Monday, March 2, 2009
Battle of Prices: Who'll Be The Winner?
Battle of Prices: Who'll Be The Winner?
HT Estates, Feb 28, 2009, Page 1
The battle rages on. No one knows who among the warring parties -- the developers, bankers or buyers -- will emerge winners.
When the SBI brought down the interest rate to 8 per cent, it was speculated that the move would revive the real estate market. However, if you listen to what the bankers have been saying, it becomes clear that any further decrease in home loan interest rates is difficult.
Earlier, when the RBI cut prime lending rates the bankers felt it would rev up the home loan demand. However, nothing much happened and no peaks in demand or growth were noticed. The bankers are of the opinion that the banks are working with very slim margins and a further slash in rates is well nigh impossible. Popular developers speak, too, rules out slashes in residential apartment rates, quoting slim margins as the reason. And the segment stuck in this tug-of-war comprises buyers, who are waiting patiently for this banker-developer conflict to resolve so they can go about their business of acquiring their dream homes.
"We already have affordable houses and prices are reasonable enough. Developers will not cut prices but will come up with houses that will fit the customer's bill. That means that in the near future we will see more of smaller houses with affordable prices," says Sunil Jindal, SVP Group.
"The talk of price cut should be addressed in the right manner. The point I would like to make is that price cut is not possible as it depends on lot many fac tors. The land prices have not come down, nor have the prices of other related products, so how can developers cut prices. The only thing we can do is to come up with smaller homes that fits the customer's bill," he says.
Have the banks done their bit?
The developer camp advocates that other Public Sector Undertaking banks follow in SBI's footsteps and further slash home loan interest rates. The developers also say that private banks would then automatically cut their rates as they would not want to lose customers to those offering cheaper lending rates. The bankers retaliate by saying that slow demand, more of an issue between homebuyers and builders, will increase only when realty prices come down. At a recent conclave organised by the business paper, Mint, the Executive Director of Housing Development Finance Corp Ltd, Renu Sud Karnad, said banks worked on a margin of two per cent and had recently cut down rates. What she indicated was that private banks would be then hard pressed to go for a further cut in home loan interest rates.
Should the govt step in now?
Says Navin Raheja, MD, Raheja Developers, "There is a shortage of approximately 2.5 crore houses throughout India and the major demand is for affordable housing in the Rs 22 lakhRs 25 lakh bracket. Unfortunately this segment is, unavailable for the Indian lower and middle class end-users.
Due to the economic global meltdown, the investors and speculators have vanished completely as the profit margins have come down. In the present situation, the Government should wake up and support private developers to ensure construction of affordable housing focused on actual users. The moment the Government takes steps to help the real estate sector, the housing demand will automatically accelerate, propelling end-users to pick up properties."
Taking advantage
It will take more than a drop in interest rates to revive demand satisfactorily "Real estate prices . will need to rationalise as well, and buyers will have to break out of their watch-and-wait mindset and make their purchases when corrected prices and amenable interest rates make homes affordable for them.
However, most of the buyers seem to be trying to time the market for the lowest entry point, which is not advisable, since the real estate market -- like the stock market -- cannot be accurately predicted. The point of optimum entry may pass and the best opportunities may be lost," says Anuj Puri, Chairman & Country Head, Jones Lang LaSalle Meghraj.
However, it remains to be seen who will blink first. Buyers are waiting for the developers and banks; while developers are waiting for the buyers to come forward and press the purchase button. The sector indeed seems to have entered an interesting ¦ phase.
Slowdown worsens, growth rates plunge
Slowdown worsens, growth rates plunge
Hindustan Times, February 28, 2009, Page 1
Fears about a slowing economy are now official. After 16 quarters, the country’s gross domestic product (GDP) grew at 5.3 per cent during the quarter ending December 2008, down 3.6 percentage points, the lowest since the quarter ending December 2005.
The farm sector, that feeds one-third of the population, contracted by 2.2 per cent — the first agricultural contraction since December 2005, when it fell by 5 per cent — underlining that the slowdown has penetrated beyond the urban hubs.
And although government officials as well as the Congress party deny it, the latest data from Central Statistical Organisation could mean that the economy will end the year with a much lower growth rate than the government’s 7.1 per cent estimate.
“It (GDP growth) is broadly in line with our expectations,” said Ashok Chawla, secretary, economic affairs. “(It) will add up to close to 7 per cent for the year as a whole. We aren’t very disappointed, we aren’t pessimistic about the number.” He said since the fourth-quarter contribution to GDP growth is normally better and backed by a better-than-normal rabi crop, overall growth will be along expected lines.
“Our expectation is still that the fourth quarter is going to show robust growth, which will add up to close to 7 per cent for the year as a whole,” he said.
The “social, community and personal services” sector has grown by 17 per cent, largely because of Pay Commission arrears that came in during the quarter as income of government servants are accounted for in this category. “That (public spending) is taking the place of the decline in private-sector spending (very quickly),” Chawla said.
In an election year, the adverse growth data is likely to assume political overtones.
The principal opposition party, the BJP, blamed “mismanagement of domestic policy” for the state of the economy. “This is a dismal figure,” former finance minister and BJP leader Yashwant Sinha told HT. “The fourth-quarter data will be even worse. This is the result of domestic policies and global slowdown.”
Predictably, the Congress party took the numbers in its stride. “The third-quarter figures are indicative of the impact of the global slowdown,” said Congress spokesman Manish Tewari. “There is nothing to be alarmed about. (These) figures preceded the economic stimulus package announced by the government on December 27, 2008 and January 29, 2009. The growth figures of the next quarter will reflect the impact of the stimulus package.”
The corporate sector reacted with optimistic caution. “While October-December was the worst quarter, things have improved in January and February, and this quarter should be better,” said Deepak Parekh, chairman, HDFC. “I expect the GDP for 2008-09 to be between 6.7 and 6.9 per cent.”
All eyes are now on the Reserve Bank of India to cut interest rates and stimulate demand, said Harsh Pati Singhania, president, FICCI. “Further, the government must send strong signals to banks to direct credit for productive activities and to support investors and consumers alike,” said Singhania.
Real Demand - Banks Can Do More
Real Demand - Banks Can Do More
HT Estates, February 28, 2009, Page 1
People in realty sector are of the view that more is needed from other banks
Cost is the factor: "Despite cuts by SBI any borrower should factor in the cost of shifting a loan, as he will have to pay a penalty on pre-payment and a processing fee on the new loan. Also, the rate given by SBI is valid for only one year after which it can be reset to the market rate. The other banks may also revise their rates downwards in the future, so these costs have to be kept in mind before one moves to a PSU bank. The effect of this rate cut has been dampened due to the uncertainty in the minds of the buyers regarding the economic situation. The developers will have to cut prices to attract more buyers as the market is lacking the strong impulse which can force the buyers to start doing transactions again," says Anshul Jain, CEO - India, DTZ International Property Advisers.
Economic scenario the dampener: "Following the RBI's cut of major policy rates like repo rates, most banks were pressed by the Government to pass on the benefits to customers. The SBI's recent rate cut to 8 per cent for new home loan customers is one such example, the other public sector banks are also expected to follow suit. While this may see a marginal shift of customers to PSU banks in the immediate future, private banks are likely to follow suit if they see a positive trend in the customer's reaction to such rate cuts. However, the overall economic scenario is likely to act as significant dampener to new home buyers than rate cuts which are likely to impact only in the short run," feels Rajiv Sahni, Partner, Real Estate Practice, Ernst & Young.
More flexibility needed: Abdul Bari, Senior VP (Marketing and sales), Uppal Group, is of the view that the PSU banks are too rigid in their policies and this can stop the home loan borrower from approaching them. "Their paper work is lengthy and services are not up to , the mark. So, PSU banks should improve these aspects to allow borrowers to approach them."
Bari also points out banks should be more flexible in giving loans to the developers. "Earlier, 85 per cent of the home loan used to be given to the developer but now it has become construction-linked. The problem is banks take construction only after the stilt level, and a developer has to bear the cost of land, excavation and the construction of base. This means only developers ¦ with money stay ".
HT Estates, February 28, 2009, Page 1
People in realty sector are of the view that more is needed from other banks
Cost is the factor: "Despite cuts by SBI any borrower should factor in the cost of shifting a loan, as he will have to pay a penalty on pre-payment and a processing fee on the new loan. Also, the rate given by SBI is valid for only one year after which it can be reset to the market rate. The other banks may also revise their rates downwards in the future, so these costs have to be kept in mind before one moves to a PSU bank. The effect of this rate cut has been dampened due to the uncertainty in the minds of the buyers regarding the economic situation. The developers will have to cut prices to attract more buyers as the market is lacking the strong impulse which can force the buyers to start doing transactions again," says Anshul Jain, CEO - India, DTZ International Property Advisers.
Economic scenario the dampener: "Following the RBI's cut of major policy rates like repo rates, most banks were pressed by the Government to pass on the benefits to customers. The SBI's recent rate cut to 8 per cent for new home loan customers is one such example, the other public sector banks are also expected to follow suit. While this may see a marginal shift of customers to PSU banks in the immediate future, private banks are likely to follow suit if they see a positive trend in the customer's reaction to such rate cuts. However, the overall economic scenario is likely to act as significant dampener to new home buyers than rate cuts which are likely to impact only in the short run," feels Rajiv Sahni, Partner, Real Estate Practice, Ernst & Young.
More flexibility needed: Abdul Bari, Senior VP (Marketing and sales), Uppal Group, is of the view that the PSU banks are too rigid in their policies and this can stop the home loan borrower from approaching them. "Their paper work is lengthy and services are not up to , the mark. So, PSU banks should improve these aspects to allow borrowers to approach them."
Bari also points out banks should be more flexible in giving loans to the developers. "Earlier, 85 per cent of the home loan used to be given to the developer but now it has become construction-linked. The problem is banks take construction only after the stilt level, and a developer has to bear the cost of land, excavation and the construction of base. This means only developers ¦ with money stay ".
Major realty cos to announce new discount schemes
Major realty cos to announce new discount schemes
Economic Times, 01st March 2009, Page 3
With DLF Group, one of the largest property developers in India, slashing prices in micro markets such as Bangalore and Chennai, it seems that other developers too will follow soon.
SundayET has learnt that many A and B grade developers across the country are planning to announce new discount schemes in markets faced with slowdown. Besides, many are also planning to offer interest free instalments to consumers which will help boost falling sales.
This scheme will be different from earlier construction-linked plans. Developers will use it only for new and up-coming projects. How it works is that on a Rs 40 lakh home the developer will ask the consumer to pay Rs 1.5 lakh bi-monthly for 30 months and rest at the time of possession.
Meanwhile, in many projects, the developers are already offering a 15-20% discount on down payment both in the residential and commercial sector. According to a developer, the new strategy includes focus on mid-income housing and execution and completion of existing projects.
Says Ashutosh Limaye, associate director (strategic consulting) Jones Lang LaSalle Meghraj; “DLF has read the market story accurately and has changed shape to fit the vessel. Wherever any company faces the challenges of a highly competitive market, they are now underlining and solidifying their market leadership. At the first level, they are doing so by reducing prices in the Bangalore and Chennai markets.
“At the second level — and as an added USP — they are offering to pay back to the buyer the differential, if prices should sink further before the project is sold out. This is a brilliant strategy that will overcome a significant portion of a buyer’s misgivings about investing now when the rates could sink even further later on. These are some of the adaptability strategies that will define all players who emerge from the current market turmoil in strength.”
The biggest reason for concern for all real estate players is that the number of deals has been few and isolated with barely any property changing hands in both the residential and commercial sector.
Industry sources, in fact, say that across all metros and tier II cities like Greater Noida, Gurgaon, Mohali, Chennai, Indore,Jaipur, Lucknow, Surat and Cochin there has been 80% drop in number of deals in last six months.
Says Rajeev Rai, veep, Assotech Limited:” We may see price reduction only in those markets where the developer had launched property at a level much above the market absorption cost or the sum total of his input costs.”
Besides the above mentioned measures the developers might also come up with more freebies with the discounts. Says Rohtas Goel, president, Naredco & CMD, Omaxe Group; “Today’s smart buyer knows his needs and he enters the real estate market only after doing thorough market analysis.”
Low response to home loan scheme
Low response to home loan scheme
Business Standard, 02nd March 2009, Page 9
Abhijit Lele / Mumbai.
Govt banks have cleared only 28,000 proposals so far.
Two months after lower interest rates were announced for home loans up to Rs 20 lakh, public sector banks (PSBs) have cleared only 28,000 proposals and disbursed Rs 1,550 crore under this special scheme.
For instance, India’s second-largest public sector bank Punjab National Bank (PNB) has approved only 35 loan proposals and disbursed Rs 1.70 crore under the scheme, according to data compiled by industry bodies and the government. At the other end of the spectrum is State Bank of India (SBI), the country's largest lender, which has cleared around 6,500 applications (see table).
Under the special loan package, pushed by the government to boost real estate demand, public sector banks decided to freeze interest rates on home loans up to Rs 5 lakh at 8.5 per cent for five years. For loans between Rs 5 lakh and Rs 20 lakh, the rate was frozen at 9.25 per cent. SBI went ahead and dropped the rate further to 8 per cent for a year and others such as Central Bank of India have also responded in the same manner.
Further, borrowers can avail themselves of a loan of up to Rs 5 lakh by paying 10 per cent upfront and in case of home loans of Rs 5-20 lakh, the upfront payment has been fixed at 15 per cent compared to 25-30 per cent for other loans.
But with buyers expecting real estate prices to fall further, many are deferring a purchase for the moment, said bankers.
Business Standard, 02nd March 2009, Page 9
Abhijit Lele / Mumbai.
Govt banks have cleared only 28,000 proposals so far.
Two months after lower interest rates were announced for home loans up to Rs 20 lakh, public sector banks (PSBs) have cleared only 28,000 proposals and disbursed Rs 1,550 crore under this special scheme.
For instance, India’s second-largest public sector bank Punjab National Bank (PNB) has approved only 35 loan proposals and disbursed Rs 1.70 crore under the scheme, according to data compiled by industry bodies and the government. At the other end of the spectrum is State Bank of India (SBI), the country's largest lender, which has cleared around 6,500 applications (see table).
Under the special loan package, pushed by the government to boost real estate demand, public sector banks decided to freeze interest rates on home loans up to Rs 5 lakh at 8.5 per cent for five years. For loans between Rs 5 lakh and Rs 20 lakh, the rate was frozen at 9.25 per cent. SBI went ahead and dropped the rate further to 8 per cent for a year and others such as Central Bank of India have also responded in the same manner.
Further, borrowers can avail themselves of a loan of up to Rs 5 lakh by paying 10 per cent upfront and in case of home loans of Rs 5-20 lakh, the upfront payment has been fixed at 15 per cent compared to 25-30 per cent for other loans.
But with buyers expecting real estate prices to fall further, many are deferring a purchase for the moment, said bankers.
Up to Rs 5 lakh
Top 5Bank No. of loans Amount
SBI & associates 6,970 260.57
Oriental Bank of Commerce 993 37.59
Syndicate Bank 1,528 33.68
Union Bank of India 1,228 30.15
Bank of Baroda 710 25.57
Bottom 5
Punjab National Bank 18 0.36
Indian Bank 41 0.84
IDBI Bank 65 2.14
Indian Overseas Bank 79 3.00
Uco Bank 160 3.39
Total for PSU banks 15,294 493.31
Rs 5-20 LAKH
Top 5Bank No. of loans Amount
SBI & associates 4,414 375.76
Syndicate Bank 1,579 118.14
IDBI Bank 723 83.50
Bank of Baroda 659 67.35
Union Bank of India 691 67.06
Bottom 5
Punjab National Bank 17 1.34
Indian Bank 52 3.28
Uco Bank 159 9.70
Punjab & Sind Bank 129 12.30
Indian Overseas Bank 108 12.34
Total for PSU banks 12,829 1,056.90
"Real estate firms are grappling with a sharp drop in demand and mounting debt repayment. They will have to reduce prices substantially to clear inventory. Once that happens, we may see some improvement in response," said a senior public sector bank executive.
Though prices have dropped by around 30 per cent in certain pockets, buyers are more worried about the equated monthly installments (EMIs), which would come down if real estate prices dropped more, bankers said. "Interest rate is a smaller worry," said a bank executive.
"With the economic slowdown, many buyers are preferring to stick to rented accommodation instead of purchasing their own apartment," another executive said.
Besides, many banks are not pushing home loans under this scheme as they are worried over their cost of funds. With funds raised at higher costs, public sector banks would see pressure on their spreads if they hawked the special scheme too aggressively, said an analyst at a Mumbai-based brokerage.
Apart from the cost of funds, banks also have to bear the cost of providing life insurance cover to the borrowers. Also, they are not allowed to charge any processing fee, which adds to the overall cost.
Bankers also said that even for normal home loans, demand has slowed down in anticipation of further reduction in real estate prices. According to the Reserve Bank of India data, the growth in housing loans dropped to 8.8 per cent for the year up to December 19, 2008, as against a year-on-year rise of 14.8 per cent in the period up to December 21, 2007. Banks sanctioned home loans of Rs 21,989 crore in the year up to December 19, 2008, as against Rs 31,780 crore in 12 months ended December 17, 2007.
Land acquisition, R&R Bills lapse
Land acquisition, R&R Bills lapse
Business Standard, February 28, 2009, Page 7
Sreelatha Menon / New Delhi
Two Bills that would have empowered industry to buy land from farmers with government help lapsed in Parliament yesterday — the last day of the 14th Lok Sabha, whose tenure was marred by some violent disputes over acquisition of land for industry.
The Land Acquisition Act Amendment Bill and the Relief & Rehabilitation Bill — which would have allowed industry to acquire 70 per cent of the land needed directly from the farmers and get the rest with the help of the government — lapsed as the Rajya Sabha failed to pass these.
The combined strength of the BJP and the CPI(M) thwarted the Bills in the Rajya Sabha. The Bills, initially introduced in the Lok Sabha on December 7, 2007, and sent to a parliamentary standing committee, came unstuck mainly on the issue of the definition of public purpose.
The Bills were also opposed for the clause that only those farmers who sold their land to the government would be rehabilitated. The CPI(M) and the BJP stressed the point that they had earlier raised in the standing committee — that a partnership between industry and government could not be fair to the farmers.
CPI(M) MP Hannan Mollah, who was a part of the standing committee, which gave a series of recommendations, said the Bills, in their present form, would have been anti-farmer. According to him, when the government offers to buy 30 per cent of the land needed for a project on behalf of industry, the farmer is under pressure to sell to industry or take the price the government offers. “So he (the farmer) is left with little choice,” says Mollah.
Both Bills moved from the standing committee to a Group of Ministers and were passed in the Lok Sabha on February 25. Yesterday, when the Bills were sought to be introduced, the CPI(M) members insisted that only the Bills listed by the Business Advisory Committee of the Rajya Sabha be introduced, said a Rajya Sabha MP. The two Bills were not listed as the agenda was prepared when these had not been passed in the Lok Sabha, said Rajya Sabha members.
“The two have lapsed and justifiably so,” said CPI(M) MP, Prasanta Chatterji.
The UPA government was able to enact 258 legislations, including landmark Acts like Right to Information, National Rural Employment Guarantee and the Unorganised Workers’ Social security Act during the 14th Lok Sabha.
Business Standard, February 28, 2009, Page 7
Sreelatha Menon / New Delhi
Two Bills that would have empowered industry to buy land from farmers with government help lapsed in Parliament yesterday — the last day of the 14th Lok Sabha, whose tenure was marred by some violent disputes over acquisition of land for industry.
The Land Acquisition Act Amendment Bill and the Relief & Rehabilitation Bill — which would have allowed industry to acquire 70 per cent of the land needed directly from the farmers and get the rest with the help of the government — lapsed as the Rajya Sabha failed to pass these.
The combined strength of the BJP and the CPI(M) thwarted the Bills in the Rajya Sabha. The Bills, initially introduced in the Lok Sabha on December 7, 2007, and sent to a parliamentary standing committee, came unstuck mainly on the issue of the definition of public purpose.
The Bills were also opposed for the clause that only those farmers who sold their land to the government would be rehabilitated. The CPI(M) and the BJP stressed the point that they had earlier raised in the standing committee — that a partnership between industry and government could not be fair to the farmers.
CPI(M) MP Hannan Mollah, who was a part of the standing committee, which gave a series of recommendations, said the Bills, in their present form, would have been anti-farmer. According to him, when the government offers to buy 30 per cent of the land needed for a project on behalf of industry, the farmer is under pressure to sell to industry or take the price the government offers. “So he (the farmer) is left with little choice,” says Mollah.
Both Bills moved from the standing committee to a Group of Ministers and were passed in the Lok Sabha on February 25. Yesterday, when the Bills were sought to be introduced, the CPI(M) members insisted that only the Bills listed by the Business Advisory Committee of the Rajya Sabha be introduced, said a Rajya Sabha MP. The two Bills were not listed as the agenda was prepared when these had not been passed in the Lok Sabha, said Rajya Sabha members.
“The two have lapsed and justifiably so,” said CPI(M) MP, Prasanta Chatterji.
The UPA government was able to enact 258 legislations, including landmark Acts like Right to Information, National Rural Employment Guarantee and the Unorganised Workers’ Social security Act during the 14th Lok Sabha.
Build living spaces, not cities
Build living spaces, not cities
The Hindu Business Line, March 2, 2009, Page 8
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The larger the city, the longer are commuting times, the greater the pollution and the lesser the social life of the people. Neighbours do not know one another. People cease to live in houses; they live in dormitories, says P. V. INDIRESAN.
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Thomas Friedman wrote The World Is Flat, a best seller. As a famous Indian politician said about the same time, there is a reaction to every action and within a year, an exactly opposite view was expressed by Professor Richard Florida in an article ‘The World Is Spiky’ in the Atlantic Monthly. In that article, Florida pointed out that in several respects, the world is spiky. At the most basic level, more and more people are living in cities, some with populations higher than 20 million. Apart from the population, the economy too is spiky — large cities have far higher economies than the rest of the population. The same holds true of energy consumption too — the brightest nights are in the cities, not in villages. Finally, he clinches the argument by pointing out that this spikiness is likely to get more and more pronounced because patents — an excellent measure of progress — are even more spiky than either population or the economy or energy consumption.
Then, whom do we believe? Do we accept Friedman’s argument or, do we follow the opposite argument that progress requires cities, the larger the better? Do we conclude that rural populations have no future, at any rate, rural populations are Children of the Lesser God?
Friedman was talking of countries as a whole, not of its constituents; Florida wrote about the rural-urban divide and not countries as a whole. Both are correct. Hence, the question remains whether, for greater progress, cities should be allowed to grow without limit and villages be allowed to decay steadily?
Go for smaller cities
We, in India, have the JNNURM — the Jawaharlal Nehru Urban Renewal Mission — as also the Bharat Nirman of rural development. The two schemes have different emphasis: the rural scheme aims at a much lower level of achievement than the urban one. Further, the urban one aims to help only the top 60 cities in the country. The result: India will indeed be spikier in the times to come.
At the time of Independence, Bangalore had a population of three hundred thousand. It was the capital of the State; it had excellent medical facilities, schools and colleges including the Indian Institute of Science plus a fair amount of industry too. It was a nice, gracious city to live in.
Now it is 20 times bigger, but it is certainly no longer as gracious as it used to be. Increase in size does not necessarily make a place better. Likewise, JNNURM will definitely make cities larger, not necessarily better. Bharat Nirman will make villages a little better but not good enough to compete with cities.
We do need large cities. Only large cities can support stock exchanges, governments, business centres or airports. However, large towns, rather than cities, are enough to sustain large hospitals, universities, factories and the like.
The Medical College in Manipal, the Birla Institute of Science and Technology in Pilani as well as innumerable sugar or paper factories have emerged and flourish in relatively small towns. Even some of the finest cities of the world — Edinburgh, Frankfurt, San Francisco — have all populations barely larger than half a million.
Bane of cities
India has seven large cities with populations in excess of five millions and growing faster than other cities and, of course, villages too.
Life in them, the traffic and the pollution are all getting worse. Should Delhi add ten million more people; should Bangalore double itself? Or, can we have a larger number of relatively smaller cities?
Why not plan for a couple of cities of around three to five hundred thousand in every district to absorb the increasing urban pressure instead of expanding our largest cities? Should we have a different form of JNNURM which builds more nice cities of the type Bangalore used to be?
Traffic and its associated pollution is the main bane of all cities. Ideally, we should be able to walk to the place of work. The larger the city, the longer are commuting times, the greater the pollution and the lesser the social life of the people. Neighbours do not know one another. People cease to live in houses; they live in dormitories.
If we accept the arguments in the Jane Jacobs classic, The Death and Rise of Great American Cities, a city (but not a smaller establishment) should have high population densities, around thirty to fifty thousand per sq.km.
On that basis, a city with a population of three to five hundred thousand can be built within a space of ten square kilometres. That would be much, much cheaper than adding the same size population to an already large city. It will also be viable. Unfortunately, unless checked, it is also liable to grow to become unlivable.
As Jane Jacobs book title indicates, cities also die. In our own country, Vijayanagar, considered to be much larger than London in its heyday, died. So did Pataliputra. Delhi died several times but was reborn again.
However, villages, as a class do not seem to die. Hence, why should we not develop villages and make them support modern industry and services the way our cities do?
Build string of villages
Villages are places where one walks to work, where you know your neighbours. However, they are not well connected. Fortunately, that need not be a problem any more. We can string together a number of villages, may be towns, to support modern industry and services. That will be cheaper than building very large cities. Hence, we have three options. One, expand existing large cities the way the JNNURM plans to do. Two, build anew a couple of thousand fairly large cities with populations of three to five hundred thousand. Three, refurbish villages by distributing most of our industries and services, just one per village and invest in connecting them well.
The problem with JNNURM and with Bharat Nirman is that neither is thinking of the two later options. I remember an IAS officer in Chennai telling me that when he first built his house in Shenoy Nagar, he could get to his office in about fifteen minutes but now it takes three times longer. Waste of time is the bane of large cities. People forget that time is irreplaceable; once lost, it is lost forever.
Would Bangalore have been better if all its new services had come up in the villages some distance away? Would Chennai have been better if it had expanded the towns and villages in its vicinity rather than expanding on its own periphery? The same can be said of all our cities — Mumbai, Delhi, Hyderabad, Ahmedabad, let alone Meerut or Nagpur.
Do we need more of JNNURM or a different mission that builds new cities on green field sites or towns? Can we think of self-sufficient neighbourhoods where people walk to work, live in houses where children share playtime and schools rather than cities where people commute hours everyday from dormitories to places of work and children too do the same?
Can we have a rule that no district will have an urbanisation level less than the nation’s average? Also a rule, that the bottom 80 per cent of the houses will occupy at least half the residential space?
Can politicians and the bureaucrats change; can they at least consider alternatives?
(The author is a former Director, IIT Madras. blfeedback@thehindu.co.in)
The Hindu Business Line, March 2, 2009, Page 8
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The larger the city, the longer are commuting times, the greater the pollution and the lesser the social life of the people. Neighbours do not know one another. People cease to live in houses; they live in dormitories, says P. V. INDIRESAN.
--------------------------------------------------------------------------------
Thomas Friedman wrote The World Is Flat, a best seller. As a famous Indian politician said about the same time, there is a reaction to every action and within a year, an exactly opposite view was expressed by Professor Richard Florida in an article ‘The World Is Spiky’ in the Atlantic Monthly. In that article, Florida pointed out that in several respects, the world is spiky. At the most basic level, more and more people are living in cities, some with populations higher than 20 million. Apart from the population, the economy too is spiky — large cities have far higher economies than the rest of the population. The same holds true of energy consumption too — the brightest nights are in the cities, not in villages. Finally, he clinches the argument by pointing out that this spikiness is likely to get more and more pronounced because patents — an excellent measure of progress — are even more spiky than either population or the economy or energy consumption.
Then, whom do we believe? Do we accept Friedman’s argument or, do we follow the opposite argument that progress requires cities, the larger the better? Do we conclude that rural populations have no future, at any rate, rural populations are Children of the Lesser God?
Friedman was talking of countries as a whole, not of its constituents; Florida wrote about the rural-urban divide and not countries as a whole. Both are correct. Hence, the question remains whether, for greater progress, cities should be allowed to grow without limit and villages be allowed to decay steadily?
Go for smaller cities
We, in India, have the JNNURM — the Jawaharlal Nehru Urban Renewal Mission — as also the Bharat Nirman of rural development. The two schemes have different emphasis: the rural scheme aims at a much lower level of achievement than the urban one. Further, the urban one aims to help only the top 60 cities in the country. The result: India will indeed be spikier in the times to come.
At the time of Independence, Bangalore had a population of three hundred thousand. It was the capital of the State; it had excellent medical facilities, schools and colleges including the Indian Institute of Science plus a fair amount of industry too. It was a nice, gracious city to live in.
Now it is 20 times bigger, but it is certainly no longer as gracious as it used to be. Increase in size does not necessarily make a place better. Likewise, JNNURM will definitely make cities larger, not necessarily better. Bharat Nirman will make villages a little better but not good enough to compete with cities.
We do need large cities. Only large cities can support stock exchanges, governments, business centres or airports. However, large towns, rather than cities, are enough to sustain large hospitals, universities, factories and the like.
The Medical College in Manipal, the Birla Institute of Science and Technology in Pilani as well as innumerable sugar or paper factories have emerged and flourish in relatively small towns. Even some of the finest cities of the world — Edinburgh, Frankfurt, San Francisco — have all populations barely larger than half a million.
Bane of cities
India has seven large cities with populations in excess of five millions and growing faster than other cities and, of course, villages too.
Life in them, the traffic and the pollution are all getting worse. Should Delhi add ten million more people; should Bangalore double itself? Or, can we have a larger number of relatively smaller cities?
Why not plan for a couple of cities of around three to five hundred thousand in every district to absorb the increasing urban pressure instead of expanding our largest cities? Should we have a different form of JNNURM which builds more nice cities of the type Bangalore used to be?
Traffic and its associated pollution is the main bane of all cities. Ideally, we should be able to walk to the place of work. The larger the city, the longer are commuting times, the greater the pollution and the lesser the social life of the people. Neighbours do not know one another. People cease to live in houses; they live in dormitories.
If we accept the arguments in the Jane Jacobs classic, The Death and Rise of Great American Cities, a city (but not a smaller establishment) should have high population densities, around thirty to fifty thousand per sq.km.
On that basis, a city with a population of three to five hundred thousand can be built within a space of ten square kilometres. That would be much, much cheaper than adding the same size population to an already large city. It will also be viable. Unfortunately, unless checked, it is also liable to grow to become unlivable.
As Jane Jacobs book title indicates, cities also die. In our own country, Vijayanagar, considered to be much larger than London in its heyday, died. So did Pataliputra. Delhi died several times but was reborn again.
However, villages, as a class do not seem to die. Hence, why should we not develop villages and make them support modern industry and services the way our cities do?
Build string of villages
Villages are places where one walks to work, where you know your neighbours. However, they are not well connected. Fortunately, that need not be a problem any more. We can string together a number of villages, may be towns, to support modern industry and services. That will be cheaper than building very large cities. Hence, we have three options. One, expand existing large cities the way the JNNURM plans to do. Two, build anew a couple of thousand fairly large cities with populations of three to five hundred thousand. Three, refurbish villages by distributing most of our industries and services, just one per village and invest in connecting them well.
The problem with JNNURM and with Bharat Nirman is that neither is thinking of the two later options. I remember an IAS officer in Chennai telling me that when he first built his house in Shenoy Nagar, he could get to his office in about fifteen minutes but now it takes three times longer. Waste of time is the bane of large cities. People forget that time is irreplaceable; once lost, it is lost forever.
Would Bangalore have been better if all its new services had come up in the villages some distance away? Would Chennai have been better if it had expanded the towns and villages in its vicinity rather than expanding on its own periphery? The same can be said of all our cities — Mumbai, Delhi, Hyderabad, Ahmedabad, let alone Meerut or Nagpur.
Do we need more of JNNURM or a different mission that builds new cities on green field sites or towns? Can we think of self-sufficient neighbourhoods where people walk to work, live in houses where children share playtime and schools rather than cities where people commute hours everyday from dormitories to places of work and children too do the same?
Can we have a rule that no district will have an urbanisation level less than the nation’s average? Also a rule, that the bottom 80 per cent of the houses will occupy at least half the residential space?
Can politicians and the bureaucrats change; can they at least consider alternatives?
(The author is a former Director, IIT Madras. blfeedback@thehindu.co.in)
DLF faces buyer activism
DLF faces buyer activism
The Hindu Business Line, March 1, 2009, Page 15
A further price cut and registration of undivided share of land in the apartment buyers’ favour are among the prime demands of an online group of buyers, some of whom are threatening to exit DLF’s Gardencity residential township project.
Over 950 buyers have banded together through the Internet to apply their collective bargaining power, according to a spokesperson and a buyer coordinating the group.
This has emerged a significant issue among the real estate developers in Chennai, with DLF, one of the largest real estate players in the country, stumbling on its first residential project here.
The buyers are dissatisfied with the price reduction announced by the company recently. DLF cut prices by Rs 300 to Rs 600 a sq.ft; on prices that ranged between Rs 2,800 and Rs 3,200 when the project was launched in December 2007.
The other demands of buyers in the project off Old Mahabalipuram Road, about 20 km from Adyar, include: establishment of an alternative approach road that bypasses a settlement for the tsunami-affected, equitable penalty for delay by either the seller or the buyer and a lifetime membership in the club coming up at the township project.
A DLF official said over 200 buyers had submitted their request for refund, but at least 50 had changed their mind after DLF had highlighted the value proposition. The various issues have been addressed by the company.
On registration of undivided share of land, the DLF official said that is the norm when three parties — a land owner, builder and buyer — are involved, and the builder agreement is not divulged to the authorities. But when, as in the case of DLF, the owner and buyer are the same, the Stamp Act says that the full value (including land and builder’s agreement) has to be registered.
DLF’s procedure gives the buyers a better legal standing, he said. It has doubled DLF’s penalty for delay to Rs 10 a sq.ft a month “representing good rental value”.
Project provisions
DLF had announced a price reduction recently making it the most competitively priced project in the vicinity. “No other project on the OMR stretch offers such a strong value proposition with facilities like a school, mall and a host of other amenities and specifications meeting Zone 4 (earthquake resistance) standards,” he said.
The company is also providing an alternative approach road, the official said.
According to the spokesperson for the buyers, the online group accounts for nearly 1,100 apartments that have been booked in the project where over 3,493 apartments have been announced.
At least 600 have demanded a refund. People had wanted to exit the project from last September-October following the downturn in the economy, but DLF at that time threatened to invoke a forfeiture clause in the provisional allotment application.
This could mean the loss of several lakhs of rupees for the buyers. The customers are to meet on Sunday to plan on further course of action.
OUR CHENNAI BUREAU
The Hindu Business Line, March 1, 2009, Page 15
A further price cut and registration of undivided share of land in the apartment buyers’ favour are among the prime demands of an online group of buyers, some of whom are threatening to exit DLF’s Gardencity residential township project.
Over 950 buyers have banded together through the Internet to apply their collective bargaining power, according to a spokesperson and a buyer coordinating the group.
This has emerged a significant issue among the real estate developers in Chennai, with DLF, one of the largest real estate players in the country, stumbling on its first residential project here.
The buyers are dissatisfied with the price reduction announced by the company recently. DLF cut prices by Rs 300 to Rs 600 a sq.ft; on prices that ranged between Rs 2,800 and Rs 3,200 when the project was launched in December 2007.
The other demands of buyers in the project off Old Mahabalipuram Road, about 20 km from Adyar, include: establishment of an alternative approach road that bypasses a settlement for the tsunami-affected, equitable penalty for delay by either the seller or the buyer and a lifetime membership in the club coming up at the township project.
A DLF official said over 200 buyers had submitted their request for refund, but at least 50 had changed their mind after DLF had highlighted the value proposition. The various issues have been addressed by the company.
On registration of undivided share of land, the DLF official said that is the norm when three parties — a land owner, builder and buyer — are involved, and the builder agreement is not divulged to the authorities. But when, as in the case of DLF, the owner and buyer are the same, the Stamp Act says that the full value (including land and builder’s agreement) has to be registered.
DLF’s procedure gives the buyers a better legal standing, he said. It has doubled DLF’s penalty for delay to Rs 10 a sq.ft a month “representing good rental value”.
Project provisions
DLF had announced a price reduction recently making it the most competitively priced project in the vicinity. “No other project on the OMR stretch offers such a strong value proposition with facilities like a school, mall and a host of other amenities and specifications meeting Zone 4 (earthquake resistance) standards,” he said.
The company is also providing an alternative approach road, the official said.
According to the spokesperson for the buyers, the online group accounts for nearly 1,100 apartments that have been booked in the project where over 3,493 apartments have been announced.
At least 600 have demanded a refund. People had wanted to exit the project from last September-October following the downturn in the economy, but DLF at that time threatened to invoke a forfeiture clause in the provisional allotment application.
This could mean the loss of several lakhs of rupees for the buyers. The customers are to meet on Sunday to plan on further course of action.
OUR CHENNAI BUREAU
Unitech in talks with OBC to sell office building at Saket
Unitech in talks with OBC to sell office building at Saket
The Economic Times, March 2, 2009, Page 14
Sanjeev Choudhary NEW DELHI
REAL estate firm Unitech is in talks with Oriental Bank of Commerce (OBC) to sell its office building in Saket, New Delhi, a top company executive said. If the deal materialises, it could fetch Unitech around Rs 500 crore. The company is also simultaneously in talks with 7-8 wealthy individuals to sell floors in that office, in the event of a deal with OBC not working out.
“We are working on two options of either selling the entire building to one buyer or different floors to multiple buyers,” Unitech MD Sanjay Chandra said. The six-floor 2.2 lakh sqft office, which is almost ready to be occupied can fetch around Rs 500 crore, if sold to one buyer and higher if sold floorwise to multiple buyers.
“Our aim would be to maximise realisation for us. But the deal will also depend on how soon we can close it,” Mr Chandra said, adding that the negotiation process with Oriental Bank of Commerce has been initiated. He said negotiations with 7-8 wealthy property investors, who generally buy such properties with an eye on regular rental income, too is underway.
Unitech, which has a total debt of Rs 10,000 crore on its balance sheet, has been looking to raise fresh funds through sale of its assets to repay debt and cover for its operational expenditure. Besides its Saket office, Unitech is also in the process of selling it’s mid-segment hotel in Gurgaon.
It is understood that the company has entered into an agreement with Delhi-based auto dealer Roop Madan to sell its hotel for around Rs 230 crore. Unitech has also sold off some land parcels in Gurgaon lately to raise funds.
These asset sale would help the firm get fresh capital, but wouldn’t be enough to sail it through the tough times. That’s why the company is also looking at diluting stake to private equity funds at project as well as company level to raise fresh funds. “We expect to raise around $500 million through private equity deals at company as well as project level,” Mr Chandra said.
“We are talking to 6-7 real estate funds to raise capital for our mid-income residential housing projects in the national capital region and Mumbai,” Mr Chandra said. The company is also in talks with three private equity funds to raise capital at the company level.
MONEY MATTERS
The company is also in talks with seven-eight wealthy individuals to sell floors in the office.
The office can fetch around Rs 500 cr, if sold to one buyer and higher if sold floor-wise to multiple buyers.
Unitech is also in the process of selling its mid-segment hotel in Gurgaon for around Rs 230 crore.
It is looking at diluting stake to private equity funds at project as well as company level to raise fresh funds .
The Economic Times, March 2, 2009, Page 14
Sanjeev Choudhary NEW DELHI
REAL estate firm Unitech is in talks with Oriental Bank of Commerce (OBC) to sell its office building in Saket, New Delhi, a top company executive said. If the deal materialises, it could fetch Unitech around Rs 500 crore. The company is also simultaneously in talks with 7-8 wealthy individuals to sell floors in that office, in the event of a deal with OBC not working out.
“We are working on two options of either selling the entire building to one buyer or different floors to multiple buyers,” Unitech MD Sanjay Chandra said. The six-floor 2.2 lakh sqft office, which is almost ready to be occupied can fetch around Rs 500 crore, if sold to one buyer and higher if sold floorwise to multiple buyers.
“Our aim would be to maximise realisation for us. But the deal will also depend on how soon we can close it,” Mr Chandra said, adding that the negotiation process with Oriental Bank of Commerce has been initiated. He said negotiations with 7-8 wealthy property investors, who generally buy such properties with an eye on regular rental income, too is underway.
Unitech, which has a total debt of Rs 10,000 crore on its balance sheet, has been looking to raise fresh funds through sale of its assets to repay debt and cover for its operational expenditure. Besides its Saket office, Unitech is also in the process of selling it’s mid-segment hotel in Gurgaon.
It is understood that the company has entered into an agreement with Delhi-based auto dealer Roop Madan to sell its hotel for around Rs 230 crore. Unitech has also sold off some land parcels in Gurgaon lately to raise funds.
These asset sale would help the firm get fresh capital, but wouldn’t be enough to sail it through the tough times. That’s why the company is also looking at diluting stake to private equity funds at project as well as company level to raise fresh funds. “We expect to raise around $500 million through private equity deals at company as well as project level,” Mr Chandra said.
“We are talking to 6-7 real estate funds to raise capital for our mid-income residential housing projects in the national capital region and Mumbai,” Mr Chandra said. The company is also in talks with three private equity funds to raise capital at the company level.
MONEY MATTERS
The company is also in talks with seven-eight wealthy individuals to sell floors in the office.
The office can fetch around Rs 500 cr, if sold to one buyer and higher if sold floor-wise to multiple buyers.
Unitech is also in the process of selling its mid-segment hotel in Gurgaon for around Rs 230 crore.
It is looking at diluting stake to private equity funds at project as well as company level to raise fresh funds .
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