Realty News Blog

Bankers Observe Slowdown in Retail Deposits

2009-05-22T15:19:00.001-07:00

Bankers believe that the sudden spurt in the stock market and the softening of deposits rates might encourage retail investors to look at alternatives to bank deposits for parking surplus funds. Though investors locked into long-term fixed deposits may not pull out, banks might still witness a slight slowdown in fresh deposits, according to top public sector bank executives. “This shift from bank deposits to alternative sources of investment such as the stock market might not be sudden as people who have already burnt their fingers might wait and watch for a while,” said Mr T. M. Bhasin, Executive Director, United Bank of India.

Banks witnessed a huge growth in deposits beginning September 2008 due to a weak stock market and the downturn in the economy. Mr O. P. Bhatt, Chairman, State Bank of India, however felt that the growth in deposits might not sustain with the stock market on a rebound. SBI’s deposits grew 38 per cent by Rs 2,04,669 crore in 2008-09 on a year-on-year basis. The bank had deposits flow of about Rs 1,000 crore daily in November-December 2008 and received Rs 20,000 crore worth of deposits in April 2009, Mr Bhatt said. “This momentum might not sustain,” he said, responding to a query by Business Line recently. “There has been an unprecedented flow of deposits, but we feel it should go down now as the stock markets seem to be on the rebound. Earlier there was money flowing from multiple sources such as stock markets and real estate into bank deposits but this momentum might not continue,” Mr Bhatt said.

Banks lowering of interest rates on deposits over the last few months following surplus liquidity might also prompt this shift. SBI has been bringing down the interest rates on deposits in a calibrated manner by about 200 basis points, the Chairman pointed out. The shift out of bank deposits might also be prompted by the pick up in the economy. Talking about the country’s growth story, Mr Bhatt said: “The worst is over for the economy; cement prices are picking up, telecom sector has been growing at a very rapid pace and the banking sector is growing at 20 per cent. So things should start picking up. Though we might not be able to clock a GDP growth rate of 9 per cent immediately, even a 6.5-7 per cent growth is good.”

The first and second quarters of a financial year are usually slow in terms of credit offtake and deposit mobilisation. So, the slowdown, if any, might also be attributed to this, bankers observed. Banks have, in fact, been grappling with surplus funds. “We have enough liquidity and we are looking at ways and means of deploying it so as to ensure that the funds are not kept idle,” Mr Bhasin said. Mr S. K. Goel, Chairman and Managing Director, UCO Bank, said the lower volumes and lower yields on deposits would help improve bank margins.

Bankers Observe Slowdown in Retail Deposits

2009-05-22T15:18:00.005-07:00

Bankers Observe Slowdown in Retail Deposits

2009-05-22T15:18:00.003-07:00

New Zealand Real Estate Agency Enters India

2009-05-22T15:18:00.001-07:00

Real estate agency Harcourts, founded in New Zealand in 1881, is looking at expanding its global footprint with franchises in India. Harcourts franchise development manager Aaron Hodson says he has visited the region several times in the past eight months to get a feel for the market. The real estate agency hopes to select an agency to sell the master Harcourts license to for India within three months.

Taking advantage of the opportunity to train up a currently unregulated industry, Harcourts is looking at designing an India-specific version of its training program. Existing Harcourts overseas franchises include China, Fiji, Indonesia and South Africa. When asked how many branches would Harcourts like to see in India, Mr Hodson says, “We have got long term figures of what hoping to achieve.” “The speed at which the Indian market grows is phenomenal, so our main focus right now is set up correctly.” Mr Hodson and Harcourts International executive director Paul Wright will be in India in June meeting potential franchise partners.

Chrysler, CAW spar over costs

2009-04-21T20:07:00.007-07:00

Senior executives at Chrysler fired a warning shot at the Canadian Auto Workers on Friday, just days before the two sides are to resume negotiations on a labour deal.

In a letter to employees signed by company chairman Robert Nardelli and president Tom LaSorda, Chrysler said the "clock is running."

"Without labour concessions, Chrysler Canada's manufacturing operations will not survive long-term," read the letter. "Thousands of good-paying jobs are in jeopardy, as well as the economic health of communities such as Windsor and Brampton."

"Let me be clear, our negotiations are about saving Chrysler Canada," said Nardelli and LaSorda's letter.

The company said it needs more progress on closing what it says is a $19-per-hour wage gap between itself and Toyota Canada.

To reduce that gap, Chrysler said it has proposed increasing health-care premiums, eliminating life insurance and eliminating a cap on prescription drug dispensing fees, among others.

Chrysler said the CAW has rejected those proposals.

CAW disputes Chrysler's numbers

CAW president Ken Lewenza rejected the $19-an-hour wage gap with Toyota. "We do not remotely accept the claim that there is a cost gap of up to $19 per hour," he said in a news release. Toyota's Canadian executives have said they essentially match CAW wages, pensions and benefits to keep the union out, he said.

Lewenza also rejected the $76 an hour figure that Chrysler said a worker costs. "This is an inflated and artificial figure that includes many non-relevant factors," such as costs paid to retirees who haven't worked for years, payroll taxes paid to government, not workers, and the proportional cost of downtime and layoffs.

He denounced the "unprecedented and outrageous series of attacks on Canadian autoworkers and their union" by business and political leaders, including Fiat CEO Sergio Marchionne, federal Industry Minister Tony Clement and Chrysler Canada CEO Reid Bigland.

Marchionne said the union must make concessions or else Fiat, a potential saviour of the company, could walk away. Clement has made similar comments.

In earlier statements, the union maintained it will follow the pattern it set with an earlier contract it reached with GM, which saw that automaker's labour costs reduced by about $7 an hour.

Union members demonstrated outside of a Chrysler assembly plant in Windsor, Ont., burning the letters they received from the company.

CAW Local 444 president Rick Laporte said unionized workers have now gone from scared and nervous to being very angry.

Bankruptcy 'probable': GM chief

The chief executive officer of General Motors said Friday that a filing under bankruptcy is "probable" under the conditions laid out by the U.S. government for the automaker to secure public money.

But a bankruptcy filing is not GM's preferred option, Fritz Henderson added.

"Contingency planning is underway," Henderson said during a conference call with reporters. "We are on several tracks."

GM has until June 1 to come up with a plan to reduce its costs and cut its debt. The company's earlier restructuring plan was rejected by the Obama administration, which gave the automaker 60 days to draw up another plan.

Henderson said any decision to file for bankruptcy would be made by the company with U.S. Treasury Department officials.

If GM does file for bankruptcy, Henderson said speed is important. GM would seek agreements with creditors and unions before filing, or go through a fast in-court process.

"It's all about speed," he said. "This environment is not helpful for us."

With files from the Associated Press

Chrysler, CAW spar over costs

2009-04-21T20:07:00.005-07:00

Senior executives at Chrysler fired a warning shot at the Canadian Auto Workers on Friday, just days before the two sides are to resume negotiations on a labour deal.

In a letter to employees signed by company chairman Robert Nardelli and president Tom LaSorda, Chrysler said the "clock is running."

"Let me be clear, our negotiations are about saving Chrysler Canada," said Nardelli and LaSorda's letter.

The company said it needs more progress on closing what it says is a $19-per-hour wage gap between itself and Toyota Canada.

To reduce that gap, Chrysler said it has proposed increasing health-care premiums, eliminating life insurance and eliminating a cap on prescription drug dispensing fees, among others.

Chrysler said the CAW has rejected those proposals.

CAW disputes Chrysler's numbers

Marchionne said the union must make concessions or else Fiat, a potential saviour of the company, could walk away. Clement has made similar comments.

In earlier statements, the union maintained it will follow the pattern it set with an earlier contract it reached with GM, which saw that automaker's labour costs reduced by about $7 an hour.

Union members demonstrated outside of a Chrysler assembly plant in Windsor, Ont., burning the letters they received from the company.

CAW Local 444 president Rick Laporte said unionized workers have now gone from scared and nervous to being very angry.

Bankruptcy 'probable': GM chief

The chief executive officer of General Motors said Friday that a filing under bankruptcy is "probable" under the conditions laid out by the U.S. government for the automaker to secure public money.

But a bankruptcy filing is not GM's preferred option, Fritz Henderson added.

"Contingency planning is underway," Henderson said during a conference call with reporters. "We are on several tracks."

Henderson said any decision to file for bankruptcy would be made by the company with U.S. Treasury Department officials.

If GM does file for bankruptcy, Henderson said speed is important. GM would seek agreements with creditors and unions before filing, or go through a fast in-court process.

"It's all about speed," he said. "This environment is not helpful for us."

With files from the Associated Press

Chrysler, CAW spar over costs

2009-04-21T20:07:00.003-07:00

Senior executives at Chrysler fired a warning shot at the Canadian Auto Workers on Friday, just days before the two sides are to resume negotiations on a labour deal.

In a letter to employees signed by company chairman Robert Nardelli and president Tom LaSorda, Chrysler said the "clock is running."

"Let me be clear, our negotiations are about saving Chrysler Canada," said Nardelli and LaSorda's letter.

The company said it needs more progress on closing what it says is a $19-per-hour wage gap between itself and Toyota Canada.

To reduce that gap, Chrysler said it has proposed increasing health-care premiums, eliminating life insurance and eliminating a cap on prescription drug dispensing fees, among others.

Chrysler said the CAW has rejected those proposals.

CAW disputes Chrysler's numbers

Marchionne said the union must make concessions or else Fiat, a potential saviour of the company, could walk away. Clement has made similar comments.

In earlier statements, the union maintained it will follow the pattern it set with an earlier contract it reached with GM, which saw that automaker's labour costs reduced by about $7 an hour.

Union members demonstrated outside of a Chrysler assembly plant in Windsor, Ont., burning the letters they received from the company.

CAW Local 444 president Rick Laporte said unionized workers have now gone from scared and nervous to being very angry.

Bankruptcy 'probable': GM chief

The chief executive officer of General Motors said Friday that a filing under bankruptcy is "probable" under the conditions laid out by the U.S. government for the automaker to secure public money.

But a bankruptcy filing is not GM's preferred option, Fritz Henderson added.

"Contingency planning is underway," Henderson said during a conference call with reporters. "We are on several tracks."

Henderson said any decision to file for bankruptcy would be made by the company with U.S. Treasury Department officials.

If GM does file for bankruptcy, Henderson said speed is important. GM would seek agreements with creditors and unions before filing, or go through a fast in-court process.

"It's all about speed," he said. "This environment is not helpful for us."

With files from the Associated Press

Chrysler, CAW spar over costs

2009-04-21T20:07:00.001-07:00

Senior executives at Chrysler fired a warning shot at the Canadian Auto Workers on Friday, just days before the two sides are to resume negotiations on a labour deal.

In a letter to employees signed by company chairman Robert Nardelli and president Tom LaSorda, Chrysler said the "clock is running."

"Let me be clear, our negotiations are about saving Chrysler Canada," said Nardelli and LaSorda's letter.

The company said it needs more progress on closing what it says is a $19-per-hour wage gap between itself and Toyota Canada.

To reduce that gap, Chrysler said it has proposed increasing health-care premiums, eliminating life insurance and eliminating a cap on prescription drug dispensing fees, among others.

Chrysler said the CAW has rejected those proposals.

CAW disputes Chrysler's numbers

Marchionne said the union must make concessions or else Fiat, a potential saviour of the company, could walk away. Clement has made similar comments.

In earlier statements, the union maintained it will follow the pattern it set with an earlier contract it reached with GM, which saw that automaker's labour costs reduced by about $7 an hour.

Union members demonstrated outside of a Chrysler assembly plant in Windsor, Ont., burning the letters they received from the company.

CAW Local 444 president Rick Laporte said unionized workers have now gone from scared and nervous to being very angry.

Bankruptcy 'probable': GM chief

The chief executive officer of General Motors said Friday that a filing under bankruptcy is "probable" under the conditions laid out by the U.S. government for the automaker to secure public money.

But a bankruptcy filing is not GM's preferred option, Fritz Henderson added.

"Contingency planning is underway," Henderson said during a conference call with reporters. "We are on several tracks."

Henderson said any decision to file for bankruptcy would be made by the company with U.S. Treasury Department officials.

If GM does file for bankruptcy, Henderson said speed is important. GM would seek agreements with creditors and unions before filing, or go through a fast in-court process.

"It's all about speed," he said. "This environment is not helpful for us."

With files from the Associated Press

DLF raises Fund from Bond sale

2009-03-01T13:58:00.001-08:00

DLF, the nation’s biggest real estate developer, has raised Rs 720 crore from selling bonds to insurance companies as part of its plan to raise Rs 5,000 crore from such sales.

DLF on February 24 raised the funds through issue of non-convertible debentures maturing in five years which offered as much as 14 per cent interest, sources in the company said. The bonds were sold to Life Insurance Corporation (LIC) of India and a few others. DLF officials were not available for comments.

DLF in March disclosed plans to raise Rs 5000 crore from selling bonds to investors. It received a ‘AA stable’ rating for the issue from Crisil. However, the rating company in January downgraded the real estate developer’s pass through certificates to ‘A+’ from ‘AA-’ because of “slowdown in the company’s real estate sales”.

The developer, while announcing its quarterly results, admitted that it had put a quarter of its projects on hold.

The rating company believed that the sales would continue to adversely affect DLF’s operating cash flows. The realtor has been forced to increasingly rely on refinancing of its debt, Crisil said.

DLF, which has to repay as much as Rs 4,300 crore of loan by June this year, has already refinanced about half of the amount. The developer has been able to refinance Rs 2,000 crore at 12-13 per cent interest rate, company sources said. The company doesn’t have loan repayments for next two years after June, the officials said.

The company plans to raise the remaining Rs 2,300 crore from selling bonds, discounting lease rentals and selling stake to private equity investors officials said.

While assigning the revised rating in January, Crisil believed that DLF had comfortable liquidity, backed by cash and bank balances of nearly Rs 800 crore. The realtor planned to raise loans of about Rs 4,900 crore against its portfolio of leased assets, CRISIL said.

DLF’s consolidated profit in the fiscal third quarter dropped 69 per cent to Rs 670.79 crore. Sales of the Kushal Pal Singh-owned company fell 62 per cent to Rs 1366.67 crore in the three months ended December 3.

DLF raises Fund from Bond sale

2009-02-28T16:41:00.015-08:00

DLF, the nation’s biggest real estate developer, has raised Rs 720 crore from selling bonds to insurance companies as part of its plan to raise Rs 5,000 crore from such sales.

The developer, while announcing its quarterly results, admitted that it had put a quarter of its projects on hold.

The rating company believed that the sales would continue to adversely affect DLF’s operating cash flows. The realtor has been forced to increasingly rely on refinancing of its debt, Crisil said.

The company plans to raise the remaining Rs 2,300 crore from selling bonds, discounting lease rentals and selling stake to private equity investors officials said.

DLF raises Fund from Bond sale

2009-02-28T16:41:00.013-08:00

DLF, the nation’s biggest real estate developer, has raised Rs 720 crore from selling bonds to insurance companies as part of its plan to raise Rs 5,000 crore from such sales.

The developer, while announcing its quarterly results, admitted that it had put a quarter of its projects on hold.

The rating company believed that the sales would continue to adversely affect DLF’s operating cash flows. The realtor has been forced to increasingly rely on refinancing of its debt, Crisil said.

The company plans to raise the remaining Rs 2,300 crore from selling bonds, discounting lease rentals and selling stake to private equity investors officials said.

DLF raises Fund from Bond sale

2009-02-28T16:41:00.011-08:00

DLF, the nation’s biggest real estate developer, has raised Rs 720 crore from selling bonds to insurance companies as part of its plan to raise Rs 5,000 crore from such sales.

The developer, while announcing its quarterly results, admitted that it had put a quarter of its projects on hold.

The rating company believed that the sales would continue to adversely affect DLF’s operating cash flows. The realtor has been forced to increasingly rely on refinancing of its debt, Crisil said.

The company plans to raise the remaining Rs 2,300 crore from selling bonds, discounting lease rentals and selling stake to private equity investors officials said.

DLF raises Fund from Bond sale

2009-02-28T16:41:00.009-08:00

DLF, the nation’s biggest real estate developer, has raised Rs 720 crore from selling bonds to insurance companies as part of its plan to raise Rs 5,000 crore from such sales.

The developer, while announcing its quarterly results, admitted that it had put a quarter of its projects on hold.

The rating company believed that the sales would continue to adversely affect DLF’s operating cash flows. The realtor has been forced to increasingly rely on refinancing of its debt, Crisil said.

The company plans to raise the remaining Rs 2,300 crore from selling bonds, discounting lease rentals and selling stake to private equity investors officials said.

DLF raises Fund from Bond sale

2009-02-28T16:41:00.007-08:00

DLF, the nation’s biggest real estate developer, has raised Rs 720 crore from selling bonds to insurance companies as part of its plan to raise Rs 5,000 crore from such sales.

The developer, while announcing its quarterly results, admitted that it had put a quarter of its projects on hold.

The rating company believed that the sales would continue to adversely affect DLF’s operating cash flows. The realtor has been forced to increasingly rely on refinancing of its debt, Crisil said.

The company plans to raise the remaining Rs 2,300 crore from selling bonds, discounting lease rentals and selling stake to private equity investors officials said.

DLF raises Fund from Bond sale

2009-02-28T16:41:00.005-08:00

DLF, the nation’s biggest real estate developer, has raised Rs 720 crore from selling bonds to insurance companies as part of its plan to raise Rs 5,000 crore from such sales.

The developer, while announcing its quarterly results, admitted that it had put a quarter of its projects on hold.

The rating company believed that the sales would continue to adversely affect DLF’s operating cash flows. The realtor has been forced to increasingly rely on refinancing of its debt, Crisil said.

The company plans to raise the remaining Rs 2,300 crore from selling bonds, discounting lease rentals and selling stake to private equity investors officials said.

DLF raises Fund from Bond sale

2009-02-28T16:41:00.003-08:00

DLF, the nation’s biggest real estate developer, has raised Rs 720 crore from selling bonds to insurance companies as part of its plan to raise Rs 5,000 crore from such sales.

The developer, while announcing its quarterly results, admitted that it had put a quarter of its projects on hold.

The rating company believed that the sales would continue to adversely affect DLF’s operating cash flows. The realtor has been forced to increasingly rely on refinancing of its debt, Crisil said.

The company plans to raise the remaining Rs 2,300 crore from selling bonds, discounting lease rentals and selling stake to private equity investors officials said.

DLF raises Fund from Bond sale

2009-02-28T16:41:00.001-08:00

DLF, the nation’s biggest real estate developer, has raised Rs 720 crore from selling bonds to insurance companies as part of its plan to raise Rs 5,000 crore from such sales.

The developer, while announcing its quarterly results, admitted that it had put a quarter of its projects on hold.

The rating company believed that the sales would continue to adversely affect DLF’s operating cash flows. The realtor has been forced to increasingly rely on refinancing of its debt, Crisil said.

The company plans to raise the remaining Rs 2,300 crore from selling bonds, discounting lease rentals and selling stake to private equity investors officials said.

Banks seek up to 150% collateral against Loans

2009-02-27T20:10:00.003-08:00

In spite of ample liquidity, banks are treading cautiously as far as lending to the real estate sector is concerned, and are seeking collateral as high as 150 per cent of the loan amount as security deposit from them.

This apart, banks are cushioning themselves by seeking more equity participation from the developers, ranging between 40 and 50 per cent of the project cost, and providing loan not more than 50 per cent of the cost in commercial real estate projects.

The high collateral was in the wake of a fall in property prices and subsequent revaluation of the projects, said some bankers.

“We ensure that genuine developers are not denied credit. While banks have not stopped lending to any sector, they are being selective and more cautious. As a measure against default, the security deposit is about 150 per cent of the loan amount at present. This is in accordance with the government advice,” said an executive director of a public sector bank.

While banks generally seek land and the asset to be created as mortgage, which generally account for the total loan amount, they are now seeking some of the finished projects of the developers as collateral as well, to tide over the fall in property prices.

“Banks are very cautious in lending to the real estate sector, especially to commercial projects. The problem arises when the interest burden accumulates and there is no cashflow due to the inability of the developers to lease out the property. Thus, banks are seeking at least 40 per cent as promoter’s own contribution and rent agreements prior to lending,” said an executive of another public sector bank.

However, the rate of interest has fallen over the last three months, and banks are charging 12-15 per cent interest for lending to real estate developers, depending upon their credit rating.

Banks are cautious in lending, despite the fact that liquidity has eased over the last one month. Also, even though the interest rate on deposits coming down, banks are able to maintain growth in deposits.

For example, on a year-on-year basis, deposits have seen a growth of three per cent at United Bank of India (UBI). The bank had not seen any impact in deposit mobilisation due to falling interest rate, and the rate of growth of deposits in January was almost the same as it was during October-December, when interest rates were high at about 11 per cent, against 8-9 per cent now.

“We have to ensure commercial viability and saleability of the project. Thus, we have to see if the developer has agreement with good companies for leasing out the finished project,” said T M Bhasin, executive director, UBI.

Real estate developers are also seeking restructuring of the loans, as demand has been staggering at low levels, according to bankers.

The Reserve Bank of India (RBI) recently allowed banks to restructure loans for commercial real estate projects, so that they do not turn into non-performing assets (NPAs).

Banks seek up to 150% collateral against Loans

2009-02-27T20:10:00.001-08:00

The high collateral was in the wake of a fall in property prices and subsequent revaluation of the projects, said some bankers.

However, the rate of interest has fallen over the last three months, and banks are charging 12-15 per cent interest for lending to real estate developers, depending upon their credit rating.

Real estate developers are also seeking restructuring of the loans, as demand has been staggering at low levels, according to bankers.

The Reserve Bank of India (RBI) recently allowed banks to restructure loans for commercial real estate projects, so that they do not turn into non-performing assets (NPAs).

Banks seek up to 150% collateral against Loans

2009-02-27T20:09:00.005-08:00

The high collateral was in the wake of a fall in property prices and subsequent revaluation of the projects, said some bankers.

However, the rate of interest has fallen over the last three months, and banks are charging 12-15 per cent interest for lending to real estate developers, depending upon their credit rating.

Real estate developers are also seeking restructuring of the loans, as demand has been staggering at low levels, according to bankers.

The Reserve Bank of India (RBI) recently allowed banks to restructure loans for commercial real estate projects, so that they do not turn into non-performing assets (NPAs).

Banks seek up to 150% collateral against Loans

2009-02-27T20:09:00.003-08:00

The high collateral was in the wake of a fall in property prices and subsequent revaluation of the projects, said some bankers.

However, the rate of interest has fallen over the last three months, and banks are charging 12-15 per cent interest for lending to real estate developers, depending upon their credit rating.

Real estate developers are also seeking restructuring of the loans, as demand has been staggering at low levels, according to bankers.

The Reserve Bank of India (RBI) recently allowed banks to restructure loans for commercial real estate projects, so that they do not turn into non-performing assets (NPAs).

Banks seek up to 150% collateral against Loans

2009-02-27T20:09:00.001-08:00

The high collateral was in the wake of a fall in property prices and subsequent revaluation of the projects, said some bankers.

However, the rate of interest has fallen over the last three months, and banks are charging 12-15 per cent interest for lending to real estate developers, depending upon their credit rating.

Real estate developers are also seeking restructuring of the loans, as demand has been staggering at low levels, according to bankers.

The Reserve Bank of India (RBI) recently allowed banks to restructure loans for commercial real estate projects, so that they do not turn into non-performing assets (NPAs).

Banks seek up to 150% collateral against Loans

2009-02-27T15:20:00.003-08:00

The high collateral was in the wake of a fall in property prices and subsequent revaluation of the projects, said some bankers.

However, the rate of interest has fallen over the last three months, and banks are charging 12-15 per cent interest for lending to real estate developers, depending upon their credit rating.

Real estate developers are also seeking restructuring of the loans, as demand has been staggering at low levels, according to bankers.

The Reserve Bank of India (RBI) recently allowed banks to restructure loans for commercial real estate projects, so that they do not turn into non-performing assets (NPAs).

Banks seek up to 150% collateral against Loans

2009-02-27T15:20:00.001-08:00

The high collateral was in the wake of a fall in property prices and subsequent revaluation of the projects, said some bankers.

However, the rate of interest has fallen over the last three months, and banks are charging 12-15 per cent interest for lending to real estate developers, depending upon their credit rating.

Real estate developers are also seeking restructuring of the loans, as demand has been staggering at low levels, according to bankers.

The Reserve Bank of India (RBI) recently allowed banks to restructure loans for commercial real estate projects, so that they do not turn into non-performing assets (NPAs).

US Dollar, Japanese Yen Down as CPI Shows the US is Teetering on Brink of Deflation

2009-02-22T14:58:00.001-08:00

US Dollar, Japanese Yen Down as CPI Shows the US is Teetering on Brink of DeflationEuro Jumps as ECB's Nowotny Says Zero Rates 'Neither Desirable Nor Needed'British Pound Gains as UK Retail Sales Rise, UK GDP Revision Could Weigh Next WeekCanadian Dollar Shows Little Reaction to Bigger Than Expected Drop in Canadian CPI

US Dollar, Japanese Yen Down as CPI Shows the US is Teetering on Brink of Deflation

The US dollar and Japanese yen ended Friday mostly lower despite clear signs of risk aversion as evidenced by gold's test of $1000/oz, sharp drops in global stock markets, and a rally in government bonds, including US Treasuries. However, with the majors generally still contained to ranges and near their spike highs/lows, it may be a bit early to say that the US dollar and Japanese yen have lost their status as “safe havens,” as correlations have a tendency to fade in and out over time. Looking at charts of the DXY Index, price pulled back from resistance at the 2008 highs and the outlook for the greenback for the next few weeks may hinge upon whether or not the drop signal a reversal or ultimately yields a break higher.

On Thursday we noted that surprisingly strong producer price growth suggested that consumer price growth would be similarly high. This proved to be the case on Friday morning as the US consumer price index (CPI) unexpectedly rose 0.3 percent in January, while the core index, which excludes volatile food and energy costs, rose 0.2 percent. The more important factor though, was that these moves helped to prevent the annualized CPI reading from falling into negative territory for the first time since 1955. Instead, the figure eased to 0 percent, signaling that prices have essentially gone unchanged from January 2007, while the core figure stayed afloat at 1.7 percent, down from 1.8 percent in December. It appears that producers aren't passing on lower input costs to consumers, as they struggle to maintain profits as demand falters, but with CPI still historically low, the Federal Reserve is highly unlikely to be concerned about upside risks to inflation, as contracting demand and credit creates greater risks for deflation.

Looking ahead to next week there will be a handful of events that US dollar traders will need to watch. On February 24 at 10:00 ET, the Conference Board's consumer confidence index for the month of February is forecasted to reach a fresh record low of 36.0, down from 37.7. With record keeping having begun in 1967, the plunge in sentiment makes the extent of the recession even more clear. However, with Federal Reserve Chairman Ben Bernanke due to testify before the Senate on the economic and Fed policy at the same time, the consumer confidence result may have little impact on the markets. Instead, traders will be listening closely for more detailed outlooks on growth, unemployment, inflation, and the financial markets. Bearish commentary could weigh heavily on risk appetite, and as a result it will be important to keep an eye on the link between the currency markets and stocks, as the Japanese yen hasn't been responding as strongly to shifts in equities while the US dollar still tends to benefit from flight-to-quality. On February 26 at 8:30 ET, signs that domestic demand is showing no sign of recovery should continue to emerge on February 26 as US Durable Goods Orders are forecasted to have dropped 2.3 percent and even excluding transportation is anticipated to fall 2.0 percent. Finally, on February 27, the 08:30 ET preliminary reading of Q4 GDP for the US is forecasted to be revised even lower after initial estimates showed the index down 3.5 percent. The latest results may show a sharp 5.4 percent contraction, which would still be the worst since Q1 1982.

Euro Jumps as ECB's Nowotny Says Zero Rates 'Neither Desirable Nor Needed'

The euro jumped during the US trading session as European Central Bank Governing Council member Ewald Nowotny said that cutting interest rates down to zero was “neither desirable nor needed,” suggesting that the ECB's dovish bias may be fading quickly. However, the markets are still expecting a 50 basis point cut by the ECB on March 5, as various other ECB members have signaled such a move in recent weeks. Furthermore, data continues to disappoint as the composite Purchasing Managers' Index (PMI) for the Euro-zone's manufacturing and services sectors unexpectedly fell to a new record low in February or 36.2 from 38.3, which also signals a contraction in activity for the ninth straight month since the index remains below 50. Looking ahead to next week, Eurostat inflation estimates for the Euro-zone have shown that CPI may have fallen to a 1.1 percent annual pace during January, which would mark the lowest since 1999 but more importantly, remains below the European Central Bank's 2.0 percent inflation target. If Eurostat confirms this at 5:00 ET on February 27, the euro could pull back, especially ahead of the ECB's meeting the following week. On the other hand, if CPI is higher than anticipated, the currency could gain as the markets will speculate that the central bank may pause in their efforts to make monetary policy more accommodative.

British Pound Gains as UK Retail Sales Rise, UK GDP Revision Could Weigh Next Week

The British pound gained on Friday after UK retail sales figures showed another rise in spending during the month of January amidst heavy discounting. However, the BOE said a few months ago that they would not put too much stock into these government statistics as they are often volatile, and instead they look toward private surveys like BRC retail sales. Next week on February 25, the 04:30 ET preliminary reading of Q4 GDP for the UK is forecasted to revised even lower, down to -1.6 percent from -1.5 percent, which would still mark the lowest level since Q2 1980. The UK has been hit particularly hard by the credit crunch, especially since the country became one of the biggest financial centers in the world. This has translated into a full-on collapse of the housing market, climbing job losses, and weak consumption. Furthermore, with growth slowing around the world, demand for British exports has declined as well, putting a large burden on manufacturers. Overall, a greater-than-expected decline could lead the British pound lower as the data would raise the odds the Bank of England will cut rates again on March 5. On the other hand, if GDP is a bit better than forecasts, the currency could gain.

Canadian Dollar Shows Little Reaction to Bigger Than Expected Drop in Canadian CPI

The Canadian dollar showed a relatively muted reaction to inflation figures, despite the fact CPI fell more than expected, as sharp declines in the US dollar across the majors determined price action for the USD/CAD pair. Taking a closer look at the data, CPI slumped for the fourth straight month in January at a rate of 0.3 percent, bringing the annual rate down to match the two-year low of 1.1 percent. Meanwhile, the Bank of Canada's core measure slipped another 0.4 percent, dragging the annual rate down to 1.9 percent from 2.4 percent. Overall, weaker commodity prices are dragging broader prices lower, but as we discussed yesterday, cheaper oil has extremely negative repercussions for the Canadian economy as a whole.

DailyFX

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Real Estate Prices Need Further Correction

2009-02-12T16:15:00.001-08:00

Equity and real estate markets were dangerous bubbles waiting to burst. Though many economists refused to comment on the real bottom levels of the current equity market, they believe the bubble in equity markets has been subdued. But the much bigger bubble, the real estate prices, continues to remain as an X factor in the economy. “Real estate is over-valued in India. The real estate prices need a correction. We are a growing economy and not a rich economy; people are not able to buy homes not only because of unavailability of credit or high interest rates but also because of high rates of housing and commercial properties,” says Vivek Kudva, President, Franklin Templeton Asset Management (India) Pvt. Ltd.

Last year, the Bombay Stock Exchange sensitive index had touched 21000 in January and it crashed nearly to half with the developments in the global economy. But markets didn’t move to a large extent after the Satyam scam announcement. Stimulus packages The recent fiscal as well as monetary stimulus packages announced by the Union Government and the Reserve Bank of India (RBI) gave thrust to the real estate sector. In a move to provide liquidity to the sector, the central bank reduced the risk weightage on commercial real estate to 100 per cent from 150 per cent, announced interest rate cuts, and the government allowed builders to raise foreign loans or external commercial borrowings (ECBs) to develop townships. In fact, the large chunk of measures announced by the Government and the RBI were aimed at helping the real estate sector. As the Reserve Bank of India Governor D. Subbarao puts it: “Although origins of the crisis are common around the world, the crisis has impacted different economies differently. ”

Fitch Ratings’ outlook for the Indian real estate sector in 2009 continues to remain negative. The sector has witnessed a significant slowdown in demand in the last 12 months to end-January 2009, both in the residential and commercial real estate segments. The fundamentals of the industry have deteriorated due to the volatile external environment, weak economic and consumer sentiment, high interest rates, poor consumer affordability and rising construction costs. In addition, developers are reluctant to reduce prices and customers are opting to postpone their purchases. Fitch believes these fundamentals could possibly improve marginally in the second half of 2009, as a result of a reduction in home loan interest rates, a reduction of the risk weights on commercial real estate, and government measures, all of which would provide some stimulus to the sector. However, improvements in affordability and stability in the economy remain the key for renewing end-user demand. The rating agency expects 2009 to be more challenging than 2008 for Indian real estate developers.

Companies in the real estate sector have leveraged substantially over the last two to three years to augment their land banks and increase the area under construction based on overly optimistic demand projections. The expansion plans were largely funded by short-term to medium-term debt. As a result, developers face substantial debt redemptions in the short-term. With significant debt maturities scheduled during the year, the availability of funding sources remains the key for all developers. With promoters’ equity holdings in most real estate companies at over 75 per cent, industry players have the ability to raise additional capital. However, looking at the current equity market environment, it appears highly unlikely that many developers will be willing to raise or successful in raising equity capital.

Bank loans, the key source of funding for developers, have become difficult to get due to banks’ reluctance to sanction fresh loans. Other investors like private equity (PE) funds are now demanding higher assured returns. Fitch also notes that developers are looking at other refinancing options such as receivable securitisation and lease rental discounting. “Fiscal and monetary measures are unlikely to be of much help unless banks boost lending and real estate companies reduce prices, improving demand in the embattled sector,” stated the rating agency. Given the adverse liquidity scenario, the ability of leveraged players to service their interest costs and fulfil their immediate term debt/land obligations remains a concern. However, the real estate bubble is unaffected at least for India as Indian authorities would be able to keep the bubble not to burst until the general elections are over.

Real Estate Prices Need Further Correction

2009-02-12T16:13:00.003-08:00

Real Estate Prices Need Further Correction

2009-02-12T16:13:00.001-08:00

Real Estate Prices Need Further Correction

2009-02-12T16:12:00.017-08:00

Real Estate Prices Need Further Correction

2009-02-12T16:12:00.015-08:00

Real Estate Prices Need Further Correction

2009-02-12T16:12:00.013-08:00

Real Estate Prices Need Further Correction

2009-02-12T16:12:00.011-08:00

Real Estate Prices Need Further Correction

2009-02-12T16:12:00.009-08:00

Real Estate Prices Need Further Correction

2009-02-12T16:12:00.007-08:00

Real Estate Prices Need Further Correction

2009-02-12T16:12:00.005-08:00

Real Estate Prices Need Further Correction

2009-02-12T16:12:00.003-08:00

Real Estate Prices Need Further Correction

2009-02-12T16:12:00.001-08:00

More Loss Expected in Real Estate Sector

2009-02-11T22:42:00.005-08:00

Falling prices and interest rates are unlikely to woo once-thirsty home buyers now spooked by slim pay hikes and job cuts, and may push cash-strapped realty firms to drop prices further in order to stave off losses. For months, real estate firms, including top-listed developer DLF and No.2 Unitech have been looking to raise funds to boost liquidity and cash flows rather than to drive growth projects. “This is a major major recession and everything is affected; so everyone has pulled back and no one is willing to commit money or cash and hence there seems to be no other source to bring in that money,” said Anurag Mathur, Managing Director of real estate consultancy Cushman & Wakefield in India.

“Now, will that lead into bankruptcies? I don’t know because that’s going to be a very case-specific question. But very clearly there is a lot of distress in companies.” Banks’ aversion to lend to property firms has increased against the backdrop of the worldwide subprime meltdown, even as other lines of credit, such as debt and equity, dry up. And even though state-run banks, led by top lender State Bank of India, have cut lending rates for buyers following the central bank’s easing measures in October, demand has not nudged up in response. While the banks’ moves would help shift attitude, “many other factors” are now influencing buyers, said Ravi Ramu, director of Puravankara Projects Ltd.

“Let’s see, if things become worse in the world and worse in India then they won’t start buying even if interest rates come down,” he said. “People are worried about their jobs. There are many factors, it is a very complex environment.” Industry players say property prices have fallen by up to 25 percent, to near-2006 levels. In addition, buyer terms have also changed. Home buyers now want projects to be completed before honouring their payments, effectively crippling builders who typically derive a big chunk of their construction costs from buyer advances.

Even as developers hope for some relief on the demand front by March, analysts say they do not see a revival even after a year and anticipate several firms will slip into the red in coming quarters. This could prove a complete turnaround for real estate firms, which rode a four-year bull run that saw property prices more than double on soaring demand. “In the next two to three quarters, many companies might start posting losses. Its going to be really bad. Volumes have completely dried up,” said Shailesh Kanani, analyst at Angel Broking said. DLF reported a 69 percent slump in December quarter profit, while Unitech’s fell 74 percent. They are looking at selling some assets to shore-up against a property slump. But on Friday, midcap realty stocks had risen between 10 and 40 percent on hopes housing would benefit from the interim budget due later this month after the government said it may include some changes in the tax structure and further stimulus measures. The realty index has plunged 90 percent from its year’s high of 12,848.09 in January 2008.

More Loss Expected in Real Estate Sector

2009-02-11T22:42:00.003-08:00

More Loss Expected in Real Estate Sector

2009-02-11T22:42:00.001-08:00

More Loss Expected in Real Estate Sector

2009-02-11T22:41:00.013-08:00

More Loss Expected in Real Estate Sector

2009-02-11T22:41:00.011-08:00

More Loss Expected in Real Estate Sector

2009-02-11T22:41:00.009-08:00

More Loss Expected in Real Estate Sector

2009-02-11T22:41:00.007-08:00

More Loss Expected in Real Estate Sector

2009-02-11T22:41:00.005-08:00

More Loss Expected in Real Estate Sector

2009-02-11T22:41:00.003-08:00

More Loss Expected in Real Estate Sector

2009-02-11T22:41:00.001-08:00

DLF and UNITECH’s Profit Witness Record Low

2009-02-05T15:32:00.001-08:00

DLF Ltd. and Unitech Ltd., India’s biggest property developers, said quarterly profits plunged to record lows as the deepest economic slump in six years damped demand for homes, offices and malls. Net income fell 69 percent to 6.71 billion rupees ($137 million) in the three months ended Dec. 31, DLF reported, missing the 15.9 billion rupee median estimate of analysts in a Bloomberg News survey. Unitech profit slid 74 percent in the same period to 1.36 billion rupees, short of analysts’ 3 billion rupee forecast.

Steeper-than-expected slides in earnings at the New Delhi- based companies underscored the mounting financial challenges the nation’s real estate sector faces, with developers caught between a cash crunch and dwindling demand. An equities slump and the global credit contraction choked funding as property purchases slowed following a six-year rally in prices. “Real estate companies are in a ‘Catch-22’ situation where getting money incrementally is difficult,” said Jayesh Shroff, who helps manage $2 billion in equities, including DLF, at SBI Asset Management in Mumbai. “They’ll have to push for higher sales, and for that will need to sweeten the deal for buyers.”

DLF’s sales fell to 13.7 billion rupees during the quarter from 36 billion rupees a year earlier. That compared with the 33.7 billion rupee median estimate of analysts. Sales at Unitech fell to 4.9 billion rupees, compared with the 8.79 billion rupees forecast by analysts.

Tough Time for Bangalore Realtors

2009-02-04T20:08:00.003-08:00

Real estate developers in Bangalore are facing a queer situation. On the one hand they are trying to lure new customers with attractive baits like offering cars free with new flats to boost the sales and on the other hand, they find it difficult to sell already booked flats to customers who want them on the current prices which have fallen due to economic meltdown. The builders say that there is a demand for residential flats but prevailing high interest rates on housing loans is keeping it subdued.

“Although we have been affected because of the international scenario, the demand for residential units was there and it continues to be there. Because the interest rates on housing loans were very high, the demand did not surface. It is like a pent up demand, demand is there but it is not able to come out because of the cost of funds on housing loans,” said Bala Krishna Hegde, Ex-President, Confederation of Real Estate Developers Association of India (CREDAI).

According to Hegde, the builders allude the fall in demand for residential units in the city to the global recession having very adversely affected the U.S.A and many other developed economies. The IT hub Bangaluru is also facing an uncertainty due to the recession as it mostly carries out business outsourced from the US and the UK. The financial institutions reluctance to advance housing loans in the current scenario has largely led to a fall in demand in the real estate sector in the city.

And those who have already purchased their flats but are yet to make final payments want these now on the current lower prices to the great discomfituref the builders. “I have got lots of friends and their families who have invested in many of the apartments. We expect them (builders) to do is to slash their prices to the current price in the market today so that we become able to pick up the flats immediately, “said Praveen Kumar, a buyer.

According to the experts from Chambers of Commerce and Industry (CCI) ofarnataka who have kept an eye on this changing situation, the bubble of a bigpurt in salaries of IT professionals and others has burst and there are salary cuts being implemented or contemplated by many companies that has madeanks jittery about advancing housing loans. Bur real estate developers are hopeful of better times to come as banks are under pressure to slash interest rates to spurt demand to tide over the ongoing economic slowdown in the country.

Tough Time for Bangalore Realtors

2009-02-04T20:08:00.001-08:00

Tough Time for Bangalore Realtors

2009-02-04T20:07:00.003-08:00

Tough Time for Bangalore Realtors

2009-02-04T20:07:00.001-08:00

Tough Time for Bangalore Realtors

2009-02-04T15:07:00.001-08:00

Union government can Change Foreign Ownership Rules

2009-01-31T18:15:00.001-08:00

The Union government plans to change foreign ownership rules in the real estate sector by scaling down the minimum area requirements for residential and commercial projects that have overseas investment. Current foreign direct investment (FDI) norms set the minimum area for serviced housing plots with such overseas ownership at 25 acres and, for construction development projects, a built-up area of at least 50,000 sq. m. The government is considering reducing the mandatory norms to 10 acres and 10,000 sq. m, respectively, according to a policy note reviewed by Mint. “The proposal is under discussion stage.

It has not been sent to the cabinet yet,” a senior commerce and industry ministry official confirmed. New Delhi’s move marks the third effort in recent times to change foreign ownership rules in three different sectors. The first has been in insurance, where the government is seeking to increase FDI to 49% of a company’s equity. The second is in airlines, where it is considering a similar ceiling. The current cap on FDI in insurance is 24%, and no FDI is allowed in airline firms.

In 2005, the government relaxed FDI norms in the real estate sector by allowing up to 100% such investment in companies. Until then, only non-resident Indians (NRIs) and persons of Indian origin were allowed to invest in the sector. Foreign investors, other than NRIs, were allowed to invest only in development of integrated townships either through a wholly owned subsidiary or through a joint venture in India along with a local partner until the 2005 decision. After that change, 100% FDI was allowed under the so-called automatic route in townships, housing and construction-development projects.

Real estate executives and consultants believe the proposal to reduce the minimum area for FDI, if it is approved, will have a positive impact on the real estate sector, but only in the long term. “I don’t think it will have a short-term impact on the sector because given the current market conditions,” said Gaurav Bhalla, executive director of Gurgaon-based real estate developer, Vatika Group. “However, this will surely send a positive signal to investors and will make the entry barriers for foreign investors less restrictive.”

Indian Real Estate in 2009

2009-01-29T22:05:00.001-08:00

CBDs markets are likely to face vacancies in 2009, as the first impact of the global recessionary economy is being felt by the financial and other fore-runner organizations. The vacancy may be further fuelled in CBD areas by the consolidation moves of many organizations. We will also see a reversal of the trend witnessed over the last two expansionary decades where large organizations moved from owned to leased assets. Given the drop in prices and availability of choice properties, this will be a good time for surviving organizations to announce their new leadership positions through trophy purchases. Jones Lang LaSalle Meghraj is currently transacting in many such mandates. This CBD vacancy rate, if triggered, can add significant pressure to the upcoming/newly developed premises in upcoming front-office districts such as Lower Parel in Mumbai and Nehru Place in Delhi.

While the sentiment in the US and Europe towards outsourcing is positive in the long term, as the corporations there realize its need more than before, the active decision-taking for expansion by BPOs is totally suspended for the moment. We do not expect this to change in the 2009. Hence, the pressure on upcoming and announced projects -especially SEZs - will continue in 2009. In 2009, IT SEZs will also experience further pressure from the fact that the STPI concessions may be extended for another couple of years. While these concessions are important for IT companies’ survival during the recession, they will adversely impact SEZ developments.

In 2009, the peripheral areas of metros as well as the Tier II/III cities will need to compete with the central or secondary business districts for the same set of talents, thus dissolving the clear segmentation which was emerging and separating various micro-markets over the last couple of expansionary years. Newly developed or announced projects are especially going to suffer and may see continued vacancy in 2009. However, 2009 will also see practices in the real estate business become more organized and professional, as they did in the late ‘90s and early 2000s with the introduction of FIs, foreign money and the creation of Government-supported large development formats. This time around, a similar professional approach may reach warehousing land acquisitions.

Indian Real Estate in 2009

2009-01-29T22:04:00.003-08:00

Indian Real Estate in 2009

2009-01-29T22:04:00.001-08:00

Indian Developer Plans Mega Home Project

2009-01-29T17:27:00.001-08:00

A housing project with 2,000 properties up for grabs is to become the third mega-project to be built by an up-and-coming Indian developer. Indu Projects Limited announced Indu City in Bachupally, Hyderabad, would also be designed and built by American real estate giants Belt Collins. It follows similar huge housing schemes called Indu Fortune Fields, in Kukatpalli, and Indu Aranya, built at Nagole.

The company also revealed the development would be a fusion between real estate and natural terrain, providing a balance between “nature and high quality living”. Indu projects said: “The proposed gated community is planned for 1,715 apartment units ranging from 750 sq ft to 3,150 sq ft, and a range of 318 villas ranging from 325 sq yards to 600 sq yards.” In line with a current drive towards more affordable housing in India, the developer also said units would be available to suit all real estate budgets.

On-site benefits will include a swimming pool, club house, and creche, with an international school also on a five acre plot of land. Funding will be part-provided by Red Fort Capital, a private international Real Estate fund which has already put over US$ 1 billion into several schemes across the country. Housing and commercial real estate in Hyderabad has become more popular as the city’s business sector continues to grow, with many IT and technology firms setting up home in the local area.

Indian Real Estate in 2009

2009-01-29T14:36:00.009-08:00

Indian Developer Plans Mega Home Project

2009-01-29T14:36:00.007-08:00

Indian Developer Plans Mega Home Project

2009-01-29T14:36:00.005-08:00

Property Magazine Gives Real Estate Excellence Awards

2009-01-29T14:36:00.003-08:00

To acknowledge the extraordinary contribution of various developers in the real estate sector in the year gone by, Realty Plus, the leading magazine for all real estate needs, announced the winners of Realty Plus Excellence Awards 2009 at New Delhi on Friday evening.

“Developer of the year” award in residential category was awarded to HIRCO Group, while Magarpatta Township Development got the award in Commercial category. Hafeez Contractor was selected as the “Architect of the year” in residential category and RSP Corp. in commercial category.

The Awardees were chosen after a rigorous selection of developers and architects on pan-Indian level. The 14 different categories that were awarded were spread across - Developer of the Year Awards (Residential, Commercial and Retail), Architect of the Year Awards (Residential and Commercial), Regional Developer of the Year Awards (North, East, West, South), and select achievement Awards and category awards.

Property Magazine Gives Real Estate Excellence Awards

2009-01-29T14:36:00.001-08:00

Secondary Real Estate Market- Profitable Venture

2009-01-29T14:35:00.003-08:00

With most developers trying to revive the sagging realty market by offering discounts and affordable housing, its the best time to go for your dream home. But it’s not just the primary market that can fetch you great deals. In fact, the secondary real estate market too can offer you a good bargain. A correction of 15-20% or even higher has taken place in the secondary market, according to experts. But don’t rush in. Make sure that a thorough check has been done before the property gets transferred in your name.

While buying from this market may be profitable right now, there are certain aspects that one must be wary of. Raminder Grover, CEO (Homebay Residential) of Jones Lang LaSalle Meghraj (JLLM), highlights some significant pointers that need to be kept in mind. He says that firstly one must understand that since it is a secondary market, one is talking of older structures which usually bring with them inherent problems in terms of maintenance, overall stability etc. Obtaining a home loan may be a problem if the building is too old as many banks do not grant home loans for units older than 15 years, while certain financial institutions grant mortgage loans of only 50% of the property value. Secondly, he warns against encumbrances on the property in the form of services or utilities dues, via a mortgage or personal loan, and other financial liabilities as not everyone will disclose such faults.

The legal status of the property may have also been compromised. The title may not be clean and adequate. It thus becomes necessary to check the legalities involved. Lastly, there is a complete lack of accountability for flaws detected at a later stage. One, undoubtedly, has to be more vigilant when buying from the secondary market. So how lucrative is it to buy from the secondary market in the present context? Are there any lucrative deals that have been driving the sales in this market? JLLM offers a citywise snapshot. According to JLLM, in Mumbai the secondary market is buoyant in Bandra, Khar, Santacruz and Andheri and there are some good bargains available currently. In Bangalore, the secondary market does not presently offer much to a window-shopping buyer — investors dealing in the secondary market only deliver good offers on the negotiation table to those who actually show a firm commitment to buy.

In Delhi NCR, Gurgaon, Indirapuram and Noida are rife with secondary market opportunities, while developers in South Delhi are making some good offers on building floors. In Kolkata, there are resale homes available throughout the city. However, there is now a rather significant secondary market in Rajarhat and along the Eastern Metropolitan bypass. These previously promising areas were driven by investors, who had blocked numerable apartments over the past two to three years and are now looking to offload them.

Secondary Real Estate Market- Profitable Venture

2009-01-29T14:35:00.001-08:00

Organised Retail May Realign in 2009

2009-01-28T19:30:00.001-08:00

2009 is expected to be a year of consolidation for Indian retail sector. As a result of adoption of best practices and restructuring of business models by the retailers, organized retail is expected to realign itself to the market conditions and create new areas of growth in 2009. Given the market malady being faced by developers and retailers alike, it is possible that partnership models of growth through mechanisms such as revenue sharing would become more prominent.

More deals are going to get renegotiated as priced drop in over-priced locations. The process of rationalization should reach its peak by March, 2009. In 2009, it is anticipated that the supply pipeline may witness further stalling Most players’ expansion plans for 2009 will slow down considerably. However, Projects that are planned well (incorporating approaches like proper zoning, optimal tenant mix strategies), implemented with high quality standards and incorporating appropriate mall management practices are anticipated to be successful. In 2009, premier brands will look at Tier II cities, but certainly not Tier III. Luxury brands will stick to metros.

Pan India mall developers will look at more practical rentals in 2009.High streets may see consolidation with a high possibility of a revenue-sharing model in terms of the overall cost-to-retailer on many high streets. For 2009, Jones Lang LaSalle Meghraj has seen a decisive upscale in transactions in the hypermarket category. However, the demand is clearly higher for stand-alone high street locations rather than mall-based locations.

Organised Retail May Realign in 2009

2009-01-28T19:29:00.003-08:00

Organised Retail May Realign in 2009

2009-01-28T19:29:00.001-08:00

Obama names Oakland attorney to head DOJ Civil Division

2009-01-28T13:57:00.003-08:00

President Obama on Thursday nominated Oakland attorney Tony West, a former federal prosecutor and prolific Obama campaign fundraiser, to head the U.S. Department of Justice's civil division.

West, 43, is a litigation partner at Morrison & Foerster in San Francisco, representing people and companies in civil and criminal matters since 2001; perhaps his highest-profile case there has been helping to defend "American Taliban" John Walker Lindh.

West's office said he was traveling and unavailable for comment Thursday.

"The American people deserve to have faith that their Justice Department will keep them safe and uphold our most basic rights," Obama said of West's and other Justice appointments in a statement Thursday. "This group has the depth of experience and integrity necessary to accomplish these goals."

If confirmed by the U.S. Senate, West will be the assistant attorney general in charge of a division representing the United States, its departments and agencies, members of Congress, Cabinet officers and other federal employees in a wide range of litigation. The civil division's attorneys handle thousands of cases per year involving billions of dollars in claims and recoveries, dealing with significant policy issues often of constitutional dimensions.

Former California Assembly Speaker and former San Francisco Mayor Willie Brown, who said he's been a political mentor to West, said Thursday that the high-ranking job Advertisementwould be a big step for anybody "but particularly for a young man who has a 30- or 40-year career ahead of him."

"His entire history is not unlike Obama's history, except at a different university," he said, adding Obama's calls for government accountability and transparency are well-served through West's appointment. "I don't think he knows how to do it any differently, and I would guess that this Civil Division, if it's going to reflect Tony West, is going to be unparalleled."

West long has been a mover-and-shaker in Democratic Party circles. A candidate in the 23rd Assembly District's 2000 Democratic primary, he later served as a delegate for John Kerry at the Democratic National Convention in Boston in 2004 — meeting Obama there, soon after the speech that put the future president on many Americans' radar for the first time — and then for Obama in Denver in 2008. He served as a California finance co-chairman for Obama's campaign, raising at least $500,000 for the candidate and often speaking on his behalf at campaign events.

West holds an undergraduate degree from Harvard College, where he was the Harvard Political Review's publisher, and a law degree from Stanford University, where he was the Stanford Law Review's president.

In 1993 and 1994, he was a special assistant in the Clinton administration's Justice Department, working on national crime policy including the 1994 Omnibus Crime Bill.

From 1994 to 1999, he was an assistant U.S. attorney here in Northern California, prosecuting a wide range of criminal cases; his highest-profile case there might have been that of the "Orchid Club," an international online child pornography and molestation ring involving 16 defendants in four countries — all convicted.

From 1999 to 2001, West was a California Special Assistant Attorney General appointed by then Attorney General Bill Lockyer to advise on high-tech crime, identity theft, the Microsoft antitrust litigation, police officer training, civil rights and police misconduct; in 1999, he helped lead a review of the shooting death of an unarmed woman by four Riverside police officers, which led to that department being forced to adopt new policies.

"He had a wonderfully diverse professional background that helped my office, and it's become even more diverse because of his private practice experience since," Lockyer, now California State Treasurer, said Thursday. "He had a skill at listening carefully to people of diverse viewpoints and trying to get them to figure out ways that they could work together and compromise and get something done. That's a good skill-set for this kind of job."West's wife, Maya Harris, until recently was executive director of the American Civil Liberties Union of Northern California; his sister-in-law is San Francisco District Attorney Kamala Harris, who called his appointment "a brilliant choice."

"I've known Tony since he was in law school and he is, in a word, brilliant," she said. "Anyone who knows him knows him to be someone who is completely modest, who is always even-tempered, who conducts himself with the highest level of integrity and ethics, and I think all of those are very important qualities in an assistant attorney general."

Consumer Confidence Falls To Record Low In January

2009-01-28T13:57:00.001-08:00

Consumer Confidence Falls To Record Low In January

Consumer Confidence (Jan) Actual 37.7, Expected 38.7, Previous 38.6 (Revised from 38.0)

Release Explanation: This is the Conference Board's survey of consumer confidence regarding current and future economic conditions and inflation. The survey, based on reponses from about 5000 households, builds an economic picture of the mood of the economy’s consumer and therefore how well the service based economies may fair over the coming months. Retail Sales, New & Existing Home Sales, CPI, Durable Goods, and GDP over a period of time if a constant trend is being built. A currency will eventually be affected by these numbers, but only once they filter through to the main releases.

Trade Desk Thoughts: Consumer confidence fell to the lowest level on record, the Conference Board said today, as the job market weakened and values of homes and retirement portfolios continued to decline. The overall index fell to 37.7 this month, down from 38.6 in December. The Present Situation Index declined slightly to 29.9 from 30.2 and the Expectations Index decreased moderately to 43.0 from 44.2.

"Consumers continue to see worsening prospects for employment and income," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "The wealth destruction caused by the hit to home values and 401k plans, along with the current state of the job market, will likely result in an increased savings rate as consumption falls to a smaller percentage of overall output."

Consumers' assessment of overall current conditions remained pessimistic. Those saying business conditions are "bad" increased to 47.9% from 45.8%, while those saying business conditions are "good" declined to 6.4% from 7.7%.

The percentage of consumers expecting fewer jobs in the months ahead decreased to 36.7% from 40.6 percent, while those expecting more jobs edged down to 9.4% from 9.8%. The proportion of consumers expecting an increase in their incomes declined to 10.0% from 12.7%, a sign that spending is likely to suffer going forward.

Forex Technical Reaction: Stocks declined after the report but were still up about 0.2% on the day. The dollar gained on the euro and pound as stocks retreated.

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RBI’s Efforts to Get Real Estate Back on Track

2009-01-22T15:21:00.021-08:00

Among the measures taken by the Reserve Bank of India in recent weeks, a special importance has been placed on the real estate sector as an engine of economic recovery. Concessions have been given on the interest charged on home loans below Rs 20 lakh, and repayment terms made more liberal for developers who had borrowed from banks. The price initiatives and regulatory forbearance have evoked a market response; HDFC recently lowered its interest rates on new home loans, following in the footsteps of several banks. This should be welcome news to policymakers, who will be keenly watching for signs that the stimulus measures are translating into lower costs for borrowers and, consequently, greater incentives to spend. On the evidence so far, however, these steps have not improved the scale of transactions in the real estate market.

Most buyers continue to hold back in the hope of further drops in prices, while developers find that financial succour gives them the staying power to withhold price cuts. The result may, therefore, prove to be the opposite of what was intended, by delaying the price adjustment that is essential if demand and supply are to balance once again. The continuing uncertainties in the job market would also be holding back potential buyers, who would not like to make substantial long-term payment commitments. A revival in the real estate market is, therefore, linked to confidence spreading that the worst of the downturn is over.

Also, new homes are bought on trust; the buyer pays the seller for a promise of future delivery. The market depends heavily, therefore, on the credibility of the seller. Even with low borrowing costs, buyers will be wary of making commitments to sellers who show signs of not being able to live up to their commitments. Thus, it was reported in this newspaper that Purvankara, a well-known Bengaluru-based developer, was unable to meet an obligation for the purchase of land. Unitech, a prominent Delhi-based, publicly-listed developer, has been trying to raise large amounts of cash to keep its operations going, even as its share price tumbles.

And IFCI, to whom Unitech had pledged shares against a loan, decided to sell the shares because falling prices were eroding their collateral value. As the uncertainty about its ability to complete projects due to funding constraints increases, people will be even less willing to either buy from it or lend to it. Similar stories are being played out across the sector with small and large developers. The prospects of the market reviving in these conditions are grim.

There is a clear need for further selective intervention. Projects that are close to completion should be encouraged with funding, and the market risks borne by the developers, who will have to take a financial hair-cut. Some of the funds being raised through special purpose vehicles like IIFC could be made available to developers who qualify on this basis. Simultaneously, moves to consolidate fragmented projects to increase their viability should be explored, once again with strict conditions on the rationalisation of prices. From the macroeconomic perspective, construction is far too important a sector to be left unattended in today’s difficult environment. Targeted action is needed to get buying and selling back on track.

RBI’s Efforts to Get Real Estate Back on Track

2009-01-22T15:21:00.019-08:00

RBI’s Efforts to Get Real Estate Back on Track

2009-01-22T15:21:00.017-08:00

RBI’s Efforts to Get Real Estate Back on Track

2009-01-22T15:21:00.015-08:00

Severe Dip in Luxury Real Estate

2009-01-22T15:21:00.013-08:00

The luxury sector may have been perceived as recession proof. But there is a visible dip in demand that is now being seen in the SundayET’s survey with global real estate consultancy Cushman and Wakefield (C&W) revealed that average capital values of luxury properties in posh localities across major metros have taken a dip of 10%-20% during the last three months. Residential rental values for the same segment have also been impacted, with some locations witnessing a drop as high as 20-25%.

Take the case of Delhi, for instance, where residential capital values of high-end properties such as Shanti Niketan, Westend and Vasant Vihar, GK I and II and Maharani Bagh have dropped to 10% over the last three months. Rental values have also followed a similar track and have seen a 6% drop over the same period.

Rajeev Talwar, executive director, DLF agrees to the fact that there has been a genuine drop in this segment. “A 25%-30% drop has been seen in capital values for these luxury properties. Luxury buyers also plan their investment cycles, hence it is only natural for them too to cut down on spending. Sales are currently going on even in the luxury sector…no segment is unaffected by recession which is a worldwide phenomenon.”

The case is similar in other swanky localities in metros. Areas in South central Mumbai such as Altamount Road, Carmichael Road, Malabar Hill, Napeansea Road and Breach Candy have seen a drop of 7% in average capital values during the last three months. The impact has been more visible in the rental values in these areas where a drop to the tune of 19% is being witnessed whereas locations in South Mumbai such as Colaba, Cuffe Parade, Nariman Point and Churchgate have seen a drop of 12% in rental values over the same period.

Niranjan Hiranandani, MD of Mumbai-based Hiranandani Developers feels that there has been a temporary respite in demand in this segment. “Demand has not taken a dip…it is a temporary phenomenon. There has been a drop of 10-20% in capital values for luxury buys. People are basically postponing their buying decisions and waiting for liquidity conditions to improve.” Kolkata, however has seen more of a drop in residential rental values in the high-end segment. Areas such as Southern Avenue and Dover Lane in South Kolkata have seen a sharp drop of 20% during the last three months.

While sought after locations such as Ballygunge, Queens Park and Gurusaday Road have seen a drop of 12% during this period. The drop has been slightly more in South West locations like Alipore Park Road, Ashoka Road and Belvedere Road which are seeing a drop of 22% in rental values. Average capital values, though, have not seen much of a change during the same period. On the contrary, down south in Bangalore, it is more of the capital values in the high-end segment that have taken a beating. Sought after areas such as Lavelle Road and Richmond Road in central Bangalore have gone down by 9%. Residential rental values for the high-end properties in the same locations have however not been affected during this period.

Hyderabad is seeing more of a decline in residential rental values in the previous three months. While posh Banjara Hills in central Hyderbad has seen a marginal drop of 4%, other locations such as Jubilee Hills also in central Hyderabad have seen a drop of 5%. Average capital values have, on the other hand, increased by 5% in these locations. Residential capital values for the high-end segment in Chennai have seen a drop of 7% in R. A. Puram in South Chennai while it has been only 1% in Boat Club. There has been no change in rental values for the same period. Similarly, Pune’s capital values have remained unaffected in most desired locations such as Koregaon Park and Bundh Garden in North East Pune.

Severe Dip in Luxury Real Estate

2009-01-22T15:21:00.011-08:00

RBI’s Efforts to Get Real Estate Back on Track

2009-01-22T15:21:00.009-08:00

Real Estate Slowdown Hits Cement Industry

2009-01-22T15:21:00.007-08:00

The slowdown in real estate sector (residential and commercial), which accounts for about 65 per cent of the total cement consumption in India, affected the cement sector. Since most builders are facing a severe cash crunch, it is unlikely that too much real estate development will take place in the near future. The IT/ITES segments account for three-fourth of the office space across India and lower growth in employee recruitment for the sector shall translate into muted demand for cement.

Cement exports, too, have declined from 10 million tonne (mt) in FY05 to 2.1 mt between April-December 2008 on account of additional capacity addition and real estate slump in the Middle East region, which is the main export market of Indian cement producers. Demand for cement can be gauged from the country’s economic performance, with demand typically averaging 1.2 times the GDP growth. Assuming that India’s GDP will grow at 6.5 per cent and 6 per cent in FY09 and FY10 respectively, analysts expect demand for cement to grow at 7.8 per cent and 7.2 per cent in the mentioned two years, respectively. Additional capacity to the tune of 90-95 mt is expected to be added by the end of FY11. This would result in a surplus of about 10 mt and 35 mt in FY09 and FY10, respectively. “We believe with over capacity scenario inevitable and demand slowing down on account of real estate slump, further price cuts will happen post FY09,” feels Mihir Jhaveri, analyst, Religare Hichens & Co. All India average cement prices during December 2008 declined to Rs 234 per 50 kg bag (Rs 238 in November 2008). Analysts have factored a marginal decline in realisations during Q4 FY09, followed by a 5-10 per cent decline in prices during FY10.

Real Estate Slowdown Hits Cement Industry

2009-01-22T15:21:00.005-08:00

Real Estate Slowdown Hits Cement Industry

2009-01-22T15:21:00.003-08:00

Real Estate Slowdown Hits Cement Industry

2009-01-22T15:21:00.001-08:00

Banks Demand Reduction in Risk weight on Home Loans

2009-01-18T13:57:00.003-08:00

Ahead of Reserve Bank’s quarterly policy review, Indian banks on Thursday asked the apex bank to relax risk-weight norms on home loans upto Rs 20-lakh to reduce their burden. Presently, the risk-weight for housing loans below Rs 20 lakh is 0.75 per cent and the lenders need to make provisioning accordingly while extending advances to borrowres. “They have suggested that the existing risk-weight on home loans to be removed, which would significantly bring down the provisioning burden on banks,” Indian Banks’ Association’s Chief Executive, K Ramakrishnan said.

In a meeting with RBI Governor D Subbarao today, the bankers are also understood to have suggested the Reserve Bank further relaxation in norms related to trade finance to export-oriented firms. “With the global funding sources drying up in the wake of global financial turmoil, there is an increased pressure on Indian banks from all category of comapnies for credit,” he said.

Contrary to the general perception, Indian banks have scaled up their lending this fiscal, Ramakrishnan, who were present at the meeting, said. The average credit growth in the Indian banking system presently stands around 24.5 per cent as against 22.4 per cent in the previous fiscal, with the credit-deposit ratio stands at 74.11 per cent, Ramakrishnan said.

Builders Bury Promises Made to Banks

2009-01-18T13:57:00.001-08:00

The banking system’s plan to bail out cash-strapped housebuilders by restructuring loans to help them survive a market slump is under strain, as builders have gone back on their promise to sell properties at reduced rates, according to senior bankers. Some bankers have complained to the central bank that after making use of the relaxed rules, which permit banks not to classify loans to real estate firms as bad loans the moment they are restructured, builders continue to hold on to artificially-inflated prices.

Last December, the Reserve Bank of India (RBI) relaxed a key rule on restructuring bank loans to the real estate sector as a one-time measure to help developers cope with falling demand and a credit crunch. The relaxation was to end in June this year. During a meeting with the RBI’s deputy governor Rakesh Mohan on Thursday to discuss monetary policy issues, a senior banker pointed out that the RBI’s relaxation had provided builders with an opportunity to hold on to high property rates that were quoted before the market slump. “There is a feeling among bankers that builders are choosing to retain assets on their balance sheets rather than reducing prices and getting rid of assets,” said one banker, who asked not to be named. “In other words, to overcome the liquidity crisis, builders are pushing for restructuring of loans rather than selling off assets or reducing property prices.”

Several developers such as DLF, Unitech, Sobha, Omaxe, Parsvnath Developers and Housing Development and Infrastructure have approached banks to restructure their loans. In the past too, bankers have pointed out to the RBI and the finance ministry that real estate companies are reluctant to reduce rates. Builders, in turn, blame banks for causing the market slump and lower sales volumes by charging high rates on home loans. Under pressure from the government to boost home sales and shore up the economy, several public sector banks recently cut rates charged on loans for affordable housing. Many of them now charge a fixed rate of 8.5% for loans up to Rs 5 lakh and 9.25% for loans up to Rs 20 lakh.

Winds of Change in Realty Sector

2009-01-18T13:56:00.001-08:00

Winds of change are sweeping across the real estate sector. After creaming the top end of the market for some years, reality has finally sunk in and builders are now flooding the market with affordable homes. Ever since the government announced that state-owned banks will provide home loans up to Rs 20 lakh at not more than 9.25 per cent for the first five years, real estate developers have started working their prices around the Rs 20-lakh figure. Dozens of real estate developers have announced homes at below Rs 25 lakh in the National Capital Region of Delhi. Till some months ago, such prices were totally out of fashion. Developers blamed high prices on the astronomical cost of land and the ever-rising prices of steel and cement.

The correction started happening around Diwali in October when developers, faced with large unsold inventories, started throwing in hefty discounts and freebies like cars. Prices have now fallen back to their 2004-05 levels. Huge auction of government-built flats in Delhi and Mumbai too has played a role in this. While the Delhi Development Authority has built some 5,000 flats, the Maharashtra Housing and Area Development Authority earlier this week threw open booking for 3,865 flats. The response was tremendous — people queued up in front of bank branches at 4:00 am! Non-metro cities across the country too have on offer ready-to-possess flats well below Rs 20 lakh. For instance, a recent scheme launched by Ansal in Lucknow is learnt to have been hugely oversubscribed.

At a property exhibition in Delhi last week, city based real estate players like SG Estates, Assotech, KDP Infrastructure, Shreya Developwell and others displayed over a dozen ongoing and future housing projects in the Rs 20-lakh range. IDBI Bank officials, who organised the exhibition, said the customer interest in the projects was encouraging against the general slump and over 300 potential customers registered for loan queries. 99acres.com, a leading online portal says that over the last two months, it has seen a growing interest among visitors to search for houses in the mid-price range (Rs 15 lakh -Rs 25 lakh). “Almost 50 per cent of enquiries that reach the portal are for this segment,” Vineet Singh, business head, 99acres.com says.

“The government’s initiative will definitely encourage more affordable housing projects, though it will mostly be in the non-metro cities of the country,” Rohtas Goel, chairman and managing director of Omaxe, says. A Mumbai-based official with the State Bank of India’s personal loan section says the excitement of the offer is already visible among the customers and real estate players: “We need to wait till the end of the offer period (June 2009) to quantify the number of home loans that are sanctioned under the concessional scheme, but there is tremendous interest. The customers are in the process of enquiring before they can approach the banks for home loans.” While the real estate players in the metros are restructuring their new projects to accommodate the interests of the sub-Rs 20 lakh housing customers, other cities are finding sudden demand for their existing properties.

“Even before the stimulus package, we had several projects that came within the parameters of affordable housing. The demand for such homes has increased since then,” C Shekhar Reddy, the president of Andhra Pradesh Builders Forum, says. Prakash Chella, the chief of the Tamil Nadu chapter of the Confederation of Real Estate Developers Association, adds: “Real estate prices had not appreciated in smaller cities as it had in metros. In southern states, flats within Rs 20 lakh are available.” Terming it as the birth of affordable housing, real estate consultancy JLL Meghraj anticipates more national players to launch affordable housing projects in 2009. “However, since different cities will have different costs for land and construction of such homes, developers will have to define ‘affordable housing’ on a city level,” a JLLM report says.

Winds of Change in Realty Sector

2009-01-17T14:45:00.007-08:00

Winds of Change in Realty Sector

2009-01-17T14:45:00.005-08:00

Winds of Change in Realty Sector

2009-01-17T14:45:00.003-08:00

Winds of Change in Realty Sector

2009-01-17T14:45:00.001-08:00

Real Estate can Witness Major Collapse in the Next 6 Months

2009-01-11T13:56:00.007-08:00

Real estate majors are pulling out of most projects and it is feared that the realty market will collapse in six months. Several giants are about to be wiped out. May be the true impact of the crisis will be felt after the Parliamentary elections. Real estate majors are rumoured to be pulling out of Uttar Pradesh and putting a stop to most of their ongoing housing projects. The reason is simple. The flats and offices they built are not selling and the consumers and housing loans they banked upon are ending up in default. The whole sector is in turmoil because there are instances where one person has invested in up to six to seven flats in the hope of making a killing by selling them and has now defaulted on the loans he took because the flats are not selling. The middle class dream of sudden riches is now over in India.

Most of the speculation took place in Uttar Pradesh and Delhi where the real estate market was simply soaring and then came reality. Now the same flats which were going for a crore are available for lakhs and worse is about to come. In six months the market despite the currency flow from banks will come under selling pressure and will also come face to face with the fact that people tried to speculate beyond all imagination in this sector. In this case the market will see the artificial demand generated by speculation vanish and be replaced by simple economic sense. The prices will fall. The boom will end in a bust.

While in the metros Mercedes, BMW and gold medallions are failing to lure home buyers this season, resulting in a 50 per cent dip in purchases in both premium and mid segments with experts predicting distress sales in six months.

The high cost of home loans, land acquisitions at high prices, a dip in demand from non-resident Indians and the general liquidity crunch are also compounding the woes of realty majors. In places like Lucknow realty developers were quoting as much as Rs.4 million/Rs.40 lakhs for mid segment housing which was quite unrealistic. Now, the same flats may see distress sales in the next six months. According to sources in the construction business builders who bought steel at Rs 55 kg are now refusing to honour their payments to suppliers, as the same material is available for Rs 35 kg. Prices of land, cement, steel and flats all are expected to halve very soon. The worst is yet to come. May be the true impact of the crisis will be felt after the Parliamentary elections.

CREDAI comes up with Grievance Redressal Forum

2009-01-11T13:56:00.005-08:00

To provide real estate promoters and customers a platform for resolving disputes, the Tamil Nadu chapter of the Confederation of Real Estate Developers’ Associations of India (CREDAI) has set up a grievance redressal forum. Speaking to TOI, Prakash Challa, president of CREDAI Tamil Nadu, said, “It will be a four-member committee but as of now we have appointed only three members S C M Jamaldeen of Jamals Housing (he is also vice-president, CREDAI), Sumanth Subramaniam of Sumanth and Co. (treasurer, CREDAI) and M S Rajamanickam of Vasanth Builders. The fourth member will be appointed soon. The decision to set up such a committee was unanimously taken by CREDAI members at our last meeting on December 30.”

The committee will handle complaints preferred by customers against promoters who are members of CREDAI. Disputes will be resolved through consultations in the shortest time possible and the decision taken by the committee will be binding on builders as well as customers. However, not all builders in Tamil Nadu are members of CREDAI. There are at least a dozen other associations formed by builders in Chennai and other parts of the state. To validate the committee, an arbitration clause will be built into all agreements signed in future between CREDAI members and their customers. The dispute redressal committee will also levy a fee for its service, said Challa. In case the committee members confront situations where there is not much clarity in the agreement between the promoter and the buyer, the customer will get the benefit of doubt, he said.

On the need to introduce a dispute redressal mechanism by the builders’ forum, Challa said, “We get many complaints from customers. If these issues go to courts, it will take a lot of time for settlement. Further, CREDAI’s objective is to ensure a high level of transparency and fair practices in property transactions. Our members mooted the idea of forming a dedicated forum to handle disputes about a year ago but only now are we able to achieve it. All the members are signatories to this decision.”

Stock Keeps Developers Going

2009-01-11T13:56:00.003-08:00

The big builders are anticipating the worst, but for most of them, work is going on. The truckers’ strike has put a stop on the supply of sand, cement and other materials crucial for the construction sector to do its business. Speaking to The Times of India, managing director of Confident Group C J Roy said the transport strike was yet to affect the bigger builders, who had already stocked up on materials. But the fuel crisis was crippling the sector, with most facing difficulty in ferrying labourers and materials around the city or even the site. “We also need to take clients around to sites, this is also being affected,” he added.

There are supplies for the next three days. It’s only after that, if the strike is still on, that the builders fear work will stop. Raj Menda, president, Confederation of Real Estate Developers’ Association of India (CREDAI), said that developers had planned to stock up on materials. “But given space constraints and other issues with stocking materials, most builders would have supplies only for 3-5 days. The exact extent of loss, number of projects that were halted and the actual effect will be known only after a week, when records from various sites are drawn up,” he added.

Developers Face Crisis- Shelve Projects

2009-01-11T13:56:00.001-08:00

With the information technology and business process outsourcing companies facing an uncertain future following a recession in the US, some real estate players developing space for these companies are being forced to shelve their projects, while others are slashing their rentals and renegotiating lease agreements to stay afloat. For these real estate developers, already reeling under the impact of a crash in property prices and a severe credit crunch, the demand from IT-BPO sector is shrinking fast. The rentals for IT ready-office spaces have already crashed by up to 40%.

India’s IT-BPO sector, which was growing at a breakneck pace of about 30% in the past five years, is expected to be affected by the economic crisis in the US market. Work outsourced by the US firms accounts for about 65% of the revenues of the sector. Mumbai-based realty firm Housing Development and Infrastructure (HDIL), which is developing two IT SEZs in Kochi and Mumbai, has decided to go slow till the real estate and IT industries make a recovery. “Since rentals have crashed by 25-40%, there is no point developing these projects immediately,” said Ashok Kumar Gupta, a director of the company.

Some developers are offering lower prices to push their projects. Ganesh Housing, which is developing a 6 million sq ft SEZ in Gujarat, is negotiating with potential clients. “Gujarat can offer cheaper space compared with IT hubs like Pune and Bangalore,” said Bhavin Mehta, in charge of business development at the company. Several real estate players in India’s IT capital, Bangalore, are facing the harsh reality. Srinivas Reddy, who has developed some 18,500 sq ft space in Bangalore’s Electronic City, has been quoting a rent of Rs 40 per sq ft.

Finding no takers, Mr Reddy is now open to negotiations. Bangalore-based Ranka Group, which has developed 1 lakh sq ft at KR Puram, finds itself in a similar situation. “We are demanding a rent of Rs 45 per sq ft but potential clients are not willing to offer more than Rs 35 per sq ft,” said AK Shetdy, the group COO. Several real estate brokers are now doing the rounds of IT firms to renegotiate lease agreements. “Renegotiations on lease rentals are bound to happen now since the real estate prices have crashed considerably. The biggest problem for the realtors will be the projects that are under construction and those that have not yet been occupied,” said Raman Roy, CMD of Quatrro BPO Solutions.

Consultants say IT companies will increase pressure to reduce rentals when the date of renewal of the lease agreements comes near. “Typically, these lease agreements are signed for a period of three years and have an automatic rental escalation clause. Since rentals have crashed below the levels prevailed 2-3 years back, renegotiations will happen for sure,” said Anshuman Magazine who heads the South Asian operations of global real estate consultancy CB Richard Ellis.

Banks and Financial Institutions can be More Flexible in their Dealings

2009-01-03T13:56:00.003-08:00

Banks and financial institutions are seeking more flexibility in dealing with commercial and industrial loan accounts, which are seeing pressure due to cash flows and repayment. Lenders take up loan recast proposals through the corporate debt restructuring (CDR) mechanism. At the last meeting of the core group of CDR, earlier this week, bankers said that real estate cases could soon come to the forum as companies were facing problems.

A recent decision by the Reserve Bank of India allowing cases related to the services sector to CDR has opened the doors for many companies to approach banks for restructuring of loans. “There is need for clarity on how to go about restructuring these cases since service sector companies did not come to CDR earlier,” a banker said. In addition, the forum is trying to work out a mechanism that provides flexibility in decision making at all levels.

RBI allowed restructuring of real estate loans withoutdowngrading status to NPA category. Permitted second restructuring for viable units facing temperory cash flow problems Banks have agreed to provide additional working capital of up to 20 per cent of the credit limit for SMEs Also relaxing margins on letters of credit, guarantees based on assessment of needs The core group comprising bank chiefs also undertook a sectoral review. The units in sectors such textiles, steel and metal - ferrous and non ferrous - are seen to be emerging as pressure points and may be referred to CDR this year, bankers present at the meeting said. They added that there may be more work needed to deal with a higher number of cases and sectors such as real estate.

But there are two issues which they intend to take up with the Reserve Bank of India for facilitating restructuring activity, said the chairman of large bank. The CDR ensures timely and transparent mechanism for restructuring the corporate debts of viable entities facing problems. It looks at accounts which are outside the purview of forums like BIFR and DRT and other legal proceedings. In particular, CDR works to preserve viable corporates that are affected by certain internal and external factors and minimise the losses to the creditors. One senior executive heading CDR unit at a public sector bank said RBI has issued revised guidelines on CDR in the third quarter of 2008, which are broad and help to take effective steps. At present CDR units is dealing with just over 200 cases involving exposure of close to Rs 90,000 crore.

After a five-year spell which saw banks clean up their books thanks to buoyant sales and high profits in the corporate sector, lenders are suddenly seeing pressure build up in some of the loans as demand for goods and services has declined in local and overseas markets amid the economic slowdown. Sensing the difficult times, RBI has extended the concessions like second time restructuring for viable units facing cash problems and permission to revamp real estate account without downgrading the client status of the NPA category.

2009 can be Worse for Real Estate

2009-01-03T13:56:00.001-08:00

Unitech is the worst performing Nifty stock of 2008 — the stock has crashed 92 per cent. Peer DLF hasn’t fared too much better, it has fallen 80 per cent while developers such as Parsvnath and Sobha too have lost 90 per cent. All in all, real estate has been the worst performing space last year with the BSE Real Estate Index giving up more than 80 per cent. Can the fundamentals of the sector recover in 2009? Unlikely.

The first half of 2009 is likely to be even tougher than 2008 as demand across segments —commercial, retail and residential continues to remain weak. Already, in 2008-09 so far, almost every developer has reported a fall in leases. According to a report by India Infoline,Unitech has more than 30 per cent vacancy on its portfolio held jointly with Unitech Corporate Parks and has managed to pre-lease only 18 per cent of the anticipated completions over H1CY09. The same report notes that cancellations have outweighed new leases at IBREL’s One Indiabulls Centre, since the REIT listing. Analysts expect rentals to fall further by 10-20 per cent in addition to the drop of 10-15 per cent already seen, given the subdued hiring plans of the IT industry and the high vacancies, coupled with lower rentals, could hurt cash flows, they point out.

According to Jones Lang Lasalle, pan-India grade A office vacancies are expected to rise from 5 per cent in 2007 to 17 per cent in 2009. In the retail space too supply will continue to outstrip demand — malls will be the hardest hit with high vacancies. Moreover, prices for residential property are likely to come down in 2009 and while there is demand, buyers are waiting for realistic prices. Consumers though may refrain from making purchases until fears of job losses and pay cuts recede. What’s worrying the Street is the high level of borrowings that many property firms have.

A recent report by Merrill Lynch noted, “We are increasingly worried about weakening credit ratios and the ability of companies to meet interest and debt obligations.” Merrill Lynch expects sales volumes for the sector to fall 10 per cent and the average selling price to decline 33 per cent in 2009-10 and as a consequence, it expects the average sector earnings to fall 42 per cent in 2009-10.

Oversupply in Commercial Real Estate

2009-01-02T20:37:00.021-08:00

The over-supply scenario that 2008 had witnessed in the commercial real estate space could well continue in 2009, says the annual year-end report by Cushman & Wakefield, real estate services firm. While some companies, which had committed to larger spaces earlier, have scaled down their absorption as a prudent step to mitigate the cost on real estate others, which had taken up space based on anticipated expansion plans, are considering sub-leasing the excess space.

“With this trend continuing in the coming year, coupled with the additional proposed supply and the already existing increasing vacancy levels, the over supply situation is likely to see no early respite. Hence, rental corrections across micro-markets seem probable over the short term,” says Kaustuv Roy, Director of Tenant Strategies and Solutions at Cushman & Wakefield. The south, central and select suburban locations of Mumbai witnessed rental correction over the year and more recently, Thane Belapur Road (IT) and Malad (non-IT) too recorded a southward movement. Vashi and the non IT-projects in Thane Belapur Road recorded a stable trend. Central and Suburban locations of Lower Parel, Bandra-Kurla, Andheri and Powai are likely to witness a further fall in rentals with all other major markets expected to stabilise.

In Bangalore, the rental market continued to strengthen recording 4-9 per cent annual appreciation in the peripheral locations and nearly 18 per cent year-on-year growth in the CBD and off-CBD regions. Outer Ring Road and the suburban areas are likely to strengthen further in the coming months, whereas ITPB, Whitefield and Electronics City are expected to stabilise, says the report. Chennai witnessed a drop of 5-10 per cent in rentals in the in the CBD and off-CBD locations of T. Nagar, Alwarpet, Anna Salai and Radhakrishnan Salai, while the suburban and peripheral regions witnessed a 7-9 per cent drop.

Rajiv Gandhi Salai in the peripheries is the only market in the city that has begun to show signs of stabilisation and is likely to continue with the trend as all other major micro markets are anticipated to record a further fall in rentals, adds the report. In Hyderabad, the CBD, off-CBD regions such as Banjara Hills, Begumpet, Raj Bhavan Road, SP Road and the peripheral regions of Pocharam and Shamshabad recorded a 6-19 per cent annual appreciation in rentals, while the suburban regions of Madhapur, Gachibowli-Nanakramguda, Manikonda and Raidurga witnessed a 5 per cent fall. Banjara Hills, Jubilee Hills, Bachupally and Uppal have also recorded a fall in rental values.

Rentals in the National Capital Region dropped between 1 and 13 per cent from last year across micro markets, with Noida (IT SEZ) recording about 32 per cent annual depreciation. Over the last quarter, rentals recorded 6-16 per cent dip with the likelihood of a further correction in the months to come. Though rentals in Pune seem to have appreciated over the last year, the last two quarters recorded a 4-10 per cent dip across locations with the exception of Sholapur Road and Hinjewadi in the peripheries that remained stable and are expected to continue remaining so. All other major micro markets in the city are likely to witness a fall in rentals over the short term.

Oversupply in Commercial Real Estate

2009-01-02T20:37:00.019-08:00

Oversupply in Commercial Real Estate

2009-01-02T20:37:00.017-08:00

Oversupply in Commercial Real Estate

2009-01-02T20:37:00.015-08:00

Oversupply in Commercial Real Estate

2009-01-02T20:37:00.013-08:00

Oversupply in Commercial Real Estate

2009-01-02T20:37:00.011-08:00