Nation
Congress ka haath, BJP ke saath!
In Gondia Zilla Parishad, Congress and BJP joined hands to keep out Sharad Pawar-led NCP, which emerged as biggest party
 
Bharatiya Janata Party (BJP) and its archrival Congress have joined hands in Maharashtra's Gondia Zilla Parishad to keep Sharad Pawar-led Nationalist Congress Party (NCP) away from the power. In the 53-member Gondia Parishad, NCP had won 20 seats, the Congress 16 and the BJP 17.
 
Cobbling up a quick post-poll alliance, the Congress and the BJP have bagged the two top posts of Zilla Parishad president and vice-president, leaving the NCP out in the cold.
 
Maharashtra Congress president Ashok Chavan has termed the development as "purely local" and has sought a report on the Gondia alliance from the party unit in Gondia.
 
On the other hand, Shiv Sena, which is an alliance partner in the state government with BJP has termed, the partnership in Gondia, as a 'miracle' that will affect state politics. The party, in an editorial in its mouthpiece, 'Saamana', said, "Taking a decision of this magnitude requires a lot of courage. Our ally has shown that it has the courage. We do not have any doubts that Maharashtra's problems like unemployment, farmers' woes will be solved with the blink of an eye." 
 
"It seemed that there was no reason to doubt the intentions of this clean, cultured and soft party (BJP) because it took its lessons from the Sangh (RSS)," the editorial said.
 
NCP in Gondia and Congress in Bhandara had unseated BJP in a comprehensive manner, in the Zilla Parishad elections held on 30th June. In Bhandara, in the 52-member house, Congress won 19 seats, NCP 15, BJP 13 and Shiv Sena won one seat.
 

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Public Interest Exclusive
Is real estate in a slow-motion crash?
Data from property websites suggests a deep slowdown in large cities. Even rental yields to rise from 2% to 4%, prices will go down 50%! argues Ambit Research
 
With banks pulling back lending to developers and fear of Black Money Bill looming large among speculators the real estate market across India is witnessing sharp drop in transactions and new launch volumes in contrast with the Reserve Bank of India (RBI)' Housing Price Index, says a research report.
 
In addition, rental yields in property markets in India have remained extremely low as compared to its other Asian peers. Ambit Capital, in a note says, “Mumbai has a rental yield of close to 2% (this is gross of tax and maintenance charges) whilst the lending rate hovers around 10%. The difference between lending rates and rental yields is one of the highest in India. Even if one assumes that buyers are willing to live with only 5% rental yields as they might have an extremely bullish view of capital gains arising from real estate in India, this would imply halving of real estate prices in Mumbai.”
 
   
"We are seeing a broad-based real estate pullback, with prices correcting in most tier -1 and tier-2 cities alongside sharp drops in transaction and new launch volumes. The drivers for this slowdown are a mix of supply-side factors and demand-side factors. The result is not just a drop in demand for building materials and challenges for lenders with big mortgage, LAP and housing finance books, but also a generalised slowdown in GDP growth, as the sector which drives 50% of India’s capex and 30% of its jobs conks off," the research note added.
 
Whilst the RBI’s Housing Price Index suggests that prices have moderated on a pan-India basis, data from property websites suggests a deeper slowdown in India’s large cities, with prices falling by 7-18% YoY. "Alongside this, we are also seeing a significant drop in transaction volumes," Ambit Capital said, adding, "our visits to five property registration offices in Mumbai suggest a sharp drop in the registration of new residential properties and data from property valuers in Maharashtra and Tamil Nadu suggest that transaction volumes have fallen by 10-15% per annum for three consecutive years now. Also, new launch volumes are down 40-80% on a pan-India level." 
 
 
According to Ambit Capital, here is a combination of supply-side and demand-side factors trigger the slide...
 
Supply side:
(a) RBI data suggests that the banking system seems to have turned the tap off for property developers over the past year. This has in turn made developers either stop construction or cut prices. 
(b) The National Democratic Alliance (NDA) government has cut subsidies sharply (down 9% in FY16) and is shifting subsidies to Direct Benefit Transfer. As a result, the ability of the politician-and-builder to pilfer subsidies to fund real estate construction has been checked and
(c) The knowledge that there is many years’ worth of unsold real estate inventory in most of India’s tier-1 and tier -2 cities is causing investors to hold back further purchases. 
 
Demand side: 
(a) The draconian Black Money Bill went live on 1st July and has made HNW families reluctant to invest in Real Estate. 
(b) The 8% point gap between the gross rental yield and bank base rate highlights the unattractiveness of real estate for investors, and 
(c) Key state governments (Maharashtra, West Bengal, Delhi) have hiked “ready reckoner” rates sharply this year and thus prevented prices from dropping to a market clearing level.
 
 
Real estate accounts for half of India’s capital formation and 30% of its job creation. With the sector on the slide, GDP growth is under pressure, directly, because of the drop in investment, and, indirectly, through pressure on wages. 
 
The slowdown in the construction sector is not only visible through the drop in new launches but also through a sharp decline in cement production on a pan-India basis. Data released by the Office of the Economic Adviser, the Ministry of Finance, suggests that cement production has dropped significantly in recent months.
 
 
According to Ambit Capital, with sluggish demand not only have new launches fallen (see the exhibit above), but real estate inventory has also started piling up in major cities across India (see the exhibit below). Data from property research houses suggest that regions like Mumbai and Delhi would take as much as 11-14 quarters to clear the existing inventory (see the exhibit below). Real estate brokers say that the time taken to clear the inventories in a healthy real estate market should be around four to six quarters, it added.
 
Alongside the drop in transactions volumes, we are also seeing real estate prices correcting. "In Delhi, our meetings with businessmen who live in south Delhi suggest that prices in this prime part of Delhi are down 20-25% over the past year and transaction volumes have fallen sharply. In the smaller cities, the situation seems to be worse, with our contacts in Jaipur, Rajkot and Lucknow also pointing to a 15-20% YoY correction and sellers saying that it is hard to receive bids for properties that they have put up for sale," the report said.
 
According to Ambit Capital, with land acquisition in rural India having come to a standstill over the past 18 months (probably due the Land Acquisition Bill that was passed on 4 September 2013), a powerful mode of wealth generation has been stopped in its tracks. As land prices have stagnated in rural India over the past 12 months, the “wealth effect” that rising land prices had created over the past decade seems to have ebbed away, it added.
 
"Whilst stated prices, which the real estate agents quote, remain elevated, transaction prices have already fallen by 10-15%, and real estate brokers are saying that a further correction is a must for inventory liquidation. Discounts have increased significantly in the secondary transactions market and distressed real estate liquidation by lenders, who have not been repaid by developers, is becoming increasingly common," Ambit Capital concluded.
 
 

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COMMENTS

R S Murthy

2 years ago

Real Estate was normal so long as the needy persons were trying to build or aquire a residence. Once this is made a product for marketing all greedy and manipulators entered the game and destroyed it just like IPL cricket Tournament.Owning a residence is slowly becoming a dream of many.

manoharlalsharma

2 years ago

(A)SPEED OF TRANSPORT (B)RATE OF INTEREST on loan & (C) RATE OF VACANT,CLEAR-TITTLE is high and it is affecting on BUSINESS of real estate slow-down

DB DESAI

2 years ago

Other than land acquisiton bill and curbing black money transdactions one more very important factor is developments of roads and other facilities for the people to create new living areas connected to the towns and cities. Transportation is the only hardship. If that is guaranteed people will happily live in even remote places and that would reduce the pressure on the cities where population is concentrated. If 7 Kms. is taking 45 minutes to travel by car how can I live in my village? So I am living unwillingly at a Taluka place. If the roads are developed and maintained I would certainly prefer to live in my ancestral house in a village just 7 Km.s away from my workplace and schools etc. I can live with my parents and take care of them. My cost of living would be much lower.

JAMBUNATHAN RAMANATHAN

2 years ago

Inordinate delay in delivery of booked properties and poor customer service of builders including the so called "building India " builders is one more reason for the middle class to lose faith in real estate. Plainly speaking people no longer wish to be cheated by the "builder politician" nexus in the building industry and lose money.

This segment will revive only when the market sentiments improve. Government need to take exemplary action against "cheating" builders instead of merely telling that action will be taken or law will follow its own course.

R.Jambunathan

REPLY

Jadhwani

In Reply to JAMBUNATHAN RAMANATHAN 2 years ago

unless very harsh punishments are spelled and executed for builders + their associates who often threaten poor buyers ............ there will be no one now coming to buy flats very soon ...... will wait and watch the honesty factor coming back in business .. gone those days when a buyer was cheated in full scale jai hind

HITESH JAIN

2 years ago

The need of the hour is to tax the unoccupied house in the hand of owner and ready but unsold home in the hand of developer.

It will help to stop Investors & builders holding on inventory at high rate and release stock for real buyer at reasonable market rate.

On a different not mass housing project should be undertaken in time bound manner in public and private enterprise partnership at affordable rate with good quality of construction. Redevelopment of old building should be made easy in time bound manner.

The most important to control on use of black money and money laundering in real estate.

REPLY

Jadhwani

In Reply to HITESH JAIN 2 years ago

bring back heavy capital tax only for the multiple property owners - so he is compelled to throw the unused flats in market to real buyers ........ so market will find right level of pricing

Gopalakrishnan T V

2 years ago

Where is the slump in real estate? Builders with black money and other investors with black money accumulation have been investing in real estate expecting a further boom which is unfortunately not taking place and it is a sign of strength in the Governance standards. In fact real estate prices should have a real crash so that middle income and lower group of people can think of having some shelter. The approach to curtail black money deals and the expectation that all transactions including the real estate transaction would have to be routed through banking channels with proper tracking with PAN numbers and linking with IT returns, people with black money who are the major investors in real estate may perhaps be avoiding real estate deals. It is a very good signal and the real estate should crash which will help the economy to be back on the growth trajectory. Nobody is able to afford thinking of doing any economic activity thanks to exorbitant real estate prices and this slump should result in a crash and economic activities need a revival. The inflation which is killing the economy and the poor alike will also come down if real estate prices are kept as low as possible.

Dr T V Gopalakrishnan

tapan sur

2 years ago

while ur article is interesting to read,I would stress it IS only the tip of the Ice Berg.Post 2017 India will be a restless country.Economy functioned in a certain way in India,& suddenly this economy cannot be subjected to strict regulations,without rectifying basics,on which the economy already sits.It is difficult to state issues openly,but one eg.if I may highlight,take south of a major city in the north,market rates for land is almost 2,00,000/sq.yard,& circle rate may be only 25000/sq.yard,so calculate the economics,& extrapolate the same with recent regulations,inference will be clear? Regulations are good but cut off period should hve been post 2014,since that has not happened,expect pains in the economy along with it's far reaching effects into all our lives, for some time to come.

Now, rate Indian Railways services on board
Passengers on the Indian Railways will now be able to give their rating of services while travelling following the launch of an IVR-based feedback collection drive, it was announced on Friday.
 
The feedback system questions passengers on six service parameters including the cleanliness of the station, platform, train, catering quality, air conditioning efficiency, food quality, punctuality of the train and the quality of bedrolls, the Indian Railways said in a statement.
 
However, of the six services, feedback is being sought for only two services immediately, the statement said without specifying which two.
 
The Indian Railway Catering and Tourism Corporation (IRCTC) has been entrusted with the responsibility of obtaining the feedback through an interactive voice response (IVR) system.
 
Passengers travelling in the trains will be randomly contacted on their mobile phones and asked to award a zero for bad or unsatisfactory service, one point for satisfactory service and two points for good service.
 
On an average, 60 to 70 calls per day per train will be made and efforts were afoot to approximately make 100,000 calls per day to the passengers of mail and express trains, the statement said.
 

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COMMENTS

Veeresh Malik

2 years ago

This call is made by Indian Railways as soon as the train reaches the destination, is what I have experienced, at the very moment when I was trying to disembark with the usual jostling and pushing going on. Indian Railways may wish to improve the timing of this otherwise great idea.

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