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Reckless deals
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newsbyte on 29 May, 2008 01:52:24
 
The recklessness that one usually identifies with the stock market has now
spilled over into the Indian real estate market.
One of the possible reasons is the virtual absence of regulation in our
generally opaque realty industry where large acquisitions are still driven by
political access and black money.
As an English language TV channel very aptly exposed prior to the recently
concluded state elections in Karnataka, the majority of the state’s
politicians are clearly a motley group of land grabbers whose collective net
worth has at least quadrupled over the last four years.
But if crooked politicians are profiting from real estate, there must be
insatiable demand from potential buyers.
I recently heard from a real estate industry veteran that the owners of a
popular travel portal are snapping up land in Kolkata’s IT corridor as if
there is no tomorrow.
The owners are probably not bullish on their primary business of travel as
prices of air tickets continue to soar.
A foreign real estate consulting firm reportedly brokered the deal.
Research reports being crafted by such consulting firms are unregulated and
unfiltered by any regulatory body like Sebi or IRDA.
In the event, potential buyers have no safety net to fall back upon.
Over valuation is a phenomenon that the Indian capital market system witnessed
when the first flush of foreign broking firms forayed into India in 1992.
The clutch of foreign realty broking firms who now dominate the corporate and
retail segments of the real estate industry appear to be as reckless in their
recommendations.
One of them even merged with an Indian entity as their expatriate managers were
not able to achieve the desired level of "access" with politicians and builders
who are intricately mixed up in any mega real estate deal. Caveat Emptor!
SEZ hurdle
Most of the land that is being front run by cartels of politicians and
businessmen who are hoping to flog it to potential special economic zones is now
akin to dead inventory as the central government has chosen to go slow on
sanctioning SEZs after stiff political opposition from quarters who obviously
have missed out on the land grabbing opportunity.
Applicants for SEZs are also aware that most of the land tracts that they are
eyeing are really "benami" holdings of politicians and transacting on such
properties will fill the pockets of one politician or the other.
If the freeze of new SEZs continue, some of our scheming politicians are not
only likely to blink but face even worse.
Credibility crisis
Some Hyderabad-based non residential Indians claim to have tied up with a large
Israeli business group to launch a series of mega townships in Southern India.
There have been reports in the media that the joint venture is aiming to invest
upwards of Rs 4,000 crore over the next 12 months.
But candidates interviewing with the group have a different story to tell.
The directors of the company seem to be in no hurry to hire as candidates are
met on several occasions without any definite indication of hiring.
Is there a mechanism by which the actual liquidity of such companies can be
assessed?