Monday, April 13, 2009

Economic Times calls for the bottom in the market

Another useless article from Economic Times on the property market in Pune. There is no mention of per sq ft prices per area, transactions, re-sales, property tax collections from the registrars office. All they have are quotes from builders and realtors. It is in ET's vested interest to get the market going. After all the builders will bring out full page ads once they start getting some buyers suckered in. The whole ploy seems to create an illusion that people are buying, thereby forcing fence sitters to commit to the market. This is how marketing and the herd mentality work. Lack of accurate data forces people to make decisions without analysis.

The good news is that the builders have concluded that prices have dropped and that buyers will not buy beyond a certain price point. It goes to show that buyers have become cautious and educated, know the implications of pre-EMI and resetting rates so they can make purchases they can afford. The mad scramble to book apts like hot vada-pav's has been replaced by suspicion, caution and careful analysis of their own personal finances.

Modi was right, just as Congress has become budiya, as has the Times group. The grand old lady of Bori Bunder has become senile

The recent interest rate cuts and attractive real estate prices have made perfect combinations to bring buyers back into the market, says Archana Sinha

There has been considerable activity in the property market in the last two months, thanks to proactive measures of the government and the developers in Pune, who started corrective measures, by reducing the home loan rates and the prices of homes. A number of new projects have been launched in the last few months and are reported to have been sold out, almost completely within the first week of launch. Although more concrete measures will be welcomed, the developers and the home seekers are not holding back their decisions any more.
Confirming the reports Rohit Gera, director, Gera Developments says, "Yes, most projects launched during the last 10 days have seen robust sales with a spill-over of a good number of wait-listed buyers. The negative sentiments that were sweeping the market are now ebbing out and people are putting the events behind them; in the true spirit, life must go on. The buyers have now concluded that prices have bottomed out and there is no point in waiting further, hence business is picking up."
Explaining the phenomenon further, he says, "If you look at the story of Satyam, people were worried on the account of 50,000 people losing jobs. Pundits predicted that the worst time is yet to come and that the company will close down, but today there are five companies that are ready to buy the company. In general, the mood is swinging back towards positive feelings and all that is translating into business."
In a similar tone, Manish Kaneria, MD, Mont Vert Homes, says, "Traffic has been coming from across the sectors and we are seeing quality enquiries for the past two months for homes between Rs 25 lakh to 50 lakh. Couples with an income of Rs. 50,000 to 60,000 per month are returning to the market as the feeling has begun to sink in that the correction has happened and the loan interest rates have come down considerably. So those who are comfortable in their jobs and have the capacity to pay are returning. I saw eight to nine closures last month and am expecting a good result this month too. The RBI is continuously taking steps to stimulate the market and results are showing up."
Kaneria pointed out that the NRIs who had retreated a few months ago have also started returning to the market as they find better investment opportunities now with the rupee weakening and the prices correcting.

Aniruddha Deshpande, MD, City Corporation Ltd, the makers of Amanora Park Town, echoes similar views. "I think the moves are good and they are showing their impact now. People have finished with their year-ending activities and children's exams, and are now concentrating on buying their homes. These are the months when they take their decisions to purchase and move into their new homes. In Pune, prices are very reasonable now and with friendly home loans they are finalising their deals."

Anand Jog, MD, Darode Jog Properties, informs that they have sold out all the 456 flats of their new project Greenland County at Narhe-Ambegaon on Sinhagad Road, within the first week of its launch.

Atul Goel, MD, Goel Ganga Group, is happy about the market now. "The rate of interest deeply impacts the buying behaviour of the customer. The buying motivation had lowered in the past, but since January-February, as the government started focusing on lowering home loan rates, the lower property prices become attractive. Although an interest rate between 7 to 7.5% would be ideal, we have received a good amount of inquiries and our sale figures have also improved in the past two months."

Of course, the slow speed of implementation of interest rates and the cautious approach of the banks in sanctioning loans are concerning people. Mohammed Aslam, regional head, Jones Lang LaSalle Meghraj says, "In a scenario like this speedy action is important. Also, SBI's rate reduction for one year is not enough; they should come up with a comprehensive policy for at least four years, to boost confidence among buyers. Moreover banks are rather apathetic towards loans below Rs 25 lakh and this is the segment that comprises government employees, who are stable in their jobs. They are less likely to default and will be the most genuine customers."

Another group of experts feel that in a scenario like this banks do become cautious, especially now with the elections approaching. But these factors are temporary and do not deter those who are in a stable job with good companies or government departments.
A senior banker from a private bank says, "The growth in home loan portfolio of banks during the last three to four years is a testimony to Indian banking policies. Expecting them to jumpstart lending is too much for the asking at this time of uncertainty. It depends on many factors. There is room to cut interest rates further given the latest cut in policy rate by RBI, but that will depend on how the cost of funds for each bank pans out in the coming months. The result of election will direct further policies which have been good and have protected us from the downslides and turmoil that have occurred in other developed economies. They are studying the situations and will come out with policies suitable to the domestic requirements."

Geo-political situations like the terror attacks and elections could create uncertainty, but only temporarily, feel developers. The salaried class is aware of these facts and does not defer its decisions. Moreover in the recent years governments have continued on the path of progress.
On a retrospective, says Kaneria, "These have been times for the market and buyers to take stock of the situation and emerge mature with realistic pricing and realistic selection of homes. Those who have the genuine need and are in a comfortable position regarding their jobs are beginning to seriously scout for homes within their budget."

Sure enough they are, as Suman Maheshwari a lawyer who is considering buying her own flat says, "If the banks lower their interest rates further, they will include the old buyers too. Prices look attractive and within reach."


Kapil said...

Good to see there are more bull in the market. Common sense should prevail.

Anonymous said...

Ambit capital puts a SELL on DLF, UNITECH, HDIL. cuts target price to 40% below current levels. If one looks at the peak of the bubble, these stocks are down 90% +. A lesson in debt for everyone

Anonymous said...

7% interest rate will attract people to invest in RE is the herd mentality of builders not buyer.

When economic uncertainty looming around, people will not make big commitments. Ask your friends & neighbors, what goods they shopped in a year? RE is much bigger investment, so it can’t be done in a uncertain situation. Just by gathering some irrelevant news builders are trying to project bulls run. But the fundamental are still weak.
What is a Rally in the Stock Market?
A rally is a term used to describe a sudden rise in stock prices, especially after a period of falling ones.
When world trades have contracted highest in last 15 years, is it going to expand in next 6 months?

Will new IT projects start in next 6 months? Current years IT budget is already released, don’t think companies are going to start new project & create jobs for you.

Do you think companies are fool to fire employees on large scale & then recruit in next 6 months?


So guys let it fall then only pick up, minimum 50% price cut is guarantee.


subel said...

man, times of india has become so pathetic, it is sad. I just don't get it, how can you f**** up a newspaper in just 17 years. You open the damn paper and what you see are just cleavages from page 1 to last and the articles just make you cringe.

absolute zero objective analysis, no standards in writing, absolute crap.

Time to go.........

Anonymous said...

The problem is that all newspapers have fallen in standards to a large degree-look at the bad spelling, grammar, writing styles-as if they did not learn any grammar or composition writing in school at all. The TOI group is just taking advantage of the fact that its rivals are more pathetic-look at DNAs writing standard. Only DNA Money is good-much better than the crap ET which is not even worth the 2 bucks it sells for. Another promising business newspaper is the MINT but it is mint fresh, lets see how it develops. As for the veracity of the news items-don't believe any of the business broadsheets that take money from builders for printing glossy supplements-you know whose side they are on. The consumer has to do his own thinking and gather data from the web (sites like this one as well as other Yahoo and Google groups sites founded by scammed customers). You know that these sites are serving a useful purpose when builders and then their cronies are coming here to whine about how "great" a time it is to purchase NOW (they have kept on saying this whatever the rate 15,000 psf to 3000 psf-the right time is always NOW-very funny).

Anonymous said...

I read an article on how newspapers are reporting the false & inflated real estate prices. Article at Indian Newspapers Report False Reality Prices

Anonymous said...

Sector Update: Real EstateOur channel checks indicate that sales volumes are still down 80-90% y-o-y and property prices continue to drop. Sharp slowdown in the economy and in the IT/ITES sector will maintain weakness in sales volumes and property prices.

Checks have also confirmed that sales volumes continue to be very low; this has maintained pressure on cash flows.
Increase in cancellations (as per reports) has increased the pressure on the already stretched cash flows for all three real estate companies.

Recent reports have indicated a sharp rise in cancellations for properties of DLF in Chennai and Gurgaon.
The report suggests that the buyers of properties at both locations are insisting on cancellations of their bookings and refund of their booking amounts.

To raise cash, most companies (including Unitech and DLF) are selling completed / partially constructed hotel properties for the past few months.However, there has been very limited success in selling these properties. Unitech has been able to sell only one out of six hotel properties it intended to sell in the past few months.

We reiterate SELL on Unitech (target Rs22 downside of 44%) and DLF (target Rs80, downside of 62%), and downgrade HDIL to SELL (target Rs67, downside of 42%).
Our downgrade on HDIL is supported by the company’s weak fundamentals due to deteriorating balance sheet (rising debt equity ratio), increasing pressure on cash flows due to weak sales coupled with falling TDR demand, and probability of higher FSI sales that could drive down NAV.

The Boss said...

There have been plenty of negative (on RE) articles in both TOI and ET over the last few months. Many of those were eagerly lapped up by the bearish crowd as proof of their 'bubble->slowdown->crash' theory. The crash never really took place except in isolated pockets. Now that the tide appears to be turning, you want to blame the newspapers aka messengers?

Anonymous said...

@The Boss 10:12 AM

Go and lap up Real Estate companies shares.

Anonymous said...

Boss, don't waste time here. You can buy plenty of "investments" from people who hold "booked" flats of DLF New Town Heights, et al. You will do them a service as well as build up your own portfolio, since you feel now is a good time as any to buy.

Shriniwas K said...

To Be honest Pune has cheaper property than metros so some of the schemes seem to be very attractive. Government employees got 6th pay commission bonuses of 2+ lakh which also prompts them to put money down for projects. The real question is whether these builders will deliver.
IMHO some builders in Pune are still less corrupt (although greedy) and have credibility. I am going to buy a house soon without taking a big loan. Apparently my father recently said that you may get short term loans for under 7% from HDFC ... Even if I were to lose 10% on a property I will make up for the loss via Rupee' debacle as its still at 50Rs per US$ and it will be for this whole year!

I am thinking of 2500 ish rates for Warje which I think is not bad at 10% loss it could go down to 2250 but I will get what I desire if I book now! What say people ...