Bihar’s Growth Fine Print India’s poorest state has been posting impressive GDP growth.

Since the start of 2009, Bihar’s growth rate was one of those rare state-level economic variables hotly debated and discussed throughout the country. 

Reports of Bihar being the fastest growing state in the country made every one sit up. Despite many academics and journalists poring over its economic data, consensus on its true growth rate has yet to be reached. And given that state-wise economic growth data tends to get reconciled with a lag of two years, consensus is elusive.

A cursory look at Bihar’s growth figures over the last decade explains why they lend themselves to such varied interpretations and analysis. Not only has the yearly growth rate swung wildly every year, the data also gets revised from the initial estimates. The initial estimates for 2007-08 and 2008-09 were nowhere near the final figures (see graph). As a result, the analysis on Bihar’s economy and Nitish Kumar’s rule could change between February and March (when the last state economic survey was released) since Bihar no longer grew at 6.35 percent — it grew at a more remarkable 10.74 percent.  
 

Infographic: Hemal Sheth

Given the volatile characteristic of growth data, observers like Shaibal Gupta of the Patna-based Asia Development Research Institute feel that Bihar’s economic growth has yet to stabilise and as such, it is too early to comment based on the growth data alone. 

 Praveen Jha, professor of economics at the Jawaharlal Nehru University stops short of saying that the figures are fudged. “The volatility is simply inexplicable. In fact, a committee led by state cabinet minister, Jagdanand Singh, during the last year of RJD (Lalu Prasad’s party) rule concluded that the data collected within the state is not reliable,” points out Jha, who has done a detailed analysis of Bihar’s growth rate. 

A look at Gujarat, which is close to two and half times Bihar’s economy and is seen by many as the fastest growing state in the country today, reveals a crucial difference. While the growth rate in Gujarat may occasionally decelerate from one year to another, it never registers negative growth or an actual decline in the state GDP. Bihar, on the other hand, is habituated to going two steps forward and one step back. Arresting this tendency could just be the key thing that Nitish Kumar needs to focus on in his second term. 

Source: Forbes India

Expensive Real Estate Markets are Due For A Correction

In late November, soon after environment minister Jairam Ramesh gave the green signal for Mumbai’s second airport, property prices around its location shot up by 20 percent. This was the same area that, even six months ago, real estate consultants and analysts were advising investors to stay away from. They reasoned that the prices had run up way too quickly. Today, the same professionals are recommending buying select properties in the same area at higher prices.

If these professionals had got it wrong once, what is the guarantee they will not get it wrong again? There are so many unanswered questions about the part of Navi Mumbai where the airport will come up. Where will the proposed Metro station be? Which areas will be most affected by aircraft noise? Where will commercial development happen?

The airport example is illustrative of the shape of things to come in 2011 for real estate buyers, both residential and commercial. As metros like Mumbai, Delhi and Chennai are retrofitting old buildings and seeing an infrastructure upgrade, a lot of real estate action is becoming visible.

While the investor can put money in stocks of real estate companies or invest in a private equity fund to play the property market, these still remain niche opportunities. For the vast majority, investment in land and concrete is the preferred option. So, what should be their strategy in 2011?

To begin with, initial signals are mixed. After a long while, Housing Development Finance Corp. (HDFC), the king of mortgages, is offering to pay a 9 percent annual interest to fixed deposit holders. This could mean that the company will eventually lend at 11 percent upwards. In short, borrowing to buy a property is going to become a costlier affair. This means only a two-digit percentage appreciation will yield a return rivaling fixed deposit rates for the investor.

Added to this, the liquidity in the banking system is getting tighter. All this will result in a correction in expensive markets. Analysts predict residential property prices will correct between 10-25 percent in Mumbai, Delhi, Hyderabad and Chennai. An analysis by Liases Foras, a Mumbai-based real estate research firm, shows that each of these cities has over apartment inventory worth 22 months.

In Bangalore and Pune, the inventory is lower at 19 and 12 months respectively. Coupled with the fact that prices of real estate have increased quickly and are close to their peaks, the oversupply is expected to hasten a correction. “The imminent dip may well be a good entry point for home buyers in these cities,” says Pankaj Kapoor, CEO of Liases Foras.

The story, however, is quite different for commercial real estate. The effect of the sunset clause over the Software Technology Parks regulations announced in the last budget is now beginning to take effect. A joint report by property consultants James Lang LaSalle, business consulting firm KPMG and Confederation of Real Estate Developers’ Association of India (CREDAI), says that a healthy demand for IT/IT Special Economic Zone (SEZ) space is already visible from the second half of 2010. 

The report says that the demand for IT SEZ space in cities such as Pune, Chennai, Hyderabad and Kolkata is likely to be robust in 2011, as the deadline for notifying an SEZ is March 2012. Top IT companies such as TCS, Infosys and Wipro have already announced that they will be hiring upwards of 100,000 people during the next year as per business growth projections. This trend will bring some cheer to India’s top real estate companies like Delhi-based Unitech, which has a lot of IT SEZ stock in Delhi. 

For other commercial spaces, due to depressed demand, the capital values of properties fell much faster than the rental income across cities. In Mumbai, for example, Lower Parel property values fell by 30-40 percent as against rentals, which fell between 20-30 percent. Say Himadri Mayank and Abhishek Kiran Gupta, authors of the report: “The trend of outright purchases by occupiers and private equity players of commercial places is expected to continue in 2011.”

So where should the home buyers and investors put their money in? There are essentially two themes playing out in the Indian real estate sector. One is the re-fitment or re-development of old properties and the other being development of new infrastructure like Metro rail and airport across the country. “Marquee properties are the ones that set new record for prices. It will be a good idea to buy premium properties by reputed builders,” says Ramesh Jogani, managing director of Indiareit Fund Advisors, which manages over Rs. 1,900 crore.

Among his recommendations: Kurla, a rundown Mumbai suburb, for its proximity to Bandra Kurla Complex, the city’s financial district; premium apartments in Pune near the Mumbai-Pune Expressway and Hadapsar, where large colonies are located.

Investments apart, for buyers and investors, the single biggest change in the sector in 2011 is likely to be the establishment of a real estate regulator. A regulator will bring in standardisation of processes, improve transparency in deals and offer a dispute resolution forum. All this will cut the risk for investors. Thus the mature phase of Indian real estate may just be beginning.

Source: Forbes India

Australian investors could lose millions on US rental properties

Australian property investors risk losing hundreds of millions of dollars after snapping up thousands of US housing bargains at forced-sale prices, experts have warned.

The lure of a perfect property storm

Emboldened by the soaring local dollar, Australians invested about $600 million on US residential property last year, according to the Washington-based National Association of Realtors, as overseas buying of US housing doubled.

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But consumer advocate Neil Jenman predicts that thousands of Australians will lose their money after unwittingly buying undesirable property.

''It's going to be a calamity, for sure and certain,'' he says.

Many investors are being lured by agents promising unrealistically high rental returns.

Investment experts say swathes of properties on offer are in bad neighbourhoods where it would be almost impossible to get a tenant, and even harder to get your money back if you decide to sell up down the track.

In the past six months, Australian companies that help investors buy US residential property have reported a big surge in interest. Vincent Selleck of Byron Bay-based buyer's agent 888 US Real Estate says his business has grown fivefold since June.

The robust local dollar means Australians' purchasing power in the US hasn't been this strong since the Aussie floated in 1983.

At the same time, bank-forced house sales mean the US residential property market has been flooded with millions of homes at bargain-basement prices.

US property spruikers are promising net rental returns of up to 20 per cent on properties that can be picked up cheaply.

Mr Jenman says the situation is creating a window of opportunity for investors who are prepared to do the research, travel to the US and make suitable purchases.

For everyone else, it's a recipe for potential disaster.

''Some of the properties being offered are in ghettos and you need a bulletproof vest and an armoured Humvee to collect the rent in there,'' Mr Jenman says.

''Tenants also have more rights in the US and if they don't clear the garbage up, it can be the landlord who gets fined - there are a lot more legal issues.''

Some Australians are already finding that after they buy their US property ''bargain'' and spend more money to renovate it to an acceptable standard, they can't find a tenant. Vandals and opportunists often strip renovated properties of their fittings if they remain unoccupied.

Chris Gray, chief executive of property portfolio manager Empire, said Australians had limited understanding of foreign property markets.

''Buying a house for $40,000 might seem like a bargain but how do you know that the house isn't really worth $20,000?,'' he said

''It's a bit like pyramid selling where it goes well only until it goes wrong, and then virtually everyone loses apart from a couple of people at the very top.''

Paul Moran of Paul Moran Financial Planning says potential investors need to be very wary of what is being offered. Mr Moran has clients who are making property investments in the US work and he is not against it for the right investor.

''But in each case, the client had good knowledge of the US residential market, went to the US and inspected the property and bought it themselves - and they are getting good returns,'' he says.

Unlike Australia, there is a surplus of homes in the US and many well-known cities are contracting. The city of Buffalo, for example, where the population has fallen from 600,000 to fewer than 300,000, has created an ''Anti-Flipping Task Force'' to try to eliminate the unethical sale of vacant foreclosed properties online for inflated prices.

888 US Real Estate's Mr Selleck said investors should consider their own risk profile before buying into the US market, and had to understand it would take up to three years for the housing market to start to show capital growth. ''We are expecting another 3 million foreclosures in the US in the next 12 months,'' he said.

Source: 

http://www.smh.com.au

Watch It: The World is Mine

The World is Mine

Today, upon a bus, I saw a very beautiful woman.
And wished I were as beautiful.
When suddenly she rose to leave,
I saw her hobble down the aisle.
She had one leg and wore a crutch.
But as she passed, she passed a smile.
Oh, God, forgive me when I whine.
I have two legs; the world is mine.

I stopped to buy some candy.
The lad who sold it had such charm.
I talked with him, he seemed so glad.
If I were late, it'd do no harm.
And as I left, he said to me, "I thank you,
you've been so kind.
It's nice to talk with folks like you.
You see," he said, "I'm blind."
Oh, God, forgive me when I whine.
I have two eyes; the world is mine.

Later while walking down the street,
I saw a child I knew.
He stood and watched the others play,
but he did not know what to do.
I stopped a moment and then I said,
"Why don't you join them dear?"
He looked ahead without a word.
I forgot, he couldn't hear.
Oh, God, forgive me when I whine.
I have two ears; the world is mine.

With feet to take me where I'd go.
With eyes to see the sunset's glow.
With ears to hear what I'd know.
Oh, God, forgive me when I whine.
I've been blessed indeed, the world is mine.

If this poem makes you feel thankful, just forward it to your
friends. After all, it's just a simple reminder that we have so much
to be thankful for!

Watch It: 

DDA Scheme Brings Home Prices Down

DDA Housing scheme has come as a boon for aspiring home buyers as it has forced even small developers in the National Capital Region (NCR) to dole out hefty discounts and freebies like cars, LCD TVs and international holiday packages to woo buyers. Most of the potential buyers who have applied for DDA flats are not looking for options till the results are out and this has led developers to offer freebies. One developer, Supertech, which had started the ` 10 lakhflat scheme, is now offering a free car with every booking in the EcoVillage, Noida Extension. Similarly, another developer, RG Builder, is offering a lucky draw with every booking of its luxury apartments, where any buyer stands to win a car or a bike.Rishab Developers of Indirapuram is offering discounts up to 15 per cent for its two- BHK flats. 
23 Dec 2010 Indiatoday.com 

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Office Space Rentals Up 15%, Occupancy Rise 23% In 2010

After several quarters of tepid growth, the office space absorption has grown 23 per cent in 2010, while the rentals in the micro markets grew by 15 per cent as the overall demand for commercial space increased due to better macro economic indicators. The total commercial space absorption grew to 32.65 million sq ft from the last year’s absorption of 27 million sq ft in the major Indian cities, according to the annual report by real estate consultants, Cushman & Wakefield. Most micro markets in the country witnessed about 5 –15 per cent rental appreciation over last year, but currently rentals have stabilized across locations. However, select locations in Hyderabad and national capital region (NCR) have seen rental growing at a slower pace. In Mumbai, the moderation in demand led to stabilization in rental values which otherwise witnessed an annual appreciation of 5-10 per cent. Rentals in Bangalore recorded an annual appreciation in the range of 5-16 per cent, while the NCR rentals grew in the range of just 2 – 10 per cent over the year across most of the micro markets. 
20 Dec 2010 Financial Chronicle

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Changes In Building Bylaws Okayed

 
To curb unauthorized construction in regularized colonies in the Capital, the central government on Tuesday gave a green signal to legalise subdivision of plots and notify changes in the building bylaws. This means in the 567 regularized colonies, some of the special areas and urban villages, people can build houses with layouts sanctioned by the Municipal Corporation of Delhi (MCD) after due checks on regarding structural safety and illegal construction. All subdivisions of plots carried out since February 8, 2007 will be eligible for approval. Once legalized, the plans and designs for subdivided plots will have to be sent for approval and vetted by the civic body, which will be able to enforce the various structural safety riders.
22 Dec 2010 Hindustan Times

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