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CREDAI is the apex body of real estate developers in the country with a membership of 3500 plus developers in 18 states across India.

CREDAI is concerned with the general slowdown of the economy. CREDAI is also aware of the negative consequences of this slowdown in terms of falling growth rates and potential loss of employment to many of the 10 million skilled and semi-skilled workers engaged in the real estate sector. Most of these workers are at the low income, daily wage levels.

Government has commenced taking some proactive steps in easing liquidity to this sector as well as in starting the decline of interest rates for the home buyers.  Further, inflation has also started showing a clear downward trend.

CREDAI believes that this is a time for all stake holders (developers, financial institutions, Government, manufacturers, service providers) to work together in order to cumulate the benefits they can pass on to the customers so as to improve the affordability for the end customer and build confidence amongst the home buyers.

In light of this, CREDAI is urging and advising its members across the country to make every effort in lowering prices to the levels possible. This will have a desirable impact and a cascading effect on employment in the industry as well as on more than 170 other industries as well as the economy and country as a whole.  Some developers across the country have already reduced prices, CREDAI now requests all its members to do the same.

In light of the vast diversity of prices of real estate across the country, varying stages of work for projects, compounded with micro market divergent factors that affect the pricing of real estate, CREDAI is unable to recommend any specific percentage of price reduction that could be considered to be workable across the country.  

Housing is a critical engine of growth of the economy and CREDAI's action is related to discharging its responsibility of keeping the wheels of this engine of growth moving forward.

Responding to the request and interest shown by all section of buyers, TDI has brought in this scheme as a part of its customer friendly approach. Though the actual price of the apartments start from Rs. 68 Lacs, the scheme enables the buyer to own any one of these exquisite high rise apartments for as less as Rs 9 Lacs.

Launching the scheme, Mr. Kamal Taneja, Managing Director, TDIL said, "Launching this scheme for "Kingsbury Terraces" is just one way of bringing in more customer friendly and innovative approaches to serve our customers better. We will soon introduce many more innovative schemes for our other projects which will be of benefit to our valued customers."

Owing to the location of the project in Kundli, the potential emerging hub of NCR, Kingsbury Terraces offer the best of world-class facilities and features. Residents of each of these Kingsbury apartments will have their select king size living space and style.

This is ensured by exclusive gated access, with the block sporting modern amenities like gymnasium, swimming pool, billiards room and community club to name the basic ones. Interflowing beautiful greenery and landscaping, State-of-the-art international standard elevations, terrace garden, four spacious bed rooms with hall, a separate servant room and balconies all around are a part of the world-class designs given to these apartments.

When would we see banks bring down interest rates?
Interest rates or any other rates are subject to supply and demand. In the supply context, which is liquidity, banks would like to see enough of it in the system before they are able to reprice credit. So, first you have to ensure that borrowings are repriced and then lending repricing will follow. It could happen in a few days or a few weeks. Steps are being taken and intentions are very clear. I am the first to say there's a need for price cut in this market.

Do you expect further monetary action by the government?
Yes. There is more scope for more action on the monetary front and they are prepared to take it. A few days ago, the Prime Minister said we are in a 24x7 readiness mode and for me, that is answer enough. Steps have been taken and more steps will be taken. The action would be determined by how the global situation unfolds. For instance, if systemic liquidity is not comfortable, it needs to be eased. Or if interest rates are still at uncomfortable levels, they need to be lowered. I am sure there is a preparedness to act on all these issues. There is further scope for a 2.5 per centage point cut in the CRR itself and, if the situation warrants, a cut in the SLR too. The financial slowdown has brought a sudden loss of confidence and it needs to be restored with the right policy decisions very soon.

Is there enough liquidity in the system?
Unlike most global market places, India is blessed. It has a more liquid system than most others. But, it is entirely a policy decision to use it to bring down interest rates or otherwise.

The finance minister said, "Hotels must cut tariffs, airlines must cut prices, real estate must cut rates of apartments and homes they sell, car makers and two-wheeler makers must cut prices."

A look at the financial performance of various sectors suggests that real estate is best placed to take a hit on its margins. In the quarter ended September 2008, the top 14 real estate players clocked an average net profit margin of 50 per cent.

However experts feel that the price cut would depend on the land acquisition cost, construction cost and cost of money.

"Market forces determine the price, however if the developer is comfortable it would make sense to compromise on margin and
keep the working capital flow on," said Anshuman Magazine, managing director, CB Richard Ellis.

Also, real estate is the only sector that has witnessed a rise in its profit margin over the same quarter previous year.

All other sectors have witnessed a fall in their profit margin over the previous year. Aviation is operating on a negative profit margin and the net margin of hotel industry is down from 19 per cent in September 2007 to 13.6 per cent in September 08. Auto companies too have taken a hit on their margins in the second quarter.

Editor's Note: After we received this story, we talked to Raheja Developers Pvt. Ltd's Mr. Harinder Dhillon (GM - Marketing, 9971091903) has given us the following response.

-- Start of Rahejas Response ---

We are a customer oriented company & focus not only on the quality aspect but also track the time overrun. Excavation work at the Atharva site in Sector 109, Gurgaon is already complete in all respects. We are the only developers in the new Gurgaon master-plan who have commenced construction activity in the new master-plan sectors. As construction at the site is a great concern for our esteemed customers who have invested their hard earned money to us, we do value their eagerness & do assure that during the project execution, they are most welcome to see the quality and efforts as keen developers we put in our projects. We would request all our customers to keep faith in our organization and also in our projects, which will blossom into major landmarks in the city in the times to come. Our esteemed customers are most welcome to visit the project site now as well as in the times to come to see the progress for themselves.

Also, bank disbursements for Vedaanta commenced six months back by Bank of Baroda, PNB, Axis Bank, HDFC, LIC Housing Finance & PNB Housing Finance. For Navodaya, bank disbursements have already commenced three months back from Bank of Baroda as well as Union Bank of India. For Atharva, Federal Bank is disbursing down payment cases as well as installment payment cases.

The installment payment plans for all our projects are very much construction linked in nature. The application forms as well as agreement to sell installment payment plan section are testimony to the same.

We have already received the in-principal approval on the Atharva building plans & the copy of the minutes of the meeting of Building Plan Approval Committee held under the chairmanship of Sh. Dhare Singh, CTP, Haryana has been scanned for anyone’s reference.

The first page of the minutes is given below.

Click on the image to ENLARGE

The page of the minutes relevant to Atharva is given below

Click on the above image to ENLARGE.

The paragraph relevant to Raheja Atharva is

And the final line says that "the committee decided to approve the building plans subject to corrections and submission from NOC from the Airport Authority of India" ...

-- END of Rahejas Response ----

The submission that our website received is reproduced below.

Hello,

We have invested in Raheja Developers residential project Raheja Atharva in Sector 109, and the following is our story. We would appreciate it if you could help us resolve some of the issues mentioned below.

A legal notice has been served to Mr. Navin Raheja, Managing Director of Raheja Developers Pvt Ltd and is attached below.

Page 1 of legal notice to Mr. Navin Raheja of Raheja Developers Pvt Ltd. Click on image to ENLARGE

Page 2 of legal notice to Mr. Navin Raheja of Raheja Developers Pvt Ltd. Click on image to ENLARGE

In essence the story is as follows:

We received letter from Rahejas in Aug/Sept 2008 that stated "there have been favorable developments at Atharva. The Building plans have been approved after licence by the Director, Town & Country Planning, Haryana. The bhoomi Pujan was solemnized on 29th July 2008." This was false and the building plans have NOT yet been approved by the DTCP. The scan of the letter is below:

The full scan of the letter can be seen below:

Click on image to ENLARGE

Even though the plans had not been been approved, Rahejas as written in the 2nd page of the same Bhoomi Pujan letter, they went ahead and created the Flat-Buyers Agreement - which are already in possession of some of the buyers. How can a buyer agreement be made when the plans have not yet even been approved? Here is the page 2 of the letter telling about the Bhoomi Pujan

Click on image to ENLARGE

Now we are being pressured by Rahejas to make payments on this project. Coercion via sms, calls, demand notes etc is being made to buyers even though the company had agreed that it would not demand further payments till banks had approved and started disbursing loans. As plans have not yet been approved, and requisite papers have not been submitted to banks, no bank - except a minor one - are disbursing any loans. Despite this the company is threatening to impose interest on "late payments" if payments are not immediately made. And as a way out Rahejas is forcing people with longstanding relations with other banks to take their loans from the only bank - Kerala based Federal Bank - that is disbursing loans.

This only bank that is disbursing loans on Raheja Atharva even without the approval of the Building Plans of the Atharva project is Federal bank. And there is news in the market that the money collected in early payments was diverted to pay costs towards the land for Atharva - as the legal notice presented earlier state, it is almost sure that Rs 20,33,78,493 of the money that we paid was later used to pay for the land on which Atharva is to be built.

Accusations are flying, and now buyers in Projects like Raheja Vedaanta & Raheja Navodaya are also protesting that money is being demanded from them while there is no discernible progress on ground.

Please help us clarify what the actual situation is as we are getting very worried about the safety of our investments, and also the fact that we are being almost daily pressured by Rahejas to make more payments to them.

The payment plan has 3 columns - time linked schedule, a construction linked schedule, and the payment due. Even though the project as sold on basis that it is construction linked (column 2), it is now being claimed that it is actually time-linked (i.e column 1). This has caused major confusion amongst the owners who are gathering in force to dispute these claims.

We are not able to get satisfactory answers from the builder Raheja Developers ( telephone 011 406 11111) and would appreciate if other visitors on this forum can pool together their knowledge and experience to help us cope with this situation where our lifetime earnings are at risk.

Please share your experience on this forum via comments, or email to Shri Surinder Kumar Bangia bangia_sk AT hotmail.com who has filed the legal notice, or email to qubrex AT gmail.com who help run this website.

A review of last reported financial results shows that growth has come mainly from selling more services to existing clients rather than adding new ones. Indeed, all the top five Indian IT companies by revenue got between 93% and 99% of their total revenue from existing clients in the second quarter this fiscal.

India's second largest software company by revenue, Infosys Technologies Ltd, added 40 clients in the second quarter of the current fiscal down from 48 in the year-ago period.

Rival Wipro Ltd added 28 clients compared with 59 in yearago quarter and Satyam Computer Services Ltd added 33 new clients in the second quarter slightly down from 37 in year-ago period. India's largest software services firm, Tata Consultancy Services Ltd (TCS), did manage to add 51 clients, the same as in the year-ago period while HCL Technologies Ltd was the sole exception, adding 29 clients in its latest quarter, up from 19.

While the high percentage of repeat business suggests sticky customers, it also is a sign that expansion is becoming harder.

Speaking to analysts after announcing second quarter results, Infosys COO S.D. Shibulal had said: "Our repeat business this quarter was 99% plus, which shows that we are able to mine our existing accounts.

But, at the same time, it shows that we are not able to ramp up our new clients and that is something which we need to focus on." Said a TCS spokesperson: "Business from existing customers offers stability of revenues in a tough operating environment and long-term relationships help offer significant value to our existing customers as we come up with ideas to optimize business operations." Still, the company says, "it is also critical to increase our base of key customers simultaneously".

As Indian companies apply the brakes on hiring, Mint talked with four young people who thought they were on the cusp of what should have been bright careers in a booming economy. None of the students wanted their names mentioned for fear of jeopardizing future jobs. Edited conversations:

Opting for CAT
On 9 October, I booted up my computer and found an email saying `has cancelled the job offer made to you on account of the slowdown in the US. We advise you to consider alternative offers. In case things get better we will get back to you.'"

As if I had loads of other offers.

Was I upset? Upset is an understatement!

I had landed the job in the seventh semester of my electrical and electronics engineering at National Institute of Technology, Surathkal in September 2007. I relaxed after getting a good job, with a good company with a good reputation.

Even though this company (an outsourced product developer in Bangalore) postponed my joining date several times, saying their new campus was not ready, I never thought they would back out. But they eventually did.

Until (this past) Sunday, I focused on nothing but the CAT (Common Admission Test for entering MBA programmes). This is how the last seven months played out for me one day at a time:

Wake up early, at 5:30 am. Go for a jog. Come home in time for breakfast. Check mails. Do some test papers. Surf the internet, read about US elections, new software or economic theories. Take online German classes. Lunch. Half an hour nap. Prepare for CAT and brush up engineering concepts in case I have to attend any interview. Read newspapers, some eight of them. Evening: Play basketball or table tennis with colony friends. Come home. Dinner. Watch TV. Sleep early.

Now that CAT is over, I'll go to Bangalore in search of a job.

Graveyard shift at the call centre
Life is hectic. The hours are maddening at the call centre. But something to keep me busy and make some money as well.

The frustration was mounting so I took up a job at a call centre at Noida (outside New Delhi). A fortnight back, I got an email saying that the on-boarding process with the multinational IT services and consulting firm that had recruited me will start in December. This is after months of phone calls that got me the company's answering machine, and repeated emails that only fetched me computer-generated responses.

The government should play its role in the matter, he said, adding: "The government has to ensure through regulatory mode and policy to facilitate larger supply of housing in the market, then the prices will come down," said Singh.

Earlier in the day, Chidambaram said at the summit that sectors like automobiles, hospitality and realty should consider cut in prices to stimulate growth in the market.

Singh said DLF had floated housing schemes in places like Kochi (Kerala), where prices were already "rock bottom".

He added that prices in the realty sector could go down further as the raw materials prices were falling.

"We must have laid off some employees somewhere," DLF Chairman K P Singh told reporters on the sidelines of India Economic Summit, but did not give the number of jobs that were cut.

The company has also deferred some of its projects due to poor demand. "In hotels, residential and commercial everywhere... deferred because of lower demand and liquidity crisis," he said, again without sharing the specifics.

Singh also said high interest rates have taken a toll on demand. "There are no takers for housing sector... Ideally, the interest rate should be around 7 per cent."

Asked if the current prices of the realty projects are inflationary, Singh denied and said: "It cannot be inflationary as it has to be competitive. It also depends on supply and demand."

Because of demand going down, many projects have been closed down by many developers across the country, he added.

The Reserve Bank on Monday allowed the cash-starved housing finance companies to raise short-term foreign currency-denominated funds from overseas markets.

Housing finance companies could raise these resources up to $10 million or 50% of their net owned fund, whichever is higher, for refinancing the short-term liability, RBI said in a release.

As such, these companies cannot use these funds for creating fresh assets, the central bank said.
These funds should have a maximum maturity of three years and must be swapped into rupee for the entire maturity, the release said.

Housing finance companies can raise these funds from only those lenders, which are multilateral or bilateral financial institutions and foreign equity holders with minimum direct equity holdings of 25%, it added.

Besides, these funds can be raised at interest rates not more than 200 points above London Interbank Offered Rate (Libor), RBI said.
Apart from taking a slew of liquidity-easing measures in general, RBI had recently reduced provisioning requirements for the housing sector.

The RBI announced yet another relief measure over the weekend as it reduced risk provisioning for the commercial real-estate industry to 100 per cent from 150 per cent.

But most banks are still reeling under the pressure from their exposure to the real estate and seem to be in no mood to follow RBI's cue and consider incremental lending.

OV Bundellu, Deputy Managing Director of IDBI Bank, said, " We have an exposure to real estate and are still cautious of lending to realty. So this will not make much of a difference."

As the slowdown is getting deeper and bankers are unwilling to take chances, the realty space is caught in a catch-22.

Moreover, with negative reactions both from the Bankex and Realty index, the RBI's sop, it seems, is likely to hit a wall.
Meanwhile realtors continue to feel the pain and insist that they are paying through their noses for funds.

Shravan Gupta, CEO of Emaar MGF, said, "Our cost of borrowing has gone up by 300 to 350 basis points."

The Central Bank seems to be considering all the options in its kitty, but with the current loans under stress and the risk of increasing NPAs from the real estate, it does certainly have an arduous task at hand.

Instruments rated in this category carry the lowest credit risk in the short term. Within this category, certain instruments are assigned the rating of A1+ to reflect their relatively stronger credit quality. ICRA has also reaffirmed the rating of long term pass through certificates (PTCs) at LA+ (SO) indicating the adequate-credit-quality in the long term. The PTCs are backed by loan to DLF.

The rating revision reflects the adverse impact on the liquidity profile of real estate companies due to the current slowdown in the domestic real estate market, prompted largely by a slowing economy, elevated property prices and high interest rates. This along with the difficulty that all corporate in general and real estate players in particular are facing in raising funds, either through loans or equity, has significantly increased funding risks for such companies.

The rating action also takes into account higher than anticipated debt levels, build-up of receivables, significant repayment obligations in the short term and deferment of planned Real Estate Investment Trust (REIT) listing in DLF Assets (DAL). Moreover the aversion of banks to lend to real estate companies because of greater risk weight assigned by the Reserve Bank of India to lending to real estate companies and the higher perceived risk now being attached to this sector has increased refinancing risks for companies like DLF.

The rating continues to draw comfort from DLFs leading market position and its diversified presence across all segments in the domestic real estate sector, its track record of successful project management and execution, its low-cost geographically diversified landholdings, and the diversity of its product offerings. The rating also favorably factors the steps taken by the company to lower its concentration on National Capital Region (NCR) by launching projects in other major locations across the country.

Going forward, although DLFs development plans are significant as compared with what it has executed in the past, the company has taken steps to reduce execution risks through measures like tying up with leading international project execution agencies such as Laing O Rourke and WSP. Moreover, demand risks for DLF are mitigated to some extent by its strong client base and the significant preleased/booked space in its on-going projects.

DLF is the largest domestic real estate developer with experience of over 50 years in developing real estate. DLF has developed some of the prime urban colonies in and around Delhi, including one of the Asia`s largest private townships DLF City in Gurgaon. Currently DLF is constructing projects totaling about 62.8 million sq. ft located across the country, which are scheduled for delivery in various stages till 2010-11. For the half year ending September 2008, DLF reported an operating income (OI) of Rs 75.55 billion and a profit after tax (PAT) of Rs 37.99 billion, as against an OI of around Rs 63.23 billion and a PAT of Rs 35.34 billion in the corresponding period of last year.

Shares of the company declined Rs 9.45, or 3.92%, to settle at Rs 231. The total volume of shares traded was 2,867,023 at the BSE (Monday).

Similarly, it raised the ceiling by 75 bps on non-resident (external) rupee accounts (NRE) to Libor plus 175 bps.

Since October 2008, the interest rate ceilings on FCNR (B) and NRE term deposits were increased by 100 basis points each.

Click On Image For Large

A Bank of Baroda (BoB) official said the system is facing a shortage of dollar resources. It is possible that NRIs may move funds to India expecting better returns when the interest rates in developed countries are being slashed. However, it was too early to see an impact.

ICICI Bank, India's second largest banking entity, revised the interest rates on its NRE fixed deposits and FCNR(B) deposits with effect from November 18, 2008.

"We are looking at divesting up to 100 per cent stake in all six properties, comprising 1,000 rooms. We are also talking to a few private equity funds for this, but a deal hasn't been clinched yet," said a top executive at Unitech. The executive also said the company had scaled down its target for hotel business. Instead of 15 hotels with 2,500 rooms as planned earlier, Unitech has decided not to go beyond the 1,000-room capacity.

"We are proceeding with our hotel business as planned earlier. Six of our hotels are under construction. The first will open in January 2009. Unitech is in the business of developing properties and looking at monetising its real estate assets. We are evaluating a divestment of equity at both individual assets as well as a group of assets. Depending on the price, we will be looking at minority or majority or outright sale in these assets," said Sanjay Chandra, MD, Unitech.

Unitech's first hotel project will be the 199-room mid-market property, which will be managed by Marriott and sport the `Courtyard' brand. A person briefed on the matter said that Unitech was seeking a valuation of Rs 250-300 crore for the property, but had been offered a lower Rs 200 crore by a private equity investor. He said the two parties may close the deal soon at the lower end of the band.

Other two hotels of Unitech, for which the company has management tie-ups with Marriott and Carlson hospital chains, will be ready in around two years.

Chandra said that Unitech planned to build 35 hotels, including 15 in the first phase. The company expected to raise $350 million through private equity in the current fiscal for its hotel business. The global financial turmoil, however, has made fund-raising difficult for real estate firms.

Parsvnath Developers Limited, has announced a Joint Venture with Constructora San Jose, S.A., a subsidiary of Grupo San Jose, a leading infrastructure development company in Spain.

Under the terms of the contract, Parsvnath Developers and San Jose will hold equal equity in the fields of Transportation, Aviation, Power Generation and Transmission.

The Indian real estate company would execute projects through floating projects specific SPVs.

RBI had reduced the risk weightage on loans for the commercial real estate industry to 100 per cent from 150 per cent last Saturday and similarly, standard asset provisioning requirements too were reduced to 0.40 per cent.

NON-STARTER

• RBI had reduced the risk weightage on loans for the commercial real estate industry to 100 per cent from 150 per cent last Saturday

• Standard asset provisioning requirements too were reduced to 0.40 per cent

• The RBI's move follows industry captains including realtors meeting the Finance Minister earlier to express liquidity concerns

"The sector is passing through stress, the risk has increased. We would like to wait and watch before taking a call, but as of now there is no question of passing on the benefits," an executive of a public-sector bank said.

A modern waste treatment plant for the waste produced in the city on the lines of the one existing in Paris is also proposed to be set up.

Spread over 10 acres, it will be a hi-tech site with proper provisions taken against the latchet.

The pits at the site will be properly lined so that toxic waste does not seep into the ground water and deteriorate its quality.

An area of 500 m on each side of the SLF site will be developed as a green belt so that the nearby residential areas don't have to bear with the dirty smell.

Noida Authority is understood to be working in close association with the Infrastructure Development Finance Corporation, Infrastructure Leasing and Financial Services Limited and the DHV India Pvt. Ltd.

The income-tax law before embracing the stamp duty value tried to call the seller's bluff by making pre-emptive purchases -- notify the department as soon as the agreement to sell is made if the proposed purchase consideration exceeded the norm -- which was different for different cities -- so that the department could purchase the property from him at such apparent consideration.

In my humble view, this was an infinitely better regime. The seller could make no grievance out of it because if the apparent consideration was, say, Rs 60 lakh, he should be indifferent to receiving the same no matter who the buyer is -- the income-tax department or the party with whom he has negotiated.

Of course, the black component of Rs 40 lakh would not have been received assuming the black-white norm, as it were, was 60:40. And this is the reason why the scheme worked fairly well till the government chickened out when the slump in property prices in the year 2000 saddled it with unsold stock of properties. To my mind, pre-emptive purchases must be revived because it is much more objective than the regime of guideline value fixed by stamp duty authorities that admittedly can be arbitrary and high-pitched.

A common colour code for vehicles meant to ply in the NCR is being finalised to facilitate unrestricted movement in the region as part of the reciprocal common transport agreement among governments of Delhi, Haryana, Rajasthan and Uttar Pradesh.

The colour code prepared by the National Institute of Design (NID) has been sent to the governments of Delhi, Haryana, UP and Rajasthan for their approval, said a senior Urban Development Ministry official. Vehicles will sport a common blue stripe at the lower portion punctuated by a thin green line in between.

With the introduction of new colour code, people will be able to identify taxis, autos and buses to hire from the airport, railway station and inter-state bus stops in the capital.

Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj (JLLM) said, "There is lack of forward movement in many of these cities. Foreign investors have slowed down their plans in these cities as well. Bigger catchment and better returns is prompting many of them to focus instead on growth avenues in the metros." Low market sentiments has indeed led to a shift in focus. Hence investor interest now is more on the present lucrative metros than these future growth cities.

Kunal Banerji, executive director, marketing, TDI feels that while no spiralling growth will be seen in these cities, a 15-20 per cent growth rate definitely exists. "I think an investor should look at places in the outer areas such as Sonepat, Kundli and Panipat that promise good return. As far as prices are concerned, I don't think that there will be any further downward correction in these markets."

JLLM however is of the view that price corrections will continue in overheated pockets of the country, particularly in locations in the metros and Tier II cities that have seen unreasonable price trends. "We expect that the rates in correcting markets will reach a decisive low point by January 2009," Puri added.

Vipin Aggarwal, executive director, Omaxe feels that the psychological impact also has a role to play in buyer behaviour. "There is low appetite for property in the current context. There was a lot of movement in these future cities half a year back as well. But due to the market situation, that is not the case now. Plus psychologically also people feel that this is not the right time to invest in property."

But not all agree. Pradeep Jain, chairman, Parsvnath Developers feels that the demand is still robust in these markets. "We have projects in cities such as Indore, Lucknow, Jodhpur and Moradabad which are seeing good demand. These markets are end-user markets and not investor-led. Hence the demand is still holding good."