Considering the current global economic slowdown and its impact on the Indian economy, realtors are coming up with novel marketing strategies to woo reluctant flat buyers. Realty players such as Mantri Synergy, Jains Sunderbans, ETA Rosedale and Hirco Palace Gardens have come out with new schemes to attract buyers. To lift up the 'sagging morale' of prospective buyers, property developers have now come forward to pay pre-EMI (equated monthly installment) interest on part-money disbursed on the housing loan taken by a flat buyer. In the changed economic context, the prospective flat buyers have turned cautious and are deferring their buying decisions, anticipating a drop in real estate prices. This has put the developers in a fix. In order to retain the buyer, especially during this period, the developers are now opting to dish out freebees such as payment of pre-EMI.

All those who are looking at buying property are now faced with a different kind of situation with regard to payments. Earlier, a buyer had to pay the builder a specific percentage of the total price as various stages of construction were completed. Many builders are now abandoning this mode of payment in favour of time-based payments. One should be aware of the working of this system, because it impacts their finances. In this form of payment, one pays the builder specific sums at certain pre-decided intervals. But it presents higher risk for buyers because they will need to make the necessary payment as per the schedule, but have little control over the construction of property. Due to this, there is a fair chance of delay creeping into the process. This is especially true if the builder gets into some kind of financial trouble and has to slow down construction activity. In such a situation, there is little that buyers can actually do because they have made the payment and can only wait for the delivery of the completed premises. So, this kind of payment should be efficiently monitored because of the higher risk element involved. If there are reputed parties at the other end of the transaction, there is some relief for buyers because they will not disappear with the money. However in other cases, buyers have to take necessary care and precaution before entering into such agreement. This would ensure that they are not chasing builders after sometime when the construction is not yet complete and they are yet to see the benefit of their investment.

Sales at Parsvnath Developers' in the festival season of Diwali are down to half from a year ago, but the company does not plan price cuts to boost sales, its chairman said. High interest rates on home loans and central bank rules forcing banks to assign a higher risk weight to real estate loans have dented property demand in India. Analysts say property prices are still high and need some correction before demand picks up. But Parsvnath has no such plans, Mr. Jain said, citing rising input costs. The company would instead focus on reducing costs by reducing salaries and firing 'non-performing staff,' and would speed up projects to improve cash flows, he added.

After shoring up the banking system with Rs 1, 45,000 crore funds, the Reserve Bank of India has paved the way for cheaper home, consumer, corporate and personal loan rates by reducing its key-short term lending rate (repo) by 100 basis points. The cut in repo would allow banks to immediately borrow short-term funds from the apex bank at a cheaper eight percent as against nine percent till now. Mr. Ashish Parthasarathy, Deputy Treasurer, HDFC Bank said, "It is a welcome step and clearly shows that the interest rate regime is now on a decent curve." Earlier, the RBI cut the mandatory cash deposits that banks must keep with it (CRR) by 250 points after five years, along with other measures.

Nothing seems to be going right for Delhi's realty market this festival season. Even discounts and freebies have failed to tide over sluggish sales. The global financial crisis has resulted in a severe credit squeeze, leaving aspiring home buyers with unaffordable rates on mortgages and expectations that property prices might fall significantly in the coming months. "Builders are offering big discounts but buyers are not relenting," said Mr. Suresh Dalal, a real estate agent. Free or subsidized clubhouse memberships, cars or other lifestyle accessories like air-conditioners, enhanced security features, reduction for waiver on premium of floor-rise, free car parking slots and complimentary school buses, are some of the other things being offered by builders. Still, buyers are determined to wait, most anticipating that prices will drop further.

Shares of real estate firms were the worst hit on Friday after concerns of a liquidity crunch in the business drove the sectoral index, the Bombay Stock Exchange’s (BSE) realty index, down nearly one-fourth.
Shares of Unitech Ltd, India’s second largest developer by market value, fell by a record 51.29% to close at Rs30.10 each after intra-day trading took it down to an all-time low of Rs26.60.
Bangalore-based real estate developer Puravankara Projects Ltd, which saw its shares closing 44.32% lower, also touched a record low of Rs42.20 in day trade.
“People are concerned about cash provisions and where will real estate companies get money from,” said Sandeep Mathew, an analyst at BNP Paribas Securities in Mumbai.
An analyst with a domestic brokerage firm, who did not want his or his employer’s name to be used, said, “...people are exiting at any price because there are no buyers for realty stocks”.
There is an aversion towards real estate stocks among “investors (who) are now shifting from net asset value-based valuation to cash flows of the company”, he added.
Shares of DLF Ltd, the largest developer in the country, shed 23.96% to close at Rs203.90. Parsvnath Developers Ltd fell by 20.70% to close at Rs45.20.
BSE’s benchmark index, the Sensex, shrank 10.96% while BSE’s realty index, which consists of 14 real estate stocks, fell by 562.31 points or, 24.4%.
“Real estate stocks have been correcting mainly because developers have not reduced home prices despite a slowdown in sales,” said another analyst with a domestic brokerage firm. “In Unitech’s case, the stock has corrected because the company is heavily leveraged.”

India's fund starved real estate industry, which is already reeling under dropping sales, high interest rates and drying up of private equity sources, has to grapple now with credit squeeze created by this quarter. According to Mr. Anuj Puri, Chairman and Managing Director, Jones Lang LaSalle Meghraj, the RBI restriction on Indian banks from financing real estate companies is playing a role. As per industry sources, several realty majors have decided to go slow on their projects, especially in large cities, because of shortage of working capital, as banks have not only withdrawn overdraft facility but also decided not to process any more corporate loans.

While banks do not see any immediate decrease in lending rates after the 150 basis-point cut in Cash Reserve Ratio by the Reserve Bank of India, realtors anticipate the move to reduce home loan rates for their consumers. Demand for real estate property has decreased by nearly 25-30 percent in the country over the last 18 months, when home loan rates increased from an average of 7 percent to as high as 12-13 percent. "The home loan rate in India is among the highest in the world and we expect it to be reduced by at least 100 basis points after the cut in CRR," said Mr. Pradip Kumar Chopra, Chairman, PS Group. Mr Abhijit Das, Regional Executive Director, Jones Lang LaSalle Meghraj Meghraj said, "The recent move by RBI is expected to enhance liquidity to the primary and secondary real estate funding, while arresting further de-growth in real estate investments in the country."

There is some good news for the elderly, the finance ministry has notified the Reverse Mortgage Scheme, which would exempt from tax the income they earn by mortgaging their property. This comes after finance minister, Mr. P Chidambaram's statement in this year's Budget that, "Reverse mortgage would not amount to transfer and the stream of revenue received by the senior citizen would not be income."Accordingly, the Central Board of Direct Taxes (CBDT) has now said that under the scheme, a capital asset would mean a residential house property which is located in India and individuals or married couples above 60 years of age will be considered as senior citizens. This means that the scheme will not be regarded as transfer of a capital asset and so would not attract capital gains tax. Also, the loan amount will be exempt from income tax for the borrower. "Reverse Mortgage means mortgage of a capital asset by an eligible person against a loan obtained by him from an approved lending institution," the CBDT said in its notification. Further, the loan under reverse mortgage should not be for more than 20 years. The CBDT notification comes into action from 15 April, 2008 and loans given in 2007-08 will also be given exemption.

Real estate developers have taken the severest hit from the funds shortage banks are going through. DLF Ltd and Unitech Ltd, the country’s two of the largest real estate developers, have not been able to draw on loans sanctioned by their bankers.

Standard Chartered Bank, the second largest foreign bank in India after Citigroup, has held back disbursement of loans sanctioned to DLF and Unitech. The bank declined to comment on the development. Spokespersons of the two real estate developers also did not want to comment on the issue.

Industry sources said Standard Chartered’s decision against increasing their exposure to the real estate sector is in view of a slowdown in home sales as property prices have reached unaffordable levels, particularly in the metros.

StanChart is not the only one pulling out of financing real estate developers.

Almost all banks have withdrawn from funding real estate developers, a segment considered as “sensitive” by the Reserve Bank of India (RBI).

Banks want to limit or reduce their exposure to real estate developers because this sector could be in severe trouble in the event of a prolonged slowdown in home sales. All the financial crises in the last 30-odd years have had their origins either in the equity markets or the real estate sector. The current financial crisis too had its origin in the crash of the US housing market.

The total exposure of banks to real estate developers at the end of March 2008 was Rs 62,276 crore. The growth in these loans in 2007-08 had dropped to 37 per cent from 69 per cent in 2006-07.

The increase in housing loans extended by commercial banks too slowed significantly in 2007-08. During the year, the increase in home loans was just 10.7 per cent against 24.7 per cent in 2006-07.

Two weeks after the Delhi Development Authority (DDA) closed its Housing Scheme 2008, where 5,010 flats are up for sale; the agency has started the process of scrutinizing the application forms. Officials said they planned to hold the draw of lots for the flats before December 15. Senior DDA officials said 12.64 lakh application forms were sold and downloaded. Of them, 5.12 lakh forms were finally submitted in different banks authorized by the DDA. For applicants, it's going to be a tough competition: for each of the 5010 flats, there will be 102 applicants. Those who don't get lucky in the lottery would get back their registration money from January. "Scrutiny of forms will be completed by November 20.Once scrutiny is over, forms which will be eligible for the draw will be uploaded in official website www.dda.org.in."DDA launched the housing scheme on August 6 after a gap of two years. The scheme offers 5,010 ready-to-move flats priced between Rs 7.95 lakh and Rs 11.90 lakh in areas like Rohini, Vasant Kunj, Dwarka, Paschim Vihar and Pitam Pura Pitampura, Dwarka, Motia Khan, Paschim Vihar, Dilshad Garden, Vasant Kunj, Narela, Shalimar Bagh, Jhilmil, East of Loni Road, Nand Nagari, Peeragarhi, Sarai Khalil, Rohini, Lok Nayak Puram, Bindapur and Zafrabad.DDA officials said the flats were 40 per cent cheaper than the market rate. Applicants had deposited a registration amount of Rs 1,50,000 at the time of submitting the application forms.

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.

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.

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.

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.

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.

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."

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.

"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.

According to a bill passed by the Haryana Assembly, realtors in the state will have to register themselves with the government. This spells good news for the common man. Till now, dealers didn't take the responsibility if buyers discovered that the property they have bought belongs to someone else and was sold to them fraudulently. The law would require a property dealer to obtain a government licence to operate. This licence will have to be renewed every year. Property agents will also be accountable for every deal they help seal and charge commission for. Haryana always needed a law to regulate the activities of its real estate dealers who can operate in a particular city.