Ravi Karandeekar's Pune Real Estate Market News Blog: subprime crisis

Showing posts with label subprime crisis. Show all posts

Sunday, September 30, 2007

The Reserve Bank of India (RBI) has kicked off an exercise to gauge the extent of bad loans of banks in the real estate segment

Impact of the subprime crisis in the US and Europe on Indian banks :

The latest exercise seems to be a follow-up on the meeting that RBI had with banks during the second week of September to discuss the impact of the subprime crisis in the US and Europe on Indian banks.

RBI officials wanted to assess whether Indian banks had any exposure to such loans while attempting to gauge the impact of the crisis on the broader Indian economy. In fact bankers have been told to keep central bank officials posted of any developments, including marker rumours.

Bad Home Loans :

RBI now wants to have a fix on the level of bad loans in the banking industry, especially relating to home loans and commercial property. It has commissioned a survey on bad loans in both residential mortgages and commercial real estate loans. The regulator has sought details on standard advances in the sector from banks for three fiscals — 2001-02, 2002-03 and 2003-04. RBI wrote to some banks on September 14, directing them to respond to queries by September 28, bankers said.

The impact of a higher interest rate :

Banks have been told to furnish details of bad loans generated during 2004-05, 2005-06 and 2006-07. RBI wants banks to submit details of all such loans at the end of March 31, 2005, 2006 and 2007. The impact of a higher interest rate on borrowers and consequent default gets reflected only with a bit of a lag. Bankers reckon that this could be the reason for the regulator calling for data of loans which had originated a few years ago.

Aggressive lending :

Commercial banks have, over the past four years, been lending aggressively to the real estate sector. In fact, for several banks lending to residential mortgages constitutes over 50% of their total retail exposure. Outstanding real estate loans for banks, according to RBI data, rose from Rs 13,546 crore in March 2005 to Rs 45,328 crore at the end of March 2007

During the last couple of years, RBI has clamped down excessive lending by banks to the real estate sector on fears of an asset price bubble.

1. Role of the Reserve Bank of India(RBI) in the growth and slowdown of the Indian real estate market

2. "Sale of residential property dropped by over 70 percent in May-June 2007," the Associated Chambers of Commerce and Industry report

3. Rise and Fall of Subprime Lenders Began on Wall Street

Sunday, September 23, 2007

Could the Weak US Housing Market Hurt Google?

According to investment fund Oppenheimer, financial services ads accounted for about 10% of Google’s total revenue in 2006, while mortgage-related services accounted for 3.3%. For a company on track to do more than $10 billion in revenue this year, that’s a pretty sizable amount of money that could be in play should advertisers tighten up. . .

Thursday, September 20, 2007

Now even the scientist are saying we're scr3wed with the Subprime mess

America's love affair with consumption has been a big source of economic stimulus for a long time. But the party might be about to end. Americans' overextended wallets could trigger the most severe downturn in economic activity seen since at least the 1980s — and possibly since the Great Depression.

read more | digg story

Tuesday, September 11, 2007

Sahara has approached bankers in London to raise between $5 billion and $7 billion to create 217 townships across India

As part of the fundraising, Sahara, which sponsors India’s cricket team, is examining listing a subsidiary company called Sahara City Homes on the London stock market.

The overseas fund raising comes at a time when RBI is tightening its grip over NBFCs raising deposits from individuals. With overseas borrowings by Indian companies tightened in the wake of high money supply, a listing overseas would help Sahara raise equity to finance its plans.

In recent months, Indian realty companies like Unitech have opted to list on London's Alternate Investment Market (AIM). Unitech raised Rs 700 crore though the AIM listing and nearly a dozen other Indian companies were planning to adopt a similar strategy, though some of them could defer their plans in the wake of the recent subprime concerns.

Friday, September 7, 2007

Och-Ziff Capital, New York, has got into a JV with Marvel Realtors, for a Rs.500 crore luxurious residencial project in Pune

The Marvel-Och-Ziff super luxury residential real estate project will come up in Kharadi, Pune. The project will have a built-up area of 1.10 million sq ft on a seven-lakh sq ft plot. The project will have a mix of 400 different sizes of luxury apartments.

At the Kharadi super luxury project, apartments will have specifications like exclusive swimming pools, spas in every apartment, extensive use of advanced home automation technology, Italian marble flooring and the latest VRV central air conditioning systems.

Construction begins in three months and the project will be completed by 2010.

“Presently this is a project specific JV with Marvel having a 55 per cent stake and Och-Ziff picking up 45 per cent. But we will do more deals with them and are open to all possible business ideas,” Vishwajeet Jhavar, CEO, Marvel Realtors said. The investment in the project will be Rs 350 crore with Rs 100 crore being the investment in land.

Automated super luxury apartment makers:

The demand for super luxury homes in Pune was increasing with demand outstripping supply by many times. Marvel has been able to sell projects even before formally launching them.

Marvel already has ongoing projects in Pune in the super luxury range with Rs four crore plus price tags. It has completed five super luxury projects and 12 regular projects covering 4.40 million sq ft worth about Rs 2,000 crore.

Marvel is a six-year-old Rs 176 crore turnover company promoted by a group of five young professionals with diverse experience in construction, engineering, electronics, automation and finance

"Global Hedge Fund" ? It's Wall Street, US Hedge Fund:

Och-Ziff is a New York-based global hedge fund. Och-Ziff has invested US $ 55 million in Bangalore-based Nitesh Estates and in another company in Hyderabad. Och-Ziff Capital founded in 1994 by Daniel Och, senior managing member currently manages over $ 29 billion and has offices in the US, Europe and Asia.
Source: PUNE Newsline

Wednesday, September 5, 2007

The top 20 'meanest' U.S. cities

The top 20 meanest cities were chosen based on the number of anti-homeless laws in the city, the enforcement of those laws and severities of penalties, the general political climate toward homeless people in the city, local advocate support for the meanest designation, the city’s history of criminalization measures, and criminalization legislation.

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Media Deserves Blame for Homelessness in the U.S.

The same media that sold us the “certainty” of weapons of mass destruction in Iraq has redefined homelessness so that low-income individuals, not powerful Presidents, Senators and Congresspersons, are to blame. It’s no wonder the public feels hopeless about solving homelessness, and blames local mayors rather than the federal government.

After the Nixon Administration stopped the construction of new public housing in the United States, the country was left with fewer low-cost units for families than would be required to meet future demand.

Within a decade, homeless families became visible on the nation’s streets. No subsequent President has addressed the shortage of low-cost housing for families by increasing the nation’s public housing supply, and the number of such units has steadily declined.

As young professionals returned to major cities in the late 1970’s, upward pressure on rents left urban areas increasingly unaffordable for low-income people.

The Reagan Administration responded to this emerging affordability crisis by sharply cutting federal housing funding in 1981. This denied low-income residents the subsidies necessary for them to stay housed.

Widespread homelessness resulted, and it was not until 1999--after Bill Clinton had eliminated any new Section 8 vouchers--- that the federal government began meaningfully increasing the numbers served by federal housing subsidies.

Bush then stopped this progress in its tracks.

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Tuesday, September 4, 2007

Subprime lending crisis changes buying, selling plans

It's hard to avoid negative news about the mortgage lending business. Defaults are rising, subprime lenders are closing shop, and fortunes could be lost as mortgage-backed securities go up in smoke. Sounds ominous, but how will these trends impact someone who's trying to buy or sell a home?

The first thing to understand is that lenders are moving back to basics. No- and very low-down-payment mortgages are available only to buyers with high credit scores. This means no more 100 percent and 95 percent mortgages for subprime borrowers.

Lenders are also backing away from low-documentation and stated-income mortgages. Many lenders now require buyers to have a cash down payment, good credit and the ability to verify income.

For years, home buyers stretched the price they could pay by using adjustable-rate and interest-only mortgages. Not long ago, lenders qualified buyers for these loan products based on the lower initial rates and on interest-only payments. Now, borrowers must qualify based on the fully indexed rate and amortized payment. In other words, qualifying for a home mortgage is more difficult.

Appraisals are also being scrutinized more carefully. If home prices have dropped in your neighborhood, the lender's underwriter might knock the appraised value down 5 percent and require you to increase your down payment accordingly. Some lenders now require two appraisals. Before the credit crisis, this was required only for loan amounts above $1 million. If your contract includes a contingency for the property to appraise for the purchase price, make sure that you have underwriting approval before you remove the contingency.

New York House - The guide to inspired living and real estate in the Hudson Valley

For some, a chance to refinance despite default

The Federal Housing Administration is coming to the rescue of at least some of the homeowners in peril across the country. The FHA, which has long helped low-income and credit-scarred borrowers get financing, has launched FHA Secure in an effort to stem the tide of foreclosures caused by the sub-prime mortgage crisis

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The School of Hard Work Or Habituated Hand-Outs?

After signing the ‘American Dream Downpayment Act of 2003’ Bush added, “We want people to be fully aware of what it means to buy a home and what it takes”. The contradiction, if otherwise unclear, was that the President was signing a law that gave free money to those who could not afford to buy a home, and then he planned to educate.about the hard work, savings, and planning that is required to buy a home.

With Wall Street packaging and selling mortgage reset time bombs, rating agencies dolling out A's first and asking questions never, and many homeowners essentially signing future default notices before their new home purchases were finalized.

Bush's efforts at expanding homeownership since 2003 have gone unnoticed as the subprime debacle widens. Unfortunately, so have the costs of funding Bush's homeownership initiatives.

What should not remain unnoticed is the irony of it all: near the height of the housing boom Bush wanted to do everything he could to boost already record high homeownership rates, but now, as the boom turns to bust, Bush is eying a plethora of emergency policy moves to simply try and keep ownership rates stable.

You can not help but wonder whether or not many Americans would have been better off if Bush simply left the mortgage market alone.

read more | digg story

Who financed the US home-price bubble ? We, the savers of Asia!

Everyone is talking about collapse of the US home-price bubble and the danger of recession, but no one is talking about the suckers who financed the bubble, namely the savers of Asia.

Asia will do so no longer. If the United States wants Asian investors to continue to take risk on its shores, it will have to allow them to buy solid US companies, rather than the sort of debt derivatives that blew up this summer.

read more | digg story

Yes, be greedy when others are fearful, go ahead and "Scoop up some REITs", please!

If you've been following the daily headlines about the subprime crisis and the deflation of the housing bubble, you know that you would have to be completely out of your mind to invest in real estate.

And that may be the best reason for giving it a look.

Thanks! Zac Bissonnette i admire and appreciate you. Pune Real Estate Market values REIT very much.

US subprime mortgage crisis all through August has led to a fall in assets of mutual funds in India by over Rs18,500 crore

The total Assets under Management (AUM) of 32 fund houses have decreased to Rs4,67,623 crore from Rs 4,86,129 crore in July, latest data from Association of Mutual Funds in India showed.

Analysts, believe the decline in the assets of fund house may be due to the redemptions by investors on concerns of a market meltdown and utilisation of cash pile of mutual funds for making purchases in the bearish markets.

The BSE benchmark index Sensex had witnessed a sharp volatility during the past month on concerns related to the US subprime mortgage crisis.

Monday, September 3, 2007

Subprime Homesick Blues

If subprime lending consisted only of lenders exploiting borrowers, after all, it would be hard to understand why so many lenders are going bankrupt. Focussing on lenders’ greed misses a fundamental part of the subprime dynamic: the over ambition and overconfidence of borrowers.

Borrowers were not passive recipients of this money—instead, many of them used the lax lending standards to make calculated, if ill-advised, gambles.

Many just fell victim to well-known decision-making flaws.

Another thing that led subprime borrowers astray was their expectation that housing prices were bound to keep going up, and therefore the value of their house would always exceed the size of their debt. This was a mistake

read more | digg story

The Subprime Meltdown and the Ownership Society

The full effects of the collapse of the subprime market remain to be seen, but it is not too early to talk about the policies that got us here. In particular, the government policy of promoting homeownership should be examined.

While homeownership is often desirable as a means for accumulating wealth and obtaining secure housing, it will not always be a good mechanism for either.
A serious housing policy should recognize that renting can be a better option for many Americans, especially for tens of millions of families with low and moderate incomes. The country cannot allow its housing policy to be determined by ideology or the interest groups that benefit from this ideology.

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Rise and Fall of Subprime Lenders Began on Wall Street

Subprime lending is based on the support of Wall Street's old-line banking establishment. It encouraged it; it funded it. Since the mid-90s, warehouse lending by Wall Street firms is what's kept companies like New Century in business.

What we're seeing now in the subprime market is, when the Wall Street firms get cool on the subprime market, they just cut the funding and the warehouse loans vanish overnight — and that's what puts a company like New Century out of business.

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"The Subprime Loan Machine"
A little-noticed tool of automated underwriting software helped fuel the recent subprime mortgage boom.

The rise and fall of the subprime market has been told as a story of a flood of Wall Street money and the desire of Americans desperate to be part of a housing boom. But it was the little-noticed tool of automated underwriting software that made that boom possible.

Automated underwriting software spawned an array of subprime mortgages, like those that required no down payment or interest-only payments. The software effectively helped move what was a niche product only a decade ago into the mainstream.

Automated underwriting “replaced the ways we used to extend credit,” said Prof. Nicolas P. Retsinas, director of the Joint Center for Housing Studies at Harvard.

Automated underwriting is now used to generate as much as 40 percent of all subprime loans, according to Pat McCoy, a law professor at the University of Connecticut who has written on real estate lending.

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the psychology of the subprime mortgage

So why do people take out sub-prime loans? Don't they realize that they won't be able to afford the ensuing 28 years of mortgage payments? I think a big part of the reason sub-prime loans remain so seductive, even when the financial terms are so atrocious, is that they take advantage of a dangerous flaw built into our brain. This flaw is rooted in our emotional brain, which tends to overvalue immediate gains (like a new house) at the expense of future costs (high interest rates). Our feelings are thrilled by the prospect of a new home, but can't really grapple with the long-term fiscal consequences of the decision. Our impulsivity encounters little resistance, and so we sign on the bottom line. We want the house. We'll figure out how to pay for it later.

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Hedge Fund Implode O Meter

The "imploded" list contains hedge- or hedge-like funds which have gone through some sort of permanent adverse change. This is a somewhat subjective call, and does not necessarily mean total shutdown or bankruptcy. It can also mean steep and rapid mark-downs in net asset value; or abnormal "bail-out" by corporate parents or peers in order to avoid write-downs and provide liquidity. The funds are of any type and sector.

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Bush to Bomb Iran to Distract World from Sub-Prime Mess

WASHINGTON (FMLiveWire) - George Bush's war machine plans to shortly destroy 1,200 targets in Iran with massive airstrikes, the US president said in an exclusive interview with FMLiveWire. "This war plan is designed to crush Iran's military in three days so the world will be distracted from the global financial crisis caused by our subprime debt fraud and worthless US bonds which everyone has purchased," he said.

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