Monday, October 20, 2008

State of Denial

Mint has a couple of good articles on the denial of the Indian builders to accept the reality of a slowdown. The Sensex has crashed 50%, midcaps 60%, small caps 70% but India real estate developers think that the word correction applies to everyone but them. Like Marie Antonette said "If you don't have bread, eat cake" the Raheja's are pricing villas for 6crores. God save the ostriches. The articles are below
Mumbai: Bhav gira kya (Has the price fallen)?” the prospective buyer asked.
“Bhav chada hi nahin girne ke liye (It needs to rise before it can fall),” came the stoic response from across the counter from the Housing Development and Infrastructure Ltd, or HDIL, representative.
That exchange more or less sums up the current dynamic between discount-seeking buyers and reduction-resistant sellers in India’s real estate market, a chasm that was apparent at Property 2008, the 13th real estate and housing finance exhibition, a four-day event held last fortnight at the Bandra-Kurla complex in Mumbai.
A dozen signboards outside the site of the expo screamed, “Take the right decision. Buy now”, but buyers seemed indifferent to that message, even though they flocked to the exhibition in droves on Saturday.
Even as analysts caution that the days to come will be critical for developers as their inventory of unsold houses increases, real estate firms put on their bravest faces at the exhibition and said they wouldn’t consider reducing prices.
Under pressure: Real estate development in the country, including housing projects such as this one in Ghaziabad, is heavily dependent on population migration due to rapid urban growth. Harikrishna Katragadda / Mint
Everyone has got it wrong, they insist. “Make up your mind, this is the right time. The economic cycle is maturing and, by January next year, apartment prices will go up,” said Vinod Manwani, marketing head at the Nahar group, which is developing more than 100 acres in the heart of Mumbai, near Powai lake.
Analysts say real estate firms aren’t helping themselves with this attitude.
“The current slowdown in demand for realty, coupled with declining internal accruals and reduced funding options, exposes them (real estate firms) to the downside of this aggressive strategy; there are large amounts of debt already on their balance sheets and, (with) external funds increasingly hard to come by, we foresee delays on their many ongoing and planned real estate projects, thereby leading to the possibility of sale of projects or even enterprises,” said Akash Deep Jyoti, head of corporate and government ratings at Crisil Ltd, a Standard and Poor’s company.
A report in Monday’s The Economic Times said banks and finance companies have begun pushing developers to sell cheap.
To make matters worse, many companies have borrowed from outside the banking system at much higher rates.
The best way out is for them to sell assets and offload completed projects, said Jyoti.
Builders also need to get realistic on pricing, as a significant correction is yet to happen, added Jyoti.
Bangalore: Real estate entrepreneur Vijay Raheja has lined up a raft of projects in Mumbai and Bangalore for the next six months to a year—braving a slump in the property market after splitting the family business with his brother in July—and started with a development targeted at the rich. His company, V Raheja Design Construction launched its first project post the split on Dussehra—the Verena luxury villas spread over five acres in east Bangalore’s Whitefield neighbourhood where each unit has been priced at Rs6 crore. Exclusive: V Raheja Design took over construction of the new JW Marriott hotel at UB City in Bangalore in July. Hemant Mishra / Mint“There are 40 villas, and all will be sold by invitation. Other residential and commercial projects will be launched gradually,” said a senior official at the company who manages the Bangalore operations, but did not want to be identified. Raheja is working on projects including an IT park, Gigaplex, a residential project, Buena Vista, and a commercial property, Raheja Chambers, in the city. In Mumbai, an information technology park is under construction. Raheja and his younger brother, Deepak, split the 56-year-old B Raheja Builders between themselves and founded their own companies, ‘Mint’ reported on 7 July. The properties and projects of B Raheja Builders were divided between the brothers, with V Raheja Design taking over the construction of the new JW Marriott hotel at UB City in Bangalore. “A Rs6 crore villa is overpriced where builders are unable to sell Rs3 crore houses in the same area,” Naresh Dandapat, regional director (south) at property consultancy Knight Frank India, said of the Verena villa project. But the official defended the pricing, saying, “They are exclusive and contemporary, and have been priced accordingly.” Analysts say builders need to get realistic about pricing, sell assets and offload finished projects

36 comments:

Anonymous said...

While accepting the problem in real estate pricing there are three categories.
One who know they purchased at wrong time with inflated price, but can’t accept it publicly, in hope that they will pass on this toxic asset to some buyer. Another who brought it at really cheap price & hoping to make huge out of it, as they can hold it
longer. The third category is most dangerous one who is not aware of the economic problem & assuming that in next couple of month market will again bounce back.

What seems to be a luxury is not necessary a luxury for other person. For an example when I visited a so called luxury project in Pune, glass walls like a commercial building was a luxury concept, when I asked about the flooring, it was some ceramic high end tiles. The project do not had any long term maintenance consideration. When people are going to invest crore they will expect marble/granite flooring, good design, consideration given to different aspects. Installing CT TV & glass wall can’t make it a luxury project. Till today he is waiting for buyer who will accept his concept of luxury & will buy it.

Anonymous said...

‘Now is the best time to sell, before prices fall even further! Get out while you can!’

It may just appear dramatic during the long, slow reversion to the mean to those who have zero equity who are watching their variable rate loan payments that they can’t afford go up while they are forced to knock their selling price lower and lower chasing the falling market because they are losing money every month on the house they could not afford in the first place.

And major layoffs are ahead. People should try to save their jobs first. I think all people in MNCs or any foreign companies or doing business with foreign countries like IT COs, should take it seriously to save their jobs. The party of high salaries and big raises/bonuses is over. Reality is coming and it will bite hard in the arse of a lot of people.

Anonymous said...

Indian people are going to witness the biggest burst and slump in their lifetimes. Many would lose a lot of money and many may think of suicides as people are not mentally prepared about the other side of capitalism.

See what happened when Jetairways announced layoffs. Gand fati and politicians started interfering. Would these idiot politicians make money for the company? This is the mental state of Indians.

The shit is about to hit the fan. The Sensex would go back to below 6000 level. Mass layoffs and Divorces.

I think crime would be at peak in the coming 3-5 years due to high unemployment and temptations towards all the good stuff that people just saw in the last few years.

I wouldn't even rule out social unrest and even emergency rule.

Atul said...

Lot of Exaggeration in the article as well as comments to it. However, one thing I agree about is that: There is a HUGE bubble created in Indian Real Estate.

Unfortunately, the bubble was identified in early 2007, but people ignored it. It kept inflating till now. Now it has become too big to sustain. Again, the deflation of this bubble will result into burst because of its size.

I do not agree to the highest pessimism of people getting into streetwar because of huge un-employment. The worst possible scenario I can draw is this:

- IT sector will start consolidating. The employees will stop thinking about investments (gambling) and return to centralized investment pattern i.e. FDs.

- Real Estate sector will see a bubble burst. Most areas (especially IT bubbled areas) will see major bursts upto 50% in price reduction.

- More then price reduction, it will be a transactional bubble which will not saw a momentun for next 3 years. Transactions will be scarce. So the people who have invested (gambled) 2 years back, will not be able to come out, even at a lower price.

- Many people will loose jobs. Unemployment will rise.

- Big corporates will loose their glories. Small organizations will outsign.

- A small increase in crime rate, but not to the extent of what people are forecasting here.

All these scenario will give way to a better Economy, after 3 years:

- Greed level will decrease. It will balance with Fear. The youngsters, who haven't seen down trend, need to see it. This will bring down their Greed factor. A balanced Fear factor will lead to productivity led Investment, in place of Speculation led investment.

- The economies of Socializm / Capitalizm will come to an end. A new method will arise. You might call it any thing, but it will focus on Objective Capitalism. Every investment will have Productivity target. Yield of every asset will be asked for before investing. People will stop expecting higher prices to make money. For eg. The dividend capabilty of stock will decide the price, not the future expectation of increased price. Similarly for Real Estate it will be rent earning capability.

- India will not have political parties like Cogress / BJP / RJD / BSP / SP etc

- India will have 2 or 3 parties with strong ideologies with all these 2/3 parties. The visions / strategy of these parties will be best for the country but will be competing each other.

ishani said...

Well, i feel that indian real estate markets havent yet seen the recession and the prices may come down even further if the builders are not able to execute the proijects on time. The RBI has cut rates but whether credit is actually being made available to corporates especially real estate developers is yet to be seen. For details see www.indianpropertyreview.com

If someone is planning to buy a house then my advice would be to wait for another 3-6 months.

Ishani

guru said...

few more things that i can envision are,
we are going to see lots of kidnaps and suparis of these realters by the private (mafia) money lenders as these realters can't pay back the money to them.
IT salaries will see huge corrections like ITES. (call centers used to pay 15k for a fresh graduate .. but now they r paying 6 to 7k per month)
Those who lost jobs will get jobs again with more realistic pays. This will change the spending pattern of corporate employs
All these new restaurants and hi-fi shopping malls will see huge losses. People will resort back to desi stuff then branded stuff.
Nothing like emergency (crime) will happen in india, as india is still considered as source for cheap skilled workers. ( thanks to the education system)
people will start appreciating the money they get ( unlike the IT guys who used to crib even after getting 2 digit pay hike)

Shailesh said...


Optimism wanes as crisis reaches India


Property falls

It is not just in the Indian stock markets that people here are feeling the effects of the global credit crunch.

An Indian investor watches share prices on a digital broadcast screen on the facade of the Bombay Stock Exchange
Investors have seen the value of their shares plunge

The property sector has also been bruised.

Until recently, property prices in Mumbai were on par with Manhattan's, boosted by scores of foreign firms coming into the financial capital, looking to set up shop here.

That foreign money also helped to create hundreds of thousands of jobs for India's young middle classes, who could now finally afford to realise their dream of owning their own home.

All that demand for flats and houses caused prices to soar 40% in some of the big cities in India last year.

But now much of that money and demand has evaporated - leaving property developers out in the cold.

Already prices are down some 10-15%, with forecasts of a bigger crash around the corner.

Real estate agent Harsh Mukri, once the envy of his friends because of the large commissions he used to make on his deals, says he is very worried.

"It's hard to get anyone to buy a house these days," he says. "No bank is willing to give loans.

"My business has completely dried up. Even renting out flats to foreign companies - a huge profit earner for us - has gone down. People aren't coming here as much as they used to."

I guess all RE Bulls on this board are not facing same situation as the one BBC contacted. They should contact BBC and ask them to correct the story.

Anonymous said...

I have been seeing people predicting market fall since last year. Some have even mentioned a fall of 50%. All the best to all of you who had preferred paying SIP instead of EMI. Although a lot of unfolding shows the pressure on builders but we are also forgetting the fact that inflation is coming down and RBI is seriously looking at further reducing the interest rate. CRR has come to 2006 levels i.e. 6.5% and is further likely to go down to 5.5% shortly (lowest in this decade). It is just matter of time home loans will be available in single digit.

2) Mumbai has a pent up demand for homes approx 30 million Sq ft per year.

3) Properties prices on an average have grown at 8.5% CAGR from 1996 to 2008. You will be shocked with these figures but pls. calculate with your own flat value.

4) Exports are hardly 10% of the GDP.

5) Government will drive growth by cutting interest rates further.

6) We have become 20% more competitive in International market on account of Rupee depreciation.

7) Migratory population composition has changed in Mumbai from worker category in 70's 80,s and now professional and working couple. Mind it the aspirations of these couples are nothing less then 3 to 4 BHK.

8) Average home value in 96 after the fall was 16 times the salary for 1 BHK, today it is less than 12 times, mind it I am not counting your spouses income

There are lot of other points like last two years the builders have made a kill and thus increasing the holding capacity, besides builders going public, PE money, SPV which have increased their holding capacity.

I just want to add further that 70% of their sales come during this festive season. If the builders have decided not go reduce the price like what a lot of people are expecting in this bog then trust me they are ready to hold this price more for a year,

Some people predict because they have position or they feel this could/will happen. I strongly believe that a common man is in no position to predict the market. Common man expected BSE to touch 25k in 2008 some even mentioned 30k what happened is v all know.

People who predict are like non working watches, two times in twenty four hours they are right.

Thanks and all the best to all of you who wants to buy house. I would request to buy if it is only for actual use and also almost completed properties. Pls. don’t forget to negotiate hard especially if it is investors flat. You should look at at least 30% discount, this is the only opportunity.

Home loans are bound to come down, stock markets will bottom out within 3 to 6 months and then the correlation between stick and real estate will vanish.

Once again all the best to all of us.

Anil

sabbalseshu said...

What Anil says makes sense. There is no dearth of money in Mumbai. Prices may show a little correction, but thats all. During the last 2 months, I negotiated the sale of 3 properties each valued more than a crore and I have a dozen customers looking for investment. Now the builders are totally reluctant to sell now to fixed income people as they know that the buyers wont be able to raise the required black, therefore many apartments are empty. Next step, the builders will reduce the white price drastically and make up the rest in black

Nothing has changed and will change in the coming forseeable future

Good Luck

Observer said...

To Mr. Anil above:

1. CRR cut by 1.5% is for increasing liquidity, which is a result of foreign portfolio inflows drying up, and impacting corporate borrowings. Not because of inflation coming down by 0.5% to 11.5% from 11.9%.

2. The pent-up demand for housing in India is primarily in the low-income housing segment, which costs less than 10 lakh rupees. This is the reason why builders are now planning to construct 600 sq ft affordable apartments which cost 10-15 lakhs.

3. Quoted property prices may have grown by the stated amount. Please provide actual sale prices. I can also quote my flat was worth 5 lakhs in 1996, and 2 crores today, or maybe 5 crores, but the important metric is sale prices.

4. Yes Exports could be of the order of 10%, but these constitute the bulk of the high paying jobs (1lakh+/month jobs). The agriculture and domestic services sector contains very few high paying jobs. 80% of the population of the country lives on less than 3000 Rupees per month. If services exports are hit, mainly IT/ITES/KPO/BPO etc, then many high paying jobs will be affected.

5. Govt. can cut interest rates, but that will weaken the rupee and drive up inflation.

6. The Rupee has lost 20% primarily on fears of credit contraction abroad, leading to portfolio withdrawals and risk averse sentiment. However, the dollar is projected to weaken once the credit crisis passes, and the rupee will become stronger again. This will affect IT/ITES/KPO/BPO salaries since the number of financial/insurance companies outsourcing will shrink both in volume and in dollar terms. Inflation may not come down significantly since as the dollar weakens, oil prices will go up since it is priced in dollars.

7. If the MNS agitation intensifies, migratory inflow may reduce, and people may choose to stay closer to their home cities. Also, aspiration, and affordability are two separate issues. It is not appropriate to mix the two.

8. If your figures are right, then it just means apartment prices have gone from being extremely unaffordable, to merely very unaffordable. The key is that they are still unaffordable to the majority of the population.

9. Common man was conned into believing the hype that the Sensex would only keep going up. Most of the brokers and FIIs have already made their money after pocketing the retail investor's money. But most intelligent people, including many blogs, quite clearly mentioned that this was a bubble waiting to burst. I crunched the numbers myself and agreed with the blogs that a P/E of 25 for an emerging market like India with huge bureaucracy made no sense, and cashed out last year itself.

Similarly, common man is being conned to drop his entire life savings, sell off jewelry, liquidate LIC policies etc and buy a house because house prices will keep going up. The builders who were early in the game have already pocketed many people's money over the last couple of years, and are sitting on huge profits. The common man is always the target since he/she is gullible enough to believe the hype. That is why the common man always ends up being taken.

However, what separates the smart ones from the herd, are people who can see the obvious trends, crunch the numbers for themselves, and see through the hype. Many of the people here on this blog fall into this category. Just like the builders, who have booked massive profits over the last couple of years, can afford to sit on those profits and wait; similarly the smart ones will watch the trends, and continue to rent. The common man however, will listen to builders, just like he listened to the stock brokers/analysts, and lose his life savings and his working life to EMIs.

Observer said...

I think Mr. Anil and Mr. Sabbalseshu should contact BBC and contradict the story that Mr. Shailesh posted. Why would the BBC and all other Indian news outlets be reporting the opposite of what Mr. Anil and Mr. Sabbalseshu are saying?

Also, Mr. Sabbalseshu should provide his opinion as to why in 1998-2002, Mumbai property prices corrected by 40%. Black money was present in that period also. Iin fact, before the liberalization of foreign exchange controls, on the current account basis, black money was an even bigger issue back in the 90s. So why did property prices fall then?

Anonymous said...

I guess according to Anil and SabbalSeshu housing is unaffordable to the middle and professional class since they dont have black money. He is right on this account. I have no black money whatsoever since TDS gets cut from my salary. I would love to not pay tax but then I would be behind bars. The only buyers will be people with 80% black. When these guys got register their properties and try to register a 1cr apt for 20 lakhs in the registrars office, the registrar will tell them "Alibag se hain kya ?" They will in turn propose to auction the property at 40-50L :).

The bottomline is that builders are screwed since they have taken high interest loans from the black market and the lenders are hounding them for their money. They could sell some at high black rates to pay off the lenders but then their profit is zero.

tough luck buddies

Anonymous said...

Dear Observer,
You really are a keen observer.
Whatever you are saying is 100% correct.

People need to wait and watch and be impatient. The downturn doesn't happen overnight like stocks. It will take easily 6 months for people to get to reality and come out of state of Denial. Then they will start lowering prices only jab peeche se danda parega and there would be no buyers.

I had predicted stock below 10K on this blog 4 months back and now I think they will go to 8000 mark.
The properties will get crushed.
Denial doesn't help, living in reality does.

Anonymous said...

"not to be impatient" in my above post.

Anonymous said...

Dear Observer,

Thanks for your valuable insights.

about: CRR cut: Request you to read times on India yesterday edition the front page showing commodity price falling more then 50%. Kindly remember inflation is a cycle once it goes up it keeps going up and when it comes down the same applies. Also request you to read today’s ET, the banks have already started cutting home loan rates. BTW this is also on the front page. I am not saying there will be significant improvement in property sales but trust me it will send positive signals to builders and people sitting on the fence will start rethinking that they may miss the bus again.

Pent up demand for home: I don’t know if you are a Mumbaite or not but let me tell you historically in Mumbai majority of the old building did not have the concept of Two, Three and off course Four BHK but thing have changed since then. I am sure instead of price coming down the builders will once again focus on 1 BHK and this has already happened. Raheja's have started doing 1 BHK projects at Chandivili.

about: property price: I am talking with my own experience I had brought a 1BHK house at Chembur Diamond garden paying 17L in 96, today the same is available at 60L. I would request you to pls. calculate the CAGR and let me know. Here I am not talking about the black and white part I am talking about the total cost. Kindly note this property I brought was immediately after the crash.Pls. work out the return it is below 10% but mind it varies from area to areas but again the difference will be miniscule on an average. I would request all the people you are reading this block to do this check and post out your comments. This will help all of us to understand and pls. try to be honest. We will take the sample after the crash , this is where the market corrected and came to realistic level.

Exports: I just want to tell the forum one thing. Money has not evaporated from the face of our earth it is only that currently money are in wrong hands in US and the globally banks are paranoid reluctant to lend. We all know that without lending no banks will survive it is just matter of time(months). India it is matter of few weeks max maybe 8 weeks.

In US money from bad people will come eventually come into the system, in the meanwhile countries like India will have lot of additional opportunities. Developed countries will further look at India to cut cost. This will be a win win situation for both India and them. Trust me I completely agree with Vinod Dham when he mentioned in ET a couple of days back saying India will only strengthen further because of our entire set up of Democracy and strong financial system besides descent quality manpower.

I personally look this an opportunity let us see in coming months whether I am right or wrong.







Correlation of sensex and housing: There is a major correlation between sensex and housing market but again it is limited to the extent of Investor. ROTI, KAPAD AUR MAKAAN has nothing to do with stock market. Last one year investors are out of the market and some investor had the time to liquidate their stock. Some investor like who have brought the house with bank loan, trust me most of them are more or less covering their EMI with their rents. Why would rent go up for residential sector year on year if their was no demand ? YES I WANT TO ADD THAT DUE TO IMBALANCE IN DEMAND AND SUPPLY IN COMMERCIAL SEGMENT. COMMERCIAL PROPERTY IS BOUND TO HAVE A SET BACK temporarily.


Govt. can cut interest rates, but that will weaken the rupee and drive up inflation :

Again as I mentioned earlier inflation is cyclical and it looks like the inflation has started coming down, currently the priority for government is clear and that is to drive growth. Pls. wait and watch for the credit policy which will be announced on 24th Oct, I am sure this will give us some indication of Govt priorities especially for people who have not understood enough signals coming from RBI.

Unless the Govt increases the FSI the property prices is unlikely to come down in near future. Manhattan it is 10, Tokyo 25, Mumbai majority areas it is only 1 and additional 1 is TDR.

Thanks,

Anil

Anonymous said...

Anil.

Try selling your 1 BHK whcih is more than 12 years old at 60 lakhs.

I bet you won't even get 10 lakhs today.

Situation has changed man. Wake up.

Observer said...

I am from Bangalore. I visited Mumbai a few times, and resolved never to live there even if I was offered 2lakh Rs/month as salary. Just the enormous number of people and unrelenting crowds everywhere. Unsanitary conditions, and acute lack of open spaces, and chawl like apartments are a turn-off for me.

Yes Bangalore has deteriorated compared to 10 years ago, but there are many parks in every sector, wide roads, and lots of open spaces in the suburbs of Bangalore like Whitefield, Sarjapura and other areas. Most IT companies are located in these areas.

I have seen one or two Mumbai apartments in Chembur, of a distant cousin of mine, and I would consider it a jail sentence to live in one of those apartments. No sunlight, constant noise, and a cramped feeling all the time. I would consider paying 60L for such an apartment as a huge joke. That cousin has moved out to Gurgaon a couple of years ago, after he visited that place and saw the open spaces.

Anonymous said...

Dear .....

Yes situation have changed from last year, I wont get an investor but my friend I will still get an end user maybe it will take some time then last year but I will be able to sell. BTW I still have friends ready to buy at 6oL in my area if you have any pls. send me your mail ID i will contact you.

I have realised that there are some people in this world who have missed the bus earlier and they are the ones who keep druming about the dooms day in economy and crash in realty. I will ask them if they have their own houses, how many of you will sell your house cheaper then the market price now?

Thanks
Anil

Observer said...

Anil said: "Some investor like who have brought the house with bank loan, trust me most of them are more or less covering their EMI with their rents."

The above statement is quite absurd. I have provided numerous examples on this website where the rental yield is around 2-3% for many properties in Bangalore, Chennai and NCR. I will try to find if there are some examples for Mumbai also. At current home loan rates, it means that the EMI is approximately 4 TIMES the monthly rent. Yes that is right. 4 TIMES!

Only if the property was bought more than 3 years ago does the rent cover the EMI. That is because the property was likely to be almost 1/3rd the price then. Hence, it makes sense for those who bought property a few years ago to hold on to those apartments. However, for new buyers, the current prices just do not make sense. Especially with the precarious employment situation, the fact that today's rents will not even come close to covering the monthly EMIs is highly relevant.

Anil said: "Developed countries will further look at India to cut cost. This will be a win win situation for both India and them. Trust me I completely agree with Vinod Dham when he mentioned in ET a couple of days back saying India will only strengthen further because of our entire set up of Democracy and strong financial system besides descent quality manpower."

I do not think anyone really in the US, even Mr. Dham, appreciates the magnitude of the recession that will hit the developed economies. India is a high cost country for outsourcing. Also, clients are actually canceling large projects. Unemployment in the US is projected to reach double digits by late next year. And if Obama becomes President, he has promised to cancel tax concessions for corporations which outsource projects. He has also promised to outlaw outsourcing of all US Federal/State Govt projects which are supported by the US taxpayer.

The dollar is projected to drop by a factor of 2-3 by 2010. Why? Because the US has a massive deficit of 10.5 TRILLION dollars which is going to seriously affect the credit rating of the US. The reason it is becoming strong now is because of deleveraging, where institutions, pension funds, hedge funds and others are pulling out of emerging markets, commodities and other investments and repatriating the money into cash at home. However, this process will not last. Once the dollar drops back down, oil prices are going to go back up.

Secondly, with a weak dollar, a severe consumer recession and unemployment and restrictions on outsourcing under an Obama administration, how will IT companies thrive? 76% of IT exports go to the US. Will Indian IT wages go up with a US in recession and a weaker dollar? If Indian IT wages do not go up, who is going to buy those 60+L apartments? Please read the NCAER survey results that I had posted a few minutes ago under another later post. People need to think beyond the next month or two, and draw their own conclusions accordingly.

Anonymous said...

Dear Observer,

Mumbai cannot be compared with Bangalore. We at Mumbai know that the quality of life is not great but we still love the place and we still want to stay. I was born here and lived my life thru and i love this place.

There are lot of people like me in Mumbai who would prefer to stay and live here and they are the guys who buy.

Bangalore is a great city and I really dont know the dynamics of property market over there. I would not like to comment about it, all my comments are purely about Mumbai and not even New Mumbai and Thane

Anonymous said...

Dear observer,

I have brought 2 BHK @ Raheja Acropolis Chembur and my total cost was 40L, today @ peak my EMI with HDFC for 30L loan is Rs.35,534 and I am getting rent of Rs. 45000 pm. If you feel I am bullshitting pls. call Raheja and ask what was the price 3 years back and today for 1075 2BHK area what is the rent going on.

I sincerly hope you call them and find out.

Thanks

Anil

Observer said...

So a 1BHK costs 60L in Chembur, but a 2BHK costs 40L? Cool.

Anonymous said...

Dear Anil,

I just want to add, dont waste your time on this blog. If you could read the site ID it says housing bubble. Here you will find only people who wants the property prices to fall are only there barring a few like you.

I have been visiting this site for almost a year and got carried away, last week i went and brought a 3 BHK flat at MCHI exhibition held in Mumbai.

I think i have made a good decesion , I had negotiated @ 11.00% with HDFC and today after reading i called HDFC about the rate cut. They have promised me that they will reduce the rate by atleast 1% by Diwali and same will be passed om to me as my loan although sancitioned has not been disbursed.

This forum is full of useless people wanting to predict infact a couple of days back one jerk predicted that US will go down to drains and he was aware about Lehman and Merriyl collapse three months back.

Stay away from this site, these guys will never look from builders eyes, they feel builders are fools are they are only right. If you still want to continue be ready to get even abused. Last year I was abusing guys like you now it will be some other guys turn.

Cheers

Anonymous said...

Dear Observer,
Yes today the 2 BK is costing 1.30 Cr. I guess you need to put a little more effort to read and Comprehend.
Anil

Anonymous said...

Dear Observer, I want to thank you for the work you are doing. You have saved me from making a big mistake a few months ago. I am now seeing a few of my colleagues in IBM Daksh in Pune getting laid off. Twelve of my colleagues on a project got cut. How will they manage their loan? Also, the builders are putting pressure and telling all lies like there are only 2 flats available and buy now. I am specifically talking about Gera properties in Kalyani Nagar. I found out through a friend that almost 25% of flats are empty and others are sitting with NRI investors in that complex. It is made for trading rather than for actual living. Please continue your good work. Gopal.

Observer said...

Anil said: "Yes today the 2 BK is costing 1.30 Cr. I guess you need to put a little more effort to read and Comprehend."

Mr. Anil,

I would suggest you should follow your own advice first. Here is the relevant paragraph that I am cutting-n-pasting from my comment above. Please read it carefully and let me know if you need me to write it in Hindi or Marathi. I will leave it to others on this blog to judge who has a reading comprehension problem.

Observer

----------------------------------
Anil said: "Some investor like who have brought the house with bank loan, trust me most of them are more or less covering their EMI with their rents."

The above statement is quite absurd. I have provided numerous examples on this website where the rental yield is around 2-3% for many properties in Bangalore, Chennai and NCR. I will try to find if there are some examples for Mumbai also. At current home loan rates, it means that the EMI is approximately 4 TIMES the monthly rent. Yes that is right. 4 TIMES!

Only if the property was bought more than 3 years ago does the rent cover the EMI. That is because the property was likely to be almost 1/3rd the price then. Hence, it makes sense for those who bought property a few years ago to hold on to those apartments. However, for new buyers, the current prices just do not make sense. Especially with the precarious employment situation, the fact that today's rents will not even come close to covering the monthly EMIs is highly relevant.

Anonymous said...

Yes Gopal you are right Gera is capable of doing that. Most of the builders in Mumbai make up for the entire cost by selling 25 to 30% of sales. How will he reduce the price for the balance property when he already recovered the cost of the entire project. Top it all buliders are going slow on just started projects and about ot start project. I feel this can also lead to imbalance in demand and supply. Let us wait and watch.

Anonymous said...

Dear Observer,
what more proof you want when I asking you to call Raheja, who had launched the project @ Rs. 3300 and today it is 12500. Pls. call Raheja's office and find out for yourself and then you can comment.

Anil

Anonymous said...

Dear Observer,

Request you to call 022-66414343 speak to one Mr. Shankar Narayan the manager and ask him about Acropolis 1. Pls. ask him the current price and the launch price 3 years back, maybe you will know what i am talking bout.

Anil

Anonymous said...

Doofus Anil, can you real estate brokers even read? No wonder you guys are so confused! I always had a low opinion of real estate brokers mental abilities in the US. Looks like in India also it is the same, or maybe worse.

Let us go through this step-by-step so your simple mind can understand.

a. Price of your 2BHK 3 years back 40L, EMI 35K/month, OK? And now you are saying the CURRENT price for your 2BHK is 1.3cr. Ok, fine, whatever, accepted. Let Shankar dude rest in peace.

b. Now, what did Observer say? He (assuming Observer is male) said, the CURRENT RENTAL YIELD is 2-3%. Your EMI is based on a price from 3 years ago, not on CURRENT sale prices, understand?

c. So, for someone buying TODAY, the price is 1.3cr and EMI will probably be around 1.5L/month. Got me so far? Or are you confused already? Take a deep breath, and read it ten times and now let us proceed.

d. So, unless in 2011,the rent for the 1.3cr apt bought TODAY (2008) jumps up to 1.5L/month, the RENT WILL NOT COVER THE EMI!!!!

The only reason your rent is able to cover the EMI today is because you bought your apartment before prices tripled! Why, oh why would rents for a 2BHK jump to 1.5 lac per month in another 3 years in Mumbai?! You think IT salaries in Mumbai will be 50-60 lac per annum in the next couple of years? What are you smoking dude? Can I have some? You real estate broker guys need to get out of Mumbai once in a while and see the world.

Anonymous said...

Dear....

It is very easy to reply out of context, thanks for you mathmetical skills. I am really impressed. What i was quoting was in my earlier post was that investors who has brought 3 years back does not have to panick even if the interest rate goes up because his EMI is more or less covered by current rent.

I never said that future will see this kind of growth or for that matter growth at all. I am just saying that in Mumbai property prices wont crash as lot of members in this blog predict.

BTW why do you sometimes come as observer and sometimes as anonymous.

Thanks Anil

Observer said...

Mr. Anil,

I do not know who anonymous above is who posted comments about 1BHK flats and another quoting me. I have always used my ID (Observer) to post messages. If you have any doubt about this, please contact the administrator of this blog and ask him to check the IP address of the "anonymous" posters, and my IP address to confirm.

Now, I agree that investors who bought a few years ago are probably in no need to sell, since they bought before prices reached their peak. My advice is geared towards first-time buyers. I am a potential first-time buyer myself, and therefore, like any customer, I would prefer not to overpay for housing. Just like builders form a cartel to keep prices high, I do not think it is wrong for buyers to warn other buyers to hold on.

Observer.

Anonymous said...

to understand the nature of the reality market we need to understand its 'Life Cycle'.although i m also trying to figure out a lot of things about economy.
in my views the property is also a product.so it has a PLC i.e. the product life cycle.now the bottoming out of this PLC takes around 8 years and it takes only half time(arnd 4-5 years) for peaking it out.
the current boom was started around 2003 and it lasted for almost 5 years till 2008.
now why it takes so much time in the process is that the nature of the product is such that u cannot build a township comprising certain hundreds flats overnight,it takes a couple of years.and in those years a lot of overnight builders, speculators jump in the markets and then starts speculation and 'greater fools theory'.
i thnk the last boom in property market was in the 1993-1994 when same things happened during those times.and from there it took almost 8-10 years for the markets to bootom out.
regards.
Abhishek

Anonymous said...

Dear Observer,

I wish you all the best. I would suggest you to keep looking for ready properties now and look at only investor who wants to sell and come out even if means giving 30 to 35% discount.

Remember it is always fear that brings in opportunities for others. Wish you all the best my freind and trust me being an investor myself i now for sure that it is impossible to predict any markets.

At the most we can predict a temporary slow down or short term boom

Anil

dave katragadda said...

well right now , real estate is feeling the heat of global meltdown.

Rishabh Ravi said...

Came across this blog when searching 'Raheja Acropolis'. I got a *negotiable* offer on Friday (20th Mar'09) for a 3B unit at this place for Rs. 7250. I was told the launch price a few years ago was Rs 3500 but also that it had shot up to Rs 12500 in the heady days of the 'bubble'! Personally I am not interested because Deonar was never on my shortlist. The right price point for Chembur (methinks) is Rs 6000. Based upon the price offered to me and given the current mood I expect this threshold will be reached by the end of year 2009. In another recent case that I know personally, in Dec '08, my cousin bought a 2.5 BD apt at Rutu Towers, Thane @ 3600 psf. The builder's asking price had been Rs 5600 psf (i.e. about a 36% reduction)! Just something to keep in mind. Cash is king - if you have the money and you are willing to negotiate, there is a deal waiting for you at whatever is your price point.