Friday, August 08, 2008

Stupid reporting from Business standard

Here is another inane article on the decline of housing prices in Mumbai. Enquires are down, thats a ridiculous measure of volume of sales. What we need is hard data on the registrations. A quick visit to the registrars office and we should get this information. If they don't oblige one can get an RTI for it. Its good to see how much the black money component is of the sales in Mumbai. The decline is slow and steady and is going to bleed the high interest loan takers to a slow agonizing end.

Property developers, consultants and brokers have seen a 40 per cent decline in enquiries from home buyers over the last three months.

With home-buyers postponing their purchases owing to higher interest rates and increase in equated monthly installments, the slowdown in the real estate market is getting deeper.

The Mumbai-based Oberoi Constructions, which used to sell around 50-60 apartments in the June-July period, a traditionally lean period for property sales, has seen a sharp fall in sales during the same period this year.

Neelkanth Group, another Mumbai-based developer that builds homes in the central Mumbai suburbs, has also seen its sales dropping by over a third in the same period.

Property consultancy Knight Frank's chairman Pranay Vakil believes the situation is getting worse. "This is just the tip of an iceberg. The worse is yet to come,'' he said.

The 30 per cent year-on-year sales fall in June and July follows the 20 per cent decline in the previous six months. And no one sees any silver lining on the horizon.

The Reserve Bank of India [Get Quote] has raised the repo rate, the rate at which it lends to banks, by 125 basis points. Commercial banks have in turn raised their consumer loan rates by 50-100 basis points. Thus, on an average, the monthly installment on a Rs 10-lakh loan for 20 years has risen over 50 per cent to Rs 12,740 on a 14.25 per cent interest rate from Rs 8,060 (7.5 per cent interest rate) five years ago.

"Home buyers are adopting a wait-and-watch approach. While ready apartments are being sold, those under construction are not finding enough buyers,'' said Vikas Oberoi, managing director, Oberoi Constructions.

A cross section of property developers, consultants and brokers said enquiries from home buyers have gone down by 40 per cent over the last three months, compared to the same period last year.

While developers are not advertising any price cuts, most are willing to reduce the prices once the negotiations begin, according to investors.

For instance, in Gurgaon, where the prices are Rs 6,000 per square feet, developers are settling deals at Rs 5,500-Rs 5,400/sqft due to a sharp reduction in demand. This is apart from freebies such as free parking, waiver of stamp duty and equated monthly installments.

Property brokers point out that some pockets in Mumbai such as Andheri and Santacruz have seen the prices soften a bit in the last few months. In Andheri, for instance, prices declined to Rs 9,000 per sqft from Rs 10,000/sqft six months ago.


mallapottell said...

The rental prices in Mumbai western suburbs have decreased by a whopping 75% in a years time whereas the there is no significant reduction in buying prices. This indicates that investors are holding on to their overvalued properties, renting them out, hoping for a boom. Bookings for new apartments too has dropped to o (zero) but the builders are publishing fictitious figures to keep the market alive. Come Diwali, the real scenario will surface and proprieties will be up for grabs. The present scam involves the govt/builders/investors/banks which are up for a quick buck. Most of the paid blogger s are either working for financial institutions are big investment companies whose job is to inject investor confidence. For the real estate agents who blog, it is a matter of their survival.

Anonymous said...

This is just the beginning. Investors and a lot of sellers will stay in a denial mode for 6-12 months. No one will want to lower the price but with the surge in inventory and distressed properties, the prices will take a hit. Either the investors will walk away from the properties or sell them at a loss. The more they wait, the further the danda will go in their arse and will hurt them more. Choice is theirs.

The prices may fall 50-60% in 2-3 years. It would be a bloodbath in the RE industry then and 3 points of GDP will go away.

Anonymous said...

Very soon these builders will start offering Mercedes and Land Rovers to potential buyers as incentives. This is the next step in the game to lure buyers by offering incentives like cash back, zero stamp duty and would soon come down to free cars with the house.

After all this fades away, builders and sellers will have to bite the bullet. The party would be over by then. And at that point the Government fools will wake up and start the prosecution process of illegal lending at banks, corrupt appraisers and Realtwhores. Many builders will start looking for ways out: Bankruptcy and have all their cash they made in the last 3-4 years stacked up in swiss banks.

People call it business to ruin normal people and country of their wealth. Well, God is there and would take account of each penny from these thieves by giving them diseases, unhappy family lives and short lives. If they are reading they know what is instore for them in future.

Anonymous said...

Actually, some builders in Bangalore are already offering a high-end car (Maruti SX4) worth 6-7 lakhs with an apartment. Please check the following link:

The apartment costs 42 lakhs, but if you consider the free car offer, there is a discount of more than 18% already off the list price. I think an additional discount of 20% may also happen in the next year or so.

Anonymous said...

I very much love this blog since I'm a housing bear. But folks, please refrain from using indecent words here. Thanks!

Anonymous said...

Hotels have been making enormous profits, as part of the real estate industry, over the last 3 years. Room tariffs have risen by 300% in the last 4 years. Isn't it surprising that a room in a place like Pune (Hotel Holiday Innn) costs almost $300/night, while the same in a medium size US tech city like Seattle costs $120 which also has a population of 3 million? At least when you open the window of your hotel room in Seattle, you will not see a line of brown asses ready to defecate, nor will you smell the wonderful toxic aroma that wafts your way. How come the third world is more expensive than a developed country like the US?

The politicians/builders lobby has amassed unimaginable wealth on the backs of all those hard-working techies who are slogging for 14-15 hours a day spoiling their health. One of the greatest wealth transfers in the history of India.

Check the following link for the sordid profiteering by the hotel/builder lobby in India.


Anonymous said...

In any investment it is the common man who suffers. 80 to 90% people will loose money and only 10 to 20% people make money. Currently if we are predicting the markets to fall then I am sure we are in for surprise atleast in Mumbai. I feel the prices are held for more then a year and is unlikely to fall.

The reason is simple, non of the hardcore Mumbai builders be Raheja, Hiranandani, Kalpatru etc have not bought land at astronmical prices. These guys have the holding power as they have made a kill in last three years. Unless these guys reduce, Mumbai can never go for a crash or major correction. This may be the right time to buy but negotiate hard and buy only ready flats or building nearing completion.

All the best to people who are looking to buy at Mumbai. It is the only city currently in Inida where the demand and supply gap is huge especially with less land and politician having their own interest. Pls. watch out for the oil prices to know the sentiments of the market.

mallapottell said...

Raheja, Hiranandani, Kalpatru are going to hold the prices for how long? These guys have to pay ministers/D company/ Chota Rajan / sundry marwari money lenders etc etc + banks. Every big business flourishes on borrowed money. These guys are not fools to have invested their personal wealth. They also will not risk themselves/family for the sake of holding the market steady for investors like you and me. The heat is on. cash in when you can.

Good Luck!!

Anonymous said...

Lets wait and watch. I personally feel that as far as Commercial property (office space and malls) we are likely to see a crash in comming times but not sure about residential projects.

6.5 Million sq ft is office requirement per year in Mumbai but starting starting 08 we will see 10 Million sq ft entering the market for next three years this will bring down the prices.

14 Million sq ft is the residentail requirement per annum but next two years will only see a supply of roughly 8 million per year.

All the best to you all.

Anonymous said...

You said "14 Million sq ft is the residentail requirement per annum but next two years will only see a supply of roughly 8 million per year."

Now just for a sample,

He said Tata Housing hoped to be a $3 billion company by 2012. The company, which had developed about 15-20 lakh sq ft in 20 years, has plans to develop about 200 lakh sq ft in four years. The projects would be a mix of residential, hospitality and commercial spaces, and would be located in nine metros and tier-I cities.

So just one realty company is about to develop 20 million sq ft. EVen if u take first two years only, still that overtakes demand estimate by you. Now add to it, supply by all other ralty developers all over india..

See ? We are living into a world where supply is manifold than demand. Its just media and the boomers who keeps the picture otherwise to protect their interests and loot innocent buyers.

Times r changing now. Buyers no more fall pray to lies. RE is crashing down right in front of our eyes.