On to the worm now

This was pure music....

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Real estate, after the meltdown, was my favorite. DLF to be precise. Don't think I did big bang research that made it quite a find. Just a wistful hunch when I saw the stock languishing at Rs.300 levels. Now I read about the Mutual Funds newfound love for all things realty. Ha!

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The MFs exposure to realty rose from Rs 1.24 bn in March 2009 to Rs 1.71 bn around December 2008 to nearly Rs 11.13 bn by the end of Q1-FY09. By July 09, it rose to Rs.14.21 bn according to this news report in BS.

Nice to feel like an early bird... On to the worm now !!!

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After thoughts governments

Placing a fielder after the ball gets struck

This is my favorite cricket metaphor. It typifies a late riser, usually a fielding team captain that moves around his fielders to spots after the ball gets hit and not before. Smart batsmen will sense this and occasionally mislead the fielding team by offering unorthodox strokes to spots where they are not so good at stroking (say, a right hand batsman playing a risky shot to the gully or extra cover on the off-side) – it’s just a ruse to rattle the field so that he can freely score at his favorite spots where there shall be no fielders. Smart captains normally set a field and make sure his bowlers bowl to the field, not letting the batsmen settle down.

Our administrators are of the former variety - of late risers. When our real estate market was red hot, global strategic and financial investors including PE were making the major mistake of investing large amounts of money in overvalued assets, our government came down with a slew of regulations – P-Note bans, setting high water marks for FDI, classifying convertible debentures as equity etc. They made sure that they punctured the swell until there was nothing but flat tires. Now after the investors are gone, the globe in a recession, real estate developers are broke, sense prevails.

The government is tweaking FDI regulations to exempt mixed development projects from the $10 million capitalization requirement, reduce the project size to 10 acres (from 25 acres) and cut the minimum built up area to 10,000 (from 50,000) square feet. The lock-in of three years after the date of completion of the project shall continue. The only condition is that 50% of the area will be kept open for hotels / tourism activities, shall be subject authority supervision and residential buildings shall not be put to use otherwise.

It was pretty much the same thing that RE developers earlier clamored for. Now after they are long broke or even dead and gone, the government is waking up to the idea. Anyway, I will stock up on some real estate stocks - expecting a rally :-)

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Breaking the back of Indian Realty

Readers of this blog may be wondering why there is a sudden slowdown in posts. Well the truth is there is not much worthy of finding a place here and I don’t post something that I don’t feel seriously about. Moreover, volatility in the stock market has given me little time to waste and make use of every available opportunity to make a quick buck. After all, it’s time we make some money now that the market has occasional rallies – bear market or not.

Now I find this. Realty prices in India could correct by over 30% - now this is it. This is when reality dawns on realty. How long could they hold back? Stock markets have given a thumb down to the sector, there is a credit crunch and bankers are loath to lend to real estate players. But these scums wouldn’t budge. Now it seems their back is breaking.

I am normally not a saddist. But as far as unreasonable realty sector is concerned, I’d gladly be one.

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Welcome to mezzanine... but will it work...?

Hard times call for novel solutions. Real estate sector took it in the chin and is deep in trouble. Bankers don’t lend, properties don’t sell, investors shun the asset class and even Private Equity that once was its messiah wouldn’t take to it kindly.

In comes Mezzanine financing. It is a debt-like instrument consisting of cash income and an equity-linked component, sandwiched between debt and equity on a company’s balance sheet. Here usually a strategic investor (say a PE firm) funds a company through debt and equity. The net cost of investments is 20-25%. Of this, 15-20% is paid as interest on debt and the remaining 5-10% is offered to the private equity investor as warrants at zero cost.

Now my question. The real estate sector lost its sheen when land prices rose to obscene levels and construction inputs like steel, cement, equipment and consumables became unremunerative. The final product, a house or commercial unit could not be sold at a reasonable cost. When liquidity dried up, the highly capital intensive real estate sector lost its only lifeline for working capital – Bank / PE funding. That was the death knell.

So how is mezzanine structure going to solve the problem of absent cash flows? When you expect the payback in the form of part interest and part stake, cash flows matter all the more. How will the borrower meet the interest obligations? Equity may come cheap, but if the sector takes longer to recover and people continue to give priority to survival than property acquisition, how do they expect valuations to improve? Even if valuations improve, with equity markets in a downward trend, how long will they stay put with value erosion and no interest income?

Clearly more than a missing link here. May be the structure envisages high margin collateral to cushion the downside. But most real estate companies are already highly leveraged, no cushion will offer complete comfort ;-)

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For better realty transparency

Shobhana Subramanian of Business Standard contrasts the real estate market rules in India / China leaning on CRISIL and CLSA reports. She finds Indian laws on real estate developers way too lenient. I found the piece pretty insightful. Excerpts –

- In China, mortgage payments have to be utilized for a specific project; Indian builders divert customer advances for other purposes as well (say, acquisition of new land).

- In China, developers must develop the land acquired within a certain time frame, failing which the appreciation in the value of the land is taxed. Back home there's really no hurry to start any construction, the land can simply lie vacant and can even be resold at premium.

- Chinese developers hold relatively small land banks; some estimates put it to be sufficient for development over a 4- to 10-year period, depending on growth targets; in India developers are estimated to be holding on to land banks for anywhere between 8 and 15 years (of course, various Indian regulatory approvals can take years - goes the argument)

- The difference in the amount of debt that Indian and Chinese players have on their books is striking. The average gearing for listed Chinese developers, CLSA reckons, is 50-60 per cent with only a couple of them at 100 per cent. For companies back home, the average would be closer to 100 per cent with a couple of firms indulging themselves beyond that.

- In India, sales and profits of realty firms and recognised well before the entire project is completed. That just won't do in China; revenues there flow into the books only after the project has been completed and the property handed over to the buyers.

Here is another case for toning down regulations. Or even Housing Finance Companies (HFC) can also help if they choose to finance buyers in projects only when they are ready for occupancy and possession. Much better if they insist the HFC be made a (confirming) party to the transaction so that even the end-use of funds is validated.

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Lenders up stakes

Real estate developers have been feeling the squeeze. Rising interest rates and slowdown have hurt sales, bringing down real estate prices 10 to 20 per cent across markets. Add in the rising steel and cement prices, input costs for developers go way up and the market meltdown has hampered their ability to raise funds at home or abroad. But it’s not misery all around, the least for lenders to Realty sector.

Promoters of Akruti, Omaxe and Sobha have pledged their shares with Indiabulls Financial Services, financiers like Dubai-based BankSarasin & Co and Credit Suisse as a liquid security for loans against properties.

Omaxe, it appears have an outstanding debt exposure of Rs.100 crore to Indiabulls Financial. On December 4, 2007, its promoters pledged 14.4 per cent stake as collateral with Indiabulls besides the security of assets and personal guarantee. Akruti City, has a net exposure of Rs 80 crore to Indiabulls. Between December 2007 and Feb 2008, Akruti's promoters pledged 10.62% stake with Indiabulls towards collateral. On September 11, 2007, Sobha Developers, which builds offices for IT major Infosys, pledged 7.81 per cent of the company's stake with Dubai-based Bank Sarasin & Co. A day earlier, the promoters had pledged 10.70 per cent with Credit Suisse.

I envy Indiabulls. If the realty markets don’t revive soon, the debt would become overdue and the lenders will promptly enforce their lien on the security including pledged shares. Then all they need do is sell them (to their own realty arm - Indiabulls real estate) when the market revives and recover many times over the sums they lent, assuming that it would be an arm's length transaction. So they get two birds with one shot. The finance arm recovers its capital + interest and the realty arm gets low price real estate going on fire sale. Wow - what a business!

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Remember the times when our (erstwhile Developmental) Financial Institutions - IDBI and IFCI used to be in project finance and routinely accepted shares as collateral? Borrowers defaulted and they almost went under. But soon their fortunes improved when markets revived and they made a killing by selling those shares.

Indiabulls for that matter made no bones about its intentions. It had no charitable veneer of a DFI. It is a for-profit, perfectly private enterprise; Make money it will!

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Realty wisdom - "build frill-free houses"

PE funds clearly having the upper hand. If you had longed for a piece of India’s realty pie and couldn’t get in because of unjust valuations, now is the time. Why, you can even wring and squeeze them on terms your own.

Industry experts feel the only avenue available for raising capital in the current situation is at the project SPV level and by way of private equity or similar sources, that is generally the most expensive method of raising capital. Concerns about liquidity will continue to plague the market since debt will not be easily available. Real estate players had traditionally raised money from debt funds via corporate deposits and commercial paper. However, debt funds are currently not eager for more exposure in real estate and are continuously rolling over the debt advanced to these players. The primary source for institutional funding will, therefore, now be private equity.

So, there you go. Pick up the thread and buy into a few near-finished projects on the cheap. By all means worry about inflation and falling sales numbers. But India is still a market with large unmet demands for housing. All that you need to do is drive some sense into your portfolio companies to build affordable, frill-free houses that people can call home – where end users drive demand of what was once a neat long-term investment; we used to call it `property’ then - ringing in permanence and legacy - not an `asset class’ as defined by wealth managers now.

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[Caution - Sales pitch. If you are a realty / infrastructure player looking out for some large funds for your FDA compliant project, I have a few private equity investors that are interested. Just send me a mail at kmonyb@gmail.com with your project report / business plan and I shall be glad to assist.]

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Don't drag RE deals, close them fast....

As real estate prices take a tumble (industry players won’t openly admit though), PE investors commit routine mistakes. In the garb of expecting a higher IRR from their investments, they badger down RE entrepreneurs and their asset valuations. In effect, they delay deals.

So what’s the big deal? Is it not expected of them?

I disagree. This is the time when entrepreneurs are hard pressed for funds and deals can be closed fast at a steep discount as developers are desperate. Demand has certainly slumped but completed projects do find takers. Last year, PE players were signing deals at ridiculously high valuations and had no complaints. Now if they have to make up for their past sins, they have to sign a few deals at a discount and fast. Delaying deals would mean loss of opportunity since long term fundamentals haven't altered one bit going by large global commitments heading our way. Take the structured finance route (deals with in-built covenants for priority returns / higher preferred equity holdings to cover the downside risk of the investor if prices decline further) if necessary, but close deals fast. Wisdom demands closing deals sooner when inflation is high and prices take a tumble ; because even a marginal decline in inflation could drive prices back up.

Want to listen to some developer clamor? Here they go seeking tax exemptions for REITs in line with Mutual Fund units. But are we ready?

REITs would provide an early exit for PE investors in a RE project, but what’s left on the table for REIT investors? For a low down how REITs suit risk-averse retail investors in India, check here.

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Best time for vault owners

Multi-triggers that burst the myth of a rising real estate market have begun to bite the landlords. Too much of froth and bubble that got built in the real estate sector is now being flushed out.

Those who argue that land prices will remain stable because of its limited supply should be asked to take a look at inflation numbers. Ask Wadhwa Builders that paid Rs.46,000 per sq.ft at a record land auction at Mumbai’s Bandra-Kurla Complex in November 2007. Compare that with the last auction at BKC, by Jet Airways, where rates tumbled to Rs 32,000, a drop of a whopping 30% in just about four months.

I ran a check on some prominent real estate stocks. The BSE realty index is the worst performer this year, having shed 51% of its 52-week peak reached in January. The country’s largest property firm DLF’s scrip lost 54% while Unitech shed 64% from its peak. The scrips of Delhi-based Parsvnath and Omaxe have lost 68% each since January. Not just the sellers were smart. Imagine the windfall to govt. from stamp duty and registration charges at the peak price! If they could wait for another 6 months, the costs of registration Wadhwas paid for that deal will outgrow the cost of the land they got.

Best times for vault owners…?

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Don't mistake infrastructure for glitzy malls

Well I am not surprised at all after reading this. In fact, I’ve already said what I had to. Here and here.

“PE funds and analysts have become far more cautious in evaluating real estate investments in India. One of the analysts said that some of the funds are tightening norms for valuations after the slowdown and at least 30 per cent of the deals are taking a much longer time to go through because of valuation issues.”

All things that go up will have to come down. That is law of gravity. Imagine real estate prices going up without adequate supporting infrastructure. Say, proportionate expansion of road area or power and water supply? Ask Chennai residents. They've proved that humans don’t need natural drinking water to survive. Their life can be threatened only if the bottled water supply stops. One lash of rain and the city is flooded and the next few days are spent clearing the slush and choked drains. Soon many other cities will follow suit.

What is the point in putting up millions of square feet of glitzy malls and complexes if there are no decent roads leading to them? This is the bane of our city dwellers. Bombay was the pioneer that led this brand of mindless development and other cities haven’t learned from its travails. Bangalore, Chennai, Kolkata, Hyderabad, Cochin are all developing fast on the roadsides. But road area available remains just the same. Naturally less people would like to visit such places, much less choose to occupy. Fewer will invest. So how do you expect the prices to keep going up?

Town planners will have to work overtime. May be, one can try out PPP route to salvation. Infrastructure companies should be entrusted with the task of developing large townships and no individual developer should be allowed to develop in fractions. The system of build a block first, then dig the road to lay water and sewer pipes and dig again to lay power/data cable should stop. Major slices of Municipal budgets getting wasted on humungous pensions for past employees should stop. Spend it on better planning and efficient execution. That, if anything, would stabilize property prices - not liquidity, not a booming stock market or a surge in demand fueled by higher disposable income with people, because all this can dry up. What is constant is easier access, navigable road network and a peaceful enjoyment of the premises with enough water to drink and power to run your essential gadgets - in the kitchen, at least.

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Indian infrastructure. Big numbers, high hopes!

Realty sector is getting hot; yet again

While the housing sector experiences a slump with investors vanishing from the market and end users finding rising interest rates a major hurdle to buy their dream homes, the broader realty infrastructure sector remains hot. Leading PE funds such as Blackstone, 3i, ICICI Venture, Axis have all raised major rounds focused on Indian infrastructure sector.

Why this rush towards Indian real estate and infrastructure?

According to estimates from ICICI Securities, the Indian real estate market is worth $57 billion, and is expected to grow at a compounded annual rate of 13% to touch $105 billion by 2012. This would require investments worth $85 billion across the residential, commercial, retail and hospitality sectors. On infrastructure, the Indian government has forecast the need to spend $492 billion over the 11th five-year plan ending 2012.

As such, the investment climate for this sector has been hot, and funds, both domestic and global, have been queuing up for a slice of the action. Did you say liquidity crisis...?

No wonder I am finding myself in a funny kinda’ situation.

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SEBI in a hurry. Did PMO ask for "status report"?

SEBI today unveiled the guidelines for real estate mutual funds (REMF). For SEBI it’s another feather in the cap. Or is it another job done?

THE FINE PRINT

 Real estate mutual fund schemes can only be close-ended, listed on recognized stock exchanges
 At least 35% investment in ready-to-use projects mandated
 Investment in real estate assets, securities (including mortgage backed securities) capped at 75% of the net assets of a scheme
 Caps to be imposed on investment in a single city, project, securities issued by sponsor or associate companies
 Fund houses need valuation by two valuers every 90 days from date of investment
 Mutual funds cannot transfer real estate assets between schemes
 Have to declare daily NAV

Some doubts still persist.

Does SEBI have the expertise necessary to regulate murky real estate sector? Talk of defective title deeds, dated survey / registry documents, arbitrary valuations, diverse stamp duty assessment norms etc. Investors should do well to approach it with care. I would say “avoid”. It only intends to provide liquidity to developers that have bought land at astronomical prices. Now future cash flow from executed projects depend on affordability of buyers.

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Then two valuers declaring valuation every 90 days. Is it possible in a RE fund? The underlying prices may not vary in that frequency at all. What could be the benchmarks? Who will supply data given that most deals are done on part cash, part cheque basis? Now wait a minute. Don't we clearly see seeds of subprime mess being sown here? Creating layers and layers of instruments that eventually masked the real borrower to the bondholder. Will there be a housing loan waiver like a farm loan waiver? Hope someone nips it in the bud before investors - that have little or no way to discover the ture value of the underlying - burn their ass.

Inflation recently crossed 7%. Global liquidity crisis is not yet completely off our back. Has PMO sought status report from SEBI to *save* the beleaguered sector? We live in times when ministers put in a “friendly word” to cabinet colleagues to “save” companies in trouble!

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Better the land prices sink

The official line of bullshit from Real Estate developers is that slowdown is only in residential segment; commercial properties are still in demand. I said cheese off!

Now hear it from the Future Group CEO Kishor Biyani –

“We are about to conclude two deals where we do not have to pay rentals for three years” – No rentals for 3 years? Huh? Hear more. He only expects surplus space to be larger in 2009. Why shouldn’t he?

The man who started off India’s retail revolution can’t be wrong. I don’t want him to be. Real estate in a third world, infrastructure starved, poverty ridden country like India shouldn’t be costing so much. Look at wafer thin retail margins. Can they be housed in expensive real estate? I can understand if India’s IT vendors that once enjoyed a margin of 35% did that. Now dollar has tanked and their margins have also been hit. Uncertainty looms everywhere. Why should real estate be any different?

The land prices/rentals have to sink, otherwise the structures they erect over the land will. You like that?

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Vultures waiting to scavenge big builders

Total chaos in the real estate market; but big builders won’t admit!

According to recent reports, home sales have dropped 20 to 30 per cent since last December in the metros. The higher discounts and more sweeteners (now offered by mid-sized developers) are seen as the first sign of a correction looming. These discounts should bleed them badly if seen with the huge interest cost they have to bear on borrowings for funding the race for high cost land acquisition amongst the big developers that was on till recently.

Now the big builders will tell you the slowdown is only on the housing front. For commercial properties, it is business as usual. They want you to believe that. Weak dollar has broken the back of IT and BPO/KPO businesses – the two huge consumers of bulk commercial real estate. Now they are looking at increasing productivity rather than adding to headcount – needing less and less real estate.

Then there is the incremental supply to deal with. Other businesses like textile mills and manufacturing units are fast closing shop in cities [because of falling revenues and higher operating costs] freeing up priced real estate for development. That augmented supply dents the cost of real estate further down.

The excesses of recent years have sucked out the entire liquidity from real estate players. They stretched their finances too thin to buy high price land and now when there is a global liquidity crisis, they are falling short of funds to execute their mega plans. Sample this -

Earlier in 2006, Unitech outbid India’s largest real estate company DLF to bag the 340-acre city development contract in Noida for Rs 1,583 crore. Other landmark deals include DLF buying prime Swatantra Bharat Mills land in Delhi from DSCL for Rs 1,675 crore in 2007; Unitech bagging 1,750-acre plot in Vishakhapatnam for Rs 3,228 crore in 2007; sale by Mumbai Metropolitan Region Development Authority(MMRDA) of nearly 75,350 sq. m. of land in Bandra-Kurla Complex for a total of Rs 2,798 crore in 2007. City-based developer Wadhwa Builders had paid Rs 5.04 lakh per sq. m. for the 16,500 sq. m. plot auctioned by MMRDA, marking the largest-ever deal on the basis of the value per sq. m. Wadhwa paid Rs 831 crore.

With rising price in steel and cement, construction costs have shot through the roof. The budgets of builders, both big and small, have gone haywire (now it hardly covers 11% lease rental + 8% stamp duty) and they will soon enter the despair zone.

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Vulture funds can't wait to feast on...

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"We are not REIT ready, pal"

Last week I met two senior private equity players and a couple of I-Banking friends. The former had just closed a $2 billion Real Estate and Infrastructure Fund and the latter wants deals in the sector. Between them they face one common problem. Everyone and his uncle have boarded the infra bus and deals get closed too fast. My business is to drive deals and I can't be happier. But the fact is, before I could say D.E.A.L, I hear they're done. It's frustrating sometimes.

So the trend now is to co-invest with others. I can see why they cringe at that prospect, playing a side-kick, but there's no choice. Take a slice of existing projects or be ready to follow a REIT model. Hey, hang on. Our regulators are still mulling a legislation. Here are some inadequacies from the draft code –

a) SEBI Act in its current form does not permit REIT to be regulated by it. It needs to be amended;

b) Proposed regulation talks of only close ended schemes, yet call for listing of REIT units in a Stock Exchange. But REIT units do not come under the definition of`securities’ under Section 2(H) of SCRA that regulates listing of securities. Go, amend SCRA now.

c) Unlike MF schemes that deal in securities, REITs deal in real estate directly. They own pieces of real estate and live off its rental and capital gains. SEBI has to think hard over its mastery over this new domain.

I have one more question. Last year Blackstone acquired Equity Office Properties (a REIT controlled by Sam Zell) for $39 billion. A little later the real estate market collapsed in the US and Blackstone started selling off these assets in a hurry to minimize the dent. Now, how much sense will a close ended scheme in the draft regulations envisage in a sector that’s infamous for its vicious cycles? What if the closure date happens to be in a phase when the prices have hit bottom?

Normally we hold RE assets for a very long time. Like family jewels, RE asset in India is legacy stuff that keep rolling down generations. When it’s a long term asset, why not leave those REIT schemes open ended?

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Who will be India’s REITmeister..?

So, who will be India’s Sam Zell? Any guesses…?

SEBI has recently nodded in favor of setting up REITs in India. The much-awaited Real Estate Investment Trusts (REITs), which would invest directly in real estate projects after collecting funds from investors through the stock exchanges, are set to see their entry in Indian markets with SEBI putting out draft rules for such trusts. The conditions include –

What interests me most is that even though FDI in real estate is still a much debated issue, Private Equity firms will get an easier exit route. Private equity comes at the beginning and it takes 5 to 7 years for the projects to get ready. Since FDI is not allowed in finished projects, REITs will provide them a platform to exit. When we reckon that over $6 billion have been invested by PE funds in Indian realty companies, entry of REITs are most welcome – for the fund managers….:)

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Asset base

You just need one puff on higher margins to get hooked. Then it becomes a habit that you can’t kick. Indian IT vendors like Infosys, TCS, Wipro, Satyam have all been addicted to this margin fixation.

Even stock markets gave them a higher PE multiple of 25-30x owing to their phenomenal growth fueled by these margins. Sustaining that growth seems a bit difficult since dollar depreciation, wage escalation and higher visa costs are taking a heavy toll.

If one goes by the acreage of real estate assets developed by these vendors during their growth years, the value of which is now many times over, they won’t lose too much sleep over stagnating margins.

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India's REIT hand downs

I am not a great supporter of self-regulation because it’ll end up being a free-for-all. The clichéd argument that violators would still abound is no argument for perpetuating lawlessness. But I prefer a quick and crappy regulation anyday to a slow and sturdy one that comes in well after an opportunity has taken flight.

Take India’s regulatory dilemma to let in REITs – similar to SEBI’s dilemma on Hedge Funds. Here the excuse offered is imperfect titles to property, surfeit of black money etc...In the US and UK, they had concerns over these funds too. Nonetheless they were let in with some early guidelines, however skimpy - that quickly helped capture the market opportunity, created jobs and liquidity reigned. But our regulators refuse to read from the same book, let alone from the same page. They are in no hurry to shed the appeal of roadblock contractors and opportunity destroyers. Why do we gladly accept political apathy as the hand we’ve been dealt…?

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Andy Mukherjee drives home the point in this interesting article. Excerpts -

“The REIT debate in India is caught in trivialities -

Should the assessment of the value of properties be based on discounted cash flows or some other method? Should net asset values be disclosed once a year, or every quarter?

Perhaps the assessor should seek a legal opinion on each tenancy agreement to see if it is enforceable in a court of law? How about a due diligence on environmental clearances?

This mentality to codify the minutiae, to make no allowances for the seller's reputation risk or the buyer's intelligence, is a big damper. It's also irrelevant because the real, big risks in property investments in India are outside any valuation model. The ``fair value'' of property in India isn't just unknown. In the present state of the physical market, it's unknowable. That is what really needs to be disclosed. After that, it's ``buyer beware.'' That seems to be the pragmatic approach adopted by the Monetary Authority of Singapore.“
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Well said, Andy… Hope those who matter hear you.

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The DLF dilemma

To invest or not to ?

DLF IPO never ceases to surprise by contrasts. The moment I finish reading a news that says overwhelming response by Institutional investors to its mega IPO, there’s another article which elaborates why the IPO should be dumped by investors.

The issue opened on Monday 11 June. On the second day, the issue was subscribed by 1.28 times. However, the retail investors have not given warm response to the country's biggest IPO, as the retail portion was subscribed merely 0.101 times.

Valued at the higher end of the price band, the company would be the eighth largest by market capitalisation, post-listing. With negative cash flows and current earnings abysmally low compared with future projections, the company is demanding its price relying solely on its vast land holdings, the value of which is not clear.

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Yet another gatecrasher…!

If you believe in something, go for it. This is the only way to really find out. Mathematically, the naysayers are right 95% of the time, but believing you’re in the 5% is what makes VCs they are.

Just as Ankur Srivastava, MD of DTZ brings out this report which talks about oversupply of commercial office space (in Chennai, it’s excess by 200% as they say) in Indian cities, Oak Investment Partners, the US based VC fund is setting up a Real Estate VC fund in India with a $ 200 m corpus. Can we call it the Symposium effect ?

Normally if you enter in an oversupply situation, the downward price pressure (or rental pressure, we are talking about real estate here) would take a long time to stabilize. That’s when leveraged investors (who have mortgaged the properties to Banks to fund their buys) begin to get margin calls from Banks and feel squished. Warren Buffet, the legendary investor's saying “the markets can remain irrational longer than you can stay solvent” comes to my mind.

I have often wondered why the Bubble horn is still not blowing. Aside of occasional rants by Deepak Parikh, Chairman, HDFC Ltd., India’s leading player in real estate and housing finance, not many seemed really concerned. [“How many malls can afford to pay Rs 100-150 or Rs 200 per sq foot? Look what happened to Crossroads (India's first mall). Only restaurants are left because food sells and the Piramals have sold out. The same thing is going to happen to other malls. There are many international brands, but they too cannot afford to be present in every mall”...Mr.Parikh squeals]

If you are riding the wave, why rock the boat....Welcome to party, Mr. Jerry Gallagher and prov'em all wrong !

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