Investors may have lost one-third investment in real estate

"Investors have pumped in $25 billion into the Indian real estate market over the last three years but with land values having gone down they could have lost a third of the value of their investment,"  said Deepak Parekh,chairman,  HDFC, in a letter to shareholders.
    
Parekh said that the $25 billion are invested through IPOs, QIPs (qualified institutional placements), AIM listing (alternate investment market) and foreign direct investment. A large part of these funds were used for buying land at exorbitant prices.
    
"With land values having come down, my estimate is that investors could have lost a third of the value of their investment," he said. Advocating caution, Parekh said investors in real estate have to be more discerning. They should be more realistic on valuation expectations and not throw caution to the wind, he said. He also criticised the recent trend where housing loans are offered at attractive interest rates in initial years.
    
"We are seeing some variations of teaser type housing loans being offered. The lure of low interest rate at the start of taking a housing loan is enticing. But are customers being made aware of future implications," he asked.  

Parekh noted that the genesis of the US housing crisis lay in loans that offered artificially low interest rates in the initial years but once the rate normalised, many found themselves unable to service the loan. These are the lessons one should learn from, he said.
    
However, the HDFC Chairman pointed out the same disturbing trend being seen in India where some variation of teaser type housing loans are being offered in the market. "Are these lending institutions providing "what if" scenarios to their customers, he asked.