Wednesday, February 03, 2016

Real estate bubble building up again in Mumbai

Mumbai: Mumbai’s real estate prices have begun to run amok once again, suggesting that another realty bubble is in the making. In a quick reversal from last year’s recessionary trends, residential property prices which had dropped by almost 35% in some areas have risen sharply in the last nine months and are now close to their earlier peaks of 2007-08.

The rise has been sudden both at the premium end of the market and the deep suburbs, suggesting the return of speculators and investors to the property market.

A three bedroom-hall-kitchen (BHK) apartment at upmarket Warden Road was recently sold at Rs93,000 a sq ft (built up rate) when it was quoting at just Rs 50,000 in early 2009. Apartments (mostly owned by investors) in Beaumonde, a building by Sheth Developers at Prabhadevi, are now quoted at approximately Rs50,000 a sq ft as against Rs35,000 and above in 2008. Apartments at Planet Godrej, developed by Godrej Properties at Mahalaxmi, are being quoted at approximately Rs27,000 a sq ft, close to the peak rate of Rs30,000 a sq ft quoted in 2008. Prices in 2008-2009 had dropped to almost Rs16,000 a sq ft.

Raheja Vivaria at Mahalaxmi is now quoted at Rs26,000 a sq ft, close to its high of Rs30,000 a sq ft in 2008. It had dropped to Rs16,000 a sq ft at the trough earlier in 2009. Similar was the case with Ashoka Towers at Lalbaug which is now quoting Rs 25,000 a sq ft. Prices at Cuffe Parade, Nariman Point and Altamount Road, which had dropped to almostRs40,000 a sq ft, are back to their earlier rates between Rs50,000 and Rs70,000

How not to mismange growth

Colors TV channel started a comedy show called Comedy Nights with Kapil. The show, which followed other comedy shows on Star Plus and Sony went on to become a hit.
Quite obviously, Colors must have hiked the advertisement rates for the show as it gained in popularity.

But it got upset when Kapil and his team started asking for more money. But guys, you too were asking from more money from your advertisers! How does that make you any different than Kapil.

To spite its face, Colors cut its own nose and launched a rival show to the popular show rather than being magnanimous in increasing the payment to Kapil & Co.

And that left Kapil & Co. no option to terminate the show. This show made a lot of people famous and rich. Including the channel.

This is a corporate lesson in how to mismanage growth. The channel could have very easily drafted a growth clause into the agreement with the production house and agreed to increase payment based on TRP and other factors. But it must have been greedy to take all the money home. After all, they must have reasoned that it was their property.

Now, they have thrown out the baby along with the bath water. The replacement show is nowhere close to what Kapil & Co. were dishing out as a team.

Like KBC was never the same without Amitabh.

The lesson to be learned is that when drafting agreements, care should be taken to factor in all eventualities and they should always be drafted with the end in mind. Had the legal agreement factored in growth in revenue and sharing formula, it would have been a win-win situation.

First dent in the evil empire of Chaggan Bhujbal.

In 15 years Chaggan Bhujbal built an empire worth 10,000 Crores (at the very minimum) auctioning police posts while being the Home Minister, selling contracts while being the PWD minister.

No one raised a finger on him. Finally the chickens have come home to roost as his infamous nephew who ran a parallel home department from his official bungalow Ramtek was arrested.
At least in this arrest, Devendra Fadnavis is more honest in going after the corrupt than our eminent Narendra Damodardas Modi. At least he has shown some spine.

Although BJP/Congress/Sena/MNS, the parties that have mismanaged Maharashtra are all hand in glove with each other, his action still shows that there is a small glimmer of hope. Now when Chaggan Bhujbal return, he too should be arrested and sent to prison. I am sure there will be enough disgruntled policemen who would like to beat the shit out of him.


Towards a just society....

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