Satyam + Maytas Properties Scam

Satyam Computers announcement to acquire two related promoter companies [Maytas Properties + Maytas Infrastructure] and final decision to drop this plan, have bought to light the company's earnings growth prospects.

Investors around the world America and India punished Satyam Computers management for valuing the Maytas companies at $1.6bn while they are not even worth $400 mn by dumping the stock of Satyam Computers which dropped by 35% in a single day in India and over 50% in New York.

The real question is who valued these property companies at 4 times the valuation ? the moral of the story is Investors don't like companies which don't have a business model and capacity to generate positive cash flow QoQ. Wait for beginning of Feb-2009 and you will see how banks will pressurise Realty developers to liquidate.

Realty Brokers Views for Top Indian Cities

In our previous article we have discussed about the overall polling by property markets across India. Here is what property brokers in the most sought after realty market had to say about the direction of prices for the next 12 months.

Bangalore:
Price trend is stagnant with a negative bias and going forward outlook is mixed. In Whitefield / Marathalli: Prices appear to have stabilized. In Sarjapur and Kanakpura Road: Brokers unable to form a view but prices have set a negative bias. Yelahanka and Devanhalli: Prices have probably bottomed. While pain is expected to be continued in Jayanagar and Malleswaram areas.

Chennai:
Property prices have started falling lately. Annanagar/Guindy: 60% brokers have no view. OMR: 80% believe prices will continue to fall over 1 year. Sriperumbudur: Prices likely to drift lower.

Delhi / NCR:
80% brokers believe near term will be extremely painful. Gurgaon: 60% brokers feel that will decline in 3 months. Manesar: 80% brokers see price correction in next 3 months. Noida: Brokers expect stability at lower levels soon. Greater Noida: Unanimous near-term pessimism. Ghaziabad: Brokers expect prices to increase over 1 year

Mumbai Metropolitan Region:
Island City: Brokers believe prices will continue to fall. Bandra-Borivali: Brokers believe prices will stabilise at lower levels soon. Beyond Borivali: 80% brokers believe prices will be stable to rising over next one year. Mulund and Thane: Enquiries are steady; prices to remain firm over a one-year time frame. Vashi and Navi Mumbai: 80% brokers believe prices will be stable or increase over a one-year perspective. Panvel: Near term pessimistic; unanimous optimism over one year.

Status of Indian SEZs

We would like to write about the current state of SEZs in India. 270 SEZs have been notified as at 30th September 2008 while 531 SEZs have formal approval and 143 SEZs have in-principle approval.

There is a clear concentration of SEZs in the southern parts of the country with Andhra Pradesh, Tamil Nadu, Karnataka and Kerala accounting for 49% (133) of notified SEZs and 42% (222) of formally approved SEZs.

In terms of sectoral distribution of SEZs, IT/ITES SEZs far exceed other categories of SEZs, accounting for 66% (178) of notified SEZs and 63% (332) of formally approved SEZs. Given the slowdown in the economy and the IT/ITES sector, we believe the risk of SEZ supply getting delayed is high as developers pushback execution time lines.

Comparison of SEZ Exports from India & China:
SEZs in China are supposed to be growth engine for the manufacturing sector. However, in India it was the largest Real Estate Scam with Government sponsored violence as well for land grabbing.

Indian SEZs export 1/7th of just what three SEZs from China [Shenzhen, Xiamen and Zhuhai] do. In FY08, these Chinese SEZ exports totalled $110 bn while that of all the SEZs in India was mere $16 bn.

SEZ pricing in India: INR / sft / Month
Bangalore - 50
Chennai -40
Hyderabad - 45
Delhi NCR - 65
Mumbai Metro Region - 110
Pune - 45

Property Brokers Poll

Here is how the Property Brokers of Bangalore, Delhi NCR , Mumbai and Chennai forecast the property market for the forthcoming year.

The Bold Statement was,

Government support will not alleviate impact of external events. Consequently, we expect property volumes to remain muted and prices to decline.

Here is an excerpt from the survey conducted by Edelweiss.

Past Price Trend:
Three questions were asked - How have prices moved over the past one year ? How have prices moved over the past three months ? How have prices moved over the past one month ?
75% of the property brokers unanimously said prices have fallen over the past one year. 77% said they have fallen further in the past 3 months.

Business Volumes:
87% brokers have seen a drop in transactions over the past one month and a whopping 69% have witnessed steep fall in inquiries as well.

Property Brokers Outlook for the next 12 months:
63% brokers expect price trend to be negative over the next three months and 46% of the brokers expect price trend to be positive over the next one year.

In the next article we will cover property brokers views in specific pockets of most sought after realty markets in India.

Orange Properties - Buy 1 Get 2 Free

If October was the Month of Buy 1 , Get 1 Free!!!. December is the Month of Buy 1 and Get 2 FREE. Yes this is the Tagline by the Desperate Orange properties of Bangalore which we have covered earlier. This time around they are offering 2 pieces of land for FREE one near Devanhalli and other near Tumkur on booking an apartment in Electronics City. The cost of Apartment as advertised by Orange Properties is Rs 20.26 lakh.

Image Courtesy: TOI, B'Lore

Where is the Transparency ?

Last week while publishing Public Opinion about Realty, I questioned the protection to home buyers and the absence of a powerful body like the SEBI. In a report released just minutes ago by KIM ENG Sec of Singapore, the analysts are concerned about the shady ways Indian Realty companies function. Excerpts from the report,

Of inventory, 40% is funded from customer advances. Construction does not usually begin until 14 months after pre-sales start. Sometimes projects are launched and pre-sold without securing land rights and despite ongoing legal conflicts. Customers have no protection. Their advances have been used for unrelated investment and actual construction funded by debt against property and shares. We believe that 8 out of 10 projects are currently running behind schedule.

Before listing on the equity markets, some developers used customer advances to build up large land inventory to increase their assets quickly. We believe the expensive land banks will make it difficult to launch profitable projects while the property market continues to weaken.

We also believe that data in IPO documents for some developers did not accurately reflect the data found in annual reports and financial disclosures. Pre-sales have not been disclosed in a standardized format making it difficult to determine sales to end users and sales to speculators.

In many cases, inventory is reported net of customer advances, which results in understating the book value of liabilities. The accounting practice of capitalizing 60% of interest cost on land banks and unfinished projects is misleading, which has resulted in inflated earnings and inflated book values.

Don't you think it is time to start a powerful regulatory body to protect the interests of Indians who toil hard to BUY that dream home ?

Hyderabad - Commercial / Office Realty review

High level of interest from Indian and multinational companies in the IT/ITES sector has been driving the demand for office space in the city over the past few years. Madhapur, Manikonda, Gachibowli and Raidurga are the technology hubs. Office space supply has increased from 1.6 mn sft to 12 mn sft in 2010.

Commercial / Office Space Rentals INR /sft /Month are as follows,

• CBD (Begumpet/ Raj Bhawan Rd, Banjara Hills) Rs 65
• Secondary market (Jubilee Hills, parts of Banjara Hills) Rs 55
  
• IT Corridor – Madhapur, Gachibowli, Hitec City - Rs 42
  
• Suburban – Himayat Nagar/Ameerpet/ SD Road - Rs 35
  
• Gachibowli, Hitec City Shamshabad, Pocharam - Rs 30
  

Expect rental/capital values to correct in prime suburban and peripheral locations, owing to slowdown in demand and near-term supply pipeline. Vacancy levels are likely to increase further over the next few quarters on completion of the large planned projects.

Should Govt Bailout Realtors ?

The Economic Times asked whether the Government of India should bailout Real Estate Developers and a whopping 79% of Indians said "No". Our Government if it bails out Realtors will be one of the shameless Govt to do so. Not a dozen, Not a hundred but tens of thousands of Home Buyers face the ire of delayed handover of residential projects anywhere between 10 to 16 months. Where the F*ck is our Government to protect the interests of Home Buyers ? Shouldn't all Home Buyers be protected by a powerful regulatory body like SEBI ?

Review of Hyderabad Residential Market

Today we are going to have a look at Hyderabad's Residential Market.

• Central Zone - Areas under this zone are Begumet,, Banjara Hills, Jubilee Hill, Ramkti etc. Most of these locations, in and around Hussain Sagar Lake, are the traditional residential hubs of the city. Locations like Banjara Hills and Jubilee Hills are considered prime residential areas, catering to the high income segment. Prices have mostly held their ground. Most of the developments are stand-alone projects as opposed to townships due to scarcity of land parcels. Majority of these are redevelopment of existing properties in inner roads of Banjara Hills. Key upcoming notable projects include Aditya's Green park in Jubilee Hills, RRS towers on Raj Bhawan Raod and Prajay Riveria at Banjara Hills.
• Northern Zone - Areas under this zone are Nizamet, Kompally, Bowenpally, Qutbullapur - Region is witnessing an even mix of both apartment and villa projects. Considerable amount of demand is investor-driven. Many prominent developers have taken up projects in the region as there are large tracts of land available along with excellent infrastructure. Noticeable projects in the region include Ambience Neighborhood by Ambience Group, Casa Estebana (54 villas) by Koncept Ambience Group, Aditya's Grand Ville and A la Maison.
• Eastern Zone - Areas under this zone are Shameerpet, Yapral Cherlapalle, Pocharam abd some parts of Secundarabad. Region mainly consists of gated communities and villa development. Northern half of this region is witnessing active real estate development (Shammerpet, Yapral). Prajay Celebrity Villas and Prajay Boomingdale are two large projects in this micro market
• Western Zone - Areas include Cyberabad locations like BHEL, Madhapur,Gacchibowli etc. Majority of demand in the region is end-user-driven, primarily from people working in Hitec City. Bachupalli, Borampet are witnessing villa and row house developments whereas Gachibowli and Kukatpalli are witnessing more high-end residential apartments. Noticeable projects in the region include Hill Ridge in Gachibowli and Lanco Hills in Manikonda, Raintree Park at Kukatpaali on 35 acres, Silicon Country at Madhapur, Prajay Ridge Wood at Nagagandala and Maytas Hill Country at Bachupalli.
• Southern Zone - Areas include Himayat Nagar, Shamshabad, etc. Plotted sales are high in the region. These locations primarily cater to mid income housing at price point

Here is the List of Pricing which we have obtained from various Developers. We didn't ask for any bargain or discount, so be sure to negotiate by atleast 20% when you Talk to them.

Sobha Developers Offering 8% Discount

Its raining discount here in Bangalore on residential projects being developed by Sobha Developers. Residential demand in Bangalore is currently sluggish. Although the company plans to launch one new project in Bangalore in FY09, given the slowdown in demand, the company has pushed back time lines of its other planned projects. The company is evaluating plans to offer homes with smaller ticket sizes of about 1,000 sq ft at an average price of about Rs3,200/sq ft.

We have obtained the price list of various projects of Sobha Developers in Bangalore and Pune and they are offering 8% discount on the prices mentioned in the list. [PDF]

Mumbai - BKC Rentals Come Crashing Down:
With increasing supply and stagnating demand, overheated rentals are bound to correct . However, the corrction has now touched 50%. BCK, deals are now happening at Rs250-225/sq ft vs. Rs450-500/sq ft earlier, according to Mr. Panay Vakil, Chairman of Knight Frank India