News About Properties

‘Current real estate prices are unsustainable’

Trikona Capital, currently the single largest real estate fund dedicated to India, is planning to invest $10 billion in real estate and infrastructure sector over the next 10 years. Trikona has earlier raised close to $500 million in UK and has commitments worth $1.5 billion in over 14 projects in the country.

Aashish Kalra, managing director and co-founder of Trikona Capital, spoke to Tinesh Bhasin on the real estate industry and how the fund plans to invest in the current scenario.

Give us your views on Reserve Bank of India’s move to curb Foreign Direct Investment (FDI) in real estate.

We need FDI to increase supply of real estate properties. Debt has become expensive as interest costs have gone up. Real estate business in the country is at nascent stage. The sector has just started witnessing institutional investments and old monopolies are breaking down as companies are selling shares to public. Transparency is seeping in. We need foreign institutional money to help the sector reach maturity.

Real Estate Impacts Bank Profitability

Real estate problems were part of the reason the earnings of Harrison-based First Federal Bank fell 82 percent in the third quarter.

The bank earned $301,000 in the quarter, compared to $1.7 million in the year-ago period.

The quarterly earnings suffered because the bank increased its loan loss provision because they are charging off more loans than they originally expected, said John Dominick, Arkansas Bankers Chair and professor of banking at the University of Arkansas.

The revenue losses were attributed to an $846,000 increase in loan loss provisions, giving the bank $1.33 million, which it set aside for losses in the quarter. The increase was needed to cover the escalating delinquent loan portfolio as the community bank has taken back more than $5 million of real estate since December 2006.

Real estate commissions on the rise

With the collapse of the sellers’ market, real estate agents are finding themselves in the driver’s seat when it comes to charging fees.

During the housing boom, home sellers were in the driver’s seat with real estate agents courting them - often at bargain commission rates. But now that the bubble has burst, the tables have turned.

In 1991, the average commission rate was 6.1 percent, according Steve Murray, of Real Trends, which tracks the brokerage industry. The rate inched down to 5.4 percent by 2001 and by the end of 2005, it stood at 5.02 percent.