Buying a Branded Home in India? Think Again…

Driven by the downturn, expensive apartments and villas have ceased to be high-return investments in India, thereby finishing off the only remaining reason for buying one such unit in the country. The only exceptions are ultra-low-cost homes and the high-value offerings from a few national developers.

First, a little history.

Late 2007. Seasonal Magazine issued an advisory to homebuyers:

‘AVOID BUYING APARTMENTS NOW’

It was also the cover story for our August 2007 Issue.

Needless to say, those who heeded this advice saved lakhs of hard-earned money. Those who didn’t, lost millions. Some lost crores.

We still get mails from some unexpected part of this globe, thanking us for this advice. NRIs are everywhere these days, but when it comes to a home, they want one in their mother-country.

Our cover story was no run-of-the-mill feature. It was well-researched and contained the distilled essence of our extensive interactions with developers and homebuyers across India, for more than 7 years.

And it was whistle-blowing at its best. Imagine predicting the market a good 14 months ahead! It was at the right moment in time, because homes tend to be long-drawn affairs for most homebuyers, thanks to the exorbitant prices that can only be financed through 10, 15, or 20 year loans.

And it was not only for the benefit of homebuyers. Many developers too gained by listening to this predictive story, and turning their products more homebuyer friendly.

We cited 8 rock-solid reasons why it was foolish to opt for a branded home then. If you haven’t read this story yet, we have posted a synopsis for you here:

Seasonal Magazine – August 2007 – Cover Story - AVOID BUYING APARTMENTS NOW

You will find that many of these 8 reasons are still valid, if not more valid.

Homebuying Advisory For Kerala - 2009-10 - Seasonal Magazine

With the Kerala real estate market soaked in uncertainties, here are the only safe options for buying a home during 2009-10:

READY-TO-MOVE-IN HOMES @ BARGAIN PRICES
Fully ready to occupy homes make some sense. That is, if you get it for bargain prices. Not at fancy rates like Rs. 2500 per sq ft. Yes, that is fancy these days. Especially, if it is from a local, Kerala-only builder. Rs. 1000 per sq ft for the 1 or 2 cents of undivided share in the land, and another 1000 per sq ft for the construction. Surprised? Yes, that is what it really costs them, including decent profit. Need you pay for their overheads? If you have 10 or 20 lakhs to spare for their overheads and ‘brand’, donate to them. But remember, it is no BMW or Merc you are getting. Our advice is to ask for Rs. 1800. It is a bargain. Let them take it or leave it.

HIGH VALUE HOMES FROM NATIONAL DEVELOPERS

Nationally branded homes still make some sense. Because, even if you want to go for a distress sale, the buying community will be wider. The design, amenities, and build quality are also much higher. We don’t know of any local, Kerala-only builder who measure up to this level. According to the location, a good price for a nationally branded home can range from Rs. 2000 to Rs. 4000 per sq ft in Kerala. When buying above that, you should be sure that you really need it. Like, for owning a piece of Marine Drive or such luxe desires. Try for projects that are racing to completion, say, 6 months or so, from now.

ULTRA-LOW-COST APARTMENTS & VILLAS
These units make immense sense, even if they are ongoing projects. But make sure that they are big enough for your current requirements, and, if it is a villa, extensible enough for your future requirements, say, five or ten years down the lane. Also, ensure that the lower prices are achieved by lower per-sq-ft rates and not lower sq-fts. Good prices to look for are in the Rs. 1250 to Rs. 1500 range. That way, you can own a 1000 sq ft apartment for Rs. 12.5 to Rs. 15 lakhs. If it is a 1000 sq ft villa, look for prices between Rs. 1900 to Rs. 2200 per sq ft for a 3 to 5 cents unit. It will come up to Rs. 19 to Rs. 22 lakhs. Villas also have the advantage of better completion times, as there is no need for a superstructure.

BEWARE OF PRICE CARTELS
Home prices across India have shrunk by 30%. Banks are pressurizing builders to cut costs further to realistic levels. But if these lower rates are not reflected in your locality, a price cartel might be working. They come in different forms, industry associations or forums being one. The strategy is simple. You want a home in a particular suburb. You go to Builder A; you are offered Rs. 3000 per sq ft. Pretty sure that it doesn’t cost that much for a home there, you go to Builder B, but is again met with Rs. 3000 per sq ft. You may continue visiting C, D, or up to Z, but the response will be the same; Rs. 3000 per sq ft. Finally, you are convinced that the running rate at your favourite suburb is Rs. 3000. Such cartels often have non-competitive clauses in their charters, which will include mechanisms to maintain prices at exorbitantly high levels. Thankfully, there are still many honest high-volume developers who are not part of any such cartels. Always, opt for them first.

DO-IT-YOURSELF HOMES
With the organized market in uncertainty, do-it-yourself homes are making a strong comeback in Kerala. Even in a dense district like Ernakulam, you can still get pristine land for Rs. 1 lakh per cent. And that too within a 30 minutes to 45 minutes travelling distance from the city centre. With building material costs down, even posh construction will cost only Rs. 1000 per sq ft. So, for a 1000 sq ft independent villa on 5 cents of land, all it costs is Rs. 15 lakhs. But a do-it-yourself home is not for the faint-hearted. Nor does it require much courage. Some hard work, and that is it. Your home, according to your dreams, in your favourite location. You can avail loan to buy property, take another loan later to build, or build it in a staggered way on your own funds. Another definite plus is the very low pollution in the affordable suburbs. Savings will also come on hospital bills. If you can afford 10 cents to plant a couple of fruit trees, that is what we call luxury. Not shared spas.

CONTINUE ON RENT
If you don’t have an ancestral home to live now, but still feel uncertain to commit to a home loan or home, we don’t blame you. Continuing on rent still makes immense sense. When the interest rates are high – as it is now – home loan EMIs don’t make much sense. An FD of Rs. 25 lakhs will fetch Rs. 20,000 per month for the rest of your life, in this interest regime. Building such a nest egg is also a viable option during these times. But be on the lookout always for that tipping point when home EMIs make better sense than monthly rent payments. In any case, investing in a small piece of land for future use is a wise decision. Homes – branded or not - never appreciate like vacant land.

To read the full advisory, subscribe to Seasonal Magazine at www.seasonalmagazine.com

Politics for a Living

We are going to decide. Vote in once and for all, the 500 odd leaders who should lead our lives for the next five years.

There will be three-way fights at most constituencies. That makes around 1500 aspirants. And each party had to deal with at least three times as many aspirants before finalizing their list. That makes around 5000 serious aspirants. The crème-de-la-crème of Indian Politics. 

Take a cursory glance at this list of 5000. What is common? Many things, but what strikes most is that most of them are unemployed. Yet, living an affluent life. How do they live?

500 of them will, anyway, go on to become MPs. Though it will be difficult to continue their lifestyle with the around 20k monthly salary of MPs, the nearly 3 lakh worth of monthly allowances, perks, & freebies should be enough for the sober among them. That is, to meet the basic expenses. To accumulate wealth, they too have to look elsewhere.

And what about the rest 4500? They will continue to live even more stylishly. Do these parties pay them regularly? Not really.

Whether it is party functionaries, MPs, or MLAs, politicians are expected to come up with their own revenue models. Party will just be a facilitator. Share the moolah with party, and party will continue to share the infrastructure with you. Politics for a living.

Are our politicians so busy with social work that they can’t earn a decent living for themselves? Gandhi was even busier with social work, but could find time regularly to earn his living by weaving khadi. Even Nehru earned his living from the royalties of his books.

When did this rot begin? Is it from Indiraji? Anyway, this rot of politics for a living has peaked in the last decade or so. The distances from Gandhi to Sonia Gandhi, from Tilak to LK Advani, from Morarji to Mulayam, from Ambedkar to Mayawati, and from AKG to Prakash Karat, are all too long.

While Ambedkar & AKG were teachers, Tilak was a journalist and Morarji a civil servant. Though all of them later abandoned their careers for social work, they had at least won their bread with their own hands for some years. Their current day successors, unfortunately, can’t stake such a claim.

Forget working with their own hands, how many of these leaders or any among these 5000 aspirants have travelled in a public bus, a second-class compartment, or an auto-rickshaw during this past one year? If anybody has, we should elect him or her. Because, only they will understand what all of us do everyday – keeping a regular job, running after buses and trains, and eating from roadside eateries.

Those who use politics for a living will never understand how we live.

Bankers Call the Bluff of Realtors

Now, who will call the bluff of bankers?

Finally, somebody is daring to tell the King that he is naked. That you can’t sell 1 or 2 cents of undivided share and 1000 odd sq ft for Rs. 4000 - 3000 per sq ft. Simply because, customers now realize that it just doesn’t cost that much to build and deliver. Developers who recently approached banks for their debt restructuring were given this music by most private and PSU banks. The question bankers asked is reportedly simple. Why do you need this restructuring? If it is for holding on to the inventory until recession passes, bankers were not interested. But if it is for reducing prices and clearing up the piled up inventory as fast as possible, bankers were game. But many developers are reluctant to be realistic, having savoured profits of 50% or more for some years now. Sales figures from both realtors and home-loan operations for the last two months show that even a 30% drop in prices may not be enough to clear the huge inventories. But the current move by banks to demand price cuts sounds hollow, as they themselves were party to this unrealistic boom, and unlike developers, are still quite unwilling to cut rates on existing loans, and unwilling to commit better rates for new loans for not more than one year.

Toyotas & Hondas to be Costlier

Reliance on Japanese component imports is making it difficult for Toyota & Honda to handle the hot Indian market conditions. The yen has been getting stronger by the day, making a major price hike imminent on their existing families like Camry, Altis, Innova, Accord, CR-V, Civic, & City. Already hit by slowing sales, there is no chance that the price hikes will be taken kindly by the market. The only hope seems to be new product launches as soon as possible, and both are planning one each by mid 2009. While Honda will pursue a seemingly sensible approach of launching its premium small car Jazz at Rs. 5-6 lakhs, Toyota is all set to pursue the seemingly intriguing strategy of launching the Fortuner SUV at Rs. 16-17 lakhs. Toyota, already the world’s largest carmaker, is more nervous about profit margins; while Honda, only the sixth largest carmaker, is more nervous about garnering market-share needed to overtake #5 Hyundai Kia, #4 Ford, #3 Porsche-Volkswagen, & #2 GM, to reach Toyota. India, with major unit sales, ranks high in the strategy of both automakers.

Buy 2 Nanos or 1 Alto?

Is it nightmare days at Maruti Suzuki? 800 can’t be coaxed to do Euro 4, and that leaves only Alto to withstand the upcoming Nano deluge. The problem? Now you can buy two Nanos at one Alto’s price! So, Alto Standard is going to climb down from its 2.3 lakh price position. Maruti is pinning its hopes on Alto’s 800 cc (Nano is just 624) and bigger size. Tata also can’t service the acute demand for small cars – its paltry supply of 5000 units for 2009 doesn’t stand a chance with Alto’s annual sales of 2 lakh units. But even after Nano’s mother plant in Gujarat becomes operational in 2010, Tata’s biggest problem will be Tata itself – its brand image, customer satisfaction, and dealer support. And once the economy looks up, and Toyota, Honda, & GM come out with their own sub-5-lakh compacts, the market will turn unpredictable for both Maruti & Tata.

Pressure Not Just on Satyam; IT’s Big-4 Feel Heat

Is Satyam losing clients due to Raju’s creative accounting or the stark recession? The happenings at Indian IT’s Big-4 – TCS, Infosys, Wipro, & HCL – would make us believe that creative accounting is only half the story at Satyam. The tainted company has already lost major contracts like Citigroup, Merrill Lynch, Coca-Cola, Glaxo-Smithkline, Novartis, Cigna, State Farm Insurance, SanDisk etc with new names being added to this list almost everyday - Nissan and Pfizer being the latest to go public with their Satyam-abandoning plans. However, the Big-4 is also not immune to this development with several of their clients forcing a take-it-or-leave-it rate cut on them. Both existing contracts and new contracts are being signed at 15-20% less margin than last year. Major outsourcing customers who have recently forced their way with the Big-4 include British Telecom, Visa, & Bank of America. Satyam’s losses should theoretically be the Big-4’s gains, but in reality those clients who have abandoned Satyam are bargaining hard with TCS, Infosys, Wipro, & HCL, coaxing them to take their accounts at 15 to 20% less margins. During the past several years, Indian IT has maintained that it operates on 25% margins, and Satyam’s core problem was said to be undertaking contracts at just 5% margins. But now, all are forced to work at 5 to 10% margins, and what this means for the future of Indian IT is clear.

DLF Tries to Mend Ways; But Will Anybody Believe?

How did DLF become India’s leading developer? They led in all those shrewd business practices that defined Indian reality during this last bull run – amassing vast land banks, announcing extravagant projects, hiking up prices to astronomical heights, collecting huge advances from homebuyers, failing to keep deadlines, and, ultimately, financing this utopia-of-an-industry manifold times with public money through an IPO. But ever since disaster struck in the form of this economic downturn, most realtors have remained literally frozen with disbelief. But not DLF. They have once again assumed the mantle of leadership. Most probably forced by its financing institutions, DLF has cut prices drastically – in some projects, even up to 32%. To withstand backlash from existing customers in those ongoing projects, the discount scheme has been extended to them too. All well and good. Some industry pundits are predicting that the DLF step is the first step in a series of action-reactions that all players will be forced to take in the coming days. That too is well and good. But what about credibility? Will a homebuyer now enter into a 20-year commitment with a bank, trusting a developer like DLF? Simply put, there is too much ambiguity. As people who had booked in DLF’s Cochin project found out for themselves, there is reportedly a public notice on the property announcing it as a government land. DLF’s Chennai project has run into even bigger troubles – massive homebuyer activism, collective bargaining etc – finally forcing DLF to announce an exit route for dissatisfied customers, that many are taking. DLF’s closest competitors, the top ten of realty, are too in a dilemma – if they don’t compete with DLF’s price cuts, they are doomed; if they do too, they run the risk of tumbling their filthily profitable industry forever. DLF is also facing regulatory pressure from the Central Government with a special audit by the IT Department, and with its request with various state governments to refund advances paid for townships, getting no response. The firm is facing a serious debt problem – around Rs. 4500 plus crores – and is finding no solace in the stock market where it heads the list of the biggest losers and with analysts still recommending SELL on DLF.

Indian Credit Card Industry Buckles in Sub-Prime

In US, it was the housing segment that dominated sub-prime borrowing. In India, it has been the credit card business. Sub-prime lending or lending to less-than-qualified borrowers has already made 22 lakh cards out of circulation in the country.

the opportunity in terrorism

When India is going through one of its toughest phases, both economically and militarily, PM is taken ill – not with a fever or sprain – but with the urgent need to do a bypass surgery, his second one, in fact. Acute stress is most probably the main reason, and Dr. Singh, not known to have ‘relaxing’ habits like alcohol or poetry, had definite risks. But what about his age? This September he will turn 77. My father is 73, and seeing his daily challenges, I feel like screaming to Sonia, “Give him a break.”

But what a joke that will be. Next in line is our current acting PM, who turns 74 this December.

And if we scream to Rajnath Singh, he will show you their Shadow PM, who turns a glorious 82 this November.

In India, it is as though you have to have 70 years of experience, before you will be entrusted with anything serious. This, in a country, whose only real strength is its mega youthful workforce, made possible by a birth-rate that refuses to fall to the absurd levels of the West. Yet, in a West plagued by a dangerously low youth population, we see a 47-year old Obama becoming the President, and George W Bush and Tony Blair calling it a day before they turned 63 and 55 respectively.

Again, we scream, where are our youth leaders? Oh, then comes images of Rahul & Omar. Better we stick with our septuagenarians and octogenarians. At least they don’t have Spain or England to run away when the going gets tough.

Let us patiently wait for our Obama. But by the time we find one, will the original flop in US? God forbid.

Anyway, India is lost. We don’t have a clue on what to do with 26/11. Extremists (including me) wanted an attack on Pakistan. But now, moderates (including me) don’t want war. The lessons from Afghanistan, Iraq, & Gaza are difficult to ignore.

But if we ignore Mumbai, what will be next? Most probably a cyber-terrorist attack that will down most of our computers, crippling our IT industry.

India is running from pillar to post, trying to garner support for its cause. It is getting plenty. But support against Pakistan? Aah, that is another story altogether.

As India is realising gradually and painfully, US, UK, & China still have plenty of use left with Pakistan. France on the other hand has never bought our story on Kashmir. Yes, even after 26/11. That leaves only Russia from the Mighty-Five, but they have lately developed a total disinterest in everything unRussian.

They all will learn, but it will take time and momentous events. US by another 9/11 maybe, UK by another 7/7, China when it loses its Xinjiang province to jihad, and even Pakistan will learn after losing a couple more Benazirs and being overrun by Taliban who already control the Swat Valley.

But can we wait till then, is the pertinent question.

We know we can’t, but solutions still elude us. There is nothing to turn to, except may be some feel-good pop psychology like from the ‘Alchemist’. Why don’t we look for the treasure within, for a change?

Border wars are something like feuding brothers or fighting couples pre-empting divorce for the sake of their kids. Each side hopes the other would change drastically. But it doesn’t happen, coexistence continues, and so does the fight. The only sensible thing then is protecting oneself or one’s family fully, and desisting from doing harm to the other. If you are magnanimous, extending unexpected help occasionally too won’t hurt.

But putting one’s own house in order should be the top priority. There is so much we can do internally.

Just because our police didn’t have the US-style SWAT (Special Weapons And Tactics) Teams, we had to call in the Army’s NSG. There is a world of difference in how Police and Army units tackle the same issue. Army is not designed to discriminate between good and bad or arrest the bad; they are trained to just finish off the bad. In the process we squandered the possibility of displaying a dozen Pakis before the world, and giving them a great trial.

Another missing facility is a centralised and distributed IT system to integrate terrorist data and intelligence inputs. After 9/11, one of the first things that US did was establish the Homeland Security Information Network (HSIN), which automatically collects, updates, and alerts all federal, state, & regional security agencies and administrations in real time. Even ordinary US citizens can provide input and avail services from the system. HSIN is largely credited with averting another 9/11.

Why can’t India do the same with all its IT prowess? It is any day more honourable than working for Satyam and the Satyams now in sheep’s clothing.

The beauty of the crisis is that it can be a huge economic opportunity too. If we are the unfortunate leaders in receiving terrorism, can’t we be the deliberate and fortunate leaders in providing counterterrorism infrastructure? IT systems, weapons, training, bullet-proofs, material sciences, gas masks, first aid kits – any diversified conglomerate’s mouth should be salivating at the opportunity. Nations will be our clients.

Don’t discard this as a pie-in-the-sky idea. If soldiers from more than a dozen countries including US & Singapore come to our Counter-Insurgency and Jungle Warfare School (CIJWS) at Mizoram regularly, what is not possible for India in defence business?

But going to war with Pakistan with a command structure that includes Pratibha Patil as Supreme Commander of Armed Forces and AK Antony as Defence Chief, should be thought at least ten times. Their counterparts, Asif Ali Zardari & Ahmad Mukhtar look menacing. Though Gilani looks even more menacing, Dr. Singh is definitely more sophisticated and capable.

Not all of us can defend the country with bullets, but a chance to do so with ballots is fast approaching. Parties which placed people like Patil & Antony to mission-critical posts, and parties that orchestrated blunders like Babri Masjid demolition & Gujarat carnage should get your feedback.

The graveness of 26/11 and the impending elections hint that India might still spring a surprise surgical attack on PoK training camps. But will it be any more effective than calling them ‘Porkistan’ on blogs, is the riddle.

Parties Make Grand Promises; Funds & Follow-up Nobody’s Concern

Pie-in-the-sky ideas are coming from every political party out there to woo voters. Promised freebies range from free electricity, five acres of land, and even 2000 bucks every month for over 1 crore people. Where are the funds for all these? Don’t insult our intelligence please…