Sales of city homes take a breakneck plunge

In a recent article appearing in Times of India Mumbai Edition dated 3rd August 2011 indications are available that real estate prices are in for a fall.

Read excerpt here

Past seven month's data gleaned from the stamp duty and registration department showed that the trend in the eastern suburbs (Kurla to Mulund) has been the worst, with a record 33% slide in the number of documents registered in 2011, compared to that in 2010. From January 2011 to July 2011, 7,529 papers were registered, while 11,371 were sealed between January 2010 and July 2010. The western suburbs seem to have fared slightly better with deals between Goregaon and Dahisar sliding by 19%. Borivli taluka recorded the registration of 13,554 documents from January 2011 to July 2011, compared to 16,846 for the same period last year.

Read the entire article here

Builders exploit FSI rules, buyers face music

A report appearing in Times of India Mumbai Edition dated 23rd July 2011 explains how a scam is happening in the real estate sector.

Read excerpt below and check out link for the whole article.

Clara Lewis, TNN Jul 23, 2011, 05.01am IST

MUMBAI: In several upmarket areas, builders get proposals sanctioned for smaller flats than they actually sell. In such instances, the buyer, or flat owner, can end up becoming the lawbreaker, making him vulnerable to extortion by corrupt civic officials in the long run.
The builders pay the civic body a pittance in development charges and scrutiny fees for the BMC-approved carpet area, and then 25% of the Ready Reckoner rate as premium for the extra Floor Space Index (FSI). They, however, charge flat buyers market rates for both the carpet and additional FSI areas. The BMC building proposals department has reportedly approved plans for such buildings in areas stretching from Malabar Hill to Gamdevi, Girgaum, the Parel mill areas, Elphinstone Road, Dadar, Bandra, Khar,Santa Cruz and the Juhu Vile Parle Development Scheme.
Drawings with TOI show that the intention is clearly to amalgamate extra spaces with the original carpet area to create one large flat. A 1,500-sq-ft flat can grow to 2,500 to 4,000 sq ft and cost Rs 10 crore to Rs 16 crore.

Read the Article Here

Builders resorting to distress sale?

In another report appearing in Times of India, Alka Shukla paints a not so rosy picture for the real estate industry.
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But here’s the catch – you can avail of the sale offer only if you make a bulk buy of not less than 10,000 sq ft area
Alka.Shukla timesgroup.com

Hiral Shah, who has been scouting new residential projects in Kandivali to buy a house, got two rude shocks. “No one is quoting less than Rs 1.2 crore for a 1,000 sq ft house in Kandivali! And surprisingly, I also discovered that almost half the flats I saw in the two new projects were vacant,” said Shah.
 
As if echoing his find, a recent survey by property research firm Liases Foras has revealed that there are 80,000 houses lying unsold in new projects across the city.
 
Even as developers maintain that sales are brisk, crevices are beginning to show up, and one indication of this is that some developers are resorting to distress sales – disposing of homes by offering as much as 40-50 per cent discount. Zen Towers in Tardeo is a case study. Set to complete in December this year, you can buy space for Rs 15,000 per sq feet as opposed to the market rate of Rs 25,000.
 
But here’s the catch: you must make a bulk buy of at least 10,000 square feet.
 
“The market is over-heated, and with a price correction being anticipated, investments are drying up. Though big builders can hold on, it is the small players who have started to feel the pinch, and are creating distressed assets even as market sentiment is positive,” said Atul Khekade, partner, Netz Realty, a property consultancy firm that has sensed opportunity here.
 
It has created a pool of 30 such distressed assets in South and Central Mumbai and is marketing them to NRIs and High Networth Individuals.
 
Experts say only about 10,000-12,000 units have been selling in each quarter this year, as against 21,000 between April-June last year. No wonder pressure is building up.
 
If a 22-storey tower in South Mumbai’s Nagpada area is available at Rs 8,000 per sq feet – as against the market rate of Rs 15,000 per sq feet – provided 10,000 sq ft is bought, another project in Andheri (W) is selling for Rs 10,500 per sq feet, almost 30 per cent lower than the market rate even if you buy just 5,000 sq ft.
 
A builder, who is selling bulk stock at 40 per cent discount, said on condition of anonymity, “As big builders go on increasing rates for their projects, the average market rate is pushed up. They get funding through FDIs or big private equity firms. But when rates reach a brink, even investors who fund small projects like mine become wary. One Gujarati investor group that had promised to pump some money into my project backed out. Now I am desperate.”
 
Real estate analysts speculate the cracks could widen. Pankaj Kapoor, Managing Director, Liases Foras said, “Creation of distressed assets is an indication that the residential market will undergo a correction, which could be to the tune of 25 per cent in the short term. This is not just because property prices are unrealistic, but also because a chunk of flats are being traded by investors instead of being bought by actual users.”

No demand for houses, but prices hit an all-time high

In a report appearing in Times of India of today (9th May 2011), it has been estimated that real estate prices may drop between 15 to 40% in the coming months. This is due to high unsold inventory and prices being out of reach of most buyers.

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The laws of demand and supply do not apply to your city’s real estate scenario. With 93,000 under-construction and ready for-possession homes still unsold, the ‘weighted average’ cost of a flat is at its peak, according to a finding put out by property research firm Liases Foras. 

On an average, the cost of a flat in Greater Mumbai (area under BMC limits) is pegged at Rs 2.18 crore. That’s a 436 per cent rise compared to 2005 prices. Since then, the graph has steadily moved northward but for a brief dip during the economic meltdown in 2008 (see info graphic).
COMMON MAN’S WOE
And this upward swing in cost has pushed the middle class to the fringes. A basic principle of lending institutions says that the cost of your house cannot exceed five times your annual salary. In 2005, to buy a home, your annual income should have been Rs 8 lakh. At today’s prices, your annual income has to be Rs 43 lakh.
    “Five years back, Rs 8 lakh per annum had a higher purchasing power than today. And it was not too difficult for one’s family income to be in the range of Rs 5-10 lakh,” said a market observer.
    “Today, even if individual incomes fall in that range, very few family incomes are in the Rs 40-lakh range,” he said.
    Managing Director of Liases Foras, Pankaj Kapoor, points out at a pricesale pattern, not particularly to Greater Mumbai but in the entire Mumbai Metropolitan Region that includes Greater Mumbai, Thane city and Navi Mumbai.
    “When prices fell, sales picked up. Like, when the per-sq-foot weighted average price in the metro region fell from Rs 8,100 in 2008 to Rs 5,300 in 2009, sales improved from 9 million sq feet to 20 million sq feet,” said Kapoor.
    “The rate today is Rs 9,235 per sq ft. Even if you factor in inflationary costs, prices will have to be in the range of Rs 6,000 per sq ft to increase market efficiency.”
PRICES LIKELY TO DROP?
With home sales already low, and if the current pace of sales continues, it will take 35 months for the current stock of unsold homes to find buyers, feel realty experts.
    And, they opine that this situation will only bring down the market further.
    “While an overall correction of 35 per cent is required to improve sales, South and Central Mumbai will need a correction to the tune of 40 per cent,” said Kapoor.
    Though not all realty experts may agree on that, the general sense is that prices will correct by at least 15 per cent in the next six months.

Actual Property Rates in Thane

In a recent exhibition held under the aegis of MCHI (Maharashtra Chamber of Housing Industry) at Thane, I happened to visit quite a few stalls.

One of the projects exhibited there was from Puranik Builders. The brochure listed a building named 'Houston' which has 2 BHK and 3BHK flats. The area for a 3BHK flat as mentioned in their brochure is 748 square feet carpet. The rate they are quoting is 4695/- per square feet with an escalation of 25 per floor.

When I called to check what was the saleable area (euphemism for super built up area, including all open spaces) they told me that the area was 1160 square feet.

So in effect you are paying 54,50,000 for a flat of carpet area of 748 square feet. That works out to a real rate of 7281/- per square feet. Given that the land cost (FSI in Thane) is around 2000/- and construction cost for tower around 1200/- the builder is making a clean profit of 30,00,000 per flat.

No wonder builders are holding on to their stock and not selling at reduced prices.

Current stock of unsold property in Bombay (Mumbai) stands at more than 1,00,000 units. Taking an average price of just 50,00,000 per flat, the total unsold stock now is worth 50,000 Crore. Th interest burden on builders calculated at just 1% per month (commercial loans are between 12 to 15% per annum) translates to an interest outgo of 500 Crores per month.

Update:

Like I wrote about the exhibition, Times of India carried a report on the failure of the exhibition to generate interest.

Read the article here

Curious case of Shridhar Vagal

Many of you will remember the Telgi Stamp Scam that happened in 2000-2003. It was hyped initially to be 60000 Crores. Later the CBI declared it to be totally not more that 172crores over many years and over the whole country. One of the fallout of the scam was the appointment of a Special Investigation Team that ended up arresting a lot of serving police officers.

RS Sharma, then CP Pune and later Mumbai, who had opened the scam in Pune, was discharged by the Pune Court at the inception for lack of any evidence. Question is, why was he arrested in the first place? Was it to teach the police a lesson not to poke their noses where they are not wanted? (The Pune Police under him had recovered 2000+ Crore worth fake stamp paper. )

Incidentally all the officers were bailed out. (a bail in MCOCA case implies absence of any evidence.) In the bail order of DCP Sawant the High Court wondered aloud whether the case is standing on its head, and whether the accused are the real heroes of the case.! I am now appalled to hear that the SIT did not ever arrest Telgi or even make any fake stamp recovery. What really is going on??.....

And now the Judge who was about to give judgment in some of the Telgi cases is abruptly transferred and removed..

The case of then JtCP Vagal gets more curious. I present some of the facts of the case as they exist in the court records. You may draw your own conclusions. Vagal was a National Merit Scholar, a Science Talent Scholar and a post graduate from IIT He joined the IPS in 1976 as a direct entry, and the youngest in the batch with an excellent track record.

In 2002-2003, when the scam broke out, he was the Joint Commissioner of Police (Crime Branch), Mumbai Police. As the Joint Commissioner he brought to book Dawood Ibrahim's brother, unraveled the Ketan Parekh Stock Scam and got Abu Salem deported and successfully got the serial bomb blast cases investigated.

He ordered the immediate arrest of Telgi in July 2002 (this order is sited as evidence against Vagal) and got Telgi arrested in the murder of his driver despite alleged instructions of then CP MN Singh not to arrest him! He approved application of MCOCA to Telgi in this case which would have fetched Telgi a possible death sentence. This proposal was later given a quiet burial by SIT/CBI.??

He personally wrote to all officers in Mumbai City including the CP to make efforts to stop stamp scam for ever the as early as July 2002 .

48 old stamp cases of Mumbai including 7 Telgi cases were reviewed and improved under his orders. Telgi who had not been arrested in any case since 1995, was arrested & charge sheeted in all these cases. Even a dormant Telgi case was revived and the first conviction of Telgi by trial was obtained by this investigation by his officers.

Defaults in 27 of these cases were found at his instance. He personally wrote to 11 DCPs to take action against defaulting Officers.

Stamps worth 800 Crores seized by Mumbai Crime Branch

He was instrumental in recovery in January 2003, 830 Crores of Fake Stamp Paper and Security Paper rolls which could have been used to further the scam. Strangely Telgi was never made an accused and his name dropped from the case by the SIT though Vagal had given in writing to arrest Telgi.

Soon Vagal was transferred out of Crime Branch in March 2003. He was arrested in Nov 2003 ostensibly for ‘attempting to facilitate’ Telgi in the Pune case. He has never worked in Pune nor did he have any access to the Pune case.

It is now clear from the case papers that there was neither any evidence what so ever against him before his arrest nor was there any mandatory prior sanction. A few hearsay statements were recorded later to justify the action. I understand that such hearsay statements are not even admissible in court as evidence. The final charge sheet was filed in 2005.

He was granted bail in 2007 by the Supreme Court which in effect observed that the Court was satisfied he was not guilty. In the trial court the CBI admitted that there was absolutely no direct evidence against him. The court observed that a case is being propped up on an interpretation of innocuous circumstances.

It appears that Vagal has suffered because he dared to take pro active action against Telgi. There is absolutely no evidence against him and in fact to the contrary. His actions against Telgi can by no strech of imagination be interpreted as helping Telgi. It is patently absurd to allege that he attempted to interfere in a case at Pune, which was investigated by a police and an SIT with which he had nothing to do, but the very investigations under him were improved and made beyond reproach.

Officers of Pune whose specific serious defaults were listed by the SIT were not made the accused. Officers who did nothing for seven years were not charged . If arresting, investigating, interrogating, taking custody, recovering property, charge sheeting and convicting an accused is a crime, he stands guilty. All these assertions are based on the documents of the case.

Because of the enormous delays in Court, he does not expect any decision by the courts in his life time. I know him well but it is only now that I came to know the facts.

This is a typical case of justice delayed is justice denied. A brilliant officer is languishing, maybe this is because he rushed in where angels feared to tread.

Builders Fined 5,00,000 for not obtaining Occupation Certificate

A report appearing in Times of India, dated 27th Feb 2008 shows how two builders were slapped with a fine of 5,00,000 for not obtaining mandatory occupation certificate for the buildings they had built.

Other societies should take this as a welcome development and approach the consumer court against builders who have not provided them OC's.

Read the article below

Builders must pay society for not procuring OCs
Kandivli Residents Have Waited 17 Yrs For Documents
Rebecca Samervel | TNN

Mumbai: The consumer court recently ordered two developers to pay Rs 5 lakh to a Kandivli-based society for not procuring Occupation Certificates (OC) on time in 1994. It was argued in court that for 17 years the residents have had to pay more taxes to the Brihanmumbai Municipal Corporation (BMC) owing to the lack of OCs for three wings.

The Mumbai Suburban District Consumer Disputes Redressal Forum recently passed the order involving the main construction company, Dwelling House Construction Company, and the successor developer Conwood Agencies Pvt Ltd. The two firms also flouted several civic rules and will now have to pay the BMC a fine to procure the OC.

The forum observed that under the Maharashtra Ownership of Flats Act and development regulations it was a statutory obligation of the promoter, builder or developer that a flat is not to be handed over to the purchaser without an OC having been obtained from the competent municipal authorities.

Pushp Heritage Cooperative Housing Society Ltd has 168 members occupying six wings. Pushp’s lawyer Uday Wawikar said that the society in its complaint filed before the forum on September 6, 2007 mentioned that the builder had failed to get the OCs for wings D, E and F within the reasonable time. The members had occupied the flats in 1994. On account of the absence of an OC, the members had to pay higher water and municipal charges and suffered financial losses. The OCs were obtained for the A, B and C wings in 2001.

The complainants pursued the matter with both companies by making oral requests and also served a legal notice in October 2005.

In its reply, Dwelling House Construction Company said that due to “certain technical reasons”, the BMC had delayed granting the OCs. The company also submitted that it was not negligent and was pursuing the matter at the appropriate level. It also denied that the society was paying higher taxes. Conwood Agencies Pvt Ltd denied its role and said that obtaining an OC was the responsibility of Dwelling House Construction Company.

The forum refused to buy the defence of both the companies. The forum also relied on the reply filed by the BMC. The BMC told the forum that, initially, plans were approved only for the A, B and C wings and they were to have stilt and upper floors. But during an inspection it was found that the building was constructed beyond the sanctioned plan. A notice was issued in 1996 and the BMC blamed the irregularity for not issuing the OCs.

Even after the BMC sent reminders about the payment of regularization fees, the developers ignored the letters.

Concluding that the real cause of non-issuance of the OCs by the BMC arose out of non-payment of taxes and cess, the forum held the firms guilty of deficiency of service.

People who would like to contact the successful lawyer can use the following information
Mr. Uday Wavikar
+(91)-(22)-23525137
+(91)-9969123161, 9820504396
28/43 3rd Flr Tardeo A/C Market, Tardeo, Mumbai - 400034

Illegal Banners in Bombay (Mumbai)

All of us see them while traveling along the roads and trains. They are an eyesore and more often than not we just tend to ignore them.

But they can cause some serious problems. Like when they are put up blocking traffic signals, they can be fatal.

I am talking about the ubiquitous banners put up all political parties all over the city.

You can report them to the officers of the Municipal Corporation. Use the numbers given below.

Forest Land Case Verdict Delayed

It seems that the Supreme Court is going to take more time to resolve the contentious forest land issue in Mumbai.

According to report appearing in the Times of India dated 10th February, the 2 Judge Bench of Supreme Court has requested for enlargement of the bench to include more judges before it can come to any conclusion.

This news is likely to cool down galloping property prices are apartments in the buildings that exist of forest land can not be sold or re-sold till the issue is resolved in the Supreme Court.

You can read the TOI report here

Builder fined 6.5 L for not giving amenities

In a report appearing in Times of India dated 6-1-2011 filed by Rebecca Samervel, a builder has been fined Rs 6,50,000 for deficiency in providing promised amenities and not securing the Occupation Certificate of the Building.

The report is reproduced below;

Mumbai: A consumer court order has cheered scores of home-buyers who are misled or even duped by builders. In 1997, a retired IOC executive and his son booked a flat in Goregaon (east) in a project advertised as “exclusive homes for exclusives” and which promised various amenities. However, not only have they not got most of the promised amenities but their complex is still surrounded by hutments and they do not even have an occupation certificate (OC).

The State Consumer Disputes Redressal Commission has now asked Ravi Ashish Land Developers to pay the Roys Rs 5 lakh for mental harassment and agony plus Rs 1,000 per month from August 1998 till the procurement of the OC.

FLAT MISERY

In 1997, the builder had promoted his project in Goregaon (E) as “exclusive homes for exclusives”

Flat buyers were promised a proper approach road, a swimming pool, garden, a playground, a nursery for kids, club house and jogging tracks

However, even after moving in, the complainant found no sign of amenities or proper approach road. Neither had the building been given an OC HOUSE WOES ‘Builder must obtain occupancy cert’

This amounts to nearly Rs 1.48 lakh. The builder will also have to pay the Roys Rs 25,000 towards the cost of litigation.

The Roys, father Pradip Kumar and son Anirban (a lawyer), claimed that they had paid the entire cost of the 825-sq ft super built-up area of the flat amounting to Rs16.5 lakh to the builder within five months from the date of issuance of allotment letter on March 5, 1997. According to the Roys, the builder had assured them that there would be a seven-storey building with three wings, Arpan, Darpan and Samarpan, and three towers, namely, Deep, Darshan and Maharaja Retreat, and 12 row houses in the Gaurav Empire Housing Complex and there would be a proper road and amenities like adequate street lights, a flowerdecked landscaped garden, a club house and a community hall, playgrounds and a kindergarten school, jogging tracks, a gymnasium, a swimming pool, a library, surrounded by a compound wall with a security gate at the main entrance of the layout. They were assured their flat would be ready by June 1997.

However, even after 13 months of the originally promised date, they
failed to get legal possession and the promised amenities were nowhere in sight. Since their landlord asked the Roys to move out of their premises in July 1998, they had no option but to shift to the flat when, according to them, it was neither habitable nor did it conform to the agreement. Citing deficiencies in the complex, the Roys complained against the absence of an approach road, non-availability of regular water supply from BMC, absence of an OC, poor quality of construction and poor maintenance.

They claimed a refund of the paid amount and also a difference arising from the current market rate of the flat and filed a complaint with the state commission on January 8, 2000. The builders filed a reply stating that they never promised the Roys that the entire housing complex would be completed by June 1997. Denying the charges levelled by the Roys, the builders also stated that construction had been delayed on account of various factors, like a sudden and a continuous slump in the estate market and dealings with about 900 slum dwellers with several litigations and orders of injunction. They also stated that the liability of the flat purchasers in the building was to the tune of Rs 27 lakh and only upon payment of that liability amount together with current property tax, if any, would the municipal corporation issue an OC.

The commission observed that there was no evidence to prove that the flat owners had outstanding liabilities. Further, it stated that it was a statutory as well as contractual obligation on the part of the builder to procure an OC. Regarding the promised amenities, the commission stated that even after 13 years all that the builder had managed to do was barely construct two buildings; there was only one road leading to these buildings from the nearby municipal road. “In any view of the matter, we find that the state of affairs of the present building of the complainants (Roys), which is seen from the photographs and which is admittedly surrounded by the hutments and slum dwellers, cannot be said to be a dream house which was advertised by the builder and therefore, there is deficiency in service.”