. However, they are yet to see the conversion of enquiries into transactions.

Says Pranay Vakil, chairman of Knight Frank, an international property firm, “If you compare residential sales this year compared with last year, there has been a drop of 90 per cent. It is just a tip of the iceberg. Worse is yet to come,’’ he says.
Adds Hemant Barabde, a Mumbai-based property consultant, “We feel the current slump to continue for a year till the general elections, after that prices may pick up again.’’

Friday, September 26, 2008


An ambience of a resort, refreshing landscaping, inspiring architecture, in a land where time slows down for you to enjoy the good life!

Gera’s Astoria is a premium project consisting of 2 and 3 bedroom apartments in Caranzalem, which is only minutes away from Panjim, the capital of Goa. The T shaped complex consists of resort styled residences, offer a panoramic sea view.

With your vacation home done in the resort style, whether you invite friends and family to join you or use your home without you, your stock is certain to rise amongst friends, family and colleagues. Even if you decide to rent your home from an investment perspective, the fact that you have a Resort Style Residence at Goa is certain to stir up a wow.

the resort style touch outside your home

* Landscaped gardens
* Lit swimming pool with swim up bar
* Jacuzzi
* Landscaped roof top with walking path
* Club house with party hall
* Cardio gymnasium
* Children's activity centre
* Barbeque area

* Grand entrance gate
* Hotel style lobby
* Piped music
* All floors with lobbies
* Concierge room
* Service elevator
* Outdoor solar lighting

Real estate demand to cross 1,000 million sq. ft by 2012

Demand for real estate across office, retail, residential and hospitality sector is expected to cross the 1000 million sq.Ft. Mark by 2012, according to a report by Cushman and Wakefield.

Despite the expected slow down in the office market the demand for commercial office space is projected to be 243 million sq ft which is 22 percent of the total demand projections for the next five years.

The retail and hospitality segments are expected to constitute 95 million sq ft (nine percent) and 73 millin sq ft (six percent) of this total demand

Anurag Mathur and Sanjay Dutt Joint Managing Directors, India Cushman and Wakefield said, 'The world wide economic slow down is definitely impacting the real estate sector across the world and India alike. Fortunately this slow down is unlikely to last beyond the next two to three years.

"In the long term strong demand for real estate in India will remain intact and will probably see us through another real estate cycle once the market finds its own levels by responding tho these short to mid term global and robust demand for real estate across sectors", they said.

A dynamic workforce, liberalised economy, robust demand for real estate across sectors are the key factor that will make Indian market in coming times more reliable for investments especially in the real estate sector, the report said.

According to the report, Bangalore depicts the second larest CAGR in demand for commercial office space over the next five years and represents the highest cumulative demand among the top seven cities. (MORE) PTI JD MSR BN SS SS 09241944q ft) and retail

(10 mn) sq fet, Hyderbad ranks sixth. The residential demand is estimated to be 61 mn sq ft.

Bangalore’s Orange County Resorts looking to offload 20% stake

Bangalore-based Orange County Resorts and Hotels Ltd that currently owns two holiday resorts in Coorg and Kabini and manages another in Hassan, Karnataka, is in discussions with New York-based investment firm Trikona Capital Ltd, private equity (PE) firm ICICI Venture, and a few others to sell up to a 20% stake for around Rs60-70 crore.

This money will part-fund the Rs220 crore the firm plans to invest in upgrading existing properties and opening four more resorts in the next three years. Orange County is also looking to expand to locations in Vietnam and the Maldives.
“We expect our valuation to go up to Rs1,000 crore by 2012. We want a strong investment partner that will not onlybring in expertise in finance, marketing and operational management, thus giving that value-addition to our brand, but also invest with us in our future and overseas expansion,” said Abe T. Ramapuram, vice-chairman and director (finance) at Orange County in a phone interview from Bangalore on Wednesday. He added that an investor would be identified within the next two months.
Ramapuram said that the company has already acquired land for its four new Indian resorts that will open for business by 2011.
Aashish Kalra, co-founder and managing director of Trikona Capital, said his company does not comment on future business initiatives.
“We have, however, said we will invest $10 billion (Rs46,300 crore) in India over 10 years in real estate and infrastructure,” he added.
An ICICI Venture spokesperson declined to comment.
The Indian hospitality business has grown 25-30% annually in revenues over the past three years on the back of an expanding economy that encouraged more business travel and put more money in the hands of domestic consumers. The concept of short weekend breaks has gained popularity.
Almost all of Orange County’s existing resorts are located within driving distance from Bangalore, India’s information technology hub.
An expert said that after infrastructure, PE firms would likely prefer to invest in any area that involves consumer spending.
“It is the right time for a one-two resort company like Orange County to bring in financial partners because they have been around for long, have well received properties, and will be able to replicate their model anywhere,” said Arun Natarajan, chief executive officer of Venture Intelligence, a research firm focused on PE and venture capital activity.
Orange County, which is privately held, claims its valuation is around Rs300-350 crore.
The company is part of the Ramapuram group, promoted by a family of seven brothers that also owns coffee and rubber plantations in Karnataka spanning 2,000 acres and valued at more than Rs200 crore.

India trying to reach out to non resident property investors

Real estate developers and agents in India are now offering more solutions to market properties to Non-Resident Indians (NRIs) and international property investors. Their focus is geared to target the burgeoning and lucrative market of prospective Western buyers.

As an increasing number of businesses are outsourcing their IT functions to India, property in commercial hubs such as Mumbai, is in high demand but it comes at a cost. Renting office space in Mumbai is even more expensive than in Manhattan.

It seems then that there is good business sense to invest in emerging markets rather than expensive, established areas such as Mumbai. Rudrapur is reported as one place that is taking off in terms of investment in business. The government has made the area a tax free zone and there are over 450 global corporations planning to set up businesses there in 2008.

According to Liam Bailey, Head of International Research for David Stanley Redfern Ltd, India is becoming increasingly attractive. 'We are seeing businesses flocking to the area since the government designated it as a Special Economic Zone (SEZ). This means businesses pay no income tax for the first five years and receive a 30% discount over the following five years.

Thursday, September 25, 2008

Developers Striving To Improve Efficiency And Cutting Costs

Realtors are now taking a more efficient and cost cutting route in the development of their projects. They are trying out new strategies to improve margins. While some are procuring expensive capital goods directly from manufacturers, others are going to China to get high quality yet cheaper material. In the last one year, developers have seen their margins shrink progressively with input costs going up tremendously. Margins for developers were high in the 60-70% range for most projects (and over 100% in some) a couple of years back. Today, they are down to about 30-40% across India, says Mr. Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj (JLLM).

Tough Time Ahead For Builders In Maharashtra

The Maharashtra Government has made it mandatory for builders to sell flats on the basis of carpet area, amending the Maharashtra Ownership Flats (regulation of the promotion of construction, sale, management and transfer) Act, 1963. "People end up paying more money for built-up area or super built-up area of flats and the amendment will help them save money," an official from the Housing Department said.

Gurgaon residents protest against garbage dump

DLF CITY, one of the most posh colonies of Gurgaon, has been going through its worst nightmare for the past three years, due to the nearby garbage dumping site. The Haryana Urban Development Authority (HUDA) dumps more than 300 tonnes of the city’s garbage into the Aravalis everyday within 500 metres of DLF Phase I and DLF Phase IV.

The DLF residents have already staged a number of demonstrations against the illegal dumping of garbage on Gurgaon-Faridabad road.
“Residents are already suffering from various skin allergies and cases of dengue are also being reported frequently from the area,” informed Harish Capoor, who is a resident of DLF Phase I and has been fighting against this menace for more than two years now.

Capoor also said that he had filed various RTI petitions and met many HUDA officials, but all in vain. He said that in spite of assurances from the authorities, nothing has been done about it. Capoor informed that the residents are again planning a protest rally at 9am at Gurgaon-Faridabad Chowk near the illegal garbage dump on September 22.

“More than 100 people are expected to participate in the protest,” said PN Raina, secretary, Silver Oaks Condominium Association. Raina also informed that various retired IAS officers, corporate honchos, IT professionals and academicians have already expressed their interest to join the rally.

A number of stray animals, like cows, pigs and dogs have also triggered a threat of diseases and road-accidents. According to Ramesh, senior supervisor, Silver Oaks Apartments, DLF, “People are constantly living under threat of dengue, malaria and waterborne diseases. ” If sources are to be believed, the property rates in the area has also seen serious implications of this site. According to a local resident, “People now think twice before buying a house in DLF.”

Meanwhile, HUDA has assured that a state-of the-art waste management facility will come up in Bhandwari village, 10 kms from the current dumping site, within one and a half years. But the DLF residents say the construction of the project has not yet started. HUDA has deployed a heavy-duty earth moving machine to cover the garbage with sand and bacterial sprays are being used to negate the foul smell and bad effects of the dump.

India beats China as top investment destination for first time: UN

Eighteen years after it started opening up its economy, India, for the first time, has replaced China as the most promising destination for foreign direct investment in the medium-to-long term, says a UN agency.

The World Investment Report (WIR) prepared by the United Nations Conference on Trade and Development (Unctad) released here Wednesday said that in the short term, however, China again ranked at the top, followed by India.

The report quoted a survey by the Japan Bank of International Cooperation (JBIC) for its remarks.

'The JBIC survey of Japanese manufacturing TNCs (transnational corporations) found that China again ranked at the top although the number of firms planning to expand production in the country continued to decline,' said the this year's report.

'As for long-term prospects, the survey showed for the first time India replacing China as the most promising country for business operations of Japanese TNCs,' the Unctad report added.

'The figures clearly show that India is fast emerging as a major player in both inward and outward FDI,' said independent consultant and research contributor to the Unctad report Premila Nazareth Satyanand, while releasing it here Wednesday.

In terms of regions and country groups for FDI, East, South and South-East Asia remains the most preferred regions for FDI, the report said that, quoting an Unctad survey.

These regions were followed by the original 15 countries in the European Union (EU-15), North America, and the new EU-12 (countries that joined the EU in 2004 and 2007), the report said quoting the Unctad survey.

China is the most preferred investment location, according to the survey, followed by India, the United States, the Russian Federation and Brazil.

'Vietnam remains in sixth place because of the availability of skilled and cheap labour and its being the second fastest growing economy in the world behind only China,' the report said.

Global consultancy major A.T. Kearney's 2007 FDI Confidence Index, also quoted in the report, shows the same countries in the top three positions.

The report said that in Europe taken alone, the United Kingdom is the most attractive location, followed by France, according to a survey by another global consultancy major Ernst and Young.

The report showed that in case of India there has been a sharp rise in FDI inflows and outflows for the years 2004-2007 as compared to the period 1990-2000.

The average annual inflow for the period 1990-2000 was only $1,705 billion which climbed to $5,771 billion in 2004, $7,606 billion in 2005, a whopping $19,662 billion in 2006 and $22,950 billion in 2007.

As a percentage of gross fixed capital formation, FDI inflows had increased from an annual average of 1.8 percent in the period 1990-2000 to 3.0 percent in 2005, 6.6 percent in 2006 and 5.8 percent in 2007.

FDI stocks in India as a percentage of gross domestic product had also gone up from 0.5 percent in 1990 to 3.7 percent in 2000, 5.7 percent in 2006 and 6.7 percent in 2007.

Outward flow of FDI from India had also increased from a measly $121 billion annual average for 1990-2000 to $2,179 billion in 2004, $2,978 billion in 2005, as much as $12,842 billion in 2006 and $13,649 in 2007.

Tuesday, September 23, 2008

Indian Realtors Positive, Despite The Crisis

The collapse of the Lehman Brothers and the buyout of Merill Lynch have not become a reason to frown for Indian realtors, as they are putting up a brave front and maintaining that there will be no impact on the real estate sector of the country. Lehman Brothers filing for bankruptcy will impact those Indian realty operators who have not structured their agreement carefully, according to Mr. Sanjay Dutt, joint Managing Director, Cushman & Wakefield. He does not foresee a situation where projects would get shelved. "Most of the funds that were committed have been delivered." Mr. Dutt is of the opinion that if projects get shelved it is mostly because of changing market dynamics and not because of a lack of liquidity. Experts think that in a bid to de-risk, these investment bankers would trade their private equity placements. India is still a growth story and as far as the real estate investment is concerned it is very attractive from a long-term perspective.

Shah Rukh Khan - An Aspiring Property Developer In The UAE

Bollywood superstar, Mr. Shah Rukh Khan is entering the property market of UAE with a new role of property developer. He is conceptualizing a series of buildings in the emirate of Ras Al Khaimah in the United Arab Emirates (UAE). His first project is called Shah Rukh Khan Boulevard and is located on the island of Al Dana in Ras Al Khaimah. Covering an area of 1,700 sq km, Ras Al Khaimah is among the five emirates that form the northern emirates of the UAE and lies along the border of Oman. Though Bollywood actors have endorsed real estate projects in the UAE, this is the first time that a celebrity is developing a property himself.

Unitech Remains Unaffected By Lehman Brothers' Crisis

Delhi-based Real Estate Developer Unitech had received about $175 million (Rs 740 crore) from Lehman and is very confident of surviving the Lehman crisis. A Unitech spokesman said, "Unitech has already received the money and closed the deal with Lehman Brothers' managed real estate fund. We are not affected by the Lehman bankruptcy. The Lehman real estate fund is third party capital managed by the Lehman asset management business." In June this year, the Lehman managed real estate fund bought a 50 per cent stake in the Mumbai project. Lehman picked up stake in one million sq ft of space in a project jointly developed by Unitech and its local partner, Western Expressway JV, at Santa Cruz. The project involves 18 million sq ft of development estimated at Rs 26,000 crore.

Thanks To Lehman Crisis, Property Prices May Fall

Real estate prices are expected to fall further as the current global financial chaos would force cash starved builders to offer hefty discounts. According to analysts, the crisis, which comes at a time when the property market is facing a slump, could lead to a major price correction in the next one-year. Property prices have already fallen by more than 20% and one can expect more.

Monday, September 22, 2008

Indian realty prices may return to 'real' levels

Indian property prices, which had taken off like jet planes, appear to be losing altitude after bad debts owing their origin to real estate brought down the US financial market to its knees.

Is the real estate crisis in the US acute?

Marketmen see prices cooling and projects being held up for want of cheap funds, but don't expect the market to crash.

Lehman and the mystery of commercial property

Raising funds from American and Western European investors, who accounted for a bulk of overseas money coming to India, will be difficult. "Developers will have to look at new avenues like middle-east and Korea," said Global realty consultant Jones Lang LaSalle Meghraj country head Anuj Puri.

Time for a real(i)ty check

The first to be hit would be commercial property prices, although a correction in residential segment too is expected. Rates had almost doubled in the three years leading to 2007, when interest rates started hardening.

Bye/Buy rating bares split realty on St

"Negative sentiments from events like these (collapse of Lehman Brothers, Merrill Lynch and others) will have a bearing on the banking and financial services' real estate requirement in India," Puri said.

‘It's not the right time to invest in homes’

Failed investment banker Lehman and Merrill Lynch, which was taken over by Bank of America, occupied commercial space in India spanning 2.5 lakh sq ft - which itself is not adequate to bring down prices crashing, but the sentiment is.

Low-cost housing, of a high quality

"It is not a big exposure considering 50 million sq ft of office spaces transacted every year in India," Puri said, adding that there would not be much of a direct impact because of the two firms going down under.

World's best places to invest in realty

Prices of properties in a good location would not be affected much, said Amit Sarin, Executive Director of Anant Raj Industries, in which Lehman held 1.8 per cent stake.

However, those in less prime areas could feel the pinch, said Sarin, whose company is predominantly into building IT space.

The credit crunch would affect the investment from the private equity players mainly based in the US, experts said.

The current environment is "challenging" for Indian real estate market, Puri said.

Asked about the overall impact on the market, he said there could be some decline in prices due to the negative sentiment.

Globally, banks have written of over $ 500 billion in bad debts, exactly half the total losses forecast by the International Monetary Fund due to loose lending by American banks to people with poor creditworthiness or the infamous 'subprime' lending.

The slowdown is also because of high interest rate regime and the prices, particularly in the housing segment, have softened in the last one year.

Private equity firm Red Fort Capital's Director Kuldip Chawlla said: "Flow of funds from the US will definitely come down, at least in the short term. Funds to both private and public equities of developers are likely to fall."

Real estate developers, who were thinking of raising money through an IPO in the near future, would now hesitate to go to the capital market, he added.

Sarin of Anant Raj said the companies which have strong internal accruals would sail through, but those dependent on debts and private equity would feel the pressure.

Realty Bites: Regulatory Hinderances

Towards the close of fiscal 2007, Ernst and Young and industry chamber Ficci on Indian real estate conducted interviews of the top management — chairpersons, CEOs, MDs and other key decision makers — of selected developers and fund managers of six prominent cities in the country. One of the aims of the survey was to analyse developers’ perspective about regulatory and Government affairs that hindered their growth opertunities.

It was found that while developers feel the government has shown definitive intent towards facilitating and promoting real estate by effecting several regulatory and policy changes, there still was a lot left to be desired.

Developers across the country are almost uniform in their opinion that delay in approval and clearences is the biggest regulatory challenge. Developers are in favour of a consistent long-term policy in the sector. High stamp duty across states also adversely impacts developers. Going forward, a much larger role by the government is envisaged to ensure sustained development of the sector.

Friday, September 19, 2008

Why Lehman Brothers went bust ? What's your take on it?

Lehman Brothers is not more. Merrill Lynch has gone down the Bank of America jaw. AIG too could go belly up. With a doubt, these developments in America are the most shocking events to have hit global financial markets. So where did it all begin? And what does it mean for the Indian stock markets? Find out. . .

What is (or was) Lehman Brothers?

America’s fourth-largest investment bank Lehman Brothers Holdings Inc has filed the biggest bankruptcy petition known to mankind.

The 158-year-old firm was founded by brothers Henry, Emanuel and Mayer Lehman, Jewish immigrants to the US from Germany, in 1850. Henry set up a general store in Alabama in 1844 and was later joined by his brothers. In 1850 they set up the merchant bank in New York after having made money in railway bonds. So what went wrong?

Lehman Bros, which till June 2008 had not reported a quarterly loss even once, had earlier survived many an economic crises, like railroad bankruptcies of the 1800s, the Great Depression in the 1930s, and the collapse of Long-Term Capital Management in the 1990s.

Thus the collapse of the giant investment bank came as a major shock for the entire world markets that plunged after Lehman filed a Chapter 11 petition with US Bankruptcy Court in Manhattan.

The $613 billion (some estimates put the size at $639 billion) bankruptcy thus throws up the question: why did the Wall Street giant go bust? Here’s why. . .

Why did Lehman Brothers go bankrupt?

The giant investment bank succumbed to the sub-prime mortgage crisis that has rocked the United States and the global economy. Lehman was strangled by a massive credit crisis and fast plummeting real estate prices.

The gargantuan $60 billion loss in bad real estate loans forced the bank to file for bankruptcy.

However, the fall of the 158-year-year institution that started cotton trade in US before the American Civil War and financed the railroad that built a nation, got hit by a large dose of bad luck, pride, arrogance and greed. Primarily, the pride of its chief executive office Richard Fuld.

But there were more reason. Check out what they were.

Lehman’s collapse was also triggered by the refusal of other banks to do business with it because of its complex and, at times, opaque ways of trading. Housing loans made by the bank to people with little support made these loans very risky, and when interest rates rose, these borrowers could no more repay Lehman. This led to huge losses, the extent of which is not yet clear.

Thus other banks stopped trading with Lehman. This led to it losing almost all business and triggered its fall.

The final straw for Lehman was the fact that both Barclays Plc of the United Kingdom and Bank of America Corp pulled out of takeover talks. BofA bought out Merrill Lynch for $50 billion.

However, Barclays has now said that it is in discussions with Lehman Brothers about buying certain assets of the stricken US investment bank.

“Barclays confirms that it is discussing with Lehman Brothers the possible acquisition of certain Lehman Brothers assets on terms that would be attractive to Barclay’s shareholders,” Britain’s third largest bank said in a statement.

When other banks do not want to buy Lehman, why is Barclays interested?

Barclays wanted to buy Lehman out at a discount, so to speak. But when Lehman CEO Fuld decided that his bank was worth much more than what Barclays had apparently offered, Barclays stepped back.

Now that Lehman has filed for bankruptcy, its assets are available fairly cheap. However, the biggest problem is to take on Lehman’s enormous liabilities.

How far is the CEO of the company responsible for Lehman’s fall?

Wall Street analysts believe that it was the ‘hubris’ of Richard Fuld, the 62-year-old CEO of Lehman, who did not take the telltale signs of impending doom very seriously. Fuld, nicknamed The Gorilla for his foul temper, intimidating presence and tough talk, rejected many bids to save Lehman because he thought that the sinking giant was much bigger than Wall Street was giving it credit for, and wanted to get more price for the sale of the company.

Analysts say if the bank was sold just a week before it went kaput, it could have been saved the ignominy of a bankruptcy, but Fuld was far too adamant to see reason. Result: the end of a 158-year-old financial giant.

Could the United States government helped, like it helped Bear Stearns in May this year, and Fannie Mae and Freddie Mac earlier this month?

The US government could have helped, but US Treasury Secretary Henry Paulson said that it would not use up any more taxpayer dollars to bail out Lehman Brothers as it would lead to investment banks getting away with their gambling ways. Paulson had bailed out Fannie Mae, Freddie Mac and Bear Stearns, saying that if the government had not done so, the US housing loan market would have collapsed leading to gigantic losses for hundreds of banks all over the globe that have invested in US property.

Paulson, however, believes that a brokerage major like Lehman, which does not have a direct connection with ordinary people who have taken on home loans, need not be bailed out as it would not cause any systemic damage to the US economy

Will everyone in Lehman lose their jobs?

The bankruptcy administrators, PricewaterhouseCoopers, feels that as Lehman’s operations were essentially centralized at New York, the folding up of the investment banker in the US will have a telling impact on all its operations globally.

Over 5,000 employees in the UK have already lost their jobs, while about 20,000 in the US might as well forget going back to their work stations. About 2,500 Lehman employees in India too face the axe.

Will the whole bank be liquidated?

Unlikely, at least for now. The US Chapter 11 that deals with bankruptcy says that PwC, the administrators, can go about taking its time to find good offers and buyers for Lehman’s ‘least affected businesses.’

The entire exercise can take months before all of Lehman’s assets are sold, given the complexities linked to the bankruptcy.

What about the Bank of America and Merrill Lynch deal?

Merrill Lynch’s buy out by Bank of America is also a shocking development. ML, saw the writing on the wall once it guessed that Lehman was going bust, and decided to sell out before it actually has to file a bankruptcy petition..

What about the insurance giant AIG?

The world’s largest insurer, American International Group, has been downgraded by credit rating agencies and is racing against time to find a multi billion dollar infusion to stay afloat. US Federal Reserve officials and two leading banks, JPMorgan Chase and Goldman Sachs, were negotiating to put together $75 billion package to save the insurance giant to stave off crisis.

AIG has sought $40 billion in bridge loan to stave off the crisis. But the Fed rebuffed the request. AIG’s ills came to fore, when three leading credit rating agencies - Standard and Poor’s Moody’s and Fitch - lowered the company’s credit scores.

Who could be the next to fall?

Some Wall Street analysts, reports The Guardian, name Washington Mutual as the next financial major to ‘find itself in serious trouble.’

However, the even bigger worry is whether the world’s largest securities firms, Goldman Sachs and Morgan Stanley, would be able to survive this brutal financial crisis. But many say that these two gaints will not melt down as they have ‘done a better job of spreading their bets across world markets and are also more diversified, less leveraged and have managed such risks much better.’

What do Indian markets fear?

The fall of two global financial behemoths — Lehman Brothers and Merrill Lynch — is expected to dent India Inc’s ability to raise resources via the equity route.

Experts feel that such events significantly increase the risk perception, which in turn will put all future investments by institutional investors such as pension or endowment funds, on the back burner.

While the public issue market has already dried up, the private equity funds are also becoming conservative in terms of pricing. This is resulting in either inordinate delays in concluding deals or transactions being called off.

There are many instances of private equity fund managers refusing to go ahead with deals after signing the term sheet. Sources said that a leading fund conducted due diligence on two companies in the last fortnight but did not close either deal primarily because of the developments in the US, their home country.

The crisis faced by Merrill Lynch and Lehman Brothers is expected to have a cascading effect on PE firms too.

Will it hit the Indian growth story?

The ongoing financial sector crisis in the United States and its repercussions on developed markets worldwide will result in lower capital inflows into emerging markets like India, economists and government officials said today.

At the same time, they called for the government to make it easier for Indian companies to borrow overseas by easing the restrictions that have been imposed in the past to reduce excessive liquidity in the system and control inflation.

This will, in turn, lead to a slowing in investment growth in the months ahead. As lending gets tighter and investment flows dry, corporate India will find it more difficult to raise both equity and debt.

Technology firms are shivering

Lehman Brothers’ bankruptcy filing may well prove to be the last straw for Indian IT firms, which were expecting the second half of FY09 to be better. As a result of the US financial market crisis, analysts do not expect Indian IT firms to sign any significant contracts in the banking, financial services and insurance (BFSI) space in the months to come.

While IT firms do not disclose client-specific details, it’s estimated that Lehman Brothers has outsourced deals amounting to anywhere between Rs 550 crore and Rs 700 crore (annually) to numerous IT firms, including majors like Tata Consultancy Services, Satyam Computer Services and Wipro. Lehman Brothers, say sources, works with 14 services providers in India - Wipro and TCS being the largest. It also has investments in a few IT firms. It’s not clear if these holdings will be liquidated to raise funds.

Moreover, the sources add that Lehman Brothers’ unit in India has issued termination letters to a majority of its 2,500 employees.

What kind of investment does Lehman have in India?

Lehman does not have direct large holding in the Indian stock markets. These holdings are estimated at around $200 million, including Participatory Notes. This figure is not enough to cripple the Indian stock markets.

But Lehman has exposure to the Indian stock market through special purpose vehicles. This exposure to real estate stocks is said to be of about $1.5 billion, enough to shake up the markets.

Thursday, September 18, 2008

200,000 applicants expected for 600 budget flats in Mumbai

The Maharashtra Housing and Area Development Authority (Mhada) plans to sell 600 so-called budget flats in Mumbai around Diwali and expects at least 200,000 applications for this, an indication of the demand for affordable housing in one of India’s most expensive real estate markets.

The flats, which will be 225 sq. ft and 600 sq. ft in size, are located in Sion and Vikhroli in the city. Property prices in Sion range between Rs6,000 and Rs12,000 a sq. ft. Mhada’s flats will be priced at Rs2,000-2,200 a sq. ft. Buyers will be picked from applicants through a lottery.

“There is a huge demand for such affordable housing in Mumbai where real estate prices have become unaffordable... We got overwhelming response from our sale earlier this year and have decided to sell some more flats this year,” said Honaji K. Jawle, chief operating officer, Mumbai Board, Mhada.

The coming sale follows one in June by Mhada to sell 900 flats to people from households with very low income (it received 65,000 applications) and an ongoing one in New Delhi where the Delhi Development Authority is selling 5,010 flats within the city (it has received around 850,000 applications and will pick the buyers by lottery).

Property prices in Mumbai have risen by 30-40% in the past year. Transactions in the range of Rs40,000-90,000 per sq. ft have put the city in the league of the world’s most expensive destinations but, in the process, elbowed out middle-class homebuyers.
Real estate advisory Knight Frank India Pvt. Ltd estimates demand for houses in Mumbai is around 84,000 a year, while supply, from the government and private firms, is only 55,000. Mhada, with land banks within the city, is one of the few options before people who seeking affordable houses. Mayfair Housing Pvt. Ltd, a local developer, offers flats for Rs18-22 lakh but even these are in Vasai, a distant suburb.

“It’s not easy to do affordable houses in Mumbai, particularly within city limits, because of the high costs of land involved. This is why we could afford to provide budget homes in Vasai...because the cost of land is much cheaper in the earlier location,” said Nayan Shah, chairman of Mayfair Housing.

Not everyone is convinced Mhada’s flats are a good bargain. “Quality issues have been a concern against Mhada houses and have kept many homebuyers away. Though the flats are far cheaper than the market rates, their construction is bad, fittings are of poor quality and finishing is not up to the mark,” said Prakash Gupta, director of Mumbai-based brokerage Sunrise Real Estate.

State Govt To Raise FSI For Sea Link Areas

The Maharashtra government is expected to raise the floor-space index (FSI) from one to four for the areas to be connected by the Rs 7,000-crore Mumbai Trans Harbour Link (MTHL). This initiative will benefit Navi Mumbai Special Economic Zone (NMSEZ), which is being developed by Reliance Industries Ltd (RIL) in a joint venture with the state government’s infrastructure arm, City and Industrial Development Corporation of Maharashtra Ltd (CIDCO). To avail the higher FSI, one will have to pay a premium of 20 per cent on the rate mentioned for the area in the ready reckoner, said a senior official from the state government’s urban development ministry. The FSI is the ratio of total floor area of a building to the size of the plot. It indicates the maximum construction that is allowed on a plot in a particular area.

Tier II Cities Like Chandigarh -The Next Preferred Destination For Realtors

Realtors have now shifted their focus to tier II cities, considering the saturation in metros and major tier I cities. Chandigarh has been overwhelmed by the response it has got from the realtors, who are keen to start construction activities. The city is going through major commercial development. Currently, there are three operational malls in the city, Fun Republic, Uppal's Centra Mall and DLF City Centre. Other malls that are likely to be operational within the next few years are TDI Mall and City Emporio Mall. Also, the Paras Downtown Square mall-cum-multiplex at Zirakpur is expected to be operational this year.

Realtors Have Found A New Reason For Falling Sales

Going through a phase of liquidity crunch, falling sales and delayed projects, real estate developers are now blaming the media. At a Ficci-conducted two-day real estate summit, developers took potshots at the media during a panel discussion accusing them of "trying to be stars at the realtors' expense". Developers such as Mumbai based-Kalpataru Properties, Bangalore based-Sterling Developers Pvt Ltd, Shriram Properties and Parsvnath Developers - all felt aggrieved by the 'negative' coverage in the media. "Journalists are blowing up the issue (of real estate slowdown) to become hot journalists and step into the limelight," said Mr. Mufatraj Munot, chairman, Kalpataru Properties. He said negative publicity in the media was one of the reasons why properties were not being sold. But there are others who are enjoying the media attention. Mr. M Murali, managing director, Shriram Properties, said, "We (realtors) are now like film stars, journalists run behind us for quotes. We should feel like superstars."

Hyderabad Hopes To Increase Office Space Through SEZs

Currently, there are 40 IT SEZs in Hyderabad and it hopes to reach US$7 billion mark with a prospective growth of 50 per cent during the current financial year. An estimated 60-70 million sq. ft of IT/ITeS specific commercial office space is expected to come up through special economic zones alone by 2010 in India. And out of the seven cities where such zones are coming up, Hyderabad leads with about 30 per cent of the total expected supply of real estate, closely followed by Pune, Bangalore and Chennai.

Lehman's bankruptcy makes B-school students jittery

At the Indian School of Business, 15 per cent of last year's class had offers from financial services companies. Lehman Brothers was one of the largest recruiter in the past.

ISB is planning to extend Day Zero to Week Zero. This is to enable international firms to be among the first to come on campus and get first crack at all students.

At Indian Institute of Management-Bangalore, Lehman Brothers and Merrill Lynch have made five pre-placement offers each. The two companies were expected to hire 10 more students during final placements.

They have not been withdrawn their pre-placement offers yet.

Investment banks account for 50 per cent of total placements every year but experts expect offers to dry up this season.

Management students are also nervous about this 'traumatic' turn of events.

At IIM-Ahmedabad possibility of pre-placement offers from Lehman Brothers and Merrill Lynch will not come through and summer placements start mid-November and final placements take place in March.

Students at IIM-A are exploring non-banking options in marketing and real estate even as the institute says it is too early to comment on placement trends.

IndusInd Bank plans Rs4,500 cr India-specific fund

Hindujas-promoted IndusInd Bank has said it is looking to float a $1 billion fund (about Rs4,500 crore) for investments in India.
“We are going to partner with Indian firms that are known in the capital market space and are in the process of floating funds of their own. It is going to be the Hinduja brand name alongside local firms,” promoter of the bank and Group Chairman S P Hinduja told PTI.
“One of the things we are planning to do in Dubai is to offer an offshore fund for investment into India,” he said after the 15th Annual General Meeting of the IndusInd International Holdings Ltd (Mauritius).
“The offshore fund would investment primarily in two specific sectors, real estate and infrastructure, for which investors in Dubai are very keen,” he added.
On the expansion plan of the bank, he stated that after 14 years of the launch, it was time to diversify and look at other sectors such as capital markets, stock broking, wealth management and asset reconstruction.
Praising the non-resident Indian community for their support since its inception, he said that the bank is now reviving a lot of NRI initiatives.

Demand slump: Experts call for cut in flat prices

International property consultants have called for reduction in residential prices as demand has gone down by over 40 per cent in the last nine months.

While end-users in big cities such as Mumbai and Delhi are postponing buying houses due to a number of reasons such as unaffordable prices, rise in interest rates and increase in their monthly pay-outs among others, investors have sold off their properties to pay for losses suffered in the stock and property markets, consultants said.

“Developers must now be ready to lower their selling prices in order to revive demand. Once this happens, we will see a definite upswing in residential real estate sales again,’’ said Anuj Puri, chairman and country head of property consultancy Jones Lang LaSalle Meghraj (JLLM).

The Reserve Bank of India (RBI) has raised repo rate, the rate at which it lends to banks, by 125 basis points in the last six months to contain inflation.

In turn, commercial banks have raised consumer loan rates by 50-100 basis points. Thus, on an average, the monthly installment on a Rs 10-lakh loan for 20 years has risen over 50 per cent to Rs 12,740 at 14.25 per cent rate from Rs 8,060 (7.5 per cent rate) five years ago.

“While ready apartments are being sold, those under construction are not finding enough buyers,’’ said Vikas Oberoi, managing director of Mumbai-based Oberoi Constructions recently.

After global investors such as Lehman Brothers and Merrill Lynch suffered huge losses in the US and others reduced their exposure in the emerging property markets including India, consultants believe foreign funds would come into the country at much lower valuations.

“If developers had a horizon of 25 funds earlier, now they will have only 10 funds. Investors would want to come in at much lower valuations. I expect nearly 20-25 per cent correction in prices around Diwali,’’ said Ambar Maheshwari, director of DTZ, a global investment advisory.

Adds Puri, “The Indian real estate market is likely to underperform in the next six to 12 months. During this period, investors are well-advised to concentrate only on key listed players who are better placed to ride out the storm. Only such companies are geared to show good share performance over the longer term,’’ he said.

A cross-section of property developers, consultants and brokers said enquiries from home buyers have gone down by 40 per cent over the last three months, compared to the same period last year. While developers are not advertising any price cuts, most are willing to reduce prices once the negotiations begin, according to investors.

For instance, in Gurgaon, where the prices are Rs 6,000 per sq ft, developers are settling deals at Rs 5,500-5,400 due to a sharp reduction in demand. This is apart from freebies such as free parking, waiver of stamp duty and equated monthly installments.

Tuesday, September 16, 2008

Lehman fall may deepen realtors’ credit woes

Domestic realty stocks fell sharply on Monday, mirroring the larger trend on the bourse and concerns over tightening of liquidity in the real estate market after US investment bank Lehman Brothers Holdings Inc., an investor in some of these firms, said it intends to file for bankruptcy.The real estate firms involved said they would not be affected as Lehman’s investments had already been credited to their accounts.

Shares of realty firms in which Lehman Brothers has directly or indirectly invested in fell sharply. Stock prices of India’s leading real estate developers DLF Ltd and Unitech Ltd were down by 7.5% each on the Bombay Stock Exchange, or BSE. Shares of Mumbai-based Orbit Corp. Ltd, in which Lehman owns shares, were down 11.69%.

These stocks—together with other plunging shares of realty firms such as Ansal Properties and Infrastructure Ltd and Housing Development and Infrastructure Ltd (HDIL) — dragged the BSE realty index down 7.65% in comparison with the Sensex, the bourse’s benchmark index, which fell 3.35%.

Analysts said the crash in real estate stocks was on account of heavy selling on concerns over future funding for real estate firms. “Real estate shares must be down because of a combination of Lehman’s bankruptcy news and the fact that real estate stocks are traditionally high beta stocks,” Unmesh Sharma, an analyst with Macquarie Research, said. A high beta stock is one that swings more than the market.

While the Sensex is down by 12.17% compared with a year ago, the BSE realty index, which is a sectoral index of 14 realty stocks such as DLF and Unitech, has shed more than 45% in value.Another analyst said Monday’s meltdown came about as investors moved to less risky stocks. “As an asset class, real estate is risky, so investors could be realigning their portfolio to less risky asset classes,” the analyst said, asking not to be named. “There are also fears that we are going to see a further tightening of liquidity conditions in the real estate market because, globally, money will become dearer.”

The firms that had investments from Lehman Brothers Real Estate Partners, a $4 billion, or Rs18,360 crore, realty private equity fund, meanwhile, shrugged off worries. The fund has so far invested more than $380 million in realty firms and their units here.

In 2007, the fund invested $200 million in DLF Assets Ltd, the promoter-owned company of DLF, that a company spokesperson said DLF Assets had received entirely.

A Unitech spokesman said the firm, too, had received money from Lehman. In June, Lehman agreed to invest $175 million for a 50% stake in the initial phase of Unitech’s Santa Cruz project on the western expressway of Mumbai. According to the agreement, Lehman gets 50% equity in the specially floated firm that will develop 1 million sq. ft of an 18 million sq. ft office space project.

“The deal will not be affected by Lehman’s bankruptcy,” the spokesman said.
In 2007, Lehman had tied up with HDIL to form a venture to bid for the Rs13,000 crore slum development project in Mumbai’s Dharavi. HDIL, which held majority equity stake in that venture, said the partnership with Lehman needed to be able to qualify for the bidding process was intact. “(Lehman’s) fund is pretty secure and they still remain as partners,” Sarang Wadhawan, HDIL’s managing director, said. Lehman also holds direct stakes in Orbit and Hyderabad’s IVRCL Infrastructures and Projects Ltd. The fund has a 4.82% stake in Orbit and a 1.20% stake in IVRCL. “Lehman picked up the stake during our initial public offer for $4 million and they paid up the entire amount,” Pujit Agarwal, Orbit’s managing director, said on Monday.

Banking turmoil sends a shudder through Wall Street; Dow suffers biggest point drop since 2001

The upheaval in the American financial system sent shock waves through the stock market Monday, producing the worst day on Wall Street in seven years as investors digested the failure of one of its most venerable banks and wondered which domino would be next to fall.

The Dow Jones industrial average lost more than 500 points, more than 4 percent, its steepest point drop since the day the stock market reopened after the Sept. 11, 2001, attacks. About $700 billion evaporated from retirement plans, government pension funds and other investment portfolios.

The carnage capped a tumultuous 24 hours that redrew U.S. finance. Lehman Brothers, an investment bank that predates the Civil War and weathered the Great Depression, filed the largest bankruptcy in American history. A second storied bank, Merrill Lynch, fled into the arms of Bank of America.

It was by far the most stomach-churning single day since a financial crisis began to bubble up from billions of dollars in rotten mortgage loans that have crippled the balance sheets of one bank after another and landed mortgage giants Fannie Mae and Freddie Mac under the control of the federal government.

"We are in the middle of a deep, dark recession, and it won't end soon. Here it is, and it is pretty nasty," said Barry Ritholtz, who writes the popular financial blog The Big Picture and is CEO of research firm FusionIQ.

And the fallout was far from over. American International Group, the world's largest insurer, was fighting for its very survival: New York Gov. David Paterson moved to allow the company to tap one of its subsidiaries for an emergency loan to stay above water.

"AIG still remains financially sound," Paterson said, even as the company's stock tumbled almost 60 percent. Almost $20 billion in AIG's shareholder value was wiped out Monday.

In Washington, Treasury Secretary Henry Paulson, who refused to toss a financial lifeline to Lehman, was unapologetic as the Bush administration signaled strongly that Wall Street shouldn't expect more rescues from Washington.

The American people should remain confident in the "soundness and resilience in the American financial system," Paulson told reporters at the White House.

Six months ago, Paulson moved to prevent the collapse of Bear Stearns, brokering a deal for JP Morgan Chase & Co. to buy the firm at a fire-sale price with Federal Reserve backing. Earlier this month, he stepped in to help the government seize Fannie and Freddie in hopes of reversing the housing and credit crises.

But Monday, Paulson said he "never once" considered it appropriate to put taxpayer money at risk to resolve the problems at Lehman Brothers, which was saddled with $60 billion worth of soured real estate holdings.

The result was one of the most momentous days in Wall Street history since legendary banker J. Pierpont Morgan helped broker the rescue of financial markets during the Panic of 1907.

The Dow industrials dropped 504.48 points to close at 10,917.51, the first time since July they have finished under 11,000. It was the sixth-largest point drop ever and the worst since Sept. 17, 2001, when the average fell 684.81 points on the first day of trading after the terror attacks.

In percentage terms, the fall for the Dow on Monday was its worst since the summer of 2002. The index has shed nearly a quarter of its value since its record high last October.

Broader stock indicators also fell. The Standard & Poor's 500 index lost more than 4 1/2 percent, and the Nasdaq composite index lost more than 3 1/2 percent.

Financial stocks fell as investors worried about the strength of banks' balance sheets. Washington Mutual Inc. fell 27 percent to $2 a share, while Wachovia Corp. fell 25 percent to $10.71.

While Lehman Brothers was filing for Chapter 11 and AIG was scurrying to find financing to stay afloat, Merrill Lynch was avoiding a similar fate with a $50 billion transaction to become part of Bank of America Corp.

The deal would create a financial giant rivaling Citigroup Inc., the biggest U.S. bank in terms of assets. Bank of America has the most deposits of any U.S. bank, while Merrill Lynch is the world's largest and most widely recognized brokerage.
"It was an opportunity of a lifetime," said Ken Lewis, Bank of America's chairman and CEO.

Lewis made the announcement at a news conference where he was flanked by a smiling John Thain, Merrill's chief executive. The two put the deal together in 48 hours, while they were taking part in marathon discussions at the New York Federal Reserve over the weekend to save Lehman Brothers. Merrill stock rose a penny Monday.
One huge concern is that the Lehman bankruptcy will probably trigger even tighter credit — making it more difficult for everyone from large companies to small businesses to American homebuyers to borrow money.

It was a dark day for Lehman workers, too. Many of them brought gym bags, shopping totes and Lehman travel bags to cart home personal files and pictures from their desks at the company's midtown Manhattan headquarters. Gawkers lined up behind metal barricades, and bystanders took pictures with their cell phones.

The failure of Lehman and probable job losses at Merrill are also a blow to the New York City economy, which is still trying to absorb a blow from shrunken tax revenues after the collapse of Bear Stearns in March. The city and its outlying suburbs rely heavily on taxes paid by workers in the financial services industry.

In marathon sessions Friday night, Saturday and Sunday, government officials and the chief executives of major U.S. and foreign banks huddled at the New York Fed's fortress-like building in downtown Manhattan, trying to work out a way to save Lehman.

They failed at that. But a group of 10 banks that includes JPMorgan, Goldman Sachs and Citigroup formed a $70 billion pool that banks or brokerages can tap to cover short-term funding needs.

There were also worries that Lehman's problems would infect other financial companies and spread to global stock markets, further harming the U.S. and global economies.

The Fed meets Tuesday to decide interest rate policy. It's widely expected to keep rates at 2 percent, but some economists believe it could lower them to soothe Wall Street's frazzled nerves.

The financial turbulence could also further derail consumer confidence in the economy just as stores prepare for the critical holiday shopping season. The upheaval in the financial system also means that those consumers with marginal credit history will have an even harder time getting loans, cutting into consumer spending.

"The backdrop even without this was tough. This certainly adds to the worry level," said Michael P. Niemira, chief economist at The International Council of Shopping Centers.

Republican presidential nominee Sen. John McCain assailed "greed and corruption" on Wall Street and promised to clean it up, while his Democratic opponent, Sen. Barack Obama, blamed White House policies and said his opponent would only deliver more of the same.

Obama called it "the most serious financial crisis since the Great Depression." McCain declared in a new TV ad that "our economy is in crisis" and that only he and his running mate, Alaska Gov. Sarah Palin, could fix it. McCain also told voters in Jacksonville, Fla., "The fundamentals of our economy are strong."

Lehman Brothers Holding in Indian Company

When we hear of the news of Lehman brother is going to file for bankruptcy the first thing that comes to our mind is the day when bear and sterns sold all its holding in Indian company ,So same thing might happen to the holding that Lehman brother has in Indian company , they might just sell the stock in the market at whatever price they can to cover losses , so please see if you hold any of these company and make a wise decision .For info Lehman Brothers are considered as FII for indian market , so they do hold lot of company in its portfolio.

List of Indian Company that Lehman Brothers Hold
Amtek Auto
Amtek India
Anant Raj Inds.
Ansal Housing
Asian Electronic
Champagne Indage
Consolidated Con
Cranes Software
Dhampur Sugar
Edelweiss Cap
Emkay Global
Era Infra
Fedders Lloyd
Genus Power
Geometric Ltd
Godawari Power and ispat
Golden Tobacco
Gremach Infra
Indo Asian
IOL Netcom
IVRCL Infrastruce
Kalpana Inds.
Karuturi Global
KPIT Cummins Info
Logix Microsys.
Lumax Inds.
Madras Cement
Mangalore Chem.
Nava Bharat Ventured
Northgate Technologies
Orbit Corporation
Pioneer Embroideries
Prajay Enggineering
Prithvi Info
Rolta India
S Kumars Nation
Spice Communication
Spice Mobiles
Triveni Engg Ind
Tulip Telecom
Vijay Shanthi Builders
Voltamp Transformers
West Coast Paper

Home Loan Rates Likely To Fall: NHB

According to the National Housing Bank (NHB), the interest rates on home loans might fall from January. Mr. Sridhar, Chairman and Managing Director of the NHB, said that the disbursal of home loans had been growing steadily and the rising interest rate had not affected it. In the last fiscal year, home loans grew at a healthy pace of 20 per cent. While disbursement by banks grew 14-15 per cent, loans from financial companies grew 24 per cent. "This year, too, the trend appears to be similar, but it is too early to form a definitive view," he said. The bank launched NHB Residex to monitor residential property prices in Delhi, Calcutta, Mumbai, Bangalore and Bhopal. Mr. Sridhar said that 10 more cities would be added in the next two months and over 60 cities would be covered over the next two years. This index would be refreshed every six months, which would give a good idea of property prices in the country and city-specific realty movement.

Demand For Houses In Small Towns Falls

A study by the Associated Chambers of Commerce and Industry of India (Assocham) has revealed that housing demand in small towns witnessed a 25 percent fall during February-July 2008 because of higher borrowing costs. Assocham Secretary General, Mr. D.S. Rawat said, "Approximately 15 million people in about 30-40 tier II and tier III cities were unable to make purchases as higher inflation and interest rate have dampened their enthusiasm and eroded their budget." The Assocham study is based on results given by affiliated real estate majors like Parsvnath, Omaxe, DLF, Unitech, and BPTP, which are developing projects in small towns. Besides rising cost, non-availability of inputs such as bricks, cement and steel, and power shortage also cause inordinate delays in project completion. The chamber has suggested that the government introduce real estate investment trusts (REITs) to bring the much needed class of institutional investors to strongly support the domestic real estate market. As per Assocham, REITs can also help develop commercial mortgage backed securities (CMBS) market and create a source of cheaper debt for commercial real estate.

Monday, September 15, 2008

Parsvnath Planning To Invest Rs 15 Crore In Moradabad Housing Project

Parsvnath Developers Ltd has announced its plans to invest about Rs 15 crore to build a luxury housing project at Moradabad in Uttar Pradesh. The project, 'Parsvnath Residency' would offer 34 luxury housing units comprising 66, 311 sq ft for saleable area. Besides this, the company is also developing a housing project,'Parsvnath Pratibha' and a shopping mall in the city.

Suncity Plans To Raise Rs 500 Crore

Real estate firm, Suncity Projects Ltd is planning to raise up to Rs500 crore through private equity for development of its IT special economic zone (SEZ) project at Gurgaon. "We are in talks with various private equity firms to raise Rs350-500 crore for our IT SEZ project in Gurgaon. The project cost to develop the SEZ would be between Rs3,000 and 4,000 crore," Suncity Projects Director, Mr Ashok Bansal said. The IT SEZ spread over 167 acre has been notified and construction would begin next month, he added.

Homes For Homeless In India By A UAE Developer

A United Arab Emirates real estate developer will develop houses for the homeless in India and three other countries during the Islamic holy month of Ramadan. For this purpose, the Dubai-based ETA Star signed an agreement with US-based not-for-profit organisation, Habitat for Humanity International (HFHI). The company is being partnered by its new development Dubai Lifestyle City, home furnishing chain Homes and cement manufacturer Star Cement. It will donate one percent of its total earnings during Ramadan towards building homes for the destitute in India, Pakistan, Bangladesh and Ethiopia, according to the agreement.

Friday, September 12, 2008

Does India need a real estate regulator?

"Land is the riskiest form of speculative real estate, which is why there are huge swings in land value," said Deepak Parekh, Chairman, HDFC [Get Quote] in a key note address at a function organised by the Federation of Indian Chambers and Industry in Mumbai on Wednesday.

The ironic thing about land is that only when there is demand to develop the land does the value increase, thereby yielding huge profits. Similarly, when demand stalls, land can lose value really quickly because there are few other ways to generate that kind of income from land, said Parekh

For instance, in cases where land is purchased from farmers, it is done at fair value, but subsequently when project plans are announced, the value of that land escalates and then the original sellers feel cheated or disgruntled with their compensation. Not to mention, Singur imbroglio is all about land.

Stating that it is difficult to find outright solutions but experience shows that the need of the hour is transparency in such land dealings, Parekh said that it is high time India has a housing regulatory authority.

Amit Mitra, secretary-general FICCI said, housing regulator makes sense only when there is a market failure.

When asked to comment about Parekh's observation that developers often take investors and lenders for a ride, Mitra said, 'there are developers and developers'. Some might be indulging in unethical practices, but realty market in India is competitive enough to take care of such anomalies.

Niranjan Hiranandani, managing director of the Hiranandani group said high interest rates and high prices of real estate are not the only deterrents to the growth of the sector.

He said, price is determined by demand and supply. Inflation, high prices of steel and cement - the last two account for 60 per cent of any construction work � are adding to the difficulty that the industry is facing.

He, however, ruled out that in near term the country's real estate sector will witness a large correction and said in the absence of a steep increase in supply, no such thing is possible.

Junking the idea that developers can hold the market to ransom, Hiranandani said, "nobody can control the market, be it the stock market or the real estate market".

He expressed his happiness over Mumbai Metropolitan Region Development Authority's plan to build 500,000 affordable apartments over the next five years.

"This," he said, "is a good beginning for affordable housing."

Parekh on his part said, 'housing for all' is often wielded as political rhetoric, but we must not lose sight of the importance of building a property owning democracy.

Realty Firms Mull Joint Developments

Considering the drop in sales of apartments and inflationary trends, realty firms are planning to foray into joint developments for construction projects by selling land parcels to other builders. Mr. Pankaj Jaju, head-real estate practice, Enam Securities said, "Metros and Tier II towns having a huge pipeline of projects have witnessed a 60% drop in sales of apartments in the last six months." Selling land parcels to other builders for joint development will enable land owners to invest in buying more land bank and increasing the supply of properties, he added. According to industry experts, real estate prices in Navi Mumbai and Bandra Kurla Complex (BKC) are expected to shoot up further by about 10-15% within the next six months if developers are not able to complete their projects on time. Besides this, raw material input costs for construction constitute 40% of total project cost. Since input costs are expected to rise further, the real estate market will witness a further dip in sales of apartments across the country.

REBI Plans To Come Up With A Realty Chain In East

Real Estate Bank India (REBI) is planning to develop 3,000 franchisees across the country, with about 48 outlets in West Bengal in the next few years. Across the eastern region, REBI would open 200 stores, said Mr. Hemant Sikaria, regional head of REBI. "India's realty segment is the only industry with a track record of 30-35 per cent growth per year in terms of investment. With the realty sector booming in east, we are confident that to be able to provide solutions to all real estate requirements of the people here," Mr. Sikaria added.

Jaipur Witnesses Correction In Prices

Capital cities are witnessing a price correction due to low liquidity of real estate and high mobility of investor capital. Particularly, the property market of Jaipur has seen a fall of 20% in property prices. "The realty market in Jaipur has hit rock bottom as property prices have come down by 20% in the past one year. We were hoping the festive season would bail us out," says Mr. Atmaram Gupta, a builder. Experts also think that the situation is not going to change unless a big corporate investment comes to the market's rescue. "The hike in salary after the sixth pay commission will not have much impact in the market due to inflation. For, small investors already reeling under debts and with the rising price of home loan interest it is more difficult for them to think of new ventures," says Mr. Sunil Jain, a member of Township Developer Association of Rajasthan. With each passing day, it's becoming difficult to predict the future, he added.