Thursday, December 22, 2005

Bangalore Real estate investors discounting profits

Saw an add on one the mailing lists.. The rats are bailing one at a time.


Brigade Metropolis - 2BHK for Sale (Savings of 5L)

Any one interested in buying 2BHK on top floors at Brigade Metroplois (2BHK).

Rentals lukewarm - Times of India

Sign of things to come ? If somone is getting a 4% return and paying 8% interest on the loan. I think this calls for a perfect storm in the times to come.

Property hot, but rentals lukewarm

By Sujit John/TNN

Bangalore: If you are investing in a residential property in Bangalore, make sure your rental expectations are realistic. For all too frequently, they are not.
Rentals, though rising, have not done so anywhere close to the rate property prices have. Consequently, residential rental returns which were in the range of 6-7% a few years ago, are no more than about 4% now.
There are many who have invested over Rs 50 lakh in an apartment and got Rs 18,000 a month as rent, a return of about 4%. There are others with inflated expectations who have been endlessly searching for tenants willing to pay the rent they are hoping for — in the process keeping their apartments locked up for months.
Kapil Phadke is buying an apartment off the Airport Road that will cost him Rs 46 lakh. It’s a second sale. Three years ago, the same apartment was bought from the builder at about Rs 19 lakh and fetched the buyer Rs 10,000 a month as rent, a return of nearly 6.5%. Phadke today will not get a rent of more than Rs 15,000 a month, a return of 3.9% on his Rs 46 lakh investment. The rent will not even be enough to cover the interest payment on the loan he takes. Still, if Phadke is buying the flat, it is because he thinks property price appreciation will make the deal attractive.
One reason for rentals rising much more slowly than property prices is that the number of flats bought for investment purpose has risen dramatically, creating a lot of options for tenants. Besides, as Manisha Grover, associate director in property consultancy Jones Lang LaSalle India says, rent payment capacity depends on people’s disposable incomes. “And since remuneration is growing at about 11-12%, rents will also grow at roughly this pace,” she says.
Difficulties in finding family tenants willing to pay reasonable rents is now compelling many to hand over their properties to service apartment operators. The opportunity in service apartments is still growing strongly. A spokesperson of Indus Inns, a service apartment operator, says hotel rooms in Bangalore remain too few and expensive, even as business travel and short-term stay requirements is rising fast. So if your next door flat has turned into a service apartment, you know why.

Bangalore : Investors or Bag holders

Recently I have been running into bunch of people who have purchased 3-4 flats in Banglaore for real estate investment and who are interested to sell.

One guy I met had over 2 crores of property. He needs to pay the 10% VAT(approx 20L) (thanks to the FM) since the purchase was done before april 05, and is now desperate to sell the apartments. Another guy I met had over 80L in houses. and surprisingly the builders havnt sold out too and these guys are trying to sell (time for a perfect storm)

All this thanks to Craigslist or Sulekha so I havn't even probed the real estate agents ?

If these guys use the realtors, they have to part with another 1-2%. If they have a 20% appreciation over 1 year the effective return they have is 20 -10 - 2% = 8%.,.Fixed deposits and stock mutual funds can yield better.. How stupid can these guys be ?

how many of these rats are trying to bail ship is anybody's guess.

I think this is the sign that the market is going to pause and turn down.. Lots of availability on Sarjapur road, rates havn't moved up and more property coming into the market.