Pakistan Property & Real Estate News

Housing inventory rises again in April

NEW YORK (CNNMoney.com) -- The number of homes for sale was on the rise again in April, according to figures from Zip Realty, a California-based real estate broker.

Nationally, inventories expanded 3.5% last month in the 29 major markets that the company tracks, and were up 6% over the same period last year.

"Inventories in some cities may be topping out," said Michael Larson, a real estate analyst with Weiss Research. "But this shows that sales are still weak."

Even some markets that used to be considered bulletproof have seen inventories grow. Twelve months ago, Seattle had a fairly small number of homes for sale. But inventory there has since spiked 45.9% to 36,632.

The number of homes for sale in San Francisco rose 23.8% and Washington, D.C. inventory increased 18% over the same 12 months.

Chicago saw the biggest jump in inventory between March and April, with 82,000 homes listed for sale, up 5.9%.

And these bloated inventories have put pressure on home sellers to slash prices that have already been on a steep decline. In Orange County, Calif., 49.8% of homes on the market in early May have had prices reductions, according to the report. In Phoenix, 49% of the homes have lowered prices, and in Sacramento 48.8% of homes have been discounted.

Larson said, "There's been very aggressive pricing and increased incentives by builders. And banks taking back properties in foreclosure have also been very aggressive in selling those homes off again."

He adds that inventories may be peaking, if for no other reason than that far fewer new homes being built.

In January, 2006 new homes were coming on the market at an annually adjusted rate of 2.3 million units. The pace of new home construction has now fallen nearly 60% since then, to 947,000 a year.

California gives mortgage debtors a tax break

SACRAMENTO (AP) The state Senate has approved a bill to help California homeowners whose lenders have forgiven part of their mortgage debt.

The bill would end a requirement that homeowners report that part of the loan that was forgiven as income on their tax returns.

Senator Mike Machado, a Democrat from Linden, says the bill would help in cases where there is a short sale, a loan modification or a loan refinance in which part or all of the debt is forgiven.

Paying the taxes can put a big burden on embattled homeowners.

The bill only applies to owner-occupied homes in which the debt is forgiven this year or last. State tax officials say it will help about 8,000 taxpayers.

Senators approved the bill unanimously. It now heads to the Assembly.

Home sales rise, but prices keep tumbling

WASHINGTON - Sales of existing homes increased unexpectedly in February after six months of decline, but private economists said it was too soon to say the prolonged slide in housing is coming to an end.

The National Association of Realtors said sales of existing homes rose by 2.9 percent in February to a seasonally adjusted annual rate of 5.03 million units. It marked the first sales increase since last July, but even with the gain sales were still 23.8 percent below where they were a year ago.

Prices continued to slide. The median sales price for single-family homes and condominiums dropped to $195,900, a fall of 8.2 percent from a year ago, the biggest slide in the current housing slump. The median price for just single-family homes was down 8.7 percent from a year ago, the biggest decline in four decades. Wall Street, which had been expecting another decline in home sales, was encouraged by the February increase as well as improved terms for Bear Stearns stockholders in the sale of that company to JPMorgan Chase & Co. The Dow Jones industrial average rose 187.32 points Monday to close at 12,548.64.

Economists, however, said they still believed any sustained housing rebound was many months away.

“The hemorrhaging has stopped but the recovery will be long, slow and painful,” said Bernard Baumohl, managing director of the Economic Outlook Group. “It’s unlikely that we will see any sustained jump in home purchases, must less higher prices, until mid 2009 at the earliest.”

Brian Bethune, an economist at Global Insight, said, “A quick bounce-back in the housing markets is simply not in the cards.”

White House press secretary Dana Perino said the increase in sales and a decline in the inventory of unsold homes was encouraging but “we can’t put a lot of stock in just one report.”

Lawrence Yun, chief economist for the Realtors, said that some formerly hot markets in California and Florida were seeing significant price declines now as sellers are cutting prices to attract buyers.

“We are not expecting a notable gain in existing-home sales until the second half of this year,” he said.

He said sales should be helped in coming months by recent moves to boost the loan limits on mortgages that can be insured by the Federal Housing Administration and purchased by Fannie Mae and Freddie Mac.

By region of the country, sales surged by 11.3 percent in the Northeast and were up 2.5 percent in the Midwest and 2.1 percent in the South. The only region of the country to see a sales decline was the West, where sales dropped by 1.1 percent.

The inventory of unsold homes dipped to 4.03 million units in February. That meant it would take 9.6 months to exhaust the supply of homes for sale at the February sales pace. That was down from January’s level of 10.2 months but still about double what the months’ supply had been during the peak of the housing boom.

Sales of existing homes fell by 12.8 percent in 2007, the biggest decline in 25 years, following an 8.5 percent drop in 2006. After a five-year boom, the steep downturn in housing over the past two years has been made worse by a severe credit crunch as financial institutions tightened their lending standards in reaction to multibillion-dollar losses on mortgages that have gone into default.

The steep slump in housing has raised concerns about a possible recession. Democrats are pushing for greater efforts to stem a tidal wave of mortgage foreclosures to keep more unsold homes from being dumped on an already glutted market.

Sen. Hillary Clinton, campaigning for the Democratic presidential nomination in Pennsylvania on Monday, called on President Bush to appoint an emergency working group on foreclosures to recommend new ways to confront the housing crisis.

“Over the past week, we’ve seen unprecedented action to maintain confidence in our credit markets and head off a crisis for Wall Street banks,” Clinton said in a campaign speech. “It’s now time for equally aggressive action to help families avoid foreclosure and keep communities across this country from spiraling into recession.”

Housing for low income group

By Dr Noman Ahmed: With a regulatory regime for managing the Real Estate Investment Trusts (REIT) in place, the Securities and Exchange Commission of Pakistan (SECP) is now ready to receive applications for issuing licences to interested parties for setting up REITs.

This has raised hopes in some quarters that the national housing scenario will undergo a significant change However, this view misses some important specifics of real estate and housing businesses. In these two closely linked segments, the stakeholders work for cross purposes and the two need to be treated separately .

The stakeholders comprise real estate developers (realtors), investors, agents, buyers, sellers, service providers, banks and financial institutions and regulators. A well-performing real estate mechanism is gauged by the periodic rise in the volume of trading, transparency, enforcement of essential principles of equity, rational profits to investors and a general trust among the participants.

The realtors face many challenges: choice of sites free from encumbrances, compliance of building/zoning regulations, prudent financial governance, keeping stakeholders satisfied and seeking profit-making opportunities. They focus on the financially strong clientele to expand the capital base and are not necessarily concerned about the social advantages of their ventures.

The real estate remains confined largely to upper and upper-middle income beneficiaries. The realtors produce numbers that are profitably viable but do not draw feasibility of projects from overall housing requirements.

In any welfare society, the state takes upon itself to provide housing – or at least the means for it – to its citizens. In the hybrid states of contemporary times, such workable options are created whereby citizens are able to access housing without fail. The variables of profit and market pricing do not surface in this pursuit. The provision of housing becomes one of the most essential functions of the state in transitional societies with massive socio-political dislocations.

Pakistan makes a crucial case study. Migration, natural population rise, demographic changes and depleting housing stock constitute the foremost reasons for the lingering housing backlog. The speculative trading in essential assets has constrained the provision of housing to all in a significant way. Land has become a tradable commodity. It used to be a social asset in the yester years. Thus the common people with low incomes and savings find it impossible to access housing.

The state institutions have not been able to generate worthwhile options for common people. A salaried person with a regular monthly income of Rs12000 and a household of six to support cannot dream of owning or even renting a decent house. He is forced to live in marginal conditions. The scene in the rural context is worse. With the swift depletion of shamlath (communal) lands, rural housing problem has worsened..

Mechanised farming has dislodged many peasants/tenants from agricultural lands. Continuing political upheavals and factional fighting has contributed to dislocation of millions of people to alternate locations which cannot accommodate the displaced. Housing is coupled with many associated social variables. The enabling environment for gainful employment, social and ethnic fusion and supporting state policies are some vital requirements to help common people acquire housing. In the present equation, the real estate and housing for common people do not have any underlying link. They can be brought closer for mutual objectives.

The realtors may be encouraged to develop programmes for the ordinary folks. State policies can gear support to such ventures where beneficiaries are the lower economic strata of the society. Financial packages may be devised in a manner where the access to housing credit becomes easy. These are tried and tested ideas. Social housing corporations, employer cooperatives and housing associations in urban areas are few instruments that have been effective across the globe. Pakistan can enormously benefit from the knowledge obtained from pilot projects demonstrated in many contexts.

Mortgage rates drop below 6 percent

WASHINGTON - Rates on 30-year mortgages dropped below 6 percent this week for the first time in more than a month, reflecting aggressive efforts by the Federal Reserve to cut interest rates to protect the economy from a serious recession.

Freddie Mac, the mortgage company, reported Thursday that 30-year fixed rate mortgages averaged 5.87 percent this week. That was down from 6.13 percent last week and marked the first time that 30-year rates have fallen below the 6 percent level since the week of Feb. 14.

Rates on 30-year mortgages dropped below the 6 percent threshold in the second week of January and stayed there for six straight weeks as the sharp economic slowdown stirred concerns about a possible recession. In the past month, bond markets had grown worried about rising inflation pressures that are coming at the same time that the economy is slowing. But the meltdown of Bear Stearns, the nation’s fifth largest investment bank, over the weekend prompted the Fed to move aggressively to pump money into the financial system and slash a key lending rate by three-fourths of 1 percent on Tuesday.

Analysts said all of these Fed efforts had helped to ease pressure on interest rates that had been generated by higher inflation readings. And helping in that area, the government reported last week that consumer prices were unchanged in February, a significant moderation from the January readings, while retail sales fell by a larger-than-expected amount in February, reinforcing worries about economic weakness.

“Slowing consumer spending and weak employment conditions are among the concerns behind the Fed’s decision to lower the target federal funds rate,” said Frank Nothaft, chief economist at Freddie Mac.

Other categories of mortgages also showed declines this week.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, fell to 5.27 percent this week, down from 5.60 percent last week.

For five-year adjustable-rate mortgages, rates dipped to 5.56 percent, compared with 5.58 percent last week.

Rates on one-year, adjustable-rate mortgages were the only category to show an increase, edging up to 5.15 percent, compared to 5.14 percent last week.

The mortgage rates do not include add-on fees known as points. For 30-year and 15-year mortgages, the nationwide average fee was 0.5 point. Five-year mortgages carried a 0.9 point average fee while one-year mortgages had a 0.8 point average.

A year ago, rates on 30-year mortgages stood at 6.16 percent, 15-year mortgage rates averaged 5.90 percent, five-year adjustable-rate mortgages were 5.91 percent and one-year adjustable-rate mortgages were at 5.40 percent.

Housing has been suffering through a severe slump that has dragged down house prices in many parts of the country. The fallout is hitting both homeowners and the economy at large, raising worries about a possible recession. The downturn is housing is being worsened by a severe credit squeeze with lenders tightening standards in the face of soaring mortgage foreclosures.

Pakistan has vast scope for investment in housing sector

ISLAMABAD: Pakistan offers excellent investment opportunities to national and international builders in housing sector as the country needs massive development in this sector, said Caretaker Minister for Provincial Coordination Dr Muhammad Amjad.

“The real estate sector in Pakistan is flourishing as there is a huge demand for housing in the country,” Dr Amjad said while addressing a gathering for balloting of Top City project situated adjacent to the Motorway and New Islamabad Airport.

The minister said the national and international investors are playing an important role in development of the housing schemes. He hoped that these schemes would be completed according to the schedule given by the builders , developers and the directors of the Top City.

He assured the investors in the housing schemes that the government will fully cooperate with those societies that are fulfilling commitment made to their members.

He said every efforts will be made to make such societies a success without creating any hurdles if they meet criteria set by the government and respective departments.

The balloting ceremony of the Top City was attended by members, property dealers, investors, and representatives of the other segments of the society. The participants appreciated the management of the Top City for allotting plot numbers to the members.

The management assured the investors and members of the housing project that the development work on the housing society will be started shortly.

U.S. home construction falls in February, Building permits slide to slowest annual rate since Sept. 1991

WASHINGTON - U.S. home building projects started in February fell by 0.6 percent to a higher-than-expected annual rate while building permit activity, a sign of future construction plans, dropped off 7.8 percent, a government report on Tuesday showed.

The Commerce Department said housing starts set an annual pace of 1.065 million units in February, higher than the 990,000 expected by economists. The January starts figure was revised upward to 1.071 million from the 1.012 million originally reported.

Prices for U.S. Treasury bonds were down after the stronger-than-expected data while stock futures stayed high.

Still, some analysts were skeptical that there is long-lasting improvement in the beleaguered housing market.

“I wouldn’t put anything in that little bounce. The housing industry is in a recession,” said Josh Stiles, Bond Strategist at IDEAGlobal in New York.

Building permits fell 7.8 percent to an annual rate of 978,000, the slowest pace since a 974,000 rate set in September 1991. Economists polled by Reuters had predicted forecast February permits at 1.020 units after the 1.061 million rate of January.

Compared to a year ago, housing starts were down 28.4 percent. But for single-family homes, starts were off 40.5 percent from a year ago - the largest year-over-year drop since January 1991 when they fell by 45.1 percent.

Home builders confidence still near record low

The index has been at 20 or below since September, a sign of persistent pessimism from builders. The report is derived from a survey of about 400 residential developers nationwide.

“Interested buyers are out there, but they are either reluctant to go ahead with a home purchase or they are unable to find mortgage financing they can afford,” said the trade group’s president, Sandy Dunn, a homebuilder from Point Pleasant, W. Va. in a prepared statement.

Index readings higher than 50 indicate positive sentiment. The seasonally adjusted index has been below 50 since May 2006. It plummeted from 36 in March 2007 to 18 in December.

Tighter lending standards, rising defaults and fear about the housing market’s future have sidelined buyers, an absence felt acutely by homebuilders such as D.R. Horton Inc., Pulte Homes Inc. and Centex Corp.

Confidence fell in the Northeast and West, remained unchanged in the Midwest and inched up in the South. Traffic from prospective buyers also remained unchanged, the trade group said.

Bernanke pledges to help troubled homeowners

WASHINGTON - Fighting to stem a dangerous wave of home foreclosures, Federal Reserve Chairman Ben Bernanke pledged Friday to do all that is possible to help struggling homeowners.

The Fed is “strongly committed to fully employing our authority, expertise and resources to help alleviate their distress,” Bernanke said in a speech to the National Community Reinvestment Coalition’s annual meeting here.

Record-high foreclosures are aggravating problems in the housing market and for the national economy, which many fear is on the verge of a recession or in one already.

Bernanke didn’t offer new recommendations — as he did earlier this month — but rather spoke of the various steps the Fed already is taking to address current problems and to prevent another crisis of this sort.

The Fed, for instance, has proposed a rule to protect homebuyers from some of the same dubious lending practices that contributed to the housing and credit debacles now shaking the country. Subprime borrowers — those with tarnished credit histories or low incomes — have been hurt the most, although problems have spread to more creditworthy borrowers.

“Far too much of the lending in recent years was neither responsible nor prudent,” Bernanke said. “The terms of some subprime mortgages permitted homebuyers and investors to purchase properties beyond their means, often with little or no equity,” he added. “In addition, abusive, unfair or deceptive lending practices led some borrowers into mortgages that they would not have chosen knowingly.”

At the end of last year, more than one in five of the roughly 3.6 million outstanding subprime adjustable-rate mortgages were seriously delinquent — meaning they were either in foreclosure or 90 days or more past due. That rate is about four times higher than it was in the middle of 2005, he said.

Meanwhile, in 2007, about 45 percent of foreclosures were on prime, near-prime or government-backed mortgages, he added.

The meltdown in the housing and credit markets are not only straining homeowners but also have forced financial companies to rack up multibillion losses. The situation has unhinged Wall Street, put the Federal Reserve and the Bush administration in crisis-management mode, rattled the public and sent politicians — including those vying to be the next president — scrambling for solutions.

Bailing out Bear Stearns Cos. Underscoring the urgency: Bear Stearns Cos., one of Wall Street’s venerable investment banks, received a rescue package by the Federal Reserve and JPMorgan Chase & Co. on Friday — just hours before Bernanke spoke. It was a last-ditch effort to save the institution.

The Federal Reserve responded swiftly to pleas from Bear Stearns that its coffers had “significantly deteriorated” within a 24-hour period. The bank, which had made a fortune in mortgage-backed securities, has ran up $2.75 billion in write-downs since last year, and faced a possible collapse without some kind of lifeline.

Before launching into his prepared remarks, Bernanke mentioned that he had a “busy morning.” He did not elaborate.

To help brace the economy from all the fallout, the Federal Reserve is expected to cut a key interest rate, now at 3 percent, next week. The debate is whether it will be a half percentage point or an even bigger three-quarter-point reduction. Bernanke, in his speech, did not provide clues on that front.

Instead, the Fed chief’s speech stuck closely to steps the Fed is taking to prevent prospective homebuyers from getting burned in the future when they take out a mortgage.

On this front, the Fed has a proposal that would restrict lenders from penalizing risky borrowers who pay loans off early, require lenders to make sure these borrowers set aside money to pay for taxes and insurance and bar lenders from making loans without proof of a borrower’s income. It also would prohibit lenders from engaging in a pattern or practice of lending without considering a borrower’s ability to repay a home loan from sources other than the home’s value. The proposal also would curtail misleading ads for many types of mortgages and bolster financial disclosures to borrowers.

“The combination of stricter regulation and better disclosure will not solve all the problems,” Bernanke said. “We do believe, however, that this proposal will give consumers much better information,” he added.

‘Strong uniform oversight’ In addition to this effort, Bernanke said a “strong uniform oversight of different types of mortgage lenders is critical to avoiding future problems.”

The housing collapse dragged down home values, clobbering borrowers. Many were left with mortgages that exceeded the value of their homes. They were further socked by low introductory rates on their adjustable mortgages, which then reset to higher rates, making their monthly payments difficult or impossible, to afford.

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“For a number of years, rapid increases in house prices effectively insulated lenders and investors from the effect of weaker underwriting, providing false comfort,” Bernanke said.

In a speech earlier this month, Bernanke urged lenders to help distressed homeowners by lowering the amount of their loans. At the time, Bernanke suggested such a longer-term permanent solution may work better than shorter-term and temporary ones, where the distressed homeowner could find himself in trouble again.

To date, permanent home mortgage modifications that have occurred have typically involved a reduction in the interest rate, while reductions of the principal balance of the loan have been quite rare, he said.

Mortgage relief plan falling short

The government’s flagship program to give struggling homeowners relief from overwhelming mortgage payments has left hundreds if not thousands of callers frustrated by long wait times, lack of follow-up and relatively minor loan modifications that have failed to help.

A story last week on msnbc.com generated hundreds of e-mail responses from readers who have called the heavily promoted hotline. Almost all the callers said they encountered a variety of roadblocks in their efforts to save their homes.

Officials affiliated with the effort said in interviews that they have helped many borrowers but say there are misunderstandings about the limited scope of the program.

The Hope Now Alliance, a private partnership organized by the federal government, launched in October and trumpeted repeatedly by President Bush and other top administration officials, has been criticized by members of Congress, state officials, and private credit counselors.

To date, the federal government's efforts to help the growing number of homeowners facing foreclosure have focused largely on prodding lenders to modify existing loans to more affordable levels. More than a million of these loans, written during the height of the lending boom, are scheduled to reset to interest rates that many homeowners will no longer be able to afford.

But the Hope Now hotline has left many callers frustrated and without hope, judging from e-mail correspondence. Readers report difficulty getting through to hotline counselors, cursory reviews of their cases, lack of follow-up, confusion over who is eligible for help, and, for those who did reach lenders, relatively minor loan modifications that weren’t sustainable over the long term.

“I was fortunate to find a helpline like HOPE, which helped with the depression I was going through of losing my home,” said a reader named Yenny from Roselle, N.J. “The problem is the loan modification that I just got from my lender is higher, and I cannot afford it. What do I do now?”

Hope Now officials say they have fielded hundreds of thousands of calls and are providing a critical bridge between homeowners at risk and their lenders. Some 141,000 loans were modified in the fourth quarter of last year, up from 76,000 in the third quarter, according to the alliance. “(Loan) modifications have gone up significantly,” said Hope Now Alliance executive director Faith Schwartz in an interview. “But I think there's more work to be done.”

Part of the challenge stems from the enormous complexity of the securitized loan pools that funded the lending boom earlier in the decade. Because these pools were sold off to thousands of investors, modifying any given mortgage involves agreements involving hundreds of investors whose securities are backed by that loan. That has forced loan servicers — who were originally set up to manage payments — to enter the fray of restructuring hundreds of thousands of loans.

“We are doing everything we can to avoid foreclosure and work through the structures of these loans with the borrower and with the servicer,” said Schwartz. “This is a loan-by-loan solution, and everyone is working very hard to make that a success.”

The Hope Now Alliance also faces the challenge of coordinating the efforts of dozens of independent entities. Prodded by the Bush administration, the alliance signed up 11 large lenders representing some 60 percent of the U.S. mortgage market, along with industry trade groups like the Mortgage Bankers Association. A handful of housing advocacy and community groups also signed on, including the Homeownership Preservation Foundation, which operated a counseling hotline.

“We’re working with third-party housing counselors, we’re working on improving communication and access to services,” said Schwartz. “And it’s not easy.”

Florida worst state for mortgage fraud, again

WASHINGTON - Florida led the nation in mortgage fraud in 2007, a dubious distinction it's had two years running.

The competition to be first in fraud is getting stiffer as the housing downturn persists and agencies nationwide report more suspect mortgages, according to industry data released Thursday.

Nevada ranked second in mortgage fraud, up from No. 6 a year earlier in the Mortgage Asset Research Institute's annual report on fraudulent mortgage activity. It was followed by Michigan, California, Utah and Georgia. Virginia made its debut on the report's top 10 list, coming in at No. 7.

The report, released at a Mortgage Bankers Association conference in Chicago, did not detail the exact number of fraud cases by state or nationwide. Instead, the group calculated a "fraud index" by comparing fraud reports with the number of home loans made in each state.

It cited FBI statistics showing 46,700 mortgage fraud reports in 2007, a more than 30 percent increase from the year before and twice as many than in 2000. Federally insured lenders are required to report fraud to the government. The report came from an industrywide database that includes information about fraud and fraud allegations collected from approximately 700 mortgage companies ranging from finance giants Fannie Mae and Freddie Mac to midsize lenders.

Merle Sharick, a vice president with ChoicePoint Inc., which owns the Mortgage Asset Research Institute, said fraud has become more evident now that the industry is examining loans in foreclosure and default. "When times are good and the market is roaring, fraud is not as evident," he said.

Sharick also noted that the industry has traditionally worried more about organized schemes to defraud lenders, rather than borrowers misrepresenting their income. But now, with property values falling "a lot more instances" of fraud committed by borrowers who were simply stretching to buy bigger homes and are now stuck with properties they can't afford.

Mortgage fraud has represented about $1 billion in losses over the past decade, the Mortgage Bankers Association said.

Common kinds of mortgage fraud include misrepresentations of income, employment history, and falsified tax returns or financial statements .

David Kittle, chairman of the mortgage bankers' group and chief executive of Principle Wholesale Lending in Louisville, Ky., said the industry does not blame borrowers alone for committing fraud. He said real estate agents, mortgage brokers, builders and lenders all share responsibility for a climate of lax standards that has now ended.

"There's enough responsibility to go around to everybody," he said in a conference call with reporters.

The Mortgage Bankers Association is calling for more than $31 million over the next five years in new funding for the FBI and Justice Department to fight mortgage fraud, money that would go to new investigators and prosecutors.

Paulson: More mortgage lender rules needed

WASHINGTON - Economic policymakers on Thursday recommended stricter regulation of mortgage lenders as part of a broad effort to prevent a repeat of a credit crisis threatening to drive the country into recession.

With problems in the credit and housing markets worsening, the Bush administration now seems to favor a larger role for government — an approach Republicans generally have had little appetite for.

Recommendations from a presidential advisory group on financial markets cover mortgage lenders and other institutions, as well as investors, credit ratings agencies and regulators. Treasury Secretary Henry Paulson, who leads that group, said the effort is not about “finding excuses and scapegoats.” The suggested actions, he said, are intended to avoid another meltdown in the credit and housing markets.

“The objective here is to get the balance right — regulation needs to catch up with innovation and help restore investor confidence but not go so far as to create new problems, make our markets less efficient or cut off credit to those who need it,” Paulson said.

Federal and state regulators should strengthen oversight of mortgage lenders, according to the group’s report released Thursday. Also, states should follow strong, uniform licensing standards for mortgage brokers. No such nationwide system exists, although legislation in Congress would create one.

Sen. Charles Schumer, D-N.Y., said administration officials are “beginning to put their toe in the water when it comes to government involvement to help the economy. The bad news is they’re going to have to do a lot more than that to address the problem.”

Other recommendations urge improvements by credit rating agencies, criticized for not accurately assessing risk on complex mortgage investments. These kinds of business transactions soured, causing market chaos. The report also suggests clearer disclosures and assessments of risks on investments.

Greg McBride, senior financial analyst at Bankrate.com, likened the recommendations to “putting up a traffic light only after a series of auto accidents.”

“It is purely reactionary,” he said. “The ideas themselves are not necessarily new but the pressure to do something is growing as housing problems become more pronounced.” The housing and credit woes have shaken Wall Street, propelled home foreclosures to record highs and forced financial companies to absorb multibillion losses on bad investments in mortgage-backed securities. For the first time since 2001, recession is a serious threat.

Federal Reserve Chairman Ben Bernanke said the proposals are “an appropriate and effective response to the deficiencies in our financial framework that contributed to the current turmoil in financial markets.” The central bank chairman serves on the advisory group, created after the 1987 Wall Street crash to monitor markets, as do the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission.

Paulson said in a speech at the National Press Club that the report “is not about finding excuses and scapegoats. Those who committed fraud or wrongdoing have contributed to the current problems; authorities need to, and are prosecuting them. But poor judgment and poor market practices led to mistakes by all participants.”

Asipac invited to join development consortium for $17 billion luxury real estate project in Brazil

Apart from IT services and companies like L&T in engineering design, there aren’t too many examples of home-grown Indian professional services companies getting large overseas assignments. Now, in a first by a services company in the real estate sector and what may be a first sign of things to come, Asipac, India’s No.1 real estate development services and project marketing company, has been invited to join a consortium that is developing a $17.35 billion (Rs.70,000 crores) luxury real estate project in Brazil. Yes, Brazil, and not a traditional market like USA or Europe.

The “EEUD” project is planned in Natal, in the Rio Grande Do Norte state of Brazil, on a whopping 6350 acre site. Brazil in general, and Natal in particular, have been rated by many international organizations as one of the Top 5 real estate investment destinations in the world for the next 2-3 years.

The project is being promoted by a consortium of investors based in Brazil, France, Spain and Taiwan. A Master Plan developed by a leading Spanish architecture firm called for construction of about three million square meters, with 4000 residential units of vastly varying sizes and budgets, 3 golf courses, 1500 hotel rooms, a convention center and 450,000 square meters of commercial development.

Asipac was one amongst five international development consultants invited to see the site, evaluate the development plan and suggest an alternate concept. After studying/evaluating the current development plan and visiting the site and its adjoining region, within just four days, Asipac concluded that the proposed master plan reflected an undesirably high quantum of development. Apart from many other issues, the plan provided for a Hitech City of 300,000 square meters for 30,000 IT professionals and Asipac felt that neither is such manpower available in the region, nor were there enough residential facilities available or provided for them.

“A density of 0.37 could spoil the abundant natural and ecological wealth. The region has the best air quality in America as per NASA, the site has a 6½ km long beach-front, a 12 km river running along and within it and a 3400 acre mangrove forest with natural wildlife including an almost extinct specie of monkeys,” said Asipac Chairman & Chief Thinker Amit Bagaria, adding “The proposed plan did not distinguish the project from many similar projects planned around the world.”

“Global investors and second-home buyers have many choices, so our offering had to be clearly different,” said Vinay Shenoy, VP Marketing, “With this aim, Asipac proposed an alternative model comprising the world’s most exclusive second homes with a “billionaire’s lifestyle for a millionaire”. The best part is that Amit dreamt up this concept while we were devouring on delicious fish and shrimps caught in front of us during a two-hour boat ride through the 12 km river on the site.”

“When we proposed our model on the fourth day, first there was anger that a greatly reduced size would reduce profits, but when we explained the broad numbers, there was total amazement and disbelief,” says Bagaria. Asipac’s model has construction of only 873,000 sqm. (29% of the earlier plan), with 630 furnished 1000 sqm. Villas/Mansions on 2½ acre estates each provided with a Limousine, 5 all-Suite Resorts, 6 Signature Spas, Indulgence Shopping Centre, Hi-tech Entertainment Centre, Offshore Casino, Marina with 34 Yachts/Boats, Water Sports Complex, Airport, 40 Executive Jets, 3 Seaplanes and 8 Helicopters, one PGA Golf Course, and an Equestrian Centre with 30 prize horses.

The promoters and their bankers liked Asipac’s concept and asked Asipac to join the consortium. Asipac’s role will be to do a detailed feasibility study, help raise $1.2 billion development capital for the project (along with i-banks such as UBS, Credit Suisse and Deutsche Bank), manage the master planning and design process, get co-developers and specialty operators, and oversee global marketing & sales efforts (in association with luxury property marketing giants such as Sotheby’s International Realty). “We do all of this in India and have worked on a $930 million project, so we don’t see any major hurdle in meeting their expectations,” said Shenoy.

Asipac expects to earn a fee of about $85 million from the project. After receiving approvals from RBI, it will incorporate an offshore subsidiary based at London to undertake its obligations. “There was initial resistance from colleagues and Board members, as some felt that focusing on India was better, but a majority were in favour, considering that fee could be 21 times our average Indian project for probably 4-5 times the effort and it was our chance to get more global opportunities in the future,” said Bagaria, “4 of our Indian clients encouraged me to go ahead, and when my usually risk-averse wife also encouraged me, the decision was made.”

Asipac has a fee order book of $65 million and expects to earn fee income of $30 million in FY’09 and more than $80 million in FY’10, excluding the Brazil project.

Homebuyers "unaware" of green properties

Despite claims of the growing popularity of eco-friendly housing, a large number of first homebuyers are not familiar with the concept, a new report revealed.

The survey conducted by Connection Research found that nearly one third of new homebuyers have never heard of "green subdivisions" and another third have heard of the term but have no idea what it means. Fewer than one in five regard them as important factor in choosing where they might live the report found.

"Everybody would like a big house with all the bells and whistles, but the survey tells us just what is most important and to which group of people," said Graeme Philipson, report's co-author and research director with Connection Research. "For example, the wealthier households are much more likely to want home automation – but only a little more likely to want water tanks," he said.

He said the finding about the lack of awareness of green subdivisions reveals one of the key contradictions in Australian's home buying patterns."People want to be green" he said. "They express a strong abstract desire to live sustainable lives. But when it comes to practicalities, and paying for them, these desires are not always translated into action."

The report also found that most people want to stay in familiar surroundings with only a minority seeking to change from city to country and vice versa. "The only exception is inland where 80-90% of people want to move towards the coast or a town or city suburbs," it said.

Australia to use tax credits to lift housing investment: report

The Rudd government will offer corporate investors a tax credit of $6,000 per dwelling to entice superannuation funds to invest in affordable housing according to a report by the Australian Financial Review.

Under the plan, the government will allocate 3,500 tax credits costing about $21 million in its budget for 2008-09 as a part of the National Rental Affordability Scheme, the report said. In addition, states will provide a $2,000 per dwelling in cash or in kind assistance to encourage developers and investors to build 50,000 new properties for rent at 20% below market rates over the next five years the newspaper said.

States are also mulling releasing land, providing cash and cutting stamp duty or infrastructure charges to further entice new developments in the housing markets it said.

"It opens up a whole new class of investment in residential real estate and I hope over time it will become an important new area for the supply of affordable rental accommodation," the report said quoting Federal Housing Minister Tanya Plibersek.

Affordability levels in Australia have deteriorated by 2.2% over the last three months to December 2007 according to REIA. Borrowers now need 37.4% of the family income to meet average mortgage repayments – the highest level reached in 22 years that REIA has tracked affordability data. Renters are not immune with 24.8% of the income going towards rent.