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Realty

Jerry Rao wants to give you 15% assured returns

Jerry Rao is a well-known entrepreneur most famously known for starting Mphasis.

His latest venture is Value and Budget Housing Corporation (VBHC) of which he is the Executive Chairman

I was surprised to get this offer from VBHC which promises the investor an assured return of 15%

[gview file=”https://alphaideas.in/wp-content/uploads/2015/07/Chennai-Investment-Scheme-V1.pdf”]

Basically, VBHC is using the credit profile of the Investor to get itself low cost HFC funds.This is surprising as only last year, VBHC had raised funds from pedigreed investors like Carlyle group and IFC.

What happened Jerry?The money ran out?

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Realty

Can Mumbai realty prices crash by 100%?

Earlier,I had blogged about a Research Report by Ambit Capital which discussed the possibility of Mumbai realty prices crashing by 50%

Now comes a study on climate change which discussed the possibility of Mumbai and other coastal cities going underwater in the next few decades:

In what may prove to be a turning point for political action on climate change, a breathtaking new study casts extreme doubt about the near-term stability of global sea levels.

The study—written by James Hansen, NASA’s former lead climate scientist, and 16 co-authors, many of whom are considered among the top in their fields—concludes that glaciers in Greenland and Antarctica will melt 10 times faster than previous consensus estimates, resulting in sea level rise of at least 10 feet in as little as 50 years. The study, which has not yet been peer reviewed, brings new importance to a feedback loop in the ocean near Antarctica that results in cooler freshwater from melting glaciers forcing warmer, saltier water underneath the ice sheets, speeding up the melting rate. Hansen, who is known for being alarmist and also right, acknowledges that his study implies change far beyond previous consensus estimates. In a conference call with reporters, he said he hoped the new findings would be “substantially more persuasive than anything previously published.” I certainly find them to be.

To come to their findings, the authors used a mixture of paleoclimate records, computer models, and observations of current rates of sea level rise, but “the real world is moving somewhat faster than the model,” Hansen says.

Hansen’s study does not attempt to predict the precise timing of the feedback loop, only that it is “likely” to occur this century. The implications are mindboggling: In the study’s likely scenario, New York City—and every other coastal city on the planet—may only have a few more decades of habitability left. That dire prediction, in Hansen’s view, requires “emergency cooperation among nations.”- from Slate

 

As an aside,I always wondered why our ancestors did not build any coastal cities.Minor ports aside, all the major capitals (Delhi, Pune, Mysore, Hyderabad, Lahore, Murshidabad etc) were miles away from the sea. All our major coastal cities such as Mumbai,Chennai,Kolkata,Karachi etc were built by the British.

Is it possible that our ancestors learnt from the experience of ancient India where cities like Dwarka, Lothal etc perished under the waves?

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Excerpts Realty Sellside Research

Can Mumbai realty prices crash by 50%?

Saurabh Mukerjea of Ambit Capital sure thinks so.

In an interesting report, Ambit Capital lays out the bear case for real estate prices and makes this startling remark:

In a fairly-priced real estate market, the rental yield tends to be somewhere close to the cost of borrowing. Instead, Mumbai has a rental yield of close to 2% (this is gross of tax and maintenance charges) whilst the lending rate hovers around 10%.

The difference between lending rates and rental yields is one of the highest in India (see the exhibit on the next page). Even if one assumes that buyers are willing to live with only 5% rental yields (as they might have an extremely bullish view of capital gains arising from real estate in India), this would imply halving of real estate prices in Mumbai.

 

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Realty

Piramal’s IndiaREIT Investors get screwed

Ajay Piramal-backed Indiareit Fund has sought consent from investors in its real estate private equity fund for another extension of the product’s tenure by a year. Indiareit Fund Scheme III, which was launched in July 2007, is due to mature in July 2015. The fund was to mature in July 2013 but it had sought investor approval to push the tenure by two years at that time.

 

In a letter addressed to investors, Piramal Fund Management’s managing director Khushru Jijina said the stated time periods are essential to realise the estimated values, and without the extension, monetisation would become extremely difficult. He believes any shorter time bound liquidation would significantly hamper the residual values. “We laid out and followed an assetwise strategy in order to bring the remaining investments closer to final realisation,” said Jijina in the letter.

 

Rich investors put money in this fund in 2007— the peak of the previous stock market bull run— as real estate prices were showing no signs of fatigue. Then, the fund raised close to Rs 600 crore. Investors had to shell out at least Rs 25 lakh to participate in the fund. The fund returned 99.83%, or Rs 24.95 lakh, of the total capital called by the fund.

 

“Though investors made an absolute return of 33%, the IRR from the fund works out to a mere 5.06%,” says Manoj Nagpal, CEO, Outlook Asia Capital. In addition to the low return, there is uncertainty when the balance money will come back. from ET
priamal.jpg
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Realty

A trigger for a realty crash?

Source:Sumit Jain

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