Welcome!

If you are here, chances are that you are tired of your wife's nagging and have accepted the fate that it's time to move out of your parent's abode, which for years had been a paradise for you. If not, your parents must be planning to kick you out of the house. Still better, you are looking for a good investment opportunity. Or, have simply shifted base to a new city and looking for permanent accommodation.
But, for those hit by escalating costs…maybe, this blog can butt out 'the but' in your case. So, feel free to read it and leave your comments.

Wednesday, December 31, 2008

Slump in the cement industry

A very happy New Year to you!

But, I am not sure if major players in the cement industry would be partying tonight. The reason is the slump in the cement industry.

Not surprisingly, the slump is due to the slow down in the economy or more directly put a slow down in the real estate sector.

This is what today’s Business Line had to say about the industry
Starting on a bullish note with prices touching historic high amid buoyant demand, cement industry slipped on to a sticky wicket as the realty sector was rattled by the unprecedented financial crunch.

Tuesday, December 30, 2008

An interesting observation

My friend A.R. Hemant today made an interesting observation concerning Satyam-Maytas issue. It was simple and yet it left me spellbound. In fact many in the industry (real estate or software) would not have even thought about it.
He just said, “Maytas is Satyam spelt the other way round.” What an observation, Sirji!

Monday, December 29, 2008

Real Estate — Has it lost its sheen as a lucrative investment avenue?

That is the question doing rounds in the realty market. And there are ample reasons for many to feel that way. I personally feel a major factor which is keeping investors or for that matter genuine buyers at bay is the overall economic slump.

No doubt sops have been announced by the government to bring the industry back on rails, but I don’t think they would in anyway raise the earnings of an individual buyer, who till two months back would have been on the radar of the hawks in the industry (property dealers), but now is more busy trying to retain his job.

With more and more companies announcing job cuts, employment has become the priority for many.

A headline in today’s ET read: “Real estate: No more an attractive investment”

And what followed below was an eye opener. Here’s what it said:

Investors have shed 50-60 % of their investments in realty stocks. Investors’ perception has been dealt a severe blow. Measures like interest rate cuts for low-value homes and correction in property prices don’t seem to be working. But a further 200-250 bps rate cut and a 20-25% price cut can spur demand. And people may once again start buying houses to live in them, rather than for investment purposes.

I think it’s high time Real Estate becomes what it was earlier – an avenue for providing people with shelter rather than an investment.

Friday, December 26, 2008

An investment opportunity?

Yesterday, I saw this huge full page advertisement on Page One of the Hindustan Times. The advertisement screamed First Time in India @ Cost Price. The site address was six minutes drive from International Airport in Bangalore.

And below an International Villa price was quoted for Rs 69 Lakhs and further down was given the price for a 2BHK apartment. At 13.59 Lakhs it certainly promises to be a steal.

And then there were other offers too. One of them offered a Mercedes Benz for a down payment of Rs 10 lakhs. Now…Now, builders of late have started using such marketing tactics to boost up their sales. It can be justified considering the ongoing recession. But, I still feel the prices quoted by them are not just affordable but a steal, especially with regards to their 2BHK flats.

In the end a word of caution – do watch out for hidden clauses which are usually enumerated under the cliché “conditions apply”.

Satyam vs World Bank!

You would call it surprising but ever since the World Bank has issued a ban on Satyam. It’s subsidiary Sify Broadband has been sending me messages by the tons promising me gifts surprises if I renew their Broadband service that I had discontinued owing to poor connectivity (read no connectivity).

Worst the copy asked the World Bank to withdraw "inappropriate" statements about the company and to issue an apology for harm done to the company. Kamaal hai.

For those who came in late, the World Bank has taken the step for providing improper benefits to Bank staff and for failing to maintain documentation to support fees charged for its subcontractors.

However, I would say the World Bank’s move is very much related to the company’s proposal to acquire Maytas Properties and Maytas Infra, companies controlled and run by the promoter family, for $1.6 billion (around Rs 7,680 crore).

Everything about that proposal was strange. No wonder the World Bank took the harsh step.

Tuesday, December 23, 2008

More banks join the bandwagon

As was expected the other banks taking cue from market leaders State Bank of India and HDFC have decided to cut down their prime lending rates (PLR) thereby slashing their interest on loans.

However, the cuts are not as steep as that announced by SBI. Bank of India and Bank of Baroda have brought it down by 75 points to 12.5 per cent. The new rates will be applicable from January 1, 2009.

Still, there isn’t much to cheer for as both banks have also announced cuts in interests on Fixed Deposits for 1-2 years. So if you plan to invest in FD, you would be getting a much lesser amount at maturity as compared to what you used to get earlier.

These measures will no doubt even out the losses for the banks, but at the costs of customers.

Monday, December 22, 2008

A reality check

Amidst all this euphoria about home loan reduction and cheaper interest rates what is being forgotten is whether you can actually afford to buy a house.

Today, someone asked me if he could buy a house worth Rs 20 lakhs in Delhi. The first question I asked him was – Does your salary support it?

Don’t forget ‘the salary’ is the first pre-requisite when applying for a home loan and that forms the basis for an EMI (Equated Monthly Instalment), unless of course you have enough savings in your bank account.

No doubt the loans have come down, but the purchasing power of the common man too has taken a dip.

The banks may have reduced interests on loans, but they have even slashed interests on deposits. So, where is the money to purchase a house?

But, all’s not lost at least for that guy who was keen on purchasing a house worth Rs 20 lakhs. For I came to know that he could manage some 7 lakhs, but still his salary could not support a house worth Rs 20 lakhs.

My suggestion in this case would be to buy an unauthorised house. If this person is lucky he might just be able to get a decent deal for Rs 10 lakhs (one room set at least).
But since he won’t be able to avail a home loan as it being an unauthorised construction, he can go in for a personal loan. But remember there’s no Income Tax rebate for personal loans.

Sunday, December 21, 2008

Some relief for existing customers

This time there’s some good news for existing customers. For State Bank of India has announced a major slash on interests on home loans.

This would mean that existing customers who had borrowed money at floating rate may have to pay less EMI.

Here are the figures:
Amount...............Tenure.......Fresh Interest Rate
Upto 30 lakhs....15-25 years.......9.5 per cent
30-75 lakhs.......15-25 years......10.75 per cent
Above 75 lakhs...15-25 years......11 per cent

The figures are all the more interesting for shorter tenures. For example if you have a home loan of Rs 30 lakhs for a five-year tenure will witness the rate of interest come down to just 9 per cent.

Taking cue from the SBI even the LIC has announced a cheaper home-loan packet for existing customers.

But, if you are not an SBI or LIC customer don’t lose heart for chances are that other banks too may follow suit. After all for most banks old is gold, especially in the time of recession.

Friday, December 19, 2008

Affordable houses galore!

Home loans have got cheaper but interestingly the real estate prices too are coming down.

Today, Supertech Limited announced their plans for a spectacular township on the outskirts of Delhi. Christened Supertech Livingston, the project being built at Crossings Republik in Ghaziabad has already attracted a lot of seekers especially for their 2BHK flats.

And the reason is simple - their price tag of Rs 21.25 lakhs is certainly gettable. Unfortunately, the offer is only valid for the losers in the DDA housing lottery scheme.

So, if you still possess lottery ticket, the offer is worth considering.

But, if you don’t belong to the ‘lucky losers’ category, don’t lose heart as company insiders say that they are also considering fresh applications.

Thursday, December 18, 2008

Satyam getting into real estate…what a farce

Satyam had proposed to acquire Maytas Properties and Maytas Infra, companies controlled and run by the promoter family, for $1.6 billion (around Rs 7,680 crore).

The move was as good as drawing money from the company’s bank account and putting it in the family’s saving account. No wonder the investors cried foul.

What’s worse is that Maytas Properties is a loss-making venture and investment in it was certainly not a wise thing to do.

The surprising part is that Satyam Chairman B. Ramalinga Raju expressed surprise at the market reaction…kamala hai!

Tuesday, December 16, 2008

Good news

Here’s some good news for the real estate investors. Yesterday, the sensex finished on a bullish note.

The rate cuts announced by the government on home loans had an effect on the bourses as the reality index on the BSE went up and with it the sensex too gained valuable points. And today, the banks benefited.

Has the recovery already started!

But that’s not the end of it for real estate giant DLF, bouyed by robust sales in the mid-income housing, has announced that it will invest Rs 15,000 crores over the next three years. Watch out for some lucrative housing schemes.

Meanwhile, the Delhi Development Authority today conducted the draw of lots for their 5,000 DDA flats ranging from Rs 7 to 77 lakh. They’ve been built in Dwarka, Rohini and Vasant Kunj.

For results please visit http://www.dda.org.in/ or http://www.urbanindia.nic.in/ or its Vikas Sadan office.

Monday, December 15, 2008

What goes up must come down!

Somehow the ongoing recession makes me feel that things are getting back to the normal rather than going into a slump.

Sometimes the laws of physics apply to economics as well. In this case I would just say – what goes up must come down. That’s exactly what’s happening at the moment.

Not very long ago (say end of 2006), the stock market was sitting pretty on 9000 points and the BSE Sensex too was rather stable. Then there was a sudden surge.

The bullish trend followed and the Sensex scaled up and up till it reached an unprecedented 21,000 points – an astronomical number, which obviously wasn’t stable and could be easily influenced.

Then the fall happened. The FII’s who were investing heavily on the bourses decided to pull out their money and the result is there for all to see.

The stock market crashed and came down to where it was before the surge had started.

The same can be said about the real estate market. The prices went up in the face of the booming economy but could not stay there for long and now they have started coming back to normal.

The other day a property dealer told me that it was bound to happen. “The prices had gone up too much and they were artificial,” he said.

So what you are seeing at the moment is not slump but return to normalcy.

Thursday, December 11, 2008

Why wait till February?

A couple of days ago the ET carried a column (http://economictimes.indiatimes.com/Opinion/Columnists/Jaideep_Mishra/Fiscal_stimuli_creditable_would_do_good/articleshow/3816072.cms) which dealt with the influence of reality market on the GDP.

The figure enumerated was an eye-opener.

The copy stated: “Estimates suggest that for every rupee invested in the construction of housing, Re 0.78 is added to the gross domestic product. Further, the real estate sector impacts as many as 269 other industries. Besides, it is the second largest employment generator in the economy.”

Considering the figure, the monetary and fiscal measures announced the government to bring the reality market out of the recession loop is understandable.

And since housing is directly linked to GDP, I am sure the measures would be swift.

So there’s no point in playing the waiting game. If you have a house in mind and can arrange the finances go for it. This is the right time.

I have come across people saying wait till February and the prices will fall to an all time low.

On the contrary, I think the market will stabilise by that time.

Wednesday, December 10, 2008

The builders are feeling the pinch

The other day I was speaking to a builder and invariably the conversation meandered towards the hot topic of the day – recession.

Though reluctantly but he did admit that there was recession in real estate sector. “I am not sure what this is but everyone these days are asking for low-price houses and I just can’t understand how to make them. After all the constructions costs have not gone down at all,” he said.

“Now the point is where do I compromise? Obviously, I can’t do it on the quality of the raw materials. If I do that my reputation will suffer and if I don’t I will have to bear losses. As of now I am bearing losses but for how long that I don’t know.”

He may be not wrong for there are many such small or medium scale builders who are feeling the pinch.

No wonder the government has announced sops in the form of cheaper loans and slashing of interest rates. But, what remains to be seen is how far would these be effective.

Still, I would say that this is the right time to buy a house considering the drop in prices – even though they may not be so acute.

P.S (only for the filthy rich): Today someone told me that the rent in capital’s upmarket Nizamuddin area is around one lakh a month. Now, now, if you can pay that amount of rent why not buy a house instead.

Monday, December 8, 2008

Recession in real estate…unlikely!

Rumour is abuzz that the real estate market is undergoing a slump. There maybe some truth in it considering the on-going recession.

But, what surprises me is the ongoing activity in the market. For despite the recession, construction work especially in the housing sector hasn’t slowed down at all.

And with the government stepping in to provide the much-needed boost in the face of the global economic slowdown with sops such as cheaper home loans and cuts in interest rates, chances are that people thinking of postponing their plans of buying a house might just think again and act swiftly.

If that happens, the property rates might just go up instead of coming down…so saying that the real estate market is undergoing a slump is but an eyewash.

Pupon that and if you have time do visit the Pragati Maidan on December 20 or 21 to get your queries on property related issues sorted out.