Developer Shakeout Begins - Small Players Out

The shake out in the real estate market has begun. Small Players who do not have any means of finance and who have desperately bought land at highly abnormal prices are feeling the heat and are selling themselves to large developers.

Pradeep Jain, Parsvnath Developers, said,

I am sitting on, at least, five-six such proposals. Some deals are at an advanced stage. The small-time developers are mainly offering land that they had acquired earlier.

Mr. Vakil of Knight and Frank Said,

Small developers are under pressure now. Fund flow into this sector has begun to dry up. Selling incomplete projects to big developers or private equity firms is an option explored by many such developers. A sharp fall in sales would force them to cut the price in the coming months. The trend is visible in many suburban markets.

RBI has cut all sources of finance for this segment of industry which is largely dominated by Politicians and Black Money with muscle power. RBI along with SEBI have also proposed 3 year lock in for Foreign investment in Indian Real Estate to curb speculation.

Source: Economic Times, June 27-2007.

Parsvnath Bags Prestigious Delhi Metro Mall

Parsvnath Developers has bagged another DMRC project for developing an ultra modern fully air-conditioned shopping mall outside Netaji Subhash Place Metro Station in North Delhi.

The prestigious project located at a prime location on the Ring Road, slated to attract huge footfall, would cost approximately Rs 150 crore. The company bagged the project through a competitive bidding process.

The project sprawls over an area of 19,400 sq.mtr with a developable area of 2,50,000 sq.ft. The project aims to gratify the shopping needs of public traveling by metro.

The company has already entered into concession agreements to develop shopping malls on 12 stations owned by the Delhi Metro Railway Corporation (DMRC) on a build-operate-transfer basis. Of these, construction of 6 is already completed.

The Netaji Subhash Place mall is expected to be fully operational within 3 years. ENAM Securities has a BUY on Parsvnath Developers Limited.

Land Scams by Devegowda and Kumarswamy family

The Chief Minister of Karnataka, H D Kumarswamy and Family are involved in massive Land Bank and Real Estate Scams according to insiders. Previously we have covered the Land Bank Scam in which Karnataka Government acquired land using KIADB and transferred to vested interest parties.

Yet in another move, the Karnataka Government under Kumarswamy auctioned land near the new Bangalore International Airport acquired from poor farmers at throw away prices. This was done against the directions of Civil Aviation Ministry which had earmarked the land for future expansion.

Today, the Karnataka Government under Kumarswamy is involved in a massive 13,500 Acre Land Bank Scam for Nandagudi SEZ which will get 4,500 acres of excellent farm land from the Government of Karnataka at throw away prices. Senior Bureaucrats and Planners in the Government are openly opposing the move.

Nandagudi is located 20 Km from the upcoming Bangalore International Airport at Devanhalli and 55 Km from Bangalore city. It is also rumored that Devegowda and family have bought vast stretches of land near Devanhalli. In 1994, Devegowda had burnt his finger venturing into Bangalore's Lloyd City which was 100% illegal construction and later went bankrupt.

Real Estate Slowdown now a Reality

We were the first one to tell that slowdown in Real Estate is imminent. Simple Reason - Unrealistic Realty Prices hurt Economic and Industrial Growth.

6 Months ago when RBI tightened lending to Real Estate, greedy developers started moving towards Foreign Money. Just 2 days ago, RBI tightened foreign money supply in real estate.

Today, ICICI Bank Executive Director, V Vaidynathan said,

The real estate business, which was earlier growing at 45 per cent, is now growing at 20 only per cent.

In another release, the Mumbai Chapter of Builder Association fo India confirmed slowdown in housing stock sale in the past 3 months. The sales drop is as high as 27%. Mid-Size builders are now offering free car parking and discounts. They expect a price correction of 10% in the next quarter.

Inputs from Business Line, 15th June, 2007

Avoid DLF IPO. Housing Loan Rates to Go Up

Avoid investing in the IPO of DLF Limited. Here is a detailed research and review of DLF IPO and why should you avoid it.

In a separate move, Deepak Parekh, Chairman of HDFC has asked the Indian Home BUYER to be prepared to pay more for home loans in couple of months as he sees housing loan interest rates rising further.

Kenmore Real Estate in India

Scottish Property Giant, Kenmore has bought 20% stake in Indian Ocean Ventures - Real Estate Investment firm for an undisclosed amount. Kenmore has a portfolio of more than $2 Billion and have projects in pipeline worth more than $1 Billion.

Mr Rob brook of Kenmore Europe said,

We have acquired 20% stake in Indian Ocean Ventures to build up knowledge base about India. We are investing in several opportunities and by 2008-09, we plan to enter the Indian market.

Kenmore is interested in Retail and Commercial Real Estate in India.

Government Bans Overseas Borrowing for Realty Companies

In a move to curtal speculation in Real Estate, the Government of India under the guidelines of Finance Ministry just a while ago banned all Real Estate companies from raising capital from overseas markets directly hitting to their bottomline and ambitious projects.

Indians had forgotten that economy can grow only when you create wealth and not simply by unreasonable REAL ESTATE prices which hurt manufacturers, industrialists, service providers and IT/ITeS companies to establish and execute projects employing millions of Indians.

Realty Companies like Unitech and DLF will be the worst hit it due to their large portfolio of loans. Mr. Chandra CEO of Unitech said,

More than interest rates, the concern for developers is the availability of funds. Indian banks are not in a position to meet the funding requirements for large projects being undertaken by the bigger developers for various reasons, single borrower limits, high risk weights for real estate lending.

Way back in 2006, India's Central Bank, RBI had raised lending to Real Estate projects citing they are risky portfolios for a bank. The ban will have an impact on the real-estate companies as the Reserve Bank of India has blocked all the avenues for real-estate developers to raise the funds. In March-07, RBI had refused Citigroups investment in Ansal Properties.

Sahara's Subroto Roy's Land Bank Scam

Sahara Group's Chairman, Subroto Roy is involved in a 100 acre prime land bank scam. India Housing Ltd in upscale Sahara Shaher Gomtinagar area of Lucknow is the property which Mr. Roy managed to lease at mere Rs 1.0 Lakh rental per annum when Mulayam Singh was the CM of UttarPradesh. This definitely looks like a scam because no where in India you can get land at such a cheap rate.

The Lucknow Development Authority has further alleged that Roy doesn't have the necessary approvals for Multi-Storey buildings constructed there. LDA Vice-Chairman has ordered an inquiry into the Land Grabbing by Subroto Roy.

Dear Readers, Please do not BUY your dream home in controversial projects such as Sahara Shaher Housing in Lucknow.

Ansal Properties launches integrated township in Agra

Ansal Properties & Infrastructure has launched an integrated township at Agra.
The township will be spread in excess of 460 acres of land and is named as "Sushant Taj City".

Sushant Taj City will have in-house amenities like educational institutions, hospitals, clubs, hotels and multiplexes.

Parsvnath Developers Launches Parsvnath Exotica

Parsvnath developers offers high-rise exclusive air-conditioned luxury condominium in Ghaziabad. The Company performed the Bhoomipujan and launched the project on June 03, 2007. The revenue from the project is approximately Rs 600 crore in next 3 years including this financial year.

Parsvnath Exotica will have 858 ultra-modern air-conditioned multi-storeyed condominiums ranging from 10 to 13 storey offering three-bedroom, four-bedroom and five-bedroom apartments.