Month: November 2008

Real estate demand in the residential vertical has been badly hit due to high prices and poor affordability.

Buyers Sentiment in Realty:
Buyers are shying away from new projects or under construction projects, where project delivery is more than a year away. This is because – buyers are optimistic that prices have to correct further in the near term, and they lack confidence in the developers and the developers’ ability / intention to construct and deliver the project on time.

Reality of Indian Realty List Prices:
The list prices quoted by developers for under construction projects have little meaning today as no few deals are concluded at the official list prices. Deals are happening at 30-50% discount to list prices. However, developers are not officially lowering list prices, as they believe that taking such measures may not necessarily result in any incremental demand from home buyers, but developer himself will be impacted due to the negative outlook on prices and weak sentiments.

Standard Chartered – BKC Deal which happened at a 30% discount to the last deal reported in Bandra Kurla complex has led to re-negotiation of lease rentals / rates in the Commercial property segment across India.

This must come as a surprise to most of our readers as India’s loan growth is accelerating; 22% yoy in Jan-08, which has climbed to 28% currently. But, with a slowing economy, where is this growth coming from ?

RBI data suggests that, Large and medium corporates are borrowing most aggressively, consumer and agriculture are lagging industry growth, while small businesses make up the rear, with negative growth YTD. [This is really bad, Small businesses should be given an opportunity to Grow]. Excluding Oil companies, loan growth remains high at 27% yoy.

Loan Growth is a Big Risk:
The fastest-growing sectors – real estate (46%), construction (56%), iron & steel (34%), credit cards (90%) and financial companies (46%) – are also probably the most risky ones. Infrastructure loans also strong (36% yoy), but have moderated in 2Q09 (3% qoq). While rising loan momentum in the face of falling economic growth / Industrial production data sits uneasy, the sectoral bias of this growth suggests even more caution.

Can Indian banks recover the loans lent to Real Estate and Credit Cards ?

Inflation for the week ended Nov-8 falls further to 8.9% as compared to 8.98% reported in the last week. The prices of primary articles decline to 9.31% for week ended November 8, 2008 as compared to 11.01% for the preceding week.

The prices of fuel items declined to 8.21% for the week as compared to 9.22% in the preceding week. The inflation for manufactured products continued to decline for eleventh consecutive week to 8.02%, as compare to 8.06% for the preceding week.

Amongst the manufactured articles, the prices of metal products, woods products, chemical and chemical products and Beverages tobacco & tobacco products rose the most, by 15.25% yoy, 9.77% yoy, 8.98% yoy and 8.33% yoy respectively.