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Dark night for realty sector, light still seems elusive

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demonetisation-Real-Estate

Mumbai, Oct 27 : It was a year when India’s realty sector was shaken to its foundation. A majority of the big, medium and small realtors across the country suffered from a severe liquidity crunch, stalled projects, elusive investors and buyers and a near-blanket stay on new projects — especially in the lucrative commercial and luxury housing segments.

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How did demonetisation result in such a severe impact on this segment?

“Essentially, demonetisation completely drained the markets of liquidity, which is still continuing. Banks have all the money but it is not being lent out. Nor is it adequately compensated by alternatives like digital growth,” Niranjan Hiranandani, leading developer and Chairman of Hiranandani Constructions, told IANS.

Hiranandani, who is also President of the National Real Estate Development Council (NAREDCO), a powerful body of construction companies, admits that the realty sector took “a battering” at close quarters in the past 12 months. The high-investment construction industry was the worst affected.

The Goods and Services Tax (GST) and the Real Estate Regulation Act (RERA) have not helped either. If anything, they have come in as additional dampeners. The result is that the realty industry is passing through a phase where it seems to be all decked up and having to go somewhere.

Hiranandani said that, on an average, around one-third of the realty market was down nationwide, with the impact even higher in the north and the east, even as the cash crunch continues. The realty sector operated on the basis of unaccounted wealth, which may have taken a hit.

Also, the sector was largely unregulated, allowing builders to delay projects at their whim, and investing money raised from customers in other projects or land banks. RERA is expected to change all that, with strict penalties for violation of construction norms or fund use.

Jaxay Shah, President of the Confederation of Real Estate Developers Association of India (CREDAI), is quite upbeat about the changes that have spelled doom for the sector he is in. “Some of the most revolutionary reforms such as demonetisation, RERA and GST have proved to be a ‘naya daur’ or a new era for the realty sector,” said Shah, who is Managing Director of the Gujarat-based Savvy Infrastructure.

Shah told IANS that the policy and legislative changes were “ushering in a new wave of growth” by increasing transparency as well as home-buyer and investor confidence. “These will eventually help in a sustainable growth of the sector and the economy.”

Only agreeing partly, Hiranandani said there were some bright spots, even though most real estate markets were down. “The situation is bright in pockets; for instance, our Group sold the highest number of units in commercial properties in our career,” he said with a smile.

But he added that very few groups — like his own — managed to scrape through after the initial shocks which hit the economy like a ‘tsunami’.

Those representing the buyers fail to see bright spots in the sector.

Ravi sharma, National Secretary of the Confederation of Real Estate Brokers Associations of India (CREBAI), said while there was a more than 25 per cent drop in new property sales, the secondary or resale market saw a collapse of nearly 50 per cent, mainly because buyer confidence was rudely shaken.

“This has created a change in the level of buying. For instance, the middle-class is now opting for affordable housing, which was earlier being bought by lower-middle classes families. The luxury housing segment has practically crashed in Maharashtra, Tamil Nadu, Kerala, Karnataka, Telangana, Andhra Pradesh, NCR and other major markets,” Sharma told IANS, adding that the situation was likely to become worse in the coming months.

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Already, he said, there were market rumours that cash component in deals was making a comeback in substantial proportion as many cash-starved builders and developers were desperate to meet their commitments in the face of new regulations.

Although there’s a substantial drop in interest rates for housing, this has attracted only a small segment of investors (not buyers). He feels that potential buyers with spare resources were now diverting to the stock markets for better returns.

Sharma said the chances of a turnaround were low. Most developers were saddled with up to one-third in unsold stocks, blocking up huge investments. With nearly a 40 per cent drop in sales in the largest market like Mumbai, almost all the builders were facing a severe financial crunch. Many are thinking of shifting to low-cost housing and to construction in tier-3 cities.

He said buyers were looking for reduced rates and some developers were trying to dispose of their unsold inventory with discount. “But how long can this go on?” Sharma asked rhetorically.

Hiranandani says a silver lining is visible, but many problems need to be sorted out.

“For instance, many foreign investors who are keen to enter are waiting for the right time — GDP is down and the economy is not picking up, despite measures by the government. Once these are tackled, investor and consumer confidence would revive.”

Shah is confident that sentiments in the sector are reviving.

“The provisions designed to protect buyers — whose interests are at the heart of the reforms — are helping to streamline processes and facilitate a transparent ecosystem for all. We are witnessing an overall recovery of the sector,” Shah said.

That may be a tad over-optimistic, but every stakeholder in the sector may be looking out for the light at the end of what seems a long, dark tunnel.

BY : Quaid Najmi

(Quaid Najmi can be reached at [email protected])

(Editors: The above article is part of a series of demonetisation stories leading up to November 8)

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Wall Street collapses, S&P 500 ends at lowest since April

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Wall Street

New York, Dec 15: US stocks fell sharply on Friday as investors grew concerns over a possible slowdown of the global economy and a slew of corporate news.

The Dow Jones Industrial Average was down 496.87 points, or 2.02 percent, to 24,100.51. The S&P 500 decreased 50.59 points, or 1.91 percent, to 2,599.95. The Nasdaq Composite Index fell 159.67 points, or 2.26 percent, to 6,910.66, Xinhua news agency reported.

The Dow slumped more than 550 points at its low during the session and dived to its lowest close since May.

The S&P 500 dipped to its lowest closing level since April. All the 11 primary S&P 500 sectors closed lower, with health and technology down 3.37 percent and 2.48 percent, respectively, leading the laggards.

After Friday’s steep sell-off, the tech-heavy Nasdaq is now just up 0.11 percent for the year.

The Cboe Volatility index, widely considered the best fear gauge in the stock market, rose 4.75 percent to 21.63 on Friday.

Global markets were in risk-off mode with investors simply trying to limit performance damage rather than reach for outperformance, according to some analysts.

“Traders are again selling shares of profitable trades before the closing of the year. There isn’t a great deal of volume in stock trading today, so that means there is less resistance against the pressure from sellers today,” John Monaco, a trader at Wellington Shields & Co. LLC, told Xinhua.

Meanwhile, a strong U.S. dollar also complicated the situation. The U.S. dollar rose in late trading on Friday.

The dollar index, which measures the greenback against six major peers, rose 0.39 percent to 97.4441 at 3:00 p.m. (2000 GMT).

“Today’s lower market index seems to be derived from another day of strong U.S. currency. The U.S. dollar’s strength must be monitored closely as too much strength in the dollar hurts global corporate profits,” said John.

Wall Street also digested a slew of corporate news.

Shares of Johnson & Johnson, a Dow member, plunged more than 10 percent on Friday after Reuters reported the company knew about asbestos in its baby powder for decades.

Apple stock slid 3.2 percent after top analysts from TF International Securities cut iPhone shipment estimates by 20 percent.

On the economic front, U.S. retail sales increased 0.2 percent last month, led by online stores, the Commerce Department said on Friday. The reading beat market expectations.

Meanwhile, U.S. industrial production rose 0.6 percent in November, topping market forecasts as gains in mining and utilities offset declines in manufacturing, according to the Federal Reserve.

IANS

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94 MLAs with criminal cases, 187 multi-millionaires in new MP Assembly

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Bhopal, Dec 14 : As many as 94 MLAs have declared criminal cases while a whopping 187 of the 230 MLAs are multi-millionaires in the newly-elected Madhya Pradesh Assembly, a report by the Association for Democratic Reforms (ADR) revealed on Friday.

The Congress, which won the Assembly polls, leads the list with 56 MLAs having criminal antecedents, followed by the Bharatiya Janata Party (BJP) with 34 while the Bahujan Samaj Party has two such lawmakers.

Of the 94 MLAs with criminal cases, 47 face serious charges with six of them facing charges of attempt to murder, three facing charges of crime against women and one for murder.

On the financial front, 187 of the lawmakers are multi-millionaires with the BJP leading the pack with 109 such MLAs followed by the Congress with 90.

BJP’s Sanjay Satyendra Pathak from Vijayragahvgarh constituency in Katni district is the richest MLA with assets in excess of Rs 226 crore. Fellow party lawmaker Chetanya Kasyap from Ratlam City is next with properties in excess of Rs 204 crore.

The average assets of the MLAs in the current Assembly is above Rs 10 crore which is just double that of the 2013 Assembly.

As many as 86 of the MLAs were re-elected and their average assets in the last five years have grown by nearly Rs 7 crore — a rise of 80 per cent.

There are only 21 female members in the new Assembly.

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Sensex ends flat on weak global cues, RBI board meet

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Sensex equity Nifty

Mumbai, Dec 14: The key Indian equity indices closed flat after trading in a narrow range on Friday tracking weakness in Asian and European markets over concerns of slowdown in global growth.

Caution in the domestic markets also prevailed as the outcome of Reserve Bank of India (RBI) board meeting was awaited till the closing bell.

Although with meagre gains, domestic indices logged their fourth session of advances led by Telecom, oil and gas and power stocks. However, finance counters remained subdued.

The Sensex settled 33.29 points higher at 35,962.93 points, touching an intra-day high of 36,019.02 and a low of 35,813.85.

The Nifty50 gained 11.85 points or 0.11 per cent to close at 10,803.40.

Bharti Airtel gained the most of the 30-stock Sensex. The shares of telecom major gained over 5 per cent after Telecom Disputes Settlement and Appellate Tribunal (TDSAT) scrapped rules on predatory pricing.

It was followed by Yes Bank which advanced by 3.23 per cent. Oil and energy stocks like ONGC, NTPC and Power Grid gained in the range of 1 to 2.5 per cent.

In contrast, HDFC and Wipro were the major losers followed by L&T, Sun Pharma and Adani Ports.

IANS

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