Business Beat

The United State has its mortgage crisis, but real estate finance professor Robert Campbell has just come back from a place where the subprime collapse could never happen but where there's another type of real estate crisis.

It's the Republic of Malawi.

In this country of about 12 million in southeastern Africa, Campbell found out that the government owns all the land and leases it to people, sometimes for a nominal or no fee.
"It's a very informal, legal system, in which a family has the right to farm land in perpetuity, from generation to generation," said Campbell, who teaches at Hofstra University and vacationed in Malawi. The government of course can take away leases if a family doesn't pay, but Campbell says that doesn't really happen.

With all land considered government property, that means mortgages aren't really given out in Malawi - after all, mortgages are secured by land and properties. So money to build homes are scraped together from family and friends, he said, and while long-term leases in the United States are sometimes considered collateral by lenders in the United States, Malawi's government does not want leases used that way.

"The government, while it's willing for land to change hands from one citizen to another, is not willing for the land to be inherited by some big bank that loaned a guy money," the professor said. "If the guy doesn't pay, the bank cannot take over the lease. The people, even though they occupy land and may have occupied it for generations, cannot offer to the bank suitable security. So as a result, all they could do is borrow an amount that they can actually pay back from their income - and that over a short period of time. So there's no way to invest capital into the real estate market in Malawi."

But like a lot of other African countries, Malawi has been facing an AIDS crisis that has killed off many parents, making orphans of their children. "It is estimated that between 1990 and 2003, the number of children under 18 who were living without one or both parents in Malawi grew from about 800,000 to 1.2 million," said a 2004 health and demographic report conducted by Malawi’s government.

It's a double tragedy because of the way Malawai's real estate system works.

"These children are put into orphanages," Campbell said, "and they lose their land rights. They lose the land that's been in their families for generations. It reverts to the government, and the government gives it to somebody else who's not dead who comes in and farms it. Sometimes that will be another family member.

"This is an agricultural subsistence economy. Your ability to live a comfortable and happy life depends on access to that land so you can farm it. The kids are losing the land because their parents were sick, and there's no legal system to protect them, to protect their interests."

--Ellen Yan

While home building on Long Island is taking a rest during the mortgage crisis, commercial building seems to be alive and well.

“It’s hard to explain that, except there are certain businesses that are doing well,” said David Scro, president of Melville-based Country View Properties, a residential builder.

The advice for stock investors to diversify seems to work for local home builders also as office space leasing rates remain stable and businesses try to start up here to support family lifestyles.

Scro, a second-generation builder, has been immersed in constructing business space to put food on his table.

“I wish I started it a while ago,” he said.

Once, Scro put up 50 to 60 homes a year, but this year, he’s barely dabbled in the residential field.

He’s been tied to an 8-acre plot he bought four years ago in Nesconset. Scro recently finished developing 60,000 square feet of business space - a 39,000-sq-foot New York Sports Club, a swimming safety school and a developmental disabilities training center. He expects to get permission to build 30,000 square feet more for a child daycare center and medical offices.

The commercial project has cost him about $9 million so far and probably won’t be as lucrative as raising dozens of homes.

But at least it’s a job until the housing market recovers, Scro said: “It will give us an income stream so we’ll survive the downturn.”

As U.S. Commerce Department data show, construction starts for one-family homes are at a 17-year low, Newsday reported this week.

--Ellen Yan

The median closing price for the spring house hunting season went up .1 percent from the same time last year for most of Long Island and Queens, according to the second-quarter report commissioned by Prudential Douglas Elliman Real Estate.

The $445,450 median is not only a slightly higher than $445,000 median closing price for last year, it’s also higher than the $435,000 median closing price for the first three months of the year. That’s no surprise, considering housing sales warm up as the weather grows warm too.

It’s not clear if that year-over-year increase is a blip. The Multiple Listing Service of Long Island has been consistently reporting drops in median closing prices compared to a year ago.

The quarterly report, prepared by Manhattan-based appraiser Miller Samuel Inc., does not cover North Fork and Hamptons sales, which are done separately.

--Ellen Yan

Just as the hurricane season started in Louisiana, a team of 19 real estate agents from Long Island and other parts of New York state landed there in a town called Slidell for a storm of rebuilding.

They spent the first six days of June helping to put up Habitat for Humanity homes in the reconstruction of the bayou town, which is 25 miles from New Orleans. It took a direct hit from Hurricane Katrina in 2005 and was flooded by waters from Lake Ponchartrain just to the south.

But instead of a hurricane watch, volunteers were actually on the lookout for anyone on the edge of fainting from working under temperatures that reached 110 degrees. They drank 20 to 25 cups of Gatorade a day.

“It was so hot and we started work at 6 o’clock a.m. and it was like afternoon” temperatures, said Mohsen Zandieh, president of the Long Island Board of Realtors and one of four volunteers from the group.

The New York team finished . . .

A gauntlet has been thrown. But will anyone pick it up?

Two teams of developers, one headed by AvalonBay Communities and the other by Ornstein Leyton Company, will each construct a Bellport home in five days next week as part of Habitat for Humanity’s nationwide building blitz.

“AvalonBay is ready to meet the challenge – I’m betting that our crew is faster than Orenstein Leyton’s, although I’m sure they think otherwise,” Matthew Whalen, vice president the Melville-based AvalonBay, said in a press release.

Both have similar track records and experience; they’re large Long Island builders who also participated in Habitat’s blitz two years ago.

When asked by Newsday, Whalen said he’s ready to back his words with some sort of collateral if Alec Ornstein, president of his Garden City company, goes along with a friendly wager: “I will bet Alec whatever he wants to bet. However confident he feels, I will match that confidence because I’m that confident in my team.”

There’s no indication that Ornstein knows he might have to watch another crew’s timing as well as his own. He could not be reached for comment yesterday, but in the press release, he said that “it is an honor to be in partnership with such a respectable organization, not only to build a home for a family in need, but to help in further enriching the Long Island community.”

The two teams will be making noise and more from about 6 a.m. Monday to hopefully about 7 p.m. Friday on the same street, Bourdois Avenue, where two mothers and their children will also put sweat equity into their future homes.

They'll be joined by volunteers from Medford-based Pulte Homes of New York and Dix Hills-based JCV Development Inc.

The project has been organized by Habitat's Suffolk affiliate and Long Island Home Builders Care Inc., the charitable arm of the Long Island Builders Institute. Scores of vendors, from the mirror supplier to the paint guys, will donate their time and supplies too.

One home will go to Sharon Kwaak, a certified nursing assistant, and daughter Zaylee, 4, who now live in a small basement one-bedroom apartment in Patchogue. The other will go to Ana Maria Rodas, a Costco employee, and children Diana, 20, Ana, 19, and Richard, 17; they now live in Habitat transitional housing in Bay Shore after moving from a Brentwood basement apartment with structural damage.

--Ellen Yan