Finance and Economic

Local auto dealer Robert Tieman has been dismissed from a lawsuit filed last week by GMAC LLC, the financing arm of General Motors Corp., against Feld Chevrolet Co. in Bridgeton.

Tieman, the owner of South County Auto Center in Weldon Spring, was named as a defendant in a lawsuit filed Wednesday in St. Louis County Circuit Court.

The suit said Feld Chevrolet closed its sales office and lot at 11200 St. Charles Rock Road, and sold used vehicles to Tieman in ways that violated financing agreements between Feld Chevrolet and GMAC. Auto dealers who sell GM vehicles borrow money through GMAC to finance their inventory.

According to the filing, GMAC did not receive money for the vehicles that Feld Chevrolet sold to Tieman.

However, Tieman corrected the situation by paying GMAC for the vehicles, and the financing company dropped legal action against him.

Tieman, a local auto dealer for nearly 20 years, told the Post-Dispatch on Monday that he has been a longtime buyer from Feld Chevrolet. When he bought vehicles — which included Chevrolet Trailblazers, Cobalts and Impalas — on Sept. 12, Tieman didn’t see any red flags with the deal, he said Monday.

After GMAC contacted Tieman last week about its agreements with Feld Chevrolet, Tieman rewired $472,850 he had paid to Feld Chevrolet and sent that money to GMAC for the vehicles.

Mike Stoller, a spokesman for GMAC, said Tieman was still named in the lawsuit Wednesday, the same day he wired the money, because lawyers filed the petition before the money was received.

"Mr free credit report instantly. Tieman responded and acted appropriately," Stoller said this week.

Tieman officially was dismissed from the lawsuit on Friday, according to a court document.

Meanwhile, GMAC’s lawsuits against Feld Chevrolet continue.

Feld Chevrolet President Andrew Wolfson, whose family has been in the St. Louis auto industry for about 60 years, said Monday that his dealership and GMAC "still have some issues to deal with" and declined to elaborate.

Wolfson told the Post-Dispatch that he had to close the Chevrolet dealership because the location had been losing money, which led GMAC to cancel its credit agreement. He said he couldn’t find a new credit source in the tough credit markets and couldn’t finance his inventory of vehicles.

Wolfson said he does not plan to re-enter the auto sales business.

atablac@post-dispatch.com | 314-340-8140

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The financial crisis entered a potentially dangerous new phase Wednesday when many credit markets stopped working normally as investors around the world frantically moved their money into the safest investments, like Treasury bills.

As a result, the Dow Jones industrial average fell nearly 450 points, or more than 4 percent, compounding Monday’s loss of more than 500 points. The broader Standard & Poor’s 500 and Nasdaq indexes saw similar percentage losses.

The stocks of Wall Street firms like Goldman Sachs and Morgan Stanley that only a couple of weeks ago were considered relatively strong came under assault by waves of selling. The fear factor was so strong that investors snapped up three-month Treasury bills with virtually no yield and pushed gold to its biggest one-day gain in nearly 10 years.

The stunning flight to safety, away from other kinds of debt as well as stocks, could cause serious damage to an already weakened economy by making it more expensive for businesses to finance their day-to-day operations.

Some economists worry that a psychology of fear has gripped investors, not only in the United States but also in Europe and Asia. While investors’ decision to protect themselves may be perfectly rational, the crowd behavior could cause a downward spiral that has broader ramifications.

"It’s like having a fire in a cinema," said Hyun Song Shin, an economics professor at Princeton. "Everybody is rushing to the door. You are rushing to the door because everyone is rushing to the door. Clearly, as a collective action, it is a disaster."

Faltering confidence could have an infectious effect in Asia, whose savings have essentially bankrolled America for decades. "Asia, perhaps more than other markets, is a bit more volatile, a bit more based on sentiment," said Dan Parr, the head of Asia-Pacific for brandRapport, a marketing consulting agency with an office in Hong Kong. "It doesn’t take much for the man on the street to become very, very concerned." In early trading today, Japan’s major stock index fell 3 percent.

Despite government efforts to reassure investors over the last 10 days by rescuing some giant institutions — Fannie Mae, Freddie Mac and American International Group — many investors remain worried that the financial system has been badly battered and that more firms may fail as Lehman Brothers did.

The Federal Reserve has greatly expanded its lending to banks and securities firms this year and is continuing to relax rules that govern financial companies in hopes of alleviating the credit squeeze. Central banks around the world are also injecting more money into their economies and lowering reserve requirements for their own institutions out of concern that the problems in the U.S. financial system will inflict further damage.

If the problems in the financial system persist, businesses will have less money to put to work, job cuts will spread, and consumers, already fearful, will have less money to spend, knocking the economy down another notch. High borrowing costs will further weaken the housing market, which has yet to show signs of life cash advance in one hour. The Commerce Department reported Wednesday that housing starts fell to their lowest level since early 1991.

Flashes of fear were evident Wednesday as investors clamored for government debt. When investors bid up the price, the yield falls, and it sank on three-month Treasury bills to 0.061 percent, from 1.644 percent a week ago. The yield was the lowest in more than 50 years.

In the stock market, the S&P 500 stock index fell 4.71 percent, to 1,156.39, the lowest close in more than three years. Worries over financial investments hammered even the venerable Wall Street firms of Goldman Sachs, whose shares fell nearly 14 percent, to $114.50, and Morgan Stanley, whose shares dropped more than 24 percent, to $21.75, causing both firms to reconsider what their best strategies might be in such a fearful market.

The cost of borrowing shot up for corporations and banks. One key overnight lending rate was above 5 percent Wednesday, more than double its level a week earlier. GMAC, the auto finance company owned in part by General Motors, had to pay interest of 5.25 percent Wednesday for a form of short-term financing known as one-week commercial paper, up from 4 percent the previous day.

Businesses stung by the high cost and without ready access to bank loans will be forced to look for ways to trim their costs, an ominous turn in a slowing economy with the unemployment rate on the rise.

Local governments and other enterprises will feel pressure, too. The city of Chicago and Lincoln Center in New York postponed debt offerings because they would have to pay such high interest rates to investors, said Daniel Solender, director of municipal bond management at Lord Abbett & Co.

"This is throwing sands in the gears of the economy," said G. David MacEwen, chief investment officer for the bond department of American Century Investments. "The economy depends on credit to finance homes, automobiles, student loans and inventories."

Money market funds braced for possible fallout from the disclosure that one big fund’s net assets fell below $1 a share, because it had held securities issued by Lehman Brothers. It is so rare for money market funds to fall below that threshold that many investors consider them as safe as cash or a checking account.

Some mutual fund companies reported that customers were moving money from broader money market funds that have had higher yields to more conservative funds within the same company, said Peter Rizzo, a senior director of Standard & Poor’s, late Wednesday afternoon. The overall effect is to reduce the appetite for securities of companies with anything other than the most stellar reputations.

Governments around the world stepped up their efforts to ease the strain on the global financial system. The Bank of England extended a special bank lending program for another three months, while central banks in Japan and Australia injected more money into their banking system. Russia lowered reserve requirements to assist its banks.

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U.S. securities regulators plan to take action on abusive short selling of stock before the end of the week, a source briefed on the matter said on Monday.

The measures came as Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research, Stock Buzz) filed for bankruptcy protection, intensifying concerns that other major financial stocks would accelerate their losses.

The Securities and Exchange Commission will likely adopt proposals to strengthen its short-selling rule, including one that deems it fraudulent for customers to deceive broker-dealers about their intention or ability to deliver securities in time for settlement.

The SEC will also move forward with a plan that would shorten the time in which traders must buy back stock if they fail to deliver a security by the settlement date.

But the SEC will not reinstate and broaden a temporary emergency rule that required traders to preborrow stock before executing a short sale online payday loan.

Two months ago, regulators were faced with similar market turmoil when IndyMac bank was seized by regulators and investors were concerned that Lehman and mortgage finance giants Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) were veering towards insolvency.

At the time, the SEC announced plans to crack down on rumor-mongering and issued an emergency rule aimed at curbing illegal naked short selling in 19 major finance stocks, including Lehman, Freddie and Fannie.

A “naked” short sale occurs when an investor sells stock that has not yet been borrowed. 

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Stocks ended higher Wednesday as investors scooped up shares battered in the previous session’s selloff and sorted through Lehman Brothers’ steep quarterly loss and restructuring plans.

Strong earnings forecasts from FedEx and Texas Instruments, a firmer dollar, and lower oil and gold prices lent additional support. But continued worries about the financial sector limited gains for the blue chips.

The Dow Jones industrial average (INDU) gained 0.3%. The Nasdaq composite (COMP) rose 0.9% and the Standard & Poor’s 500 (SPX) index advanced 0.6%.

Stocks slumped Tuesday, with the Dow sinking 280 points, as speculation about Lehman’s ability to raise capital and AIG’s mortgage-related losses sparked worries about another Bear Stearns - the bank that the government had to rescue in March.

Lehman sought to manage those fears Wednesday, announcing its third-quarter results early and addressing the liquidity issues.

The news seemed to give a boost to a variety of stocks, with investors finding some reassurance in the announcement. However, the stock market was also being lifted by technical factors, with investors scooping up recently beaten-down shares, said Robert Loest, portfolio manager at Integrity Funds.

The news coming out of Lehman was "better than nothing, but not enough," Loest said.

"You have institutions like Lehman announcing a writedown or a restructuring and people think they’re getting a handle on the balance sheet, but they’re not," he said. "These solutions are near-term pieces of hope that aren’t going to solve long-term problems."

Lehman Brothers: Lehman reported a nearly $4 billion fiscal third-quarter loss, its biggest quarterly loss since it went public in 1994. The company also said it will spin off part of its commercial real estate assets and slash its dividend. Additionally, Lehman plans to sell a 55% stake in its investment management division, which includes profitable money manager Neuberger Berman.

Wall Street had been betting on Lehman selling all or part of the investment division for weeks. However, investors became nervous Tuesday when reports said Lehman’s talks with the state-run Korea Development Bank had dried up, with no partnership announced. That sent Lehman shares down 45%.

Lehman calmed some of those fears Wednesday when it said it was in advanced talks with a number of potential partners.

"I think there’s relief that they are at least addressing the issues and that there are potential buyers out there," said Joe Arnold, wealth manager at Dawson Wealth Management.

Lehman (LEH, Fortune 500) shares were choppy on the news, ending lower after rising nearly 10% in the morning and almost 30% in pre-market trading.

But other firms that made bad mortgage bets and are potentially in need of capital saw their shares pummeled. They included Washington Mutual (WM, Fortune 500) and Wachovia (WB, Fortune 500). (Full story)

In addition, Arnold said stock investors were continuing to respond to the government bailout of troubled mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), announced Sunday.

"You look at the buyout of Fannie and Freddie and that has actually sent mortgage rates lower already, which is positive," he said payday loans online.

(However, the lower rates don’t necessarily make getting a loan any easier.)

On the downside, regional banks and insurers continued to struggle in the wake of the government takeover of the two mortgage giants.

Company news. FedEx (FDX, Fortune 500) offered some encouraging news late Tuesday, saying it expects higher fiscal first-quarter earnings of $1.23 per share versus current expectations for a profit of 95 cents, largely because of lower commodity costs. FexEx is often seen as a proxy for the economy. Shares gained 3.7% Wednesday.

Texas Instruments (TXN, Fortune 500) shares inched higher after the chipmaker narrowed its earnings and sales forecast to a range that meets or beats analysts’ forecasts. The announcement was part of its scheduled mid-quarter update late Tuesday.

Research in Motion (RIMM) shares jumped after it introduced a flip phone version of its popular Blackberry Pearl phone.

The Pentagon said it’s delaying its decision on a $35 billion Air Force refueling tanker contest until the next administration takes office. Northrop Grumman was initially awarded the deal, which Boeing contested as unfair. The government agreed, initially reopening bidding, before deciding to end the current contest and have the decision made by the next administration.

Northrop (NOC, Fortune 500) and Boeing (BA, Fortune 500) shares both declined. (Full story)

In other news, ImClone (IMCL) said it has received a $70-per-share buyout offer from a large pharmaceutical company, topping an earlier offer of $60 per share from Bristol-Myers Squibb (BMY, Fortune 500). Bristol already owns a 20% share in the company. ImClone stock gained 6.7%.

Among other movers, a variety of airlines, railroads and truckers bounced on the lower oil prices, lifting the Dow Jones Transportation (DJTA) average up by 2.5%.

Market breadth was positive. On the New York Stock Exchange, winners beat losers on volume of 1.55 billion shares. On the Nasdaq, advancers topped decliners four to three on volume of 2.32 billion shares.

Fuel prices: Oil prices as the government indicated weaker demand for gasoline, even as supplies of crude and gas dipped more than expected last week.

U.S. light crude oil for October delivery fell 68 cents to settle at $102.58 a barrel on the New York Mercantile Exchange, the lowest close since April 1.

Gas prices rose overnight, breaking a nine-day losing streak, according to a national survey of credit-card activity.

Other markets: In global trade, European and Asian markets ended lower.

In the bond market, Treasury prices tumbled, raising the yield on the benchmark 10-year note to 3.63% from 3.57% late Tuesday. Prices and yields move in opposite directions.

The dollar rallied versus the euro and yen.

COMEX gold for December delivery fell $29.50 to $762.50 an ounce. 

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After a 25-year career as a cardiologist—and after co-founding the Prime Care Physicians group—John Bennett took over as the head of Capital District Physicians’ Health Plan on July 1.

The 54-year-old former CDPHP chairman replaced Dr. William Cromie who retired after nearly seven years due to health reasons.

The Business Review recently sat down with Bennett to talk universal care, his new job and what role health insurers could play under a universal care system. Here are the highlights.

You initially went to RPI to study chemical engineering. What did you hope to be when you first enrolled?

I entered as a freshman at age 16 [having skipped a grade in elementary school]. … I had it in my mind that I was going to design chemical process plants.

Why chemical process plants?

I was really quite specific in what I wanted, even at 16. I loved chemistry. I loved math. At that time, I was going to the library, doing research, trying to figure out how I would put math and chemistry together. I started to read books about the field and decided it was something I wanted to do. Two years later, I figured out I wanted something else.

The story goes that volunteering in the emergency room at Samaritan Hospital in Troy inspired you to go into medicine. What made you decide to volunteer in the first place?

I had to do it. I was an engineering student but was required to do some humanities courses. And I started taking a medical sociology course. They wanted you to do some work in the community in terms of health care. Samaritan Hospital was right near RPI, so I decided I would go there.

Did you go reluctantly at first?

I was probably neutral about it. But I ended up loving it. I met the doctors and the nurses. It is probably the nurses that get you excited about medicine. [He laughs.] I didn’t mean it that way. Really. What I mean by that is, as you work with the nurses, that’s where you work with the patients. That patient contact, especially as a volunteer, comes through the nurses who are showing you around cash advance loan. The doctors are almost like this abstract concept that briefly comes into the room.

When you were a med student, did you foresee your career going in this direction—becoming the head of a health insurer?

No. It was the last thing I was thinking of at that time. When I was a med student, I wanted to be a family doctor. On day one, I signed up for the family medicine program. From day one, I wanted to go to a doctor’s office and see what was going on.

Your predecessor, Bill Cromie, talked about becoming a family doctor and going back to his hometown to practice.

A lot of people start that way. Especially in those days, as a kid, those were the doctors you knew. He would come to the house with his black bag and give you your shot, make you feel better. Those were your heros.

What made you decide on cardiology in the end?

It had to do with that thing inside me that made me want to be an engineer—that tech geek. My techie side came out in cardiology. As I began to study medicine and go through my internship and residency, I gravitated to the more technical side of internal medicine. And cardiology is very technical. The heart is a mechanical pump. The heart has a wiring system and the heart has flow.

So how do you go from practicing medicine to being the head of a health insurer?

That didn’t happen overnight. It was an evolution. I went in practice in 1983, joined a three-man cardiology practice. The ’80s saw a lot of growth in cardiology. And we began to grow the practice and grow it in numbers. … And as we grew, the organization became a business. I evolved as one of the business leaders in the practice.

To some, it might seem incongruous going from being a doctor to a health insurance executive.

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Suspected dollar-selling intervention by South Korean authorities lifted the won from a four-year low on Wednesday, but they may not have done enough to stem the slide in Asia’s worst-performing currency this year.

The won has lost more than 18 percent against the dollar in 2008 and analysts polled by Reuters on Wednesday expect it to fall another 4.3 percent before recovering in the fourth quarter.

Investors began dumping the won this week on fear that foreign investors would withdraw cash from about $7 billion in bonds maturing this month. While the withdrawal itself might barely affect the market, the panic it has caused could trigger a capital flight that Korea fears so much, analysts said.

“The bigger worry is that over the last week foreigners’ desire to hold Korean assets has diminished because of the fear that they are not being compensated for risk,” said ING economist Tim Condon.

Talk of capital flight from the bond market stirred memories of the 1997 Asian financial crisis when foreign investors dumped Asian assets.

The timing could not have been worse creditscore. South Korea is about to run its first yearly current account deficit since that crisis and foreign selling of Korean stocks is at a record this year.

Won selling reached fever pitch on Tuesday as authorities stayed on the sidelines instead of stepping in to stop its slide.

But the authorities, which have already sold $30 billion in 2008 to support the struggling currency, were spotted intervening on Wednesday by some dealers after the won hit the four-year low. 

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The government sent out an additional 2.4 million stimulus payments, totaling $1.5 billion, since July 11, according to a statement from the Treasury department.

A total of $93.4 billion has been sent out to 114.8 million tax filers since the program was started in the spring, and the government is still working to distribute more checks.

By July 11, the government had mailed out 112 million stimulus payments totaling $92 billion. Those checks went to people whose 2007 tax returns were processed by April 15.

The government was still working to distribute stimulus checks to tax filers who obtained an extension on their 2007 tax return and to those Americans who qualify for a stimulus check, but may not normally file a tax return, according to Nancy Mathis, spokesperson for the IRS.

Roughly 10 million Americans requested an extension to file their tax return. The government is working to contact another 5.2 million - primarily retirees and veterans - to determine if they qualify, said Mathis.

The government said that tax filers who obtained an extension for the 2007 tax year must file by Oct. 15 in order to get a stimulus payment in 2008 free credit report online. If filers fail to get their tax return in by Oct. 15, there will still be an opportunity in 2009 to get the stimulus payment.

The stimulus program was enacted earlier this year in the wake of a slowdown tied to the credit crisis and the end of the housing boom.

The program did juice the economy. On Thursday, the Commerce Department said GDP, the broadest measure of the nation’s economic activity, stood at an annual rate of 3.3% in the second quarter, adjusted for inflation. This reading was revised higher from an initial estimate of 1.9% growth.

To qualify for a stimulus payment, individuals and households must file a 2007 income tax return. Single taxpayers with adjusted gross income of less than $75,000 last year will get checks of as much as $600. Joint filers with adjusted gross income of less than $150,000 were eligible for a rebate of up to $1,200.

In addition, parents will also receive $300 per child under 17; there is no cap on the number of qualifying children eligible. 

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Sony Corp. said Tuesday its April-June profit plunged to $326.9 million - about half that recorded a year ago - as a strong yen, the absence of "Spider-Man 3" revenue and faltering results at its cell phone operations battered earnings.

The Japanese electronics and entertainment company, which makes the Walkman player and the PlayStation 3 game machine, had recorded about $620 million in profit for the fiscal first quarter the previous year.

Price competition in its core electronics sector also led to Sony’s worse-than-expected quarterly performance. Analysts surveyed by Thomson Financial had forecast a $486 million profit.

Sony also lowered its full year profit forecast Tuesday to $2.24 billion from an earlier $2.71 billion, blaming expected poor results at its Sony Ericsson mobile joint venture and a pessimistic outlook in electronics.

The results for the latest quarter were also hurt by the absence of a blockbuster like "Spider-Man 3," which lifted the performance of Sony’s movie division in the same period a year earlier, according to the company.

In a bit of bright news, the Tokyo-based manufacturer marked a continued recovery in its long struggling video game section, which was profitable in the latest quarter in contrast to losses the previous year.

Sony sold 1.56 million PlayStation 3 machines in April-June, more than double the 700,000 machines sold the same period a year ago. It kept unchanged its forecast for selling 10 million PS3 consoles the fiscal year through March 2009.

The PS3 has been struggling against the hit Wii from rival Nintendo Co payday advance. Sony said it has now sold a cumulative 14.4 million PS3 machines worldwide since it went on sale late 2006. Nintendo reports earnings Wednesday.

Sony’s quarterly sales were just about unchanged at $18.5 billion compared with $18.37 billion a year ago.

If currency rates had remained the same, sales would have jumped 8% on year, but the yen rose against the dollar by nearly 16% from the previous year, Sony said.

In its electronics business, the unfavorable exchange rate erased $133.6 million from Sony’s operating profit for the fiscal first quarter.

Sony raised its sales forecast for the year ending March 2009, to $85.98 billion, up from an earlier $84.1 billion, citing in part a more favorable exchange rate. Sony had assumed the dollar would trade at 93 cents but now expects it to hold at 98 cents.

Price competition, unpopular products and higher research investments hammered results at Sony Ericsson, Sony’s joint venture with Ericsson (ERIC) of Sweden, for the quarter ended June 30.

In other equity-related income, Sony’s music business Sony BMG deteriorated into losses from a year earlier, reflecting an overall decline in the worldwide market and restructuring costs.

Best-sellers during the quarter included Usher’s "Here I Stand" and Neil Diamond’s "Home Before Dark," Sony said.

Sony (SNE) shares fell 3.2% to $39. Trading ended in Tokyo before Sony’s earnings were announced. 

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European bankers and some of their U.S. clients can expect a grilling from a Senate panel looking into offshore tax abuses that investigators believe are costing American taxpayers about $100 billion a year.

The questioning, expected at a hearing Thursday, follows the release of a report by the Senate panel accusing the banks of helping commit massive tax evasion and urging tougher laws to combat offshore tax havens around the world.

The 109-page report by the Senate Homeland Security and Governmental Affairs investigations subcommittee took aim specifically at Switzerland’s UBS AG (UBS), among the world’s largest wealth managers, and Liechtenstein’s LGT group, owned by the principality’s royal family.

Representatives from UBS and LGT were scheduled to testify, along with some of LGT’s U.S. clients.

A federal judge ruled this month that the Internal Revenue Service could serve legal papers on UBS in an expanding probe of U.S. taxpayers who may have used overseas accounts to hide assets and avoid taxes. UBS has said it is cooperating with Swiss and American investigations and will disclose records involving U.S. clients who might have broken tax laws. It also has banned its Swiss bankers from traveling to the United States.

Investigations linked to LGT have been launched in a number of countries since German authorities in February obtained a CD-ROM of some 1,400 alleged tax cheats with accounts at the bank. Germany has since passed the file to other countries, including the United States.

U.S cash til payday loan. taxpayers are required to report all their foreign financial accounts if the total value exceeds $10,000 at any point during the tax year. Failure to report the accounts can result in penalties of up to 50 percent of the amount in the accounts.

The subcommittee report said "UBS Swiss bankers targeted U.S. clients, traveled across the country in search of wealthy individuals and aggressively marketed their services to U.S. taxpayers who might otherwise never have opened Swiss accounts."

It said the bank’s practices resulted in billions of dollars of U.S. taxpayer money in undeclared accounts that were not disclosed to the IRS. The report said UBS has estimated that it has 1,000 declared accounts in Switzerland for U.S. clients against 19,000 undeclared, with a combined value of $17.9 billion.

While UBS did not technically violate U.S. reporting requirements under the 2001 "qualified intermediary program," it actively assisted clients in structuring their Swiss accounts to avoid disclosure responsibilities with the IRS and thus aided tax evasion, the report said.

In Liechtenstein, the report said the royal family’s LGT Group contributed to a "culture of secrecy and deception" that enabled clients to "evade U.S. taxes, dodge creditors and ignore court orders." 

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India's five-year property boom is coming to an end as the supply of housing increases, borrowing costs rise and a stock market rout erodes buying power, according to executives at two mortgage lenders.

Prices across India may drop as much as 15 percent in the coming months, said Keki Mistry, vice chairman of Housing Development Finance Corp., India's largest mortgage lender. Gagan Banga, chief executive of rival Indiabulls Financial Services Ltd., said prices in some cities may fall as much as 20 percent.

India's central bank signaled it will increase borrowing costs further after raising rates this week to the highest in more than six years, curtailing demand for loans. The nation's property market may avoid the meltdown seen in the U.S., U.K. and Spain because of lower indebtedness and a housing shortage estimated by the government at 24.7 million units, the executives said.

“Due to the state of the equity markets, many investors who would have bought a second or a third house are abstaining from doing so,'' Mistry said in a June 24 interview in Mumbai. “Genuine home buyers who are looking to buy a house for self occupation will continue to buy.'' Mistry was speaking hours before the central bank raised its repurchase rate by 0.5 percentage point to 8.5 percent.

Real estate stocks have led Indian equities to the worst six-month performance in at least three decades, with the Bombay Stock Exchange Realty Index slumping 59 percent this year http://savingpaydayloans.com. The benchmark Sensitive Index has shed 30 percent in the same period.

“The real estate sector as a whole is under pressure because of rising input costs, and the increase in interest rates,'' said R.K. Gupta, managing director of Taurus Asset Management Co. in New Delhi. Gupta manages 3.5 billion rupees and owns shares of developers DLF Ltd. and Parsvnath Developers Ltd. Higher borrowing costs “will push the developers to cut prices in the near future,'' he said.

Big Developers Safe

Still, the nation's biggest developers, most of whom raised capital from share sales in the last two years, aren't at risk of delinquency because they haven't borrowed from banks to purchase real estate, Banga said in Mumbai yesterday.

His company's sister firm, Indiabulls Real Estate Ltd., is the nation's fourth-biggest developer. The company, backed by billionaire Lakshmi Mittal, sold shares in a property trust in Singapore to raise $258 million earlier this month.

“If you don't have an interest meter running, and you just raised capital, where is the question of going belly up?'' Banga said in an interview. “I don't see any systemic damage, or a large name disappearing into thin air, or going bankrupt. The momentum has slowed down.''

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