Who Bought The Real Estate Fall ?

It makes perfect sense to go bargain hunting, especially in the Indian Realty space which corrected more than any other industry vertical in the recent crash. Here is the data on who bought into recent the fall.

• Pan Atlantic in Sobha Developers $10 mn invstment in SPV developing residential project in Bangalore
• LTG International pumped $12 mn in Subsidiary of Prozone Enterprises, Provogue's real estate arm
• Samara Capital invested $12 mn in Shriram Land Development
• Kotak Realty Fund & Sun- Apollo Ventures bought 50% stake in Janapriya Projects and 65% stake in Janapriya Townships respectively. Funding details was not disclosed.
• AIG Global Real Estate pumped into 8.5 mn sft Velankani Tech Park which is a notified IT SEZ in Sriperumbudur, Chennai
• Orient Global bought 1.2% stake in HDIL through the stock market route

Stay tuned for Red Hot updates on the Indian realty sector.

AIM Listed India Realty Funds in Trouble

Indian Realty developers moved to London Stock Exchange's AIM offering part of their Realty cake. Investors bought these funds as if there was no tomorrow and now these scrips are quoting at deep discount to NAVs.

• Unitech Corporate Park is trading at 75% discount to its NAV
• K Raheja's Ishaan Real Estate is quoting at 65% to NAV
• Hiranandani promoted Hirco is quoting at 80% discount to its NAV

Laxey Partners one of the main shareholders in Hirco is asking promoters to Buy-back shares and bridge the difference. In some cases investors are asking companies to liquidate their portfolios / land holdings and BUY-back the shares.

Neerav Investments - Niraj and Ravi Raheja's investment arm has picked up 35% stake in Ishaan Real Estate.

It is time to go and pick up Realty from distressed Sellers if you believe in Realty or want your Dream House.

Kolkatta Property Market Review

In the residential sector, prices are stagnating at Rs2,500-3,000, while resale prices are down 15-20%; volumes are end-user-driven and are down 30-40% and the pace of pre-sales slowed sharply in Aug-Sep 08. Most projects are running 6-12 months behind schedule, and Phase-II time-lines are being pushed back on demand slowdown.

Demand for IT and non-IT space has cooled off over the past 2-3mnts, following the Singur episode and downturn in global markets. Rentals are holding at Rs32-38/sqft for IT Parks and Rs38-42/sqft for IT SEZs, but absorption has fallen significantly. Most retail malls have been put on the slow track.

Land Prices Correct Sharply: Post the exit of the Tatas from Singur, land prices in peripheral areas have corrected sharply from 10-20 mn/acre to less than 3mn / acre. But prices in key development zones like Rajarhat are holding at Rs120m/acre, though transactions are down.

DLF Residential project of ~800 units was sold-out shortly after launch at Rs3200/sqft; construction started in Jun 08, exploring more launches but nothing immediately in the pipeline.

Unitech's Uniworld City, the company's flagship project of ~3500 units, has seen sales of ~2200 at an average of Rs3,000 - resale prices are down 12-15%; fresh sales have, however, slowed to mere 25 units vs. ~60 units 6 months back. Additionally, cash starved Unitech has delayed construction by 6-8 months. Kona Gateway project launched a year back has seen significant delays, sales and prices have stagnated; management expect s construction to commence shortly. Phase-I construction of row house at houses at Kolkatta West International City, Howrah is underway.

Residential - Buy 1 Get 1 Free

We have been shouting at the top of our voice how unrealistic residential real estate prices were. Developers have now launched BUY One House and Get One Free.

Cosmos Prime Projects Developers has launched the scheme in Mumbai for its projects in Thane. The Advertisement sent to us says,

With the Purchase of a Bungalow of a 2 BHK, a 1 BHK comes FREE, While with a 2 BHK Flat, a 1 Room Kitchen is FREE.

You can view the entire scanned copy of the advertisement here. Let realty prices crash and get a little bit REAL.

Incentives Offered by Real Estate Developers

Our Analyst tracking the Realty players is filing this report about various freebies and incentives offered by Developers across India.

• DLF Free gold coin on booking of 3-Bedroom apartment
• Unitech Free LCD TV on every booking
• Pal Infrastructure Free jewellery up to Rs100,000 & more than 6% discount on booking of flat at Gurgaon
• SVP Free 50g Gold Coin on booking of apartment in Ghaziabad
• Jaypee Greens Free Economy/Luxury car with every apartment
• Mapsko Free Economy/Luxury car with a flat/villa
• Tulip Free Solitaire Diamond worth Rs125,000
• Gaursons Rs100,000 off on all spot bookings
• Dhingra Developers Free 32" Plazma TV on booking of flat

However, we recommend First and New Home Buyers to squeeze the cash strapped developer and straight away negotiate for at least 25% discount.

India Realty Stocks - New Low

The Indian Realty Stocks representing the Absurd Builders and Developers have hit a new low as nobody wants to own them anymore. Here is how UGLY they look like.
We have been Realty Bears ever since these Developers started sucking blood of innocent and hard working middle class Indians.

Home Loan Customers Default at Vijaya Bank

Vijaya Bank has just a while ago informed in a flash to the BSE that it is witnessing increased defaults in Home Loans due to rising EMIs. The NPAs of Vijaya Bank in the second quarter jumped 131% to Rs 268 crore, against Rs 116 crore in the same period last year.

Retail loan portfolio is 25% of Vijaya Bank's books at Rs 9,000 crore. The Bank has said that it will continue to lend but very cautiously and try to negotiate with defaulters to make them regular customers.

Which Bank of Financial institution is next in the Queue ? ICICI or SBI ?

Realtors Face Downgrade - CRISIL

Before fingers can be pointed out at rating agency after the company collapses, CRISIL is playing safe and is set to downgrade all the Indian Realtors who are debt trapped and facing severe liquidity crunch.

Developers today have few options in terms of financing. Either they have to slow down construction or reduce property prices to catalyze demand. Crisil has assigned non-investment grade ratings to some of the developers, indicating weak financial profile of these companies.

In a related development, lenders - Banks and financial Institutions are constinuously mounting pressure on Developers to price the properties lower and SELL-off before its too late. Baanks are fearing defaults on interest payments in this quarter and hence are meeting the managements of various Realty companies on weekly basis. Banks have also asked the Realty companies to get their Land Bank re-valued due to the correction in prices as most of them are holding them as co-laterals.

Developers such as Parsvnath, Unitech, HDIL, Omaxe, Orbit Corporation, Sobha Developers etc have borrowed aggressively to support their unrealistic realty plans which are likely to come crashing very soon.

Mumbai Residential Price Index

Here is Mumbai's Residential Price Index as published by Kotak Research with 1993 as the base year.

And in between 2003 and 2008, the NSE Index went from 900 levels to 6,000.

So sure Mumbaikars made lot of money on the NSE which later flowed into Realty. Now that NSE has melted down, what will be the Reality in Realty ?

Mumbai Property Rates - Part-II

In continuing our coverage on Mumbai's Residential Property prices, here is Part-2 of the same.

The property exhibition received a lukewarm response from the buyers in comparison to previous year. Most of the attendees had come to check the extent of the property price correction rather than buy. The majority of the potential buyers we spoke to found the price points unaffordable and did not find the discounts attractive enough.

All are residential properties
Name of the Builder, Location, Price / sft and Tentative Possession Date

• Rustomjee- Elanza Malad (W) 9,000, Urbanaia Thane (W) 5,130, Ozone Goregaon (W) 10,500
• Kalpatru Properties - Kalpataru Estate JVLR, Andheri 10,000
  Kalpataru Riverside Navi Mumbai Panvel 3,800
  Kalpatru Aura Ghatkopar (W) 7,800
  Kamdhenu Mulund (E) 5,200
  Shrusti Mira Road 4,750
• Dosti Group - Flamingos Sewree 15,000
  Acres New Wadala 11,600
  Vihar Thane(W) 5,750 Dec-2010
• Nirmal Lifestyle - City of Joy Mulund (W) 10,500
  Galaxy Mulund (W) 10,500 June-2009
• Mahindra Lifespace - Eminente Goregaon (W) 8,500
  Splendour Bhandup (W) 6,950
• Ahuja Construction - Clubbe Life Borivali (W) 7,500
  Karma Kastle Tilak Nagar, Chembur (W) 7,200 Dec-09
• Lok Housing - Lok Surbhi Kalyan (W) 2,300
  Lok Everest Mulund (W) 6,500
  Lok Raunak Marol, Andheri (E) 6,600
• Buildtech Builders - Orient Ganesh Navi Mumbai Koperkhairene 3,000 Nov-08
  Orient Ram Navi Mumbai Koperkhairene 2,700 Nov-08
  Orient Star Navi Mumbai Kamothe 2,500 June-10
  Orient Arcade Navi Mumbai Kamothe 2,500 June-09
• Royal Palms - Garden View Aarey Colony, Goregaon (E) 6,500 Jun-09
  Lake View Aarey Colony, Goregaon (E) 7,200 Ready Possession
  Summit Aarey Colony, Goregaon (E) 6,500 Ready Possession
• Supreme Universal - Lake Homes Powai 9,000
  Lake Primrose Powai 8,500
• Neptune - Color Scape Mulund (West) 8,991 Dec-09
  Living Point Bhandup 7,991
• Nahar's Amrit Shakti - Vinca, Yucca, Yarrow Chandivili 12000 - 14000 Apr-09
  Ivy, Mimosa, Tilia Chandivili 12000 - 14000 Mar-10
• Neelkanth - Kingdom Vidyavihar 7,500 Dec-09
  Woods Phase II Thane 5,600 Jun-09
• Oberoi Construction - Oberoi Exquisite Goregaon (East) 7500-8500 3-4 years
  Oberoi Splendor JVLR, Andheri East 14,000 Dec-09
  Oberoi Springs Andheri (west) 20,765 Dec-08
  Oberoi Woods Goregaon (East) 16,500

Property Prices to Fall 20% - Pujit Aggarwal

Property Prices which had touched the roof will fall inevitably by 15-20% very soon. This is backed by Orbit Corporation [Mumbai's Leading Developer] MD, Mr. Pujit Aggarwal. He said,

It should come down in the festive season itself; people those who are ready to reduce it in the festive season itself it is where it will sell. If they don’t reduce the prices during that period, then it will not sell. There should be a correction of at least 15-20% from the top.

Many Large Developers are facing extreme liquidity problems and may run into loss on a QoQ basis if they don't sell by lowering the prices.

For instance, Parsvnath Developers promoters [Mr. Jain Family] pledged their own shares to raise immediate funding for a project, so tight is the liquidity situation. But due to the recent meltdown in Realty stocks, the lender invoked further co-lateral due to erosion in the stock value of Parsvnath. Had Mr. Jain defaulted, the pledged shares would end up in the market sending the stock prices further lower. To preserve the stock price, Parsvnath has to earn on a QoQ basis and this can happen only when they lower the price of the property and start resuming the stagnated sales.

Mumbai Property Exhibition Rates

Our analyst tracking the Mumbai Property Market has an update on the rates at various projects as detailed in the Mumbai Property Exhibition. Many of the real estate developers gave discounts in the form of stamp duty and registration fees reimbursement to buyers, which accounts to a discount of 5-6%. No heavy discounts [20%] yet. So keep checking out before you BUY your dream home. If you are in for your second, you should be really RICH :-)

All are residential properties
Name of the Builder, Location, Price / sft and Tentative Possession Date

• Happy Home - Jade Garden Near BKC - Opp MIG Club 20,000 Oct-2010
• Kanakia Spaces - Niharika Thane (W) 5,000 Jun-2010
• Kohinoor - Kohinoor City - Phase III Kurla (west) 8,800 Dec-2009
• M S Shah Developers - Olive Andheri E 6,500
• Man Infraprojects - Valley Vista Navi Nerul 6,000 Apr-2011
• Mantri Real Estate - Mantri Park Goregaon (E) 5,550 Jun-2009
• Mayfair Housing - Silver Juhu 17,000 Dec-09
• NeelSidhi - Atlantis Navi Nerul 5,600 Dec-10
• Skyline Group - Skyline Oasis Vidyavihar (W) 9,000 Ready for Possession
• Bhoomi Rock Enclave Kandivali W 6,500, Rock Avenue Kandivali W 6,500, Elegant Kandivali E 5,700 - Ready for Possession
• Damji Shamji Shah Group - Mahavir Milestone Thane W 6,800, Mahavir Universe Bhandup W 6,561, Mahavir Millennium Thane W 4,951, Mahavir Platinum Cheda nagar 6,750, Mahavir Empress Ghatkopar W 8,000 Dec-2009
• Rajesh Builders - Raj Legacy Vikhroli W 10,400, Raj Maximus Borivli W 9,500, Raj Sunflower Borivli W 11,500 March-2010
• RNA Developers - RNA Sapphire Andheri W 11,000, RNA Royal Park Kandivali W 6,500. March 2009
• Godrej Properties - Kalyan 3,000 July-2010
  Planet Godrej Mahalakshmi 35,000 - March-09
• Akruti City - Gardenia Mira Rd E 3,650, Vedant 9,500
• Hiranandani Estates - Villa Grand Thane 6,100, Canary Thane 6,600
• Acme - Ozone Thane W 7,500, Amrut Dahisar E 4,500
• Sheth - Grandeur Vasant Marvel, Borivali (E) 7,600, Polaris Goregaon W 11,000
  Ivy Vasant Valley, Malad (E) 7,900, Vasant Pride Thakur Complex, Kandivili (E) 6,000, Silve Bell Off LBS Marg, Mulund(W) 6,200

We are yet to receive more quotations and the same shall be posted as soon as we receive them.

Falling Land Prices - Mumbai

Its just not the realty stocks, but the Land Prices [a mini sub-prime bubble in Mumbai] has cracked. The Rail Land Development Authority (RLDA) recently reduced the minimum reserve price for 45,371 sq meters plot at Bandra (E), Mumbai by 14.4% from Rs46.28 bn to Rs39.6 bn. The location of the plot is near established business district of Bandra-Kurla Complex in Mumbai and the available FSI on the plot is 4.

Additionally, our Analyst tracking the deal said RLDA has removed the option of bullet payment for the land cost and extended the time lines for the installment option from 24 months to 60 months is enough evidence of tight market condition for real estate developers.

Finally, we believe that the revised reserve price of Rs39.6 bn is still on a higher side due to fall in rental values and will require developers to bid with aggressive rental assumptions[unfeasible] and other means of increasing the available FSI.

In another deal, MMRDA invited bids for commercial and cinema complex at Wadala in Central Mumbai, for which it got very a poor response. Real estate developers in the re bid meeting with MMRDA officials indicated that the reserve price for the plots is high as compared to the market prices. MMRDA has revised the last date for submission of bids from 23 September 2008 to 15 October 2008.

Realty Stocks - All Time Low

The Indian Real Estate Stocks which have been crashing since few months now have hit a new Life Time Low. Their are no buyers for these stocks due to the flawed business model as earnings visibility of these companies has disappeared. [Evident from Advance Tax Nos]
First time Home Buyers can hit the street to look for bargains. Don't RUSH to close the deal as these Realtors will come down to more affordable pricing in existing projects. [Forget new ones, they have to clear the inventory to generate working capital]

Bangalore Realty Roundup

Citi analysts were in Bangalore [ once upon a time known as Garden City]. Here is what they have to say about the top 3 companies operating in the market. Demand is lackluster with most buyers adopting a wait and watch approach. Oversupply of residential and commercial space continues in Eastern parts of the city (Whitefield and Sarjapur Outer Ring Road) and is unlikely to improve in the near-term.

Purvankara:
Purva Highlands project is on track. The project has 13 towers and foundation work has been completed for all 13 towers while the structure is up for 4-5 towers. 7 blocks were launched in the first phase ~2yrs ago and are 60%-70% sold. Possession of these 7 blocks will be handed over in Sep'09.

Sobha Developers:
Sobha launched two projects in Bangalore - one in North Bangalore (Petunia) and the other in Sarjapur Road (Celsia). In Celsia only ~30 out of 226 apartments have been sold while in Petunia, which is located in North Bangalore, ~107 of the 156 apartments have been sold.

Brigade:
Brigade Metropolis in Whitefield has 1,578 apartments of which ~1,100 are sold. The project has 12 residential towers. The structure is up for 10 towers and delivery of the first phase consisting of 7 towers will begin from Dec 2008. The project has 2 office towers and is likely to fetch a rental of mere Rs 40 / sft / month.

BPTP - Indian Sub-Prime Company ?

India's most expensive real estate deal is in trouble yet again, this time for mere Rs 230 crore second installment payment. Recall BPTP has defaulted in April over the Noida Land deal. Then the sum was Rs 1,251 crore but now its a paltry Rs 230 crore and the company has sough an extention to pay the same.

Due to global liquidity crunch the company has failed to stike a deal for diluting its own equity. It has already sold 40% of the four IT SEZs to raise $160 mn and another 3% stake in the parent company to JP Morgan Chase for Rs 250 cr.

What you should know is that the company is still struggling to pay for the land and has started its defaults right from the first installment, seeking extension and paying interest. Now consider a Base Case secnario, assuming BPTP begs and some how manages to pay off for the Land. What about the Development of the property ? If JP Morgan or the other investor who has bought 40% stake in IT SEZ [fully developed] and BPTP defaults on development [requires Cash] and the investor invokes his rights / clauses, this will lead to massive unwinding and trouble will spell to all those who are directly or in-directly exposed to this deal. [We can't say this for sure unless we get to see the facts, but on fair assumption, the towers will collapse on drawing broad even before they rise in Noida]

This is not just the case of BPTP, their are several small and mid-size developers in similar situation in every Tier-I and Tier-II cities. The listed companies are surviving because they kind of looted innocent investors money in IPO.

Realty Companies Advance Tax Nose Dives

The greedy and shady realty companies of India have taken a severe beating in Q2Fy09 as their advance tax numbers an indication of profits has nose dived. Here is the data which was circulated.

• DLF - Skipped to pay any advance tax in Q2
• HDIL - Skipped to pay any advance tax in Q2
• Unitech - Advance tax has declined by 50% in Q2
• Sobha Developers - Advance Tax declined by 60% to mere INR 5 crore
• Ansal API - Advance tax has dipped 50% to mere Rs 5 crore

Omaxe CMD, Mr. Goel confirmed and said,

It's general slowdown in the real estate sector which is showing in the advance tax figures.

If you are planning to BUY your first home, hit the street with Cash and start negotiating. Also remember while negotiating that you are bailing them out in difficult times. Don't RUSH to close the deal as Realty market won't bounce back immediately. Try to squeeze the last drop from them.