Tuesday, August 26, 2014

Over 2L flats remain unsold due to demand-supply gap

The unabated demand-supply gap in the residential property market has created a pile-up of 2,13,742 unsold units, according to a Knight Frank India report released on Tuesday . The unsold inventory could take almost three years to sell.

The half-yearly report, India Real Estate Outlook,analyses the residential and office market performance in the Mumbai metropolitan region (MMR) between January and June 2014.

Demand in the region dropped by a whopping 25% during this period in comparison with the same period last year. "Buyers continued to sit on the fence for the most part of H1 2014 in anticipa tion that the new and stable leadership at the Centre would revive the ailing economy ," it said The most expensive location (south Mumbai) accounts for less than 1% of the 4,47,294 under-construction units in the MMR. " A comparison with all other micromarkets in MMR shows that the inventory level in south Mumbai market will take maximum time of 18 quarters (4.5 years) to sell," it said.

Central Mumbai, on the other hand, emerged as a prominent residential market on the back of premium residential and social segment and corporate headquarters from manufacturing, media and consulting sectors. It will take almost four years to clear the inventory that has been in the market for the past nine quarters.

The western suburbs saw a 19% jump in new launches compared to 12% during the same period last year. This belt has an unsold inventory of over three years.

With developers deferring fresh launches, new project completions dropped by 25% in H1 2014 compared to the same period last year.

Saturday, August 23, 2014

`1 lakh cr of your money: What’ve banks done with it?

dna exposes one of the best-kept secrets in the Indian banking industry: Fraud cases on the rise

Mumbai: Bank funds of about Rs 1 lakh crore are caught up in frauds or under investigation by the Central Bureau of Investigation (CBI).

But banks are greening their books by selling off bad loans to asset reconstruction companies (ARCs) or by restructuring payments (where the tenure of loan is altered when there is a repayment issue) or plain writing it off to make their balance-sheets rosier.

As on June 30, about Rs 2.54 lakh crore of bank loans turned into bad loans after borrowers defaulted on repayments. Add another Rs 4.46 lakh crore of restructured assets and you have around Rs 7 lakh crore out of the Rs 61.98 lakh crore of bank loans (read depositors' money) that are under stress.

Frauds and vigilance investigations have become commonplace. Depositors' money is getting wasted on operationalising promoters' business plans that are being drawn up to swindle money from banks. Most frauds are staged by dubious businessmen, who are hand-in-glove with corrupt bankers.

Which are the notable frauds reported?

Banks are closely monitoring the Bhushan Steel case (Rs 40,000 crore) while the account has still not turned bad. Kingfisher (Rs 4,022 crore), Deccan Chronicle (Rs 4,000 crore), Zoom Developers (Rs 2,400 crore). Winsome Diamonds (Rs 6,581 crore) and First Leasing Financial (Rs 1,000 crore) are some of the other big cases.

Aren't banks punished?

The RBI recently carried out an independent scrutiny of the loan and current accounts of Deccan Chronicle Holdings and slapped a combined monetary penalty of Rs 1.5 crore on 12 banks for violation of various rules. They were five public sector and seven private banks. While the maximum penalty of Rs 40 lakh was imposed on ICICI Bank, others penalised include Andhra Bank, Axis Bank, Canara Bank, Corporation Bank, HDFC Bank, IDBI Bank, IndusInd Bank, Kotak Mahindra, Ratnakar Bank, State Bank of Hyderabad and Yes Bank.

How do banks report drop in bad loans?

Despite an increase in frauds, many big banks like SBI and ICICI Bank have reported lower bad loans in the first quarter of 2014-15. Banks have sold bad loans of close to Rs 30,000 crore to ARCs till the end of the first quarter ended June 30, 2014. Banks have started selling off loans that are just 60 days due for repayment to avoid an NPA tag on their balance-sheets.

What do ARCs do?

Asset reconstruction companies (ARCs) specialise in recovery of loans or reviving the fortunes of stressed companies. Banks like SBI, ICICI Bank and IDBI Bank together have set up an ARC --ARCIL. There are private ARCs owned by Edelweiss and JM Financial.

How do banks

sell bad loans?

Banks often sell the loans at a discount of 20-40%. ARCs pay 15% of the bad loans in cash and the remaining as security receipts, to be encashed over 8 years. All public sector banks sell loans through an auction process. Private sector banks sell them through bilateral deals.

What is RBI doing

about it?

RBI said in its annual report released on Thursday. The increase in the level of restructured standard advances since 2012-13 reflects potential hidden stress in the quality of loan assets. The improvement in NPAs during Q4 of 2013-14 needs to be cautiously examined in the face of the increased of?oad of loans to ARCs by banks.

Is it planning any concrete action?

The RBI is proposing to cut down bank exposure to companies by half, so that funding to companies is drastically brought down. Tightening norms will help banks in risk mitigation during cyclical downturns.

Working to implement GST says FM

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