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Seeing the rupee crossing 44 mark just reminded me of few of my friends turned economists :).Well i said ‘turned econmomist’ because there is always some among you who would be actively predicting future. I often heard few of my friends saying Rupee is going up and $$$$ is going down and it is likely to touch 35 mark.

Infact there was panic among NRI to transfer as much of fund from savings and convert it in INR. well that was last year. I remember the lowest rupee touched was 38.What happened now. It has bounced back to 44 Mark. What happened to our good old economist who were saying it would touch 35.

Well that did not happen atleast for last one year and may be not in the near future. I am tempted to co-relate the happenings to Real estate and stocks.Many would have seens stocks have tested their low and is slowly bouncing back. Real estate currently is still low because of the fear factor of a economy slump and other reasons.

My question is ARE WE PREDICTING ECONOMY by saying things like Real estate would fall, US will go down, $$$$ will fall, prices would go down heavly.

Some might be successful in speculating but no body could get it 100% right. Same story with the interest rates. Even this Jan i wrote saying that interest rates would come down below 11%. Its is reverse trend. Rates have risen and its near 13% for floating rate.

Same with Inflation. No body would have expected it to touch 12-13% from 3-4%. Does it not give a indication that speculating can only result loss of valuable time. For some reason i am under a firm notion that the current RE prices are here to stay if not rise.

I am only seeing this, Prices are slowly increased by Rs 100 per sq ft by builders on an average every 3-4 months. The max incentive i saw recently was the free LCD by ARTHAMONEY. May be few builders are offerin pre-emi waiver etc through tie-ups with banks.

The more you wait, the more you lose. The more expensive it becomes to own your dream home. Rent have hit the sky roof. Residential apartments are now more rented for commercial purpose which fetches high rental returns.

I again repeat, Never try to time the market and if you have the money this is one of the best times to go for your dream home.Never predict the future, Have money invest for a 5 years time period. You are sure to gain

Well raising money in India through personal loans is waste as the interest rates are hitting sky. Last week a classmate of mine was enquiring about taking home loans and interest rates. Since he was about to build a 2BHK Individual house in Chennai, he requirement was not more than 5 Lakhs to begin house construction.

I suggested him to go for loans here in US rather then India. I know he had 2 cars since they were a working couple. I suggested him to talk to a credit union to find out more about CAR TITLE LOANS. A week later, he signed a Cheque for 4 Lakhs INR and send it to his Dad in India to be used for starting his house construction.

The Loan Deal, an interest rate of 5.99% APR for 3 years for $10000 against his 2 cars. The EMI per month worked out around $310 for him. He is atmost paying a maximum interest of $900 for 3 years, which works out only around Rs 37000 for years. I am sure no bank in India would lend you loans for 4.2 Lakhs with an interest of Rs 37000 for 3 years.

I still remember I helped a friend of mine to get loan for Rs 1 Lakh and he paid Rs 17000 overall interest for 3 years.

I feel one has to be aggressive during these tough times and make sure you don’t pay unnecessary interest to blood sucking banks like HDFC and ICICI for home loans. Talk to your Credit unions soon and find out how much your car is worth and start pre closing your Home Loan.

Good luck.

I always wonder if the authorities are not inteligent enough to handle massive projects approval at faster pace. May i thought they dont have the neccessary infrastructure to do so.Well after reading this we know it is more than that. Even if we give them the best of workplace, approvals would take time. It all depends on Builders.

Any guess why DLF increased carpet areas all of sudden and if it can be related to sorting out approval issues with respect to Electricity post etc in their site. DLF safely passed their overheads to both innocent and greedy buyers who did not care about extra common area and were just thinking about how much DLF would appreciate after 2 years. I feel only sorry for genuine buyers who really wanted to own DLF. Same carpet area, more common area. Hmmmmm.

Purva ,Hirco and the host of other projects are still facing approval delays. If the payment is Rs 50-75 PSF then imagine who is the richest govt employees in Chennai :).May GOD HELP GENUINE BUYERS and impart some sanity on CMDA.

Builders up in arms against CMDA, want it revamped

A group of builders has come out in the open against the Chennai Metropolitan Development Authority (CMDA) and the Directorate of Town and Country Planning (DTCP), calling the two agencies retarding forces.
On Monday, the members of the Federation of Tamil Nadu Flat and Housing Promoters’ Association staged a mock funeral in front of the CMDA office, carrying a dummy of the city’s second master plan on a bier.
Later, association president P Manishankar told TOI: “The CMDA and the DTCP need to be revamped and divested of the powers of giving building plan approvals. Instead, their role should be that of formulating long-term developmental plans, setting up satellite cities, doing zonal classification of land and imposing strict regulatory mechanisms. These agencies, working with skeletal staff, take more than a year and at times even two years to issue clearance for buildings at present.”
By delegating powers to give plan approvals to corporations, municipalities, town panchayats and village panchayats, such inordinate delays could be avoided, he noted.
Manishankar said: “In Chennai, the corporation takes only 15 days to one month to clear applications seeking building (ground plus one floor) permission. Same is the case with other corporations too. However, when it comes to constructing a building with stilt plus two floors or a special building having ground plus three floors, the builder is at the mercy of the CMDA (in Chennai) or the DTCP (outside Chennai).”
The primary reason for the delay in these agencies was that there was no accountability for the officials working there, he lamented. “If the applications do not comply with the norms, they should be rejected in the initial scrutiny itself. Instead, the officials sit on files for months together to assess whether the builder will pay them their due. Brokers hang around in these agencies to strike deals with the builders. While the officials take a cut of Rs 20 per sq ft in the DTCP, in the CMDA it is as high as Rs 50 to Rs 75 per sq ft. Those who refuse to pay will never get their approvals. While rejecting the files, the officials merely say they are not as per norms. They never specify the defects,” noted Manishankar.
To make the officials more accountable, he said, they should be shuffled once in five years.
By introducing inter-departmental transfers among the CMDA, DTCP and the public works department, it could be ensured that no official stayed in a single place for long periods.
The federation has also called for an adalat for handling plan applications pending for more than six months.

Chennai: The real estate industry had a decent run during 2007 with market witnessing upbeat demand for products across all segments – office space, residential, retail, etc. Naturally, corporates managed to garner good realisations. Enthused by their success, a positive sentiment reflected in the IPO market, where major real estate companies raised around Rs 14,600 crore during the last year.

The scene was no different in the private equity space, where real estate (or realty) topped the list of all PE deals by value. But that was 2007. Year 2008 has begun on a subdued note. Buyers are waiting for prices to fall further as sellers are waiting for the downturn to be temporary. Home loans getting costlier hasn’t helped, neither has inflation. Property Plus talked to Mr Venu Gopal, Associate Director and Mr Ganapathiraman, Associate Vice President part of Transaction Advisory Services, Ernst & Young.

They feel projects having a limited time frame of 2-3 years may face a crisis. However, they also note that any project having a life of 5 years and above may not be affected in the long run as the current slowdown in the market is temporary. They advice landowners to be cognisant of the fact that markets are slowing down and it is surely not what it was in the last 2-3 years. “In the given circumstances, land owners looking for an exit in the immediate future should be moderate in their price expectations otherwise they may find it difficult to justify their valuations,” the experts feel. For more insightful advice, read the email interview…

Edited excerpts.

What do you think are the major factors affecting the real estate market today?

To understand that, one has to be aware of the six angles from where real estate developers are facing the problem. Firstly, high land prices combined with increased input prices (steel) makes the product costs high. The result: the developer has to face slowing down of sales and shrinking margins.

Secondly, significant supply hitting the market at the same time (in suburban areas) creates pressure to sustain competition. Naturally, there is a decline in booking and advances from customers as they go into a ‘wait-n-watch’ mode. The developer is hit again!

Thirdly, rising inflation has made the central bank proactive. The hikes in Cash Reserve Ratio as well as other monetary measures have had a telling effect on the money available for lending. No doubt, lending rates have also risen. This has made the borrower shell out a higher EMI for home loan. The sidekick comes in form of a pronounced decline in bookings. The developer is at the receiving end.

Fourthly, bank funding for real estate projects is becoming tough due to stringent norms laid down by RBI. Coupled with volatile capital market conditions and private equity investors exercising caution, funding routes for developers have dried up. The result - the developer who wants to create properties but doesn’t have the funding has to stall plans for the time being.

The fifth factor is surrounding the confusion over extending tax benefits to Software Technology Parks of India (STPI) units and the ensuing slowdown in leasing activities of non-SEZ space.

Lastly, the developers are also suffering from the gloom in the financial world. Factors such as sub-prime fears, crude oil shock, global slowdown fears, liquidity crisis and sloth in FII inflows have engulfed the minds of many businesses; real estate is no different.

What is the reason behind the sudden slow down in residential bookings as witnessed in the last few months?

Specific segments of the suburban/peripheral areas are showing signs of a slow down in residential bookings in the last few months. Major reasons that one can attribute is significant supply (targeting premium / high end segment) hitting the market, increase in housing loan interest rates, unaffordable prices even for the customers of the target segment etc.

To explain this further, let’s consider the case of Old Mahabalipuram Road (OMR). Located on the southern outskirts of Chennai, where significant residential developments are in progress targeting the workforce employed with IT/ITES companies in and around Siruseri, which is estimated to be around 1,00,000 by end of the 2008.

According to internal research done by Ernst & Young, currently almost 20 residential projects, under different stages of development on and off OMR, are selling in the range of Rs 3,000 – Rs 4,500 per square feet. Effective cost per unit for a customer is anywhere between Rs 40 lakhs and Rs 1 crore — depending upon other factors like unit size, floor level, car parks, club house facilities offered etc.

Here comes the conundrum. Developers are clearly targeting a miniscule lot of the total target population. Almost all the residential developments are catering to only 16 per cent of the target population. Even for the junior management category, an investment of close to Rs 45 - 50 lakhs (which is the approximate price range) with most of the current projects, becomes unattractive / unaffordable.

Will the current scenario have an equal impact on the developers?

We feel that the current slowdown in the market is temporary and any project having a life of 5 years and above may not be affected in the long run.

However, projects having a limited time frame of 2-3 years may face a crisis depending upon factors like Floor Space Index (FSI) land cost, sustainability of the developer to hold on to the stock and the prices, fund availability for completing the development, cost of servicing the debt, pressure to meet investor returns (if any) etc.

A slowdown in the customer advances (from what was projected earlier) means money available for funding the resultant gap, has become a serious concern now. That money will decide the fate of several projects, which are currently under development. The market may also witness a consolidation phase, whereby small developers unable to meet their commitments may exit the project in favor of major developers.

What should be the ideal strategy to be adopted by developers in the current scenario?

Developers can look at the possibility of smaller unit sizes, cutting down on special features (like providing club house facilities, swimming pool etc.) and target the segment which can afford a budget of Rs 30 – 45 lakhs.

Developers, who were hitherto planning to fund their projects through customer advances, can look at the option of raising private equity (assuming that the project is already leveraged) to fund the development.

However, in the present scenario the developers will have to be reasonable in their assumptions and strike a deal that will be a win-win situation for both the parties.

Does the scenario dampen the mood for private equity investors / real estate funds?

Real Estate Funds / Private Equity investors still have a huge scope for investment in the Indian real estate market. In the current scenario, PE investors / RE funds will be keen to look at entity level funding to spread the risk across projects and asset classes.

In case of specific projects, investors may tend to be conservative and may not favour an opportunity entailing promoter to cash out on their investment (unless the exit route for the investor is adequately provided for). They would also be comfortable in looking at opportunities that offer a minimum guarantee / preferred return structure on their investments, promote structures where the promoter will be eligible for a higher share of the cash flows after achieving the minimum return expectations of the investor.

What is your advice for land owners? Should they hold or sell in the current scheme of things?

Land owners should be cognisant of the fact that the markets are slowing down and it is not what it was in the last 2-3 years.

In the given circumstances, land owners looking for an exit in the immediate future should be moderate in their price expectations, otherwise they may find it difficult to justify their valuations.

Alternatively, if they believe that valuation is much more than what is being offered, they can look at the option of doing a joint development with the prospective investor. Even in such a scenario, the joint development ratio offered by the investor is expected to be conservative and it finally boils down to the keenness shown by either party to close the deal.

Nevertheless, the land owners can always hold on to the asset and develop it at the most opportune time.

Do you see any emerging opportunities for developers in the immediate future?

The current real estate boom can be mostly attributed to the phenomenal growth witnessed in the IT/ITES industry in the last 3 – 4 years. Most of the residential developments were high end premium apartments/villas targeting the IT/ITES crowd.

Now with IT/ITES market slowing down, developers can look at avenues of catering to the significant demand emanating from the manufacturing sector – develop projects that can cater to the Rs. 15–30 lakh budget segment.

Telecom/industrial corridors like Sriperumbudur, Oragadam will witness tremendous potential for such developments over the next few years. Increasing manufacturing activity has also increased the demand for high-quality warehousing space. It is estimated that around 200 million square feet of warehousing space will be required to meet the demand over the next 5 years.

Developing warehousing/logistics parks requires lesser investments, when compared to commercial projects and will help the developer to earn a reasonable return on their investment.

Chennai: At a time when flat purchasers are feeling the pinch of the steep increase in interest rates, some of the leading builders in the city have announced hikes in their prices ranging from Rs 100 to Rs 500 per sq ft.
Over the past two months, eight leading builders have increased prices. In actual terms, the increase in the cost per apartment ranges from Rs 1.5 lakh to Rs 7.5 lakh.
Among the biggest players, Estancia, the joint-venture project of Arun Excello and L&T, where 2,000 apartments are on offer, the price has increased from Rs 3,450 to Rs 3,950 per sq ft for the first 12 floors and from Rs 3,950 to Rs 4,450 per sq ft for the floors above that. Akshaya Homes has increased the price for the ‘Adora’, a 200-apartment project on the Old Mahabalipuram Road, from Rs 4,000 per sq ft to Rs 4,300 per sq ft and for ‘Metropolis’, a 480-apartment project on the Grand Southern Trunk Road, from Rs 2,800 to Rs 2,950 per sq ft.
Justifying the hike, Akshaya CMD T Chitty Babu said, “In the past one year alone, the cost of inputs for construction has increased by Rs 400 to Rs 450 per sq ft. So far, we have absorbed that shock. The cushion has melted. Now, it has reached a stage where we are forced to pass on the burden to the buyers. However, the hike in the price has not hit our business. Our average sales per month continues as usual,” he said.
Other builders who have hiked prices recently are Lancor, ETA Star, Doshi Housing, Alliance Infrastructure, Indus and Arihant. While most of them are doing apartment projects, Alliance is doing an independent villa project near Porur, for which, the cost has gone up by Rs 7 lakh per unit.
Prakash Challa, president of the Tamil Nadu unit of the Confederation of Real Estate Developers’ Association of India (CREDAI) said, “Builders are finding it difficult in the present scenario. Along with the increase in the cost of inputs, banks are refusing to fund projects. The delay caused by the regulatory agencies in giving clearance for the projects also contributes to the increase in the cost of construction. Unless the government steps in to do something drastic like controlling the prices of cement and steel, the industry cannot survive.”

But there are still some who are buying property

The steep hike in the interest rates in recent months has not dampened the spirit of Chennaiites looking for their dream apartments.
If the loan disbursements of major players in the housing finance sector like HDFC and LIC Housing Finance are of any indication, there has actually been a 30-50% increase in business in the past four months compared to business in the corresponding period last year.
LIC Housing Finance CEO RR Nair told The Times of India, “In Chennai, as against an average loan disbursement of Rs 80 crore per month last year, we have done Rs 120 crore per month this year. However, the investors and speculators have taken a back seat. The end users are the ones who pick up apartments now though the rates are high. For them, it is a question of shifting from a rented house to their own home.”
These buyers are mostly in the salaried class, and in their late 20’s or early 30’s. Apart from owning a house, they also seek the income tax exemption given on the interest and principal repayment on housing loans.
HDFC has recorded a growth of 35% in the past four months compared to the corresponding period last year, said sources in the bank. The average loan disbursement per month has gone up from Rs 130 crore to Rs 170 crore.
A senior official of the bank said, “It is too early to gauge the actual impact of the recent hikes in interest. It will be evident only over the next six months. In July, there was a fall of Rs 20 crore compared to June. If there is a further hike in interest over the next month, the business might take a severe beating.”
Over 50%of HDFC’s business is contributed by the IT sector and the balance by banking and manufacturing sectors. This year, many IT companies gave very low increments to their employees. “That might affect our business too in the coming months,” he said.
It is interesting to note that there is a significant increase in the number of people who opt for old apartments. “In the past two months, we noticed that this segment is growing by 3–4%,” said another official in HDFC.
Also there is a fall in the number of people who buy their second or third apartment. It was quite natural for people with high disposable income to buy more than one flat till recently. But with the interest rate showing no sign of a fall, they are now guarded.

Home owners who bought their dream house with loans from banks or financial institutions should ready themselves for a bigger hole in their pockets. Buying a house with a loan just got costlier. On Thursday, a host of home loan companies, led by sector leader HDFC, raised interest rates on home loans. HDFC and private banking major ICICI Bank raised their housing finance rates by 75 basis points (100 basis points = 1%), which will affect all customers under the floating rate as also new customers opting for fixed rates.
Home loan and other loan rates have been on an upward swing for almost five years now. It was in October 2003 that home loan rates dipped to a low of 7.5-7.75%. Under the changed home loan rate structure, for customers who had opted for floating rate loans, for a 20-year loan of Rs 20 lakh, the equated monthly instalment (EMI) will rise by Rs 1,030, while for a Rs 50 lakh loan the additional outgo would be Rs 2,576 and for a Rs 1 crore loan it would be Rs 5,152.

New home loan rates to take effect from today

New Delhi: Under the changed home loan rate structure, for customers who had opted for floating rate loans, for a 20-year loan of Rs 20 lakh, the equated monthly installment (EMI) will rise by Rs 1,030, while for a Rs 50 lakh loan the additional outgo would be Rs 2,576 and for a Rs 1 crore loan it would be Rs 5,152. The new rate will come into effect from Friday.
New customers with HDFC’s floating rate loans will pay at least 11.75% per annum, while those opting for a fixed rate would pay at least 14%. For ICICI Bank, the rates are slightly higher.
While floating rate loans from ICICI Bank would cost about 12-12.25% per annum, customers who have taken a fixed rate will have to pay at the rate of 15.50%.
Industry watchers believe that with most sector leaders hiking rates, following Tuesday’s RBI decision to raise key policy rates, more banks and financial institutions would raise deposit and loan rates. State Bank of India, the country’s largest bank and also a major player in the home loan sector, is yet to announce any decision on its rates.
Existing home loan customers of HDFC as well as ICICI Bank who are under the fixed rate structure will not be impacted by the recent changes in rates.
On Thursday, ICICI Bank also raised its lending rate for corporate and non-retail loans (called I-BAR), and also its deposit rates. While it has raised deposit rates between 0.75% to 1% for various tenures, the revised I-BAR would be 17.25%, an ICICI Bank release said. Two other banks, Yes Bank and Bank of Rajasthan, have also revised their rates upward. The recent increase in rates was necessitated by the rising interest rates in the economy, “which have hardened due to rising inflation and shrinking liquidity in the domestic market,” a release from HDFC said.
Thursday’s rise in rates comes on the heels of hike in rates by Punjab National Bank, Axis Bank and Jammu & Kashmir Bank on Wednesday.