Financial services provider Edelweiss expects decline in real estate prices by around 60 per cent over the next five to six years from its peak in the first quarter of 2008.
“Property prices in India increased sharply over the past 6-7 years, rising two and a half times over 2001 prices. We expect a price correction of 58 per cent in real terms from the peak,” Edelweiss said in a report on real estate sector.
Stating that the industry has so far witnessed around 24 per cent correction in real terms, the report said that the industry witnessed 8-10 months decline of the expected 5-6 years.
“We expect prices to correct by another around 30 per cent in nominal terms in the next three years. However, prices in real terms, will continue to decline for about a year thereafter,” it said.
Analysing global property cycles across 15 countries, Edelweiss said that volumes are closely related to GDP growth and real returns on properties but share a weak relation with interest rates.
“From September 2006, the GDP growth rate has started falling and has come down significantly to 7.6 per cent in September 2008. We expect the rate to go down further to 6 per cent by FY10,” it said.
Edelweiss said that reduced hiring by the IT sector and decline in dusbursement of home loans were worsening the real estate demand scenario.
Three out of top five IT/ITes companies have reduced the pace of recruitment considerably with Wipro reducing its headcount marginally. Homeloans have been also falling sharply, it said.
Edelweiss said that the threat of capitulation was likely to resurface in the sector.
“Developers, with their high debt servicing obligations, will continuously face strained cash flows. Thus, we believe, though the threat of capitulation has deferred, it still exists and is likely to re-emerge as key issue in the sector,” it said.
As per a survey conducted by Wall Street Journal, the overall CEO compensation at American firms has declined, but Motorola’s Jha still got a hefty package of USD 104 million in 2008, making him the top paid CEO in the country.
In India, none of the business executives get paid even USD 10 million (Rs 50 crore), while there are just about two dozen people getting more than Rs 10 crore.
These include RIL’s Mukesh Ambani, Sun TV Network’s Kalanithi Maran and Kavery Maran, Madras Cement’s P R Ramasubrahmanya Rajha, Reliance Communications’ Anil Ambani, Ranbaxy Labs’ Malvinder Mohan Singh, Bharti Airtel’s Sunil Mittal, Jindal Steel’s Naveen Jindal, JSW Steel’s Sajjan Jindal and Grasim Industries’ Kumar Mangalam Birla.
Jha is the only CEO in the US to get a compensation package exceeding USD 100 million, as per the WSJ CEO Compensation Study, which was conducted by management consulting firm Hay Group and is based on an analysis of CEO pay of the first 200 US companies with fiscal year 2008 revenue of at least USD 5 billion that filed their proxy statements between October 2008 and March 2009. The study would be updated as companies file new proxies.
The survey showed that overall, the median chief executive salary and bonus paid last year by 200 big American companies declined 8.5 per cent to USD 2.24 million, as profits and stock prices were hit by recession.
Including the awarded value of stock, stock options and other long-term incentives, total direct compensation for chiefs slipped 3.4 per cent to a median of USD 7.6 million.
In the wake of the financial meltdown, huge executive compensations at American companies had come in for severe criticism from different quarters.
The payouts for chief executives dropped sharply at banks and brokerages.
The survey noted that median annual cash compensation for CEOs in the financial industry fell 43 per cent, to USD 9,76,000. Total direct compensation fell 14.2 per cent, to a median USD 7.6 million.