October 28, 2011

Housing /Realty sector going down in India.

“ Industrial production rose less than expected following record interest-rate increases by the central bank and as the global recovery weakens. Output at factories, utilities and mines increased 4.1 percent in August from a year earlier after a revised 3.8 percent gain in July, the Central Statistical Office said in a statement in New Delhi today. The median of 20 estimates in a Bloomberg News survey was for a 4.7 percent gain.

Emerging markets from Brazil to Indonesia have cut borrowing costs to shield expansion as Europe’s debt woes and a faltering U.S. recovery hurt the world economy. In India, the fastest inflation in more than a year is sustaining pressure for higher rates even as consumer demand wanes.”

As I have written since I shifted to Delhi in late 2007 that there appeared little awareness then about the Housing bubble ( apart from other bubbles yet to burst) in US , which was obvious by end 2005 and early 2006 . In 2008 I found Indians increasing their real estate values , many times almost 100% .Indians are great believers in God’s gift . The same remains true of equity jumps .
Since I stayed away in Turkey and mostly in Bucharest till 2007 , I had missed out on growing urbanization and acquirement of all symbols of prosperity by a rich minority led by the likes of Ambanis and Mittals .Yes during my 2to 3 months visit to Delhi and India in winters , I did see considerable growth of prosperity .But I have pondered over it since my return.
PM and Ahluwalia know nothing better than what IMF and US lays down and does in economic sector .In case willy-nilly almost all world economies have been tagged to US economy, almost now going down hill as in the film ‘Run away train’ So as US goes down ( In EU except Germany most other members are almost bankrupt) it will take other s down or at least affecting them adversely . With poverty line debate it is clear that the Ahluwalias with Rs 32 per day urban income not below the line are out of touch grass roots level reality .Out of 8% growth , 7% goes to a few hundred thousand families.Only 1% goes to the very poor ; 50% or more .
Quite obviously the US economists have messed up their economy. I have written 8 articles on the subject since 2002 . I have written something appeared amiss with India’s realty sector .What happens when it starts going down .Violence .suicides
I had circulated a news item about housing and infrastructure surplus in China too. And Banks’ indebtedness.
Take Care Gajendra 28 October, 2011.

Mirroring the US, India's Real Estate Sector Melts Down

By MADHUR SINGH / NEW DELHI Monday, Oct. 20, 2008

The new moon of the lunar month of Kartika marks Diwali, the Indian festival of lights, when Hindus across the country worship the goddess of wealth, Lakshmi. But divinities know full well the laws that govern finance, and Lakshmi may now be a little tight-fisted about circulating her riches amid the ongoing global credit crunch.

Indian tradition decrees that it is auspicious to make purchases in the days leading up to Diwali, which falls in October or November. With faith meshing so effortlessly with commerce, the season sees sellers, advertisers and marketers urging the devout to spend money with a religious fervor, as they hawk everything from chocolates and consumer durables to gold and houses. Buying a home is considered especially propitious. What better way to welcome the goddess of wealth into one's life than by inviting Lakshmi into a new abode? Thus, the period from just before Diwali through March is usually a bonanza for the real estate industry: some 70% of the annual business is conducted then.

Not this year. With just about a week to go until Diwali, the mood is decidedly downbeat. The demon of impending economic doom refuses to die, and as tightened liquidity makes people put off larger purchases, the real estate sector is facing the worst attack. "This time last year, I was selling 10 to 12 properties every day," says Alok Gupta, who runs Advanced Real Estate in the New Delhi suburb of Noida. "This time, I haven't sold a single property all month!"

Considered the barometer of its economic growth, the real estate sector in India has grown 30% to 35% during the past five years, reflecting the rapidly increasing demand for office, commercial and industrial space, as well as for bigger homes, now considered within the range of India's prospering working classes. But the economic juggernaut began slowing earlier this year because of double-digit inflation and a severe liquidity crunch (a fallout from the U.S. subprime crisis). Now economic activity may shrink as part of a global slowdown. The country's growth estimates of 9% at the beginning of the year have been revised to well below 7%, and the effect is directly visible in the realty sector. "No one's buying anymore," says Ashwani Shukla of New Delhi-based Triveni Associates. "Two years ago, 25-year-olds earning fat pay packets from [multinational corporations] were buying high-end apartments. Now there are no takers for flats selling at 20% markdowns. Estate agents are finding it difficult to even meet daily overheads."

Shukla himself has branched out of real estate. He started selling insurance six months back "to pay the bills," he says. According to various estimates, sales in cities like Mumbai and Chennai are down 30% to 40%. Hoping to induce buyers during Diwali, realtors are advertising cash discounts of 5% to 10% for down payments, and as much as 25% discounts if buyers are willing to wait two to three years before taking possession of the property. "But there is no liquidity with the end user," says Arvind Nandan, director of consultancy at real estate company Cushman & Wakefield India. "Home-loan rates have hit the roof, and people's investments have lost value at the stock market. No one has the money to buy."

Shukla says if the situation does not improve, there could be distress sales within the next six months. The realty sector was heading for a cyclical slowdown even before the current economic slump. Over the past few years, increasing demand had pushed up prices, with speculators jumping in to further inflate the market. Eventually, inventory piled up when buyers refused to pay unrealistically high prices. "So many transactions were taking place between speculators and investors that no one bothered to find out what the end user, the family who would eventually live in the house, would be willing and able to pay," Shukla says. And those prospective homeowners are the biggest target of India's real estate industry: almost 80% of real estate developed in the country is residential space.

This all comes at the worst possible time. Even as buyers refused to bite, inflation passed into double digits in June this year, raising prices of construction material. Realtors overran their budgets and projects stalled, leaving skeletal structures dotting the landscape in big and small cities all over the country. Then came the liquidity squeeze, as the government sponged away cash from the system to control inflation. Home-loan rates went from about 7% to 12% and higher. People who bought struggled to pay, and potential buyers kept away.

Realtors like Shukla and Gupta may have little reason to light firecrackers this Diwali, but their prayers to Lakshmi, the goddess of wealth, will definitely be more fervent, especially as experts predict that things will get worse before they get any better. "This was a much-needed correction," says Nandan. "And it isn't complete yet. I expect the market to go down further, and it's hard to say when the recovery will begin."

Yet no one is entirely pessimistic. Experts and industry insiders believe that once the storm blows over, demand is bound to rise for the same reasons it did last time — a large, young workforce; gradual but consistent liberalization reforms; and a high rate of consumer and private-sector savings. "The silver lining is that once this phase ends, land and property prices will be corrected to rational levels, speculators will be out, and the sector will have stronger fundamentals," says Shukla. If everyone's prayers go right, the goddess will eventually be propitiated and her blessings will issue forth once more.

Read more: http://www.time.com/time/business/article/0,8599,1851969,00.html#ixzz1aUq88qFu

An earlier article

India’s realty sector getting sick


Mumbai, Aug. 8: A million newly built homes lying unsold and no sign of the market picking up, Mumbai’s realtors have turned to the Bhagvad Gita for solace.
Gita crash courses are mushrooming in every neighbourhood as the message of stoic focus on work and steadfast disinterest in results has suddenly become fashionable.
“The Bhagvad Gita is very relevant in the current scenario of recession in the real estate market. The doctrine of Karmanye vadhikaraste, Ma phaleshou kadachana (One has the right to work but not to results) brings a lot of solace when the prospects of healthy bottomlines look bleak for most builders,” said a course guide at the Chinmaya International Foundation, a wing of the Ernakulam-based Chinmaya Mission, whose Bhagvad Gita and Vedanta classes are very popular.
Sanskrit and theology tutors who otherwise render selected chapters from the Gita and Vedanta at corporate workshops or at posh satsangs have attained celebrity status, their appointments almost as hard to get as those of top city doctors.
Mall lobbies and even seedy shopping arcades are letting out space on a day-to-day basis for Gita-Vedanta classes.
Depending on the class size, the course fee varies from Rs 3,000 to Rs 5,000 for a week-long course on the Gita rendered in English.
The price tag is pegged at Rs 25,000 for a year-long course, which includes the study of Sanskrit.
“But those are less popular and for older people as they are more time-consuming,” says Anil Tripathi who, with three other tutors, runs Gita classes in and around upscale Bandra. They also give tuitions at home or in the office of the realtors.
The Chinmaya Mission’s courses at their Marine Lines and Powai branches are overbooked.
“We decided to launch a full Bhagvad Gita appreciation programme from 15th July given the tremendous enthusiasm — it was sold out in a day and now we are directing people to register for our online and postal courses. The response has been phenomenal,” said Rahul Arya, programme and admissions co-ordinator.
Over 10,000 have registered for the online courses, of whom 60 per cent are associated with the realty industry which has been hit hard by the rise in EMIs as well as inflation, the two factors that have pushed people to put off their home buying decisions.
“The biggest realtors are taking classes in the academy or opting for Net courses with us,” said Arya.
Top Mumbai builder Niranjan Hiranandani, who changed the face of Powai, is one of the star students of the Bhagvad Gita e-learning and appreciation course at Chinmaya Mission.
“Learning the Bhagvad online is a good opportunity. The Bhagvad Gita is not only a religious book... We should definitely read it, learn it and understand it,” he said in a statement.